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

                                      FORM 10-K

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934
     For the Year ended  December 31, 1997

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934
     For the transition period from ______ to ______

                         Commission file number  000-23815

                                    REGENCY BANCORP
               (Exact name of registrant as specified in its charter)

            STATE OF CALIFORNIA                           77-0378956
            -------------------                           ----------
(State or other jurisdiction of incorporation         (I.R.S. Employer
              or organization)                       Identification No.)


7060 N. Fresno Street, Fresno, California                   93720
-----------------------------------------                 ----------
 (Address of principal executive office)                  (Zip code)

Registrant's telephone number, including area code  (209) 438-2600

Securities registered pursuant to Section 12(b) of the Act:

     Title of each class       Name of each exchange on which registered
     -------------------       -----------------------------------------
           None                                  None

Securities registered pursuant to Section 12(g) of the Act:

     Title of each class       Name of each exchange on which registered
     -------------------       -----------------------------------------
       Common  Stock                              None


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 _____

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [X].

The aggregate market value of the voting stock held by non-affiliates of the
registrant at March 18,1998 was  $ 24,854,000.

As of March 18, 1998, the registrant had 2,621,624 shares of Common Stock
outstanding.

                        DOCUMENTS INCORPORATED BY REFERENCE

The following documents are incorporated by reference into this Form 10-K:
(1) Portions of the definitive Proxy Statement for the 1997 annual meeting of
shareholders into Part III. Items 10-13.

The Index to Exhibits is located at page 89.               Page 1 of 104 Pages.

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                                      PART  I

Item 1.  BUSINESS

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

     GENERAL DEVELOPMENT OF BUSINESS

     Regency Bancorp (the "Company") is a California corporation organized to
act as the holding company for Regency Bank (the "Bank"), and Regency
Investment Advisors, Inc. ("RIA"), a SEC registered investment advisor.  The
Company and the Bank maintain their administrative headquarters and banking
offices in Fresno, California.  The Bank also maintains a full service
banking office in Madera, California and a loan production office in Modesto,
California.  In 1995, upon its formation, the Company acquired all of the
outstanding common stock of the Bank.  Other than its investment in the Bank
and RIA, the Company currently conducts no other significant business
activities, although it is authorized to engage in a variety of activities
which are deemed closely related to the business of banking upon prior
approval of the Board of Governors of the Federal Reserve System (the "Board
of Governors"), the Company's principal regulator.

     The Bank is a California banking corporation which has served small and
medium-sized businesses, professionals, merchants and individuals located in
and adjacent to Fresno, California since 1980.  The Company and Bank operate
through the administrative headquarters office and Herndon Branch banking
office located at 7060 N. Fresno St., Fresno, California, and offer a full
range of commercial banking services, including the acceptance of demand,
savings and time deposits, and the making of commercial, real estate
(including real estate construction and residential mortgage), Small Business
Administration, personal, home improvement, automobile and other installment
and term loans.  It also offers Visa credit cards, traveler's checks, safe
deposit boxes, notary public, courier service and other customary bank
services.

     The Bank's Herndon branch office is open from 9:00 a.m. to 5:00 p.m.,
Monday through Friday.  In addition to its Herndon Office, the Bank operates
a full service banking office at 126 N. "D" Street in Madera, California.
The Madera office hours are 9:00 a.m. to 5:00 p.m. Monday through Thursday,
9:00 a.m. to 6:00 p.m. on Friday and 9:00 a.m. to 1:00 p.m. on Saturday.  The
Bank also operates a limited service facility in the Fig Garden Village
Shopping Center, 726 W. Shaw Avenue, Fresno, California.  The facility is
open from 10:00 a.m. to 6:00 p.m., Monday through Friday and 9:00 a.m. to
1:00 p.m. on Saturday. Additionally, the Bank operates loan production
offices located at 5240 N. Palm Ave., Fresno, California and has established
a loan production office in Modesto, California.  The Bank has automated
teller machines located at its headquarters office, its limited service
facility and its Madera office.  The Bank is insured under the

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Federal Deposit Insurance Act and each depositor's account is insured up to
the legal limits thereon. The Bank is chartered (licensed) by the California
Commissioner of Financial Institutions ("Commissioner") and has chosen not to
become a member of the Federal Reserve System.

     The Bank has one subsidiary, Regency Service Corporation ("RSC"), a
California corporation which engages in the business of real estate
development primarily in the Fresno/Clovis area.  For more information on
RSC, see, "Real Estate Development Activities" under this section and
additionally, under notes 4 and 11 of the Company's audited consolidated
financial statements included in item 8.

     The Company's second subsidiary, Regency Investment Advisors ("RIA"),
provides investment management and consulting services from offices located
in the Company's headquarters office at 7060 N. Fresno St., Fresno,
California. For more information on RIA, see, "Investment Management
Activities"  under this section.

     The three areas in which the Bank has directed virtually all of its
lending activities are: (i) commercial loans; (ii) real estate loans
(including residential construction  and mortgage loans); and (iii) consumer
loans.  As of December 31, 1997, these three categories accounted for
approximately 58 percent, 35 percent and 7 percent, respectively, of the
Bank's loan portfolio.

     The Bank's deposits are attracted primarily from small and medium-sized
businesses, professionals, merchants and individuals.  The Bank's deposits
are not received from a single depositor or group of affiliated depositors
the loss of any one of which would have a material adverse effect on the
business of the Bank, nor is a material portion of the Bank's loans
concentrated within a single industry or group of related industries.

     As of December 31, 1997, the Bank had total deposits of $176,279,000. Of
this total, $46,744,000 represented noninterest-bearing demand deposits,
$85,114,000 represented interest-bearing demand deposits and interest-bearing
savings deposits, and $44,421,000 represented time deposits.

     REAL ESTATE DEVELOPMENT ACTIVITIES

     The Bank, through RSC and pursuant to California Financial Code Section
751.3 has engaged in real estate development activities since 1986. RSC's
real estate development activities, which have generally involved the
acquisition, development and sale of the properties (but which sometimes
involve the sale of properties prior to their development) historically have
been structured as limited partnerships in which RSC is the limited partner
and a local developer is the general partner.  The Bank, in accordance with
internal policies and restrictions which limit the amount of loans that may
be made to such partnerships and other parties involved in RSC's real estate
projects, from time to time have made loans to such parties.  RSC also from
time to time made loans to the partnerships.  In exchange for its investment
in the partnerships, RSC typically received 50% of the income generated from
the sale of the partnership assets, as well as interest on invested capital.

     Under FDIC regulations, banks were required to divest their real estate
development investments as quickly as prudently possible but in no event
later than December 19, 1996, and submit a plan to the FDIC regarding
divestiture of such investments.  Such regulations also

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permitted banks to apply for the FDIC's consent to continue, on a limited
basis, certain real estate development activities.

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

          For more information regarding RSC and its financial performance, see
"Item 7 - Regency Service Corporation", below and additionally, see notes 4 and
11 of the Company's audited financial statements included in Item 8 for
additional information regarding RSC and real estate development activities.

     INVESTMENT MANAGEMENT ACTIVITIES

     RIA was formed in August 1993 through the acquisition by the Bank of the
assets, including client list, of a fee-only investment management and
consulting firm.  RIA provides investment management and consulting services,
including comprehensive financial and retirement planning and investment
advice to individuals and corporate clients for an annual fee that varies
depending upon the size of a client's account.  For more information
regarding RIA and its financial performance, see "Item 7 - Regency Investment
Advisors", below.

     SUPERVISION AND REGULATION

     The common stock of the Company is subject to the registration
requirements of the Securities Act of 1933, as amended, and the qualification
requirements of the California Corporate Securities Law of 1968, as amended.
The Bank's common stock, however, which is owned 100% by the Company, is
exempt from such requirements.  The Company is also subject to the periodic
reporting requirements of Section 13 of the Securities Exchange Act of 1934,
as amended, which include, but are not limited to, filing annual, quarterly
and other current reports with the Securities and Exchange Commission.

     The Bank is licensed by the Commissioner, its deposits are insured by
the FDIC, and it has chosen not to become a member of the Federal Reserve
System. Consequently, the Bank is subject to the supervision of, and is
regularly examined by, the Commissioner and the FDIC.  Such supervision and
regulation include comprehensive reviews of all major aspects of the Bank's
business and condition, including its capital ratios, subsidiary operations,
allowance for possible loan losses and other factors.  However, no inference
should be drawn that such authorities have approved any such factors.  The
Company and the Bank are required to file reports with the Commissioner, the
FDIC and the Board of Governors and provide such additional information as
the Commissioner, FDIC and the Board of Governors may require.

     The Company is a bank holding company within the meaning of the Bank
Holding Company Act of 1956, as amended (the "Bank Holding Company Act"), and
is registered as such

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with, and subject to the supervision of, the Board of Governors.  The Company
is required to obtain the approval of the Board of Governors before it may
acquire all or substantially all of the assets of any bank, or ownership or
control of the voting shares of any bank if, after giving effect to such
acquisition of shares, the Company would own or control more than 5% of the
voting shares of such bank.  The Bank Holding Company Act prohibits the
Company from acquiring any voting shares of, or interest in, all or
substantially all of the assets of, a bank located outside the State of
California unless such an acquisition is specifically authorized by the laws
of the state in which such bank is located.  Any such interstate acquisition
is also subject to the provisions of the Riegle-Neal Interstate Banking and
Branching Efficiency Act of 1994 discussed below.

     The Company, and any subsidiaries which it may acquire or organize, are
deemed to be "affiliates" of the Bank within the meaning of that term as
defined in the Federal Reserve Act.  This means, for example, that there are
limitations (a) on loans by the Bank to affiliates, and (b) on investments by
the Bank in affiliates' stock as collateral for loans to any borrower.  The
Company and its subsidiary are also subject to certain restrictions with
respect to engaging in the underwriting, public sale and distribution of
securities.

     In addition, regulations of the Board of Governors promulgated under the
Federal Reserve Act require that reserves be maintained by the Bank in
conjunction with any liability of the Company under any obligation
(promissory note, acknowledgment of advance, banker's acceptance or similar
obligation) with a weighted average maturity of less than seven (7) years to
the extent that the proceeds of such obligations are used for the purpose of
supplying funds to the Bank for use in its banking business, or to maintain
the availability of such funds.

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

     Assets, commitments to extend credit, and off-balance sheet items are
categorized according to risk and certain assets considered to present less
risk than others permit maintenance of capital at less than the 8% ratio.
For example, most home mortgage loans are placed in a 50% risk category and
therefore require maintenance of capital equal to 4% of such loans, while
commercial loans are placed in a 100% risk category and therefore require
maintenance of capital equal to 8% of such loans.

     The guidelines establish two categories of qualifying capital: Tier 1
capital comprising core capital elements, and Tier 2 comprising supplementary
capital requirements.  At least one-half of the required capital must be
maintained in the form of Tier 1 capital.  Tier 1 capital includes common
shareholders' equity and qualifying perpetual preferred stock less intangible
assets and certain other adjustments.  However, no more than 25% of the
Company's total Tier 1 capital may consist of perpetual preferred stock.  The
definition of Tier 1 capital for the Bank is the same, except that perpetual
preferred stock may be included only if it is noncumulative.  Tier

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2 capital includes, among other items, limited life (and in the case of
banks, cumulative) preferred stock, mandatory convertible securities,
subordinated debt and a limited amount of reserve for credit losses.

     The Board of Governors and the FDIC also adopted minimum leverage ratios
for banking organizations as a supplement to the risk-weighted capital
guidelines.  The leverage ratio is generally calculated using Tier 1 capital
(as defined under risk-based capital guidelines) divided by quarterly average
net total assets (excluding intangible assets and certain other adjustments).
 The leverage ratio establishes a limit on the ability of banking
organizations, including the Company and the Bank, to increase assets and
liabilities without increasing capital proportionately.

     The Board of Governors emphasized that the leverage ratio constitutes a
minimum requirement for well-run banking organizations having diversified
risk, including no undue interest rate risk exposure, excellent asset
quality, high liquidity, good earnings and a composite rating of 1 under the
regulatory rating system for banks and 1 under the regulatory rating system
for bank holding companies.  Banking organizations experiencing or
anticipating significant growth, as well as those organizations which do not
exhibit the characteristics of a strong, well-run banking organization
described above, will be required to maintain minimum capital ranging
generally from 100 to 200 basis points in excess of the leverage ratio.  The
FDIC adopted a substantially similar leverage ratio for state non-member
banks which established (i) a 3 percent Tier 1 minimum capital leverage ratio
for highly-rated banks (those with a composite regulatory rating of 1 and not
experiencing or anticipating significant growth); and (ii) a 4 to 5 percent
Tier 1 minimum capital leverage ratio for all other banks, as a supplement to
the risk-based capital guidelines.

     The federal banking agencies during 1996 issued a joint agency policy
statement regarding the management of interest-rate risk exposure (interest
rate risk is the risk that changes in market interest rates might adversely
affect a bank's financial condition) with the goal of ensuring that
institutions with high levels of interest-rate risk have sufficient capital
to cover their exposures.  This policy statement reflected the agencies'
decision at that time not to promulgate a standardized measure and explicit
capital charge for interest rate risk in the expectation that industry
techniques for measurement of such risk will evolve.

     However, the Federal Financial Institution Examination Counsel ("FFIEC")
on December 13, 1996, approved an updated Uniform Financial Institutions
Rating System ("UFIRS").  In addition to the five components traditionally in
the so-called "CAMEL" rating system which has been used by bank examiners for
a number of years to classify and evaluate the soundness of financial
institutions (including capital adequacy, asset quality, management, earnings
and liquidity), UFIRS includes for all bank regulatory examinations conducted
on or after January 1, 1997, a new rating for a sixth category identified as
sensitivity to market risk.  Ratings in this category are intended to reflect
the degree to which changes in interest rates, foreign exchange rates,
commodity prices or equity prices may adversely affect an institution's
earnings and capital.  The rating system henceforth will be identified as the
"CAMELS" system.

          As a result of an examination of the Bank as of June 30, 1997, the
FDIC determined that the Company required special supervisory attention.  The
Bank consented to an FDIC Order on October 28, 1997.  The FDIC Order is a
"cease-and-desist order" for the purposes of Section 8 of

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the Federal Deposit Insurance Act, and violation of the FDIC Order by the
Bank can give rise to enforcement proceedings under Section 8 of the Federal
Deposit Insurance Act.

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

          As a result of an examination of the Bank as of June 30, 1997, the
Department of Financial Institutions and the Bank have stipulated to the
issuance of the State Order by the California Department of Financial
Institutions ("CDFI") which State Order is a final order pursuant to Section
1913 of the California Financial Code.

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

     Management believes the Bank is in substantial compliance with the terms
and conditions of the FDIC Order and the State Order as of December 31, 1997.
See "Item 7 - Capital Resources" for more information regarding the FDIC Order
and the State Order.

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     COMPETITION

     The banking business in California generally, and in the Bank's primary
service area specifically is highly competitive with respect to both loans
and deposits, and is dominated by a relatively small number of major banks
with many offices operating over a wide geographic area.  Among the
advantages such major banks have over the Bank are their ability to finance
wide-ranging advertising campaigns and to allocate their investment assets to
geographic regions of higher yield and demand. Such banks offer certain
services such as trust services and international banking services which are
not offered directly by the Bank and, by virtue of their greater total
capitalization upon which legal lending limits are based, such banks have
substantially higher limits than the Bank.  At December 31, 1997, the Bank's
legal lending limits to a single borrower and such borrower's related
interests were $2,400,000 on an unsecured basis and $4,000,000 on a fully
secured basis based on regulatory capital of $16,003,000.

     The Bank's primary service area encompasses Fresno County and Madera
County.  As cited in "The 1997 Bank and Thrift Branch Office Data Book"
published by the FDIC, as of June 30, 1997, there were 26 banks and savings
and loans operating in Fresno County with total deposits of $5,292,217,000.
At that time, the Bank held a total of $156,304,000 in deposits at it's
Fresno branches representing approximately 2.95% of total bank and savings
and loan deposits in Fresno County.  Additionally, there were 13 banks and
savings and loans operating in Madera County with total deposits of
$535,395,000.  At that time, the Bank held a total of $15,846,000 in
deposits, representing approximately 2.96% of total bank and savings and loan
deposits in Madera County.

     In order to compete with the major financial institutions in its primary
service area, the Bank uses to the fullest extent possible the flexibility
which is accorded by its independent status.  This includes an emphasis on
specialized services, local promotional activity, and personal contacts by
the Bank's officers, directors and employees.  The Bank also seeks to provide
special services and programs for individuals in its primary service area who
are employed in the professional and business fields, such as loans for
equipment, furniture, tools of the trade or expansion of practices or
businesses.  In the event there are customers whose loan demands exceed the
Bank's lending limits, the Bank seeks to arrange for such loans on a
participation basis with other financial institutions.  The Bank also assists
those customers requiring services not offered by the Bank to obtain such
services from correspondent banks.

     Banking is a business which depends on interest rate differentials.  In
general, the difference between the interest rate paid by the Bank to obtain
its deposits and its other borrowings and the interest rate received by the
Bank on loans extended to its customers and on securities held in the Bank's
portfolio comprise the major portion of the Bank's earnings.

     Commercial banks compete with savings and loan associations, credit
unions, other financial institutions and other entities for funds. For
instance, yields on corporate and government debt securities and other
commercial paper affect the ability of commercial banks to attract and hold
deposits. Commercial banks also compete for loans with savings and loan
associations, credit unions, consumer finance companies, mortgage companies
and other lending institutions.

     The interest rate differentials of the Bank, and therefore its earnings,
are affected not only by general economic conditions, both domestic and
foreign, but also by the monetary and fiscal

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policies of the United States as set by statutes and as implemented by
federal agencies, particularly the Federal Reserve Board.  This agency can
and does implement national monetary policy, such as seeking to curb
inflation and combat recession, by its open market operations in United
States government securities, adjustments in the amount of interest free
reserves that banks and other financial institutions are required to
maintain, and adjustments to the discount rates applicable to borrowing by
banks from the Federal Reserve Board.  These activities influence the growth
of bank loans, investments and deposits and also affect interest rates
charged on loans and paid on deposits.  The nature and timing of any future
changes in monetary policies and their impact on the Bank can't be predicted.

     On December 19, 1991, President Bush signed the Federal Deposit
Insurance Corporation Improvement Act of 1991 ("FDICIA").  The FDICIA
substantially revised banking regulations, certain aspects of the Federal
Deposit Insurance Act and established a framework for determination of
capital adequacy of financial institutions, among other matters.  Under the
FDICIA, financial institutions are placed into five capital adequacy
categories as follows: (1) well capitalized, (2) adequately capitalized, (3)
undercapitalized, (4) significantly undercapitalized, and (5) critically
undercapitalized.  The FDICIA authorized the Board of Governors, the
Comptroller and FDIC to establish limits below which financial institutions
will be deemed critically undercapitalized, provided that such limits can not
be less than two percent (2%) of the ratio of tangible equity to total assets
or sixty-five percent (65%) of the minimum leverage ratio established by
regulation.  Financial institutions classified as undercapitalized or below
are subject to limitations including restrictions related to (i) growth of
assets, (ii) payment of interest on subordinated indebtedness, (iii) capital
distributions, and (iv) payment of management fees to a parent holding
company.

     The FDICIA requires the Board of Governors, the Comptroller and FDIC to
initiate corrective action regarding financial institutions which fail to
meet minimum capital requirements.  Such action may result in orders to
augment capital such as through sale of voting stock, reduction in total
assets, and restrictions related to correspondent bank deposits.  Critically
undercapitalized financial institutions may also be subject to appointment of
a receiver or conservator unless the financial institution submits an
adequate capitalization plan.

     In 1995 the FDIC, pursuant to Congressional mandate, reduced bank
deposit insurance assessment rates to a range from $0 to $0.27 per $100 of
deposits, dependent upon bank's risk.  The FDIC has continued these reduced
assessment rates through the first semiannual assessment period of 1998.
Based upon the above risk-based assessment rate schedule, the Bank's current
capital ratios, the Bank's current level of deposits, and assuming no further
change in the assessment rate applicable to the Bank during 1998, the Bank
estimates that its annual noninterest expense attributed to assessments will
increase during 1998 by approximately $245,000.

     The Board of Governors, the Comptroller and FDIC adopted regulations
effective December 19, 1992, implementing a system of prompt corrective
action pursuant to Section 38 of the Federal Deposit Insurance Act and
Section 131 of the FDICIA.  The regulations establish five capital categories
with the following characteristics: (1) "Well capitalized" - consisting of
institutions with a total risk-based capital ratio of 10% or greater, a Tier
1 risk-based capital ratio of 6% or greater and a leverage ratio of 5% or
greater, and the institution is not subject to an order, written agreement,
capital directive or prompt corrective action directive; (2) "Adequately
capitalized" - consisting of institutions with a total risk-based capital
ratio of 8% or greater, a

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Tier 1 risk-based capital ratio of 4% or greater and a leverage ratio of 4%
or greater, and the institution does not meet the definition of a "well
capitalized" institution; (3) "Undercapitalized" - consisting of institutions
with a total risk-based capital ratio less than 8%, a Tier 1 risk-based
capital ratio of less than 4%, or a leverage ratio of less than 4%; (4)
"Significantly undercapitalized" - consisting of institutions with a total
risk-based capital ratio of less than 6%, a Tier 1 risk-based capital ratio
of less than 3%, or a leverage ratio of less than 3%; (5) "Critically
undercapitalized" - consisting of an institution with a ratio of tangible
equity to total assets that is equal to or less than 2%.

