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UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-QSB

Quarterly report under section 13 or 15(d) of the Securities
Exchange Act of 1934

For the quarterly period ended September 30, 2002

Commission file number:
000-29105

CENTENNIAL FIRST FINANCIAL SERVICES(Name of Small Business Issuer as specified in its charter)

|California                               |  | 91-1995265                             
|---------------------------------------- |  | ---------------------------------------
|(State of Incorporation)                 |  | (I.R.S. Employer Identification Number)
|                                         |  |                                        
|218 East State Street                    |  |                                        
|Redlands, California                     |  | 92373                                  
|(Address of Principal Executive Offices) |  | (Zip Code)                             

Issuers telephone number, including area code:  (909)
798-3611

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 | o
|--- | - | -- | -

The number of shares of Common Stock of the registrant outstanding as of October 21, 2002 was 1,202,119

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TABLE OF CONTENTS

|        |                                                                                       | PAGE
|------- | ------------------------------------------------------------------------------------- | ----
|        |                                                                                       |     
|PART I  |                                                                                       |     
|ITEM 1  | Financial statements                                                                  | 2   
|ITEM 2  | Managements Discussion and Analysis of Financial Condition and Results of Operations | 10  
|ITEM 3  | Controls and Procedures                                                               | 28  
|        |                                                                                       |     
|PART II |                                                                                       |     
|ITEM 1  | Legal Proceedings                                                                     | 29  
|ITEM 2  | Changes in Securities and Use of Proceeds                                             | 29  
|ITEM 3  | Defaults Upon Senior Securities                                                       | 29  
|ITEM 4  | Submission of Matters to a Vote of Security Holders                                   | 29  
|ITEM 5  | Other Information                                                                     | 29  
|ITEM 6  | Exhibits and Reports on Form 8-K                                                      | 30  
|        | Signature                                                                             | 31  



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CENTENNIAL FIRST FINANCIAL SERVICES AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CONDITIONSeptember 30, 2002 & December 31, 2001

|Dollar amounts in thousands |                                                                                                                                                                              | 2002        |   | 2001    | 
|--------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------- | - | ------- | 
|                            |                                                                                                                                                                              |             |   |         | 
|                            |                                                                                                                                                                              | (unaudited) |   |         | 
|ASSETS                      |                                                                                                                                                                              |             |   |         | 
|                            | Cash and due from banks                                                                                                                                                      |             | $ | 11,414  | 
|                            | Federal funds sold                                                                                                                                                           |             |   | 4,190   | 
|                            |                                                                                                                                                                              |             |   |         | 
|                            | Total cash and cash equivalents                                                                                                                                              |             |   | 15,604  | 
|                            | Interest-bearing deposits in financial institutions                                                                                                                          |             |   | 4,980   | 
|                            | Investment securities, available for sale                                                                                                                                    |             |   | 28,453  | 
|                            | Federal Home Loan Bank stock                                                                                                                                                 |             |   | 361     | 
|                            | Loans, net                                                                                                                                                                   |             |   | 137,247 | 
|                            | Accrued interest receivable                                                                                                                                                  |             |   | 864     | 
|                            | Premises and equipment, net                                                                                                                                                  |             |   | 2,667   | 
|                            | Goodwill                                                                                                                                                                     |             |   | 4,180   | 
|                            | Cash surrender value of life insurance                                                                                                                                       |             |   | 4,157   | 
|                            | Other assets                                                                                                                                                                 |             |   | 1,021   | 
|                            |                                                                                                                                                                              |             |   |         | 
|                            | Total assets                                                                                                                                                                 |             | $ | 199,534 | 
|                            |                                                                                                                                                                              |             |   |         | 
|LIABILITIES                 |                                                                                                                                                                              |             |   |         | 
|                            | Deposits:                                                                                                                                                                    |             |   |         | 
|                            | Noninterest-bearing                                                                                                                                                          |             | $ | 49,588  | 
|                            | Interest-bearing and NOW accounts                                                                                                                                            |             |   | 48,994  | 
|                            | Savings                                                                                                                                                                      |             |   | 15,531  | 
|                            | Time deposits $100,000 or greater                                                                                                                                            |             |   | 29,780  | 
|                            | Other time deposits                                                                                                                                                          |             |   | 28,743  | 
|                            |                                                                                                                                                                              |             |   |         | 
|                            | Total deposits                                                                                                                                                               |             |   | 172,636 | 
|                            | Accrued interest payable                                                                                                                                                     |             |   | 127     | 
|                            | Long-term debt                                                                                                                                                               |             |   |        | 
|                            | Redeemable Preferred Securities of Subsidiary trust holding solely Junior Subordinated Debentures                                                                            |             |   | 6,186   | 
|                            | Other liabilities                                                                                                                                                            |             |   | 3,868   | 
|                            |                                                                                                                                                                              |             |   |         | 
|                            | Total liabilities                                                                                                                                                            |             |   | 182,817 | 
|                            |                                                                                                                                                                              |             |   |         | 
|STOCKHOLDERS EQUITY        |                                                                                                                                                                              |             |   |         | 
|                            | Common stock, $4 stated value; authorized 10,000,000 shares, issued and outstanding 1,202,119 and 1,144,440 shares at September 30, 2002 and December 31, 2001,
respectively |             |   | 4,808   | 
|                            | Additional paid-in capital                                                                                                                                                   |             |   | 9,100   | 
|                            | Retained earnings                                                                                                                                                            |             |   | 2,463   | 
|                            | Accumulated other comprehensive income (loss)                                                                                                                                |             |   | 346     | 
|                            |                                                                                                                                                                              |             |   |         | 
|                            | Total stockholders equity                                                                                                                                                   |             |   | 16,717  | 
|                            |                                                                                                                                                                              |             |   |         | 
|                            | Total liabilities and stockholders equity                                                                                                                                   |             | $ | 199,534 | 
|                            |                                                                                                                                                                              |             |   |         | 
|                            |                                                                                                                                                                              |             |   |         | 

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CENTENNIAL FIRST FINANCIAL SERVICES AND SUBSIDIARYCONSOLIDATED STATEMENTS OF EARNINGS Three and Nine
Months Ended September 30, 2002 and 2001

|                                                      |                                                     | Three months ended September 30, |      | Nine Months Ended September 30, |  
|----------------------------------------------------- | --------------------------------------------------- | -------------------------------- | ---- | ------------------------------- | -
|                                                      |                                                     |                                  |      |                                 |  
|Dollar amounts in thousands, except per share amounts |                                                     | 2002                             |      | 2001                            |  
|                                                      |                                                     |                                  |      |                                 |  
|                                                      |                                                     | (unaudited)                      |      | (unaudited)                     |  
|Interest income:                                      |                                                     |                                  |      |                                 |  
|                                                      | Interest and fees on loans                          |                                  | $    | 3,238                           |  
|                                                      | Deposits in financial institutions                  |                                  |      | 56                              |  
|                                                      | Federal funds sold                                  |                                  |      | 30                              |  
|                                                      | Investments                                         |                                  |      | 375                             |  
|                                                      |                                                     |                                  |      |                                 |  
|                                                      | Total interest income                               |                                  |      | 3,699                           |  
|                                                      |                                                     |                                  |      |                                 |  
|Interest expense:                                     |                                                     |                                  |      |                                 |  
|                                                      | Demand and savings deposits                         |                                  |      | 108                             |  
|                                                      | Time deposits $100,000 or greater                   |                                  |      | 168                             |  
|                                                      | Other time deposits                                 |                                  |      | 161                             |  
|                                                      | Interest on borrowed funds                          |                                  |      | 90                              |  
|                                                      |                                                     |                                  |      |                                 |  
|                                                      | Total interest expense                              |                                  |      | 527                             |  
|                                                      |                                                     |                                  |      |                                 |  
|                                                      | Net interest income                                 |                                  |      | 3,172                           |  
|Provision for loan losses                             |                                                     |                                  | 146  |                                 |  
|                                                      |                                                     |                                  |      |                                 |  
|                                                      | Net interest income after provision for loan losses |                                  |      | 3,026                           |  
|                                                      |                                                     |                                  |      |                                 |  
|Other income:                                         |                                                     |                                  |      |                                 |  
|                                                      | Customer service fees                               |                                  |      | 188                             |  
|                                                      | Gain from sale of loans                             |                                  |      | 162                             |  
|                                                      | Gain (loss) from sale of investment securities      |                                  |      |                                |  
|                                                      | Other income                                        |                                  |      | 292                             |  
|                                                      |                                                     |                                  |      |                                 |  
|                                                      | Total other income                                  |                                  |      | 642                             |  
|                                                      |                                                     |                                  |      |                                 |  
|Other expenses:                                       |                                                     |                                  |      |                                 |  
|                                                      | Salaries and wages                                  |                                  |      | 1,108                           |  
|                                                      | Employee benefits                                   |                                  |      | 417                             |  
|                                                      | Net occupancy expense                               |                                  |      | 309                             |  
|                                                      | Other operating expense                             |                                  |      | 1,209                           |  
|                                                      |                                                     |                                  |      |                                 |  
|                                                      | Total other expenses                                |                                  |      | 3,043                           |  
|                                                      |                                                     |                                  |      |                                 |  
|                                                      | Income before provision for income taxes            |                                  |      | 625                             |  
|Provision for income taxes                            |                                                     |                                  | 207  |                                 |  
|                                                      |                                                     |                                  |      |                                 |  
|                                                      | Net income                                          |                                  | $    | 418                             |  
|                                                      |                                                     |                                  |      |                                 |  
|Basic earnings per share                              |                                                     | $                                | 0.35 |                                 | $
|                                                      |                                                     |                                  |      |                                 |  
|Diluted earnings per share                            |                                                     | $                                | 0.34 |                                 | $
|                                                      |                                                     |                                  |      |                                 |  
|                                                      |                                                     |                                  |      |                                 |  

