<PAGE>

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

                   QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                  For Quarterly Period Ended September 30, 1998

                         Commission file number 2-76555

                            ELDORADO BANCSHARES, INC.
                            -------------------------
             (Exact name of registrant as specified in its charter)

                        DELAWARE                   33-0720548
                        --------                   ----------
          (State or other jurisdiction of      (I.R.S. Employer or
          incorporation or organization)       Identification No.)

       24012 Calle de la Plata, Suite 150, Laguna Hills, California   92653 
       ------------------------------------------------------------   -----
         (Address of principal executive offices)                  (Zip Code)

                                 (949) 699-4344
                                 --------------
                           (Issuer's telephone number)

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 such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X]   No [ ]

APPLICABLE ONLY TO CORPORATE ISSUERS:

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

Common Stock, $.01 par value            9,173,698 shares outstanding on November
                                        14, 1998 (restated to reflect the
                                        one-for-two reverse split effective
                                        September 4, 1998)

<PAGE>


                            ELDORADO BANCSHARES, INC.
                     U.S. SECURITIES AND EXCHANGE COMMISSION
                                    FORM 10-Q

                                      INDEX

                                                                           Page

Part I - Financial Information

   Item 1. Financial Statements

         Condensed Consolidated Statements of Condition -                     3
         September 30, 1998 and December 31, 1997

         Condensed Consolidated Statements of Operations                      5
         For the three and six months ended September 30, 1998 and 1997

         Condensed Consolidated Statements of Cash Flows -                    6
         For the six months ended September 30, 1998 and 1997

         Notes to the Condensed Consolidated Financial Statements             8

    Item 2. Management's Discussion and Analysis or Plan of Operation        10

    Item 3. Qualitative and Quantitative Disclosure about Market Risk        28


                                      2


<PAGE>

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                         ELDORADO BANCSHARES, INC.
                             AND SUBSIDIARIES
             CONDENSED CONSOLIDATED STATEMENTS OF CONDITION
                SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
                         (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                      SEPTEMBER 30,
                                                           1998          DECEMBER 31,
                                                       (UNAUDITED)           1997
                                                    ----------------     ------------
<S>                                                <C>                  <C>

ASSETS
Cash and due from banks                            $     205,191         $   81,030
Federal funds sold                                                           40,000
                                                    ----------------     ------------
   Total cash and cash equivalents                       205,191            121,030

Available-for-sale investment securities                 102,250             67,295

Mortgage loans held for sale                             169,282             96,230
Loans and leases, net of unearned income                 514,405            519,048
   Less allowance for loan and lease loss                (8,126)            (9,395)
                                                    ----------------     ------------
      Loans, net                                         675,561            605,883

Loan and servicing sale receivable                         3,855              1,247
Premises and equipment, net                                9,686             11,232
Real estate acquired through foreclosure, net              1,321              2,740
Intangibles arising from acquisitions, net                64,386             66,769
Accrued interest receivable and other assets              28,094             26,159
                                                    ----------------     ------------
Total assets                                        $  1,090,344         $  902,355
                                                    ----------------     ------------
                                                    ----------------     ------------

</TABLE>

            See notes to condensed consolidated financial statements.



                                      3
<PAGE>

                                ELDORADO BANCSHARES, INC.
                                    AND SUBSIDIARIES
             CONDENSED CONSOLIDATED STATEMENTS OF CONDITION (CONTINUED)
                        SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
                                  (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                             SEPTEMBER 30,
                                                                  1998            DECEMBER 31,
                                                              (UNAUDITED)             1997
                                                             ----------------     -------------
<S>                                                          <C>                  <C>

Liabilities and Shareholders' Equity
Deposits:
   Demand:
      Non-interest bearing                                         267,555             289,344
      Interest bearing                                             101,742              97,416
   Savings:
      Regular                                                      208,505              98,465
      Money market                                                  89,607              98,189
   Time:
      Under $100,000                                               153,948              99,713
      $100,000 or more                                             117,826              82,076
                                                             ----------------     -------------
         Total deposits                                            939,183             765,203

Federal funds purchased                                              4,612               2,050
Due to related parties
Accrued expenses and other liabilities                              18,336              12,172
Mandatory convertible debentures                                       405                 537
Subordinated debentures                                             27,657              27,657
                                                             ----------------     -------------
         Total liabilities                                         990,193             807,619

Shareholders' equity:
   Preferred stock, $.01 par value, 1,500,000 shares
      authorized, 116,593 issued and outstanding at
      September 30, 1998                                            11,659              11,659
   Special common stock, $.01 par value, 9,651,600
      shares authorized, 2,412,859 issued and outstanding
      at September 30, 1998                                             92                  24
   Common stock, $.01 par value, 50,000,000
      shares authorized, 6,760,840 issued and
      outstanding at a September 30, 1998                                                   68
   Additional paid-in capital                                       83,946              83,946
   Retained earnings                                                 5,081                 524
   Unearned compensation                                            (1,132)             (1,509)
   Accumulated other comprehensive income (loss)                       505                  24
                                                             ----------------     -------------
Total shareholders' equity                                         100,151              94,736

                                                             ----------------     -------------
Total liabilities and shareholders' equity                       1,090,344             902,355
                                                             ----------------     -------------
                                                             ----------------     -------------
</TABLE>

            See notes to condensed consolidated financial statements.


                                       4
<PAGE>




                            ELDORADO BANCSHARES, INC.
                                AND SUBSIDIARIES

              CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS 
         THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
                (DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                           THREE MONTHS ENDED                    NINE MONTHS ENDED
                                                              SEPTEMBER 30,                        SEPTEMBER 30,
                                                   -----------------------------------  ------------------------------------
                                                        1998               1997               1998               1997
                                                   ----------------   ----------------  -----------------  -----------------
<S>                                                <C>                  <C>             <C>                <C>


    Interest and fee income on loans                        14,854             13,527             46,342             28,990
    Income from lease finance receivables                    1,870                942              4,452              3,110
    Interest and dividend income on securities               1,317              1,927              3,236              3,620
    Interest income on federal funds sold                    1,325                410              1,645              1,124
                                                   ----------------   ----------------  -----------------  -----------------
       Total interest and fee income                        19,366             16,806             55,675             36,844

    Interest on deposits                                     7,442              5,631             18,992             13,005
    Interest on federal funds purchased                        262                 86              1,159                233
    Interest on subordinated notes                             830                836              2,488              1,070
                                                   ----------------   ----------------  -----------------  -----------------
       Total interest expense                                8,534              6,553             22,639             14,308

    Net interest income                                     10,832             10,253             33,036             22,536

    Provision for loan and lease losses                        700                358              2,622              1,087

    Net interest income after provision
      for loan and lease losses                             10,132              9,895             30,414             21,449

    Service charges on deposit accounts                        782                830              2,563              1,490
    Gain on sale of mortgage loans                           4,336              2,457             12,049              7,664
    Other non-interest income                                1,244                  7              3,112                977
                                                   ----------------   ----------------  -----------------  -----------------
       Total non-interest income                             6,362              3,294             17,724             10,131

    Salaries and employee benefits                           5,509              4,471             15,966             11,121
    Expenses of premises & fixed assets                      1,933              1,889              5,437              4,380
    Amortization of intangibles                                975                826              2,714              1,386
    Other non-interest expense                               4,180              3,612             12,958             10,835
                                                   ----------------   ----------------  -----------------  -----------------
       Total non-interest expense                           12,597             10,798             37,075             27,722

    Income before taxes and other                            3,897              2,391             11,063              3,858
    Applicable income taxes                                  1,806              1,318              5,549              2,230
                                                   ----------------   ----------------  -----------------  -----------------
    Net income                                     $         2,091    $         1,073   $          5,514   $          1,628
                                                   ----------------   ----------------  -----------------  -----------------
                                                   ----------------   ----------------  -----------------  -----------------


    Net income available to common                 $         1,771    $           750   $          4,558   $          1,220
    Earnings per share (basic)                     $          0.19    $          0.08   $           0.50   $           0.18
    Earnings per share (dilutive)                  $          0.18    $          0.08   $           0.46   $           0.17

</TABLE>

            See notes to condensed consolidated financial statements.


                                       5

<PAGE>

                            ELDORADO BANCSHARES, INC.
                                AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
              FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                 NINE MONTHS ENDED SEPTEMBER 30,
                                                                            ------------------------------------------
                                                                                   1998                  1997
                                                                            -------------------   --------------------
                                                                                     (Dollars in thousands)

<S>                                                                           <C>                  <C>
OPERATING ACTIVITIES:

Net income                                                                     $     5,514         $   1,628
Adjustments to reconcile net income to net cash 
(used in) provided by operating activities:
   Provision for loan and lease losses                                               2,622             1,176
   (Gain) loss on sale of investment securities                                          9
   Gain on sale of mortgage loans                                                1,250,523            (5,013)
   (Gain) loss on sale of premises and equipment                                       (10)               15
   Loss on sale of real estate owned                                                   303                55
   Depreciation and amortization                                                     4,267             2,676
   Accretion/amortization related to securities                                       (896)              246
   Mortgage loans originated for sale                                           (1,306,103)         (627,993)
   Proceeds from sales of loans and servicing                                      (10,767)          634,061
   Equity in  loss of real estate joint venture                                                          250
   Decrease (increase) in servicing sale receivable                                 (1,241)          (46,009)
   Other, net                                                                        3,391           (10,190)
                                                                               -----------         ---------
Net (used in) provided by operating activities                                     (52,397)          (49,089)

INVESTING ACTIVITIES:

Decrease in interest bearing deposits with other financial institutions
Purchase of investment securities                                                 (123,733)          (17,016)
Proceeds from sales and maturities of investment securities                         90,117            49,724
Loans/Leases originated for portfolio net of principal repayment                    (6,149)          (10,584)
Purchase of premises and equipment                                                  (1,217)             (722)
Proceeds from sale of premises and equipment                                         1,220                12
Proceeds from sales of real estate acquired through foreclosure                      1,818             2,824
Capital expenditures for other real estate owned                                                      (3,064)
Purchase of Eldorado Bank, net of cash received                                                      (46,477)
                                                                               -----------         ---------
Net cash (used in) provided by investing activities                                (37,944)          (25,303)

</TABLE>

            See notes to condensed consolidated financial statements.


                                       6
<PAGE>

                            ELDORADO BANCSHARES, INC.
                                AND SUBSIDIARIES
           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
              FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                    NINE MONTHS ENDED SEPTEMBER 30,
                                                               ------------------------------------
                                                                    1998                  1997
                                                               ---------------       ---------------
                                                                         (Dollars in thousands)
<S>                                                            <C>                   <C>

    FINANCING ACTIVITIES

    Net increase in deposits                                          173,980           75,439
    Issuance of subordinated debentures                                                 27,657
    Issuance of preferred stock preferred stock                                         11,659
    Issuance of common stock                                                            18,004
    Issuance of  special common stock                                                   25,224
    Payment of dividends                                                (433)            (408)
    Repayment of notes payable                                                         (4,500)
    Net increase (decrease) in other borrowings                         2,430          (6,120)
                                                               ---------------   --------------
    Net cash provided by financing activities                         175,977          146,955

    INCREASE IN CASH AND CASH EQUIVALENTS                              85,636           72,563
    CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                    121,030           46,222
                                                               ---------------   --------------
    CASH AND CASH EQUIVALENTS, END OF PERIOD                   $      206,666     $    118,785
                                                               ---------------   --------------
                                                               ---------------   --------------


    Supplemental disclosures of cash flow information:

       Cash paid for Interest on deposits                              12,432           10,221
       Cash paid for Income taxes                                       1,610              895


</TABLE>

            See notes to condensed consolidated financial statements.

