<PAGE>


                                    UNITED STATES
                          SECURITIES AND EXCHANGE COMMISSION
                               Washington, D.C.  20549

                                      FORM 10-Q


[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
    EXCHANGE ACT OF 1934
    For the quarterly period ended      September 30, 1997               .

[ ] 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  33-82150
                                           
                                   REGENCY BANCORP
                (Exact name of registrant as specified in its charter)
                                            
            CALIFORNIA                             77-0378956
    (State or other jurisdiction of              (I.R.S. Employer
    Incorporation or organizations)              Identification No.)

    7060 N. FRESNO STREET, FRESNO, CALIFORNIA                      93720
    (Address of principal executive offices)                     (Zip code)


    REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE    (209) 438-2600

                                         None
                                           
    (Former name, former address and fiscal year, if changed since last report)


Indicate by check mark whether the registrant (1) has filed all reports 
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act 
of 1934 during the preceding 12 months (or for the 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      .  

As of November 6, 1997, the registrant had 1,871,125 shares of Common Stock 
outstanding.

The Exhibit Index is located on page 34.

This report contains a total of 35 pages of which this is page one. 

<PAGE>

                     REGENCY BANCORP AND SUBSIDIARIES
PART  I,  ITEM 1.          FINANCIAL INFORMATION

CONSOLIDATED BALANCE SHEET
------------------------------------------------------------------------------
                                             (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)        SEPTEMBER 30, 1997  DECEMBER 31, 1996
------------------------------------------------------------------------------
ASSETS                                                                        
Cash and due from banks                            $ 13,710           $ 14,833
Federal funds sold                                    2,500              5,000
------------------------------------------------------------------------------
Total Cash and Equivalents                           16,210             19,833
------------------------------------------------------------------------------
Interest bearing deposits in other banks                  -                 98
Securities available-for-sale                        37,460             33,270
------------------------------------------------------------------------------
Loans                                               119,836            102,458
Allowance for credit losses                          (2,211)            (1,615)
Deferred loan fees & discounts                       (1,057)            (1,073)
------------------------------------------------------------------------------
Net Loans                                           116,568             99,770
------------------------------------------------------------------------------
Investments in real estate                            8,911             16,489
Other real estate owned                                 519                437
Cash surrender value of life insurance                3,002              2,903
Premises and equipment, net                           1,877              2,262
Accrued interest receivable and other assets          4,401              5,996
------------------------------------------------------------------------------
Total Assets                                      $ 188,948          $ 181,058
------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY                                          
Deposits:                                                                     
Noninterest bearing transaction accounts           $ 41,204           $ 36,613
Interest bearing transaction accounts                53,559             47,850
Savings accounts                                     35,434             25,540
Time deposits $100,000 or over                       27,280             30,766
Other time deposits                                  17,501             19,033
------------------------------------------------------------------------------
Total Deposits                                    $ 174,978          $ 159,802
------------------------------------------------------------------------------
Short term borrowings                                     -                  -
Notes payable                                             -              4,976
Other liabilities                                     1,525              2,810
------------------------------------------------------------------------------
Total Liabilities                                 $ 176,503          $ 167,588
------------------------------------------------------------------------------
Shareholders' Equity:                                                         
Preferred stock, no par value;                                                
1,000,000 shares authorized;                                                  
no shares issued or outstanding                                               
Common stock, no par value; 5,000,000                                         
  shares authorized, 1,871,125 and  1,818,160 shares                          
  issued and outstanding in 1997 and 1996, 
  respectively                                        9,276              8,868
                                                      2,995              4,601
Retained earnings                                                             
Net unrealized gain (loss) on available-for-sale 
  securities, net of taxes of $126,000 in 1997 and 
  $1,000 in 1996                                        174                  1
------------------------------------------------------------------------------
Total  Shareholders' Equity                          12,445             13,470
------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity        $ 188,948          $ 181,058
------------------------------------------------------------------------------
See notes to consolidated financial statements

                                       2

<PAGE>

                        REGENCY BANCORP AND SUBSIDIARIES

<TABLE>
<CAPTION>

CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)                              
----------------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT FOR PER COMMON AND EQUIVALENT SHARE DATA)      FOR THE THREE MONTHS         FOR THE NINE MONTHS
                                                                      ENDED SEPTEMBER 30,          ENDED SEPTEMBER 30,
----------------------------------------------------------------------------------------------------------------------------
                                                                      1997           1996          1997           1996
----------------------------------------------------------------------------------------------------------------------------
<S>                                                                <C>            <C>            <C>            <C>
INTEREST INCOME
Loans (including fees)                                             $ 3,330        $ 2,884        $ 9,034        $ 8,380
Investment securities:
  Taxable                                                              557            430          1,651          1,272
  Tax exempt                                                            45             99             99             66 
----------------------------------------------------------------------------------------------------------------------------
Total Investment  Interest Income                                      602            451          1,750          1,338
Other                                                                   99             17            354             60
----------------------------------------------------------------------------------------------------------------------------
Total Interest Income                                                4,031          3,352         11,138          9,778
----------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE                                                                                                       
Interest on deposits                                                 1,331          1,130          3,900          3,296
Other                                                                   20             41             60            141
----------------------------------------------------------------------------------------------------------------------------
Total Interest Expense                                               1,351          1,171          3,960          3,437
----------------------------------------------------------------------------------------------------------------------------
Net interest income                                                  2,680          2,181          7,178          6,341
Provision for credit losses                                            460              -          1,295              -
----------------------------------------------------------------------------------------------------------------------------
Net interest income after                                                                                              
   provision for credit losses                                       2,220          2,181          5,883          6,341
----------------------------------------------------------------------------------------------------------------------------
NONINTEREST INCOME                                                                                                     
Gain on sale of loans                                                   26            231            512          1,119
Depositor service charges                                              101             83            295            244
Income from investment management services                             198            174            600            500
Gain/(loss) on sale of securities                                        -              -            (34)             -
Gain on sale of assets                                                 248              5            252             14
Servicing fees on loans sold                                            83             92            250            231
Other                                                                   68             90            249            342
----------------------------------------------------------------------------------------------------------------------------
Total Noninterest Income                                               724            675          2,124          2,450
----------------------------------------------------------------------------------------------------------------------------
NONINTEREST EXPENSE                                                                                                    
Loss (gain) from investments in real estate partnerships               (21)           (12)         3,569            170
Salaries and related benefits                                        1,216          1,154          3,613          3,340
Occupancy & equipment                                                  399            438          1,213          1,231
FDIC insurance and regulatory assessments                               47             15             91             47
Marketing                                                              102            117            334            328
Professional services                                                   56            178            334            601
Director's fees and expenses                                            44             90            220            258
Management fees for real estate projects                                 9            126            121            359
Supplies, telephone & postage                                           78             94            241            272
Other                                                                  490            171          1,035            730
----------------------------------------------------------------------------------------------------------------------------
Total Noninterest Expense                                            2,420          2,371         10,771          7,336
----------------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes                                      524            485         (2,764)         1,455
Provision (benefit) for income taxes                                   223            203         (1,158)           613
----------------------------------------------------------------------------------------------------------------------------
Net Income (loss)                                                     $301           $282       $ (1,606)        $  842
----------------------------------------------------------------------------------------------------------------------------
Net income (loss) per common and                                                                                       
   common equivalent share                                           $ .16          $ .15       $   (.84)        $  .45
Shares used in computation                                           1,926          1,869          1,912          1,869
----------------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements

</TABLE>

                                       3

<PAGE>

                        REGENCY BANCORP AND SUBSIDIARIES

<TABLE>
<CAPTION>

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)
----------------------------------------------------------------------------------------------------------------------------
FOR THE NINE  MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
----------------------------------------------------------------------------------------------------------------------------
                                               Common Stock         Common                            Net
                                                  Number of          Stock       Retained      Unrealized
(In thousands)                                       Shares         Amount       Earnings      Gain (Loss)        Total
----------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>                 <C>           <C>           <C>             <C>
Balance, December 31, 1995                            1,818        $ 8,868        $ 4,029           $ 45       $ 12,942
----------------------------------------------------------------------------------------------------------------------------
Issuance of common stock
   under stock option plan                                -              -              -              -              -

Cash dividends                                            -              -           (327)             -           (327)

Net change in unrealized gain (loss) on
   available-for-sale securities (net of
    taxes of $135,000)                                    -              -              -           (186)          (186)

Net Income (loss)                                         -              -            842              -            842
----------------------------------------------------------------------------------------------------------------------------
Balance, September 30, 1996                           1,818        $ 8,868        $ 4,544         $ (141)      $ 13,271
----------------------------------------------------------------------------------------------------------------------------


----------------------------------------------------------------------------------------------------------------------------
                                               Common Stock         Common                            Net
                                                  Number of          Stock       Retained      Unrealized
(In thousands)                                       Shares         Amount       Earnings      Gain (Loss)        Total
----------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996                            1,818        $ 8,868        $ 4,601            $ 1       $ 13,470
----------------------------------------------------------------------------------------------------------------------------
Issuance of common stock
   to employee stock ownership plan                      36            333              -              -            333

Issuance of common stock
   under stock option plan                               17             75              -              -             75

Cash dividends                                            -              -              -              -              -

Net change in unrealized gain (loss) on
   available-for-sale securities (net of                  -              -              -            173            173
    taxes of $126,000)

Net Income (loss)                                         -              -         (1,606)             -         (1,606)
----------------------------------------------------------------------------------------------------------------------------
Balance, September 30, 1997                           1,871        $ 9,276        $ 2,995          $ 174       $ 12,445
----------------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements

</TABLE>

                                       4

<PAGE>

                        REGENCY BANCORP AND SUBSIDIARIES

<TABLE>
<CAPTION>

CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
----------------------------------------------------------------------------------------
(IN THOUSANDS) FOR THE NINE MONTHS ENDED SEPTEMBER 30,           1997          1996
----------------------------------------------------------------------------------------
<S>                                                          <C>              <C>
OPERATING ACTIVITIES:
Increase (decrease) in cash equivalents:
Net income/(loss)                                            $ (1,606)        $ 842
Adjustments:
Provision for credit losses                                     1,295             -
Provision for losses on real estate                               364             -
Provision for OREO losses                                          80             -
Depreciation and amortization                                     467           535
Deferred income taxes                                            (171)          490
(Increase) decrease in interest receivable and other assets     1,641           (92)
Increase in surrender value of life insurance                     (99)         (104)
Distributions of  income from real estate partnerships              7           103
Equity in (income) loss of real estate partnerships               397           (10)
(Increase) decrease in real estate held for sale                6,110         6,417
(Gain)/loss on acquisition of partnerships                          -           (63)
Increase (decrease)  in other liabilities                      (1,285)         (566)
Gain on sale of loans held-for-sale                              (512)       (1,119)
Proceeds from sale of loans held-for-sale                      14,475        11,619
Additions to loans held-for-sale                              (14,065)       (8,253)
Loss (gain) on sale of premises and equipment and OREO            (22)           (1)
Loss (gain) on sale of furniture and equipment                     16             -
(Gain)/loss on sale of investment securities                       33             -
----------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities           $ 7,125       $ 9,798
----------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Purchase of available-for-sale securities                     (15,612)      (12,109)
Proceeds from sales of available-for-sale securities            4,341         1,000
Proceeds from maturities of available-for-sale securities       7,303        14,094
Loan participations purchased                                       -             -
Loan participations sold                                            -             -
Net (increase) decrease in loans                              (18,355)       (5,839)
Net decrease (increase) in other short-term investments            98             -
Cash received through acquisition of partnerships                   -           441
Proceeds from sale of OREO                                        224           123
Capital contributions to real estate partnerships                   -          (397)
Capital distributions from real estate partnerships               700         1,012
Purchases of premises and equipment                               (89)         (357)
Proceeds from sale of premises and equipment                       34             -
----------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities         $ (21,356)     $ (2,032)
----------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Net increase (decrease) in time deposits accounts              (5,018)        9,949
Net increase (decrease) in other deposits                      20,194        (1,626)
Net increase (decrease) on short term borrowings                    -             -
Cash dividends paid                                                 -          (327)
Payments for fractional shares related to stock dividends           -             -
Payments on notes payable                                      (7,155)       (7,059)
Proceeds from notes payable                                     2,179           380
Proceeds from the issuance of common stock under
   employee stock option plan                                      75             -
Proceeds from the issuance of common stock to
   employee stock ownership plan                                  333             -
----------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities            10,608         1,317
----------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS           (3,623)        9,083
----------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD               19,833         8,925
----------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT  END OF PERIOD                  $ 16,210      $ 18,008
----------------------------------------------------------------------------------------
See notes to consolidated financial statements