     The regulations established procedures for classification of financial
institutions within the capital categories, filing and reviewing capital
restoration plans required under the regulations and procedures for issuance
of directives by the appropriate regulatory agency, among other matters.  The
regulations impose restrictions upon all institutions to refrain from certain
actions which would cause an institution to be classified within any one of
the three "undercapitalized" categories, such as declaration of dividends or
other capital distributions or payment of management fees, if following the
distribution or payment the institution would be classified within one of the
"undercapitalized" categories.  In addition, institutions which are
classified in one of the three "undercapitalized" categories are subject to
certain mandatory and discretionary supervisory actions.  Mandatory
supervisory actions include (1) increased monitoring and review by the
appropriate federal banking agency; (2) implementation of a capital
restoration plan; (3) total asset growth restrictions; and (4) limitation
upon acquisitions, branch expansion, and new business activities without
prior approval of the appropriate federal banking agency.  Discretionary
supervisory actions may include (1) requirements to augment capital; (2)
restrictions upon affiliate transactions; (3) restrictions upon deposit
gathering activities and interest rates paid; (4) replacement of senior
executive officers and directors; (5) restrictions upon activities of the
institution and its affiliates; (6) requiring divestiture or sale of the
institution; and (7) any other supervisory action that the appropriate
federal banking agency determines is necessary to further the purposes of the
regulations.  Further, the federal banking agencies may not accept a capital
restoration plan without determining, among other things, that the plan is
based on realistic assumptions and is likely to succeed in restoring the
depository institution's capital.  In addition, for a capital restoration
plan to be acceptable, the depository institution's parent holding company
must guarantee that the institution will comply with such capital restoration
plan.  The aggregate liability of the parent holding company under the
guaranty is limited to the lesser of (i) an amount equal to 5 percent of the
depository institution's total assets at the time it became undercapitalized,
and (ii) the amount that is necessary (or would have been necessary) to bring
the institution into compliance with all capital standards applicable with
respect to such institution as of the time it fails to comply with the plan.
If a depository institution fails to submit an acceptable plan, it is treated
as if it were "significantly undercapitalized."  The FDICIA also restricts
the solicitation and acceptance of and interest rates payable on brokered
deposits by insured depository institutions that are not "well capitalized."
An "undercapitalized" institution is not allowed to solicit deposits by
offering rates of interest that are significantly higher than the prevailing
rates of interest on insured deposits in the particular institution's normal
market areas or in the market areas in which such deposits would otherwise be
accepted.

     Any financial institution which is classified as "critically
undercapitalized" must be placed in conservatorship or receivership within 90
days of such determination unless it is also determined that some other
course of action would better serve the purposes of the regulations.
Critically undercapitalized institutions are also prohibited from making (but
not accruing) any

                                      10

<PAGE>

payment of principal or interest on subordinated debt without the prior
approval of the FDIC and the FDIC must prohibit a critically undercapitalized
institution from taking certain other actions without its prior approval,
including (1) entering into any material transaction other than in the usual
course of business, including investment expansion, acquisition, sale of
assets or other similar actions; (2) extending credit for any highly
leveraged transaction; (3) amending articles or bylaws unless required to do
so to comply with any law, regulation or order; (4) making any material
change in accounting methods; (5) engaging in certain affiliate transactions;
(6) paying excessive compensation or bonuses; and (7) paying interest on new
or renewed liabilities at rates which would increase the weighted average
costs of funds beyond prevailing rates in the institution's normal market
areas.

     The capital ratio requirements for the "adequately capitalized" category
generally are the same as the existing minimum risk-based capital ratios
applicable to the Company and the Bank.  It is not possible to predict what
effect the prompt corrective action regulation will have upon the Company and
the Bank or the banking industry taken as a whole in the foreseeable future.

     Under the FDICIA, the federal financial institution agencies have
adopted regulations which require institutions to establish and maintain
comprehensive written real estate policies which address certain lending
considerations, including loan-to-value limits, loan administrative policies,
portfolio diversification standards, and documentation, approval and
reporting requirements.  The FDICIA further generally prohibits an insured
state bank from engaging as a principal in any activity that is impermissible
for a national bank, absent FDIC determination that the activity would not
pose a significant risk to the Bank Insurance Fund, and that the bank is, and
will continue to be, within applicable capital standards.  Similar
restrictions apply to subsidiaries of insured state banks.  The Company does
not currently intend to engage in any activities which would be restricted or
prohibited under the FDICIA.

     The federal financial institution agencies have established safety and
soundness standards for insured financial institutions covering (1) internal
controls, information systems and internal audit systems; (2) loan
documentation; (3) credit underwriting; (4) interest rate exposure; (5) asset
growth; (6) compensation, fees and benefits; and (7) excessive compensation
for executive officers, directors or principal shareholders which could lead
to material financial loss.  If the agency determines that an institution
fails to meet any standard, the agency may require the financial institution
to submit to the agency an acceptable plan to achieve compliance with the
standard.  If the agency requires submission of a compliance plan and the
institution fails to timely submit an acceptable plan or to implement an
accepted plan, the agency must require the institution to correct the
deficiency.  Under the final rule, an institution must file a compliance plan
within 30 days of a request to do so from the institution's primary federal
regulatory agency.  The agencies may elect to initiate enforcement action in
certain cases rather than rely on an existing plan particularly where failure
to meet one or more of the standards could threaten the safe and sound
operation of the institution.

     The Board of Governors issued final amendments to its risk-based capital
guidelines to be effective December 31, 1994, requiring that net unrealized
holding gains and losses on securities available for sale determined in
accordance with SFAS No. 115, "Accounting for Certain Investments in Debt and
Equity Securities," are not to be included in the Tier 1 capital component
consisting of common stockholders' equity.  Net unrealized losses on
marketable equity securities (equity securities with a readily determinable
fair value), however, will continue to be deducted from Tier 1 capital.  This
rule has the general effect of valuing available for sale

                                      11

<PAGE>

securities as amortized cost (based on historical cost) rather than at fair
value (generally at market value) for purposes of calculating the risk-based
and leverage capital ratios.

     On December 13, 1994, the Board of Governors issued amendments to its
risk-based capital guidelines regarding concentration of credit risk and
risks of non-traditional activities, which were effective January 17, 1995.
As amended, the risk-based capital guidelines identify concentrations of
credit risk and evaluate an institution's ability to manage such risks and
the risk posed by non-traditional activities as important factors in
assessing an institution's overall capital adequacy.

     Since 1986, California has permitted California banks and bank holding
companies to be acquired by banking organizations based in other states on a
"reciprocal" basis (i.e., provided the other state's laws permit California
banking organizations to acquire banking organizations in that state on
substantially the same terms and conditions applicable to local banking
organizations).  Some increase in merger and acquisition activity among
California and out-of-state banking organizations has occurred as a result of
this law, as well as increased competition for loans and deposits.  Since
October 2, 1995, California law implementing certain provisions of prior
federal law has (1) permitted interstate merger transactions; (2) prohibited
interstate branching through the acquisition of a branch business unit
located in California without acquisition of the whole business unit of the
California bank; and (3) prohibited interstate branching through de novo
establishment of California branch offices.  Initial entry into California by
an out-of-state institution must be accomplished by acquisition of or merger
with an existing whole bank which has been in existence for at least five
years.

     Community Reinvestment Act ("CRA") regulations effective as of July 1,
1995 evaluate banks' lending to low and moderate income individuals and
businesses across a four-point scale from "outstanding" to "substantial
noncompliance," and are a factor in regulatory review of applications to
merge, establish new branches or form bank holding companies.  In addition,
any bank rated in "substantial noncompliance" with the CRA regulations may be
subject to enforcement proceedings.

     The Bank has a current rating of "satisfactory" CRA compliance, and is
scheduled for further examination for CRA compliance during 1998.

     Recently, the Federal banking agencies, especially the OCC and the Board
of Governors, have taken steps to increase the types of activities in which
national banks and bank holding companies can engage, and to make it easier
to engage in such activities.  On November 20, 1996, the OCC issued final
regulations permitting national banks to engage in a wider range of
activities through subsidiaries. "Eligible institution" (those national banks
that are well capitalized, have a high overall rating and a satisfactory CRA
rating, and are not subject to an enforcement order) may engage in activities
related to banking through operating subsidiaries after going through a new
expedited application process.  In addition, the new regulations include a
provision whereby a national bank may apply to the OCC to engage in an
activity through a subsidiary in which the bank itself may not engage.  This
OCC regulation could be advantageous to national banks depending on the
extent to which the OCC permits national banks to engage in new lines of
business.

     Certain legislative and regulatory proposals that could affect the Bank
and the banking business in general are pending or may be introduced before
the United States Congress, the

                                      12

<PAGE>

California State Legislature and Federal and state government agencies.  The
United States Congress is considering numerous bills that could reform
banking laws substantially.  For example, proposed bank modernization
legislation under consideration would, among other matters, include a repeal
of the Glass-Steagall Act restrictions on banks that now prohibit the
combination of commercial and investment banks.

     It is not known to what extent, if any, the legislative proposals will
be enacted and what effect such legislation would have on the structure,
regulation and competitive relationships of financial institutions.  It is
likely, however, that many of these proposals would subject the Company and
the Bank to increased regulation, disclosure and reporting requirements and
would increase competition and the cost of doing business.

     In addition to pending legislative changes, the various banking
regulatory agencies frequently propose rules and regulations to implement and
enforce already existing legislation.  It cannot be predicted whether or in
what form any such rules or regulations will be enacted or the effect that
such rules and regulations may have on the business of the Company and the
Bank.

Item 2.  PROPERTIES

     The Company leases land and a building at 5240 N. Palm Avenue, Fresno,
California, under a lease agreement having an initial term of approximately
30 years with 2 five year options.  The lease is accounted for as an
operating lease for the land and a capital lease for the building.  The
facility is approximately 9,000 square feet with rental payments of $1.05 per
square foot per month.  The lease calls for rent payment increases of 25%
every five years. The foregoing description of the lease is qualified by
reference to the lease agreement dated December 22, 1988 attached as exhibit
10.10 to the Company's Registration Statement on Form S-4 filed with the
Securities and Exchange Commission on July 27, 1994.

     On February 20, 1995, the Bank entered into a lease agreement for its
SBA loan production office located at  3501 Coffee Road, Suite 3, Modesto,
California.  The lease is for a period of 5 years on facilities of 1,072
square feet at a lease rate of  $1.35 per square foot.  The lease calls for
annual rent adjustments based on changes in the consumer price index of not
less than 3% and not more than 5%.  The foregoing description of the lease is
qualified by reference to the lease agreement dated February 20, 1995 and
attached as exhibit 10.19 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1995.

     On August 17, 1995, the Company entered into a sale-leaseback of its
corporate headquarters located at 7060 N. Fresno Street, Fresno, California.
The leaseback is accounted for as an operating lease with a term of 15 years
and contains provisions for periodic rent increases every three years based
on changes in the consumer price index not to exceed 12% per year.  The
facility is approximately 24,100 square feet with the initial rental rate set
at $1.35 per square foot. The foregoing description of the lease is qualified
by reference to the lease agreement dated August 17, 1995 and attached as
exhibit 10.21 to the Company's Form 10-K for the year ended December 31, 1995.

     On December 14, 1995, the Bank renewed the lease on its limited service
facility, commonly referred to as the Mini Branch, at 726 W. Shaw Avenue,
Fresno, California.  The term of the lease is for five years with provisions
for rent rate increases in years 2 and 4 as specified in the lease agreement.
The facility is approximately 350 square feet in size with the initial rental

                                      13

<PAGE>

rate set at $1,875 per month.  The foregoing description of the lease is
qualified by reference to the lease agreement dated December 14, 1995 and
attached as exhibit 10.23 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1995.

     On  May 13, 1996, the Bank entered into a lease for its fourth branch
office, commonly referred to as the Madera Branch, at 126 North "D" Street,
Madera, California.  The initial term of the lease is for three years at a
fixed rate of $2,091 per month with an option for an additional three years
at a rate of $2,510 per month.  The facility is approximately 2,500 square
feet in size and is located in the primary downtown business district in
Madera.  The foregoing description of the lease is qualified by reference to
the lease agreement dated May 13, 1996 and attached as exhibit 10.4 to the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1996.

     Rent expense under all operating lease agreements was $528,000, $540,000
and $273,000, for the years ended December 31, 1997, 1996 and 1995,
respectively.

     At December 31, 1997, the aggregate minimum future lease commitments
under capital leases and noncancelable operating leases with terms of one
year or more consist of the following:

<TABLE>
<CAPTION>
                                         CAPITAL LEASES    OPERATING LEASES
<S>                                      <C>               <C>
1998                                              $  48              $  516
1999                                                 48                 506
2000                                                 76                 477
2001                                                 76                 457
2002                                                 76                 456
                                                 ------            --------
Thereafter                                        2,526               4,476
                                                 ------            --------
Total minimum lease payments                      2,850            $  6,888
Amount representing interest                     (2,341)
                                                 ------            --------
Net present value of minimum
   lease payments                                $  509
                                                 ------
</TABLE>

Item 3.  LEGAL PROCEEDINGS

     There are no material proceedings adverse to the Company or the Bank to
which any director, officer, affiliate of the Company or 5% shareholder of
the Company or the Bank, or any associate of any such director, officer,
affiliate or 5% shareholder of the Company or Bank is a party, and none of
the above persons has a material interest adverse to the Company or the Bank.

     Neither the Company nor the Bank is a party to any pending legal or
administrative proceedings (other than ordinary routine litigation incidental
to the Company's or the Bank's business) and no such proceedings are known to
be contemplated.

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

No matters were submitted to a vote of security holders during the fourth
quarter of 1997.

                                      14
<PAGE>

                                       PART II

Item 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
         MATTERS

(a)  MARKET INFORMATION

     There is limited trading in and no established public market for the
Company's Common Stock.  As of March 18, 1998 the Company's Common Stock was
not listed on any exchange, however, the Company has filed an application
with Nasdaq to list its common stock on the Nasdaq National Market System.
Management anticipates the Company's application will be approved and its
common stock will begin trading on Nasdaq during the second quarter of 1998.

     Hoefer & Arnett, Incorporated, Sutro & Co., Banc Stock Exchange and Van
Kasper & Company facilitate trades in the Company's Common Stock. Based on
information provided to the Company from these sources, the range of high and
low bids for the Company's Common Stock for the two most recent fiscal years
are set forth below.  Such bid prices represent inter-dealer prices without
retail mark-up, mark-down or commission and may not necessarily represent
actual transactions.

<TABLE>
<CAPTION>
     CALENDAR YEAR                                       LOW           HIGH
     <S>                                              <C>          <C>
     1996
     First Quarter                                    $7.000       $  8.000
     Second Quarter                                    7.500          9.000
     Third Quarter                                     7.000          8.500
     Fourth Quarter                                    7.250          9.875
     1997
     First Quarter                                     9.125         10.625
     Second Quarter                                    9.000         10.000
     Third Quarter                                     8.250         10.125
     Fourth Quarter                                    9.250         11.000
</TABLE>

The bid price for the Company's Common Stock was $14.00 as of  March 18, 1998.

(b)  HOLDERS

     As of March 18, 1998, there were approximately 690 holders of the Common
Stock of the Company.  There are no other classes of common equity
outstanding.

(c)  DIVIDENDS

     The Company's shareholders are entitled to receive dividends when and as
declared by its Board of Directors, out of funds legally available therefor,
subject to the restrictions set forth in the California General Corporation
Law (the "Corporation Law").  The Corporation Law provides that a corporation
may make a distribution to its shareholders if the corporation's retained
earnings equal at least the amount of the proposed distribution.  The
Corporation Law further provides that, in the event that sufficient retained
earnings are not available for the proposed distribution, a corporation may
nevertheless make a distribution to its shareholders if it

                                      15

<PAGE>

meets two conditions, which generally stated are as follows: (1) the
corporation's assets equal at least 1-1/4 times its liabilities; and (2) the
corporation's current assets equal at least its current liabilities or, if
the average of the corporation's earnings before taxes on income and before
interest expenses for the two preceding fiscal years was less than the
average of the corporation's interest expenses for such fiscal years, then
the corporation's current assets must equal at least 1-1/4 times its current
liabilities.  Funds for payment of any cash dividends by the Company would be
obtained from its investments as well as dividends and/or management fees
from the Bank.  The payment of cash dividends by the Bank is subject to
restrictions set forth in the California Financial Code (the "Financial
Code"). The Financial Code provides that banks may not make a cash
distribution to its shareholders in excess of the lesser of (a) the bank's
retained earnings; or (b) the bank's net income for its last three fiscal
years, less the amount of any distributions made by the bank or by any
majority-owned subsidiary of the bank to the shareholders of the bank during
such period.  However, a bank may, with the approval of the Commissioner,
make a distribution to its shareholders in an amount not exceeding the
greater of (a) its retained earnings; (b) its net income for its last fiscal
year; or (c) its net income for its current fiscal year.  In the event that
the Commissioner determines that the shareholder's equity of a bank is
inadequate or that the making of a distribution by the bank would be unsafe
or unsound, the Commissioner may order the bank to refrain from making a
proposed distribution.

     The FDIC may also restrict the payment of dividends if such payment
would be deemed unsafe or unsound or if after the payment of such dividends,
the Bank would be included in one of the "undercapitalized" categories for
capital adequacy purposes pursuant to the Federal Deposit Insurance
Corporation Improvement Act of 1991.  Additionally, while the Board of
Governors has no general restriction with respect to the payment of cash
dividends by an adequately capitalized bank to its parent holding company,
the Board of Governors might, under certain circumstances, place restrictions
on the ability of a particular bank to pay dividends based upon peer group
averages and the performance and maturity of the particular bank, or object
to management fees on the basis that such fees cannot be supported by the
value of the services rendered or are not the result of an arm's length
transaction.

     Under these provisions and considering minimum regulatory capital
requirements, at December 31, 1997, further dividends from the Bank to the
Company would need prior approval of the Commissioner.  Additionally, the
Company's Board of Directors, have consented to orders with the FDIC and the
CDFI that among other matters, provide that the Company will not declare
additional cash dividends without the prior approval of the FDIC and CDFI.
See "Item 1 - Supervision and Regulation" for additional information
regarding the FDIC Order and State Order.

     During 1997, the Company paid no cash dividends.  During 1996, the
Company paid four quarterly cash dividends of $.06 per common share and
during 1995, the Company paid four cash dividends of $.05 per common share,
as well as a 5% stock dividend to shareholders of record on May 12, 1995.
There can be no assurance that the Company will pay dividends in the future.
The determination to pay dividends is subject to regulatory restrictions
applicable to the Bank and the Company, the financial condition of the Bank
and the Company and such other factors as the Board of Directors of the
Company may consider.

                                      16

<PAGE>

Item 6.  SELECTED FINANCIAL DATA

     The following table presents certain consolidated financial information
concerning the business of the Company and the Bank.  This information should
be read in conjunction with the Consolidated Financial Statements and the
notes thereto, and Management's Discussion and Analysis of Financial
Condition and Results of Operations contained elsewhere herein.

<TABLE>
<CAPTION>
(In thousands, except
percentages, share and  per share data)          1997           1996           1995           1994           1993
-----------------------------------------------------------------------------------------------------------------
<S>                                          <C>            <C>            <C>           <C>             <C>
OPERATING RESULTS:
Interest income                              $ 15,285       $ 13,227       $ 12,841       $ 10,708       $  8,952
Interest expense                                5,320          4,694          5,092          2,989          2,509
                                             --------       --------       --------       --------       --------
Net interest income                             9,965          8,533          7,749          7,719          6,443
Provision for loan loss                         1,353              -            470            487             37
                                             --------       --------       --------       --------       --------
Net interest income after provision
  for loan losses                               8,612          8,533          7,279          7,232          6,406

Non-interest income                          $  2,687       $  3,109       $  1,883       $  4,026       $  3,604
Non-interest expense                           13,406          9,902         12,105          8,327          6,660
                                             --------       --------       --------       --------       --------
Income (loss) before income taxes              (2,107)         1,740         (2,943)         2,931          3,350
Income taxes (benefit)                           (833)           732         (1,176)         1,195          1,388
                                             --------       --------       --------       --------       --------
Net Income (loss)                              (1,274)         1,008         (1,767)         1,736          1,962

FINANCIAL CONDITION AND CAPITAL
  YEAR END BALANCES:
Total assets                                 $198,241       $181,058       $163,682       $155,802       $144,012
Net loans                                     126,430         99,770         94,529         89,589         85,453
Investments in real estate                      4,338         16,926         17,954         16,209         13,797
Deposits                                      176,279        159,802        143,745        137,889        123,529
Shareholders' equity                           18,734         13,470         12,942         14,327         12,945

FINANCIAL CONDITION AND CAPITAL
  AVERAGE BALANCES:
Total assets                                 $186,243       $166,532       $160,215       $144,734       $124,259
Net loans                                     110,025         98,333         91,046         83,230         70,984
Investments in real estate                     12,538         17,892         17,801         15,667         12,034
Deposits                                      168,296        143,723        142,943        128,288        110,272
Shareholders' equity                           13,272         13,358         14,948         13,737         11,950

FINANCIAL RATIOS:
Return on average assets                        (0.68%)         0.61%         (1.10%)         1.20%          1.58%
Return on average equity                        (9.60%)         7.55%        (11.82%)        12.64%         16.42%
Average equity to average assets                 7.13%          8.02%          9.33%          9.49%          9.62%
Dividend payout ratio                               -          43.33%        (19.93%)         9.50%             -
Allowance for loan losses to total loans         1.71%          1.58%          1.85%          1.69%          1.54%

EARNINGS (LOSS) PER COMMON SHARE:
Basic                                        $   (.68)       $   .55       $   (.98)       $  1.00       $   1.14
Diluted                                      $   (.68)       $   .54       $   (.98)       $   .94       $   1.08
Shares on which earnings (loss) per common
  share were based:
Basic                                       1,860,000      1,818,000      1,805,000      1,734,000      1,716,000
Diluted                                     1,860,000      1,872,000      1,805,000      1,841,000      1,821,000
Cash dividends declared per common share:           -       $   0.24       $   0.20       $   0.10              -
</TABLE>

                                      17

<PAGE>

Item 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF
          FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     Certain matters discussed or incorporated by reference in this Annual
Report on Form 10-K including, but not limited to, matters described in Item 7 -
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," are forward-looking statements that are subject to risks and
uncertainties that could cause actual results to differ materially from those
projected.  Changes to such risks and uncertainties, which could impact future
financial performance, include, among others, (1) competitive pressures in the
banking industry; (2) changes in the interest rate environment; (3) general
economic conditions, either nationally or regionally; (4) changes in the
regulatory environment; (5) changes in business conditions and inflation; and
(6) changes in securities markets.  Therefore, the information set forth therein
should be carefully considered when evaluating the business prospects of the
Company and the Bank.