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CENTENNIAL FIRST FINANCIAL SERVICES AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITYNine Months Ended September 30, 2002 and 2001

|Dollar amounts in thousands             |                                                                                                     | Common Stock |       | Additional Paid-In Capital |   | Retained Earnings |       | Accumulated Other Comprehensive Income (Loss) |       | Total |  
|--------------------------------------- | --------------------------------------------------------------------------------------------------- | ------------ | ----- | -------------------------- | - | ----------------- | ----- | --------------------------------------------- | ----- | ----- | -
|                                        |                                                                                                     |              |       |                            |   |                   |       |                                               |       |       |  
|BALANCE, DECEMBER 31, 2000              |                                                                                                     | $            | 2,769 |                            | $ | 2,959             |       | $                                             | 1,184 |       | $
|                                        | Comprehensive income:                                                                               |              |       |                            |   |                   |       |                                               |       |       |  
|                                        | Net income                                                                                          |              |       |                           |   |                   |      |                                               |       | 682   |  
|                                        | Change in net unrealized gain (loss) on investment securities available for sale, after tax effects |              |       |                           |   |                   |      |                                               |       |      |  
|                                        |                                                                                                     |              |       |                            |   |                   |       |                                               |       |       |  
|                                        | Total comprehensive income                                                                          |              |       |                            |   |                   |       |                                               |       |       |  
|                                        |                                                                                                     |              |       |                            |   |                   |       |                                               |       |       |  
|                                        | Cash dividend                                                                                       |              |       |                           |   |                   |      |                                               |       | (35   | )
|                                        | Proceeds from issuance of common stock                                                              |              |       | 1,694                      |   |                   | 5,359 |                                               |       |      |  
|                                        | Exercise of stock options, including tax benefit                                                    |              |       | 110                        |   |                   | 64    |                                               |       |      |  
|                                        |                                                                                                     |              |       |                            |   |                   |       |                                               |       |       |  
|BALANCE, SEPTEMBER 30, 2001 (unaudited) |                                                                                                     | $            | 4,573 |                            | $ | 8,382             |       | $                                             | 1,831 |       | $
|                                        |                                                                                                     |              |       |                            |   |                   |       |                                               |       |       |  
|BALANCE, DECEMBER 31, 2001              |                                                                                                     | $            | 4,578 |                            | $ | 8,386             |       | $                                             | 2,194 |       | $
|                                        | Comprehensive income:                                                                               |              |       |                            |   |                   |       |                                               |       |       |  
|                                        | Net income                                                                                          |              |       |                           |   |                   |      |                                               |       | 1,211 |  
|                                        | Change in net unrealized gain on investment securities available for sale, after tax effects        |              |       |                           |   |                   |      |                                               |       |      |  
|                                        |                                                                                                     |              |       |                            |   |                   |       |                                               |       |       |  
|                                        | Total comprehensive income                                                                          |              |       |                            |   |                   |       |                                               |       |       |  
|                                        |                                                                                                     |              |       |                            |   |                   |       |                                               |       |       |  
|                                        | Stock dividend                                                                                      |              |       | 228                        |   |                   | 714   |                                               |       | (942  | )
|                                        | Cash paid in lieu of Fractional shares                                                              |              |       | (3                         | ) |                   |      |                                               |       |      |  
|                                        | Exercise of stock options, including tax benefit                                                    |              |       | 5                          |   |                   |      |                                               |       |      |  
|                                        |                                                                                                     |              |       |                            |   |                   |       |                                               |       |       |  
|BALANCE, SEPTEMBER 30, 2002 (unaudited) |                                                                                                     | $            | 4,808 |                            | $ | 9,100             |       | $                                             | 2,463 |       | $
|                                        |                                                                                                     |              |       |                            |   |                   |       |                                               |       |       |  
|                                        |                                                                                                     |              |       |                            |   |                   |       |                                               |       |       |  

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CENTENNIAL FIRST FINANCIAL SERVICES AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWSNine Months Ended September 30, 2002 and 2001

|Dollar amounts in thousands          |                                                                                   | 2002        |   | 2001        |  
|------------------------------------ | --------------------------------------------------------------------------------- | ----------- | - | ----------- | -
|                                     |                                                                                   |             |   |             |  
|                                     |                                                                                   | (unaudited) |   | (unaudited) |  
|CASH FLOWS FROM OPERATING ACTIVITIES |                                                                                   |             |   |             |  
|                                     | Net income                                                                        |             | $ | 1,211       |  
|                                     | Adjustments to reconcile net income to net cash provided by operating activities: |             |   |             |  
|                                     | Depreciation and amortization                                                     |             |   | 425         |  
|                                     | Provision for loan losses                                                         |             |   | 307         |  
|                                     | Gain from sale of loans                                                           |             |   | (554        | )
|                                     | Amortization of deferred loan fees                                                |             |   | (387        | )
|                                     | Amortization of excess purchase value of deposits                                 |             |   | (133        | )
|                                     | Amortization of excess purchase value of loans                                    |             |   | 112         |  
|                                     | Increase in intangible asset                                                      |             |   |            |  
|                                     | Deferred income tax provision (benefit)                                           |             |   | 438         |  
|                                     | Amortization of premiums on investment securities available for sale              |             |   | 191         |  
|                                     | Increase in cash surrender value of life insurance                                |             |   | (144        | )
|                                     | Decrease (increase) in assets:                                                    |             |   |             |  
|                                     | Accrued interest receivable                                                       |             |   | 68          |  
|                                     | Other assets                                                                      |             |   | 1,326       |  
|                                     | Increase (decrease) in liabilities:                                               |             |   |             |  
|                                     | Accrued interest payable                                                          |             |   | (96         | )
|                                     | Other liabilities                                                                 |             |   | (837        | )
|                                     |                                                                                   |             |   |             |  
|                                     | Net cash provided by (used in) operating activities                               |             |   | 1,927       |  
|                                     |                                                                                   |             |   |             |  
|CASH FLOWS FROM INVESTING ACTIVITIES |                                                                                   |             |   |             |  
|                                     | Net decrease (increase) in interest-bearing deposits in financial institutions    |             |   | 974         |  
|                                     | Activity in available for sale securities:                                        |             |   |             |  
|                                     | Net sales, maturities and (purchases)                                             |             |   | 5,790       |  
|                                     | Purchased goodwill from the acquisition of Palomar                                |             |   |            |  
|                                     | Proceeds from sale of other real estate owned                                     |             |   |            |  
|                                     | Redemptions (Purchases) of Federal Home Loan Bank stock                           |             |   | 35          |  
|                                     | Purchase of Pacific Coast Bankers Bank stock                                     |             |   |            |  
|                                     | Net increase in loans                                                             |             |   | (11,030     | )
|                                     | Additions to bank premises and equipment                                          |             |   | (445        | )
|                                     |                                                                                   |             |   |             |  
|                                     | Net cash used in investing activities                                             |             |   | (4,676      | )
|                                     |                                                                                   |             |   |             |  
|                                     |                                                                                   |             |   |             |  

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CENTENNIAL FIRST FINANCIAL SERVICES AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS  (Continued)Nine Months Ended September 30, 2002 and 2001

|Dollar amounts in thousands                    |                                                                                                                             | 2002        |        | 2001        |  
|---------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------- | ----------- | ------ | ----------- | -
|                                               |                                                                                                                             |             |        |             |  
|                                               |                                                                                                                             | (unaudited) |        | (unaudited) |  
|CASH FLOWS FROM FINANCING ACTIVITIES           |                                                                                                                             |             |        |             |  
|                                               | Net increase in demand and savings deposits                                                                                 |             | $      | 3,128       |  
|                                               | Net (decrease) increase in time deposits                                                                                    |             |        | (4,820      | )
|                                               | Cash dividends                                                                                                              |             |        |            |  
|                                               | Proceeds from issuance of long-term debt                                                                                    |             |        |            |  
|                                               | Repayment of long-term debt                                                                                                 |             |        | (3,500      | )
|                                               | Proceeds from issuance of Redeemable Preferred Securities of Subsidiary Trust holding solely Junior Subordinated Debentures |             |        | 6,000       |  
|                                               | Proceeds from stock issuance                                                                                                |             |        |            |  
|                                               | Cash paid in lieu of fractional shares                                                                                      |             |        | (3          | )
|                                               | Proceeds from exercise of stock options                                                                                     |             |        | 5           |  
|                                               |                                                                                                                             |             |        |             |  
|                                               | Net cash provided by financing activities                                                                                   |             |        | 810         |  
|                                               |                                                                                                                             |             |        |             |  
|                                               | Net (decrease) increase in cash and cash equivalents                                                                        |             |        | (1,939      | )
|CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |                                                                                                                             |             | 17,543 |             |  
|                                               |                                                                                                                             |             |        |             |  
|CASH AND CASH EQUIVALENTS, END OF PERIOD       |                                                                                                                             | $           | 15,604 |             | $
|                                               |                                                                                                                             |             |        |             |  
|SUPPLEMENTARY INFORMATION                      |                                                                                                                             |             |        |             |  
|                                               | Interest paid                                                                                                               |             | $      | 1,876       |  
|                                               |                                                                                                                             |             |        |             |  
|                                               | Income taxes paid                                                                                                           |             | $      | 590         |  
|                                               |                                                                                                                             |             |        |             |  
|                                               |                                                                                                                             |             |        |             |  

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CENTENNIAL FIRST FINANCIAL SERVICES

NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSSeptember 30, 2002

Note 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The
unaudited financial information included herein has been prepared in conformity with the accounting principles and practices of Centennial First Financial Services (the Company) consolidated financial statements, Note 1, included in the
Annual Report for the year ended December 31, 2001.  The accompanying interim consolidated financial statements contained herein are unaudited.  However, in the opinion of the Company, all adjustments, consisting of normal recurring items
necessary for a fair presentation of the operating results for the periods shown, have been made.  The results of operations for the three and nine months ended September 30, 2002 may not be indicative of operating results for the year ending
December 31, 2002.  Certain prior year and prior quarter amounts have been reclassified to conform to current classifications.  Cash and cash equivalents consist of cash, due from banks, and federal funds sold.

Note 2.  EARNINGS PER SHARE

Basic earnings per share represents income available to common stockholders divided by the weighted-average number of common shares
outstanding during the period.  Diluted earnings per share reflects additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the
assumed issuance.  Potential common shares that may be issued by the Company relate solely to outstanding stock options and are determined using the treasury stock method.