</TABLE>

<PAGE>

                       REGENCY BANCORP AND SUBSIDIARIES
            NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. - BASIS OF PRESENTATION

    The accompanying consolidated financial statements include the accounts 
of Regency Bancorp and its wholly-owned subsidiaries (the "Company"). Regency 
Bancorp is a California corporation organized to act as the holding company 
for Regency Bank (the "Bank") and Regency Investment Advisors, Inc., ("RIA"). 
 RIA provides investment management and consulting services.  The Bank has 
one wholly-owned subsidiary, Regency Service Corporation, a California 
corporation ("RSC"), that engages in the business of real estate development 
primarily in the Fresno/Clovis area.  All significant intercompany balances 
and transactions have been eliminated in consolidation.

    These unaudited consolidated financial statements have been prepared in 
accordance with generally accepted accounting principles on a basis 
consistent with the accounting policies reflected in the audited consolidated 
financial statements of the Company included in the Annual Report on Form 
10-K for the year ended December 31, 1996.  They do not, however, include all 
of the information and footnotes required by generally accepted accounting 
principles for complete financial statements.  In the opinion of management, 
the unaudited interim consolidated financial statements reflect all 
adjustments (all of which are of a normal, recurring nature) necessary for a 
fair presentation of the results for the interim periods presented.  
Operating results for the interim periods presented are not necessarily 
indicative of the results that may be expected for any other interim period 
or for the year as a whole.

NOTE 2. - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

    In June 1996, the Financial Accounting Standards Board ("FASB") issued 
Statement of Financial Accounting Standards SFAS No. 125 "Accounting for 
Transfers and Servicing of Financial Assets and Extinguishments of 
Liabilities". This Statement establishes standards for when transfers of 
financial assets, including those with continuing involvement by the 
transferor, should be considered a sale.  SFAS No. 125 also establishes 
standards for when a liability should be considered extinguished. This 
statement is effective for transfers of assets and extinguishments of 
liabilities after December 31, 1996, applied prospectively.  In December 
1996, the FASB reconsidered certain provisions of SFAS No. 125 and issued 
SFAS No. 127 "Deferral of the Effective Date of Certain Provisions of SFAS 
No. 125" to defer for one year the effective date of implementation for 
transactions related to repurchase agreements, dollar-roll repurchase 
agreements, securities lending and similar transactions.  Management 
determined that the effect of adoption of SFAS No. 125 on the Company's 
financial statements was not material and believes that the effect of 
adoption of SFAS No. 127 will also not be material.

    In February 1997, the FASB issued SFAS No. 128, "Earnings per Share".  
This Statement simplifies the standards for computing earnings per share 
("EPS") and makes them comparable to international EPS standards.  SFAS No. 
128 replaces the presentation of primary 

                                       6

<PAGE>

EPS with a presentation of basic EPS.  In addition, all entities with complex 
capital structures are required to provide a dual disclosure of basic and 
diluted EPS on the face of the income statement and a reconciliation of the 
numerator and denominator of the basic EPS computation to the numerator and 
denominator of the diluted EPS computation.  This Statement applies to 
entities with publicly held common stock or potential common stock and is 
effective for financial statements issued for periods ending after December 
15, 1997, including interim periods, and requires restatement of all prior 
period EPS data presented.  Management believes the adoption of this Standard 
will not materially affect its earnings per share.

    The following table provides pro forma disclosure of basic and diluted 
EPS in accordance with SFAS No. 128:

                              THREE  MONTHS            NINE  MONTHS 
                           ENDED  SEPTEMBER 30,      ENDED SEPTEMBER 30,
                        --------------------------------------------------
                             1997      1996           1997      1996
                            ------    ------         ------    ------
Proforma basic EPS           .16       .16            (.87)     .15
Proforma diluted EPS         .16       .15            (.84)     .45

    In June 1997, the FASB adopted SFAS No. 130 ("Reporting of Comprehensive 
Income"), which requires that an enterprise report, by major components and 
as a single total, the change in its net assets during the period from 
nonowner sources; and SFAS No. 131, ("Disclosures about Segments of an 
Enterprise and Related Information") which establishes annual and interim 
reporting standards for an enterprise's business segments and related 
disclosures about its products, services, geographic areas, and major 
customers.  Adoption of these statements will not impact the Company's 
consolidated financial position, results of operations or cash flows.  Both 
statements are effective for fiscal years beginning after December 15, 1997, 
with earlier application permitted.

NOTE 3. - INVESTMENT SECURITIES

    During the period between December 31, 1996, and September 30, 1997, the 
Company recorded a net increase in the value of its available-for-sale 
portfolio of $173,000 net of applicable taxes.  This change is reflected as a 
change in shareholders' equity in the Consolidated Statement of Shareholders' 
Equity. This change in value is primarily the result of lower interest rates 
in the bond market at September 30, 1997, as compared to rates at December 
31, 1996 and higher yielding investments in the Company's investment 
securities portfolio.

Following is a comparison of the amortized cost and approximate fair value of 
securities available-for-sale:

<TABLE>
<CAPTION>

-----------------------------------------------------------------------------------------------------
AVAILABLE-FOR-SALE SECURITIES                    SEPTEMBER 30, 1997            DECEMBER 31, 1996
-----------------------------------------------------------------------------------------------------
                                             Amortized           Fair     Amortized            Fair
(In thousands)                                    Cost          Value           Cost          Value
-----------------------------------------------------------------------------------------------------
<S>                                          <C>              <C>         <C>               <C>
U.S. Treasuries                                $ 2,010        $ 2,017        $ 2,020        $ 2,029
U.S. Government Agencies                        19,679         19,772         21,408         21,384
Mortgage-backed securities                      10,695         10,784          7,972          7,948
State and Political Subdivisions                 4,563          4,673          1,518          1,559
Equity Securities                                  214            214            350            350
-----------------------------------------------------------------------------------------------------
Total                                         $ 37,161       $ 37,460       $ 33,268       $ 33,270
-----------------------------------------------------------------------------------------------------
</TABLE>

                                       7

<PAGE>

NOTE 4. -  LOANS

The following table presents a breakdown of the Company's loan portfolio in both
dollars outstanding as well as a percentage of total loans.  Further discussion
of the Company's loan portfolio can be found in Item No. 2 - Management's
Discussion and Analysis, Balance Sheet Analysis.

<TABLE>
<CAPTION>

-----------------------------------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT PERCENTAGES)                SEPTEMBER 30, 1997           DECEMBER 31, 1996
-----------------------------------------------------------------------------------------------------
                                                           Percent of                    Percent of
                                                Amount    Total Loans         Amount    Total Loans
-----------------------------------------------------------------------------------------------------
<S>                                           <C>         <C>               <C>         <C>
Commercial                                    $ 67,182          56.1%       $ 56,625          55.3%
Real estate mortgage                            15,443          12.9%         13,260          12.9%
Real estate construction                        28,188          23.5%         23,795          23.2%
Consumer and other                               9,023           7.5%          8,778           8.6%
-----------------------------------------------------------------------------------------------------
Subtotal                                     $ 119,836         100.0%      $ 102,458         100.0%
-----------------------------------------------------------------------------------------------------
Less:                                                                                              
Unearned discount                                  668                           681               
Deferred loan fees                                 389                           392               
Allowances for credit losses                     2,211                         1,615               
-----------------------------------------------------------------------------------------------------
Total loans, net                             $ 116,568                      $ 99,770               
-----------------------------------------------------------------------------------------------------

</TABLE>

NOTE 5. - SUPPLEMENTAL CASH FLOW INFORMATION

Following is a summary of amounts paid for interest and taxes and of non-cash
transactions for the nine months ended September 30, 1997 and 1996:

------------------------------------------------------------------------------
(IN THOUSANDS)                                             1997           1996
------------------------------------------------------------------------------
Cash paid during the period for:                                          
  Interest on deposits and other borrowings             $ 3,039        $ 3,387
  Income taxes                                                -            316
------------------------------------------------------------------------------
Non cash transactions:                                                    
  Transfer of loans to other real estate owned            $ 364           $  -
------------------------------------------------------------------------------

                                       8

<PAGE>

ITEM 2.                MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                    FINANCIAL CONDITION AND RESULTS OF OPERATIONS

         Certain matters discussed in this Report on Form 10-Q are 
forward-looking statements that are subject to risks and uncertainties that 
could cause actual results to differ materially from those projected. Such 
risks and uncertainties include, but are not limited to, those described in 
Management's Discussion and Analysis of Financial Condition and Results of 
Operations. Changes to such risks and uncertainties, which could impact 
future financial performance, include, among other things, (1) competitive 
pressures in the banking industry; (2) changes in the interest rate 
environment; (3) general economic conditions, either nationally or 
regionally; (4) changes in the regulatory environment; (5) changes in 
business conditions and inflation; and (6) changes in security markets.  
Therefore, the information set forth therein should be carefully considered 
when evaluating the business prospects of the Company and the Bank.

         FINANCIAL SUMMARY

         The Company's consolidated net loss for the nine months ended 
September 30, 1997, was $1,606,000, compared to net income of $842,000 for 
the period ended September 30, 1996.  Net income for the third quarter of 
1997 was $301,000 as compared to income of $282,000 in the third quarter of 
1996.  The net loss for the first nine months of 1997 was the direct result 
of the Company's decision to further accelerate the disposition of  RSC's  
real estate holdings.  Based upon the Company's efforts to pursue the bulk 
sale of several projects, as well as discounting other holdings to reflect 
RSC's anticipated sales proceeds during the second quarter of 1997, several 
properties were written down in value and additional reserves were added to 
allow for potential future losses on the sale of real estate.  The Company's 
profitability during the third quarter of 1997 is primarily a result of these 
actions taken during the second quarter.  Further discussion regarding RSC 
and the impact its losses have had on the Company can be found on pages 18 - 
19.