     BUSINESS ORGANIZATION

     Regency Bancorp (the "Company") is a California corporation organized to
act as the holding company for Regency Bank (the "Bank") and Regency
Investment Advisors, Inc. ("RIA"), a SEC registered investment advisor. In
1995, upon its formation, the Company acquired all of the outstanding common
stock of the Bank.  Other than its investment in the Bank and RIA, the
Company currently conducts no other significant business activities, although
it is authorized to engage in a variety of activities which are deemed
closely related to the business of banking upon prior approval of the Board
of Governors, the Company's principal regulator.

     The Bank engages in commercial and consumer banking, offering a diverse
range of traditional banking products and services to the business,
professional and consumer markets, with emphasis on business and professional
accounts. The Bank emphasizes the delivery of these products within its
primary service areas consisting of Fresno County and Madera County.

     RIA provides investment management and consulting services from offices
located in the Company's headquarters office at 7060 N. Fresno St., Fresno,
California.

     The following analysis is designed to enhance the reader's understanding
of the Company's financial condition and the results of its operations as
reported in the Consolidated Financial Statements included in this Annual
Report. Reference should be made to those statements and the Selected
Financial Data presented elsewhere in this report for additional detailed
information.

     OVERVIEW

     The 1997 fiscal year was a year of significant changes for Regency
Bancorp. Highlights included overall asset growth of 9.5% which allowed the
Company to reach nearly 200 million in total assets, substantial progress in
reducing RSC's real estate holdings, growth in interest earning assets of
more than 20%, a private placement capital offering of 750,000 shares which
netted the Company $5.9 million in new capital and an overall loss for the
year caused by significant losses in RSC related to the divestiture of its
holdings. Additionally, during the fourth quarter the board consented to
administrative orders imposed by the FDIC and CDFI.

                                      18

<PAGE>

     For the year ended December 31, 1997, total assets increased by
$17,183,000 or 9.5%, to $198,241,000 from $181,058,000 at December 31, 1996.
During 1996, total assets increased $17,376,000 or 10.6% from $163,682,000 at
December 31, 1995.  For 1997, total loans increased $27,332,000 or 26.7% as a
result of the Company's decision to hold newly originated SBA loans rather
than sell the guaranteed portion in the secondary market.  In 1996, total
loans increased 5.3% or $5,166,000 to $102,303,000 from $97,137,000 at
December 31, 1995.

     During 1997, the Company significantly reduced its investments in real
estate, reducing its holdings by 73.7% or $12,151,000 to $4,338,000 from
$16,489,000 at December 31, 1996 and from $17,954,000 at December 31, 1995.
With the reduction in real estate at December 31, 1997, the Company was able
to increase its interest earning assets by $29,662,000 or 21.1% to
$168,909,000 from $139,793,000 at December 31, 1996 and from $128,108,000 at
December 31, 1995.

     For the fiscal year ended December 31, 1997, the Company recorded a net
loss of $1,274,000  representing a decrease of $2,282,000 from 1996's net
income of $1,008,000.  For the fiscal year ended December 31, 1996, the
Company had a net income of $1,008,000 representing an increase of
$2,775,000 from 1995's net loss of $1,767,000.  On a per common and common
equivalent share basis, the net loss for 1997 was $(.68) compared to net
income of $.55 per share in 1996 and a net loss of $(.98) per share in 1995.
The net loss in 1997 was primarily the result of losses totaling $5.7
million related to the dissolution of RSC's real estate development
activities.  The net income recorded in 1996 was primarily a result of lower
losses related to RSC's real estate development activities, as well as, an
increase of income from the sale of loans.  1995's loss was also primarily
attributable to losses from RSC's real estate development activities of $3.4
million.   Additional discussion of RSC's activities and the losses related
to the divestiture of it's holdings can be found in more detail later in this
analysis.

     Common shareholder's equity increased by $5,264,000 during 1997 to
$18,734,000, primarily as a result of the private placement capital offering
completed by the Company in December 1997.  In 1996, shareholder's equity
increased by $528,000 to $13,470,000, primarily as a result of the retention
of earnings net of four cash dividends totaling $437,000.  In 1995,
shareholders equity declined by $1,385,000 to $12,942,000 primarily as a
result of losses experienced by RSC. During 1997, the Company paid no cash
dividends.  During 1996, the Company declared and paid four quarterly cash
dividends of $.06 per common share. The Company paid four cash dividends of
$.05 in 1995.  It is the objective of management to maintain adequate capital
for future growth through the retention of earnings. Additionally, the Bank
and Company have agreed to administrative orders which require the approval
of the FDIC and CDFI prior to declaration and payment of additional cash
dividends.  Therefore, there can be no assurance that the Company will pay
dividends in the future.  See "Item 5 - Market For Registrant's Common Equity
and Related Stockholder Matters", for discussion of dividend restrictions
applicable to the Company and Bank.  The Company's ratio of common
shareholders' equity to total assets was  9.45% at December 31, 1997 compared
to 7.44% at December 31, 1996 and 7.91% at December 31, 1995.   In addition
to the cash dividends paid in 1996 and 1995, respectively, the Company
distributed a five percent stock dividend during 1995. Per share earnings
have been adjusted to reflect any stock dividends and any dilutive effect of
common stock equivalents (stock options outstanding but not exercised)
calculated on the treasury stock method.

                                      19

<PAGE>

     INVESTMENT SECURITIES

     The provisions of  Statement of Financial Accounting Standards (SFAS)
115 require, among other things, that certain investments in debt and equity
securities be classified under three categories: securities held-to-maturity;
trading securities; and securities available-for-sale.  Securities classified
as held-to-maturity are to be reported at amortized cost; securities
classified as trading securities are to be reported at fair value with
unrealized gains and losses included in operations; and securities classified
as available-for-sale are to be reported at fair value with unrealized gains
and losses excluded from earnings and reported as a separate component of
shareholders' equity, net of tax.  The Company has not classified securities
as held-to-maturity or trading securities.

     Although the Company currently has the ability to hold its entire
investment portfolio until maturity, management makes a determination at the
time of purchase as to which classification is most appropriate based on
various factors.  Securities classified as held-to-maturity are stated at
amortized cost, adjusted for amortization of premiums and accretion of
discounts.  Such amortization and accretion is included in investment income.
 Interest on securities classified as held-to-maturity is included in
investment income.

     Securities not classified as held-to-maturity are classified as
available-for-sale.  Available-for-sale securities are carried at fair value,
with the unrealized gains and losses, net of tax, reported as a separate
component of shareholders' equity.  The amortized cost of debt securities in
this category is adjusted for amortization of premiums and accretion of
discounts to maturity. Such amortization and accretion is included in
investment income.  Realized gains and losses and declines in value judged to
be other-than-temporary on available-for-sale securities are included in
investment income.  The cost of securities sold is based on the specific
identification method.  Interest on securities classified as
available-for-sale is included in investment income.

     During the period between December 31, 1996 and December 31, 1997, the
Company recorded a net increase in the value of its available-for-sale
portfolio of $203,000 net of applicable taxes.  This change is reflected as a
change in shareholders' equity in the Consolidated Statements of
Shareholders' Equity. This change in value is primarily the result of an
overall decline in interest rates resulting in higher market values of the
Company's security portfolio.

                                      20

<PAGE>

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

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
AVAILABLE -FOR-SALE SECURITIES                      DECEMBER 1997                 DECEMBER 1996                 DECEMBER 1995
-----------------------------------------------------------------------------------------------------------------------------
(In thousands)                           Amortized           Fair      Amortized           Fair      Amortized           Fair
                                              Cost          Value           Cost          Value           Cost          Value
-----------------------------------------------------------------------------------------------------------------------------
<S>                                      <C>              <C>          <C>              <C>          <C>              <C>
U.S. Treasuries                            $ 2,007        $ 2,012        $ 2,020        $ 2,030        $ 2,003        $ 2,004
U.S. Government Agencies                    17,431         17,489         21,408         21,383         20,474         20,459
Mortgage-backed Securities                  11,541         11,647          7,972          7,948          7,655          7,686
State and Political Subdivisions             5,441          5,624          1,517          1,559          1,540          1,601
Equity Securities                              214            214            350            350              -              -
-----------------------------------------------------------------------------------------------------------------------------
                                           $36,634        $36,986        $33,267        $33,270        $31,672        $31,750
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>

The following table sets forth the securities available-for-sale as of December
31, 1997 and weighted average yields of such securities.

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
                                                        AFTER ONE          AFTER FIVE
SECURITIES                             WITHIN            THROUGH             THROUGH              AFTER
AVAILABLE-FOR-SALE (1)               ONE YEAR          FIVE YEARS           TEN YEARS           TEN YEARS               TOTAL
-----------------------------------------------------------------------------------------------------------------------------
                                  Amount     Yield    Amount     Yield    Amount    Yield    Amount    Yield    Amount  Yield
-----------------------------------------------------------------------------------------------------------------------------
<S>                               <C>        <C>      <C>        <C>      <C>       <C>      <C>       <C>     <C>      <C>
U.S.  Treasuries                  $2,007      6.05%  $    -      0.00%     $  -             $     -     0.00%  $ 2,007   6.05%
U.S. Government agencies               -         -%   10,811      6.48%    6,620     7.21%        -     0.00%   17,431   6.75%
Mortgage-backed securities             -         -%      575      7.07%    1,934     6.92%    9,032     6.57%   11,541   6.68%
State and political subdivisions     200      5.25%      776      5.90%      104     4.95%    4,361     5.18%    5,441   5.28%
Equity Securities                    214      5.57%        -      0.00%        -     0.00%        -     0.00%      214   5.57%
-----------------------------------------------------------------------------------------------------------------------------
TOTAL                             $2,421      6.52%  $12,162      6.49%   $8,658     7.10%  $13,393     6.11%  $36,634   6.46%
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  Yields calculated on nontaxable securities have not considered tax
equivalent effects.

There were no investment securities classified as held-to-maturity at December
31, 1997 and 1996.

     NET INTEREST INCOME

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

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

                                      21

<PAGE>

CONSOLIDATED AVERAGE BALANCE SHEETS, NET INTEREST INCOME AND INTEREST RATES

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
                                                       1997                1996                1995
--------------------------------------------------------------------------------------------------------------
(In thousands, except
percentages)                  AVERAGE  YIELD/  INTEREST   AVERAGE  YIELD/  INTEREST  AVERAGE  YIELD/  INTEREST
                              BALANCE   RATE              BALANCE   RATE             BALANCE   RATE
--------------------------------------------------------------------------------------------------------------
<S>                          <C>       <C>     <C>        <C>      <C>     <C>      <C>       <C>     <C>
ASSETS:
Interest-earning assets:
Loans  (1)                   $111,891  11.18%   $12,506  $100,052  11.25%   $11,255 $ 92,501  11.69%   $10,815
Investment securities  (2)     35,879   6.49%     2,328    29,013   6.22%     1,805   30,665   6.27%     1,923
Federal funds sold & other      8,417   5.36%       452     3,254   5.13%       167    1,907   5.40%       103
--------------------------------------------------------------------------------------------------------------
Total interest-
earning assets                156,187   9.79%    15,286   132,319  10.00%    13,227  125,073  10.27%    12,841
--------------------------------------------------------------------------------------------------------------
Noninterest-earning assets:
Allowances for credit losses   (1,866)                     (1,719)                    (1,455)
Cash and due from banks         9,562                       8,482                      7,920
Real estate investments        12,538                      17,518                     17,399
Other real estate owned           462                         374                        402
Premises and equipment, net     2,041                       2,296                      4,769
Cash surrender value of
  life insurance                2,965                       2,829                      2,699
Accrued interest receivable
  and other assets              4,354                       4,435                      3,408
--------------------------------------------------------------------------------------------------------------
Total average assets         $186,243                    $166,534                   $160,215
--------------------------------------------------------------------------------------------------------------
LIABILITIES AND
SHAREHOLDERS' EQUITY:
Interest-bearing liabilities:
Transaction accounts         $ 50,240   2.52%    $1,264  $ 46,237   2.67%    $1,235 $ 51,759   3.33%   $ 1,721
Savings accounts               34,150   4.09%     1,397    25,327   4.18%     1,058   22,518   4.76%     1,071
Time deposits                  47,223   5.47%     2,580    41,791   5.36%     2,241   40,379   5.51%     2,225
Federal funds purchased
  and other (3)                 3,104   2.58%        80     6,795   2.36%       160    1,635   4.59%        75
--------------------------------------------------------------------------------------------------------------
Total interest-bearing
  liabilities                 134,717   3.95%     5,321   120,150   3.91%     4,694  116,291   4.38%     5,092
--------------------------------------------------------------------------------------------------------------
Noninterest-bearing
liabilities:

Transaction accounts           36,683                      30,369                     26,652
Other liabilities               1,571                       2,657                      2,324
--------------------------------------------------------------------------------------------------------------
Total liabilities             172,971                     153,176                    145,267
--------------------------------------------------------------------------------------------------------------
Shareholders' equity:
Common stock                    9,202                       8,868                      8,500
Retained earnings               4,029                       4,529                      6,678
Unrealized gain/(loss) on
   investment securities           41                         (39)                      (230)
--------------------------------------------------------------------------------------------------------------
Total shareholders' equity     13,272                      13,358                     14,948
--------------------------------------------------------------------------------------------------------------
Total average liabilities
   and shareholders' equity  $186,243                    $166,534                   $160,215
--------------------------------------------------------------------------------------------------------------
Net interest income                              $9,965                     $ 8,533                    $ 7,749
--------------------------------------------------------------------------------------------------------------
Interest income as a
  percentage of average
  interest-earning assets               9.79%                      10.00%                     10.27%
Interest expense as a
   percentage of average
   interest-earning assets             (3.41%)                     (3.55%)                    (4.07%)
--------------------------------------------------------------------------------------------------------------
Net interest  margin                    6.38%                       6.45%                      6.20%
--------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  Loan amounts include nonaccrual loans, but the related interest income
has been included only for the  period prior to the loan being placed on a
nonaccrual basis.  Loan interest income includes loan fees of approximately
$1,252,000, $1,232,000 and $1,220,000 for the years ended December 31, 1997,
1996 and 1995, respectively.

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

(3)  Interest expense has been reduced by capitalized interest on real estate
projects of approximately $0, $0 and $55,000 for the years ended December 31,
1997, 1996 and 1995, respectively.

                                      22

<PAGE>

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

     VOLUME/RATE ANALYSIS

<TABLE>
<CAPTION>
(In thousands)                                           1997 - 1996                       1996 - 1995
--------------------------------------------------------------------------------------------------------------------
                                                  Volume      Rate      Total      Volume       Rate          Total
--------------------------------------------------------------------------------------------------------------------
<S>                                               <C>         <C>       <C>        <C>          <C>           <C>
NET INTEREST EARNINGS VARIANCE ANALYSIS: (1)

Increase (decrease) in interest income:
Loans                                              1,323       (72)     1,251         820       (381)           439
Investment securities  (2)                           443        80        523        (103)       (15)          (118)
Federal funds sold and other                         277         8        285          69         (5)            64
--------------------------------------------------------------------------------------------------------------------
Total                                              2,043        16      2,059         786       (401)           385
--------------------------------------------------------------------------------------------------------------------

Increase (decrease) in interest expense:
Transaction accounts                                  88       (59)        29        (171)      (315)          (486)
Savings accounts                                     360       (21)       339        (533)       520            (13)
Time deposits                                        295        44        339          69        (53)            16
Federal funds purchased and other                    (97)       17        (80)        100        (15)            85
--------------------------------------------------------------------------------------------------------------------
Total                                                646       (19)       627        (535)       137           (398)
--------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net interest income         1,397        35      1,432       1,321       (538)           783
--------------------------------------------------------------------------------------------------------------------
</TABLE>

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

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

     Total interest income increased $2,059,000 or 15.6% in 1997 to
$15,286,000.  During 1996, interest income before the provision for loan
losses increased by $386,000 or 3.00% to $13,227,000 from $12,842,000 in
1995. Interest expense in 1997 increased by $627,000 or 13.4% to $5,321,000.
Interest expense in 1996 declined by $398,000 or 7.81% to $4,694,000 for the
year compared to $5,092,000 for 1995.  The Company's net interest margin
declined to 6.38% in 1997 from 6.45% in 1996 and 6.20% in 1995.  The primary
reason for the decline in net interest margin was a drop in the average yield
on earning assets of .21% which offset a .14% decline in interest expense to
average earning assets.

     Average interest-earning assets increased  $23,868,000 to $156,187,000
in 1997 compared to $132,319,000 in 1996 and $125,073,000 in 1995.  Growth in
average interest earning assets was spread over all earning asset categories
with federal funds sold increasing 158.7%, investments increasing 23.7% and
loans increasing 11.8%. Average interest bearing liabilities grew by
$14,569,000 in 1997 to $134,719,000 from $120,150,000 in 1996 and
$116,291,000 in 1995. All major interest bearing liabilities grew during 1997
with the exception of federal funds purchased and other.  During 1997, the
Company was able to retire all debt incurred as a result of the acquisition
of limited partnership properties involving RSC.  In April 1997, in an effort
to improve it's interest margin and overall interest income, the Company
began to accumulate SBA loans that previously had been sold to generate
noninterest income.  For the quarter ended December 31, 1997, the Company had
increased its net interest margin to 6.60%.

                                      23

<PAGE>

     INTEREST-EARNING ASSET MIX

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
(In thousands except                          1997                        1996                      1995
percentages)
--------------------------------------------------------------------------------------------------------------------
(Percentage of average interest          Average    Percentage    Average     Percentage     Average    Percentage
earning assets)                          Balance      of Total    Balance      of Total      Balance      of Total
--------------------------------------------------------------------------------------------------------------------
<S>                                    <C>          <C>           <C>         <C>            <C>        <C>
INTEREST-EARNING ASSET MIX:
Loans                                  $ 111,891         71.6%   $ 100,052        75.61%     $ 92,501        73.96%
Investment securities                     35,879         23.0%      29,013        21.93%       30,665        24.52%
Federal funds sold and other               8,417          5.4%       3,254         2.46%        1,907         1.52%
--------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST-EARNING ASSETS          $ 156,187        100.0%   $ 132,319        100.0%    $ 125,073        100.0%
--------------------------------------------------------------------------------------------------------------------
</TABLE>

     NONINTEREST INCOME

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

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
(In thousands)                                                 1997                   1996                     1995
--------------------------------------------------------------------------------------------------------------------
<S>                                                          <C>                   <C>                       <C>
NONINTEREST INCOME:
Gain on sale of loans                                        $  608                $ 1,315                   $  590
Depositor service charges                                       397                    338                      271
Income from investment management
   services                                                     810                    682                      471
Gain  (loss) on sale of securities                              (19)                     -                      (25)
Gain on sale of assets                                          252                     18                        7
Servicing fees on loans sold                                    329                    322                      321
Other                                                           310                    434                      248
--------------------------------------------------------------------------------------------------------------------
TOTAL                                                       $ 2,687                $ 3,109                  $ 1,883
--------------------------------------------------------------------------------------------------------------------
</TABLE>

     Other income decreased $422,000 to $2,687,000 in 1997 from $3,109,000 in
1996.  Other income for the year ended December 31, 1995 was $1,883,000.
The greatest decrease occurred in the gain on sale of loans, down $707,000
primarily as a result of the Company's decision to retain the guaranteed
portion of SBA loans originated in its loan portfolio rather than sell the
SBA loans to generate immediate noninterest income.  Income from investment
management services (RIA) was up $128,000 in 1997 to $810,000 from $682,000
in 1996 and $471,000 in 1995, respectively.  The primary reason for the
increase in income from investment management services was a larger asset
base under management at RIA.  In 1996, other income increased $1,226,000 to
$3,109,000 from $1,883,000 for 1995.  The increase in 1996 was primarily due
to the gain on sale of SBA loans and an increase in income from investment
management services (RIA).