The weighted-average
number of shares used in computing basic and diluted earnings per share is as follows:

|                           |                                         | Earnings per share calculation For the three months ended September 30: (in thousands, except for per share amounts) |    
|-------------------------- | --------------------------------------- | -------------------------------------------------------------------------------------------------------------------- | ---
|                           |                                         |                                                                                                                      |    
|                           |                                         | 2002                                                                                                                 |    
|                           |                                         |                                                                                                                      |    
|                           |                                         | Net Income                                                                                                           |    
|                           |                                         |                                                                                                                      |    
|Basic earnings per share   |                                         | $                                                                                                                    | 418
|Effect of dilutive shares: |                                         |                                                                                                                      |    
|                           | assumed exercise of outstanding options |                                                                                                                      |    
|Diluted earnings per share |                                         | $                                                                                                                    | 418
|                           |                                         |                                                                                                                      |    

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|                           |                                         | Earnings per share calculation For the nine months ended September 30: (in thousands, except for per share amounts) |      
|-------------------------- | --------------------------------------- | ------------------------------------------------------------------------------------------------------------------- | -----
|                           |                                         |                                                                                                                     |      
|                           |                                         | 2002                                                                                                                |      
|                           |                                         |                                                                                                                     |      
|                           |                                         | Net Income                                                                                                          |      
|                           |                                         |                                                                                                                     |      
|Basic earnings per share   |                                         | $                                                                                                                   | 1,211
|Effect of dilutive shares: |                                         |                                                                                                                     |      
|                           | assumed exercise of outstanding options |                                                                                                                     |      
|Diluted earnings per share |                                         | $                                                                                                                   | 1,211
|                           |                                         |                                                                                                                     |      

Note 3.   OFF-BALANCE SHEET COMMITMENTS

In the normal course of business, there are various commitments
outstanding, such as commitments to extend credit, which are not reflected in the financial statements.  At September 30, 2002 and December 31, 2001, such commitments included approximately $135,000 and $394,000, respectively, of standby
letters of credit and approximately $66,237,000 and $52,510,000, respectively, of undisbursed lines of credit and undisbursed loans in process.  The Companys exposure to credit loss is represented by the contractual amount of these
commitments.  The Company uses the same credit policies in making commitments as it does for on-balance-sheet instruments.

Note 4.   MERGER OF PALOMAR COMMUNITY BANK AND
REDLANDS CENTENNIAL BANK

On May 24, 2002 Palomar Community Bank, which was previously a separate wholly-owned subsidiary of Centennial First Financial Services, surrendered its state charter and
was merged into and became a branch of Redlands Centennial Bank.  Centennial First Financial Services initially acquired Palomar Community Bank on August 17, 2001.

Note
5.   ISSUANCE OF TRUST PREFERRED SECURITIES

On July 11, 2002, Centennial Capital Trust I, a newly formed Delaware statutory business trust and a wholly-owned subsidiary of the
Company (the Trust), issued an aggregate of $6,000,000 of principal amount of Floating Rate TRUPS® (Capital Trust Pass-through Securities of the Trust) (the Trust Preferred Securities).  Salomon Smith Barney, Inc.
acted as placement agent in connection with the offering of the Trust Preferred Securities.  The securities issued by the Trust are fully guaranteed by the Company with respect to distributions and amounts payable upon liquidation, redemption
or repayment.  The entire proceeds to the Trust from the sale of the Trust Preferred Securities were used by the Trust in order to purchase $6,000,000 in principal amount of the Floating Rate Junior Subordinated Deferrable Interest Debentures
due 2032 issued by the Company (the Subordinated Debt Securities).

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Subject to a maximum of 25% of Tier 1 capital for all cumulative preferred stock, the Trust Preferred Securities are included as
Tier 1 capital for purposes of calculating the Companys regulatory capital ratios under the Prompt Corrective Action guidelines issued by the Federal Reserve Board.

The Subordinated Debt
Securities bear a variable interest rate equal to LIBOR plus 3.65% (1.8637% + 3.65% = 5.5137% at September 30, 2002), with a maximum rate of 12.5% through the first call date in July 2007.  The Company used approximately $4 million of the
approximately $5.8 million in net proceeds it received from the Subordinated Debt Securities to retire existing long-tem debt.  Total broker and legal costs associated with the issuance of $191,500 will be amortized over a 10-year period
starting in July 2002.

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ITEM 2.   MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Centennial First
Financial Services (the Company) is the holding company for Redlands Centennial Bank (Redlands) in Redlands, California.  This discussion focuses primarily on the results of operations of the Company on a consolidated
basis for the three and nine months ended September 30, 2002, and the financial condition of the Company as of September 30, 2002 and 2001.  Results of operations for the three and nine months ended September 30, 2002 include Palomar Community
Bank as a branch of Redlands Centennial Bank.  Results of operations for the three and nine months ended September 30, 2001 only include income from Palomar starting August 17, 2001. (See note 4 on page 8).

Managements discussion and analysis is written to provide greater insight into the results of operations and the financial condition of the Company and its subsidiary.  For a more complete understanding of the
Company and its operations, reference should be made to the financial statements included in this report and in the Companys 2001 Annual Report on Form 10-KSB.  Certain statements in this Report on Form 10-QSB constitute 
forward-looking statements under the Private Securities Litigation Reform Act of 1995, which involve risks and uncertainties.  The Companys actual results may differ significantly from the results discussed in such
forward-looking statements.  Factors that might cause such a difference include, but are not limited to, economic conditions and competition in the geographic and business areas of San Bernardino, Los Angeles, Orange, and San Diego Counties in
which the Company conducts operations, volatility of rate sensitive deposits, asset/liability matching risks, credit quality, and government regulations.  Therefore, the matters set forth below should be carefully considered when evaluating the
Companys business prospects.  For additional information concerning these factors, refer to the Companys 10-KSB for the year ended December 31, 2001.

RESULTS OF
OPERATIONS

The Company reported net income of $418,000 or $0.35 per basic share and $0.34 per diluted share for the third quarter of 2002.  This compares to net income of $264,000, or $0.27
per basic share and $0.26 per diluted share for the same period in 2001.  Earnings per share for 2001 have been restated due to a stock dividend, which was issued on April 1, 2002.

For the nine
months ended September 30, 2002, the Company reported net income of $1.21 million or $1.01 per basic share and $1.00 per diluted share.  This compares to net income of $682,000 or $0.83 per basic share and $0.81 per diluted share for the same
period in 2001.

Consolidated statements of earnings as of, and for the three and nine months ended September 30, 2001 represents only income from Redlands through August 16, 2001. Starting August 17,
2001, income from Redlands Palomar branch is included in net income.  Consolidated statements of earnings as of, and for the three and nine months ended September 30, 2002 includes income from both Redlands and its branch Palomar. 
The acquisition of Palomar, which was consummated on August 17, 2001, has primarily been responsible for the increase in net income for the three and nine months ended September 30, 2002.  The increase in the number of loans booked by the
Company during the first nine months of 2002 has continued to positively impact the Companys earnings.

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Return on average assets and return on average equity for the third quarter of 2002 was 0.77% and 10.07% respectively, as
compared to 0.70% and 9.54% respectively, for the same period in 2001.  Return on average assets and return on average equity for the nine months ended September 30, 2002 was 1.16% and 15.04% compared to 0.77% and 10.64% for the same period in
2001.  The increase in return on average assets and return on average equity is due to the fact that growth in the Companys income exceeded growth in the Companys assets.  Net income for the nine months ended September 30, 2002
increased by 78% over net income for the same period in 2001, while assets grew only 3.5% during the same periods.

Net Interest Income/Net Interest Margin

The principal component of the Companys earnings is net interest income, which is the difference between the interest and fees earned on loans and investments, and the interest paid on deposits and borrowed funds. 
When net interest income is expressed as a percentage of average earning assets, the result is the net interest margin.  The net interest spread is the yield on average earning assets minus the average cost of interest-bearing deposits and
borrowed funds.  The Companys net interest income, interest spread, and net interest margin are sensitive to general business and economic conditions.  These conditions include short-term and long-term interest rates, inflation,
monetary supply, and the strength of the economy, in general, and the local economies in which the Company conducts business.

For the nine months ended September 30, 2002, net interest income before
the provision for loan losses was $9.0 million.  This represented an increase of $3.7 million, or 69.2%, over net interest income of $5.3 million for the nine months ended September 30, 2001.  The increase in net interest income for the
first nine months of 2002 compared to 2001 was primarily the result of the acquisition of Palomar Community Bank, as well as an increase in the number of loans made during the first nine months of 2002. Total interest earning assets averaged $178.3
million for the first nine months of 2002.  This represented an increase of $18.2 million, or 11.3%, compared to average total interest earning assets of $160.1 million for the first nine months of 2001.

The net interest margin measures net interest income as a percentage of average earning assets.  The net interest margin can be affected by changes in the yield on earning assets and the cost of interest-bearing
liabilities, as well as changes in the level of interest-bearing liabilities in proportion to earning assets.  The net interest margin can also be affected by changes in the mix of earning assets as well as the mix of interest-bearing
liabilities.  The Companys net interest margin was 6.71% for the first nine months of 2002, compared to 6.17% for the same period of 2001.  The rate paid on average deposits and other borrowings decreased by 1.05% in these two
periods.  This was the primary reason for the increase in the net interest margin, as the return on total interest earning assets only decreased by 0.55% over the same period.  The Companys Prime rate averaged 7.33% during the first
nine months of 2001, compared to 4.97% for the first nine months of 2002.

The yield on average interest earning assets decreased slightly in the first nine months of 2002 to 8.05% from 8.60% in the
same period of 2001. The decrease in the yield on average earning assets resulted from a market in which lower interest rates prevailed in the first 9 months of 2002 compared to 2001.  The yield on average interest earning assets also decreased
because Palomars loans for the most part have lower yields than Redlands loans.  The combination of Redlands and Palomars loans in the first nine months of 2002 caused a decrease in the yield of average loans

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from the same period in 2001, which only included loans from Redlands for the first 7 1⁄2 months of 2001.  Decrease in
yields on average loans had the biggest effect on the decrease in the yield from average interest earning assets.  The yield on average loans decreased to 9.30% for the nine months ended September 30, 2002, as compared to 10.40% for the first
nine months of 2001.