         Earnings/(loss) per weighted average common share were $.16 in the 
third quarter of 1997, and $(.84) for the nine month period ended September 
30, 1997, compared to $0.15 per share in the third quarter of 1996 and $0.45 
for the nine month period ended September 30, 1996.  The Company paid no cash 
dividends in the third quarter of 1997, while a cash dividend of $0.06 per 
share was paid in the third quarter of 1996.  The Company's net income, 
excluding losses from RSC, would have been $1,436,000 or $.75 per share for 
the nine months ended September 30, 1997.

         The Company's return on average assets was (1.17)% for the first 
nine months of 1997 compared to 0.69% for the first nine months of 1996.  
Return on average common equity for the first nine months of 1997 was 
(16.04)% compared to 8.46% for the same period in 1996. For the quarter ended 
September 30, 1997, the Company's return on average assets was 0.63% compared 
to 0.68% for the third quarter of 1996.   Return on average common equity for 
the third quarter of 1997 was 9.58% compared to 8.51% for the same period in 
1996.

                                       9

<PAGE>

         During the third quarter of 1997, RSC continued the divestiture of 
its remaining real estate holdings through various transactions.  During the 
third quarter, RSC sold 36 homes and lots and as of September 30, 1997 had 
entered into escrow or sales agreements for the sale of 190 of the remaining 
220 homes and lots in which RSC has an interest.  The majority of the 190 
units in escrow are expected to close during the fourth quarter of 1997.

         At September 30, 1997, the Company's total capital to risk weighted 
assets was 9.42%, while the Tier 1 capital to average assets (leverage 
capital) ratio was 5.87%.   Capital ratios at these levels are normally 
considered adequate under  FDICIA regulatory  guidelines, however, under the 
Prompt Corrective Action ("PCA") guidelines, any institution that has 
consented to a formal order as described below under "Administrative Orders" 
cannot be technically considered "Adequately Capitalized".  Capital 
guidelines under the PCA are discussed in greater detail on page 29.

         During the third quarter, the Company continued to pursue the 
acquisition of additional capital.  It is anticipated that a private 
placement offering will be completed during the fourth quarter of 1997, 
resulting in the Company receiving additional capital of approximately 
$6,000,000.

         ADMINISTRATIVE ORDERS

         As a result of an examination of the Bank as of June 30, 1997, the 
FDIC determined that the Company required special supervisory attention.  The 
Bank consented to an FDIC Order on October 28, 1997.  The FDIC Order is a 
"cease-and-desist order" for the purposes of Section 8 of the Federal Deposit 
Insurance Act, and violation of the FDIC Order by the Bank can give rise to 
enforcement proceedings under Section 8 of the Federal Deposit Insurance Act.

         The FDIC Order provides that the Bank must: (a) retain qualified 
management; (b) increase on or before December 31, 1997, and thereafter 
maintain Tier 1 capital equal to the greater of $14,000,000 or the equivalent 
of a Tier 1 capital to average assets ratio of at least 7.0%; (c) eliminate 
from its books classified assets not previously collected or charged off; (d) 
not extend additional credit to borrowers with previous classified or charged 
off credits which are uncollected; (e) not engage in any activities not 
permissible for a national bank subsidiary, except that the Bank and RSC may 
continue real estate activities as permitted by the FDIC's letter of November 
29, 1996, to the Bank requiring, among other things, that RSC divest all 
properties held by it not later than December, 31, 1998;  (f) review the 
adequacy of the Bank's allowance for loan and lease losses and establish  a 
comprehensive policy for determining its adequacy on a quarterly basis; (g) 
develop a plan to control overhead and other expenses and restore the Bank to 
profitability; (h) prepare a business/strategic plan for the operation of the 
Bank acceptable to the FDIC; (i) not pay cash dividends in any amount except 
with the prior written consent of the FDIC and the Commissioner; and (j) 
furnish quarterly written progress reports to the FDIC and the Commissioner 
detailing the form and manner of any actions taken to comply with the 
Administrative Orders.

         As a result of an examination of the Bank as of June 30, 1997, the 
Department of Financial Institutions and the Bank have stipulated to the 
issuance of the State Order by the Department of 

                                      10

<PAGE>

Financial Institutions which State Order is a final order pursuant to Section 
1913 of the California Financial Code.

         The State Order provides that the Bank must: (a) retain management 
and maintain a Board of Directors for the Bank and RSC acceptable to the 
Commissioner and FDIC; (b) increase and maintain tangible shareholders' 
equity (shareholders' equity less intangible assets) to an amount not less 
than the greater of (i) 7% of its tangible assets (total assets less 
intangible assets) or (ii) $14,000,000; (c) maintain an adequate allowance 
for loan and lease losses;  (d) cause RSC to maintain an adequate reserve for 
losses on its real estate investments; (e) cause RSC to reduce the assets 
classified as substandard so that the amount of such assets shall not exceed 
$10,115,000 by December 31, 1997, $8,750,000 by March 31, 1998, $7,100,000 by 
June 30, 1998 and $4,900,000 by September 30, 1998; (f) develop, adopt and 
implement a plan acceptable to the Commissioner for divestiture of RSC and 
all of RSC's real estate investments by not later than December 31, 1998; (g) 
not make any distribution to shareholders except with the prior written 
approval of the Commissioner; and (h) furnish written progress reports within 
thirty (30) days after the end of each quarter to the Commissioner and the 
FDIC describing actions to comply with the State Order.

         As of the date of this Form 10-Q, the Company and the Bank have 
taken certain actions to comply with the Administrative Orders, including 
initiating action to raise capital through a private offering, which is 
expected to close in the fourth quarter 1997, in order to comply with the 
capital requirements. 

         NET INTEREST INCOME

         The Company's operating results depend primarily on net interest 
income (the difference between the interest earned on loans and investments 
less interest expense on deposit accounts and borrowings).  A primary factor 
affecting the level of net interest income is the Company's interest rate 
margin, the difference between the yield earned on interest earning assets 
and the rate paid on interest bearing liabilities, as well as the difference 
between the relative amounts of average interest earning assets and interest 
bearing liabilities.

         The following tables present, for the periods indicated, the 
Company's total dollar amount of interest income from average interest 
earning assets and the resultant yields, as well as the interest expense on 
average interest bearing liabilities and the resultant cost, expressed both 
in dollars and rates. The tables also set forth the net interest income and 
the net earning balance for the periods indicated.

                                      11

<PAGE>

     CONSOLIDATED AVERAGE BALANCE SHEETS, NET INTEREST INCOME AND
     INTEREST RATES 

<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------------------------------------
 (IN THOUSANDS, EXCEPT FOR PERCENTAGES)
 FOR THE THREE MONTHS ENDED SEPTEMBER 30,                          1997                                    1996
----------------------------------------------------------------------------------------------------------------------------------
                                                     Average       Yield/                     Average      Yield/
                                                     Balance        Rate      Interest        Balance       Rate        Interest
----------------------------------------------------------------------------------------------------------------------------------
 <S>                                               <C>            <C>         <C>           <C>            <C>          <C>
 ASSETS
 Interest-earning assets:
 Loans (1)                                         $ 115,239       11.46%       $ 3,330     $ 103,154      11.13%         $ 2,884
 Investment securities (2)                            37,003        6.45%           602        28,221       6.36%             451
 Federal funds sold & other                            7,250        5.42%            99         1,620       4.17%              17
----------------------------------------------------------------------------------------------------------------------------------
 Total Interest-earning Assets                     $ 159,492       10.03%       $ 4,031     $ 132,995      10.03%         $ 3,352
----------------------------------------------------------------------------------------------------------------------------------
 Noninterest -earning assets:
 Allowance for credit losses                          (1,912)                                  (1,690)
 Cash and due from banks                              10,220                                    8,668
 Real estate investments                              11,112                                   16,677
 Premises and equivalent, net                          1,965                                    2,313
 Cash surrender value of life insurance                2,979                                    2,845
 Accrued interest receivable and other assets          4,450                                    4,171
----------------------------------------------------------------------------------------------------------------------------------
 Total Average Assets                              $ 188,306                                $ 165,980
----------------------------------------------------------------------------------------------------------------------------------
 LIABILITIES AND SHAREHOLDERS' EQUITY
 Interest-bearing liabilities:
 Transaction accounts                               $ 51,613        2.47%           321      $ 46,326       2.68%            312
 Savings accounts                                     35,491        4.09%           366        23,976       4.25%            256
 Time deposits                                        46,183        5.53%           644        42,306       5.29%            562
 Federal funds purchased, notes payable
   and other                                           1,956        4.06%            20         7,219       2.26%             41
----------------------------------------------------------------------------------------------------------------------------------
 Total Interest-bearing Liabilities                $ 135,243        3.96%       $ 1,351     $ 119,828       3.89%        $ 1,171
----------------------------------------------------------------------------------------------------------------------------------
 Noninterest -bearing liabilities:
 Transaction accounts                                 38,807                                   30,622
 Other liabilities                                     1,787                                    2,350
----------------------------------------------------------------------------------------------------------------------------------
 Total Liabilities                                 $ 175,837                                $ 152,800
----------------------------------------------------------------------------------------------------------------------------------
 Shareholders' Equity:
 Common stock                                          9,274                                    8,868
 Retained earnings                                     3,061                                    4,452
 Unrealized gain / (loss)  on investment
    securities                                           134                                     (141)
----------------------------------------------------------------------------------------------------------------------------------
 Total Shareholders' Equity                           12,469                                   13,179
----------------------------------------------------------------------------------------------------------------------------------
 Total average liabilities and
    shareholders' equity                           $ 188,306                                 $165,980
----------------------------------------------------------------------------------------------------------------------------------
 Net Interest Income                                                            $ 2,680                                  $ 2,181
----------------------------------------------------------------------------------------------------------------------------------
 Interest income as a percentage of average
    interest-earning assets                                        10.03%                                  10.03%
 Interest expense as a percentage of average
    interest-earning assets                                        (3.36%)                                 (3.51%)
----------------------------------------------------------------------------------------------------------------------------------
 Net Interest Margin                                                6.67%                                   6.52%
----------------------------------------------------------------------------------------------------------------------------------

</TABLE>

(1)  Loan amounts include nonaccrual loans, but the related interest income 
has been included only for the  period prior to the loan being placed on a 
nonaccrual basis.  Loan interest income includes loan fees of approximately 
$344,000 and $321,000 for the three months ended September 30, 1997, and 
1996, respectively.

(2)  Applicable nontaxable securities yields have not been calculated on a 
taxable-equivalent basis because they are not material to the Company's 
results of operations.

