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                                                                    EXHIBIT 10.3

                              EMPLOYMENT AGREEMENT

         This Agreement is made this 29th day of January, 1998, between
SOUTHWEST COMMUNITY BANK, a California banking corporation,(the "Bank"), having
a principal place of business at 257 No. El Camino Real, Suite A&B, Encinitas,
California, 92024, and FRANK J. MERCARDANTE ("Executive"), whose residence
address is 1657 Independence Way, Vista, California, 92084.

                               W I T N E S S E T H

         WHEREAS, the Bank is a banking corporation duly organized, validly
existing, and in good standing under the laws of the State of California, with
power to own property and carry on its business as it is now being conducted;

         WHEREAS, the Bank desires to avail itself of the skill, knowledge, and
experience of Executive in order to insure the successful management of its
business;

         WHEREAS, the parties hereto desire to specify the terms of Executive's
employment by the Bank as controlling Executive's employment with the Bank;

         NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, and intending to be legally bound, it is agreed that from and after
the date of receipt by the Bank of non-disapproval from the FDIC of Executive's
proposed employment with the Bank (the "Effective Date"), the following terms
and conditions shall apply to Executive's said employment:

         A.       TERM OF EMPLOYMENT

                  1.       Term. The Bank hereby employs Executive and Executive
hereby accepts employment with the Bank for the period (the "Term") commencing
with the Effective Date and terminating on such date and upon such terms as
provided for in Paragraph F of this Agreement.

         B.       DUTIES OF EXECUTIVE

                  1.       Duties. Executive shall perform the duties of
President and Chief Executive Officer of the Bank, subject to the powers by law
vested in the Board of Directors of the Bank and in the Bank's shareholders.
During the Term, Executive shall perform exclusively the services herein
contemplated to be performed by Executive faithfully, diligently, and to the
best

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of Executive's ability, consistent with the highest and best standards of the
banking industry and in compliance with all applicable laws and the Bank's
Articles of Incorporation, Bylaws, and internal written policies.

                  2.       Conflicts of Interest. Except as permitted by the
prior written consent of the Board of Directors of the Bank, Executive shall
devote Executive's entire productive time, ability, and attention to the
business of the Bank during the Term, and Executive shall not directly or
indirectly render any services of a business, commercial, or professional
nature, to any other person, firm, or corporation, whether for compensation or
otherwise, which are in conflict with the Bank's interest. Notwithstanding the
foregoing, Executive may make investments of a passive nature in any business or
venture, provided, however, that neither such business or venture is in
competition, directly or indirectly, in any manner with the Bank.

         C.       COMPENSATION

                  1.       Salary. For Executive's services hereunder, the Bank
shall pay or cause to be paid as annual base salary to Executive the sum of One
Hundred Fifty Thousand Dollars ($150,000) for each year (i.e., 12-month period)
of the Term. Said salary shall be payable in equal installments in conformity
with the Bank's normal payroll period. Annual adjustments after the first year
of the Term may be made in the discretion of the Board of Directors.

                  2.       Bonuses. As soon as deemed practicable by the Board
of Directors after the Effective Date, the Bank shall implement the Higgins'
incentive compensation plan or comparable plan for all employees of the Bank,
which plan shall include executive level incentive compensation upon terms and
conditions mutually agreeable by the Bank and Executive.

         D.       EXECUTIVE BENEFITS

                  1.       Vacation. Executive shall be entitled to a four (4)
week vacation during each year of the Term; provided, however, that for each
year of the Term, Executive is required to and shall take at least two (2) weeks
of said vacation (the "Mandatory Vacation"), which shall be taken consecutively.
Executive shall not be entitled to vacation pay in lieu of vacation.

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                  2.       Automobile. During the Term hereunder, the Bank shall
provide Executive, for Executive's sole use, a suitable full-sized automobile,
the specific make and model of such automobile to be determined by Executive,
which automobile shall be initially new and at no time be older than three (3)
years. The Bank shall pay all operating expenses of any nature whatsoever with
regard to such automobile, provided Executive furnishes to the Bank adequate
records and other documentary evidence required by federal and state statutes
and regulations issued by the appropriate taxing authorities for the
substantiation of such payments as deductible business expenses of the Bank and
not as deductible compensation to Executive. The Bank shall also procure and
maintain in force an automobile liability insurance policy on such automobile,
containing all reasonable and necessary coverage.