The cost of average interest-bearing liabilities, including non-interest bearing deposits and borrowed funds, decreased to 1.31% for the nine months ended September 30, 2002,
compared to a cost of 2.36% for the first nine months of 2001.  The decrease is a result of several factors, including a lower interest rate environment in the first nine months of 2002 compared to the same period in 2001, and having higher
rate certificates of deposit mature and being replaced by certificates of deposit that reflect the current rate environment.  The cost of average interest-bearing deposits and borrowed funds was 1.73% for the first nine months of 2002 as
compared to 3.00% for the same period in 2001.  The cost of borrowed funds was 7.26% for the nine months ended September 30, 2002 compared to 5.52% for the same period in 2001.

The Company
reported total interest income of $10.7 million for the nine months ended September 30, 2002, which represented an increase of $3.5 million, or 48.6%, over total interest income of $7.2 million for the nine months ended September 30, 2001. 
Interest expense totaled $1.8 million for the nine months ended September 30, 2002, which represented a decrease of $0.1 million, or 5.3%, over total interest expense of $1.9 million for the nine months ended September 30, 2001, and is principally
the result of a reduced cost of funds in the first nine months of 2002 compared to the same period in 2001.

For the three months ending September 30, 2002, the Company had total interest income of
$3.7 million, which is an increase of $0.9 million or 32.1% over total interest income for the three months ended September 30, 2001.  The increase in interest income during this period can be partially attributed to the acquisition of Palomar,
but also to continued loan growth.  Interest expense for the three months ending September 30, 2002 was $527,000, which is a decrease of 27.6% or $201,000 compared to the same period in 2001.  The decrease in interest expense for this
period is because the average rate the Company paid for deposits and other borrowings decreased from 2.17% to 1.15% for the three months ending September 30, 2001 and 2002.

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The following tables sets forth average assets, liabilities, and shareholders equity; the amount of interest income of interest
expense; and the average yield or rate for each category of interest-bearing assets and interest bearing liabilities and the net interest margin (net interest income divided by average earning assets) for the periods indicated.

|                                                    |                                       | Quarter Ended September 30, |        
|--------------------------------------------------- | ------------------------------------- | --------------------------- | -------
|                                                    |                                       |                             |        
|                                                    |                                       | 2002                        |        
|                                                    |                                       |                             |        
|(Dollars in thousands)                              |                                       | Average Balance             |        
|                                                    |                                       |                             |        
|INTEREST-EARNING ASSETS:                            |                                       |                             |        
|Federal funds sold                                  |                                       | $                           | 5,641  
|Interest-bearing deposits in financial institutions |                                       |                             | 4,633  
|Investment securities:                              |                                       |                             |        
|                                                    | Taxable                               |                             |        
|                                                    | Non-taxable                           |                             |        
|                                                    |                                       |                             |        
|Total investments                                   |                                       |                             | 39,051 
|Loans                                               |                                       |                             | 138,212
|                                                    |                                       |                             |        
|                                                    | Total average interest-earning assets |                             | $      
|                                                    |                                       |                             |        
|INTEREST-BEARING LIABILITIES:                       |                                       |                             |        
|Demand deposits                                     |                                       | $                           | 51,315 
|Interest-bearing demand deposits                    |                                       |                             | 15,299 
|Money market deposits                               |                                       |                             | 36,019 
|Savings deposits                                    |                                       |                             | 17,833 
|Time deposits of $100,000 or more                   |                                       |                             | 28,399 
|Time deposits under $100,000                        |                                       |                             | 29,507 
|                                                    |                                       |                             |        
|Total average interest-bearing liabilities          |                                       | $                           | 127,057
|                                                    |                                       |                             |        
|Other borrowings                                    |                                       |                             | 4,492  
|                                                    |                                       |                             |        
|Total average deposits and other borrowings         |                                       | $                           | 182,864
|                                                    |                                       |                             |        
|Average rate excluding demand deposits              |                                       |                             |        
|Net interest income                                 |                                       |                             |        
|                                                    |                                       |                             |        
|Net interest margin                                 |                                       |                             |        
|                                                    |                                       |                             |        

---

1Average rates/yields for these periods have been annualized

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|                                                    |                                       | Nine months Ended September 30, |        
|--------------------------------------------------- | ------------------------------------- | ------------------------------- | -------
|                                                    |                                       |                                 |        
|                                                    |                                       | 2002                            |        
|                                                    |                                       |                                 |        
|(Dollars in thousands)                              |                                       | Average Balance                 |        
|                                                    |                                       |                                 |        
|INTEREST-EARNING ASSETS:                            |                                       |                                 |        
|Federal funds sold                                  |                                       | $                               | 9,049  
|Interest-bearing deposits in financial institutions |                                       |                                 | 4,678  
|Investment securities:                              |                                       |                                 |        
|                                                    | Taxable                               |                                 |        
|                                                    | Non-taxable                           |                                 |        
|                                                    |                                       |                                 |        
|Total investments                                   |                                       |                                 | 45,155 
|Loans                                               |                                       |                                 | 133,143
|                                                    |                                       |                                 |        
|                                                    | Total average interest-earning assets |                                 | $      
|                                                    |                                       |                                 |        
|INTEREST-BEARING LIABILITIES:                       |                                       |                                 |        
|Demand deposits                                     |                                       | $                               | 43,982 
|Interest-bearing demand deposits                    |                                       |                                 | 20,613 
|Money market deposits                               |                                       |                                 | 33,558 
|Savings deposits                                    |                                       |                                 | 18,459 
|Time deposits of $100,000 or more                   |                                       |                                 | 29,058 
|Time deposits under $100,000                        |                                       |                                 | 31,377 
|                                                    |                                       |                                 |        
|Total average interest-bearing liabilities          |                                       | $                               | 133,065
|                                                    |                                       |                                 |        
|Other borrowings                                    |                                       |                                 | 4,406  
|                                                    |                                       |                                 |        
|Total average deposits and other borrowings         |                                       | $                               | 181,453
|                                                    |                                       |                                 |        
|Average rate excluding demand deposits              |                                       |                                 |        
|Net interest income                                 |                                       |                                 |        
|                                                    |                                       |                                 |        
|Net interest margin                                 |                                       |                                 |        
|                                                    |                                       |                                 |        

The following table presents a rate and volume analysis for changes in interest income, interest expense, and net interest income.

|                                                    |             | Quarter Ended September 30, 2002 Compared to Quarter Ended September 30, 2001 Increase (Decrease) Due to |      
|--------------------------------------------------- | ----------- | -------------------------------------------------------------------------------------------------------- | -----
|                                                    |             |                                                                                                          |      
|(Dollars in thousands)                              |             | Volume                                                                                                   |      
|                                                    |             |                                                                                                          |      
|INCREASE (DECREASE) IN INTEREST INCOME              |             |                                                                                                          |      
|Federal funds sold                                  |             | $                                                                                                        | (679 
|Interest-bearing deposits in financial institutions |             |                                                                                                          | (121 
|Investment securities:                              |             |                                                                                                          |      
|                                                    | Taxable     |                                                                                                          |      
|                                                    | Non-Taxable |                                                                                                          |      
|Loans                                               |             |                                                                                                          | 2,392
|                                                    |             |                                                                                                          |      
|                                                    | Total       |                                                                                                          | $    
|                                                    |             |                                                                                                          |      
|INCREASE (DECREASE) IN INTEREST EXPENSE             |             |                                                                                                          |      
|Interest bearing demand deposits                    |             | $                                                                                                        | (13  
|Money market deposits                               |             |                                                                                                          | (57  
|Savings deposits                                    |             |                                                                                                          | 44   
|Time deposits of $100,000 or more                   |             |                                                                                                          | 72   
|Time deposits under $100,000                        |             |                                                                                                          | (221 
|Other borrowings                                    |             |                                                                                                          | 152  
|                                                    |             |                                                                                                          |      
|                                                    | Total       |                                                                                                          | $    
|                                                    |             |                                                                                                          |      
|TOTAL CHANGE IN NET INTEREST INCOME                 |             | $                                                                                                        | 2,125
|                                                    |             |                                                                                                          |      
|                                                    |             |                                                                                                          |      

---

2Average rates/yields for these periods have been
annualized

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|                                                    |             | Nine Months EndedSeptember 30, 2002 Compared to Nine Months Ended September 30, 2001 Increase (Decrease) Due
to |      
|--------------------------------------------------- | ----------- | --------------------------------------------------------------------------------------------------------------- | -----
|                                                    |             |                                                                                                                 |      
|                                                    |             | Volume                                                                                                          |      
|                                                    |             |                                                                                                                 |      
|INCREASE (DECREASE) IN INTEREST INCOME              |             |                                                                                                                 |      
|Federal funds sold                                  |             | $                                                                                                               | (621 
|Interest-bearing deposits in financial institutions |             |                                                                                                                 | (132 
|Investment securities:                              |             |                                                                                                                 |      
|                                                    | Taxable     |                                                                                                                 |      
|                                                    | Non-Taxable |                                                                                                                 |      
|Loans                                               |             |                                                                                                                 | 2,319
|                                                    |             |                                                                                                                 |      
|                                                    | Total       |                                                                                                                 |      
|                                                    |             |                                                                                                                 |      
|INCREASE (DECREASE) IN INTEREST EXPENSE             |             |                                                                                                                 |      
|Interest bearing demand deposits                    |             |                                                                                                                 | 14   
|Money market deposits                               |             |                                                                                                                 | (74  
|Savings deposits                                    |             |                                                                                                                 | 66   
|Time deposits of $100,000 or more                   |             |                                                                                                                 | 209  
|Time deposits under $100,000                        |             |                                                                                                                 | (162 
|Other borrowings                                    |             |                                                                                                                 | 203  
|                                                    |             |                                                                                                                 |      
|Total                                               |             |                                                                                                                 | 256  
|                                                    |             |                                                                                                                 |      
|TOTAL CHANGE IN NET INTEREST INCOME                 |             | $                                                                                                               | 2,173
|                                                    |             |                                                                                                                 |      
|                                                    |             |                                                                                                                 |      

PROVISION FOR LOAN LOSSES

Due to the credit risk inherent in the business of making loans, Centennial First sets aside
an allowance, or reserve for loan losses through charges to earnings.  The charges are shown in the income statements as provision for loan losses, and specifically identifiable and quantifiable losses are immediately charged off against
current period earnings to achieve an allowance for loan

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losses that in Managements judgment is considered adequate to absorb losses inherent in the loan portfolio after net
charge-offs have been deducted.  The amount of the allowance is based on managements regular review of the loan portfolio and consideration of such factors as historical loss experience, general prevailing economic conditions, changes in
the size and composition of the loan portfolio and specific borrower considerations, including repayment ability and the estimated value of the underlying collateral.