                                      12

<PAGE>

    CONSOLIDATED AVERAGE BALANCE SHEETS, NET INTEREST INCOME AND 
    INTEREST RATES

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
 (IN THOUSANDS, EXCEPT FOR PERCENTAGES)
 FOR THE NINE MONTHS ENDED SEPTEMBER 30,                          1997                                     1996
----------------------------------------------------------------------------------------------------------------------------------
                                                     Average       Yield/                     Average       Yield/
                                                     Balance        Rate       Interest       Balance        Rate       Interest
----------------------------------------------------------------------------------------------------------------------------------
 <S>                                               <C>            <C>          <C>          <C>            <C>          <C>
 ASSETS
 Interest-earning assets:
 Loans (1)                                         $ 107,893       11.19%       $ 9,034      $ 98,964       11.31%       $ 8,380
 Investment securities (2)                            35,736        6.55%         1,750        28,702        6.23%         1,338
 Federal funds sold & other                            8,763        5.40%           354         1,640        4.89%            60
----------------------------------------------------------------------------------------------------------------------------------
 Total Interest-earning Assets                     $ 152,392        9.77%      $ 11,138     $ 129,306       10.10%       $ 9,778
----------------------------------------------------------------------------------------------------------------------------------
 Noninterest -earning assets:
 Allowance for credit losses                          (1,755)                                  (1,743)
 Cash and due from banks                               9,301                                    8,300
 Real estate investments                              14,457                                   18,723
 Premises and equivalent, net                          2,118                                    2,297
 Cash surrender value of life insurance                2,948                                    2,811
 Accrued interest receivable and other assets          4,324                                    4,428
----------------------------------------------------------------------------------------------------------------------------------
 Total Average Assets                              $ 183,785                                $ 164,122
----------------------------------------------------------------------------------------------------------------------------------
 LIABILITIES AND SHAREHOLDERS' EQUITY
 Interest-bearing liabilities:
 Transaction accounts                               $ 49,217        2.52%         $ 928      $ 45,604        2.69%         $ 919
 Savings accounts                                     32,764        4.08%         1,000        25,383        4.19%           796
 Time deposits                                        47,845        5.51%         1,972        39,740        5.32%         1,581
 Federal funds purchased, notes payable
    and other                                          3,483        2.30%            60         7,888        2.39%           141
----------------------------------------------------------------------------------------------------------------------------------
 Total Interest-bearing Liabilities                $ 133,309        3.97%       $ 3,960     $ 118,615        3.87%       $ 3,437
----------------------------------------------------------------------------------------------------------------------------------
 Noninterest-bearing liabilities:
 Transaction accounts                                 34,971                                   29,653
 Other liabilities                                     2,121                                    2,554
----------------------------------------------------------------------------------------------------------------------------------
 Total Liabilities                                 $ 170,401                                $ 150,822
----------------------------------------------------------------------------------------------------------------------------------
 Shareholders' Equity:
 Common stock                                          9,156                                    8,868
 Retained earnings                                     4,224                                    4,468
 Unrealized gain / (loss)  on investment
    securities                                             4                                      (36)
----------------------------------------------------------------------------------------------------------------------------------
 Total Shareholders' Equity                           13,384                                 $ 13,300
----------------------------------------------------------------------------------------------------------------------------------
 Total average liabilities and
    shareholders' equity                           $ 183,785                                 $164,122
----------------------------------------------------------------------------------------------------------------------------------
 Net Interest Income                                                            $ 7,178                                  $ 6,341
----------------------------------------------------------------------------------------------------------------------------------
 Interest income as a percentage of average
    interest-earning assets                                         9.77%                                   10.10%
 Interest expense as a percentage of average
    interest-earning assets                                        (3.47%)                                  (3.55%)
----------------------------------------------------------------------------------------------------------------------------------
 Net Interest Margin                                                6.30%                                    6.55%
----------------------------------------------------------------------------------------------------------------------------------

</TABLE>

(1)  Loan amounts include nonaccrual loans, but the related interest income 
has been included only for the  period prior to the loan being placed on  a 
nonaccrual basis.  Loan interest income includes loan fees of approximately 
$950,000 and $935,000 for the nine months ended September 30, 1997, and 1996, 
respectively. 

(2)  Applicable nontaxable securities yields have not been calculated on a 
taxable-equivalent basis because they are not material to the Company's 
results of operations.

                                      13

<PAGE>

    Changes in the interest margin can be attributed to changes in the yield on
interest earning assets, the rate paid on interest bearing liabilities, as well
as changes in the volume of interest earning assets and interest bearing 
liabilities. The following table presents the dollar amount of certain changes
in interest income and expense for each major component of interest earning
assets and interest bearing liabilities and the difference attributable to
changes in average rates and volumes for the periods indicated.

    VOLUME/RATE ANALYSIS

<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------------------------
 (IN THOUSANDS)                                                         AMOUNT RESULTING FROM CHANGES IN
----------------------------------------------------------------------------------------------------------------------
 FOR THE THREE MONTHS ENDED SEPT. 30, 1997 COMPARED TO 1996     VOLUME (1)             RATE (1)                TOTAL
----------------------------------------------------------------------------------------------------------------------
 <S>                                                            <C>                    <C>                     <C>
 Net Interest Earnings Variance Analysis
 Increase (decrease) in interest income:
 Loans                                                              347                   99                    446
 Investment securities (2)                                          143                    8                    151
 Federal funds sold and other                                        75                    7                     82
----------------------------------------------------------------------------------------------------------------------
 Total                                                              565                  114                    679
----------------------------------------------------------------------------------------------------------------------
 Increase (decrease) in interest expense:
 Transaction accounts                                                27                  (18)                     9
 Savings accounts                                                   118                   (8)                   110
 Time deposits                                                       53                   29                     81
 Federal funds purchased, notes payable and other                   215                 (236)                   (21)
----------------------------------------------------------------------------------------------------------------------
 Total                                                              414                 (234)                    180
----------------------------------------------------------------------------------------------------------------------
 Increase (decrease) in net interest income                         151                  348                     499
----------------------------------------------------------------------------------------------------------------------


----------------------------------------------------------------------------------------------------------------------
 (IN THOUSANDS)                                                                     AMOUNT RESULTING FROM CHANGES IN
----------------------------------------------------------------------------------------------------------------------
 FOR THE THREE MONTHS ENDED SEPT. 30, 1997 COMPARED TO 1996     VOLUME (1)             RATE (1)                TOTAL
----------------------------------------------------------------------------------------------------------------------
 Net Interest Earnings Variance Analysis
 Increase (decrease) in interest income:
 Loans                                                              746                 (92)                    654
 Investment securities (2)                                          342                  70                     412
 Federal funds sold and other                                       287                   7                     294
----------------------------------------------------------------------------------------------------------------------
 Total                                                            1,375                 (15)                  1,360
----------------------------------------------------------------------------------------------------------------------
 Increase (decrease) in interest expense:
 Transaction accounts                                                48                 (39)                     9
 Savings accounts                                                   225                 (21)                   204
 Time deposits                                                      332                  59                    391
 Federal funds purchased , notes payable and other                  (76)                 (5)                   (81)
----------------------------------------------------------------------------------------------------------------------
 Total                                                              529                  (6)                   523
----------------------------------------------------------------------------------------------------------------------
 Increase (decrease) in net interest income                         846                  (9)                   837
----------------------------------------------------------------------------------------------------------------------

</TABLE>

(1) A change due to both volume and rate has been allocated to the change in
volume and rate in proportion to the relationship of the dollar amount of the
change in each.

(2) Changes calculated on nontaxable securities have not considered tax
equivalent effects.

    Net interest income before the provision for credit losses was $2,680,000 
for the third quarter of 1997 as compared to $2,181,000 for the comparable 
period of 1996, an increase of $499,000 or 22.9%. This increase was primarily 
attributable to a larger earning assets base as well as lower rates on 
deposit accounts.  The Company's net interest margin in the third quarter of 
1997 (based on average interest earning assets) was 6.67% as compared to 
6.52% for the same period in 1996.  Average interest earning assets grew 
19.9% between the third quarter of 1997 and the third 

                                      14

<PAGE>

quarter of 1996 while interest bearing liabilities grew only 12.9% over the 
same period.  The Company's earning asset mix shifted between comparable 
periods with federal funds sold increasing from 1.2% of interest earning 
assets during the third quarter of 1996 to 4.5% of interest earning assets 
during the third quarter of 1997.  As a percentage of average assets, loans 
dropped from 77.6% to 72.3% between the third quarter of 1996 and the third 
quarter of 1997 respectively, while investments increased from 21.2% to 23.2% 
of average earning assets.  Although there was a shift of interest earning 
assets from higher yielding loans to lower yielding federal funds sold and 
investments, both loans and investments yielded higher earnings in 1997 as 
compared to 1996.  Overall the yield on earning assets for both third 
quarters was 10.03%. With the growth in earning assets outpacing the growth 
in interest bearing liabilities, the overall interest margin improved by .15% 
between the third quarter of 1996 and the third quarter of 1997, respectively.
    
    Net interest income before the provision for credit losses for the first 
nine months of 1997 was $7,178,000 as compared to $6,341,000 for the 
comparable period of 1996, an increase of $837,000 or 13.2%. This increase 
was primarily attributable to a larger earning asset portfolio.  The 
Company's net interest margin for the nine month period ended September 30, 
1997 (based on average interest-earning assets) was 6.30% as compared to 
6.55% for the same period in 1996.  Average interest-earning assets grew 
17.9% for the nine month period ended September 30, 1997 as compared to the 
nine month period ended September 30, 1996, while interest-bearing 
liabilities grew 12.4% over the comparable periods.  The Company's earning 
asset mix showed an increased level of Federal Funds sold and investment 
securities and a lower level of loans, based on the percentage of earning 
assets, between comparable periods. 

    INTEREST EARNING ASSET MIX

The following tables set forth, for the periods indicated, the average 
balance and percentages of the Company's principal categories of interest 
earning assets.

<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------
 (IN THOUSANDS, EXCEPT PERCENTAGES)
 FOR THE THREE MONTHS ENDED SEPTEMBER 30,               1997                       1996
----------------------------------------------------------------------------------------------------
                                               Average       Percent       Average       Percent
                                               Balance      of Total       Balance      of Total
----------------------------------------------------------------------------------------------------
 <S>                                         <C>            <C>          <C>            <C>
 Interest-Earning Asset Mix:
 Loans                                       $ 115,239        72.3%      $ 103,154        77.6%
 Investment securities                          37,003        23.2%         28,221        21.2%
 Federal funds sold and other                    7,250         4.5%          1,620         1.2%
----------------------------------------------------------------------------------------------------
 Total Interest-earning Assets               $ 159,492       100.0%      $ 132,995       100.0%
----------------------------------------------------------------------------------------------------


----------------------------------------------------------------------------------------------------
 (IN THOUSANDS, EXCEPT PERCENTAGES)  
 FOR THE NINE MONTHS ENDED SEPTEMBER 30,                1997                       1996
----------------------------------------------------------------------------------------------------
                                               Average       Percent       Average       Percent
                                               Balance      of Total       Balance      of Total
----------------------------------------------------------------------------------------------------
 Interest -Earning Asset Mix:
 Loans                                       $ 107,893        70.8%       $ 98,964        76.5%
 Investment securities                          35,736        23.5%         28,702        22.2%
 Federal funds sold and other                    8,763         5.7%          1,640         1.3%
----------------------------------------------------------------------------------------------------
 Total Interest-earning Assets               $ 152,392       100.0%      $ 129,306       100.0%
----------------------------------------------------------------------------------------------------

</TABLE>

                                      15

<PAGE>

    Average interest-earning assets for the third quarter ended September 30, 
1997 increased to $159,492,000 from $132,995,000 for the comparable period in 
1996, an increase of $26,497,000 or 19.9%.  Average loans increased by 
$12,085,000 to $115,239,000 representing 72.3% of average interest-earning 
assets for the third quarter of 1997, compared to $103,154,000  or 77.6% for 
the third quarter of 1996. The yield on average loans increased to 11.46% at 
September 30, 1997, from 11.12% at September 30, 1996, primarily due to the 
Company's decision to hold higher yielding  SBA loans in its loan portfolio 
rather than selling them into the secondary market. Average investment 
balances increased 31.1% between the third quarter of 1996 and the third 
quarter of 1997 while average federal funds sold increased by 347.6% during 
the same time periods. Increased liquidity from the growth in deposits 
providing a large amount of funds for investment was the primary cause of the 
large increase in investments and federal funds sold.