     LOAN ORIGINATION & SALES

     The Bank originates various types of loans with the intention of selling
the loan on secondary markets to generate noninterest income.  Types of loans
originated and sold include; loans made under the U.S. Small Business
Administration ("SBA") program that generally provides for SBA guarantees of
70% to 90% of each loan, loans made under the U.S. Department of
Agriculture's Business and Industry loans program and conventional real
estate mortgage loans. Historically, the majority of the Banks gain on the
sale of loans has come from SBA loan sales.  During 1997, the Company decided
to discontinue sales of new SBA originations in an effort to more rapidly
build its loan portfolio and increase interest income.

     An additional source of income related to the Bank's loan origination
activities is reflected in income from the ongoing servicing of loans sold.
For 1997, servicing fee income increased

                                      24

<PAGE>

$7,000 to $329,000.  For 1996, servicing fee income increased $1,000 to
$322,000 from $321,000 for the comparable period in 1995.  These increases
are the result of a larger servicing portfolio of loans.

     REGENCY SERVICE CORPORATION

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

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

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

     For the year ended December 31, 1997, RSC experienced a loss from
investments in real estate in the amount of $3,973,000 compared to a loss of
$351,000 for the year ended December 31, 1996, an increase of $3,622,000. The
increased loss resulted from the sale of properties at discounted prices, as
well as, the writedown of several properties to reflect RSC's anticipated
sales proceeds.  During the year ended December 31, 1995, losses from
investments in real estate were $3,441,000 primarily as a result of the
establishment of a reserve for future losses. For the year ended December 31,
1997, on a stand alone basis, RSC's activities (including losses from the
sale of properties, additions to RSC's provision for real estate losses and
provision for credit losses, plus operating expenses), reduced the Company's
overall pre-tax income by $5,720,000 compared to $1,499,000 in 1996, and
$4,014,000 in 1995, respectively.

     Additional discussion of loans made by RSC is contained in this report
under the heading, "Nonperforming Loans".

                                      25
<PAGE>

         REGENCY INVESTMENT ADVISORS

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

         Revenue from RIA as of December 31, 1997 increased to $810,000 from
$682,000 in the same period of 1996, an increase of $128,000. Income from RIA
as of December 31, 1995 was $471,000. The increased revenue over the past two
years was primarily the result of a larger asset base managed by RIA. On a
stand alone basis, RIA provided the Company with pre-tax net income of
$181,000 and $55,000 in the years ended December 31, 1997 and 1996,
respectively, compared to a pre-tax loss of $163,000 for the year ended
December 31, 1995.

         As of December 31, 1997, RIA had $86.5 million in assets under
management an increase of $9.3 million or 12.0% over 1996. As of December 31,
1996, RIA had $77.2 million in assets under management, an increase of $20.4
million compared to $56.8 million as of December 31, 1995. Assets in client
accounts managed by RIA are not reflected in the consolidated assets of the
Company.

                                      26

<PAGE>

         NONINTEREST  EXPENSE

         Noninterest expense reflects the costs of products and services,
systems, facilities and personnel for the Company. The major components of other
operating expenses stated both as dollars and as a percentage of average assets
are as follows:

         NONINTEREST EXPENSE TO AVERAGE ASSETS

<TABLE>
<CAPTION>

--------------------------------------------------------------------------------------------------------------------
(In thousands, except percentages)                       1997                 1996                   1995
--------------------------------------------------------------------------------------------------------------------
<S>                                              <C>        <C>        <C>        <C>       <C>        <C>
NONINTEREST EXPENSE:
Loss from investments in real estate              $  3,973      2.13%   $    351      .21%   $  3,441         2.15%
Salaries and related benefits                        4,782      2.57%      4,560     2.74%      4,441         2.77%
Occupancy                                            1,639       .88%      1,567      .94%      1,366          .85%
FDIC insurance and regulatory assessments              120       .06%         63      .04%        175          .11%
Marketing                                              450       .24%        428      .26%        382          .24%
Professional services                                  461       .25%        749      .45%        521          .33%
Directors' fees and expenses                           270       .15%        383      .23%        298          .18%
Management fees for real estate projects               120       .07%        488      .29%        243          .15%
Supplies, telephone and postage                        329       .18%        350      .21%        294          .18%
Other                                                1,262       .68%        963      .58%        945          .59%
--------------------------------------------------------------------------------------------------------------------
TOTAL NONINTEREST EXPENSE                         $ 13,406      7.20%    $ 9,902     5.95%    $12,106         7.55%
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
</TABLE>

         Noninterest expenses increased by $3,504,000 to $13,406,000 for the
year ended December 31, 1997 from $9,902,000 in 1996. The primary cause of
the increase related to losses from investments in real estate which
increased by $3,622,000 during 1997. Noninterest expenses for the year ended
December 31, 1995 were $12,106,000 which also included high expense related
to real estate development activities (RSC). When compared to average assets
for the respective periods, other expenses increased to 7.20% for 1997 as
compared to 5.95% for 1996 and 7.55% for 1995.

         Salaries and related benefits increased by $222,000 or 4.87% in 1997
to $4,782,000, primarily as a result of higher commissions paid to staff on
incentive based compensation. During 1996, salaries and related benefits
increased by $119,000 to $4,560,000. Salaries and related benefits were
$4,441,000 in 1995. The primary cause of the increase in 1996 related to
additional staff hired to support the Bank's Madera office opened in August
1996. As a percentage of average assets, salaries and related benefits have
declined over the past three years and were 2.57%, 2.74% and 2.77% in 1997,
1996 and 1995, respectively.

         Occupancy expense increased by $72,000 in 1997 to $1,639,000
compared to $1,567,000 in 1996 and $1,366,000 in 1995. The increase in 1997
was primarily the result of a full year's rental expense related to the
Bank's Madera office, as well as, higher maintenance and utility expense.
During 1996, occupancy expense increased due to higher rent expense related
to the Company's headquarters building which was sold and subsequently leased
back during 1995. As a percentage of average assets, occupancy expense was
 .88%, .94% and .85% in 1997, 1996 and 1995, respectively.

         During 1997, the Company's FDIC insurance and regulatory assessments
increased as a result of the administrative orders issued the Bank and lower
capital levels at the mid-year assessment period. With the completion of the
Company's private placement stock offering, the capital component of the
FDIC's insurance assessment has been improved, however, higher than
historical expense related to regulatory assessments in 1998 are possible,
pending relief from the administrative orders. FDIC assessments increased by
$57,000 to $120,000 in 1997 compared to

                                      27

<PAGE>

$63,000 in 1996. FDIC and regulatory assessment in 1996 declined from
$175,000 in 1995 as a result of the FDIC reducing the rate at which banks pay
FDIC insurance. As a percentage of average assets, FDIC insurance and
regulatory assessments were .06%, .04% and .11% in 1997, 1996 and 1995,
respectively.

         Professional services consist primarily of fees paid for legal,
accounting and consulting services to third party professionals. During 1997,
professional services declined by $288,000 to $461,000 from $749,000 for the
year ended December 31, 1996. The primary result of the decrease was lower
legal and accounting expenses related to RSC. During 1996, professional
services increased by $228,000 from $521,000 in 1995 as a result of higher
consulting fees and legal expenses related to the disposal of RSC related
properties. As a percentage of average assets, professional services were
 .25%, .45% and .33% in 1997, 1996 and 1995, respectively.

         Management fees paid for real estate projects in 1997 decreased by
$368,000 to $120,000 from $488,000 in 1996. During 1995, management fees paid
for real estate projects were $298,000. As a percentage of average assets,
management fees for real estate projects were .07%, .29% and .15% in 1997,
1996 and 1995, respectively. The decrease in fees paid for real estate
projects during 1997 was the result of a restructured management contract
with RSC's project manager.

         Supplies, telephone and postage declined in 1997 by $21,000 to
$329,000 from $350,000 in 1996. Expense for supplies, telephone and postage
was $294,000 in 1995. Over the past three years, supplies, telephone and
postage as a percentage of average assets have remained fairly constant at
 .18%, .21% and .18% in 1997, 1996 and 1995, respectively.

         Other expenses increased by $299,000 in 1997 to $1,262,000 primarily
as a result of a one time expense related to the write-off of an unsecured
account receivable held by RSC. In 1996, other expenses increased $18,000 to
$963,000 from $945,000 in 1995. The primary cause of the increase in 1996 was
the one time expense of $140,000 related to the expiration of an option to
purchase the property immediately contiguous to the Company's headquarters
building. As a percentage of average assets, other expenses were .68%, .58%
and .59% in 1997, 1996 and 1995, respectively.

         BALANCE SHEET ANALYSIS

         For the year ended December 31, 1997, total assets increased by
$17,183,000 or 9.5%, to $198,241,000 from $181,058,000 at December 31, 1996.
During 1996, total assets increased $17,376,000 or 10.6% from $163,682,000 at
December 31, 1995. For 1997, total loans increased $27,333,000 or 26.7% as a
result of the Company's decision to hold newly originated SBA loans rather
than sell the guaranteed portion in the secondary market. In 1996, total
loans increased 5.3% or $5,166,000 to $102,303,000 from $97,137,000 at
December 31, 1995. Cash and cash equivalents were virtually the same at
December 31, 1997 and 1996 at $19,893,000 and $19,833,000, respectively,
while investment securities increased 11.2% to $36,986,000 at December 31,
1997 from $33,270,000 at December 31, 1996. During 1996, cash and cash
equivalents increased $10,909,000 or 122.2% as the Company increased its cash
liquidity to meet anticipated seasonal funding needs during the Company's
first quarter.

         During 1997, the Company significantly reduced its investments in
real estate, reducing its holdings 73.7% or $12,151,000 to $4,338,000 from
$16,489,000 at December 31, 1996 and from

                                      28

<PAGE>

$17,954,000 at December 31, 1995. With the reduction in real estate at
December 31, 1997, the Company was able to increase its interest earning
assets by $29,116,000 or 20.1% to $168,909,000 from $139,793,000 at December
31, 1996 and from $128,108,000 at December 31, 1995.

         Deposits increased during 1997 by $16,477,000 or 10.3% to
$176,279,000 from $159,802,000 at December 31, 1996. Deposits increased
during 1996 by $16,057,000 or 11.2% from $143,745,000 at December 31, 1995.
All categories of deposits showed an increase in 1997 with the largest growth
in noninterest bearing deposits. Notes payable and capital lease obligations
decreased 90.7% or $4,943,000 to $509,000 at December 31, 1997 from
$5,452,000 at December 31, 1996 as the Company paid off all debts related to
the acquisition of real estate properties from RSC's former partners. The
remaining $509,000 classified under notes payable and capital lease
obligations relates to the Bank's capital lease on its Palm branch facility.

<TABLE>
<CAPTION>
LOANS COMPOSITION:
---------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS,
EXCEPT PERCENTAGES)     DECEMBER 1997      DECEMBER 1996      DECEMBER 1995      DECEMBER 1994       DECEMBER 1993
---------------------------------------------------------------------------------------------------------------------
<S>                    <C>         <C>     <C>       <C>      <C>       <C>     <C>         <C>    <C>         <C>
Commercial             $ 75,487    58.3%   $56,625   55.4%    $54,150   55.7%   $46,374     50.3%  $43,422     49.5%
Real estate:
  Construction           30,128    23.2%    23,640   23.1%     23,706   24.4%    29,857     32.4%   29,351     33.4%
  Real estate            14,900    11.5%    13,260   12.9%     10,389   10.7%     9,318     10.1%    9,225     10.5%
  mortgage                9,120     7.0%     8,778    8.6%      8,892    9.2%     6,559      7.2%    5,754      6.6%
  Consumer and other
---------------------------------------------------------------------------------------------------------------------
SUBTOTAL                129,635     100%   102,303    100%     97,137    100%    92,108      100%   87,752      100%
---------------------------------------------------------------------------------------------------------------------
Less:
Allowances
   for credit losses      2,219              1,615              1,784             1,541              1,338
Deferred loan fees          364                392                356               542                605
Unearned discount           623                526                468               436                356
---------------------------------------------------------------------------------------------------------------------
TOTAL LOANS, NET       $126,430            $99,770            $94,529           $89,589            $85,453
---------------------------------------------------------------------------------------------------------------------
</TABLE>

The following table represents the maturity distribution of the loan portfolio
as of December 31, 1997.

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
                                                                     AFTER ONE
                                                     WITHIN            THROUGH             AFTER
MATURITY DISTRIBUTION OF LOAN PORTFOLIO            ONE YEAR         FIVE YEARS        FIVE YEARS               TOTAL
---------------------------------------------------------------------------------------------------------------------
<S>                                               <C>               <C>               <C>                  <C>
Loans:
Commercial                                        $  23,185          $  13,682         $  38,620           $  75,487
Real estate construction                             27,627              1,773               728              30,128
Real estate mortgage                                  1,397              7,736             5,767              14,900
Consumer and other                                    2,691              3,192             3,237               9,120
---------------------------------------------------------------------------------------------------------------------
TOTAL                                                54,900             26,383            48,352             129,635
---------------------------------------------------------------------------------------------------------------------

Fixed rate                                           14,388              6,545             7,938              28,871
Variable rate                                        40,512             19,838            40,414             100,764
---------------------------------------------------------------------------------------------------------------------
TOTAL                                             $  54,900          $  26,383         $  48,352          $  129,635
---------------------------------------------------------------------------------------------------------------------
</TABLE>

         During 1997, the Bank continued its success in SBA lending, leading
the 16 county Fresno SBA district in loans made for the fifth consecutive
year. In addition, the Bank continued to actively participate in the U.S.
Department of Agriculture Business and Industry Loan program. Business and
Industry loans, ("B&I"), contain a government guarantee on a portion of the
loan similar to that of a SBA loan guarantee. In its second year offering
loans under the B&I program, the Bank was the third largest B&I lender in
California in new loans made in 1997.

         Commercial loans, including SBA and B&I loans, comprised
approximately 58.3% of the Company's loan portfolio at December 31, 1997
compared to 55.4% at December 31, 1996, and

                                      29

<PAGE>

55.7% of the Company's loan portfolio at December 31, 1995. These loans are
generally made to small and mid-size businesses and professionals. Commercial
loans are diversified as to industries and types of business, with no
material industry concentrations. Most of these loans have floating rates
based upon underwriting analysis. The primary source of repayment on most
commercial loans is cash flow from the primary business. Additional
collateral in the form of real estate, cash, accounts receivable, inventory
or other financial instruments is often obtained as a secondary source of
repayment.

         Real estate construction lending comprised 23.2% of the Company's
loan portfolio at December 31, 1997, compared to 23.1% of the Company's loan
portfolio at December 31, 1996, and 24.4% at December 31, 1995. These loans
are primarily made for the construction of single family residential housing.
Loans in this category may be made to the home buyer or to the developer.
Construction loans are secured by deeds of trust on the primary property. The
majority of construction loans have floating rates based upon underwriting
analysis. A significant portion of the borrowers' ability to repay these
loans is dependent upon the sale of the property, which is affected by, among
other factors, the residential real estate market. In this regard, the
Company's potential risks include a general decline in the value of the
underlying property, as well as cost overruns or delays in the sale or
completion of a property.

         Real estate mortgage loans comprised 11.5% of the loan portfolio at
December 31, 1997, compared to 12.9% at December 31, 1996 and 10.7% of the
loan portfolio at December 31, 1995. Real estate mortgage loans are made up
of non-residential properties (75%) and single-family residential mortgages
(25%). The non-residential loans generally are "mini-perm" (medium-term)
commercial real estate mortgages with maturities under seven years. The
residential mortgages are secured by first trust deeds and have varying
maturities. Both types of loans may have either fixed or floating rates. The
majority are floating. Risks associated with non-residential loans include
the decline in value of commercial property values; economic conditions
surrounding commercial real estate properties; and vacancy rates. The
repayment of single-family residential mortgage loans is generally dependent
upon the income of the borrower from other sources, however, declines in the
underlying property value may create risk in these loans.

         Consumer loans represented the remainder of the loan portfolio at
December 31, 1997, comprising 7.0% of the loan portfolio compared to 8.6% of
total loans at December 31, 1996 and 9.2% at December 31, 1995. This category
includes traditional Consumer loans, Home Equity Lines of Credit, and Visa
Card loans. Consumer loans are generally secured by third trust deeds on
single-family residences or personal property, while Visa Cards are unsecured.

         RISK ELEMENTS

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

                                      30

<PAGE>

portfolio. Additionally, management believes its ability to manage portfolio
credit risk is enhanced by the knowledge of the Bank's service area by the
lending personnel and Board of Directors.

                                      31

<PAGE>

         NONPERFORMING LOANS

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

         At December 31, 1997, nonaccrual loans totaled $1,736,000 or 1.34%
of total loans compared to $3,301,000 or 3.23% of total loans at December 31,
1996 and $581,000 or .60% at December 31, 1995. Of the total nonaccrual
loans, $1,138,000 represented loans RSC has made to facilitate the sale of
former partnerships. During 1997 these loans RSC made to facilitate the sale
of former partnerships decreased by $2,112,000 or 65.0% from $3,250,000 at
December 31, 1996. During the divestiture process of RSC's real estate
holdings, RSC has made several loans to facilitate the sale of former
partnerships that have loan to value ratios higher than would normally be
made by the Bank. Due to the higher loan to value ratios, the Company has
placed these loans on non-accrual status and is accounting for them on the
cost recovery method. At December 31, 1995, of the $581,000 in non-accrual
loans, $505,000 represented loans RSC had outstanding to real estate limited
partnerships. At December 31, 1994 and 1993 the Company had $391,000 and
$604,000 in non-accrual loans respectively, all of which were associated with
the Bank's lending function.

         Without the non-accrual loans made by RSC, the Bank's loan portfolio
at December 31, 1997 had $598,000 in non-accrual loans or .46%, compared to
$51,000 in non-accrual loans or .05% at December 31, 1996. Of the Bank's
non-accrual loans (excluding RSC loans) at December 31, 1997, $473,000
represented the portion of SBA loans that are guaranteed by the SBA.
Beginning in 1997, the SBA changed the requirements for Bank's originating
SBA loans which are subsequently sold in the secondary market. Under the new
requirement, if a borrower defaults on a SBA guaranteed loan, the originating
bank is required to buy the guaranteed portion back and hold it in its
portfolio until collection efforts are exhausted. While this guaranteed
portion is backed by the full faith and credit of the U.S. government and
poses little risk of loss to the Bank, the Bank does incur loss of the use of
the funds while awaiting payoff from the SBA or other loan collateral.
Expense from the loss of use of the funds is expected to be minimal; however,
due to this new requirement, it is expected that SBA non-accrual loan levels
will be slightly higher. Bank only non-accrual loans at December 31, 1995,
1994 and 1993 were $76,000, or .08%, $391,000 or .43% and $604,000 or .70%
respectively.

         The gross interest income that would have been recorded for loans
placed on nonaccrual status was $254,000, $276,000 and $82,000 for the years
ended December 31, 1997, 1996 and 1995, respectively.

                                      32

<PAGE>

         Other real estate owned was $503,000 at December 31, 1997 compared
to $437,000 at December 31, 1996, and $341,000 at December 31, 1995. There
were no troubled debt restructured loans as defined in SFAS 15 at December
31, 1997, 1996 or 1995 respectively.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
(In thousands, except percentages)                   1997          1996           1995          1994           1993
--------------------------------------------------------------------------------------------------------------------
<S>                                              <C>           <C>            <C>           <C>            <C>
NONPERFORMING ASSETS:
Nonaccrual RSC loans                              $ 1,138      $  3,250           $505           $ -            $ -
Nonaccrual Bank loans                                 598            51             76           391            604
--------------------------------------------------------------------------------------------------------------------
Nonperforming loans                                 1,736         3,301            581           391            604
Other real estate owned                               503           437            341           299            696
--------------------------------------------------------------------------------------------------------------------
Total nonperforming assets                          2,239         3,738            922           690          1,300
--------------------------------------------------------------------------------------------------------------------
Accruing loans 90 days past due                        48            19            725            58            268
--------------------------------------------------------------------------------------------------------------------
Total loans before allowance for losses          $129,635      $102,303       $ 97,137      $ 91,130       $ 86,791
Total assets                                      198,241       181,058        163,682       155,802        144,012
Allowance for possible credit losses              (2,219)       (1,615)        (1,784)       (1,541)        (1,338)
--------------------------------------------------------------------------------------------------------------------
RATIOS:
Nonperforming loans to total loans                  1.34%         3.23%           .60%          .43%           .70%
Nonperforming loans to total loans
  (excluding RSC loans)                              .46%          .05%           .08%          .43%           .70%
Nonperforming assets to:
   Total loans                                      1.73%         3.65%           .95%          .76%          1.50%
   Total loans and OREO                             1.72%         3.64%           .95%          .75%          1.49%
   Total assets                                     1.13%         2.06%           .56%           44%           .90%
Allowance for possible credit losses to
    total nonperforming assets                     99.11%        43.20%         193.5%        223.3%         102.9%
Allowance for possible credit losses  to            1.71%         1.58%          1.85%         1.69%          1.54%
loans
--------------------------------------------------------------------------------------------------------------------
</TABLE>

         Management is not aware of any potential problem loans, which were
accruing and current at December 31, 1997, where serious doubt exists as to
the ability of the borrower to comply with present repayment terms.