                                       7


<PAGE>

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

BASIS OF PRESENTATION

         The preparation of financial statements in conformity with generally 
accepted accounting principles requires management to make estimates and 
assumptions that effect the reported amounts of assets and liabilities and 
disclosure of contingent assets and liabilities at the date of the financial 
statements and reported amounts of revenue and expenses during the reporting 
period. Actual results could differ from those estimates. The accompanying 
financial information for Eldorado Bancshares, Inc. ("ELBI" or the "Company") 
has been prepared in accordance with the Securities and Exchange Commission 
rules and regulations for quarterly reporting and therefore does not 
necessarily include all information and footnote disclosures normally 
included in financial statements prepared in accordance with generally 
accepted accounting principles. The interim financial data is unaudited; 
however, in the opinion of management, the interim data includes all 
adjustments, consisting only of normal recurring adjustments, necessary for a 
fair statement of the results for the interim periods. Certain 
reclassifications have been made in the 1997 financial information to conform 
to the presentation used in 1998. Results for the period ending September 30, 
1998 are not necessarily indicative of results which may be expected for any 
other interim period or for the year as a whole. The information contained in 
this report should be read in conjunction with the Annual Report of ELBI on 
Form 10-K for the year ended December 31, 1997 and in particular the 
footnotes to the audited financial statements included therewith.

RISKS AND UNCERTAINTIES

         In the normal course of its business, the Company encounters two 
significant types of risk: economic and regulatory. Economic risk is 
comprised of three components - interest rate risk, credit risk and market 
risk. The Company is subject to interest rate risk to the degree that its 
interest-bearing liabilities mature and reprice at different speeds, or on a 
different basis, than its interest-bearing assets. Credit risk is the risk of 
default on the Company's loan portfolio that results from the borrower's 
inability or unwillingness to make contractually required payments. Market 
risk results from changes in the value of assets and liabilities which may 
impact, favorably or unfavorably, the realizability of those assets and 
liabilities.

         The Company is subject to the regulations of various governmental 
agencies. These regulations can and do change significantly from period to 
period. The Company is also subject to periodic examinations by the 
regulatory agencies, which may subject it to changes in asset valuations, in 
amounts of required loss allowances and in operating restrictions resulting 
from the regulators' judgments based on information available to them at the 
time of their examination.

EARNINGS PER COMMON SHARE

         The actual number of common shares outstanding at September 30, 1998 
was 9,173,699. Basic earnings per share is computed by dividing net income 
less dividends paid to preferred shareholders by the weighted average number 
of common shares outstanding during the period. Diluted earnings per share is 
computed by dividing net income less dividends paid to preferred shareholders 
plus the income impact of diluted securities by the common shares outstanding 
plus diluted common stock equivalents by using the treasury stock method.

         At September 30, 1998, the Company had outstanding common stock 
purchase warrants entitling the holders to purchase a total of 2,241,217 
shares of common stock and stock options entitling the holder to purchase a 
total of 350,213 shares of common stock. Lacking an active market for its 
shares, the Company assumed a weighted average per share price in computing 
the diluted impact of the outstanding warrants and options of $8.00 for the 
three and nine months ended September 30, 1998.

         At September 30, 1997, the Company had outstanding common stock 
purchase warrants entitling the holders to purchase a total of 2,241,217 
shares of common stock. There were granted but no exercisable stock options 
outstanding at September 30, 1997. Lacking an active market for its shares, 
the Company assumed a weighted average per share price in computing the 
dilutive impact of the outstanding warrants and options of $12.00 for the 
three and nine months ended September 30, 1997.



                                       8

<PAGE>


         The weighted average number of common shares used to compute basic
earnings per share were 9,173,699 and 9,385,790 for the three months ended
September 30, 1998 and 1997, respectively and 9,173,699 and 6,776,556 for the
nine months ended September 30, 1998 and 1997, respectively. The fully diluted
average number of common shares used to compute dilutive earnings per share were
9,963,371 and 9,830,298 for the three months ended September 30, 1998 and 1997,
respectively and 9,963,371 and 9,830,298 for the nine months ended September 30,
1998 and 1997, respectively. Net income was not adjusted in the calculation of
dilutive earnings per share.

COMPREHENSIVE INCOME

         Effective January 1998, the Company adopted Statement of Financial 
Accounting Standards No. 130, "Reporting Comprehensive Income". This 
statement requires that all items recognized under accounting standards as 
components of comprehensive income be reported in an annual financial 
statement that is displayed with the same prominence as other annual 
financial statements. This Statement also requires that an entity classify 
items of other comprehensive income by their nature in an annual financial 
statement. For example, other comprehensive income may include foreign 
currency translation adjustments, minimum pension liability adjustments, and 
unrealized gains and losses on marketable securities classified as 
available-for-sale. Annual financial statements for prior periods will be 
reclassified, as required. The Company's total comprehensive income were as 
follows:












                                       9


<PAGE>


<TABLE>
<CAPTION>

                                                               (dollars in thousands)
                                           THREE MONTHS ENDED                          NINE MONTHS ENDED
                                              SEPTEMBER 30,                              SEPTEMBER 30,
                                     -----------------------------------   ------------------------------------
                                            1998               1997               1998                1997
                                     ----------------    --------------    ----------------    ----------------
<S>                                  <C>                 <C>                <C>                <C>
Net income                           $         2,091     $        1,073    $         5,514     $         1,628
Comprehensive income                             564                128                505                 152
                                     ----------------    ---------------   ----------------    ----------------
   Total comprehensive income        $         2,655     $        1,201    $         6,019     $         1,780
                                     ----------------    --------------    ----------------    ----------------
</TABLE>


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

INTRODUCTION

         This information should be read in conjunction with the consolidated 
financial statements and the notes thereto of Eldorado Bancshares Inc. 
("ELBI" or the "Company") included in Item 1 of this Quarterly Report and the 
audited consolidated financial statements and notes thereto and Management 
Discussion and Analysis of Financial Condition and Results of Operations for 
the year ended December 31, 1997 contained in the 1997 Annual Report of ELBI 
on Form 10-K.

         Except for the historical information contained herein, the 
following discussion contains forward looking statements that involve risks 
and uncertainties. ELBI's actual results could differ materially from those 
discussed here. Factors that could cause or contribute to such differences 
include, but are not specifically limited to, changes in regulatory climate, 
shifts in interest rate environment, change in economic conditions of various 
markets ELBI serves, as well as the other risks detailed in this section, and 
in the sections entitled Results of Operations, Capital Resources and 
Liquidity and Interest Sensitivity, and those discussed in ELBI's Form 10-K 
for the year ended December 31, 1997, including without limitation those 
sections entitled Supervision and Regulation, Capital Resources and Liquidity.

         Prior to September 1995, the predecessor to the Company, SDN 
Bancorp, Inc., owned a single bank, San Dieguito National Bank ("San 
Dieguito"), with approximately $56 million in assets that was categorized as 
"critically undercapitalized" by federal regulators. In September 1995, the 
Company was recapitalized by DCG, a limited partnership controlled by Mr. 
Keller and a majority of the other directors of the Company. Between 
September 1995 and June 30, 1997, the Company acquired three banks; Liberty 
National Bank ("Liberty"), Commerce Security Bank ("CSB") and Eldorado Bank, 
increasing the Company's tangible assets by $779 million. The Company 
completed its most recent acquisition Eldorado Bancorp and its subsidiary 
bank Eldorado Bank (the "Eldorado Acquisition") in June 1997, which increased 
the Company's assets by approximately $404 million. The Liberty acquisition 
was completed as of March 31, 1996, and the CSB acquisition was completed as 
of September 1, 1996. Each of those acquisitions was accounted for using the 
purchase method of accounting for business combinations, and therefore the 
operating results of those banks are reflected in the Company's financial 
statements only from the date of acquisition. Consequently, the 
period-to-period comparisons for the nine months ended September 30, 1998 and 
1997 are affected by the timing of those acquisitions.

         Within the recent past, CSB, Eldorado Bank, Liberty and San Dieguito 
were adversely affected by a variety of factors, including high levels of 
nonperforming assets, reliance on high-cost brokered deposits and excessive 
overhead costs. The high levels of nonperforming assets and related overhead 
costs were partly attributable to adverse economic conditions, including 
declining real estate values that California experienced during the earlier 
part of this decade.

         Effective June 30, 1997, the Company merged San Dieguito, Liberty, 
CSB and Eldorado Bank into a single bank (the "Bank"), which is known as 
Eldorado Bank. The Company owns 100% of the Bank, which now is the Company's 
only banking subsidiary and its principal asset.

         Contained within this document are various measures of financial 
performance that have been calculated excluding the amortization of 
intangibles. These measures are identified as "excluding goodwill 
amortization" and have been provided to assist the reader in evaluating the 
core performance of the Company. This presentation is not defined by 
Generally Accepted Accounting Principles ("GAAP"), but management believes it 
to be beneficial to gaining an understanding of the Company's financial 
performance in comparison to its peer group.


                                      10


<PAGE>


              FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997

OVERVIEW

         To the extent that the following discussion relates to the operating 
results of the Company during the nine months ended September 30, 1997, it 
includes the results of only four months of operations of Eldorado Bank. In 
most of the Company's income and expense categories and with respect to the 
Company's net income, the increases in the amounts reported for nine months 
ended September 30, 1998 compared to the same period of 1997 resulted from 
the Eldorado Acquisition. Other significant factors affecting the Company's 
results of operations and financial condition are described in the applicable 
sections below.

         The Company had net income of $5.5 million for the nine months ended 
September 30, 1998. This represents an increase of $3.9 million, or 238.70%, 
over net income of $1.6 million for the nine months ended September 30, 1997. 
Basic net income per share for the nine months ended September 30, 1998 was 
$.50 compared to $.18 for the nine months ended September 30, 1997. Diluted 
net income per share for the nine months ended September 30, 1998 was $.46 
compared to $.17 for the nine months ended September 30, 1997. Excluding the 
amortization of goodwill and other intangibles, basic and diluted earnings 
per share for the nine months ended September 30, 1998 were $.79 and $.73, 
respectively, compared to $.38 and $.36 for the same period of 1997. The 
Company's return on average assets was .74% and a return on average common 
equity was 7.60% for the nine months ended September 30, 1998, as compared to 
 .34% and 3.37%, respectively, for the nine months ended September 30, 1997. 
Excluding the amortization of goodwill and other intangibles, return on 
average assets was 1.11% and return on average common equity was 11.34% for 
the nine months ended September 30, 1998, as compared to .63% and 6.23%, 
respectively, for the nine months ended September 30, 1997.