                  3.       Group Medical and Life Insurance Benefits. The Bank
shall, at Executive's option, (i) provide for Executive, at Bank's expense,
participation in the Bank's existing California Banker's Association Group
Insurance Program (the "CBA Program") at a level commensurate for an employee of
Executive's salary level or (ii) pay all premiums on Executive's existing
insurance policy. Said coverage shall be in existence or shall take effect as of
the Effective Date hereof and shall continue throughout the Term. The Bank's
liability to Executive for any breach of this Paragraph shall be limited to the
amount of premiums required hereunder to be payable by the Bank to obtain or
maintain, as applicable, the coverage contemplated herein.

                  4.       Stock Options. The Bank shall grant Executive a stock
option to purchase up to 12,500 shares of the Bank's authorized but unissued
Common Stock, at an exercise price equal to market value on the date of grant,
subject to compliance with any applicable requirements of the Bank's Stock
Option Permit issued by the California Department of Financial Institutions. The
Bank and Executive agree that such option shall be for a term of ten (10) years
and will vest over a period of five (5) years from the date of grant as follows:
twenty percent (20%) will be exercisable on or after each of the first five (5)
anniversaries of the date of grant of the stock option.

                  The Bank and Executive further agree that options for
additional shares will be granted up to five percent (5%) of the Bank's issued
and outstanding shares. The Bank and Executive also agree that, to the maximum
extent permitted by law, the option will qualify as an "incentive stock option"
within the meaning of Section 422 of the Internal Revenue Code of 1986, as

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amended. Such stock option will be granted to Executive pursuant to the Bank's
current Stock Option Plan, and an agreement between the Bank and Executive
containing the terms as may be agreed upon by such parties.

                  5.       401(k) Plan. When such a plan is established by the
Bank, Executive shall be entitled to participate in the Bank's 401(k) Plan
subject to the eligibility and vesting requirements set forth in said Plan.

                  6.       Long Term Disability. Bank shall provide a long term
disability policy for Executive; however, Executive shall pay his own premiums.

         E.       REIMBURSEMENT FOR BUSINESS EXPENSES

                  Executive shall be entitled to reimbursement by the Bank for
any ordinary and necessary business expenses incurred by Executive in the
performance of Executive's duties and in acting for the Bank during the Term,
which types of expenditures shall be determined by the Board of Directors,
provided that:

                           (a)      Each such expenditure is of a nature
qualifying it as a proper deduction on the federal and state income tax returns
of the Bank as a business expense and not as a deductible compensation to
Executive; and

                           (b)      Executive furnishes to the Bank adequate
records and other documentary evidence required by federal and state statutes
and regulations issued by the appropriate taxing authorities for the
substantiation of such expenditures as deductible business expenses of the Bank
and not as deductible compensation to Executive.

         F.       TERMINATION

                  1.       Termination for Cause. The Bank may terminate this
Agreement at any time by action of the Board of Directors if Executive fails to
perform or habitually neglects the duties which he is required to perform
hereunder, if Executive engages in illegal activity which materially adversely
affects the Bank's reputation in the community or which evidences the lack of
Executive's fitness or ability to perform Executive's duties as reasonably
determined by the Board of Directors in good faith, or if Executive commits any
act which would cause termination of coverage under the Bank's Bankers' Blanket
Bond as to Executive (as distinguished from termination of coverage

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as to the Bank as a whole). In the event the Bank terminates this Agreement for
cause as provided herein, Executive shall not be eligible for any severance
benefits otherwise contemplated by this Agreement. Such termination shall not
prejudice any remedy which the Bank may have at law, in equity, or under this
Agreement.

                  2.       Death or Disability. In the event of Executive's
death, or if Executive is found to be physically or mentally disabled (as
hereinafter defined) by the Board of Directors in good faith, this Agreement
shall terminate without any further liability or obligation by the Bank to
Executive.

                  For purposes of this Agreement only, physical or mental
disability shall be defined as Executive being unable to fully perform under
this Agreement for a continuous period of ninety (90) days or a cumulative
period of 120 days in any calendar year. If there should be a dispute between
the Bank and Executive as to Executive's physical or mental disability for
purposes of this Agreement, the question shall be settled by the opinion of an
impartial reputable physician or psychiatrist agreed upon by the parties or
their representatives, or if the parties cannot agree within ten (10) days after
a request for designation of such party, then by a physician or psychiatrist
designated by the San Diego County Medical Association. The certification of
such physician or psychiatrist as to the question in dispute shall be final and
binding upon the parties hereto.