         The Company does not believe there to be any concentration of loans
in excess of 10% of total loans which are not disclosed above which would
cause them to be significantly impacted by economic or other conditions. For
further discussion of the impact of California economic conditions upon the
loan portfolio, see "Allowance for Credit Losses" in the section below.

         ALLOWANCE FOR CREDIT LOSSES

         The allowance for credit losses reflects management's judgment as to
the level which is considered adequate to absorb potential losses inherent in
the loan portfolio. This allowance is increased by provisions charged to
expense and reduced by loan charge-offs net of recoveries. Management
determines an appropriate provision based on information currently available
to analyze credit loss potential, including: (1) the loan portfolio growth in
the period, (2) a comprehensive grading and review of new and existing loans
outstanding, (3) actual previous charge-offs, and (4) changes in economic
conditions.

         The allowance for credit losses totaled $2,219,000 or 1.71% of total
loans at December 31, 1997 compared to $1,615,000 or 1.58% of total loans at
December 31, 1996 and $1,784,000 or 1.85% of total loans at December 31,
1995. Charge-offs during 1997 were $895,000 while recoveries were $146,000.
Of the $895,000 charged off in 1997, $601,000 represented write downs of
loans made by RSC. During 1997, $1,353,000 in additional provision for credit
losses was added to reserves. Charge-offs during 1996 were $258,000 while
recoveries were $89,000. During 1996, no additional provision for credit
losses was added to reserves. It is the policy of

                                      33

<PAGE>

management to maintain the allowance for credit losses at a level deemed
adequate for known and currently anticipated future risks inherent in the
loan portfolio. Based on information currently available to analyze credit
loss potential, including economic factors, overall credit quality,
historical delinquency and a history of actual charge-offs, management
believes that the credit loss provision and allowance is adequate. However,
no prediction of the ultimate level of loans charged-off in future years can
be made with any certainty.

         Although management is of the opinion that the allowance for credit
losses is maintained at an adequate level for known and currently anticipated
future risks inherent in the loan portfolio, the Fresno economy and real estate
market remain stagnant. The Bank's loan portfolio could be adversely affected if
economic conditions and the real estate market in the Bank's market area
deteriorate. The effect of such events, although uncertain at this time, could
result in an increase in the level of nonperforming loans and OREO and the level
of the allowance for loan losses, which could adversely affect the Company's and
the Bank's future growth and profitability.

Following is a table presenting the activity within the Company's provision for
credit losses for the period between December 31, 1993 and December 31, 1997.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
(In thousands)                                      1997          1996           1995          1994            1993
--------------------------------------------------------------------------------------------------------------------
BALANCE,  (beginning of year)                    $ 1,615       $ 1,784        $ 1,541       $ 1,338         $ 1,289
Provision charged to expense                       1,353             -            470           487              37
--------------------------------------------------------------------------------------------------------------------
<S>                                              <C>           <C>            <C>           <C>             <C>
Charge-offs:
  Commercial                                        (132)         (193)          (211)         (259)           (100)
  Real estate construction                          (663)            -             (8)            -               -
  Real estate mortgage                                 -             -              -             -               -
  Consumer and other                                (100)          (65)           (46)          (54)             (5)
--------------------------------------------------------------------------------------------------------------------
Total Charge-offs                                   (895)         (258)          (265)         (313)           (105)
--------------------------------------------------------------------------------------------------------------------
Recoveries:
  Commercial                                         122            76             37            27             117
  Real Estate construction                             -             -              -             2               -
  Real estate mortgage                                 -             -              -             -               -
  Consumer and other                                  24            13              1             -               -
--------------------------------------------------------------------------------------------------------------------
TOTAL RECOVERIES                                     146            89             38            29             117
--------------------------------------------------------------------------------------------------------------------
Net Charge-offs                                     (749)         (169)          (227)         (284)             12
--------------------------------------------------------------------------------------------------------------------
BALANCE,  (end of year)                          $ 2,219       $ 1,615        $ 1,784       $ 1,541          $1,338
--------------------------------------------------------------------------------------------------------------------
Net charge-offs to average loans
outstanding                                          .66%          .17%           .24%          .34%           (.01)%
--------------------------------------------------------------------------------------------------------------------
</TABLE>

The following table represents the allocation of the allowance for loan losses
for the period between December 1993 and December 1997.

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
                              1997                1996                1995               1994               1993
-----------------------------------------------------------------------------------------------------------------------
                                  Percent             Percent             Percent           Percent            Percent
                                 of loans            of loans            of loans           of loans           of loans
                                  in each             in each             in each           in each            in each
                                 category            category            category           category           category
(In thousands,                   to total            to total            to total           to total           to total
except  percentages)     Amount     loans    Amount     loans    Amount     loans   Amount     loans  Amount      loans
-----------------------------------------------------------------------------------------------------------------------
<S>                      <C>     <C>         <C>     <C>         <C>     <C>        <C>     <C>       <C>      <C>
Commercial               $1,184     58.2%    $1,069     54.6%    $1,005     55.7%   $1,001    50.3%   $1,000      49.5%
Real estate
  construction              506     23.2%       208     23.6%       215     24.4%      135    32.4%      135      33.4%
Real estate mortgage        121     11.5%       100     13.1%        78     10.7%       65    10.1%       69      10.5%
Consumer and other          226      7.1%       238      8.7%       221      9.2%      184     7.2%      134       6.6%
Unallocated                 182         -         -         -       265         -      156        -        -          -
-----------------------------------------------------------------------------------------------------------------------
Total                   $ 2,219    100.0%    $1,615    100.0%    $1,784    100.0%   $1,541   100.0%   $1,338     100.0%
-----------------------------------------------------------------------------------------------------------------------
</TABLE>

                                      34

<PAGE>

         FUNDING SOURCES

         Deposits represent the Bank's primary source of funds for investment.
Deposits are primarily core deposits in that they are demand, savings, and time
deposits generated from local businesses and individuals. These sources are
considered to be relatively more stable, long-term deposit relationships thereby
enhancing steady growth of the deposit base without major fluctuations in
overall deposit balances. The Bank normally experiences a seasonal decline in
deposits in the first quarter of each year. In order to assist in meeting its
funding needs the Bank maintains Fed Funds lines with correspondent banks in the
amount of $5,000,000 in addition to using its investment portfolio to raise
funds through repurchase agreements. In addition, the Bank may, from time to
time, obtain additional deposits through the use of brokered time deposits. As
of December 31, 1997, the Bank held no institutional brokered time deposits.

         In August 1996, the Bank opened its first full service branch office
outside of Fresno, California approximately 20 miles north in the city of
Madera. Through 1997, it's first full year of operation, the Madera branch had
obtained deposits of approximately $20 million.

The following table presents the composition of the deposit mix at December 31,
1993 through December 31, 1997, respectively.

<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------------
                              1997               1996               1995                1994                1993
------------------------------------------------------------------------------------------------------------------------
(In thousands, except
percentages)             AMOUNT   PERCENT   AMOUNT   PERCENT   AMOUNT   PERCENT   AMOUNT   PERCENT    AMOUNT    PERCENT
------------------------------------------------------------------------------------------------------------------------
<S>                     <C>       <C>       <C>      <C>       <C>      <C>       <C>      <C>       <C>       <C>
DEPOSITS:
Noninterest-bearing     $ 46,744    26.5%   $36,613    22.9%   $32,672    22.7%   $30,589     22.2%   $30,422     24.6%
Interest-bearing
deposits                  85,114    48.3%    73,390    45.9%    75,539    52.6%    72,615     52.7%    63,137     51.1%
Time  under  $100,000     15,778     9.0%    19,032    11.9%    12,229     8.5%    12,852      9.3%    12,607     10.2%
Time $100,000
  and  over               28,643    16.2%    30,766    19.3%    23,305    16.2%    21,833     15.8%    17,363     14.1%
------------------------------------------------------------------------------------------------------------------------
Total interest-bearing
  deposits               129,535    73.5%   123,189    77.1%   111,073    77.3%   107,300     77.8%    93,107     75.4%
------------------------------------------------------------------------------------------------------------------------
TOTAL DEPOSITS           176,279     100%   159,802     100%   143,745     100%   137,889      100%   123,529      100%
------------------------------------------------------------------------------------------------------------------------
</TABLE>

The following table represents maturities of time deposits of $100,000 or more
at December 31, 1997.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
                                                                    Over Three
                                             Three Months               Though                   Over
(In thousands)                                    Or Less        Twelve Months          Twelve Months             Total
------------------------------------------------------------------------------------------------------------------------
<S>                                          <C>                 <C>                    <C>                   <C>
Maturities of Time Deposits Greater
Than $100,000                                   $  17,846             $  8,957               $  1,840         $  28,643
------------------------------------------------------------------------------------------------------------------------
</TABLE>

         LIQUIDITY

         Liquidity management refers to the Bank's ability to provide funds on
an ongoing basis to meet fluctuations in deposit levels as well as the credit
needs and requirements of its clients. Both assets and liabilities contribute to
the Bank's liquidity position. Federal Funds lines, short-term investments and
securities, and loan repayments contribute to liquidity, along with deposit
increases, while loan funding and deposit withdrawals decrease liquidity. The
Bank assesses the likelihood of projected funding requirements by reviewing
historical funding patterns, current and forecasted economic conditions and
individual client funding needs. The Bank maintains lines of credit with two
correspondent banks for up to $5,000,000 available on a short-term basis.

                                      35

<PAGE>

Additionally, the Bank generally maintains a portfolio of SBA loans either
available-for-sale or in its portfolio that could be sold should additional
liquidity be required.



                                      36
<PAGE>

         INTEREST RATE SENSITIVITY

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

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

<TABLE>
<CAPTION>

--------------------------------------------------------------------------------------------------------------------
                                                        Next Day        After    After One
                                                      But Within        Three         Year        After
(In thousands, except percentages)                         Three       Months          But   Five Years
As of December 31, 1997                 Immediately       Months   But Within       Within                    Total
                                                                    12 Months   Five Years
--------------------------------------------------------------------------------------------------------------------
<S>                                     <C>           <C>          <C>          <C>          <C>         <C>
Interest Rate Sensitivity Gap:
Loans                                     $  46,712    $  50,957    $  12,737    $  10,455     $  7,038  $  127,899
Investment securities and other                 213       15,229       11,334        4,918        4,940      36,634
Federal  funds  sold                          3,000            -            -            -            -       3,000
--------------------------------------------------------------------------------------------------------------------
Total interest-earning assets             $  49,925    $  66,186    $  24,071    $  15,373    $  11,978  $  167,533
--------------------------------------------------------------------------------------------------------------------
Interest-bearing transaction accounts        48,616            -            -            -            -      48,616
Savings accounts                             33,662        2,836            -            -            -      36,498
Time deposits                                     -       25,316       15,250        2,951          904      44,421
--------------------------------------------------------------------------------------------------------------------
Total  interest-bearing liabilities       $  82,278    $  28,152    $  15,250     $  2,951       $  904  $  129,535
--------------------------------------------------------------------------------------------------------------------
Interest rate sensitivity gap              (32,350)       38,034        8,821       12,422       11,074
Cumulative gap                             (32,350)        5,681       14,502       26,924       37,998
Cumulative gap percentage to
   interest earning assets                 (19.31%)        3.39%        8.66%       16.07%       22.68%
--------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Amounts exclude nonaccrual loans of $1,736,000.

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

                                       37
<PAGE>

         INFLATION

         The impact of inflation on a financial institution differs
significantly from that exerted on manufacturing, or other commercial
concerns, primarily because its assets and liabilities are largely monetary.
In general, inflation primarily affects the Company indirectly through its
effect on the ability of its customers to repay loans, or its impact on
market rates of interest, and thus the ability of the Bank to attract loan
customers. Inflation affects the growth of total assets by increasing the
level of loan demand, and potentially adversely affects the Company's capital
adequacy because loan growth in inflationary periods may increase more
rapidly than capital. Interest rates in particular are significantly affected
by inflation, but neither the timing nor the magnitude of the changes
coincides with changes in the Consumer Price Index, which is one of the
indicators used to measure the rate of inflation. Adjustments in interest
rates may be delayed because of the possible imposition of regulatory
constraints. In addition to its effects on interest rates, inflation directly
affects the Company by increasing the Company's operating expenses. The
effect of inflation during the three-year period ended December 31, 1997 has
not been significant to the Company's financial position or results of
operations.

         CAPITAL RESOURCES

         The Company has historically been able to sustain its growth in
capital through profit retention. Beginning in September 1994, the Company
began paying quarterly cash dividends. Although, cash dividends have been
paid on a regular basis in the past, there can be no assurance that the
Company will pay dividends in the future. See "Item 5 - Market For
Registrant's Common Equity and Related Stockholder Matters", regarding
dividend restrictions applicable to the Bank and the Company and the
restrictions imposed under the FDIC and CDFI Orders.

         The Board of Governors issued final amendments to its risk-based
capital guidelines to be effective December 31, 1994, requiring that net
unrealized holding gains and losses on securities available-for-sale
determined in accordance with Statement of Financial Accounting Standards
("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," are not to be included in the Tier 1 capital component
consisting of common shareholders equity. Net unrealized losses on marketable
equity securities (equity securities with a readily determinable fair value),
however, will continue to be deducted from Tier 1 capital. This rule has the
general effect of valuing available-for-sale securities at amortized cost
(based on historical cost) rather than at fair value (generally at market
value) for purposes of calculating the risk-based and leverage capital ratios.

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

                                      38

<PAGE>

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

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

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

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

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

                                      39

<PAGE>

appointment of a receiver or conservator unless the financial institution
submits an adequate capitalization plan.

         The Company and Bank's Board of Directors, in consenting to
administrative orders issued by the FDIC and CDFI have agreed that the Bank
will maintain Tier 1 capital equal to the greater of $14,000,000 or the
equivalent of a Tier 1 capital to average assets ratio of at least 7.0%.

The Company and Bank's actual capital amounts (in thousands) and ratios are
also presented in the following table:

<TABLE>
<CAPTION>
                                                                                                  TO BE WELL
                                                                     FOR CAPITAL               CAPITALIZED UNDER
                                                                       ADEQUACY                PROMPT CORRECTIVE
                                               ACTUAL                  PURPOSES:              ACTION PROVISIONS:
                                       --------------------------------------------------------------------------------
                                         AMOUNT      RATIO       AMOUNT        RATIO        AMOUNT          RATIO
                                       --------------------------------------------------------------------------------
   <S>                                   <C>         <C>         <C>           <C>          <C>             <C>
   AS OF DECEMBER 31, 1997
   Total Capital (to Risk Weighted
   Assets):
     Company                              $18,779      13.87%     >=$10,828      >=8.00%              N/A
     Regency Bank                         $16,003      11.79%     >=$10,860      >=8.00%    >=$ 13,576    >=10.00%

   Tier 1 Capital (to Risk Weighted
   Assets):
     Company                             $ 17,081      12.62%     >=$ 5,414      >=4.00%              N/A
     Regency Bank                        $ 14,300      10.53%     >=$ 5,430      >=4.00%     >=$ 8,145    >= 6.00%

   Tier 1 Capital (to Average Assets):
     Company                             $ 17,081       8.89%     >=$ 7,686      >=4.00%              N/A
     Regency Bank                        $ 14,300       7.46%     >=$ 7,663      >=4.00%     >=$ 9,579    >= 5.00%

<CAPTION>
                                                                                               TO BE ADEQUATELY
                                                                     FOR CAPITAL               CAPITALIZED UNDER
                                                                       ADEQUACY                PROMPT CORRECTIVE
                                               ACTUAL                  PURPOSES:              ACTION PROVISIONS:
                                       --------------------------------------------------------------------------------
                                         AMOUNT      RATIO       AMOUNT        RATIO         AMOUNT         RATIO
                                       --------------------------------------------------------------------------------
   <S>                                   <C>         <C>         <C>           <C>          <C>             <C>
   AS OF DECEMBER 31, 1996
   Total Capital (to Risk Weighted
   Assets):
     Company                              $14,306      10.21%     >=$11,207      >=8.00%              N/A
     Regency Bank                         $13,944       9.97%     >=$11,193      >=8.00%     >=$ 11,193    >=8.00%

   Tier 1 Capital (to Risk Weighted
   Assets):
     Company                             $ 12,691       9.06%     >=$ 5,604      >=4.00%              N/A
     Regency Bank                        $ 12,329       8.81%     >=$ 5,596      >=4.00%      >=$ 5,596    >=4.00%

   Tier 1 Capital (to Average Assets):
     Company                             $ 12,691       7.66%     >=$ 6,630      >=4.00%              N/A
     Regency Bank                        $ 12,329       7.12%     >=$ 6,923      >=4.00%      >=$ 6,923    >=4.00%
</TABLE>

                                      40

<PAGE>

         OTHER MATTERS

         As discussed in "Item 1 - Supervision and Regulation", during the
fourth quarter of 1997, the Company's Board of Directors consented to
administrative orders issued by the FDIC and CDFI. In regard to the two most
significant issues raised in each order, specifically the mandate to (1)
increase on or before December 31, 1997 and thereafter maintain Tier 1
capital equal to the greater of $14,000,000 or the equivalent of a Tier 1
capital to average assets ratio of at least 7.0%; and (2) cause RSC to reduce
the assets classified as substandard so that the amount of such assets shall
not exceed $10,115,000 by December 31, 1997, $8,750,000 by March 31, 1998,
$7,100,000 by June 30, 1998 and $4,900,000 by September 30, 1998.

         On December 31, 1997, the Company completed its private placement
capital offering of approximately $5.7 million allowing the Bank to reflect
Tier 1 capital of $14.3 million and a capital to assets ratio of 7.46% at
year-end. Both measurements are above required levels and are considered
"Well Capitalized" under FDICIA standards. See "Capital Resources" in this
section. Additionally, approximately $2.4 million of capital remained at the
Bank's parent company, Regency Bancorp, which could be contributed to further
augment the Bank's capital if required. In January 1998, the Company filed a
progress report with the FDIC and CDFI indicating the Bank's progress to date
in complying with the administrative orders. The progress report indicated
that at December 31, 1997, RSC had reduced total classified assets to
$4,831,000, well below levels required at year-end. Subsequent to year end
1997, RSC completed the sale of several additional units and at January 15,
1998 had further reduced its level of classified assets to $3,826,000. The
remainder of the items specified in the administrative orders are more
subjective in nature and "compliance" can only be defined by the appropriate
regulatory agency, however, management believes they are in full compliance
with both orders.

         NEW ACCOUNTING PRONOUNCEMENTS

            The Company implemented SFAS No. 125 "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities" in
January 1997. The Statement establishes standards for when transfers of
financial assets, including those with continuing involvement by the
transferor, should be considered a sale. SFAS No. 125 also establishes
standards for when a liability should be considered extinguished. This
statement is effective for transfers of assets and extinguishments of
liabilities after December 31, 1996, applied prospectively. In December 1996,
the FASB reconsidered certain provisions of SFAS No. 125 and issued a SFAS
No. 127 to defer for one year the effective date of implementation for
transactions related to repurchase agreements, dollar-roll repurchase
agreements, securities lending and similar transactions.

         In February 1997, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 128, "Earnings Per Share", ("EPS"). SFAS No. 128 replaces the
presentation of primary EPS with a presentation of basic EPS. In addition,
entities with complex capital structures are required to provide disclosure
of diluted EPS. Basic earnings (loss) per share is computed by dividing net
income (loss) available to common stockholders by the weighted average number
of common shares outstanding during the period. Diluted earnings (loss) per
share is computed by dividing net income (loss) available to common
stockholders adjusted for the effects of preferred dividends, interest on
convertible debt, and other changes in income or loss resulting from the
presumed conversion of potential common shares, if any, by the weighted
average common shares outstanding during the period plus potential common
shares outstanding. Diluted EPS

                                      41

<PAGE>

reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock
or resulted in the issuance of common stock that then shared in the earnings
of the Company. Diluted loss per common share is equal to basic loss per
common share at December 31, 1997 and 1995 because the effect of potentially
dilutive securities under the stock option plans were antidilutive.

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

         YEAR 2000 COMPLIANCE

         The inability of most computers, software and other equipment
utilizing microprocessors to distinguish the year 1900 from the year 2000
poses substantial risks to all financial institutions including the Company.
The year 2000 problem is pervasive and complex. Virtually every financial
institution, service provider and vender will have its computing operations
affected in some way by the rollover of the two-digit year value to 00 if
action is not taken to fix the problem before the year 2000 arrives.

         The Company is currently engaged in a five-phase management program
which includes awareness, assessment, renovation, validation, and
implementation. The Company has identified all major applications and systems
that may require modification to ensure "Year 2000 Compliance". The scope of
the project covers all computer systems including PC and network hardware and
software, and mainframe and mainframe software. It also covers all equipment
and other systems utilized in the bank operations or in the premises from
which the Company operates.