    Average interest-bearing liabilities for the third quarter ended 
September 30, 1997 increased to $135,243,000 from $119,828,000 for the 
comparable period in 1996, an increase of $15,415,000 or 12.9%.  The primary 
reason for the increase was a result of exceptionally strong growth in 
deposits over the past 12 months with a large portion attributable to the 
opening of the Bank's Madera branch in August 1996.   For the quarter ended 
September 30, 1997, the average interest rate paid on interest-bearing 
liabilities increased to 3.96% from an average rate of 3.89% paid during the 
third quarter of 1996. 

    Average interest-earning assets for the nine months ended September 30, 
1997 increased to $152,392,000 from $129,306,000 for the comparable period in 
1996, an increase of $23,086,000 or 17.9%.  Average loans increased by 
$8,929,000 to $107,893,000 representing 70.8% of average interest-earning 
assets for the first nine months of 1997, compared to $98,964,000  or 76.5% 
for the first nine months of 1996. The yield on average loans declined to 
11.19% for the nine months ended September 30, 1997, from 11.31%, for the 
nine months ended September 30, 1996, primarily due to competitive pressure 
from other banks. Average investment balances increased 24.5% for the nine 
months ended September 30, 1997, compared to the same period in 1996 while 
average federal funds sold increased by 434.3% during the same time periods.  
Increased liquidity providing a large amount of funds for investment was the 
primary cause of the large increase in investments and federal funds sold.

    Average interest-bearing liabilities for the nine months ended September 
30, 1997 increased to $133,309,000 from $118,615,000 for the comparable 
period in 1996, an increase of $14,694,000 or 12.4%.  Exceptionally strong 
growth in deposits attributable to the Bank's Madera branch opening as well 
as new deposits resulting from business acquired as a result of the 
Westamerica acquisition of locally based Valliwide Bank were the primary 
causes of the increase.  For the first nine months ended September 30, 1997, 
the average interest rate paid on interest-bearing liabilities increased to 
3.97% from an average rate of 3.87% paid during the first nine months of 
1996.

                                      16

<PAGE>

    NONINTEREST INCOME

    The Company receives a significant portion of its income from noninterest 
sources related both to activities conducted by the Bank (loan originations 
and servicing, depositor service charges), as well as from the Company's 
investment advisory firm, RIA.

The following table sets forth, for the periods indicated, the principal 
categories of noninterest income received by the Company.

<TABLE>
<CAPTION>

-----------------------------------------------------------------------------------------------------
 (IN THOUSANDS)                                       FOR THE THREE MONTHS       FOR THE NINE MONTHS
                                                        ENDED SEPTEMBER 30,       ENDED SEPTEMBER 30,
-----------------------------------------------------------------------------------------------------
                                                       1997          1996         1997         1996
-----------------------------------------------------------------------------------------------------
 <S>                                                  <C>          <C>          <C>        <C>
 Noninterest Income:
 Gain on sale of loans                                 $ 26         $ 231        $ 512      $ 1,119
 Depositor service charges                              101            83          295          244
 Income from investment management services             198           174          600          500
 Gain on sale of securities                               -             -         (34)            -
 Gain on sale of assets                                 248             5          252           14
 Servicing fees on loans sold                            83            92          250          231
 Other                                                   68            90          249          342
-----------------------------------------------------------------------------------------------------
 Total                                                $ 724         $ 675      $ 2,124      $ 2,450
-----------------------------------------------------------------------------------------------------
(Income from RSC and RIA in these consolidated financial statements is included
in noninterest income.  A further discussion of RSC and RIA is set forth below.)

</TABLE>

    Noninterest income for the third quarter of 1997 increased by $49,000 or 
7.3% to $724,000 compared to $675,000 for the same period during 1996. The 
increase resulted primarily from the recognition of approximately $230,000 in 
income related to the deferred gain on the sale of the Company's headquarters 
building which was sold in the third quarter of 1995.  The recognition of the 
gain on sale of assets was partially offset by a decline in income related to 
the sale of loans of $205,000 related to the Company's decision to hold SBA 
loans originated in portfolio rather than sell them in the secondary market. 

     For the first nine months of 1997, noninterest income was $2,124,000, 
compared to $2,450,000 for the first nine months of 1996, a decrease of 
$326,000 or 13.3%.  This decline was primarily attributable to lower gains on 
sale of loans related to the decision to hold a larger portfolio of these 
loans in the Bank's loan portfolio rather than sell them for immediate gain 
and the one time gain from the sale of the Company's headquarters building. 
              
         LOAN ORIGINATION & SALES

         The Bank originates various types of loans that may be sold in 
active secondary markets.  Included in loans originated and sold are 
permanent mortgage loans, Business and Industry loans guaranteed by the 
United States Department of Agriculture ("USDA") and Small Business 
Administration ("SBA") loans.  The majority of loans available for sale are 
originated under the ("SBA") program which generally provides for SBA 
guarantees of 70% to 90% of each loan. Historically, the Bank has sold the 
guaranteed portion of the loan in the secondary market while retaining the 
unguaranteed portion of the loan as well as the ongoing servicing.  Income 
from the sale of the guaranteed portion is affected by the timing and volume 
of sales (when loans are funded 

                                      17

<PAGE>

and available for sale), as well as the premium paid in the secondary market. 
The premium paid in the secondary market is further affected by the rate and 
terms of the loan as well as the yield curve. 

         During the quarter ended September 30, 1997, the Company had no 
sales of SBA loans, choosing instead to hold a larger portfolio of the 
guaranteed portion of these loans in an effort to increase interest income.  
Income from the sale of other types of loans and income from the recognition 
of deferred gains on sale from loans sold in prior periods was $26,000 in the 
third quarter of 1997, a decrease of $205,000 compared to $231,000 in the 
third quarter of 1996.   For the nine months ended September 30, 1997, gain 
on the sale of loans was $512,000 compared to $1,119,000 during the first 
nine months of 1996, a decrease of $607,000. 

         An additional source of income related to the Bank's SBA loan 
origination activities is reflected in income from the ongoing servicing of 
loans sold.  During the third quarter ended September 30, 1997, servicing 
income totaled $83,000,  a decrease of $9,000 compared to $92,000 in 
servicing income during the quarter ended September 30, 1996.  For the nine 
months ended September 30, 1997, servicing income totaled $250,000, an 
increase of $19,000 compared to $231,000 during the first nine months of 
1996.  The servicing income increase for the first nine months of 1997 was 
the result of a larger portfolio of loans serviced.

         REGENCY SERVICE CORPORATION (RSC)

         The Bank's wholly owned subsidiary, Regency Service Corporation 
("RSC"), has engaged in real estate development activities since 1986. Such 
activities, which typically involve the acquisition, development and sale of 
residential real properties (but which sometimes involve the sale of 
properties prior to development), historically have been structured as 
limited partnerships in which RSC is the limited partner and local developers 
are the general partners.  Partnerships are accounted for under the equity 
method.

    Under FDIC regulations, banks were required to divest their real estate 
development investments as quickly as prudently possible but in no event 
later than December 19, 1996, and submit a plan to the FDIC regarding 
divestiture of such investments.  Such regulations also permitted banks to 
apply for the FDIC's consent to continue, on a limited basis, certain real 
estate development activities.

         In 1994, the Bank and RSC submitted a divestiture plan (the 
"Divestiture Plan") to the FDIC.  The Divestiture Plan provided for RSC to 
divest itself of all real estate development investments by year-end 1996; 
however, since RSC was a limited partner in the majority of its real estate 
development projects and, thus, did not control the operation of such 
projects, there was no assurance that such divestiture would occur by 
year-end 1996.  In December 1995, the Bank and RSC submitted a request to 
extend the mandatory time period in which it must divest of its real estate 
development interests.  In December 1996, the FDIC, responding to the Bank's 
request, granted the Bank and RSC a two year extension, until December 31, 
1998, to continue its divestiture activities.

                                      18

<PAGE>

         For the third quarter ended September 30, 1997, RSC generated income 
from investments in real estate in an amount of $21,000 compared to income of 
$12,000 for the same period in 1996.  During the third quarter of 1997, RSC 
sold 36 homes and lots and had entered into escrow or sales agreements for 
the sale of 190 additional homes and lots which are anticipated to close 
during the fourth quarter of 1997.  On a stand alone basis, RSC's activities 
(losses from the sale of properties, additions to RSC's provision for real 
estate losses and provision for credit losses, plus operating expenses), 
reduced the Company's overall pre-tax income by $331,000 in the third quarter 
of 1997 compared to a loss of $282,000 in the third quarter of 1996.  These 
operating expenses have been consolidated with similar operating expenses in 
the Company's consolidated statement of income.

         For the nine months ended September 30, 1997, RSC experienced a loss 
from investments in real estate partnerships in the amount of $3,569,000 
compared to a loss of $170,000 for the same period in 1996, an increase of 
$3,399,000. The increased loss resulted from the sale of properties at 
discounted prices, as well as the writedown of several properties to reflect 
RSC's anticipated sales proceeds.  For the nine months ended September 30, 
1997, on a stand alone basis, RSC's activities (including losses from the 
sale of properties, additions to RSC's provision for real estate losses and 
provision for credit losses, plus operating expenses), reduced the Company's 
overall pre-tax income by $5,246,000 compared to $1,053,000 in 1996.

         REGENCY INVESTMENT ADVISORS  (RIA)

         The Company's other wholly-owned subsidiary, Regency Investment 
Advisors ("RIA"), was formed in August 1993 through the acquisition by the 
Bank of the assets, including the client list, of a fee-only investment 
management and consulting firm. RIA provides investment management and 
consulting services, including comprehensive financial and retirement 
planning and investment advice, to individuals and corporate clients for an 
annual fee that varies depending upon the size of a client account.
    

         Revenue from RIA for the third quarter of 1997 increased to $198,000 
from $174,000 in the same period of 1996, an increase of $24,000 or 13.8%.  
On a stand alone basis, RIA's activities, (income from investment management 
activities less operating expenses), provided the Company with after-tax 
income of $29,000 in the third quarter of 1997 compared to after-tax income 
of $8,000 in the third quarter of 1996.  RIA's operating expenses have been 
consolidated with similar operating expenses in the Company's consolidated 
statement of income.

         For the nine months ended September 30, 1997, revenue from RIA 
increased to $600,000 from $500,000 for  the same period in 1996, an increase 
of $100,000 or  20.0%.  On a stand alone basis, RIA's activities (income from 
investment management activities less operating expenses), provided the 
Company with after-tax income of $77,000 for the nine months ended September 
30, 1997, compared to $12,000 for the same period in 1996. These operating 
expenses have been consolidated with similar operating expenses in the 
Company's consolidated statement of income.