                  3.       Action by Supervisory Authority. If the Bank is
closed by or taken over by the California Department of Financial Institutions
or other supervisory authority, including the Federal Deposit Insurance
Corporation, such bank supervisory authority may immediately terminate this
Agreement without further liability or obligation by the Bank to Executive.

                  4.       Merger or other Corporate Reorganization. In the
event of: (i) a merger where the Bank is not the surviving corporation, (ii) a
transfer of all or substantially all of the assets of the Bank or (iii) any
acquisition, consolidation, or other corporate reorganization where there is a
change in ownership of at least fifty-one percent (51%), except that may result
from a transfer of shares to another corporation in exchange for at least eighty
percent (80%) control of that corporation, and, in the event that this Agreement
and Executive's employment are terminated for any reason during the two (2) year
period immediately following the effective date of

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consummation of such merger or other corporate reorganization by either
Executive or by the surviving entity, in the event of a merger; by either
Executive or the transferee of assets in the event of a purchase or sale, or by
either Executive or the acquiror, in the event of an acquisition of stock in the
Bank, then Executive shall be entitled to the same severance benefits as
contemplated by Paragraph F.5 below for a six (6) month period immediately
following such termination of this Agreement; provided, however, that if, on the
first business day immediately preceding the effective time of such merger or
other corporate reorganization, the Bank's total assets equal $200 million or
greater, then Executive shall be entitled to said severance benefits for a two
(2) year period immediately following such termination. Notwithstanding the
foregoing, no such severance benefits shall be payable to Executive in the event
that this Agreement is terminated during the above-described two-year period for
any of the reasons delineated in Paragraph 5.1 above.

                  6.       Termination without Cause. Notwithstanding anything
to the contrary contained herein, it is agreed by the parties hereto that either
the Bank or Executive may at any time elect to terminate this Agreement and
Executive's employment by the Bank for any reason. Such termination shall be
effective thirty (30) days following proper delivery of notice of termination to
the non-terminating party in accordance with the notice provisions set forth
herein. In the event this Agreement is terminated by Executive, all benefits
provided by the Bank hereunder to Executive shall cease upon the effective date
of such termination of this Agreement and Executive shall not be entitled to any
severance benefits whatsoever. In the event this Agreement is terminated by the
Bank (other than in accordance with Paragraph F.1 hereof), Executive shall be
entitled to each of the following severance benefits commencing upon the
effective date of termination of this Agreement: (a) Executive shall continue to
be paid Executive's base salary for a period of six (6) months immediately
following the effective date of Executive's termination, which payments shall be
payable to Executive in accordance with the normal method of payment as
specified in this Agreement; and (b) Executive shall be entitled to maintain all
medical and life insurance benefits which were granted to him during his
employment with the Bank for a period of six (6) months immediately following
the effective date of Executive's termination.

                  6.       Effect of Termination. In the event of the
termination of this Agreement for any reason (except as provided

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herein), Executive shall be entitled to the salary and bonus, if any, earned by
Executive prior to the date of termination as provided for in this Agreement
(except that Executive shall not be entitled to any bonus in the event his
employment is terminated for cause as provided in Paragraph F.1 above), computed
pro rata up to and including that date; but Executive shall be entitled to no
further compensation for services rendered after the date of termination, except
as provided in Paragraph F.4 above regarding merger or other corporation
reorganization, or Paragraph F.5 above regarding termination without cause by
the Bank. Executive further agrees that in the event of any such termination, he
will resign from the Board of Directors of the Bank on the effective date of the
termination of this Agreement.

         G.       GENERAL PROVISIONS

                  1.       Trade Secrets. During the Term, Executive will have
access to and become acquainted with what Executive and Bank acknowledge are
trade secrets; to wit, knowledge or data concerning the Bank, including its
operations and methods of doing business, and the identity of customers of the
Bank, including knowledge of their financial condition and their financial
needs. Executive shall not disclose any of the aforesaid trade secrets, directly
or indirectly, or use them in any way, either during the Term or for a period of
two (2) years after the termination of this Agreement, except as required in the
course of Executive's employment with the Bank.

                  2.       Covenant Not to Compete. Executive hereby covenants
and agrees that for a period of eighteen (18) months following termination of
this Agreement, Executive shall not engage in the business of banking within a
twenty-five (25) mile radius of the Bank's head office, or any branch office, or
of any location for which the Bank has applied for a branch office.
Notwithstanding the foregoing, this covenant not to compete shall not be
applicable in the event that this Agreement is terminated in accordance with
Paragraph F.4 hereof.