RESULTS OF OPERATIONS

         The Company's results of operations depend primarily on the Bank's 
net interest income, which is the difference between interest and dividend 
income on interest-earning assets and interest expense on interest-bearing 
liabilities. The Bank's interest-earning assets consist primarily of loans 
and investment securities, while its interest-bearing liabilities are 
deposits and borrowings. The Company's results of operations are also 
affected by the Bank's provision for loan and lease losses, resulting from 
management's assessment of the adequacy of the Bank's allowance for loan and 
lease losses, the level of its other income, including fee income from the 
origination of mortgage loans, the level of its other expenses, such as 
compensation and employee benefits, occupancy costs, expenses associated with 
the administration of problem assets, and income taxes.

         The increase in net income for the nine months ended September 30, 
1998, compared to the same nine month period of 1997 was the result of an 
increases in both interest income and non-interest income. The increase in 
interest income was the result of an increase in the level of interest 
earning assets. The increase in the level of earning assets was due in part 
to the assets purchased in the acquisition of Eldorado which are included for 
the full nine months ended September 30, 1998 and only four months of the 
nine months ended September 30, 1997. The increase in non-interest income was 
a result of an increase in the volume of mortgage loans originated and sold 
and an increase in service charges and fees.

         The increase in revenue was partially offset by increases in 
interest expense, the provision for loan losses, and other operating 
expenses. The increase in interest expense was the result of both a greater 
volume and cost of average interest paying liabilities. The increase in the 
volume of interest bearing liabilities assets was affected by the Eldorado 
acquisition. The increase in the cost of average interest bearing liabilities 
reflects a greater reliance on other borrowed funds. The increase in the 
provision for credit losses reflects the greater volume of loans. The 
increase in non-interest expenses was due in part to the cost of operating 
the additional branch facilities acquired in the Eldorado purchase. 
Non-interest expense was also affected by increased commission expense 
reflecting the increased volume of mortgage loan origination


NET INTEREST INCOME AND NET INTEREST MARGIN

         For the nine months ended September 30, 1998, the Company generated 
net interest income of $33.0 million. This represented an increase of $10.5 
million, or 46.59%, over net interest income of $22.5 million for the nine 
months ended September 30, 1997. The net yield on earning assets decreased to 
5.54% for the nine months ended September 30, 1998, compared to a net yield 
of 5.68% for the same period last year.

         Total interest income was $55.7 million for the nine months ended
September 30, 1998. This represented an increase of $18.8 million, or 51.11%,
over total interest income of $36.8 million for the nine months ended 


                                     11

<PAGE>


September 30, 1997. The increase in total interest income was primarily the 
result of an increase in the average earning assets for the most recent nine 
month period. Average earning assets were $797.4 million for the nine months 
ended September 30, 1998. This represented an increase of $267.2 million, or 
50.39%, over average earning assets of $530.2 million, for the nine months 
ended September 30, 1997. The yield on total earning assets increased to 
9.34% for the nine months ended September 30, 1998, compared to an average 
yield of 9.29% for the nine months ended September 30, 1997. The increase in 
the yield on earning assets resulted as a greater percentage of earning 
assets were allocated to loans.

         Interest and fees on loans and income from lease finance receivables 
totaled $50.8 million for the nine months ended September 30, 1998. This 
represented an increase of $18.7 million, or 58.24%, compared to total loans 
and lease income of $32.1 million for the nine months ended September 30, 
1997. The increase in loan and lease income was the result of greater average 
balances for the first nine months of 1998 compared to the same period last 
year. Loans and leases averaged $684.8 million for the nine months ended 
September 30, 1998. This represented an increase of $262.9 million, or 
62.31%, greater than average loans and leases of $421.9 million for the nine 
months ended September 30, 1997. The yield on loans and leases decreased to 
9.34% for the first nine months of 1998, compared to an average yield of 
10.17% for the same nine months of 1997. The increase in average balances was 
affected by the Eldorado acquisition. The decrease in yields reflects in part 
an increased price competition for earning assets for the most recent nine 
month period.

         Interest expense totaled $22.6 million for the nine months ended 
September 30, 1998. This represented an increase of $8.3 million, or 58.23%, 
over total interest expense of $14.3 million for the nine months ended 
September 30, 1997. The increase in interest expense is the result of both an 
increased volume and cost of average interest paying liabilities. Average 
interest bearing liabilities were $625.7 million for the nine months ended 
September 30, 1998. This represented an increase of $218.2 million, or 
53.54%, over average interest bearing liabilities of $407.6 million for the 
nine months ended September 30, 1997. The cost of average interest bearing 
liabilities was 4.84% for the nine months ended September 30, 1998, compared 
to an average cost of 4.69% for the same nine month period in 1997.

         The increase in average interest bearing liabilities was primarily 
the result of increased average interest bearing deposits. Interest bearing 
deposits averaged $387.9 million for the nine months ended September 30, 
1998. This represented an increase of $193.6 million, or 49.93%, compared to 
average interest bearing deposits of $387.9 million for the nine months ended 
September 30, 1997. The cost of average interest bearing deposits decreased 
to 4.37% for the nine months ended September 30, 1998, compared to an average 
cost of 4.48% for the same nine month period last year. The decrease in the 
average cost of interest bearing deposits was primarily the result of a 
decrease in the cost of average time deposits. The average cost of time 
deposits decreased to 4.83% for the nine months ended September 30, 1998, 
compared to an average cost of 5.56% for the same period last year.

           Other interest bearing liabilities averaged $44.2 million. This 
represented an increase of $24.5 million, or 124.7 % over average other 
interest bearing liabilities of $19.7 million for the nine months ended 
September 30, 1997. The average cost of other interest bearing liabilities 
increased to 11.03% for the nine months ended September 30, 1998, compared to 
an average cost of 8.85% for the nine months ended September 30, 1997. The 
increase in the average balance and cost of borrowings is attributable to the 
subordinated debentures issued to fund a portion of the Eldorado Acquisition.





                                     12


<PAGE>

         The following table presents, for the periods indicated, the 
distribution of average assets, liabilities and shareholders' equity, as well 
as the total dollar amounts of interest income from average interest-bearing 
assets and the resultant yields, and the dollar amounts of interest expense 
and resultant cost expressed in both dollars and rates. Nonaccrual loans are 
included in the calculation of the average loans while nonaccrued interest 
thereon is excluded from the computation of rates earned.


<TABLE>
<CAPTION>

                                                                 NINE MONTHS ENDED SEPTEMBER 30,
                                             ----------------------------------------------------------------------------
                                                           1998                                      1997
                                             ---------------------------------------------------   ----------------------
                                                              INTEREST     AVERAGE                   INTEREST     AVERAGE
                                                 AVERAGE      INCOME OR    YIELD OR     AVERAGE     INCOME OR    YIELD OR
                                                 BALANCE       EXPENSE       COST       BALANCE      EXPENSE       COST
                                             --------------  -----------  ---------   -----------  -----------  ---------
<S>                                          <C>             <C>          <C>         <C>          <C>          <C>
ASSETS
Interest earning assets:
    Loans and leases (1)                      $     684,828   $ 50,794      9.92%      $ 421,920    $  32,100     10.17%
    Investment securities (2)                        71,030      3,236      6.09%         80,223        3,620      6.03%
    Federal funds sold                               41,498      1,645      5.30%         28,032        1,124      5.36%
                                             --------------  -----------  ---------   -----------  -----------  ---------
         Total interest earning assets              797,356     55,675      9.34%        530,175       36,844      9.29%
Non earning assets
    Cash and deposits with banks                     77,858                               49,198
    Other assets                                    100,419                               58,259
                                             --------------                           -----------
         Total assets                               975,633                              637,632
                                             --------------                           -----------
                                             --------------                           -----------

LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing liabilities:
    Interest bearing demand                   $      99,294   $  1,174      1.58%      $  57,417    $     909      2.12%
    Money market                                     92,680      2,660      3.84%         56,764        1,377      3.24%
    Savings                                         161,072      6,901      5.73%        107,297        3,804      4.74%
    Time                                            228,473      8,257      4.83%        166,394        6,915      5.56%
                                             --------------  -----------  ---------   -----------  -----------  ---------
         Total interest bearing deposits            581,519     18,992      4.37%        387,872       13,005      4.48%
                                                                                               -
    Short term borrowing                             15,967      1,159      9.70%          8,419          233      3.70%
    Long term debt                                   28,252      2,488     11.77%         11,261        1,070     12.70%
                                             --------------  -----------  ---------   -----------  -----------  ---------
         Total interest bearing liabilities         625,738     22,639      4.84%        407,552       14,308      4.69%
Non-interest bearing liabilities:
    Demand deposits                                 237,106                              157,780
    Other liabilities                                16,041                                7,796
                                             --------------                           -----------
         Total liabilities                          878,885                              573,128
Shareholders' equity                                 96,748                               64,504
                                             --------------                           -----------
         Total liabilities and 
           shareholders' equity                     975,633                              637,632
                                             --------------                           -----------
                                             --------------                           -----------
Net interest income                                             33,036                                 22,536
                                                             -----------                           -----------
                                                             -----------                           -----------
Net yield on interest earning assets                                        5.54%                                  5.68%
                                                                          ---------                             ---------
                                                                          ---------                             ---------
</TABLE>
-----------

(1)  Loan fees of $3.5 million and $2.0 million are included in the 
     computations for 1998 and 1997, respectively.

(2)  Yields are calculated on historical cost and exclude the impact 
     of the unrealized gain (loss) on available for sale securities.


                                      13
<PAGE>


         The following table sets forth changes in interest income and 
interest expense attributable to changes in rates and changes in volume of 
the various components. Changes due to a combination of rate and volume are 
presented under the column titled "Mix." Nonaccrual loans are included in 
total loans outstanding while nonaccrued interest thereon is excluded from 
the computation of rates earned.

<TABLE>
<CAPTION>
                                                   NINE MONTHS ENDED SEPTEMBER 30,
                                                        1998 COMPARED TO 1997
                                                        ---------------------
                                              NET         RATE       VOLUME        MIX
                                             CHANGE       ----       ------        ---
                                             ------
                                                          (DOLLARS IN THOUSANDS)
<S>                                        <C>           <C>         <C>          <C>
Interest income:
   Loans and leases ...............        $ 18,694    $  (806)     $ 20,001     $(501)
   Investment securities ..........            (384)        35          (415)       (4)
   Federal funds sold .............             521        (13)          540        (6)
   Other earning assets ...........              --         --            --         --
        Total interest income .....          18,831       (784)       20,126      (511)
Interest expense:
   Interest-bearing demand ........             265       (230)          663      (168)
   Money market ...................           1,284        253           871       160
   Savings ........................           3,097        793         1,906       397
   Time ...........................           1,341       (902)        2,580      (337)
   Short-term borrowing ...........             926        378           209      (339)
   Long-term debt .................           1,418        (57)        1,558       (83)
        Total interest expense ....           8,331        235         7,787       308
Net interest income ...............        $ 10,500    $(1,019)     $ 12,339     $(819)
</TABLE>


PROVISION FOR LOAN AND LEASE LOSSES

         The Company maintains an allowance for potential credit losses. A 
provision for credit losses is charged to the Company's earnings sufficient 
to maintain the allowance for credit losses at a level determined adequate by 
the Bank's management. The provision for credit losses totaled $2.6 million 
for the nine months ended September 30, 1998. This represented an increase of 
$1.5 million, or 141.21%, over the provision for credit losses of $1.1 
million for the nine months ended September 30, 1997. The increased provision 
is primarily attributable to the increase in the loan portfolio due to the 
Eldorado Acquisition and to partially offset the loans charged off against 
the allowance discussed below. See "Financial Condition."