         RIA's ability to generate and increase income comes, in large part, 
from the volume of assets under management. As of September 30, 1997, RIA had 
$86.2 million in assets under management, an increase of $13.7 million, or 
18.9% compared to $72.5 million as of September 

                                      19

<PAGE>

30, 1996.  Assets in client accounts managed by RIA are not reflected in the 
consolidated balance sheet of the Company.

    NONINTEREST  EXPENSE 

    Noninterest expense reflects the costs of products and services, systems, 
facilities and personnel for the Company.  The following tables set forth, 
for the period indicated, the major components of other operating expenses 
stated both as dollars and as a percentage of average assets:

    NONINTEREST OPERATING EXPENSE TO AVERAGE ASSETS

<TABLE>
<CAPTION>

-------------------------------------------------------------------------------------------------------------------
 (IN THOUSANDS, EXCEPT PERCENTAGES)
 FOR THE THREE MONTHS ENDED SEPTEMBER 30,                                 1997                     1996
-------------------------------------------------------------------------------------------------------------------
                                                                             Percent of                 Percent of
                                                                              Average                    Average
                                                                   Amount      Assets        Amount       Assets
-------------------------------------------------------------------------------------------------------------------
 <S>                                                              <C>        <C>            <C>         <C>
 Noninterest Expense:
 Loss (gain) from investments in real estate partnerships          $ (21)     (0.04%)       $ (12)       (0.03)%
 Salaries and related benefits                                      1,216       2.56%       1,154          2.76%
 Occupancy                                                            399       0.84%         438          1.05%
 FDIC insurance and regulatory assessments                             47       0.10%          15          0.04%
 Marketing                                                            102       0.21%         117          0.28%
 Professional services                                                 56       0.12%         178          0.43%
 Director's fees and expenses                                          44       0.09%          90          0.22%
 Management fees for real estate projects                               9       0.02%         126          0.30%
 Supplies, telephone & postage                                         78       0.16%          94          0.23%
 Other                                                                490       1.03%         171          0.41%
-------------------------------------------------------------------------------------------------------------------
 TOTAL                                                              2,420       5.09%      $2,371          5.69%
-------------------------------------------------------------------------------------------------------------------
</TABLE>

    For the third quarter ended September 30, 1997, noninterest expenses 
increased 2.1% or $49,000 to $2,420,000, up from $2,371,000 during the 
comparable period in 1996.  The principal causes of the increase were 
increases in salaries and related benefits of $62,000 and an increase in 
other expense of $319,000.  The increase in other expenses related primarily 
to the writedown of an OREO property and RSC related expenses.  In contrast, 
several expense categories showed marked improvement during the third quarter 
of 1997 compared to the same period in 1996, including professional services 
which declined primarily due to lower legal and accounting expense related to 
RSC and directors fees which declined as a result of reduced fees paid to 
directors for board and committee meetings.  For the third quarter ended 
September 30, 1997, noninterest expense to average assets declined to 5.09% 
compared to 5.69% for the comparable period in 1996.

                                      20

<PAGE>

     NONINTEREST OPERATING EXPENSE TO AVERAGE ASSETS 

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
 (IN THOUSANDS, EXCEPT PERCENTAGES)
 FOR THE NINE MONTHS ENDED SEPTEMBER 30,                 1997                        1996
------------------------------------------------------------------------------------------------------
                                                               Percent of                  Percent of
                                                                 Average                     Average
                                                   Amount        Assets        Amount        Assets
------------------------------------------------------------------------------------------------------
 <S>                                              <C>          <C>            <C>          <C>
 Noninterest Expense:
 Loss (gain) from investments in real estate 
   partnerships                                   $ 3,569         2.60%      $   170          0.14%
 Salaries and related benefits                      3,613         2.63%        3,340          2.72%
 Occupancy                                          1,213         0.88%        1,231          1.00%
 FDIC insurance and regulatory assessments             91         0.07%           47          0.04%
 Marketing                                            334         0.24%          328          0.27%
 Professional services                                334         0.24%          601          0.49%
 Director's fees and expenses                         220         0.16%          258          0.21%
 Management fees for real estate projects             121         0.09%          359          0.29%
 Supplies, telephone & postage                        241         0.18%          272          0.22%
 Other                                              1,035         0.75%          730          0.59%
------------------------------------------------------------------------------------------------------
 TOTAL                                             10,771         7.84%      $ 7,336          5.97%
------------------------------------------------------------------------------------------------------
</TABLE>

    For the nine months ended September 30, 1997, noninterest expenses 
increased 46.8% or $3,435,000 to $10,771,000, up from $7,336,000 during the 
comparable period in 1996.  The primary cause of  the increase was due to 
losses from RSC investments in real estate of $3,569,000.  When compared to 
average assets for the respective periods, other expenses increased to 7.84% 
versus 5.97% in 1996.  In addition to the loss from RSC, categories with an 
increase included salaries and related benefits, up $273,000 or 8.2%, 
primarily due to additional staff related to the Bank's new Madera branch, as 
well as commissions paid to staff on incentive based compensation programs; 
FDIC insurance and regulatory assessments, up $44,000 or 93.6%, primarily due 
to a larger deposit base and a higher assessment rate; and other expenses, up 
$305,000 or 41.2%, related to charges taken by RSC.  Expense categories 
showing improvement in the nine months ended September 30, 1997 compared to 
the nine months ended September 30, 1996 include professional services, down 
$267,000 or 44.4%, primarily due to lower legal and accounting expense 
related to RSC and management fees for real estate projects, down $238,000 or 
66.3%, primarily as a result of a restructured sales and building program 
initiated by RSC. 

    LOANS

    The Company's loans are primarily made within its defined market area of 
Fresno and Madera counties.  Additionally, the Company operates a loan 
production office in Modesto which generates SBA and Business & Industry 
loans.
         
    Commercial loans, including SBA loans, comprised approximately 56.1% of 
the Company's loan portfolio at September 30, 1997. These loans are generally 
to small and mid-size businesses and professionals. Commercial loans are 
diversified as to industries and types of business, with no material industry 
concentrations.  Most of these loans have floating rates with the majority 
tied to the national Prime Rate. The primary source of repayment on most 
commercial loans is cash flow from the primary business.   Additional 
collateral in the form of real estate, cash, 

                                      21

<PAGE>

accounts receivable, inventory or other financial instruments is often 
obtained as a secondary source of repayment.

    Real Estate Construction lending comprised 23.5% of the Company's loan 
portfolio at September 30, 1997,  consisting of loans primarily for the 
construction of single family residential housing. Loans in this category may 
be extended to the home buyer or to the developer.  Construction loans are 
secured by deeds of trust on the primary property.  Such loans also contain 
$5.0 million in loans RSC has made to its partnerships or to facilitate the 
sale of a project.  The majority of construction loans have floating rates 
tied to either the national Prime Rate or Regency Bank's Reference Rate.  A 
significant portion of the borrowers' ability to repay these loans is 
dependent on the residential real estate market, principally from the sale of 
the property.  In this regard, the Company's potential risks include a 
general decline in the value of the underlying property, as well as cost 
overruns or delays in the sale or completion of a property. 

    Real Estate Mortgage loans comprised 12.9% of the loan portfolio at 
September 30, 1997, and are made up of (63%) non-residential properties and 
(37%) single-family residential mortgages. The non-residential loans 
generally are "mini-perm" (medium-term) commercial real estate mortgages with 
maturities under seven years.  The residential mortgages are secured by first 
trust deeds and have varying maturities.  Both types of loans may have either 
fixed or floating rates. The majority are floating.  Risks associated with 
non-residential loans include the decline in value of commercial property 
values, economic conditions surrounding commercial real estate properties, 
and vacancy rates. The repayment of single-family residential mortgage loans 
is generally dependent on the income of the borrower from other sources; 
however, declines in the underlying property value may create risk in these 
loans.

    Consumer installment loans represented the remainder of the loan 
portfolio at September 30, 1997, comprising 7.5% of total loans.  This 
category includes traditional Consumer Installment Loans (53%), Home Equity 
Lines of Credit (39%), and Visa Card Loans (8%). Consumer installment loans 
are generally secured by third trust deeds on single-family residences, while 
Visa Cards are unsecured. 

    RISK ELEMENTS 

    The Company assesses and manages credit risk on an ongoing basis through 
stringent credit review and approval policies, extensive internal monitoring 
and established formal lending policies.  Additionally, the Bank contracts 
with an outside loan review consultant to periodically grade new loans and to 
review the existing loan portfolio.  Management believes its ability to 
identify and assess risk and return characteristics of the Company's loan 
portfolio is critical for profitability and growth.  Management strives to 
continue the historically low level of credit losses by continuing its 
emphasis on credit quality in the loan approval process, active credit 
administration and regular monitoring. With this in mind, management has 
designed and implemented a comprehensive loan review and grading system that 
functions to continually assess the credit risk inherent in the loan 
portfolio. Additionally, management believes its ability to manage portfolio 
credit risk is enhanced by the knowledge of the Bank's service area by the 
lending personnel and Board of Directors. 

                                      22

<PAGE>

    NONPERFORMING LOANS

    The Company's current policy is to cease accruing interest when a loan 
becomes 90-days past due as to principal or interest; when the full, timely 
collection of interest or principal becomes uncertain; or when a portion of 
the principal balance has been charged off, unless the loan is well secured 
and in the process of collection.  When a loan is placed on nonaccrual 
status, the accrued and uncollected interest receivable is reversed and the 
loan is accounted for on the cash or cost recovery method thereafter, until 
qualifying for return to accrual status.   Generally, a loan may be returned 
to accrual status when all delinquent interest and principal become current 
in accordance with the terms of the loan agreement or when the loan is both 
well secured and in process of collection.  

    At September 30, 1997, non-performing loans amounted to $2,013,000 or 
1.68% of total loans compared to $3,301,000 or 3.22% at December 31, 1996 and 
$3,524,000 or 3.43% at September 30, 1996.  Other real estate owned was 
$519,000 at September 30, 1997 compared to $437,000 at December 31, 1996.  Of 
the total non-performing loans, $1,370,000 represented loans RSC has made to 
facilitate the sale of former partnerships that have loan to value ratios 
higher than would normally be made by the Bank.  Without the non-accrual 
loans made by RSC, the Bank's loan portfolio at September 30, 1997 had 
$612,000 in non-accrual loans or .51%, compared to $51,000 in non-accrual 
loans or .05% at December 31, 1996.  Of the Bank's non-accrual loans 
(excluding RSC loans) at September 30, 1997, $470,000 represents the portion 
of SBA loans that are guaranteed by the SBA. Beginning in 1997, the SBA 
changed the requirements for Bank's originating SBA loans which are 
subsequently sold in the secondary market.  Under the new requirement, if a 
borrower defaults on an SBA guaranteed loan, the originating bank is required 
to buy the guaranteed portion back and hold it in its portfolio until 
collection efforts are exhausted.  While this guaranteed portion is backed by 
the full faith and credit of the U.S. government and poses little risk of 
loss to the Bank, the Bank does incur loss of the use of the funds while 
awaiting payoff from the SBA or other loan collateral.  Expense from the loss 
of use of the funds is expected to be minimal; however, due to this new 
requirement, it is expected that SBA non-accrual loan levels will be slightly 
higher.