                  3.       Indemnification. To the extent permitted by law,
applicable statutes and the Bylaws or resolutions of the Bank in effect from
time to time, the Bank shall indemnify Executive against liability or loss
arising out of Executive's actual or asserted misfeasance or non-feasance in the
performance of Executive' duties or out of any actual or asserted wrongful act
against, or by, the Bank, including but not limited to judgments, fines,
settlements, and expenses incurred in the

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defense of actions, proceedings, and appeals therefrom. However, the Bank shall
have no duty to indemnify Executive with respect to any claim, issue, or matter
as to which Executive has been adjudged to be liable to the Bank in the
performance of his duties, unless and only to the extent that the court in which
such action was brought shall determine upon application that, in view of all of
the circumstances of the case, Executive is fairly and reasonably entitled to
indemnification for the expenses which such court shall determine. The Bank
shall endeavor to apply for and obtain Directors and Officers Liability
Insurance to indemnify and insure the Bank and Executive from and against the
aforesaid liabilities. The provisions of this Paragraph shall apply to the
estate, executor, administrator, heirs, legatees, or devisees of Executive.

                  4.       Return of Documents. Executive expressly agrees that
all manuals, documents, files, reports, studies, instruments, or other materials
used and/or developed by Executive during the Term are solely the property of
the Bank, and that Executive has no right, title, or interest therein. Upon
termination of this Agreement, Executive or Executive's representative shall
promptly deliver possession of all of said property to the Bark in good
condition.

                  5.       Notices. All notices, demands, or other
communications hereunder shall be in writing and shall be delivered in person
(professional courier acceptable); or by United States mail, certified or
registered, postage prepaid, with return receipt requested; or by facsimile
transmission; or otherwise actually delivered, to the addresses for the parties
appearing at the inception of this Agreement. The persons or addresses to which
mailings or deliveries shall be made may change from time to time by notice
given pursuant to the provisions of this Paragraph G.5. Any notice, demand, or
other communication given pursuant to this Agreement shall be deemed to have
been given on the date actually delivered, if delivered in person, three (3)
days following the date mailed, if delivered by U.S. mail, or upon written
confirmation of transmission, if delivered by facsimile.

                  6.       Review by Counsel. Executive represents and warrants
to the Bank that he has had this Agreement reviewed by independent legal counsel
of his choice, or if he has not, that he has had the opportunity to do so, and
hereby waives any claim, objection, or defense on the grounds that this
Agreement has not been reviewed by legal counsel of his choice.

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                  7.       California Law. This Agreement is to be governed by
and construed in accordance with the laws of the State of California.

                  8.       Captions and Paragraph Headings. Captions and
paragraph headings used herein are for convenience only and are not a part of
this Agreement and shall not be used in construing it.

                  9.       Invalid Provisions. Should any provision of this
Agreement for any reason by declared invalid, void, or unenforceable by a court
of competent jurisdiction, the validity and binding effect of any remaining
portion shall not be affected, and the remaining portions of this Agreement
shall remain in full force and effect as if this Agreement had been executed
with said provisions eliminated.

                  10.      Entire Agreement. This Agreement contains the entire
agreement of the parties. It supersedes any and all other agreements, either
oral or in writing, between the parties hereto with respect to the employment of
Executive by the Bank. Each party to this Agreement acknowledges that no
representations, inducements, promises, or agreements, oral or otherwise, have
been made by any party, or anyone acting on behalf of any party, which are not
embodied herein, and that no other agreement, statement, or promise not
contained in this Agreement shall be valid or binding. This Agreement may not be
modified or amended by oral agreement, but only by an agreement in writing
signed by both the Bank and Executive.

                  11.      Receipt of Agreement. Each of the parties hereto
acknowledge that he has read this Agreement in its entirety and does hereby
acknowledge receipt of a fully executed copy thereof. A fully executed copy
shall be an original for all purposes, and is a duplicate original.

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         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.

                               SOUTHWEST COMMUNITY BANK:

                           By: /s/ Howard B. Levenson
                               -----------------------------------
                               Howard B. Levenson, Chairman

                           By: /s/ Paul M. Weil
                               -----------------------------------
                               Paul M. Weil, Secretary

                               EXECUTIVE:

                               /s/ Frank J. Mercardante
                               -----------------------------------
                               FRANK J. MERCARDANTE

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EXHIBIT 10.3