NON-INTEREST INCOME

         Non-interest income totaled $17.7 million for the nine months ended 
September 30, 1998. This represented an increase of $9.3 million, or 110.0%, 
over non-interest income of $8.4 million for the nine months ended September 
30, 1997. The increase in non-interest income for the first nine months of 
1998 was primarily the result of income related to operations acquired in the 
Eldorado Acquisition, and increased earnings from the Bank's mortgage 
operations.

         Income from service charges on deposit accounts totaled $2.6 million 
for the nine months ended September 30, 1998. This represented an increase of 
$1.1 million, or 72.01%, compared to service charges on deposit accounts of 
$1.5 million for the nine months ended September 31, 1997. Gains on the sale 
of mortgage loans totaled $12.0 million for the nine months ended September 
30, 1998. This represented an increase of $7.2 million, or 147.36%, over a 
gain on the sale of mortgage loans of $4.9 million for the nine months ended 
September 30, 1997.

         The following table presents for the periods indicated the major 
categories of non-interest income:

<TABLE>
<CAPTION>
                                                NINE MONTHS ENDED
                                                  SEPTEMBER 30,
                                                  -------------
                                                 1998        1997
                                                 ----        ----
                                                  (IN THOUSANDS)
<S>                                              <C>        <C>
Service charges on deposit accounts .........    $2,563     $1,490
Gains on sale of mortgage loans .............    12,049      4,871
SBA loan servicing ..........................     1,886      1,581
Other income ................................     1,226        498
   Total non-interest income ................   $17,724     $8,440
</TABLE>



                                      14

<PAGE>


NON-INTEREST EXPENSES

         Non-interest expenses are the costs, other than interest expense, 
associated with providing banking and financial services to customers and 
conducting the affairs of the Bank. Also included are the costs of carrying 
and administering the OREO portfolio (as defined below) as well as the costs 
associated with problem assets, which include nonperforming and restructured 
loans. "OREO," or "other real estate owned," consists of real estate acquired 
through foreclosure or by acceptance of a deed in lieu of foreclosure.

         Total non-interest expense was $37.1 million for the nine months 
ended September 30, 1998. This represented an increase of $9.4 million, or 
33.74%, over total non-interest expense of $27.7 million for the nine months 
ended September 30, 1997. For the most part, the increase is attributable to 
the added personnel, facilities and general administrative overhead resulting 
from the Eldorado Acquisition.

         Salaries and employee benefits totaled $15.9 million for the nine 
months ended September 30, 1998. This represented an increase of $4.8 
million, or 43.57%, over salaries and employee benefits of $11.1 million for 
the first nine months of 1997. The increase in salaries and employee benefit 
expense is due in part to the Eldorado Acquisition and as a result of 
increased commission expense paid for mortgage loan origination. Occupancy 
and equipment expense totaled $5.4 million for the nine months ended 
September 30, 1998. This represented an increase of $1.1 million, or 24.13%, 
over occupancy and equipment expense of $4.4 million for the nine months 
ended September 30, 1997. The increase primarily reflects the increase in the 
number of facilities that resulted from the Eldorado Acquisition. The 
amortization of intangibles totaled $2.7 million for the nine months ended 
September 30, 1998. This represented an increase of $1.3 million, or 95.82%, 
over an amortization expense of $1.4 million for the nine months ended 
September 30, 1997. The increase in amortization expense is the result of the 
Eldorado Acquisition.

         The Company's efficiency ratio decreased to 73.04% for the nine 
months ended September 30, 1998, compared to a ratio of 84.86% for the same 
period last year. The decrease in the ratio indicates that a smaller portion 
of the Company's net revenue was paid as operating expenses for 1998 compared 
to 1997. Annualized operating expenses as a percent of average assets totaled 
5.07% for the nine months ended September 30, 1998, compared to an annualized 
ratio of 5.80% for the same period last year. The decrease in the ratio 
indicates that Company is managing greater levels of average assets at a 
lower total cost for 1998 compared to last year.

         The following table presents for the periods indicated the major 
categories of non-interest expense:

<TABLE>
<CAPTION>
                                                            NINE MONTHS ENDED
                                                              SEPTEMBER 30,
                                                              -------------
                                                             1998         1997
                                                             ----         ----
                                                              (IN THOUSANDS)
<S>                                                          <C>        <C>
Salaries and employee benefits ........................     $15,966     $11,121
Non-staff expenses
   Occupancy and equipment ............................       5,437       4,380
   Amortization of intangibles ........................       2,714       1,386
   Loan expense, including carrying cost for OREO .....       1,095         714
   Other ..............................................      11,863      10,121
        Total non-interest expense ....................     $37,075     $27,722
</TABLE>


PROVISION FOR INCOME TAXES

         For the nine months ended September 30, 1998, the Company expensed 
to earnings a provision for income taxes of $5.5 million. This represented an 
increase of $3.3 million, or 148.83%, over the provision for income taxes of 
$2.2 million for the nine months ended September 31, 1998. The Company's 
effective tax rate (50.16%) is higher than the applicable statutory rate 
(42.0%), primarily because the goodwill amortization is a charge to earnings 
for financial statement purposes and is not deductible for federal income tax 
purposes.


                                      15



<PAGE>




             FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997

OVERVIEW

         For the quarter ended September 30, 1998, the Company generated net 
income of $2.1 million. This represented an increase of $1.0 million, or 
94.87%, over net income of $1.0 million for the quarter ended September 30, 
1997. Basic net income per share for the quarter ended September 30, 1998 was 
$0.19 compared to $0.08 per share for the quarter ended September 30, 1997. 
Diluted net income per share for the quarter ended September 30, 1998 was 
$0.18, compared to diluted net income per share of $0.08 for the quarter 
ended September 30, 1997. Excluding the amortization of goodwill and other 
intangibles, basic and diluted net income per share for the quarter ended 
September 30, 1998 were $0.30 and $0.28, respectively, compared to $0.17 and 
$0.16 for the quarter ended September 30, 1997. The Company's return on 
average assets was .80%, and its return on average common equity was 8.44% 
for the quarter ended September 30, 1997. For the same quarter last year, the 
Company generated a return on average assets of .47%, and a return on average 
common equity of 4.45%. The return on average assets excluding goodwill 
amortization was 1.18 % and return on average common equity excluding 
goodwill amortization was 12.37% for the quarter ended September 30, 1998, as 
compared to returns of .84% and 7.88%, respectively, for the quarter ended 
September 30, 1997.

RESULTS OF OPERATIONS

         The increase in net income for the quarter ended September 30, 1998, 
compared to the same quarter last year, was primarily the result of increased 
non-interest income. The increase in non-interest income was principally the 
result of increased gains on the sale of mortgage loans. The increase in net 
income for the quarter ended September 30, 1998 compared to 1997 was also the 
result of an increase in net interest income. Increased interest income 
resulting from a higher volume of average earnings assets more than offset 
increased interest expense that resulted from both a greater average volume 
and a higher average cost of interest bearing liabilities. Increases in net 
interest income and non-interest income were partially offset by increases in 
the provision for credit losses and increases in non-interest expense.

NET INTEREST INCOME AND NET INTEREST MARGIN

         Net interest income totaled $10.8 million for the quarter ended 
September 30, 1998. This represented an increase of $500,000, or 4.85%, over 
net interest income of $10.3 million for the quarter ended September 30, 
1997. The net yield on earning assets decreased to 4.90% for the quarter 
ended September 30, 1998, compared to a net yield of 5.51% for the quarter 
ended September 30, 1997. The increase in net interest for the most recent 
quarter was primarily the result in an increase in the volume of average 
earning assets.

         Total interest and fee income was $19.4 million for the quarter 
ended September 30, 1998. This represented an increase of $2.6 million, or 
15.23%, over total interest and fee income of $16.8 million for the quarter 
ended September 30, 1997. The increase in total interest and fee income was 
the result of an increased volume of average earning assets. Earning assets 
averaged $877.4 million for the quarter ended September 30, 1998. This 
represented an increase of $138.5 million, or 18.75%, over average earning 
assets of $738.8 million for the quarter ended September 30, 1997. The yield 
on average earning assets decreased to 8.76% for the quarter ended September 
30, 1998, compared to an average yield of 9.05% for the quarter ended 
September 30, 1997. The decrease in the yield on average earning assets 
reflects in part an increased price competition for earning assets for the 
most recent quarter.

         Interest and fees on loans and leases totaled $16.7 million for the 
quarter ended September 30, 1998. This represented an increase of $2.3 
million, or 15.59%, over interest and fees on loans and leases of $14.5 
million for the quarter ended September 30, 1997. The increase and loan and 
lease income was the result of an increase in the average volume of loans and 
leases for the most recent quarter. Average loans and leases increased 
$105,088, or 18.11%, to $685.5 million for the quarter ended September 30, 
1998, from $580.4 million for the quarter ended 


                                      16

<PAGE>


September 30, 1997. The yield on loans decreased to 9.68% for the quarter 
ended September 30, 1998, compared to an average yield of 9.89% for the same 
quarter last year.

         Interest expense totaled $8.5 million for the quarter ended 
September 30, 1998. This represented an increase of $2.0 million, or 30.23%, 
over total interest expense of $6.5 million for the quarter ended September 
30, 1997. The increase in interest expense reflects an increase in both the 
volume and costs of average interest bearing liabilities for the most recent 
quarter. Average interest bearing liabilities were $687.0 million for the 
quarter ended September 30, 1998. This represented an increase of $125.6 
million, or 21.93%, over average interest bearing liabilities of $563.5 
million for the quarter ended September 30, 1998. The cost of average 
interest bearing liabilities increased to 4.93% for the quarter ended 
September 30, 1998, from an average cost of 4.61% for the same quarter last 
year. The increase in average interest bearing liabilities was the result of 
increases in savings deposits, time deposits and other borrowed funds.

         The following table presents, for the periods indicated, the 
distribution of average assets, liabilities and shareholders' equity, as well 
as the total dollar amounts of interest income from average interest-bearing 
assets and the resultant yields, and the dollar amounts of interest expense 
and resultant cost expressed in both dollars and rates. Nonaccrual loans are 
included in the calculation of the average loans while nonaccrued interest 
thereon is excluded from the computation of rates earned.