                                      23

<PAGE>

     The following table presents information concerning the nonperforming 
loans for the periods ending September 30, 1997 and December 31, 1996, 
respectively.

    NONPERFORMING ASSETS

<TABLE>
<CAPTION>

-------------------------------------------------------------------------------------------------------------
 (IN THOUSANDS, EXCEPT PERCENTAGES)                      SEPTEMBER 30, 1997               DECEMBER 31, 1996
-------------------------------------------------------------------------------------------------------------
 <S>                                                     <C>                              <C>
 Nonperforming Assets:
 Nonaccrual RSC loans                                          $ 1,370                         $ 3,250
 Nonaccrual bank loans                                             612                              51
 Restructured loans                                                 31                               -
-------------------------------------------------------------------------------------------------------------
 Nonperforming loans                                             2,013                           3,301
 Other real estate owned                                           519                             437
-------------------------------------------------------------------------------------------------------------
 Total nonperforming assets                                      2,532                           3,738
-------------------------------------------------------------------------------------------------------------
 Accruing loans 90 days past due                                   184                              19
-------------------------------------------------------------------------------------------------------------
 Total loans before allowance for losses                       119,836                         102,458
 Total assets                                                  188,948                         181,058
 Allowance for possible credit losses                           (2,211)                         (1,615)
-------------------------------------------------------------------------------------------------------------
 Ratios:
 Nonperforming loans to total loans consolidated                  1.68%                           3.22%
 Nonperforming loans to total loans bank only 
   (excluding RSC loans)                                          0.51%                           0.05%
 Nonperforming assets to:
 Total loans                                                      2.11%                           3.65%
 Total loans and OREO                                             2.10%                           3.63%
 Total assets                                                     1.34%                           2.06%
 Allowance for possible credit losses to total
   nonperforming assets                                          87.32%                          43.20%
 Allowance for possible credit losses to loans                    1.85%                           1.58%
-------------------------------------------------------------------------------------------------------------
</TABLE>

    At September 30, 1997 and December 31, 1996, the Company's recorded 
investment in loans for which an impairment has been recognized totaled 
$273,000 and $242,000, respectively. These amounts were evaluated for 
impairment using the fair value of collateral.  At September 30, 1997, the 
related SFAS No. 114 allowance for credit losses considered impaired was 
$63,000. The Company uses the cash basis method of income recognition for 
impaired loans.  For the nine months ended September 30, 1997 and 1996, the 
Company did not recognize any income on such loans. 

    ALLOWANCE FOR CREDIT LOSSES

    The allowance for credit losses reflects management's judgment as to the 
level which is considered adequate to absorb potential losses inherent in the 
loan portfolio.  This allowance is increased by provisions charged to expense 
and reduced by loan charge-offs net of recoveries. Management determines an 
appropriate provision based on information currently available to analyze 
credit loss potential, including: (a) the loan portfolio growth in the 
period, (b) a comprehensive grading and review of new and existing loans 
outstanding, (c) actual previous charge-offs, and (d) changes in economic 
conditions. 

    The allowance for credit losses totaled $2,211,000 or 1.85% of total 
loans at September 30, 1997, compared to $1,615,000 or 1.58% at December 31, 
1996. The increase is the result of charge-offs net of recoveries of $699,000 
during the first nine months of 1997 with an additional provision for credit 
losses of $1,295,000.  It is the policy of management to maintain the 
allowance for credit losses at a level adequate for known and future risks 
inherent in the loan portfolio.  Based on information currently available to 
analyze credit loss potential, including economic factors, 

                                      24

<PAGE>

overall credit quality, historical delinquency and a history of actual 
charge-offs, management believes that the credit loss provision and allowance 
is adequate. However, no prediction of the ultimate level of loans 
charged-off in future years can be made with any certainty. 

    Following is a table presenting the activity within the Company's 
provision for credit losses for the period between December 31, 1996 and 
September 30, 1997.

----------------------------------------------------------------------------
 Balance,  December  31,  1996    (In thousands)                     $ 1,615
----------------------------------------------------------------------------
 Provision charged to expense                                          1,295
 Loans charged-off                                                      (820)
 Recoveries                                                              121
----------------------------------------------------------------------------
 Balance, September 30, 1997                                         $ 2,211
----------------------------------------------------------------------------


    INVESTMENTS IN REAL ESTATE

    The Company's investment in real estate consists of the Bank's investment 
of capital and retained earnings in RSC.  RSC is currently the sole owner of 
six projects and is a limited partner in two projects.  Included in the 
investments in real estate balance at September 30, 1997 are acquisition, 
development and construction loans held by the Bank totaling $275,000. The 
remaining investments in real estate balance of $8,636,000 represents RSC's 
investments in real estate.

    The following table represents the condensed financial information 
relative to RSC for the periods ended September 30, 1997 and December 31, 
1996, respectively. 

<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------
 (IN THOUSANDS)                                           SEPTEMBER 30, 1997      DECEMBER 31, 1996
----------------------------------------------------------------------------------------------------
 <S>                                                      <C>                     <C>
 Financial Position:
   Investments in real estate
     Real estate held-for-sale                                      $  8,700               $ 15,520
     Equity in partnerships                                              966                  2,070
----------------------------------------------------------------------------------------------------
   Investment in real estate before allowance                          9,666                 17,590
   Allowance for real estate losses                                   (1,030)                (1,310)
----------------------------------------------------------------------------------------------------
   Investment in real estate                                         $ 8,636               $ 16,280
----------------------------------------------------------------------------------------------------
   Loans to real estate partnerships and projects                      1,552                  3,988
   Allowance for loan  losses                                           (364)                  (110)
----------------------------------------------------------------------------------------------------
  Net Loans                                                            1,188                  3,878
----------------------------------------------------------------------------------------------------
  Other Assets                                                         1,889                  1,733
----------------------------------------------------------------------------------------------------
  Liabilities                                                           (387)                (6,219)
----------------------------------------------------------------------------------------------------
  Bank's investment in RSC                                          $ 11,326               $ 15,672
----------------------------------------------------------------------------------------------------

</TABLE>

<PAGE>

    FUNDING SOURCES

    Deposits represent the Bank's principal source of funds for investment. 
Deposits are primarily core deposits in that they are demand, savings, and 
time deposits generated from local businesses and individuals.  These sources 
are considered to be relatively more stable, long-term deposit relationships 
thereby enhancing steady growth of the deposit base without major 
fluctuations in overall deposit balances.   In order to assist in meeting its 
funding needs, the Bank maintains federal funds lines with correspondent 
banks in addition to using its investment portfolio to raise funds through 
repurchase agreements.  In addition, the Bank may, from time to time, obtain 
additional deposits through the use of brokered time deposits.  As of 
September 30, 1997, the Bank held no brokered time deposits and had no 
borrowings from correspondent banks against its federal funds lines.

    The following table presents the composition of the deposit mix for the 
period ending September 30, 1997 and December 31, 1996, respectively.

<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------------------
 (IN THOUSANDS)                                           SEPTEMBER 30, 1997              DECEMBER 31, 1996
----------------------------------------------------------------------------------------------------------------
                                                                     Percent of                     Percent of
                                                        Amount     Total Deposits       Amount    Total Deposits
----------------------------------------------------------------------------------------------------------------
 <S>                                                    <C>        <C>                 <C>        <C>
 Noninterest-bearing  transaction accounts              $ 41,204        23.5%          $ 36,613       22.9%

 Now and MMI                                              53,559        30.6%            47,850       29.9%
 Savings                                                  35,434        20.3%            25,540       16.0%
 Time $100,000 and over                                   27,280        15.6%            30,766       19.3%
 Time under $100,000                                      17,501        10.0%            19,033       11.9%
----------------------------------------------------------------------------------------------------------------
 Total  interest-bearing deposits                        133,774        76.5%           123,189       77.1%
----------------------------------------------------------------------------------------------------------------
 Total Deposits                                        $ 174,978       100.0%         $ 159,802      100.0%
----------------------------------------------------------------------------------------------------------------
</TABLE>

    LIQUIDITY

    Liquidity management refers to the Bank's ability to provide funds on an 
ongoing basis to meet fluctuations in deposit levels as well as the credit 
needs and requirements of its clients.  Both assets and liabilities 
contribute to the Bank's liquidity position.  Federal funds lines, short-term 
investments and securities, and loan repayments contribute to liquidity, 
along with deposit increases, while loan funding and deposit withdrawals 
decrease liquidity.  The Bank assesses the likelihood of projected funding 
requirements by reviewing historical funding patterns, current and forecasted 
economic conditions and individual client funding needs.  The Bank maintains 
a line of credit with a correspondent bank for up to $5,000,000 available on 
a short-term basis. Additionally, the Bank generally maintains a portfolio of 
SBA loans either available for sale or in its portfolio that could be sold 
should additional liquidity be required. 

<PAGE>

    INTEREST RATE SENSITIVITY 

    Interest rate sensitivity is a measure of the exposure to fluctuations in 
the Bank's future earnings caused by fluctuations in interest rates.  
Generally, if assets and liabilities do not reprice simultaneously and in 
equal volumes, the potential for such exposure exists.  It is management's 
objective to maintain stability in the net interest margin in times of 
fluctuating interest rates by maintaining an appropriate mix of interest 
sensitive assets and liabilities.  To achieve this goal, the Bank prices the 
majority of its interest-bearing liabilities at variable rates.  At the same 
time, the majority of its interest-earning assets are also priced at variable 
rates, the majority of which float with the Prime Rate.  This pricing 
structure tends to stabilize the net interest margin percentage earned by the 
Bank.  

    The following table sets forth the interest rate sensitivity and 
repricing schedule of the Company's interest-earning assets and 
interest-bearing liabilities, the interest rate sensitivity gap, the 
cumulative interest rate sensitivity gap, and the cumulative interest rate 
sensitivity gap ratio.

<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------------------------
                                                               NEXT DAY      AFTER THREE         AFTER
                                                             BUT WITHIN           MONTHS      ONE YEAR
 (IN THOUSANDS, EXCEPT PERCENTAGES)                               THREE       BUT WITHIN    BUT WITHIN          AFTER
 AS OF SEPTEMBER 30, 1997                     IMMEDIATELY        MONTHS        12 MONTHS    FIVE YEARS     FIVE YEARS          TOTAL
------------------------------------------------------------------------------------------------------------------------------------
 <S>                                          <C>            <C>              <C>           <C>            <C>            <C>
 Interest Rate Sensitivity Gap:
 Loans (1)                                         48,664        40,029         10,314         12,170          7,148        118,325
 Investment securities and other                      214        17,142          7,137          8,739          3,933         37,165
------------------------------------------------------------------------------------------------------------------------------------
 Total Earning Assets                            $ 51,378      $ 57,171       $ 17,451       $ 20,909       $ 11,081      $ 157,990
------------------------------------------------------------------------------------------------------------------------------------
 Interest-bearing transaction accounts             53,559                                                                    53,559
 Savings accounts                                  32,627         2,807                                                      35,434
 Time deposits                                          -        14,286         26,392          3,297            806         44,781
 Federal funds  purchased                               -                                                                         -
------------------------------------------------------------------------------------------------------------------------------------
 Total Interest-Bearing Liabilities              $ 86,186      $ 17,093       $ 26,392        $ 3,297          $ 806      $ 133,774
------------------------------------------------------------------------------------------------------------------------------------
 Interest rate sensitivity gap                    (34,808)       40,078         (8,941)        17,612         10,275
 Cumulative gap                                   (34,808)        5,270         (3,671)        13,941         24,216
 Cumulative gap percentage to
    interest earning assets                       (22.03%)         3.34%        (2.32%)          8.82%         15.33%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  Amounts exclude nonaccrual loans of $1,982,000.