For the nine months ended
September 30, 2002, the provision for loan losses increased 85% or $141,000 to $307,000, compared to $166,000 in the same period in 2001.  The increase in 2002 is primarily the result of the growth in the size of the Companys loan
portfolio, which was due primarily to the acquisition of Palomar, as well as continued strong demand for loans.  The procedures for monitoring the adequacy for the allowance for loan losses, as well as detailed information concerning the
allowance itself, are included below under Allowance for loan losses.

NON-INTEREST INCOME

Non-interest income includes revenues
earned from sources other than interest income.  These sources include:  service charges and fees on deposit accounts, gains from sales of loans, gain or loss on sale of securities or on other real estate owned, increases in the cash
surrender value of life insurance, and other sources of income.

Other operating income totaled $1.8 million for the nine months ended September 30, 2002.  This represented an increase of $0.5
million, or 38.4%, from other operating income of $1.3 million for the nine months ended September 30, 2001.  The increase was primarily the result of increases in the amount of customer service fees collected as a result of the Palomar
Community Bank acquisition in August 2001, and an increase in gains from loans sold.  For the third quarter of 2002, other operating income totaled $642,000, which represents a $71,000 increase or 12.4% over the same period in 2001.  The
increase in the third quarter of 2002 is primarily the result of increases in the volume of loans sold.

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The following table sets forth components of Centennial Firsts non-interest income for the periods indicated and expresses
the amounts as percentage of total non-interest income:

|                                                                       |                    | Three months endedSeptember 30, |       | Nine months endedSeptember 30, |  
|---------------------------------------------------------------------- | ------------------ | ------------------------------- | ----- | ------------------------------ | -
|                                                                       |                    |                                 |       |                                |  
|(Dollars in thousands)                                                 |                    | 2002                            |       | 2001                           |  
|                                                                       |                    |                                 |       |                                |  
|                                                                       |                    | Amount                          |       | Amount                         |  
|NON-INTEREST INCOME:                                                   |                    |                                 |       |                                |  
|Customer service fees                                                  |                    | $                               | 188   |                                | $
|Gain from sale of loans                                                |                    |                                 | 162   |                                |  
|Increase in cash value Of life insurance                               |                    |                                 | 53    |                                |  
|Broker fee income                                                      |                    |                                 | 94    |                                |  
|Other income                                                           |                    |                                 | 145   |                                |  
|                                                                       |                    |                                 |       |                                |  
|                                                                       | Total other income |                                 | $     | 642                            |  
|                                                                       |                    |                                 |       |                                |  
|                                                                       |                    |                                 |       |                                |  
|                                                                       |                    | Three months endedSeptember 30, |       | Nine months endedSeptember 30, |  
|                                                                       |                    |                                 |       |                                |  
|                                                                       |                    | 2002                            |       | 2001                           |  
|                                                                       |                    |                                 |       |                                |  
|                                                                       |                    | Amount                          |       | Amount                         |  
|Customer service fees                                                  |                    |                                 | 29.28 | %                              |  
|Gain from sale of loans                                                |                    |                                 | 25.23 | %                              |  
|Increase in cash value Of life insurance                               |                    |                                 | 8.26  | %                              |  
|Broker fee income                                                      |                    |                                 | 14.64 | %                              |  
|Other income                                                           |                    |                                 | 22.59 | %                              |  
|                                                                       |                    |                                 |       |                                |  
|                                                                       | Total other income |                                 |       | 100.00                         | %
|                                                                       |                    |                                 |       |                                |  
|Total non-interest income as a percent of average assets (annualized): |                    |                                 | 1.18  | %                              |  
|                                                                       |                    |                                 |       |                                |  
|                                                                       |                    |                                 |       |                                |  

NON-INTEREST EXPENSE

Non-interest expenses for the Company  includes  expenses for salaries and
benefits,  occupancy,  equipment,  professional services,  promotion and other expenses (data processing,  stationery and supplies, deposit insurance,  promotional,  other real estate owned,  and misc. 
expenses).  Other  operating expenses  totaled  $8.7 million for the nine  months  ended September 30,  2002.  This represented an increase of $3.4 million, or 64.2%, over other operating expenses of $5.3
million for the nine months ended September 30, 2001.  The increase in non-interest expense is due to the acquisition of Palomar Community Bank, as well as increases in professional fees due to the merger of Palomar Community Bank into Redlands
Centennial Bank in 2002, as well as increases in salaries during the first 9 months of 2002.  For the third quarter of 2002, other operating expenses totaled $3.0 million.  This represents a $1.0 million increase or 50.0% over the same
period in 2001.  The increase in the third quarter of 2002 is primarily the result of the acquisition of Palomar Community Bank in the second half of 2001, as well as increased professional fees related to the merger of Palomar into Redlands
Centennial Bank.

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##### Table of Contents

The following table sets forth components of Centennial Firsts non-interest expense for the periods indicated and expresses
the amounts as a percentage of total non-interest expense:

|                                                                        |                      | Three months endedSeptember 30, |       | Nine months endedSeptember 30, |  
|----------------------------------------------------------------------- | -------------------- | ------------------------------- | ----- | ------------------------------ | -
|                                                                        |                      |                                 |       |                                |  
|(Dollars in thousands)                                                  |                      | 2002                            |       | 2001                           |  
|                                                                        |                      |                                 |       |                                |  
|                                                                        |                      | Amount                          |       | Amount                         |  
|OTHER EXPENSES:                                                         |                      |                                 |       |                                |  
|Salaries, wages, and employee benefits                                  |                      | $                               | 1,525 |                                | $
|Net occupancy expense                                                   |                      |                                 | 432   |                                |  
|Marketing                                                               |                      |                                 | 70    |                                |  
|Data processing fees                                                    |                      |                                 | 238   |                                |  
|Professional fees                                                       |                      |                                 | 181   |                                |  
|Postage, telephone, supplies                                            |                      |                                 | 109   |                                |  
|Directors fees                                                          |                      |                                 | 35    |                                |  
|Legal settlement                                                        |                      |                                 | 225   |                                |  
|Other operating expenses                                                |                      |                                 | 228   |                                |  
|                                                                        |                      |                                 |       |                                |  
|                                                                        | Total other expenses |                                 | $     | 3,043                          |  
|                                                                        |                      |                                 |       |                                |  
|                                                                        |                      |                                 |       |                                |  
|                                                                        |                      | Three months endedSeptember 30, |       | Nine months endedSeptember 30, |  
|                                                                        |                      |                                 |       |                                |  
|                                                                        |                      | 2002                            |       | 2001                           |  
|                                                                        |                      |                                 |       |                                |  
|                                                                        |                      | Amount                          |       | Amount                         |  
|Salaries, wages, and employee benefits                                  |                      |                                 | 50.12 | %                              |  
|Net occupancy expense                                                   |                      |                                 | 14.20 | %                              |  
|Marketing                                                               |                      |                                 | 2.30  | %                              |  
|Data processing fees                                                    |                      |                                 | 7.82  | %                              |  
|Professional fees                                                       |                      |                                 | 5.95  | %                              |  
|Postage, telephone, supplies                                            |                      |                                 | 3.58  | %                              |  
|Directors fees                                                          |                      |                                 | 1.15  | %                              |  
|Legal settlement                                                        |                      |                                 | 7.39  | %                              |  
|Other operating expense                                                 |                      |                                 | 7.49  | %                              |  
|                                                                        |                      |                                 |       |                                |  
|                                                                        | Total other expenses |                                 |       | 100.00                         | %
|                                                                        |                      |                                 |       |                                |  
|Total non-interest expense as a percent of average assets (annualized): |                      |                                 | 5.61  | %                              |  
|                                                                        |                      |                                 |       |                                |  

FINANCIAL CONDITION

GENERAL

The Companys total assets were $199.5 million at September 30, 2002, an increase of 0.8% or $1.5 million, compared to total assets of $198.0 million at
December 31, 2001.  Total deposits at September 30, 2002 were $172.6 million, a slight decrease from total deposits of $174.3 million at December 31, 2001.  Total loans, net of the allowance for loan losses and unearned income increased
9.1%, or $11.5 million to a total of $137.2 million.  Strong loan demand in the market areas of Redlands and Palomar contributed to the increase in total assets and total loans.

LOANS

The Companys total gross loans at September 30, 2002 were $139.3 million, representing a 9.2% increase over total gross loans at December 31, 2001 of $127.6
million.  The Companys lending focus is commercial, real estate, and construction loans.  These types of loans make up 93% of the

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total loan portfolio.  The performance and future repayment of construction and real estate loans is dependent on a number
of regional economic factors, including real estate prices.  The future repayment of commercial loans is generally dependent on future cash flows from business operations.

The remaining types of
loans consist of auto loans, equity loans, indirect loans, and other types of consumer loans.  These types of loans make up the remaining 7% of the total loan portfolio.