<TABLE>
<CAPTION>
                                                                           THREE MONTHS ENDED SEPTEMBER 30,
                                           ---------------------------------------------------------------------------------------

                                                          1998                                             1997
                                           ----------------------------------------------  ---------------------------------------
                                                             INTEREST       AVERAGE                         INTEREST     AVERAGE
                                                 AVERAGE     INCOME OR      YIELD OR         AVERAGE        INCOME OR    YIELD OR
                                                 BALANCE      EXPENSE         COST           BALANCE         EXPENSE       COST
                                           --------------- --------------- -----------   --------------- -------------- ----------
<S>                                        <C>             <C>             <C>           <C>             <C>            <C>
ASSETS
Interest earning assets:

    Loans and leases (1)                   $      685,491        16,724       9.68%           580,403         14,469         9.89%
    Investment securities (2)                      92,601         1,317       5.64%           128,816          1,927         5.93%
    Federal funds sold                             99,261         1,325       5.30%            29,601            451         6.04%
                                           --------------- ------------- -----------  ---------------   ------------  ------------
         Total interest earning assets            877,353        19,366       8.76%           738,820         16,847         9.05%
Non earning assets

    Cash and deposits with banks                   73,520                                     66,590
    Other assets                                   89,625                                     99,377
                                           ---------------                            ---------------
         Total assets                           1,040,498                                    904,787
                                           ===============                            ===============

LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing liabilities:

    Interest bearing demand                $      100,128          341       1.35%            90,498             371         1.63%
    Money market                                   89,825          921       4.07%            97,369             823         3.35%
    Savings                                       198,100        3,169       6.35%           141,065           1,666         4.69%
    Time                                          267,209        3,011       4.47%           200,752           2,771         5.48%
                                           --------------- ------------- -----------  ---------------   ------------  ------------
         Total interest bearing deposits          655,262        7,442       4.51%           529,684           5,631         4.22%

    Short term borrowing                            4,102          262      25.34%             5,581              86         6.11%
    Long term debt                                 27,657          830      11.91%            28,194             836        11.76%
                                           --------------- ------------- -----------  ---------------   ------------  ------------
         Total interest bearing liabilities       687,021        8,534       4.93%           563,459           6,553         4.61%
Non-interest bearing liabilities:
    Demand deposits                               235,176                                    236,297
    Other liabilities                              19,181                                     8,657
                                           --------------                             --------------
         Total liabilities                        941,378                                   808,413
Shareholders' equity                              99,120                                     96,374
                                           --------------                             --------------
         Total liabilities and 
           shareholders' equity                1,040,498                                    904,787
                                           ==============                             =============

Net interest income                                             10,832                                        10,294
                                                            ============                                ============
Net yield on interest earning assets                                         4.90%                                           5.53%
                                                                         ===========                                  ============
</TABLE>


-----------

(1)  Loan fees of $1.2 million and $617,000 are included in the computations for
     1998 and 1997, respectively.

(2)  Yields are calculated on historical cost and exclude the impact of the
     unrealized gain (loss) on available for sale securities.



                                      17



<PAGE>



         The following table sets forth changes in interest income and interest
expense attributable to changes in rates and changes in volume of the various
components. Changes due to a combination of rate and volume are presented under
the column titled "Mix." Nonaccrual loans are included in total loans
outstanding while nonaccrued interest thereon is excluded from the computation
of rates earned.

<TABLE>
<CAPTION>
                                               THREE MONTHS ENDED SEPTEMBER 30,
                                                     1998 COMPARED TO 1997
                                                     ---------------------
                                             NET       
                                            CHANGE     RATE       VOLUME        MIX 
                                            ------     ----       ------        --- 
                                                          (DOLLARS IN THOUSANDS)
<S>                                        <C>          <C>        <C>          <C>
Interest income:
   Loans and leases .................      $ 2,255       $(308)    $ 2,620      $ (57)
   Investment securities ............         (610)        (95)       (542)        27
   Federal funds sold ...............          874         (56)      1,063       (138)
        Total interest income .......        2,519        (459)      3,141       (163)
Interest expense:
   Interest-bearing demand ..........          (30)        (63)         39         (7)
   Money market .....................           98         175         (64)       (13)
   Savings ..........................        1,503         591         674        239
   Time .............................          240        (509)        917       (167)
   Short-term borrowing .............          136         254         (44)       (74)
   Long-term debt ...................           (7)          9         (16)         0
        Total interest expense ......        1,940         457       1,506        (22)
Net interest income .................      $   579        (916)      1,635       (141)
</TABLE>

PROVISION FOR LOAN AND LEASE LOSSES

         For the quarter ended September 30, 1998, the company charged to 
earnings a provision for loan losses of $700,000. This represented an 
increase of $342,000, or 95.53%, over the provision for loan losses of 
$358,000 for the quarter ended September 30, 1997. Management of the Bank 
continues to carefully monitor the allowance for loan and lease losses in 
relation to the size of the Bank's loan and lease portfolio and known risks 
or problem loans and leases.

NON-INTEREST INCOME

         Non-interest income totaled $6.4 million for the quarter ended 
September 30, 1998. This represented an increase of $3.3 million, or 93.14%, 
over non-interest income of $3.3 million for the quarter ended September 30, 
1997. The increase in non-interest income was primarily the result of 
increased gains on the sale of mortgage loans. Gain on the sale of mortgage 
loans was $4.3 million for the quarter ended September 30, 1998. This 
represented an increase of $1.9 million, or 76.48%, over gains on sales of 
mortgage loans of $2.5 million for the quarter ended September 30, 1997.

         For the quarter ended September 30, 1997, the Company reversed 
income of $786,000 relating to the re-purchase of loans for which gains had 
been recognized earlier in that year. The reversal of the gains previously 
recognized contributed to the $184,000 charge to other income for the quarter.







                                      18

<PAGE>



         The following table presents for the periods indicated the major
categories of non-interest income:

<TABLE>
<CAPTION>
                                                    THREE MONTHS ENDED
                                                      SEPTEMBER 30,
                                                      ------------
                                                     1998        1997
                                                     ----        ----
                                                      (IN THOUSANDS)
<S>                                                  <C>         <C>
Service charges on deposit accounts .............     $782       $830
Gains on sale of mortgage loans .................    4,336      2,457
SBA loan servicing ..............................      620        191
Other income ....................................      624       (184)
   Total non-interest income ....................   $6,362     $3,294
</TABLE>

NON-INTEREST EXPENSES

         Total non-interest expense was $12.6 million for the quarter ended 
September 30, 1998. This represented an increase of $1.8 million, or 16.66%, 
over total non-interest expense of $10.8 million for the quarter ended 
September 30, 1997. Increased salaries and employee benefits contributed to 
the increases in non-interest expense. Salaries and related benefits totaled 
$5.5 million for the quarter ended September 30, 1998. This represented an 
increase of $1.0 million, or 23.22%, over total salaries and related benefits 
of $4.5 million for the quarter ended September 30, 1997. An increase in the 
commissions paid for mortgage origination contributed to the increase in 
salaries and related benefits for the most recent quarter.

         Non-interest expenses measured as a percent of net revenue decreased 
to 73.26% for the quarter ended September 30, 1998, compared to a ratio of 
79.71% for the quarter ended September 30, 1997. The decrease in the ratio 
indicates that the Company paid a lower portion of net revenue as 
non-interest expense for the most recent quarter. Non-interest expense as a 
percent on average assets increased to 4.84% for the quarter ended September 
30, 1998, compared to a ratio of 4.77% for the same period last year.

         The following table presents for the periods indicated the major 
categories of non-interest expense:

<TABLE>
<CAPTION>
                                                     THREE MONTHS ENDED
                                                       SEPTEMBER 30,
                                                       -------------
                                                      1998        1997
                                                      ----        ----
                                                       (IN THOUSANDS)
<S>                                                   <C>         <C>
Salaries and employee benefits ...................    $5,509      $4,471
Non-staff expenses
   Occupancy and equipment .......................     1,933       1,889
   Amortization of intangibles ...................       975         826
   Other non-interest expenses ...................     4,180       3,612
        Total non-interest expense ...............   $12,597     $10,798
</TABLE>

PROVISION FOR INCOME TAXES

         The provision for income taxes was $1.8 for the quarter ended 
September 30, 1998. This represented an increase of $488,000, or 37.03%, over 
a provision for income taxes of $1.3 million for the quarter ended September 
30, 1997. The effective tax rate for the quarter ended September 30, 1998 was 
46.34%, compared to an effective tax rate of 55.12% for the quarter ended 
September 30, 1997.




                                      19


<PAGE>



FINANCIAL CONDITION

         At September 30, 1998, the Company reported total assets of $1.1 
billion. This represented an increase of $188.0 million, or 20.83%, over 
total assets of $902.4 million at September 30, 1997. The increase in assets 
was the result of increased loans, cash and due from banks, and investment 
securities. Total earning assets were $777.8 million at September 30, 1998. 
This represented an increase of $64.6 million, or 9.06%, compared to total 
earning assets of $713.2 million at September 30, 1997. The increase in 
earning assets was the result of increased loans and investment securities.

LOANS AND LEASES

         Net loans totaled $675.6 million at September 30, 1998. This 
represented an increase of $69.7 million, or 11.50%, over net loans of $605.9 
million at September 30, 1997. The increase in net loans was the result of 
increased mortgage loans held for sale. Mortgage loans held for sale totaled 
$169.3 million at September 30, 1998. This represented an increase of $73.1 
million, or 75.91%, over mortgage loans held for sale of $96.2 million at 
September 30, 1997.

         Excluding those loans held for sale, at September 30, 1998, the four 
largest lending categories were: (i) commercial real estate loans, (ii) 
commercial loans, (iii) loans to individuals and (iv) residential mortgage 
loans, including land and construction loans. The following table sets forth 
the amount of loans and leases outstanding for the Company as of the dates 
indicated, according to type of loan, inclusive of mortgage loans held for 
sale. The Company has no foreign loans or energy-related loans.

<TABLE>
<CAPTION>
                                                                        DECEMBER 31,
                                               SEPTEMBER 30,              -----------
                                                   1998          1997         1996         1995
                                                   ----          ----         ----         ----
                                                                  (DOLLARS IN THOUSANDS)
<S>                                             <C>            <C>            <C>         <C>
Commercial ..................................      $96,981     $115,919       $47,772     $16,188
Real estate-commercial ......................      210,824      235,244        86,397          -- 
Real estate-construction ....................       28,414       35,617        18,812         599
Real estate-mortgage ........................       22,395       32,132        41,650      15,710
Installment loans to individuals ............       81,898       62,323        22,512       6,525
Lease financing .............................       77,737       40,819        46,498          --
   Subtotal (portfolio loans) ...............      518,249      522,054       263,641      39,022
Loans and leases held for sale ..............      169,282       96,230        64,917          --
      Total .................................      687,531      618,284       328,558      39,022
Less: allowance for loan and lease losses ...       (8,126)      (9,395)       (5,156)       (639)
Deferred loan and lease fees ................       (3,844)      (3,006)       (2,444)        (45)
Net loans and leases ........................     $675,561     $605,883      $320,958     $38,338
</TABLE>


         For regulatory and financial reporting purposes, the Company 
categorizes commercial loans that are secured in whole or part by real estate 
as commercial real estate loans. The Company believes such categorization 
overstates the Company's emphasis on real estate lending, because, for 
example, all SBA loans are secured by real estate and thus categorized as 
commercial real estate loans.





                                      20



<PAGE>



         The following table shows the amounts of certain categories of loans 
outstanding as of September 30, 1998, which, based on remaining scheduled 
repayments of principal, were due in one year or less, more than one year 
through five years, and more than five years. Demand or other loans having no 
stated maturity and no stated schedule of repayments are reported as due in 
one year or less. Residential mortgage loans held for sale are reported as 
due after five years.