         In addition, the Company has communicated with its large borrowers,
corporate customers, and major vendors upon which it relies to determine the
extent to which the Company is vulnerable to those third parties if they fail
to resolve their Year 2000 issues. However, there can be no guarantee that
the systems of other companies on which the Company's systems rely will be
converted on time, or that a failure to convert by another company, or a
conversion that is incompatible with the Company's systems, would not have a
material adverse effect on the Company.

         The Company will utilize both internal and external resources to
implement its Year 2000 Project. The Company expects to complete the majority
of its efforts by the end of 1998 leaving adequate time to assess and correct
any significant issues that may materialize. Purchased hardware and software
will be capitalized in accordance with normal policy. Personnel and all other
costs related to the project are being expensed as incurred. The majority of
these costs are expected to be incurred during 1998, and are not expected to
have a material impact on the Company's cash flows, results of operations or
financial condition.

                                      42

<PAGE>

MARKET RISK

         The Company utilizes a vendor-purchased simulation model to analyze
net interest income sensitivity to movements in interest rates. The
simulation model projects net interest income based on a 200 basis point rise
and a 200 basis point fall in interest rates ramped over a twelve month
period, with net interest impacts projected out as far as twenty four months.
The model is based on the actual maturity and repricing characteristics of
the Company's interest-sensitive assets and liabilities. The model
incorporates assumptions regarding the impact of changing interest rates on
the prepayment of certain assets and liabilities. Projected net interest
income is calculated assuming customers will reinvest maturing deposit
accounts and the Company will originate a certain amount of new loans. The
balance sheet growth assumptions utilized correspond closely to the Company's
strategic growth plans and annual budget. Excess cash is invested in
overnight funds or other short-term investment such as U.S. Treasuries. Cash
shortfalls are covered through additional borrowing of overnight funds. Based
on the information and assumptions in effect at December 31, 1997, management
believes that a 200 basis point rate shock over a twelve month period, up or
down, would not significantly affect the Company's annualized net interest
income.

         The Company also utilizes the same vendor-purchased simulation model
to project the impact of changes in interest rates on the underlying market
value of all the Company's assets, liabilities, and off-balance sheet account
under alternative interest rate scenarios. The resultant net value, as
impacted under each projected interest rate scenario, in referred to as the
market value of equity ("MV of Equity"). This technique captures the interest
rate risk of the Company's business mix across all maturities. The market
analysis is performed using an immediate rate shock of 200 basis points up
and down calculating the present value of expected cash flows under each rate
environment at applicable discount rates. The market value of loans is
calculated by discounting the expected future cash flows over either the term
to maturity for fixed rate loans or scheduled repricing for floating rate
loans using the current rate at which similar loans would be made to borrows
with similar credit ratings. The market value of investment securities is
based on quoted market prices obtained from reliable independent brokers. The
market value of time deposits is calculated by discounting the expected cash
flows using current rates for similar instruments of comparable maturities.
For non-interest sensitive assets and liabilities, as well as deposits with
no defined maturites, including interest-bearing checking, money market and
savings accounts, the market value is equal to their carrying value amounts
at the reporting date.

                                      43

<PAGE>

         The following table sets forth the analysis of the Company's market
value risk inherent in its interest-sensitive financial instruments as they
relate to the entire balance sheet at December 31, 1997. Fair value estimates
are subjective in nature and involve uncertainties and significant judgment and,
therefore, cannot be determined with absolute precision. Assumptions have been
made as to appropriate discount rates, prepayment speeds, expected cash flows
and other variables. Changes in these assumptions significantly affect the
estimates and as such, the obtained fair value may not be indicative of the
value negotiated in the actual sale or liquidation of such financial
instruments, nor comparable to that reported by other financial institutions. In
addition, fair value estimates are based on existing financial instruments
without attempting to estimate future business.

<TABLE>
<CAPTION>
($ in thousands)
        Change in                 Estimated MV               Change in MV               Change in MV
          Rates                     of Equity                 of Equity $                of Equity %
--------------------------- -------------------------- -------------------------- --------------------------
<S>                               <C>                        <C>                        <C>
         +200 BP                    $ 21,014                     $ 800                      3.96%
            0 BP                    $ 20,214                         0                      0.00%
         -200 BP                    $ 18,668                  $ (1,546)                    -7.65%
</TABLE>

Item 7a.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
          Non Applicable

                                      44

<PAGE>

Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

<TABLE>
<CAPTION>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS                                                                     PAGE
                                                                                                               ----
<S>                                                                                                            <C>
Independent Auditors' Report of Deloitte & Touche LLP                                                           45

Consolidated Balance Sheets, December 31, 1997 and 1996                                                         46

Consolidated Statements of Operations for the three years ended                                                 48
  December 31, 1997, 1996, and 1995

Consolidated Statements of Shareholders' Equity for the three years ended                                       49
  December 31, 1997, 1996 and 1995

Consolidated Statements of Cash Flows for the three years ended                                                 50
  December 31, 1997, 1996, and 1995

Notes to Consolidated Financial Statements                                                                      51
</TABLE>

                                      45
<PAGE>






REGENCY BANCORP AND SUBSIDIARIES


CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 1997 AND 1996, AND FOR
EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1997 AND INDEPENDENT
AUDITORS' REPORT




                                      46

<PAGE>


INDEPENDENT AUDITORS' REPORT


To the Board of Directors and Shareholders of
Regency Bancorp
Fresno, California

We have audited the accompanying consolidated balance sheets of Regency
Bancorp and subsidiaries (the "Company"), as of December 31, 1997 and 1996,
and the related consolidated statements of operations, shareholders' equity
and cash flows for each of the three years in the period ended December 31,
1997.  These financial statements are the responsibility of the Company's
management.  Our responsibility is to express an opinion on the financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement.  An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation.  We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Regency Bancorp and subsidiaries
as of December 31, 1997 and 1996, and the results of their operations and
their cash flows for each of the three years in the period ended December 31,
1997 in conformity with generally accepted accounting principles.

DELOITTE & TOUCHE LLP  /s/

Fresno, California
February 4, 1998


                                      47


<PAGE>


REGENCY BANCORP AND SUBSIDIARIES

<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996 (IN THOUSANDS, EXCEPT SHARES)   1997         1996
-------------------------------------------------------------------------------
<S>                                                    <C>          <C>
ASSETS

CASH AND DUE FROM BANKS                                $   16,893   $   14,833

FEDERAL FUNDS SOLD                                          3,000        5,000
                                                       ----------   ----------
           Cash and cash equivalents                       19,893       19,833

INTEREST BEARING DEPOSITS IN OTHER BANKS                      232           98

INVESTMENT SECURITIES (Note 2):
  Available-for-sale at fair value (cost of $36,634        36,986       33,270
     in 1997 and $33,267 in 1996)


LOANS, net of allowance for credit losses of $2,219
and $1,615  (Notes 3 and 11)                              126,430       98,294

LOANS HELD FOR SALE                                          -           1,476
                                                       ----------   ----------
           Total loans, net                               126,430       99,770

INVESTMENTS IN REAL ESTATE (Note 4)                         4,338       16,489

OTHER REAL ESTATE OWNED                                       503          437

PREMISES AND EQUIPMENT, net (Note 5)                        1,751        2,262

CASH SURRENDER VALUE OF LIFE INSURANCE (Note 9)             3,038        2,903

INTEREST RECEIVABLE, DEFERRED INCOME TAXES
  AND OTHER ASSETS (Note 8)                                 5,070        5,996
                                                       ----------   ----------
                                                       $  198,241   $  181,058
                                                       ----------   ----------
                                                       ----------   ----------
</TABLE>
See notes to consolidated financial statements.


                                      48


<PAGE>

<TABLE>
<CAPTION>
                                                           1997         1996
-------------------------------------------------------------------------------
<S>                                                    <C>          <C>
LIABILITIES AND SHAREHOLDERS' EQUITY

DEPOSITS (Note 6):
  Noninterest bearing deposits                          $  46,744    $  36,613
  Interest bearing deposits                               129,535      123,189
                                                       ----------   ----------
           Total deposits                                 176,279      159,802


NOTES PAYABLE AND CAPITAL LEASE OBLIGATION                    509        5,452
  (Notes 4 and 7)

ACCRUED INTEREST AND OTHER
  LIABILITIES (Note 9)                                      2,719        2,334
                                                       ----------   ----------
           Total liabilities                              179,507      167,588

COMMITMENTS AND CONTINGENCIES (Notes 3, 4 and 7)

SHAREHOLDERS' EQUITY (Notes 9, 10 and 13):
  Preferred stock, no par value;
    1,000,000 shares authorized;
    no shares issued
  Common stock, no par value; 5,000,000
    shares authorized, 2,621,125 and 1,818,160
    shares outstanding                                     15,203        8,868
  Retained earnings                                         3,327        4,601
  Net unrealized gain (loss) on available for sale
    securities, net of taxes of $148 and $1                   204            1
                                                       ----------   ----------
           Total shareholders' equity                      18,734       13,470
                                                       ----------   ----------
                                                       $  198,241   $  181,058
                                                       ----------   ----------
                                                       ----------   ----------
</TABLE>


                                      49


<PAGE>

<TABLE>
<CAPTION>
REGENCY BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995                 1997           1996           1995
------------------------------------------------------------------------------------------------
<S>                                                    <C>            <C>            <C>
(In thousands, except per share data)
INTEREST INCOME:
  Interest and fees on loans                            $  12,506      $  11,255      $  10,815
  Interest on investment securities:
    Taxable                                                 2,163          1,718          1,834
    Nontaxable                                                165             87             89
                                                       -----------------------------------------
                                                            2,328          1,805          1,923
  Other                                                       452            167            103
                                                       -----------------------------------------
           Total interest income                           15,286         13,227         12,841
INTEREST EXPENSE:
  Interest on deposits                                      5,241          4,534          5,017
  Interest on borrowings                                       80            160             75
                                                       -----------------------------------------
           Total interest expense                           5,321          4,694          5,092

NET INTEREST INCOME                                         9,965          8,533          7,749
PROVISION FOR CREDIT LOSSES                                 1,353              -            470
                                                       -----------------------------------------
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES       8,612          8,533          7,279

NONINTEREST INCOME:
  Gain on sale of loans (Note 3)                              608          1,315            590
  Depositor service charges                                   397            338            271
  Income from investment management services                  810            682            471
  Gain (loss) on sale of investment securities (Note 2)       (19)             -            (25)
  Gain on sale of assets                                      252             18              7
  Servicing fees on loans sold                                329            322            321
  Other                                                       310            434            248
                                                       -----------------------------------------
           Total noninterest income                         2,687          3,109          1,883

NONINTEREST EXPENSES:
  Loss from investments in real estate
    partnerships (Note 4)                                   3,973            351          3,441
  Salaries and related benefits (Notes 9 and 11)            4,782          4,561          4,441
  Occupancy                                                 1,639          1,568          1,366
  FDIC insurance and regulatory assessments                   120             63            175
  Marketing                                                   450            428            381
  Professional services                                       461            749            521
  Directors' fees and expenses                                270            383            298
  Management fees for real estate projects (Note 11)          120            488            243
  Supplies, telephone and postage                             329            349            294
  Other                                                     1,262            962            945
                                                       -----------------------------------------
           Total noninterest expenses                      13,406          9,902         12,105
                                                       -----------------------------------------
INCOME (LOSS) BEFORE INCOME TAXES                          (2,107)         1,740         (2,943)
INCOME TAX EXPENSE (BENEFIT) (Note 8)                        (833)           732         (1,176)
                                                       -----------------------------------------
NET INCOME (LOSS)                                       $  (1,274)     $   1,008      $  (1,767)
                                                       -----------------------------------------
EARNINGS (LOSS) PER COMMON SHARE (Note 10)
Basic                                                   $   (0.68)     $    0.55      $   (0.98)
Diluted                                                 $   (0.68)     $    0.54      $   (0.98)
                                                       -----------------------------------------
SHARES ON WHICH EARNINGS (LOSS) PER COMMON SHARE
 WERE BASED (Note 10)
Basic                                                       1,860          1,818          1,805
Diluted                                                     1,860          1,872          1,805
                                                       -----------------------------------------
</TABLE>

See notes to consolidated financial statements.


                                      50
<PAGE>

REGENCY BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 (IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)

<TABLE>
<CAPTION>

                                                              COMMON STOCK
                                                        ------------------------                      NET
                                                        NUMBER OF                      RETAINED    UNREALIZED
                                                         SHARES          AMOUNT        EARNINGS    GAIN (LOSS)       TOTAL

<S>                                                     <C>             <C>           <C>          <C>             <C>
BALANCE, JANUARY 1, 1995                                    1,711       $  7,950       $  7,017          (640)     $  14,327
                                                        ---------       --------      ---------    ----------      ---------
                                                        ---------       --------      ---------    ----------      ---------
  Issuance of common stock under stock
    option plan (Note 9)                                       22             19              -             -             19

  Issuance of 5% common stock dividend                          -              -              -             -             -

     including fractional shares                               85            866           (868)            -             (2)

  Tax benefit of stock option transactions                      -             33              -             -             33

  Cash dividends ($0.20 per share)                              -              -           (352)            -           (352)

  Net change in unrealized gain (loss) on
    available-for-sale securities (net of taxes
    of $496)                                                    -              -              -           684            684

  Net loss                                                      -              -         (1,767)            -         (1,767)
                                                        ---------       --------      ---------    ----------      ---------
BALANCE, DECEMBER 31, 1995                                  1,818          8,868          4,030            44         12,942
                                                        ---------       --------      ---------    ----------      ---------
                                                        ---------       --------      ---------    ----------      ---------
  Cash dividends ($0.24 per share)                              -              -           (437)            -           (437)

  Net change in unrealized gain (loss) on
    available-for-sale securities (net of taxes
    of $31)                                                     -              -              -           (43)           (43)

  Net income                                                    -              -          1,008             -          1,008
                                                        ---------       --------      ---------    ----------      ---------
                                                                -              -              -             -              -
BALANCE, DECEMBER 31, 1996                                  1,818          8,868          4,601             1         13,470
                                                        ---------       --------      ---------    ----------      ---------
                                                        ---------       --------      ---------    ----------      ---------
Issuance of common stock to
  employee stock ownership plan (Note 9)                       36            333              -             -            333

Issuance of common stock under
  stock option plan (Note 9)                                   17             75              -             -             75

Net change in unrealized gain (loss) on
  available-for-sale securities (net of
   taxes of $148)                                               -              -              -           203            203

Issuance of common stock in private placement
  captial offering, net of expenses (Note 10)                 750          5,927              -             -          5,927

Net loss                                                        -              -         (1,274)            -         (1,274)
                                                        ---------       --------      ---------    ----------      ---------
BALANCE, DECEMBER 31, 1997                                  2,621      $  15,203       $  3,327        $  204      $  18,734
                                                        ---------       --------      ---------    ----------      ---------
                                                        ---------       --------      ---------    ----------      ---------

</TABLE>

See notes to consolidated financial statements.


                                      51

<PAGE>

REGENCY BANCORP AND SUBSIDIARIES

<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 (IN THOUSANDS)          1997           1996        1995
----------------------------------------------------------------------------------------------------
<S>                                                            <C>             <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss)                                            $  (1,274)      $  1,008     $ (1,767)
    Adjustments:
      Provision for credit losses                                  1,353              -          470
      Provision for losses on investments in real estate               -              -        2,798
      Provision for OREO losses                                      121              -          110
      Depreciation and amortization                                  653            632          606
      Deferred income taxes                                         (428)           831       (1,403)
      Decrease (increase) in interest receivable and
       other assets                                                1,209         (1,491)       1,530
      Increase in surrender value of life insurance                 (135)          (139)        (125)
      Distributions of income from real estate partnerships          232            103          158
      Equity in (income) loss of real estate partnerships            436           (151)         (32)
      Decrease in real estate held for sale                       10,783          7,170        3,472
      Increase (decrease) in other liabilities                       418           (790)      (1,490)
      Loss on sale of securities                                      19              -           25
      Gain on sale of loans held for sale                           (607)        (1,315)        (590)
      Proceeds from sale of loans held for sale                   18,537         13,904        7,522
      Additions to loans held for sale                           (16,454)       (11,313)      (8,919)
      Loss (gain) on sale of premises and equipment and OREO          11             (1)          (4)
                                                              -----------     ----------    ---------
           Net cash provided by operating activities              14,874          8,448        2,361

 CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of available-for-sale securities                     (21,059)       (21,596)     (16,001)
  Proceeds from sales of available-for-sale securities             2,353          1,000        3,105
  Proceeds from maturities of available-for-sale securities       15,262         18,881       11,091
  Purchases of held-to-maturity securities                             -              -       (7,898)
  Proceeds from maturities of held-to-maturity securities              -              -        6,000
  Loan participations purchased                                        -         (1,750)        (750)
  Loan participations sold                                         2,039          4,842          810
  Net increase in loans                                          (31,918)        (7,802)      (1,565)
  Net (increase) decrease in interest bearing deposits
   in other banks                                                   (134)           (95)         199
  Cash received through acquisition of partnerships                    -            804          276
  Proceeds from sale of OREO                                         208            123           76
  Capital contributions to real estate partnerships                    -           (397)      (1,443)
  Capital distributions from real estate partnerships                700          1,012          687
  Payments towards the acquisition and development of
   investments in real estate                                          -              -       (3,383)
  Purchases of premises and equipment                               (136)          (435)        (207)
  Proceeds from sale of premises and equipment                        34              -        1,682
                                                              -----------     ----------    ---------
           Net cash used in investing activities                 (32,651)        (5,413)      (7,321)

 CASH FLOWS FROM FINANCING ACTIVITIES:
  Net increase (decrease) in time deposits                        (5,377)        14,265          849
  Net increase in other deposits                                  21,855          1,791        5,007
  Cash dividends paid                                                  -           (437)        (352)
  Payments for fractional shares related to stock dividends            -              -           (2)
  Payments on notes payable                                       (7,155)        (8,131)        (321)
  Proceeds from notes payable                                      2,179            385          368
  Proceeds from the issuance of common stock under
   employee stock option plan                                         75              -           19
  Proceeds from the issuance of common stock to
   employee stock ownership plan                                     333              -            -
  Net proceeds from the issuance of common stock                   5,927              -            -
                                                              -----------     ----------    ---------
           Net cash provided by financing activities              17,837          7,873        5,568

NET INCREASE IN CASH AND CASH EQUIVALENTS                             60         10,908          608

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                      19,833          8,925        8,317
                                                              -----------     ----------    ---------

CASH AND CASH EQUIVALENTS, END OF YEAR                         $  19,893       $ 19,833     $  8,925
                                                              -----------     ----------    ---------
                                                              -----------     ----------    ---------
</TABLE>

See notes to consolidated financial statements.

                                              52
<PAGE>

REGENCY BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
--------------------------------------------------------------------------------

1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

   BASIS OF PRESENTATION - The consolidated financial statements include the
   accounts of Regency Bancorp and its wholly-owned subsidiaries, hereinafter
   referred to as the ("Company").    Regency Bancorp is a California
   corporation organized to act as the holding company for Regency Bank
   ("Bank"), with headquarters and branches in Fresno, a branch in Madera and a
   loan production office in Modesto, and Regency Investment Advisors Inc.
   ("RIA") an SEC registered investment advisor.   The Bank has one wholly-
   owned subsidiary, Regency Service Corporation, a California corporation
   ("RSC"), that engages in the business of real estate development primarily
   in the Fresno/Clovis area.  In 1995, upon formation of the holding company,
   the Company acquired all of the outstanding common stock of the Bank.  Other
   than its investment in the Bank and RIA, the Company currently conducts no
   other significant business activities, although it is authorized to engage
   in a variety of activities which are deemed closely related to the business
   of banking upon prior approval of the Board of Governors of the Federal
   Reserve System ("Board of Governors"), the Company's principal regulator.
   All significant intercompany balances and transactions have been eliminated
   in consolidation.

   NATURE OF OPERATIONS - The Company operates three bank branches through its
   bank subsidiary in Fresno, California and one branch in Madera, California.
   The Bank is a California banking corporation which has served individuals,
   merchants, small and medium-sized businesses and professionals located in
   and adjacent to Fresno, California, since 1980.  The Bank offers a full
   range of commercial banking services including the acceptance of demand,
   savings and time deposits, and the making of commercial, real estate
   (including real estate construction and residential mortgage), Small
   Business Administration ("SBA"), personal, home improvement, automobile and
   other installment and term loans.  It also offers Visa credit cards,
   traveler's checks, safe deposit boxes, notary public, customer courier and
   other customary bank services.  The Bank's primary source of revenue is
   interest generated by providing loans to customers.  Additionally, the Bank
   generates revenue from the sale and servicing of loans made under government
   guaranteed programs.  A significant portion of the Bank's operating expenses
   have been generated by the divestiture of properties held by RSC.  As
   discussed further in Note 4 to the consolidated financial statements, RSC is
   in the process of divesting all of its real estate investments.

   USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS - The
   preparation of financial statements in conformity with generally accepted
   accounting principles requires management to make estimates and assumptions
   that affect the reported amounts of assets and liabilities and disclosure of
   contingent assets and liabilities at the date of the financial statements
   and the reported amounts of revenues and expenses during the reporting
   period.  Actual results could differ from those estimates.