The following table
shows the amounts of total loans outstanding by category as of the dates indicated:

|                                |                              | September 30, 2002 |        | December 31, 2001 | 
|------------------------------- | ---------------------------- | ------------------ | ------ | ----------------- | 
|                                |                              |                    |        |                   | 
|(Dollars in thousands)          |                              | Amount             |        | %                 | 
|                                |                              |                    |        |                   | 
|Real estate loans               |                              |                    |        |                   | 
|                                | Construction and development |                    | $      | 50,715            | 
|                                | Mortgage loans               |                    |        | 46,262            | 
|Commercial loans                |                              |                    | 32,945 |                   | 
|Automobile loans                |                              |                    | 2,185  |                   | 
|Indirect loans                  |                              |                    | 16     |                   | 
|Equity loans                    |                              |                    | 5,567  |                   | 
|Consumer and other loans        |                              |                    | 1,604  |                   | 
|                                |                              |                    |        |                   | 
|                                | Total loans                  |                    |        | 139,294           | 
|Less unearned income            |                              |                    | (377   | )                 | 
|Less allowance for loans losses |                              |                    | (1,670 | )                 | 
|                                |                              |                    |        |                   | 
|                                | Net loans                    |                    | $      | 137,247           | 
|                                |                              |                    |        |                   | 
|                                |                              |                    |        |                   | 

Non-performing assets

Centennial Firsts policy is to recognize interest income on an accrual basis unless the full
collectibility of principal and interest is uncertain. Loans that are delinquent 90 days or more, unless well secured and in the process of collection, are placed on nonaccrual status on a cash basis.  Previously accrued, but uncollected
interest, is reversed against income. Thereafter, income is recognized only as it is collected. Collectibility is determined by considering the borrowers financial condition, cash flow, quality of management, the existence of collateral or
guarantees, and the state of the local economy.

Nonperforming assets include loans for which interest is no longer accruing, loans 90 or more days past due, impaired loans and other real estate
owned. As a result of Centennial Firsts continued adherence to strict loan standards and policies, nonperforming assets at September 30, 2002 were  $543,000 compared to $241,000 at December 31, 2001, representing .39% and .19% of gross
loans at September 30, 2002 and December 31, 2001, respectively.

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The following table provides information with respect to all nonperforming assets as of September 30, 2002 and December 31,
2001:

|(Dollars in thousands)                                           |                            | September 30 2002 |        | December 31 2001 |  
|---------------------------------------------------------------- | -------------------------- | ----------------- | ------ | ---------------- | -
|                                                                 |                            |                   |        |                  |  
|Loans on nonaccrual status                                       |                            | $                 | 543    |                  | $
|Loans past due greater than 90 days                              |                            |                   |       |                  |  
|                                                                 |                            |                   |        |                  |  
|                                                                 | Total nonperforming assets |                   | $      | 543              |  
|                                                                 |                            |                   |        |                  |  
|Allowance for loan losses                                        |                            | $                 | 1,670  |                  | $
|Ratio of total nonperforming assets3 to total loans              |                            |                   | .39    | %                |  
|Ratio of allowance for loan losses to total nonperforming assets |                            |                   | 307.55 | %                |  
|Ratio of non-performing loans to total loans                     |                            |                   | .39    | %                |  
|                                                                 |                            |                   |        |                  |  

ALLOWANCE FOR LOAN LOSSES

The allowance for loan losses totaled $1.7 million at September 30, 2002, compared to $1.5
million at December 31, 2001. The procedures for monitoring the adequacy of the allowance, as well as detailed information concerning the allowance itself, are included below.  The increase in the allowance in the nine months ended September
30, 2002 was primarily due to a decrease in the amount of loans charged off in the first nine months of 2002 compared to the same period in 2001, as well as an increase in the provision charged to operations for the same nine month
periods.

The allowance for loan losses is increased by the provision for loan losses and decreased by charge-offs, and increased for recoveries.  The adequacy of the allowance for loan losses is
measured in the context of several key ratios and factors including: (1) the ratio of the allowance to total outstanding loans; (2) the ratio of total nonperforming loans to total loans; and, (3) the ratio of net charge-offs (recoveries) to average
loans outstanding. Additional factors considered in establishing an appropriate allowance include a careful assessment of the financial condition of the borrower; a realistic determination of the value and adequacy of underlying collateral; the
condition of the local economy and the condition of the specific industry of the borrower; comprehensive analysis of the levels and trends of loan categories; and a review of delinquent and classified loans. Managements evaluation is based on
a system whereby each loan is graded at the time of origination, extension or renewal. Each grade is assessed a risk factor, which is calculated to assess the adequacy of the allowance for loan losses. Further, management considers other
factors including changes in the nature and volume of the loan portfolio, overall portfolio quality, loan concentrations, trends in the level of delinquent and classified loans, specific problem loans and commitments, and current and anticipated
economic conditions.  Management and the Board of Directors review the allowance for loan losses monthly.  While the Board of Directors believes that it uses the best information available to determine the allowance for loan losses,
unforeseen market conditions could result in material adjustments, and net earnings could be

---

3  Consists entirely of
nonperforming loans. The Company had no OREO as of September 30, 2002 or December 31, 2001.

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##### Table of Contents

significantly adversely affected, if circumstances differ substantially from the assumptions used in making the final
determination.

The allowance for loan losses as a percentage of total loans outstanding as of September 30, 2002 was 1.20%, as compared to 1.19% as of September 30, 2001.  Net loan charge-offs
during the third quarter of 2002 approximated $68,000, or 0.05% of average total loans, compared to $186,000 or 0.16% during the same period in 2001.  Net loan charge-offs during the first nine months of 2002 totaled $97,000, compared to
$227,000 during the same period in 2001.   The Company maintains the allowance for loan losses at a level management feels is adequate to absorb losses inherent in the loan portfolio. The evaluation is based upon a continuous review of the
Companys and the banking industrys historical loan loss experience, known and inherent risks contained in the loan portfolio, composition and growth of the loan portfolio, current and projected economic conditions and other factors.
However, no assurance can be given that changes in the current economic environment in the Companys market areas or other circumstances will not result in increased losses in the loan portfolio in the future.

The following table summarizes the changes in the allowance for loan losses for the periods shown:

|                                                                          |                         | Nine months ended September 30, |        
|------------------------------------------------------------------------- | ----------------------- | ------------------------------- | -------
|                                                                          |                         |                                 |        
|(Dollars in thousands)                                                    |                         | 2002                            |        
|                                                                          |                         |                                 |        
|Allowance for loan losses balance, beginning of period                    |                         | $                               | 1,460  
|Acquisition allowance, Palomar                                            |                         |                                 |        
|Loans charged off:                                                        |                         |                                 |        
|Real estate                                                               |                         |                                 | 49     
|Commercial                                                                |                         |                                 | 22     
|Consumer                                                                  |                         |                                 | 46     
|Lease financing                                                           |                         |                                 |       
|Credit card and related accounts                                          |                         |                                 | 5      
|                                                                          |                         |                                 |        
|                                                                          | Total loans charged off |                                 |        
|Recoveries:                                                               |                         |                                 |        
|Real estate                                                               |                         |                                 | 2      
|Commercial                                                                |                         |                                 | 12     
|Consumer                                                                  |                         |                                 | 11     
|Credit card and related accounts                                          |                         |                                 |       
|                                                                          |                         |                                 |        
|                                                                          | Total recoveries        |                                 |        
|                                                                          |                         |                                 |        
|Net (charge-offs) recoveries                                              |                         |                                 | (97    
|                                                                          |                         |                                 |        
|Provision charged to operations                                           |                         |                                 | 307    
|Provision for off-balance sheet commitments                               |                         |                                 |       
|                                                                          |                         |                                 |        
|Allowance for loan losses balance, end of period                          |                         | $                               | 1,670  
|                                                                          |                         |                                 |        
|Loans outstanding at end of period, net of unearned interest income       |                         | $                               | 139,294
|Average loans outstanding for the period, net of unearned interest income |                         | $                               | 133,143
|Ratio of net loans charged off (recovered) to average loans outstanding   |                         |                                 | .07    
|Ratio of allowance for loan losses to loans at end of period              |                         |                                 | 1.20   

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The following table summarizes the allocation of the allowance for loan losses:

|                              |  | September 30, 2002        |         | December 31, 2001                                 | 
|----------------------------- |  | ------------------------- | ------- | ------------------------------------------------- | 
|                              |  |                           |         |                                                   | 
|(Dollars in thousands)        |  | Allowance for Loan Losses |         | Ratio of Loan Category to Outstanding Total Loans | 
|                              |  |                           |         |                                                   | 
|Real estate-construction      |  | $                         | 468     |                                                   | 
|Real estate-mortgage          |  |                           | 561     |                                                   | 
|Commercial loans              |  |                           | 507     |                                                   | 
|Automobile                    |  |                           | 0       |                                                   | 
|Indirect                      |  |                           | 0       |                                                   | 
|Equity loans                  |  |                           | 54      |                                                   | 
|Consumer & other              |  |                           | 80      |                                                   | 
|Not allocated                 |  |                           |        |                                                   | 
|                              |  |                           |         |                                                   | 
|Total allowance for loan loss |  | $                         | 1,670   |                                                   | 
|                              |  |                           |         |                                                   | 
|Total loans                   |  | $                         | 139,294 |                                                   | 
|                              |  |                           |         |                                                   | 

INVESTMENTS

Centennial Firsts
investment portfolio provides income to Centennial First and also serves as a source of liquidity. Total yield, maturity and risk are among the factors considered in building the investment portfolio.  Pursuant to FASB 115, securities must be
classified as held to maturity, available for sale, or trading securities. Those securities held in the available for sale category must be carried on Centennial Firsts books at fair market
value. At September 30, 2002 and December 31, 2001, 100% of the investment securities owned by the Company were classified as Available for Sale.  At September 30, 2002, Centennial Firsts investment portfolio at fair value
consisted of $22.7 million in mortgage-backed securities, $4.8 million in municipal bonds, $487,000 of marketable equity securities, $271,000 in U.S. Treasury obligations, and $186,000 of corporate securities compared to $28.7 million, $4.5 million,
$487,000, $264,000, and $0 respectively at December 31, 2001.  The slight decrease in the Companys investment portfolio was due to maturities, early payoffs for some of the Mortgage-backed securities, and funds reinvested in
loans.

The Company also has cash invested in interest-bearing deposits and short-term time certificates at other financial institutions totaling $4.98 million at September 30, 2002 versus $5.95
million at December 31, 2001.  Overnight federal funds sold totaled $4.19 million at September 30, 2002, versus $7.50 million at December 31, 2001.