<TABLE>
<CAPTION>
                                             SEPTEMBER 30, 1998
                                             ------------------
                                           COMMERCIAL   REAL ESTATE
                                           ----------   -----------
                                            (DOLLARS IN THOUSANDS)
<S>                                        <C>          <C>
Aggregate maturities of loans and leases 
   which are due:
   Within one year .......................     $38,880    $45,243
After one year but within five years:
   Interest rates are floating or
      adjustable .........................      35,330     50,895
   Interest rates are fixed or 
      predetermined ......................       5,590     37,015
After 5 years:
   Interest rates are floating or 
      adjustable .........................      12,090    272,012
   Interest rates are fixed or 
      predetermined ......................       5,090     37,015
      Total ..............................     $96,981   $430,915
</TABLE>


NONPERFORMING ASSETS

         The following table summarizes nonperforming assets as of the end of
the five most recent fiscal quarters ended June 30, 1998.

<TABLE>
<CAPTION>
                                           SEPTEMBER 30,  JUNE 30,   MARCH 31,  DECEMBER 31,   SEPTEMBER 30,
                                              1998         1998        1998        1997            1997
                                              ----         ----        ----        ----            ----
                                           (DOLLARS IN  (DOLLARS IN
                                            THOUSANDS)   THOUSANDS)
<S>                                        <C>           <C>          <C>       <C>            <C>
Nonaccrual loans and leases, not 
   restructured ..........................  $7,338        $7,712      $6,049     $10,589        $9,101
Accruing loans and leases past due 90
   days or more ..........................   2,198         1,136       1,377       4,638         1,244
Restructured loans and leases ............   3,944         4,133       3,892       2,779         5,661
   Total nonperforming loans and leases 
     ("NPLs") ............................  13,480        12,981      11,318      18,006        16,006
Other real estate owned ("OREO") .........   1,321         1,499       1,539       2,740         3,433
   Total nonperforming assets ("NPAs") ... $14,801       $14,482     $12,857     $20,746       $19,439
Selected ratios:
   NPLs to total portfolio loans and
      leases(1) ..........................     2.9%          2.5%        2.2%        3.5%          3.2%
   NPAs to total portfolio loans and
      leases and OREO(1) .................     2.9           2.8         2.5         4.0           3.8
   NPAs to total assets ..................     1.4           1.4         1.3         2.3           2.1
</TABLE>
-----------

(1)      Excludes residential mortgages held for sale.

         The Company's current policy is to stop accruing interest on loans 
which are past due as to principal or interest 90 days or more, except in 
circumstances where the loan is well-secured and in the process of 
collection. When a loan is placed on nonaccrual, previously accrued and 
unpaid interest is generally reversed out of income.

         The Company would have recorded additional interest income of 
approximately $180,000 for the nine months ended September 30, 1998 on 
nonperforming loans if such loans had been current in accordance with their 
original terms. Interest income recorded on nonperforming loans for the six 
months ended September 30, 1998 was approximately $115,000.


         Loans aggregating $11.6 million at September 30, 1998 have been
designated as impaired in accordance with SFAS 114 as amended by SFAS 118. The
Company's impaired loans are all collateral dependent, and as such the method
used to measure the amount of impairment on these loans is to compare the loan
amount to the fair value of collateral. In calculating the allowance for loan
and lease losses that was required under the Company's internal


                                      21

<PAGE>



guidelines, management determined that a minimum of $2.1 million should be 
included in the allowance at September 30, 1998 because of the risk to the 
loan and lease portfolio represented by such impaired loans.

         Management is not aware of any loan that had not been placed on 
nonaccrual status as of September 30, 1998 as to which there was serious 
doubt as to the ability of the borrower to comply with present loan repayment 
terms.

         At September 30, 1998, the Company had OREO properties with an 
aggregate carrying value of $1.3 million. This represented a decrease of 
$1.4 million, or 51.79%, from OREO of $2.7 million at December 31, 1997. 
Management believes that all of the Company's OREO properties are recorded at 
amounts that are equal to or less than the market value based on current 
independent appraisals reduced by estimated selling costs.

ALLOWANCE FOR LOAN AND LEASE LOSSES

         The allowance for loan and lease losses represents the amounts which 
have been set aside for the specific purpose of absorbing losses which may 
occur in the Bank's loan and lease portfolio. The provision for loan and 
lease losses is an expense charged against operating income and added to the 
allowance for loan and lease losses.

         In determining the adequacy of the allowance for loan and lease 
losses, management considers such factors as historical loan loss experience, 
known problem loans, evaluations made by regulatory agencies and the 
Company's outside loan reviewer, growth and composition of the loan 
portfolio, the estimated value of collateral, assessment of economic 
conditions and other appropriate data to identify the risks in the portfolio. 
In determining the amount of the allowance, a specific allowance amount is 
assigned to those loans with identified special risks, and the remaining loan 
portfolio is reviewed by category and assigned an allowance percentage for 
inherent losses. The allocation process does not necessarily measure 
anticipated future credit losses; rather, it reflects management's assessment 
at a certain date of perceived credit risk exposure and the impact of current 
and anticipated economic conditions, which may or may not result in future 
credit losses. While management believes the allowance to be adequate, it 
should be noted that it is based on estimates, and ultimate losses may vary 
from such estimates if future conditions differ materially from the 
assumptions used in making the evaluation.

         The Federal Reserve and the DFI, as an integral part of their 
respective supervisory functions, periodically review the Company's allowance 
for loan and lease losses. Such regulatory agencies may require the Company 
to increase its provision for loan and lease losses or to recognize further 
loan charge-offs, based upon judgments different from those of management.

         In December 1993, the federal banking agencies issued an 
inter-agency policy statement on the allowance for loan and lease losses 
which, among other things, establishes certain benchmark ratios of loan loss 
reserves to classified assets. The benchmark set forth by such policy 
statement is the sum of (i) assets classified loss; (ii) 50% of assets 
classified doubtful; (iii) 15% of assets classified substandard; and (iv) 
estimated credit losses on other assets over the upcoming 12 months. At 
September 30, 1998, the Company's allowance constituted over 217% of the 
benchmark amount suggested by the federal banking agencies' policy statement 
as compared with 250% at December 31, 1997.

         The Company's lending is concentrated in Southern California, which 
has in the recent past experienced adverse economic conditions, including 
declining real estate values. Those factors have adversely affected 
borrowers' ability to repay loans. Although management believes the level of 
the allowance as of September 30, 1998 is adequate to absorb losses inherent 
in the loan portfolio, a decline in the local economy may result in increased 
losses that cannot reasonably be predicted at this date. The possibility of 
increased costs of collection, nonaccrual of interest on those which are or 
may be placed on nonaccrual, and further charge-offs could also have an 
adverse impact on the Company's financial condition in the future.

         The Company's allowance for loan and lease losses was $8.1 million, or
1.58% of net portfolio loans (i.e., excluding residential mortgages held for
sale) at September 30, 1998. The allowance for loan losses was $9.4 million, or
1.80% of net portfolio loans at December 31, 1997. For the nine months ended
September 30, 1998, the provision for loan and lease losses was $2.6 million
compared to a provision of $1.1 million for the nine months ended September 30,
1997. For the nine months ended September 30, 1998, loan and lease charge-offs
were $4.9 million and recoveries were $1.0 million. For the nine months ended
September 30, 1997, loan and lease charge-offs of $1.3 million and recoveries of
$225,000. Annualized net charge-offs as a percentage of average portfolio loans
were 1.02% for the nine months ended September 30, 1998 as compared to .31% for
the comparable period in 1997. The increase in annualized net charge-offs is
primarily attributable to the charge-off during the quarter ended March 31, 1998
of two loans with an aggregate principal balance of $2.1 million. The Company


                                      22

<PAGE>



acquired those loans in the CSB acquisition, and although the loans were 
performing in accordance with their terms as of September 30, 1998, the 
Company became aware in early 1998 of a deterioration in the borrowers' 
financial condition. Consistent with regulatory guidelines, the Company's 
internal credit administration standards dictated that the loans should be 
charged off as a result of the decline in the borrowers' creditworthiness.

         The table below summarizes average portfolio loans and leases
outstanding, gross portfolio loans and leases, nonperforming loans and leases
and changes in the allowance for possible loan and lease losses arising from
loan and lease losses and additions to the allowance from provisions charged to
operating expense as of and for the five most recent fiscal quarters ended June
30, 1998:

<TABLE>
<CAPTION>
                                                AS OF AND FOR THE FISCAL QUARTER ENDED,
                                                ---------------------------------------
                                      SEPTEMBER 30,  JUNE 30,    MARCH 31,  DECEMBER 31,  SEPTEMBER 30,
                                         1998          1998        1998         1997          1997
                                         ----          ----        ----         ----          ----
<S>                                      <C>         <C>         <C>         <C>          <C>
Average portfolio loans and leases(1) .  $507,604    $510,650    $518,670    $512,969     $505,602
Gross portfolio loans and leases(1) ...   518,250     512,350     520,884     522,054      506,625
Nonperforming loans and leases ........    13,480      12,981      11,318      18,006       16,006
Allowance for loan and lease losses:
   Balance at beginning of period .....     7,820       7,892       9,395       9,249        9,242
   Balance acquired during the period .        --          --          --          --           --
   Loans charged off during period
      Commercial ......................       215         520       2,296         142           11
      Leases ..........................       253         166         167         646          140
      Real estate .....................                   710          64         258          188
      Installment .....................       274         184          98         132          156
        Total .........................       692       1,580       2,625       1,178          495
   Recoveries during period
      Commercial ......................       215         461          20         223          100
      Leases ..........................                    22          16           4           27
      Real estate .....................                    11         143         514            1
      Installment .....................        82          14          21         175           16
        Total .........................       298         508         200         916          144
   Net loans and leases charged off
      during period  ..................       394       1,072       2,425         262          351
   Provisions for loan and lease
      losses ..........................       700       1,000         922         408          358
      Balance at end of period ........    $8,126      $7,820      $7,892      $9,395       $9,249
Selected ratios:
   Net charge-offs to average 
      portfolio loans and leases
      (annualized) ....................       .04%        .84%       1.87%        .20%         .28%
   Provision for loan and lease
      losses to average portfolio
      loans and leases (annualized) ...       .68         .78         .71         .32          .28
   Allowance at end of period to
      gross portfolio loans and
      leases ..........................      1.58        1.53        1.52        1.80         1.83
   Allowance as a percentage of
      nonperforming loans and leases ..     70.23       60.24       69.73       52.18        57.78
</TABLE>

-----------

(1)      Excludes residential mortgages held for sale.


                                      23

<PAGE>



         The following table indicates management's allocation of the allowance
as of the dates indicated:

<TABLE>
<CAPTION>
                                                        SEPTEMBER 30,
                                                        -------------
                                                 1998                    1997
                                                 ----                    ----
                                          AMOUNT      PERCENT      AMOUNT      PERCENT
                                          ------      -------      ------      -------
                                                     (DOLLARS IN THOUSANDS)
<S>                                       <C>         <C>          <C>         <C>
Allocated amount:
   Commercial, financial and agricultural.    $861         10.6%       $723         7.7%
   Real estate and construction ..........   1,381         17.0       1,503        16.0
   Consumer ..............................     658          8.1         432         4.6
   Unallocated ...........................   5,225         64.3       6,736        71.7
        Total ............................  $8,126        100.0%     $9,242       100.0%
</TABLE>

         In allocating the Company's allowance for possible loan and leases 
losses, management has considered the credit risk in the various loan 
categories in its portfolio. As such, the allocation of the allowance for 
possible loan and lease losses is based primarily upon the average aggregate 
historical net loan losses experienced in each of the acquired subsidiary 
banks. While the Company has made a reasonable effort to allocate the 
allowance to specific categories of loans, management believes that any 
allocation of the allowance for possible loan and lease losses into loan 
categories lends an appearance of exactness which does not exist, in that the 
allowance for possible loan and lease losses is utilized as a single 
unallocated allowance available for losses on all types of loans and leases, 
and actual losses in loan categories may vary from the amounts allocated to 
such categories.