   SIGNIFICANT ACCOUNTING POLICIES - The accounting and reporting policies of
   the Company conform to generally accepted accounting principles and to
   prevailing practices within the banking industry.  The following is a
   summary of significant policies:

   a. CASH AND CASH EQUIVALENTS - The Company considers cash and cash
      equivalents to include cash, federal funds sold, and other short-term
      investments consisting of deposits in other banks.  Generally, federal
      funds are sold for one-day periods.

                                   53

<PAGE>

   b. INVESTMENT SECURITIES - The Company's investment policy, as established
      by its investment committee, governs the type and quality of securities
      in which management may invest with the objective of achieving an optimum
      balance between credit quality, liquidity and income.

      The Company has classified its investment securities as available-for-
      sale.  These securities are recorded at their fair value.  Unrealized
      gains or losses are included in shareholders' equity, net of tax.  Gain
      or loss on the sale of available-for-sale securities is based on the
      specific identification method.

   c. LOANS - Loans are stated at the outstanding unpaid principal balance
      reduced by any charge-offs or specific valuation allowances.  Interest on
      loans is accrued daily based on outstanding loan balances.  The
      recognition of interest income on a loan is discontinued, and previously
      accrued interest is reversed, when the payment of interest or principal
      is ninety days past due, unless the outstanding loan is adequately
      secured and is in the process of collection.  The loan is accounted for
      thereafter on the cash or cost recovery method until qualifying for
      return to accrual status.

      Impaired loans are measured based on the present value of expected future
      cash flows discounted at the loan's effective interest rate or as a
      practical expedient at the loan's observable market rate or the fair
      value of the collateral if the loan is collateral dependent.  Impaired
      loans are accounted for as loans until foreclosure.

      Nonrefundable fees and related direct costs associated with the
      origination or purchase of loans are deferred and netted against
      outstanding loan balances.  The net deferred fees and costs are
      generally amortized into interest income over the loan term using a
      method which approximates the interest method.  Other credit-related
      fees, such as standby letter of credit fees, loan placement fees and
      annual credit card fees are recognized as noninterest income over the
      commitment period or over the period the related service is performed.

      The Company originates loans to customers under a Small Business
      Administration program that generally provides for SBA guarantees of 75%
      to 90% of each loan.  Loans held for sale are carried at the lower of
      cost or estimated market value in the aggregate.  Historically, the
      Company has sold the guaranteed portion of each loan to a third-party
      and has retained the unguaranteed portion in its own portfolio.  The
      Company allocates basis of the loans sold and the retained portions
      based upon their relative fair market value.  The Company may be
      required to refund a portion of the sales premium received, if the
      borrower defaults or the loan prepays within 90 days of the settlement
      date.  At December 31, 1997 and 1996, the Company had received premiums
      of  $104,000 and $169,000, respectively, subject to such recourse.

      The Company retains a servicing spread on the sale of SBA guaranteed
      loans that creates loan servicing income.  Under Statement of Financial
      Accounting Standards ("SFAS") No. 125, which was implemented by the
      Company as of January 1, 1997, the servicing spread is recognized as a
      servicing asset to the extent the contractual servicing fee in the loan
      sale agreement exceeds adequate compensation for the servicing.
      Servicing spread in excess of the contractual fee, formerly known as
      excess servicing is recognized as an interest only strip.  The Company
      measures the servicing assets and interest only strip by discounting the
      respective cash flow for the estimated expected life of the loan.  The
      Company uses prepayment statistics and its own prepayment experience in
      estimating the expected life of the loans.  Both the servicing asset and
      the interest only strip represent the discounted present values of cash
      flows that are recorded as loan servicing income.  These assets are
      amortized

                                  54

<PAGE>

      as an offset to loan servicing income over the estimated expected life of
      the loans, as well as the capitalized excess servicing in prior years.

      SFAS No. 125 requires periodic measurements of the fair value for
      servicing assets and interest only strips as well as loan prepayment
      experience.  The statement further requires that these assets be
      stratified by one or more predominant risk characteristics of the
      underlying loans.  The Company stratifies the servicing portfolio by
      date of origination.  Fair value is measured by discounting the
      respective cash flows for the servicing assets and interest only strips
      over this remaining period.

      At December 31, 1997, there was no material difference between the
      Company's amortized carrying value for servicing assets and the fair
      value.

      The Company measures the fair value of its interest only  ("IO") strips
      following the same stratification and discounted cash flow methods used
      for servicing assets.  The IO strip is treated as a financial asset in
      substance, similar to an available-for-sale security under SFAS No. 115.
      Differences between the fair value of the strip and its amortized
      carrying value are recorded as unrealized gains or losses, and recorded
      net of the related tax effect as a separate component of shareholders'
      equity.  At December 31, 1997, there was no material difference between
      the carrying value and the fair value of the IO strip.

   d. ALLOWANCE FOR CREDIT LOSSES - The allowance for credit losses represents
      management's recognition of the risks assumed when extending credit and
      its evaluation of the quality of the loan portfolio.  The allowance is
      maintained at a level considered to be adequate for potential credit
      losses based on management's assessment of various factors affecting the
      loan portfolio, which include a review of problem loans, business
      conditions and an overall evaluation of the quality of the portfolio.
      The allowance is increased by provisions for credit losses charged to
      operations and reduced by charges to the allowance net of recoveries.
      Management considers the allowance for credit losses adequate to cover
      any losses that may be inherent in the loan portfolio.

      In evaluating the probability of collection, management is required to
      make estimates and assumptions that affect the reported amounts of
      loans, allowance for credit losses and the provision for credit losses
      charged to operations.  Actual results could differ significantly from
      those estimates.

   e. PREMISES AND EQUIPMENT - Premises and equipment are stated at cost less
      accumulated depreciation.  Depreciation is computed on a straight-line
      basis over the estimated useful lives of the assets as follows:


          Buildings                                  30 years
          Leasehold improvements                     Life of the lease
          Furniture and equipment                    3 - 10 years


   f. LONG LIVED ASSETS - The Company periodically evaluates the carrying value
      of long-lived assets to  be held and used, including goodwill and other
      intangible assets.   Based on such an evaluation, the Company
      determined that there is no impairment loss to be recognized in 1997 or
      1996.

   g. OTHER REAL ESTATE OWNED - Real estate properties acquired through, or in
      lieu of, loan foreclosure are to be sold and are initially recorded at
      fair value at the date of foreclosure establishing a new cost basis.
      After foreclosure, valuations are periodically performed by

                                     55
<PAGE>
      management and the real estate is carried at the lower of carrying
      amount or fair value less cost to sell.  Revenue and expenses from
      operations and changes in the valuation allowance are included in
      noninterest expenses.

   h. INVESTMENTS IN REAL ESTATE - Investments in real estate represent RSC's
      equity interests in real estate development partnerships and certain
      other real estate holdings held for sale or development (see Note 4).
      All investments in real estate are valued at net realizable value.
      Revenue recognition on the disposition of real estate, including other
      real estate owned, is dependent upon the transaction meeting certain
      criteria relating to the nature of the property sold and the terms of the
      sale.  Under certain circumstances, revenue recognition may be deferred
      until these criteria are met.  Interest and other carrying charges
      related to property held for development are capitalized during the
      construction period.  The Company capitalizes interest on qualifying
      expenditures at its average cost of funds.  Capitalization of interest
      ceases when the qualifying asset is substantially complete and ready for
      sale or when activities related to development cease.  For 1997, 1996 and
      1995, the Company capitalized interest of $0,  $0 and $55,000,
      respectively.

   i. INCOME TAXES - The Company files a consolidated federal income tax return
      and a combined California tax return.  Deferred income taxes are provided
      for temporary differences between the financial reporting basis and the
      tax basis of the Company's assets and liabilities in accordance with
      Statement of Financial Accounting Standards No. 109.

   j. NET INCOME (LOSS) PER SHARE - In February 1997, the Financial Accounting
      Standards Board ("FASB") issued SFAS No. 128, "Earnings Per Share",
      ("EPS").   SFAS No. 128 replaces the presentation of primary EPS with a
      presentation of basic EPS.  In addition, entities with complex capital
      structures are required to provide disclosure of diluted EPS.  Basic
      earnings (loss) per share is computed by dividing net income (loss)
      available to common stockholders by the weighted average number of common
      shares outstanding during the period. Diluted earnings (loss) per share
      is computed by dividing net income (loss) available to common
      stockholders by the weighted average common shares outstanding during the
      period plus potential common shares outstanding.  Diluted EPS reflects
      the potential dilution that could occur if securities or other contracts
      to issue common stock were exercised or converted into common stock or
      resulted in the issuance of common stock that then shared in the earnings
      of the Company.  Diluted loss per common share is equal to basic loss per
      common share at December 31, 1997 and 1995 because the effect of
      potentially dilutive securities under the stock option plans were
      antidilutive.

   k. STOCK-BASED COMPENSATION - The Company accounts for stock-based awards to
      employees using the intrinsic value method in accordance with APB No. 25,
      "Accounting for Stock Issued to Employees".

   l. NEW ACCOUNTING PRONOUNCEMENTS - In June 1997, the FASB issued SFAS No.
      130 , "Reporting of Comprehensive Income", which requires than an
      enterprise report, by major components and as a single total, the change
      in its net assets during the period from nonowner sources; and SFAS No.
      131, "Disclosures about Segments of an Enterprise and Related
      Information", which establishes annual and interim reporting standards
      for an enterprise's business segments and related disclosures about its
      products, services, geographic areas, and major customers.  Adoption of
      these statements will not impact the Company's consolidated financial
      position, results of operations or cash flows.

                                       56

<PAGE>

   m. RECLASSIFICATIONS -  Certain reclassifications have been made to prior
      year balances to conform to current year classifications.

2. INVESTMENT SECURITIES

    Investment securities are comprised of the following (In thousands):
<TABLE>
<CAPTION>
                                                             DECEMBER 31, 1997
                                           ------------------------------------------------------
                                                            GROSS         GROSS
                                           AMORTIZED     UNREALIZED     UNREALIZED         FAIR
                                              COST          GAINS         LOSSES          VALUE
     <S>                                    <C>               <C>          <C>           <C>
     AVAILABLE-FOR-SALE:
      U.S. Treasuries                        $ 2,007           $  5         $   -         $ 2,012
      U.S. Government agencies                17,431             91           (33)         17,489
      Mortgage-backed securities              11,541            142           (36)         11,647
      State and political subdivisions         5,441            183             -           5,624
      Equity securities                          214              -             -             214
                                           ---------        -------        ------         -------
                                             $36,634           $421         $ (69)        $36,986
                                           ---------        -------        ------         -------
                                           ---------        -------        ------         -------
<CAPTION>
                                                             DECEMBER 31, 1997
                                           ------------------------------------------------------
                                                            GROSS         GROSS
                                           AMORTIZED     UNREALIZED     UNREALIZED         FAIR
                                              COST          GAINS         LOSSES          VALUE
     <S>                                    <C>               <C>          <C>           <C>
     AVAILABLE-FOR-SALE:
      U.S. Treasuries                      $  2,020           $  10         $   -        $  2,030
      U.S. Government agencies               21,408              37           (62)         21,383
      Mortgage-backed securities              7,972              54           (78)          7,948
      State and political subdivisions        1,517              42              -          1,559
      Equity securities                         350               -              -            350
                                           ---------        -------        ------         -------
                                          $  33,267           $ 143         $(140)      $  33,270
                                           ---------        -------        ------         -------
                                           ---------        -------        ------         -------
</TABLE>


   There were no investment securities classified as held-to-maturity at
   December 31, 1997 or December 31, 1996.

                                             57

<PAGE>


Gross realized gains and losses on sales of available-for-sale securities in
1997, 1996 and 1995 are as follows (In thousands):

<TABLE>
<CAPTION>
                                                    YEAR ENDED DECEMBER 31
                                                    ----------------------
                                                    1997    1996     1995
<S>                                                <C>     <C>      <C>
Gross realized gains                                $ 21    $  -     $  3
Gross realized losses                                (40)      -      (28)
                                                    ----    ----     ----
                                                               -
  Net gain (loss)                                   $(19)   $  -     $(25)
                                                    ----    ----     ----
                                                    ----    ----     ----

</TABLE>

Actual maturities will differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without call or
prepayment penalties.  The amortized cost and fair value of debt securities
available for sale at December 31, 1997, by contractual maturity, are shown
below. (In thousands):

<TABLE>
<CAPTION>

                                                        DECEMBER 31, 1997
                                                      ----------------------
                                                       AMORTIZED      FAIR
                                                         COST         VALUE
<S>                                                   <C>          <C>
AVAILABLE-FOR-SALE:
  Due in one year or less                              $ 2,421      $ 2,426
  Due after one year through five years                 12,162       12,219
  Due after five years through ten years                 8,658        8,752
  Due after ten years                                   13,393       13,589
                                                       -------      -------
                                                       $36,634      $36,986
                                                       -------      -------
                                                       -------      -------

</TABLE>

At December 31, 1997 and 1996, investment securities with carrying values of
approximately $4,007,000 and $3,020,000 (market value of $4,011,000 and
$3,027,000, respectively), were pledged as collateral to secure public funds
and for other purposes as required by law or contract.

                                      58

<PAGE>

3. LOANS

   Loans are comprised of the following (In thousands):

<TABLE>
<CAPTION>
                                                    DECEMBER 31
                                     ----------------------------------------
                                             1997                  1996
                                                 PERCENT               PERCENT
                                                 OF TOTAL              OF TOTAL
                                       AMOUNT     LOANS      AMOUNT     LOANS
<S>                                  <C>         <C>        <C>        <C>
Commercial                           $ 75,487       58%     $ 55,149      54%
Real estate:
  Mortgage                             14,900       12%       13,260      13%
  Construction                         30,128       23%       23,640      24%
Consumer and other                      9,120        7%        8,778       9%
                                     --------               --------     ----
    Total loans                       129,635      100%      100,827     100%
                                     --------      ----     --------     ----
Less:
  Unearned discount                       623                    526
  Deferred loan fees                      363                    392
  Allowance for credit losses           2,219                  1,615
                                     --------               ---------
    Loans, net                        126,430                 98,294
Loans held-for-sale                         -                  1,476
                                     --------               ---------
    Total loans, net                 $126,430               $ 99,770
                                     --------               ---------
                                     --------               ---------
</TABLE>


The Company's business activity is with customers primarily located within
Fresno and Madera counties.  The Company grants real estate, commercial and
installment loans to these customers.  The Company's commercial portfolio is
highly diversified among industry groups within the Company's service area.
The Company's largest concentration of loans is in real estate mortgages and
real estate construction lending.  A significant portion of its customers'
ability to repay these loans is dependent upon the economic sectors of
residential real estate development and construction.  Generally, loans are
secured by various forms of collateral.  The loans are expected to be repaid
from income of the borrower or with proceeds from the sale of assets securing
the loans.  The Company's loan policy requires sufficient collateral to meet
the Company's relative risk criteria for each borrower. The Company's
collateral mainly consists of real estate, cash, accounts receivable,
inventory and other financial instruments.  The Company either maintains
possession of the collateral in safekeeping or perfects a security interest
with the State of California.

                                     59

<PAGE>

At December 31, 1997 and 1996, the following information related to
nonperforming assets. (In thousands, except percentages)

<TABLE>
<CAPTION>
                                                              DECEMBER 31,
                                                         ----------------------
<S>                                                      <C>           <C>
                                                           1997          1996
 Nonperforming Assets:
 Nonaccrual RSC loans                                    $  1,138      $  3,250
 Nonaccrual Bank loans                                        598            51
                                                         ----------------------
 Nonperforming loans                                        1,736         3,301
 Other real estate owned                                      503           437
                                                         ----------------------
 Total nonperforming assets                              $  2,239      $  3,738
                                                         ----------------------
                                                         ----------------------

 Total loans before allowance for losses                 $129,635      $102,303
 Total assets                                             198,241       181,058
 Allowance for possible credit losses                      (2,219)       (1,615)
                                                         ----------------------
 Ratios:
 Nonperforming loans to total loans                         1.34%         3.23%
 Nonperforming loans to total loans
  (excluding RSC loans)                                      .46%          .05%
 Nonperforming assets to:
  Total loans                                               1.73%         3.65%
  Total loans and OREO                                      1.73%         3.64%
  Total assets                                              1.13%         2.06%
 Allowance for possible credit losses to total
  nonperforming assets                                     99.11%        43.20%
                                                         ----------------------
</TABLE>

The gross interest income that would have been recorded for loans placed on
nonaccrual status was $254,000, $276,000 and $82,000 for the years ended
December 31, 1997, 1996 and 1995, respectively.  Other real estate owned was
$503,000 at December 31, 1997 compared to $437,000 at December 31, 1996.
There were no troubled debt restructured loans as defined in Statement of
Financial Accounting Standards No. 15 at December 31, 1997.

The Company is not aware of any potential problem loans, which were accruing
interest at December 31, 1997, where serious doubt exists as to the ability
of the borrower to comply with present repayment terms.

The Company does not believe there to be any concentration of loans in
excess of 10% of total loans which are not disclosed above which would cause
them to be significantly impacted by economic or other conditions.



                                      60

<PAGE>


At December 31, 1997 and 1996, the following information related to impaired
loans under SFAS 114 was included in the total loan balance (In thousands):

<TABLE>
<CAPTION>
                                                              DECEMBER 31,
                                                        ----------------------
                                                          1997         1996
<S>                                                     <C>          <C>
Total impaired loans                                     $1,410        $242

Impaired loans without specified SFAS 114
  allowance for credit losses                               598         129
                                                         ------        ----
Impaired loans with specific SFAS 114
  allowance for credit losses                            $  812        $113
                                                         ------        ----
                                                         ------        ----
Specific allowance for credit losses on impaired loans   $  194        $ 89
                                                         ------        ----
                                                         ------        ----
</TABLE>

Average impaired loans were $689,000 and $188,000 for December 31, 1997 and
1996, respectively.  The Company uses the cash basis method of income
recognition for impaired loans.  For the years ended December 31, 1997 and
1996, the Company did not recognize any income on such loans.

An analysis of the changes in the allowance for credit losses is as follows
(In thousands):

<TABLE>
<CAPTION>
                                                              YEAR ENDED DECEMBER 31
                                                         -------------------------------
                                                           1997         1996       1995
<S>                                                      <C>          <C>        <C>
  Balance, beginning of the year                          $1,615       $1,784     $1,541
  Provision charged to operations                          1,353            -        470
  Losses charged to the allowance                           (895)        (258)      (265)
  Recoveries of amounts charged off                          146           89         38
                                                          ------       ------     ------
  Balance, end of the year                                $2,219       $1,615     $1,784
                                                          ------       ------     ------
                                                          ------       ------     ------
</TABLE>

Included in commercial loans are SBA loans with unguaranteed balances of
$18,567,000 and $13,084,042  at December 31, 1997 and 1996, respectively.
The activity in the asset accounts related to the servicing spread retained
on SBA guaranteed loan sales for the three years ended December 31, 1997,
1996 and 1995 is summarized as follows:

<TABLE>
<CAPTION>
                                                                     1997             1996          1995
                                                          -------------------------------------------------
                                                           SERVICING
                                                            ASSETS      IO STRIPS
<S>                                                       <C>          <C>          <C>           <C>
     Balance, beginning of the year                        $ 595          $  -        $290          $122
     SFAS 125 reclassification                              (143)          143           -             -
     Servicing assets and IO strips recognized
       on SBA loans sold                                      61            13         396           195
     Amortization                                           (126)          (19)        (91)          (27)
                                                           ------         ----        ----          ----
     Balance, end of the year                              $ 387          $137        $595          $290
                                                           ------         ----        ----          ----
                                                           ------         ----        ----          ----
</TABLE>

                                      61

<PAGE>



In the ordinary course of business, the Company enters into various types of
transactions which involve financial instruments with off-balance sheet
risk.  These instruments include commitments to extend credit and standby
letters of credit which are not reflected in the accompanying balance
sheets.  These transactions may involve, to varying degrees, liquidity,
credit and interest rate risk in excess of the amount, if any, recognized in
the balance sheets.  The Company's off-balance sheet credit risk exposure is
the contractual amount of commitments to extend credit and standby letters
of credit.  The Company applies the same credit standards to these contracts
as it uses in its lending process.

<TABLE>
<CAPTION>
                                                             DECEMBER 31,
                                                       -------------------------
                                                           1997         1996
<S>                                                     <C>           <C>
Financial instruments whose contractual
  amount may represent additional risk
  if funded (In thousands):
    Commitments to extend credit                         $44,139       $57,927
    Standby letters of credit                            $   795       $ 1,267
</TABLE>





Commitments to extend credit are agreements to lend to customers.  These
commitments have specified interest rates and generally have fixed
expiration dates but may be terminated by the Company if certain conditions
of the contract are violated.  Many of these commitments are expected to
expire or terminate without funding.  Therefore, the total commitment
amounts do not necessarily represent future cash requirements.  Collateral
relating to these commitments varies, but may include cash, securities and
real estate.

Standby letters of credit are conditional commitments issued by the Company
to guarantee the performance of a customer to a third party.  Credit risk
arises in these transactions from the possibility that a customer may not be
able to repay the Company upon default of performance.  Collateral held for
standby letters of credit is based on an individual evaluation of each
customers' credit worthiness, but may include cash, securities or other
guarantees.