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The following table is a comparison of amortized cost and fair value of investment securities at September 30, 2002 and December
31, 2001:

|                                            |  | September 30, 2002 |       
|------------------------------------------- |  | ------------------ | ------
|                                            |  |                    |       
|(Dollars in thousands)                      |  | Amortized Cost     |       
|                                            |  |                    |       
|AVAILABLE-FOR-SALE:                         |  |                    |       
|Mortgage-backed securities                  |  | $                  | 22,323
|Obligations of States and Local Governments |  |                    | 4,596 
|Marketable Equity Securities                |  |                    | 487   
|U.S. Treasury Obligations                   |  |                    | 257   
|Corporate Securities                        |  |                    | 186   
|                                            |  |                    |       
|                                            |  | $                  | 27,849
|                                            |  |                    |       
|                                            |  |                    |       
|                                            |  | December 31, 2001  |       
|                                            |  |                    |       
|                                            |  | Amortized Cost     |       
|                                            |  |                    |       
|AVAILABLE-FOR-SALE:                         |  |                    |       
|Mortgage-backed securities                  |  | $                  | 28,436
|Obligations of States and Local Governments |  |                    | 4,624 
|Marketable Equity Securities                |  |                    | 487   
|U.S. Treasury Obligations                   |  |                    | 260   
|                                            |  |                    |       
|                                            |  | $                  | 33,807
|                                            |  |                    |       

DEPOSITS

Total deposits decreased slightly
by $1.7 million, or 1.0%, to $172.6 million at September 30, 2002 from $174.3 million at December 31, 2001. Noninterest-bearing demand deposits at September 30, 2002, were $49.6 million, an increase of $8.2 million, or 19.8% from $41.4 million at
December 31, 2001. Interest bearing and NOW accounts decreased 6.3%, or $3.3 million to $48.9 million at September 30, 2002 from $52.2 million at December 31, 2001. Savings and time deposits decreased by $6.7 million to $74.0 million at September
30, 2002 from $80.7 million at December 31, 2001.  The slight decrease in deposits in the first nine months of 2002 is due to a decrease in deposits at the Palomar branch after the fee structure of Redlands was implemented at
Palomar.

The average rate paid on time deposits was significantly lower in the first nine months of 2002 compared to 2001, with the average rate paid on time deposits of $100,000 or more decreased
from 4.95% for the year ended December 31, 2001 to 2.60% for the nine months ended September 30, 2002, while the average rate on time deposits under $100,000 decreased from 4.11% for the year ended December 31, 2001 to 2.86% for the nine months
ended September 30, 2002.  The decrease in the rates paid on time deposits is a result of the interest rate decreases throughout 2001.

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The following table summarizes the distribution of average deposits and the average rates paid for the periods
indicated:

|                                  |  | Nine Months Ended September 30, 2002 |         | Year Ended December 31, 2001 | 
|--------------------------------- |  | ------------------------------------ | ------- | ---------------------------- | 
|                                  |  |                                      |         |                              | 
|(Dollars in thousands)            |  | Average Balance                      |         | Average Rate                 | 
|                                  |  |                                      |         |                              | 
|INTEREST-BEARING LIABILITIES:     |  |                                      |         |                              | 
|Demand deposits                   |  | $                                    | 43,982  |                              | 
|Interest-bearing demand deposits  |  |                                      | 20,613  |                              | 
|Money market deposits             |  |                                      | 33,558  |                              | 
|Savings deposits                  |  |                                      | 18,459  |                              | 
|Time deposits of $100,000 or more |  |                                      | 29,058  |                              | 
|Time deposits under $100,000      |  |                                      | 31,377  |                              | 
|                                  |  |                                      |         |                              | 
|Total interest-bearing deposits   |  |                                      | 133,065 |                              | 
|                                  |  |                                      |         |                              | 
|Total deposits                    |  | $                                    | 177,047 |                              | 
|                                  |  |                                      |         |                              | 

The following table sets forth, by time remaining to maturity, all time certificates of deposit
accounts outstanding in amounts of $100,000 or more at September 30, 2002 and December 31, 2001:

|(Dollars in thousands)           |       | As of September 30, 2002 |        | As of December 31, 2001 |  
|-------------------------------- | ----- | ------------------------ | ------ | ----------------------- | -
|                                 |       |                          |        |                         |  
|Three months or less             |       | $                        | 10,168 |                         | $
|Over three through twelve months |       |                          | 18,147 |                         |  
|Over one year to three years     |       |                          | 206    |                         |  
|Over three years                 |       |                          | 1,259  |                         |  
|                                 |       |                          |        |                         |  
|                                 | Total |                          | $      | 29,780                  |  
|                                 |       |                          |        |                         |  
|                                 |       |                          |        |                         |  

LIQUIDITY

Liquidity is the Companys ability to absorb fluctuations in deposits while simultaneously providing for
the credit needs of its borrowers.  The Company has adopted policies to maintain a relatively liquid position to enable it to respond to changes in the financial environment and ensure sufficient funds are available to meet those needs. 
Generally, the Companys major sources of liquidity are customer deposits, sales and maturities of investment securities, proceeds from the sale of loans, the use of federal funds markets, borrowings from the Federal Home Loan Bank (FHLB), and
net cash provided by operating activities.  Scheduled loan payments are a relatively stable source of funds, while deposit inflows and unscheduled loan repayments are not a stable source of liquidity.  The Company holds overnight federal
funds as a cushion for temporary

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##### Table of Contents

liquidity needs.  During the nine months ended September 30, 2002, federal funds sold averaged $9.0 million, or 4.3% of
total average assets compared to $25.6 million or 13.3% of total average assets at September 30, 2001.  Redlands also maintains borrowing arrangements with several correspondent banks.

The
following table sets forth certain information with respect to Centennial Firsts liquidity as of September 30, 2002 and December 31, 2001.

|(Dollars in thousands)    |                     | As of September 30, 2002 |        | As of December 31, 2001 |  
|------------------------- | ------------------- | ------------------------ | ------ | ----------------------- | -
|                          |                     |                          |        |                         |  
|Cash and due from banks   |                     | $                        | 11,414 |                         | $
|Federal funds sold        |                     |                          | 4,190  |                         |  
|Interest earning deposits |                     |                          | 4,980  |                         |  
|Unpledged securities      |                     |                          | 26,956 |                         |  
|                          |                     |                          |        |                         |  
|                          | Total liquid assets |                          | $      | 47,540                  |  
|                          |                     |                          |        |                         |  
|Liquidity ratios(1)       |                     |                          |        |                         |  
|                          | Liquid assets       |                          |        |                         |  
|                          | Ending assets       |                          |        | 23.83                   | %
|                          | Ending deposits(2)  |                          |        | 27.54                   | %
|                          |                     |                          |        |                         |  

---

|(1) | Liquid assets include cash and due from banks, federal funds sold, interest-bearing deposits and market value of available-for-sale securities less book value of pledged
securities.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                      
|(2) | Less pledged public deposits.                                                                                                                                                        

ASSET/LIABILITY MANAGEMENT

The purpose of asset/liability management is to provide stable net interest income growth by protecting The Companys earnings from undue interest rate risk.  The Company expects to generate earnings from increasing
loan volume, appropriate loan pricing and expense control, and not from trying to accurately forecast interest rates.  Another important function of asset/liability management is managing the risk/return relationship between interest rate risk,
liquidity, market risk and capital adequacy.  The Company gives priority to liquidity concerns followed by capital adequacy, then interest rate risk and market risk in the investment portfolio.  The Company controls the exposure of
earnings to changing interest rates by generally maintaining a position within a narrow range around an earnings neutral position.  An earnings neutral position is defined as the mix of assets and liabilities that generate a net
interest margin that is not affected by interest rate changes.  However, Management does not believe that the Company can maintain a totally earnings neutral position.  Further, the actual timing of repricing of assets and liabilities does
not always correspond to the timing assumed by the Company for analytical purposes.  Therefore, changes in market rates can generally impact the Companys net interest income and net interest margin for long or short periods of
time.

The Company monitors its interest rate risk on a monthly basis through the use of a model, which calculates the effect on earnings of changes in the prevailing market interest rate, rates up
environment and rates down environment.  The model converts a prevailing market interest rate change into rate changes for each major class of asset and liability, then simulates the net interest

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##### Table of Contents

margin based on actual repricing over a one year period, assuming that maturities are reinvested in instruments similar to those
maturing during the period.

INTEREST RATE RISK. The table below shows the potential change in NIM (before taxes) if rates changed as of September 30, 2002. NIM is the net interest
margin which is the spread or difference between interest-earning assets and interest-paying liabilities. Centennial Firsts NIM tends to increase if rates rise, and tends to decline if rates fall. The cause of this exposure is due to
Centennial Firsts concentration of short-term and rate sensitive loans as of September 30, 2002.

ECONOMIC RISK. Centennial First establishes earnings risk limits for flat rates,
up/down 100 basis points, and up/down 200 basis points. Centennial First has determined that under these scenarios, the resultant economic value of equity or EVE should be no higher than 20% and no lower than 7%. The Company
measures the potential change in the net present value of its net existing assets and liabilities if rates change (the EVE). The table below also shows the EVE. The EVE is determined by valuing Centennial Firsts assets and
liabilities as of September 30, 2002, using a present value cash flow calculation as if Centennial First is liquidated. The EVE increases when rates increase because there are more variable rate assets than variable rate liabilities.

The following table presents possible changes to net interest margin based on changes in prevailing interest rates:

|(Dollars in thousands)   |   |                                      |        |                                                 |  |          |    |  |       |  
|------------------------ | - | ------------------------------------ | ------ | ----------------------------------------------- |  | -------- | -- |  | ----- | -
|                         |   |                                      |        |                                                 |  |          |    |  |       |  
|Change in Interest Rates |   | Change in NIM (In thousands pre-tax) |        | % Change in NIM to Shareholder Equity (pre-tax) |  | % of EVE |   
|                         |   |                                      |        |                                                 |  |          |    |  |       |  
|+2                       | % | $                                    | (3,404 | )                                               |  | (19.26   | )% |  | 7.39  | %
|+1                       | % |                                      | (1,680 | )                                               |  | (9.50    | )% |  | 8.19  | %
|-1                       | % |                                      | 1,487  |                                                 |  | 8.41     | %  |  | 9.63  | %
|-2                       | % |                                      | 2,555  |                                                 |  | 14.46    | %  |  | 10.10 | %

CAPITAL RESOURCES

The Federal Reserve Board and
the FDIC have established similar guidelines to implement risk-based capital requirements.  Falling below minimum established levels may limit the bank holding company, bank or savings bank from certain activities.  Failure to satisfy
applicable guidelines may also subject a banking institution to a variety of enforcement actions by federal regulatory authorities.