INVESTMENT SECURITIES

         The Bank maintains a portion of its assets in investment securities 
to balance risk and to ensure liquidity. See " Liquidity."

         Total investments at September 30, 1998 were $102.3 million. This 
represents an increase of $35.0 million, or 51.94%, over total investments of 
$67.3 million at December 31, 1997. At September 30, 1998, the investment 
portfolio primarily consisted of U.S. treasury and agency securities and 
mortgage-backed securities.

         The following table presents the amortized cost of securities and 
their approximate fair values at September 30, 1998:

<TABLE>
<CAPTION>
                                              SEPTEMBER 30, 1998
                                              ------------------
                                               GROSS      GROSS    ESTIMATED
                                  AMORTIZED  UNREALIZED UNREALIZED   MARKET
                                    COST        GAIN       LOSS      VALUE
                                    ----        ----       ----      -----
                                            (DOLLARS IN THOUSANDS)
<S>                                 <C>       <C>        <C>         <C>
Available-for-sale:
   U.S. Treasury ...............     $42,777       $788               $43,565
   U.S. Government Agencies ....      20,132         --                20,132
   Mortgage-backed securities ..      38,407        146                35,514
        Total ..................    $101,316        $40              $102,250
</TABLE>


                                      24
<PAGE>



         The following table shows the maturities of investment securities at
September 30, 1998 and the weighted average yields of such securities:

<TABLE>
<CAPTION>

                                      WITHIN ONE YEAR   AFTER ONE YEAR BUT    AFTER FIVE YEARS BUT  AFTER TEN YEARS
                                      ---------------   WITHIN FIVE YEARS      WITHIN TEN YEARS     ---------------
                                                        ------------------    -------------------
                                      AMOUNT   YIELD     AMOUNT    YIELD   AMOUNT      YIELD    AMOUNT   YIELD
                                      ------   -----     ------    -----   ------      -----    ------   -----
                                                             (DOLLARS IN THOUSANDS)
<S>                                   <C>      <C>       <C>       <C>     <C>         <C>      <C>      <C>

                          
   Securities available-for-sale:
     U.S. Treasuries ............          --       --%  $43,565     6.10%      --       --%       --       --%
     U.S. Government agencies ...      10,037     6.21    10,095     5.45       --       --        --       --
     Mortgage backed 
       securities ...............          --       --     3,198     6.88    9,830     6.71    25,486     6.92
     Equity securities ..........          38       --        --       --       --       --        --       --
       Total investment 
         portfolio ..............     $10,075     6.21%  $56,858     6.00%  $9,830     6.71%  $25,486     6.92%
</TABLE>

         There are certain inherent risks associated with mortgage-backed 
securities ("MBS") including volatility, credit risk, interest rate risk and 
average life extension risk. The Company's MBS portfolio has limited credit 
risk as the MBS portfolio contains only U.S. Government agency obligations 
that carry the highest ratings by nationally recognized statistical rating 
organizations. MBS price volatility is similar to U.S. Government or 
corporate bond obligations, in that as interest rates increase the value of 
the MBS decreases and, conversely, as interest rates decrease the value of 
the MBS increases. In addition, the interest rate risk associated with MBS 
can be exacerbated by extension or prepayment risk, particularly with respect 
to fixed-rate instruments. With fixed-rate MBS, as interest rates move 
upward, the probability of the average life extending increases as a result 
of prepayments generally slowing on the underlying collateral of the MBS. 
With the extension of average life in a rising rate environment, the Bank 
would own a security that has a below market yield for a longer period of 
time than was previously anticipated which also affects the market price 
negatively. If interest rates were to decline, the weighted average life of 
the fixed-rate MBS portfolio would shorten, prepayments would rise and the 
market value would increase. At September 30, 1998, the weighted average life 
of the Bank's fixed-rate MBS portfolio was 2.8 years.

         Additional information concerning investment securities is provided 
in the notes to the accompanying consolidated financial statements.

DEPOSITS

         At September 30, 1998, the Company reported total deposits were 
$939.2 million. This represented an increase of $174.0 million, or 22.74%, 
over total deposits of $765.2 million at December 31, 1997. The increase in 
deposits was the result of increases in savings and time deposits, partially 
offset by decreases in non-interest bearing demand deposits, and money market 
balances. In April 1998, the Company placed $18.3 million of wholesale 
certificates of deposits through financial intermediaries.

         Total non-interest bearing demand deposits were $267.6 million at 
September 30, 1998. This represented a decrease of $21.8 million, or 7.53%, 
from total non-interest bearing demand deposits of $289.3 million at December 
31, 1997. The decrease in non-interest bearing demand deposits primarily 
reflects normal seasonal fluctuations in commercial demand deposits. Title 
and Escrow Deposits averaged $182.0 million, representing 19.9% of the 
Company's average total deposits for the quarter ended September 30, 1998. 
Actual balances of Title and Escrow Deposits tend to vary widely during a 
month, with the highest balances usually occurring at the end of the month 
when residential real estate closings are generally scheduled to occur. One 
company controlled approximately 14.0% of the Company's average Title and 
Escrow Deposits for the nine months ended September 30, 1998.


         The Company considers Title and Escrow Deposits to be volatile 
because of the fluctuation in deposit amounts and the concentration of 
control over those deposits with a limited number of customers, even though 
the Company believes that its relationships with its principal Title and 
Escrow Deposit customers and its specialized deposit services partially 
mitigate the risk that such customers may terminate or significantly reduce 
their deposits with the Company. As a consequence of that potential 
volatility, the Company utilizes Title and Escrow Deposits solely to fund 
short-term assets, primarily consisting of residential mortgages held for 
sale, which are generally sold within 30 days after such mortgage loans are 
funded. If a substantial portion of the Title and Escrow Deposit were 
withdrawn suddenly, the Company believes that it has sufficient alternative 
sources of liquidity to fund its mortgage pipeline during a transition 
period. See "Liquidity."

                                       25

<PAGE>

         The following table presents the daily average balances and weighted 
average rates paid on interest-bearing deposits for the nine months ended 
September 30, 1998 and 1997, respectively below.

<TABLE>
<CAPTION>

                                           NINE MONTHS ENDED SEPTEMBER 30,
                                           -------------------------------
                                              1998                 1997
                                              ----                 ----
                                        AVERAGE   AVERAGE   AVERAGE    AVERAGE
                                        BALANCE    RATE     BALANCE     RATE
                                        -------   -------   -------    --------
                                                (DOLLARS IN THOUSANDS)
<S>                                     <C>       <C>       <C>        <C>

Non-interest-bearing demand .......     $237,106    0.00%    157,780      0.00%
Interest-bearing demand ...........       99,294    1.58      57,417      2.12
Money market ......................       92,680    3.84      56,764      3.24
Savings ...........................      161,072    5.73     107,297      4.74
Time ..............................      228,473    4.83     166,394      5.56
      Total .......................     $818,625    3.10%   $545,652      3.19%

</TABLE>

         The following table shows the maturities of time certificates of 
deposits of $100,000 or more at September 30, 1998:


<TABLE>
<CAPTION>
                                                        SEPTEMBER 30, 1998
                                                        ------------------
                                                           (IN THOUSANDS)
<S>                                                     <C>
Due in three months or less ..........................       $45,573
Due in over three months through six months ..........        26,123
Due in over six months through twelve months .........        42,292
Due in over twelve months ............................         3,838
      Total ..........................................      $117,826
</TABLE>

BORROWINGS

         Borrowings of the Company totaled $51.0 million at September 30, 
1998. This represented an increase $8.6 million, or 20.26%, over borrowings 
of $42.2 million at December 31, 1997. This increase in borrowings was 
primarily due to an increase in Federal funds purchased, which increased to 
$4.6 million at September 30, 1998 from $2.1 million at December 31, 1997. 
The additional borrowings were undertaken primarily to fund increased 
mortgage origination volume.

CAPITAL RESOURCES

         Current regulatory capital standards generally require banks and
holding companies to maintain a ratio of "core" or "Tier 1" capital (consisting
principally of common equity) to adjusted total assets ("Tier 1 Leverage Ratio")
of at least 3%, a ratio of Tier 1 Capital to risk-weighted assets of at least 4%
("Tier 1 Risk-Weighted Ratio"), and a ratio of total capital (which includes
Tier 1 capital plus certain forms of subordinated debt, a portion of the
allowance for loan and lease losses and preferred stock) to risk-weighted assets
("Total Risk-Weighted Ratio") of at least 8%. Risk-weighted assets are
calculated by multiplying the balance in each category of assets according to a
risk factor which ranges from zero for cash assets and certain government
obligations to 100% for some types of loans and adding the products together.

         The Company and the Bank were well capitalized at September 30, 1998 
for federal regulatory purposes. At September 30, 1998, both the Company and 
the Bank had Tier 1 Leverage Ratios of 6.48%, Tier 1 Risk-Weighted Ratios of 
9.32% and Total Risk-Weighted Ratios of 10.52%.

                                      26

<PAGE>



LIQUIDITY

         The Company relies on deposits as its principal source of funds and, 
therefore, must be in a position to service depositors' needs as they arise. 
Management attempts to maintain a loan-to-deposit ratio of not greater than 
80% and a liquidity ratio (liquid assets, including cash and due from banks, 
Federal funds sold and investment securities, to deposits) of approximately 
20%. The average loan-to-deposit ratio was 83.66% for the nine months ended 
September 30, 1998. This represents an increase from an average loan to 
deposit ratio of 77.32% for the nine months ended September 30, 1997. The 
average liquidity ratio was 23.36% for the nine months ended September 30, 
1998, compared to an average liquidity ratio of 28.86% for the nine months 
ended September 30, 1997. While fluctuations in the balances of a few large 
depositors cause temporary increases and decreases in liquidity from time to 
time, the Company has not experienced difficulty in dealing with such 
fluctuations from existing liquidity sources.

         Should the level of liquid assets (primary liquidity) not meet the 
liquidity needs of the Company, other available sources of liquid assets 
(secondary liquidity), including the purchase of Federal funds, sale of 
securities under agreements to repurchase, sale of loans, window borrowing 
from the Federal Reserve Bank and, borrowings from the FHLB, could be 
employed. The Company has relied primarily upon the purchase of Federal funds 
and the sale of securities under agreements to repurchase for secondary 
sources of liquidity. At September 30, 1998, the Company had $17.0 million of 
unused borrowing capacity under FHLB advances. In order to borrow from the 
Federal Reserve, the Company would be required to physically deliver to the 
Federal Reserve collateral consisting of marketable Government securities. At 
September 30, 1998, the Company has no such collateral at the Federal Reserve.