    The above table indicates the time periods in which interest-earning 
assets and interest-bearing liabilities will mature or reprice in accordance 
with their contractual terms.  The table does not necessarily indicate the 
impact of general interest rate movements on the net interest margin since 
the repricing of various categories of assets and liabilities is subject to 
competitive pressures. Additionally, this table does not take into 
consideration changing balances in forward periods as a result of normal 
amortization, principle paydowns, changes in deposit mix or other such 
movements of funds as a result of changing interest rate environments.

                                      27

<PAGE>

    CAPITAL RESOURCES

    The Board of Governors of the Federal Reserve System and the FDIC have 
adopted risk-based capital guidelines for evaluating the capital adequacy of 
bank holding companies and banks.  The guidelines are designed to make 
capital requirements sensitive to differences in risk profiles among banking 
organizations, to take into account off-balance sheet exposures and to aid in 
making the definition of bank capital uniform internationally.  Under the 
guidelines, the Company and the Bank are required to maintain capital equal 
to at least 8.0% of its assets and commitments to extend credit, weighted by 
risk, of which at least 4.0%, must consist primarily of common equity 
(including retained earnings) and the remainder may consist of subordinated 
debt, cumulative preferred stock, or a limited amount of loan loss reserves.  
Assets, commitments to extend credit and off-balance sheet items are 
categorized according to risk and certain assets considered to present less 
risk than other permit maintenance of capital at less than the 8% ratio.

    The guidelines establish two categories of qualifying capital: Tier 1 
capital comprising core capital elements and Tier 2 comprising supplementary 
capital requirements.  At least one-half of the required capital must be 
maintained in the form of Tier 1 capital.  Tier 1 capital includes common 
shareholder's equity and qualifying perpetual preferred stock less intangible 
assets and certain other adjustments.  However, no more than 25% of the 
Company's total Tier 1 capital may consist of perpetual preferred stock.  The 
definition of Tier 1 capital for the Bank is the same, except that perpetual 
preferred stock may be included only if it is noncumulative.  Tier 2 capital 
includes, among other items, limited life (and in the case of banks, 
cumulative) preferred stock, mandatory convertible securities, subordinated 
debt and a limited amount of reserves for credit losses.

    The Board of Governors also adopted a 3.0% minimum leverage ratio for 
banking organizations as a supplement to the risk-weighted capital 
guidelines. The leverage ratio is generally calculated using Tier 1 capital 
(as defined under risk-based capital guidelines) divided by quarterly average 
net total assets (excluding intangible assets and certain other adjustments).

    The Board of Governors emphasized that the leverage ratio constitutes a 
minimum requirement for well-run banking organizations having diversified 
risk. Banking organizations experiencing or anticipating significant growth, 
as well as those organizations which do not exhibit the characteristics of a 
strong, well-run banking organization above, will be required to maintain 
minimum capital ranging generally from 100 to 200 basis points in excess of 
the leverage ratio.  The FDIC adopted a substantially similar leverage ratio 
for state non-member banks.

                                      28

<PAGE>

The table below presents the Company's and the Bank's risk-based and leverage 
capital ratios as of September 30, 1997. 

<TABLE>
<CAPTION>
                                                                                                 TO BE ADEQUATELY
                                                                                                 CAPITALIZED UNDER
                                                                      FOR  CAPITAL ADEQUACY      PROMPT CORRECTIVE
(IN THOUSANDS, EXCEPT PERCENTAGES)                    ACTUAL                 PURPOSES            ACTION PROVISIONS
---------------------------------------------------------------------------------------------------------------------
AS OF  SEPTEMBER 30, 1997                        AMOUNT      RATIO       AMOUNT      RATIO       AMOUNT      RATIO
---------------------------------------------------------------------------------------------------------------------
<S>                                             <C>          <C>       <C>        <C>           <C>          <C>
Total Capital (to Risk Weighted Assets:)
         Company                                $12,668      9.42%     >=$10,761   >=8.00%               N/A
         Regency Bank                           $12,293      9.18%     >=$10,709   >=8.00%      >=$ 10,709   >=8.00%

Tier 1 Capital (to Risk Weighted Assets):
         Company                                $10,980      8.16%     >=$ 5,380   >=4.00%               N/A
         Regency Bank                           $10,613      7.93%     >=$ 5,354   >=4.00%      >=$ 5,354    >=4.00%

Tier 1 Capital (to Average Assets):
         Company                                $ 10,980     5.87%     >=$ 7,481   >=4.00%               N/A
         Regency Bank                           $ 10,613     5.68%     >=$ 7,474   >=4.00%      >=$ 7,474    >=4.00%
---------------------------------------------------------------------------------------------------------------------

</TABLE>

    As indicated in the table above, at  September 30, 1997, the Company's 
and Bank's capital ratios are considered "Adequately Capitalized" by current 
standards of the prompt corrective action provision of the FDICIA described 
below.

    On December 19, 1991, the President signed the Federal Deposit Insurance 
Corporation Improvement Act of 1991 ("FDICIA").  The FDICIA, among other 
matters, substantially revised banking regulations and established a 
framework for determination of capital adequacy of financial institutions.  
Under the FDICIA, financial institutions are placed into one of five capital 
adequacy categories as follows: (1) "Well capitalized" - consisting of 
institutions with a total risk-based capital ratio of 10% or greater, a Tier 
1 risk-based capital ratio of 6% or greater, and a leverage ratio of 5% or 
greater, and the institution is not subject to an order, written agreement, 
capital directive or prompt corrective action directive; (2) "Adequately 
capitalized" - consisting of institutions with a total risk-based capital 
ratio of 8% or greater, a Tier 1 risk-based capital ratio of 4% or greater 
and a leverage ratio of 4% or greater, and the institution does not meet the 
definition of a "well capitalized" institution; (3) "Undercapitalized" - 
consisting of institutions with a total risk-based capital ratio less than 
8%, a Tier 1 risk-based capital ratio of less than 4%, or a leverage ratio of 
less than 4%; (4) "Significantly undercapitalized" - consisting of 
institutions with a total risk-based capital ratio of less than 6%, a Tier 1 
risk-based capital ratio of less than 3%, or a leverage ratio of less than 
3%; (5) "Critically undercapitalized" - consisting of an institution with a 
ratio of tangible equity to total assets that is equal to or less than 2%.

    Financial institutions classified as undercapitalized or below are 
subject to various limitations including, among other matters, certain 
supervisory actions by bank regulatory authorities and restrictions related 
to (i) growth of assets, (ii) payment of interest on subordinated 
indebtedness, (iii) payment of dividends or other capital distributions, and 
(iv) payment of management fees to a parent holding company.  The FDICIA 
requires the bank regulatory authorities to initiate corrective action 
regarding financial institutions which fail to meet minimum 

                                      29

<PAGE>

capital requirements.  Such action may be taken in order to, among other 
matters, augment capital and reduce total assets.  Critically 
undercapitalized financial institutions may also be subject to appointment of 
a receiver or conservator unless the financial institution submits an 
adequate capitalization plan.

    RETURN ON EQUITY AND ASSETS

    The following table sets forth the ratios of net income to average assets 
and average shareholders' equity, and average shareholders' equity to average 
assets.  Also indicated is the Company's dividend payout ratio.  (For 
purposes of calculating average shareholders' equity as used in these ratios, 
unrealized losses on the Company's available-for-sale securities portfolio 
have been included and the percentages shown have been annualized).

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
                                             FOR THE THREE MONTHS   FOR THE NINE MONTHS 
                                              ENDED SEPTEMBER 30,    ENDED SEPTEMBER 30, 
--------------------------------------------------------------------------------------------
                                                1997       1996        1997       1996
--------------------------------------------------------------------------------------------
<S>                                            <C>        <C>        <C>          <C>
 Return on average assets                       .63%       0.68%      (1.17%)      0.69%
--------------------------------------------------------------------------------------------
 Return  on average shareholders' equity       9.58%       8.51%     (16.04%)      8.46%
--------------------------------------------------------------------------------------------
 Average  shareholders' equity to
 average assets                                6.62%       7.94%       7.28%       8.10%
--------------------------------------------------------------------------------------------
 Dividend payout ratio                         0.00%      38.68%       0.00%      38.87%
--------------------------------------------------------------------------------------------

</TABLE>

                                      30

<PAGE>


PART II        OTHER INFORMATION


    ITEM 1.    LEGAL PROCEEDINGS
                   None

    ITEM 2.    CHANGES IN SECURITIES
                   None

    ITEM 3.    DEFAULTS UPON SENIOR SECURITIES
                   None

    ITEM 4.    SUBMISSION OF MATTER TO VOTE OF SECURITY HOLDERS
                   None
                   
    Item 5.    OTHER INFORMATION
                   None

    ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

    
              (a) Exhibits


    *(10.1)   Amended and Restated Executive Salary Continuation Agreement
              dated September 23, 1997, made by and between Regency Bank and
              Steven F. Hertel,   incorporated by reference from exhibit 99.1
              of the Form 8-K, filed with the Commission on October 9, 1997.  
         
    *(10.2)   Amended and Restated Executive Salary Continuation Agreement
              dated September 26, 1997, made by and between Regency Bank and
              Robert J. Longatti, incorporated by reference from exhibit 99.2
              of the Form 8-K, filed with the Commission on October 9, 1997.  
    
    *(10.3)   Amended and Restated Executive Salary Continuation Agreement
              dated September 30, 1997, made by and between Regency Bank and
              Steven R. Canfield, incorporated by reference from exhibit 99.3
              of the Form 8-K, filed with the Commission on October 9, 1997.  
                   
      (27.1)  Financial Data Schedule

    * Denotes management contracts, compensatory plans or arrangement.

                                      31

<PAGE>

        (b) Reports on Form 8-K 

              The Company filed a Form 8-K dated October 9, 1997, in which it
              reported that on October 6, 1997, the Registrant Amended and
              Restated the Executive Salary Continuation Agreements between
              Regency Bank and Steven F. Hertel, Robert J. Longatti and Steven
              R. Canfield.   
         



                                      32


<PAGE>


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




                                         REGENCY BANCORP



Date: November 7, 1997                 By:  /s/ Steven F. Hertel
     --------------------------------     ------------------------------
                                           Steven F. Hertel
                                           President and Chief Executive Officer
                                           (Principal Executive Officer)



Date: November 7, 1997                 By:  /s/ Steven R. Canfield
     --------------------------------     ------------------------------
                                           Steven R. Canfield
                                           Executive Vice President and
                                           Chief Financial Officer (Principal
                                           Financial and Accounting Officer)



                                      33

<PAGE>





                                    EXHIBIT INDEX
                                           
                                           
Exhibit                                                           Sequential
Number                              Description                   Page Number

  27.1                       Financial Data Schedule                 35






                                      34