The Company and its subsidiary are required to maintain the
following minimum ratios:  Total risk based capital ratio of at least 8%, Tier 1 Risk-based capital ratio of at least 4%, and a leverage ratio of at least 4%.  Total capital is classified into two components:  Tier 1 (common
shareholders equity, qualifying perpetual preferred stock to certain limits, trust preferred securities, and minority interests in equity accounts of consolidated subsidiaries, less intangibles) and Tier 2 (supplementary capital including allowance
for possible credit losses, certain preferred stock, eligible subordinated debt, and other qualifying instruments).  Under the established guidelines, the Company has attained the highest level of capitalization, characterized as Well
Capitalized.  It is the intent of the Company to continue to maintain Well Capitalized risk-based capital ratios.

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##### Table of Contents

The total risk-based capital ratio, tier 1 risk-based capital ratio, and leverage ratio for the Company increased by 22.2%,
30.5%, and 45.3% respectively from December 31, 2001 to September 30, 2002.  These increases are primarily due to the issuance of the Junior Subordinated Debt (Trust Preferred Securities) by the Company on July 11, 2002.

The total risk-based capital ratio, tier 1 risk-based capital ratio, and leverage ratio for Redlands Centennial Bank increased by 18.0%, 19.1%, and 22.1% respectively from December 31, 2001 to September 30, 2002. 
These increases are primarily due to the merger of Palomar Community Bank into Redlands Centennial Bank on May 24, 2002.

The following table illustrates the capital and prompt corrective action
guidelines applicable to the Company and Redlands Centennial Bank, as well as their total risk-based capital ratios, Tier 1 capital ratios and leverage ratios as of September 30, 2002 and December 31, 2001:

|                                     |  | At 9/30/02 |       | At 12/31/01 |  | Minimum Necessary to Be Well Capitalized |   | Minimum Necessary to Be Adequately Capitalized |     
|------------------------------------ |  | ---------- | ----- | ----------- |  | ---------------------------------------- | - | ---------------------------------------------- | ----
|                                     |  |            |       |             |  |                                          |   |                                                |     
|Centennial First Financial Services: |  |            |       |             |  |                                          |   |                                                |     
|Total risk-based capital ratio       |  |            | 13.53 | %           |  | 11.07                                    | % |                                                | 10.0
|Tier 1 risk-based capital ratio      |  |            | 10.83 | %           |  | 8.30                                     | % |                                                | 6.0 
|Leverage ratio                       |  |            | 8.27  | %           |  | 5.69                                     | % |                                                | 5.0 
|                                     |  |            |       |             |  |                                          |   |                                                |     
|                                     |  | At 9/30/02 |       | At 12/31/01 |  | Minimum Necessary to Be Well Capitalized |   | Minimum Necessary to Be Adequately Capitalized |     
|                                     |  |            |       |             |  |                                          |   |                                                |     
|Redlands Centennial Bank:            |  |            |       |             |  |                                          |   |                                                |     
|Total risk-based capital ratio       |  |            | 11.85 | %           |  | 10.04                                    | % |                                                | 10.0
|Tier 1 risk-based capital ratio      |  |            | 10.60 | %           |  | 8.90                                     | % |                                                | 6.0 
|Leverage ratio                       |  |            | 8.01  | %           |  | 6.56                                     | % |                                                | 5.0 

Risked-based capital ratios for Palomar Community Bank are included in Redlands
Centennial Bank as of September 30, 2002.

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##### Table of Contents

ITEM 3.  CONTROLS AND PROCEDURES

(a)     Evaluation of Disclosure Controls and Procedures

The Companys Chief Executive Officer and its Chief Financial Officer, after evaluating the effectiveness of the Companys disclosure controls and procedures (as defined in Exchange Act Rules 13a-14(c) and
15-d-14(c) as of a date within 90 days of the filing date of this report (the Evaluation Date) have concluded that as of the Evaluation Date, the Companys disclosure controls and procedures were adequate and effective to ensure
that material information relating to the Company and its consolidated subsidiaries would be made known to them by others within those entities, particularly during the period in which this quarterly report was being prepared.

Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported,
within the time periods specified in the Securities and Exchange Commissions rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed
by us in the reports that we file under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required
disclosure.

(b)     Changes in Internal Controls

There were no significant changes in the Companys internal controls or in
other factors that could significantly affect the Companys internal controls subsequent to the Evaluation Date, nor any significant deficiencies or material weaknesses in such controls requiring corrective actions.  As a result, no
corrective actions were taken.

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##### Table of Contents

PART II  OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

On July 10, 2002 the Company settled a breach of contract lawsuit for $425,000, all of which was
expensed in 2002.  For more information, refer to the caption LEGAL PROCEEDINGS on page 22 of the Companys form 10-KSB filed on March 29, 2002.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5.  OTHER INFORMATION

None.

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##### Table of Contents

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(A)     EXHIBITS

|Item  |  | Description                                                                                                                                
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------
|      |  |                                                                                                                                            
|      |  |                                                                                                                                            
|1.    |  | Plan of Reorganization and Agreement of Merger, Dated December 1, 1999 Filed as exhibit to Form S-4 dated October 20, 1999                 
|3.1   |  | Articles of Incorporation, Filed as exhibit to Form S-4 dated October 20, 1999                                                             
|3.2   |  | Certificate of Amendment of Articles of Incorporation, dated May 4, 2000. Filed as exhibit to Form 10-QSB, dated August 9, 2002            
|3.3   |  | Restated Bylaws of the Corporation, dated July 26, 2002. Filed as exhibit to Form 10-QSB, dated August 9, 2002.                            
|10.1  |  | Plan document for the Redlands Centennial Bank Employee Stock Ownership Plan Filed as exhibit to Form S-4 date October 20, 1999.           
|10.2  |  | Redlands Centennial Bank 1990 Stock Option Plan and Addendums Filed as exhibit to Form S-4 dated October 20, 1999.                         
|10.3  |  | Brea Branch Lease, dated September 20, 2000 Filed as exhibit to Form SB-2 dated March 21, 2001.                                            
|10.4  |  | Form of Indemnification Agreement Filed as exhibit to Form SB-2 dated March 21, 2001 .                                                     
|10.5  |  | Stock Purchase Agreement for Palomar Community Bank Dated  December 1, 2000 Filed as exhibit to Form SB-2 dated March 21, 2001.            
|10.6  |  | Employment Agreement of Richard Sanborn, dated December 1, 2000. Filed as exhibit to Form 10-KSB dated March 29, 2002.                     
|10.7  |  | Salary Continuation plan of Timothy P. Walbridge, dated August 1, 2001. Filed as exhibit to Form 10-KSB dated March 29, 2002.              
|10.8  |  | Salary Continuation plan for Beth Sanders, dated October 1, 2001. Filed as exhibit to Form 10-KSB dated March 29, 2002.                    
|10.9  |  | Salary Continuation plan of Richard Sanborn, dated October 1, 2001. Filed as exhibit to Form 10-KSB dated March 29, 2002.                  
|10.10 |  | Employment Agreement of Timothy P. Walbridge, dated December 1, 2001. Filed as exhibit to Form 10-KSB dated March 29, 2002.                
|10.11 |  | Employment Agreement of Beth Sanders, dated December 1, 2001. Filed as exhibit to Form 10-KSB dated March 29, 2002.                        
|10.12 |  | Amendment to Salary Continuation plan of Timothy P. Walbridge, dated December 1, 2001 Filed as exhibit to Form 10-KSB dated March 29, 2002.
|10.13 |  | Amendment to Salary Continuation plan of Richard Sanborn, dated December 1, 2001. Filed as exhibit to Form 10-KSB dated March 29, 2002.    
|10.14 |  | Redlands Centennial Bank Employee Stock Ownership Plan, dated February 1, 2000 Filed as exhibit to Form 10-QSB dated May 12, 2000.         
|10.15 |  | Centennial First Financial Services Amended Stock Option Plan, dated February 20, 2002.                                                    
|10.16 |  | Palomar Community Bank lease, dated April 15, 1987 Filed as exhibit to Form 10-QSB dated, May 14, 2002.                                    
|10.17 |  | Trust Preferred Securities Indenture, dated July 11, 2002.                                                                                 
|10.18 |  | Trust Preferred Securities Amended and Restated Declaration of Trust, dated July 11, 2002.                                                 
|10.19 |  | Trust Preferred Securities Guarantee Agreement, dated July 11, 2002.                                                                       
|99.1  |  | Certification of periodic financial report.                                                                                                

(B)     REPORTS ON FORM 8-K

The Company filed no reports on form 8-K during the third quarter of 2002.

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SIGNATURE

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.

|     | CENTENNIAL FIRST FINANCIAL SERVICES (Registrant)                                                                               
|---- | -------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                
|     |                                                                                                                                
|Date | 11/12/02                                                                                                                       
|     |                                                                                                                                
|     | Beth Sanders Chief Financial Officer (Principal Accounting Officer, and officer authorized to sign on behalf of the registrant)
|     |                                                                                                                                

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Certification

I, Beth Sanders, certify that:

1. I have reviewed this quarterly report on Form 10-QSB of Centennial First Financial Services;

2. Based on my knowledge, this quarterly report does not
contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrants other certifying officers and I are
responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure
controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is
being prepared;

b) evaluated the effectiveness of the registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the
Evaluation Date); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation
Date;

5. The registrants other certifying officers and I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit committee of registrants
board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data and have identified for the registrants auditors any material weaknesses in internal controls; and

b) any fraud, whether or not
material, that involves management or other employees who have a significant role in the registrants internal controls; and

6. The registrants other certifying officers and I have
indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material weaknesses.

Date:  November 12, 2002

|/s/  BETH SANDERS                                | 
|------------------------------------------------ | 
|                                                 | 
|Executive Vice-President/Chief Financial Officer | 

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