INFLATION

         The majority of the Company's assets and liabilities are monetary 
items held by the Bank, and only a small portion of total assets is in 
premises and equipment. The lower inflation rate of recent years did not have 
the positive impact on the Bank that was felt in many other industries. The 
small fixed asset investment of the Company minimizes any material 
misstatement of asset values and depreciation expenses which may result from 
fluctuating market values due to inflation. A higher inflation rate, however, 
may increase operating expenses or have other adverse effects on borrowers of 
the Bank, making collection more difficult for the Bank. Rates of interest 
paid or charged generally rise if the marketplace believes inflation rates 
will increase.

                                      27
<PAGE>



ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISK

         In Management's opinion there has not been a material change in the 
Company's market risk profile during the nine months ended September 30, 
1998. Market risk is the risk of loss in a financial instrument arising from 
adverse changes in market prices and rates, foreign currency exchange rates, 
commodity prices and equity prices. The Company's market risk arises 
primarily from interest rate risk inherent in its lending and deposit taking 
activities. To that end, management actively monitors and manages its 
interest rate risk exposure. The Company does not have any market risk 
sensitive instruments acquired for trading purposes. The Company manages its 
interest rate sensitivity by matching the repricing opportunities on its 
earning assets to those on its funding liabilities. Management uses various 
asset/liability strategies to manage the repricing characteristics of its 
assets and liabilities to ensure that exposure to interest rate fluctuations 
is limited within Company guidelines of acceptable levels of risk-taking. 
Hedging strategies, including the terms and pricing of loans and deposits, 
and managing the deployment of its securities are used to reduce mismatches 
in interest rate repricing opportunities of portfolio assets and their 
funding sources.

         When appropriate, management may utilize off balance sheet 
instruments such as interest rate floors, caps and swaps to hedge its 
interest rate position. A Board of Directors approved hedging policy 
statement governs use of these instruments. As of September 30, 1998, the 
Company had not utilized any interest rate swap or other such financial 
derivative to alter its interest rate risk profile.

         One way to measure the impact that future changes in interest rates 
will have on net interest income is through a cumulative gap measure. The gap 
represents the net position of assets and liabilities subject to repricing in 
specified time periods. Generally, a liability sensitive gap position 
indicates that there would be a net positive impact on the net interest 
margin of the Company for the period measured in a declining interest rate 
environment since the Company's liabilities would reprice to lower market 
rates before its assets would. A net negative impact would result from an 
increasing interest rate environment. Conversely, an asset sensitive gap 
indicates that there would be a net positive impact on the net interest 
margin in a rising interest rate environment since the Company's assets would 
reprice to higher market interest rates before its liabilities would, while a 
net negative impact would result from a declining rate environment.

         The following table sets forth the distribution of repricing 
opportunities of the Company's interest-earning assets and interest-bearing 
liabilities, the interest rate sensitivity gap (i.e., interest rate sensitive 
assets less interest rate sensitive liabilities), cumulative interest-earning 
assets and interest-bearing liabilities, the cumulative interest rate 
sensitivity gap, the ratio of cumulative interest-earning assets to 
cumulative interest-bearing liabilities and the cumulative gap as a 
percentage of total assets and total interest-earning assets as of September 
30, 1998. The table also sets forth the time periods during which 
interest-earning assets and interest-bearing liabilities will mature or may 
reprice in accordance with their contractual terms. The interest rate 
relationships between the repriceable assets and repriceable liabilities are 
not necessarily constant and may be affected by many factors, including the 
behavior of customers in response to changes in interest rates. This table 
should, therefore, be used only as a guide as to the possible effect changes 
in interest rates might have on the net margins of the Company.

                                       28

<PAGE>

<TABLE>
<CAPTION>


                                                                                  SEPTEMBER 30, 1998
                                                                                  ------------------
                                                                            AMOUNTS MATURING OR REPRICING IN
                                                                            --------------------------------
                                                                       OVER 3 
                                                                       MONTHS      OVER 1                
                                                          3 MONTHS     TO 12      YEAR TO      OVER         NON-     
                                                           OR LESS     MONTHS     5 YEARS    5 YEARS     SENSITIVE(1)   TOTAL
                                                          --------     ------     -------    -------     ------------   ------
                                                                                (DOLLARS IN THOUSANDS)
<S>                                                       <C>          <C>        <C>        <C>         <C>            <C>
   

ASSETS
Cash and due from banks .........................              $--         $--        $--        $--      $ 205,191     $205,191
Federal funds sold ..............................               --          --         --         --             --           --
Investment securities ...........................               --      10,037     53,660     38,515             38      102,250
Loans and leases ................................          308,765      44,141    129,251     39,994             --      522,151
Loans held for sale .............................          169,282          --         --         --             --      169,282
Other assets(2) .................................               --          --         --         --         91,470       91,470
      Total assets ..............................        $ 478,047    $ 54,178   $182,911    $78,547       $296,661   $1,090,344

LIABILITIES AND SHAREHOLDERS' EQUITY
Non-interest-bearing demand deposits ............              $--         $--        $--        $--       $267,555     $267,555
Interest-bearing demand, money market and savings          399,854          --         --         --             --      399,854
Time certificates of deposit ....................           86,258     174,584     10,721        211             --      271,774
Short-term debt .................................            4,612          --         --         --             --        4,612
Long-term debt ..................................               --          --        405     27,657             --       28,062
Other liabilities ...............................               --          --         --         --         18,336       18,336
Shareholders' equity ............................               --          --         --         --        100,151      100,151
      Total liabilities and shareholders' equity         $ 490,724    $174,584   $ 11,126    $27,868       $386,042   $1,090,344
                                                                                                                       
Period Gap ......................................        $ (12,677)  $(120,406)  $171,785    $50,679       $(89,381)   
Cumulative Gap ..................................          (12,677)   (133,083)    38,702     89,381
Cumulative Gap as a percent of:
   Total assets .................................            (1.16)%    (12.21)%     3.55%      8.20%

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

(1)  Assets or liabilities which are not interest rate sensitive.

(2)  Allowance for possible loan losses of $8.1 million as of September 30, 1998
     is included in other assets.


         At September 30, 1998, the Company had $532.2 million of assets and
$665.3 million of liabilities repricing within one year. Therefore, $133.1
million more in interest rate sensitive liabilities than interest rate sensitive
assets will change to the then current rate (changes occur due to the
instruments being at a variable rate or because the maturity of the instrument
requires its replacement at the then current rate). If rates were to fall during
this period, interest expense would decline by a greater amount than interest
income and net income would increase. Conversely, if rates were to rise, the
reverse would apply, and the Company's net income would decrease.

         Since interest rate changes do not affect all categories of assets and
liabilities equally or simultaneously, a cumulative gap analysis alone cannot be
used to evaluate the Company's interest rate sensitivity position. To supplement
traditional gap analysis, the Company performs simulation modeling to estimate
the potential effects of changing interest rates. The process allows the Company
to explore the complex relationships within the gap over time and various
interest rate environments. Based upon the Company's interest rate shock
simulations, net interest income is expected to decrease approximately 1.5% with
a 200 basis point instantaneous increase to interest rates and increase
approximately 1.3% with a 200 basis point instantaneous decrease in rates.
Management has a target of minimizing the decline in net interest income to no
more than 4.0% given a 200 basis point instantaneous decrease in rates.

         The preceding sensitivity analysis does not represent a forecast and
should not be relied upon as being indicative of expected operating results.
These hypothetical estimates are based upon numerous assumptions, including the
nature and timing of interest rate levels including the shape of the yield curve
prepayments on loans and securities, changes in deposit levels, pricing
decisions on loans and deposits, reinvestment and replacement of asset and
liability cash flows and others. While assumptions are developed based upon
current economic and local 

                                      29

<PAGE>



market conditions, the Company cannot make any assurances as to the 
predictive nature of these assumptions including how customer preferences or 
competitor influences might change.

         Also, as market conditions vary from those assumed in the 
sensitivity analysis, actual results will also differ because of prepayment 
and refinancing levels likely deviating from those assumed, the varying 
impact of interest rate change caps or floors on adjustable rate loans, 
depositor withdrawals and product preference changes, and other internal and 
external variables. Furthermore, the sensitivity analysis does not reflect 
actions that management might take in responding to or anticipating changes 
in interest rates.

         Management has taken several steps to reduce the positive gap of the 
Company by lengthening the maturities in its investment portfolio and 
originating more fixed-rate assets that mature or reprice in balance with its 
interest bearing liabilities. Management will continue to maintain a balance 
between its interest earning assets and interest bearing liabilities in order 
to minimize the impact on net interest income due to changes in market rates.

        The Company and Bank's operations are significantly dependent on a 
number of data processing systems. Failure to anticipate and resolve 
potential problems associated with the ability of these systems to process 
transactions and information into the year 2000 could have a serious impact 
on the Company's operations. This could increase the level of operating 
losses and its liability for improperly processed transactions.

        In addition, a number of the Bank's customers have operations that 
are dependent on their data processing systems. The potential that some or 
all of these customers will not properly prepare their systems for the 
problems associated with the year 2000 could affect their ability to repay 
their loans with the Bank and as a consequence adversely affect the quality 
of the Company's loan portfolio. The Company's primary source of funds are 
from its customers' deposits. Many of these customers' operations are 
dependent on their data processing systems. Any adverse affects resulting 
from the year 2000 could impact the level of these customers' deposits, which 
in turn could impact the Company's liquidity.

        The Company relies primarily on outside vendors to provide its data 
processing. The Company's management has obtained from each a written copy of 
their plans to address solutions to potential problems resulting from the 
year 2000. The Company closely monitors each applicable vendor's progress 
toward those solutions. In addition, the Company's management is conducting 
third party tests of all the software and hardware used by the Bank to ensure 
that these systems will operate beyond the year 2000. The Company's 
management will correct or replace all data sensitive equipment and software 
that is determined not to be Year 2000 complaint by the second quarter of 
1999. The Company has developed a Year 2000 Contingency Plan. In the event 
the contingency plan is invoked, contingency plan team members will 
participate in the execution of the plan, ensuring business operations may 
continue.

        The Company has identified all its borrowers for which the year 2000 
may pose a significant credit risk. Each of these borrowers has been 
contacted and their operations analyzed in an effort to quantify the 
potential risks in Company's loan portfolio that might arise as a result of 
year 2000. The Company's management has also developed liquidity contingency 
plans to provide for potential decreases in funding sources that might arise 
as a result of the year 2000. The Company's Management has projected that the 
total cost of preparing for the year 2000 is $500,000.

                                      30

<PAGE>


                   ELDORADO BANCSHARES, INC. AND SUBSIDIARIES
                U.S. SECURITIES AND EXCHANGE COMMISSION FORM 10-Q

SIGNATURES

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

                              ELDORADO BANCSHARES, INC.


DATE: November 16, 1998       Robert P. Keller /s/
                              ------------------------------------------
                              Robert P. Keller
                              President and Chief Executive Officer


DATE: November 16, 1998       John L. Gordon /s/
                              -----------------------------------------
                              John L. Gordon
                              Senior Vice President and Chief Financial Officer


                              31