4. REAL ESTATE ACTIVITIES

Regency Service Corporation is involved in residential real estate
development in the Fresno/Clovis area through both limited partnership
investments and direct investments in real estate projects.  These real
estate activities consist of residential subdivisions being developed into
lots and homes.  Limited partnership investments are accounted for under the
equity method.  Gains on sales of limited partnership properties are
recognized on the accrual method and are allocated between the partners
based on the provisions of the partnership agreements.


                                      62
<PAGE>

In 1996, RSC dissolved six limited partnerships and acquired their assets
and liabilities.  Accordingly, the accompanying consolidated financial
statements include the total assets and liabilities of these six dissolved
partnerships from the date of acquisition.  The condensed financial
information of the acquired entities as of the acquisition dates were as
follows (In thousands):

<TABLE>
<S>                                                     <C>
Assets:
  Cash                                                  $   804
  Notes receivable                                        2,205
  Land and real estate under construction                15,898
  Other residential property                                  -
  Other assets                                              227
                                                        -------
           Total assets                                  19,134

Liabilities:
  Notes payable                                           8,614
  Accrued interest and other liabilities                    714
                                                        -------
          Total liabilities                               9,328
                                                        -------
Equity                                                  $ 9,806
                                                        -------
                                                        -------
</TABLE>








                                      63


<PAGE>


At December 31, 1996, the Company's consolidated financial statements
included $4,976,000 in notes payable from debt incurred as a result of the
acquisition of former limited partnerships.  In 1997 the notes payable were
paid in full.

Included in the investments in real estate balances are acquisition,
development and construction loans held by the Bank totaling $271,000 and
$209,000 at December 31, 1997 and 1996, respectively.  The remaining
investments in real estate balances of $4,067,000 and $16,280,000 represent
RSC's investments in real estate at December 31, 1997 and 1996.

Condensed financial information relative to RSC included in the Company's
consolidated financial statements at December 31, 1997 and 1996,
respectively, is as follows (In thousands):


<TABLE>
<CAPTION>
                                                              DECEMBER 31
                                                         ---------------------
                                                            1997        1996
                                                         --------    ---------
<S>                                                      <C>         <C>
Financial position:
  Investments in real estate:
    Real estate held for sale                             $ 4,420     $15,520
    Equity in partnerships                                    702       2,070
                                                          -------     -------
           Investment in real estate before allowance       5,122      17,590
    Allowance for real estate losses                       (1,055)     (1,310)
                                                          -------     -------
           Investment in real estate                        4,067      16,280

Loans to real estate partnerships and projects              1,768       3,988
    Allowance for loan losses                                (364)       (110)
                                                          -------     -------
           Net loans                                        1,404       3,878

Other assets                                                2,524       1,733

Liabilities                                                  (144)     (6,219)
                                                          -------     -------

Bank's investment in RSC                                  $ 7,851     $15,672
                                                          -------     -------
                                                          -------     -------
</TABLE>



                                       64


<PAGE>

<TABLE>
<CAPTION>
                                                              YEAR ENDED DECEMBER 31
                                                        -----------------------------------
                                                         1997          1996           1995
                                                        ------        ------         ------
<S>                                                     <C>          <C>           <C>
Summary of loss:
  Income (loss) from partnerships accounted for on
    the equity method (before amortization of
    capitalized interest and eliminating entries of
    $0 in 1997, $0 in 1996 and $368 in 1995              $  (436)     $   151       $    32
  Loss from direct investments in real estate             (3,565)        (583)         (348)
  Provision for real estate losses                             -            -        (2,798)
  Provision for loan losses                                 (855)           -          (110)
                                                         -------      -------       -------
             Net loss from real estate projects           (4,856)        (432)       (3,224)

  Other income                                               102          249            85
  Other expenses                                            (966)      (1,316)         (875)
                                                         -------      -------       -------

           Total loss from RSC (excluding
             income tax benefits)                        $(5,720)     $(1,499)      $(4,014)
                                                         -------      -------       -------
                                                         -------      -------       -------
</TABLE>

During 1997, the Company accelerated the disposition of RSC's real estate
holdings.  Based upon the Company's decision to pursue the bulk sale of
several projects, as well as discounting other holdings to reflect RSC's
current anticipated sales proceeds, several properties were written down to
their estimated net realizable value.  The amount of the writedown in 1997
was $2,342,000.

Condensed unaudited financial information relative to investments in real
estate limited partnerships accounted for under the equity method, before
eliminations, are as follows (In thousands):


<TABLE>
<CAPTION>

                                                              DECEMBER 31
                                                         --------------------
                                                            1997        1996
                                                         --------     -------
<S>                                                      <C>          <C>
Assets:
  Real estate                                             $2,755       $6,883
  Other assets                                               657        1,412
                                                          ------       ------
           Total                                          $3,412       $8,295
                                                          ------       ------
                                                          ------       ------
Liabilities and Equity:
  Liabilities (primarily third-party debt)                $1,895       $4,967
  RSC's equity (before write down of $213 in 1997)           915        2,070
  Others' equity                                             602        1,258
                                                          ------       ------
           Total                                          $3,412       $8,295
                                                          ------       ------
                                                          ------       ------
</TABLE>


                                        65


<PAGE>

<TABLE>
<CAPTION>
                                                           YEAR ENDED DECEMBER 31,
                                                    --------------------------------------
                                                      1997           1996           1995
                                                    --------      ---------      ---------
<S>                                                 <C>           <C>            <C>
Summary of partnerships' income (loss):
  Sales of real estate                               $ 9,493       $ 11,930       $ 28,896
  Cost of sales and expenses                          (9,930)       (11,635)       (29,128)
                                                     -------       --------       --------

           Net income (loss)                         $  (437)      $    295       $   (232)
                                                     -------       --------       --------
                                                     -------       --------       --------

RSC's share of net income (loss) in limited
  partnerships                                       $  (223)      $    151       $     32
Write down of RSC's investment  in limited
  partnerships                                          (213)             -              -
                                                     -------       --------       --------

           Total                                     $  (436)      $    151       $     32

Increases (decreases) to RSC's share of
  net income:
    Amortization of capitalized interest                   -              -           (368)
    Loss from direct investments in real estate       (3,565)          (583)          (348)
    Provision to reduce partnerships' carrying
      value of land and real estate under
      development                                          -              -         (2,798)
    Other                                                 28             81             41
                                                     -------       --------       --------

          Total                                       (3,537)          (502)        (3,473)
                                                     -------       --------       --------

Loss from investments in real estate                 $(3,973)      $   (351)      $ (3,441)
                                                     -------       --------       --------
                                                     -------       --------       --------
</TABLE>


The FDIC has adopted final regulations under the Federal Deposit Insurance
Corporation Improvement Act of 1991 regarding real estate investment and
development activities of insured state banks and their majority-owned
subsidiaries.

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

In December 1996, the FDIC, responding to the Bank's request, granted the
Bank and RSC a two year extension, until December 31, 1998, to continue its
divestiture activities.  Management believes they will be in full compliance
with the FDIC mandated divestiture by December 1998.


                                       66


<PAGE>


5. PREMISES AND EQUIPMENT

   Bank premises and equipment consists of the following (In thousands):

<TABLE>
<CAPTION>
                                                                DECEMBER 31
                                                            --------------------
                                                              1997         1996
                                                            -------      --------
   <S>                                                     <C>          <C>
   Land                                                     $     -      $     -
   Buildings                                                    250          245
   Leasehold improvements                                     1,253        1,253
   Furniture and equipment                                    3,465        3,421
                                                            -------      -------
                                                              4,968        4,919
   Accumulated depreciation and amortization                 (3,217)      (2,658)
                                                            -------      -------
           Total premises and equipment                     $ 1,751      $ 2,261
                                                            -------      -------
                                                            -------      -------
</TABLE>


6. DEPOSITS

   Deposits are comprised of the following (In thousands):

<TABLE>
<CAPTION>                                                      DECEMBER 31
                                                         ---------------------
                                                            1997         1996
                                                         ---------    ---------
<S>                                                      <C>          <C>
   Noninterest bearing deposits                           $ 46,744     $ 36,613
   Interest bearing deposits:
     NOW and money market accounts                          48,616       47,851
     Savings accounts                                       36,498       25,540
     Time deposits:
       Under $100,000                                       15,778       19,032
       $100,000 and over                                    28,643       30,766
                                                          --------     --------
              Total interest bearing deposits              129,535      123,189
                                                          --------     --------
              Total deposits                              $176,279     $159,802
                                                          --------     --------
                                                          --------     --------
</TABLE>



   At December 31, 1997, time deposits of $100,000 or more include
   approximately $17,846,000 maturing in 3 months or less, $8,957,000 maturing
   in 3 to 12 months and $1,840,000 maturing after 12 months.

   At December 31, 1997, the scheduled maturities of all certificates of
   deposits and other time deposits are as follows (In thousands):

<TABLE>
<CAPTION>
                                    DECEMBER 31, 1997
                            ------------------------------------
                            <S>                        <C>
                            1998                        $40,568
                            1999                          2,369
                            2000                            582
                            2001                            806
                            2002 and thereafter              96
                                                        -------
                                                        $44,421
                                                        -------
                                                        -------
</TABLE>
                                          67

<PAGE>

7. SHORT-TERM BORROWINGS, LEASE COMMITMENTS, AND CONTINGENCIES

   At December 31, 1997 and 1996, the Company had no federal funds purchased or
   securities sold under repurchase agreements outstanding.

   At December 31, 1997, the Company had unsecured federal funds lines of
   credit available providing for short-term borrowings up to an aggregate of
   $5,000,000.  Borrowings under federal funds lines are generally on an
   overnight basis with interest rates determined by market conditions.
   Interest rates ranged between 5.125% and 5.625% at December 31, 1997.  The
   agreements are subject to annual renewal.  Information concerning federal
   funds lines is summarized as follows (In thousands):

<TABLE>
<CAPTION>
                                                                     DECEMBER 31
                                                              ------------------------
                                                                  1997         1996
       <S>                                                    <C>          <C>

       Average balance during the year                         $       -    $      869
       Average interest rate during the year                           -         5.69%
       Maximum month-end balance during the year               $       -    $    3,500
</TABLE>


   In addition to its federal funds lines, the Company uses unpledged
   securities in its investment portfolio as a source of short-term liquidity
   by selling securities under repurchase agreements.  Securities sold under
   repurchase agreements generally mature within one to seven days from the
   transaction date.  Securities sold under repurchase agreements are delivered
   to broker dealers who arrange the transactions.  The broker dealers may
   sell, loan or otherwise dispose of such securities to other parties in the
   normal course of their operations and agree to resell to the Company
   substantially identical securities at the maturities of the agreements.
   There were no such outstanding agreements at December 31, 1997 and 1996.
   Information concerning securities sold under agreements to repurchase is
   summarized as follows (In thousands):


<TABLE>
<CAPTION>
                                                                     DECEMBER 31
                                                              -------------------------
                                                                  1997          1996
       <S>                                                    <C>          <C>

       Average balance during the year                         $       -    $      617
       Average interest rate during the year                           -         5.79%
       Maximum month-end balance during the year               $       -    $    4,954
</TABLE>

   The Company leases land and a building under a lease agreement having an
   initial term of approximately 30 years.  The lease is accounted for as an
   operating lease for the land and a capital lease for the building.

   During 1995, the Company entered into a sale-leaseback of its corporate
   headquarters.  The leaseback is accounted for as an operating lease with a
   term of 15 years.  Additionally, the Bank has lease commitments related to
   certain other properties which are accounted for as operating leases.  Rent
   expense under all operating lease agreements was $528,000, $540,000 and
   $273,000 for the years ended December 31, 1997, 1996 and 1995, respectively.

                                      68

<PAGE>

   At December 31, 1997, the aggregate minimum future lease commitments under
   capital leases and noncancelable operating leases with terms of one year or
   more consist of the following (In thousands):

<TABLE>
<CAPTION>
                                                        CAPITAL    OPERATING
                                                         LEASES       LEASES
                                                     ------------------------
<S>                                                  <C>            <C>
       1998                                           $      48     $    516
       1999                                                  48          506
       2000                                                  76          477
       2001                                                  76          457
       2002                                                  76          456
       Thereafter                                         2,526        4,476
                                                      ---------    ---------
       Total minimum lease payments                       2,850     $  6,888
       Amount representing interest                      (2,341)   ---------
                                                      ---------    ---------

       Net present value of minimum lease payments    $    509
                                                      ---------
                                                      ---------
</TABLE>

   The Company is party to legal proceedings and claims which arise during the
   ordinary course of business.  In the opinion of management, the ultimate
   outcome of such litigation and claims will not have a material adverse
   effect on the Company's financial position or results of its operations.

8. INCOME TAXES

   Income tax expense (benefit) is summarized as follows (In thousands):

<TABLE>
<CAPTION>
                                          1997           1996         1995
       <S>                            <C>              <C>         <C>

       Current:
        Federal                       $  (358)         $ (149)     $   135
        State                             (47)             54           92
                                      -------         -------     --------
           Total current              $  (405)            (95)         227

       Deferred:
        Federal                          (280)            688       (1,634)
        State                            (148)            139          231
                                      -------         -------     --------
           Total deferred                (428)            827       (1,403)
                                      -------         -------     --------
                                      $  (833)         $  732      $(1,176)
                                      -------         -------     --------
                                      -------         -------     --------
</TABLE>

                                        69

<PAGE>

   A reconciliation of the statutory federal income tax rate with the effective
   tax rate is as follows:

<TABLE>
<CAPTION>
                                                  PERCENT OF PRE-TAX INCOME
                                                    YEAR ENDED DECEMBER 31
                                              1997            1996          1995
                                            --------------------------------------
<S>                                          <C>            <C>            <C>
       Statutory rate                        (35.0)%         35.0 %        (35.0)%
       State taxes, net of federal benefit    (6.1)%          7.3 %         (6.8)%
       Other, net                              1.6 %         (0.3)%          1.9 %
                                            -------         ------         ------
       Effective rate                        (39.5)%         42.0 %        (39.9)%
                                            -------         ------         ------
                                            -------         ------         ------
</TABLE>

   Income tax expense (benefit) related to unrealized investment security gains
   and losses were $(8,000), $0 and $(10,000) for the years ended December 31,
   1997, 1996 and 1995, respectively and were based on the effective tax rates
   for those years.

   The Company's net deferred tax asset (included in other assets) is comprised
   of the following (In thousands):

<TABLE>
<CAPTION>
                                                         DECEMBER 31
                                                  -----------------------
                                                     1997           1996
          <S>                                      <C>          <C>

          Deferred tax assets:
           Bad debt reserves                        $   871      $   519
           Lease financing                              150          132
           Deferred compensation                        340          313
           Nonaccrual loan interest                     259          143
           Gain on sale-leaseback                         -           21
           Allowance for real estate losses             802          606
           Other                                        231           83
                                                   --------     --------
               Total deferred tax assets              2,653        1,817
                                                   --------     --------

          Deferred tax liabilities:
           State taxes                                 (205)        (141)
           Depreciation                                 (32)         (92)
           Unrealized investment gains                 (148)          (1)
           Other                                       (610)        (206)
                                                   --------     --------

               Total deferred tax liabilities          (995)        (440)
                                                   --------     --------
               Net deferred tax asset               $ 1,658      $ 1,377
                                                   --------     --------
                                                   --------     --------
</TABLE>

    The Company's net deferred tax asset is expected to be fully recognized.
    Accordingly, for the years ended December 31, 1997 and 1996 no valuation
    allowance related to the net deferred tax asset was considered necessary.

                               70

<PAGE>

9. EMPLOYEE BENEFIT PLANS

   STOCK OPTION PLAN - The Company has reserved 545,448 shares of its common
   stock for issuance under its amended 1990 stock option plan.  Options
   granted under the plan may either be immediately exercisable for the full
   number of shares granted thereunder or may become exercisable in cumulative
   increments over a period of months or years as determined by the
   Compensation Committee of the Board of Directors but, in no event less than
   20% of the shares subject to the option per year during the five years from
   the date of grant.  All options are granted at prices not less than 100% of
   the fair value of the stock at the date of grant.

   A summary of stock option activity follows:

<TABLE>
<CAPTION>
                                                                                WEIGHTED
                                                                NUMBER           AVERAGE
                                                              OF SHARES    EXERCISE PRICE
                                                            -----------   ---------------
<S>                                                         <S>                 <S>
       OUTSTANDING, JANUARY 1, 1995                             164,872             $4.91
                                                            -----------
         Options exercised                                       (3,500)            $5.33
         Effect of 5% stock dividend                              8,066             $4.67
         Options exercised                                      (47,724)            $5.58
                                                            -----------
       OUTSTANDING, DECEMBER 31, 1995
         (121,714 exercisable at a weighted average
          price of $4.31)                                       121,714             $4.31
                                                            -----------
         Options granted (weighted average fair value
          of $9.23)                                             167,000             $9.23
                                                            -----------
       OUTSTANDING, DECEMBER 31, 1996                           288,714             $7.15
                                                            -----------
       (150,964 exercisable at a weighted average
       price of $5.21)

       Options exercised                                        (17,387)            $4.31

       Options expired                                          (12,500)            $9.49
                                                            -----------
       OUTSTANDING, DECEMBER 31, 1997                           258,827             $7.23
                                                            -----------
       (173,577 exercisable at a weighted average
       price of $6.20)
</TABLE>

    At December 31, 1997 and 1996, 190,994 and 178,494 shares were available
   for grant, respectively.

                                        71

<PAGE>

   Additional information regarding options outstanding as of December 31, 1997
   is as follows:

<TABLE>
<CAPTION>
                                     OPTIONS OUTSTANDING                   OPTIONS EXERCISABLE
     ----------------------------------------------------------------  ----------------------------
                                        WEIGHTED AVG.
                                          REMAINING
        RANGE OF            NUMBER       CONTRACTUAL    WEIGHTED AVG.     NUMBER      WEIGHTED AVG.
      EXERCISE PRICES    OUTSTANDING    LIFE & (YRS.)  EXERCISE PRICE   EXERCISABLE   EXERCISE PRICE
      <S>                  <C>            <C>            <C>            <C>            <C>

          $4.31             104,327        2.40 yrs.       $4.31         104,327          $4.31
          $8.94              94,500        8.96 yrs.       $8.94          57,250          $8.94
          $9.63              60,000        8.34 yrs.       $9.63          12,000          $9.63
     ----------------------------------------------------------------  ----------------------------
      $ 4.31 - $9.63        258,827        6.17 yrs        $7.23         173,577          $6.20
</TABLE>

   EMPLOYEE STOCK OWNERSHIP PLAN - The Company has an employee stock ownership
   plan covering substantially all full-time employees meeting certain
   requirements.  Contributions to the plan are discretionary as determined by
   the Board of Directors.  The employee stock ownership plan expense was
   $200,000, $173,500 and $156,000 for the years ended December 31, 1997, 1996
   and 1995, respectively.  The plan owned 161,239 and 138,466 shares of the
   Company's common stock at December 31, 1997 and 1996, respectively.

   ADDITIONAL STOCK PLAN INFORMATION - As discussed in Note 1, the Company
   continues to account for its stock-based awards using the intrinsic value
   method in accordance with APB No. 25, "Accounting for Stock Issued to
   Employees", and its related interpretations and no compensation expense has
   been recognized in the financial statements for employee stock arrangements.

   SFAS No. 123, "Accounting for Stock-Based Compensation", (SFAS 123) requires
   the disclosure of pro forma net income and earnings per share had the
   Company adopted the fair value method as of the beginning of fiscal 1995.
   Under SFAS No. 123, the fair value of stock-based awards to employees is
   calculated through the use of option pricing models, although such models
   were developed to estimate the fair value of freely tradable, fully
   transferable options without vesting restrictions, which significantly
   differ from the Company's stock option awards.  Such models also require
   subjective assumptions, including future stock price volatility and expected
   time to exercise, which greatly affect the calculated values.  The Company's
   calculations were made using a binomial option pricing model with the
   following weighted average assumptions:  expected life, 36 to 120 months:
   stock volatility, 20%; risk free interest rates, 6.10% to 6.50%; and
   quarterly dividends of 2.5% of earnings during the expected term.  The
   Company's calculations are based on a multiple option valuation approach and
   forfeitures are recognized as they occur.  There were no stock options
   granted in 1995 or 1997.  If the computed fair values of the 1996 awards had
   been amortized to expense over the vesting period of the awards, pro forma
   net loss would have been $(1,330,000), ($(0.71) basic and diluted earnings
   per share) in 1997 and pro forma net income would have been $959,000  ($0.53
   basic earnings per share; $0.51 diluted earnings per share)  in 1996.
   However, the impact of outstanding stock options granted prior to 1995 has
   been excluded from the pro forma calculation; accordingly, the 1997 and 1996
   pro forma adjustments are not indicative of future period pro forma
   adjustments, when the calculation will apply to all applicable stock
   options.

   OTHER PLANS - The Company has also established the Regency Bancorp Cash or
   Deferred Retirement Plan which qualifies under the Internal Revenue Code
   Section 401(k).  Employee contributions to the Plan may be matched by the
   Company at the discretion of the Board of Directors.  Employee contributions
   to the Plan are immediately vested while any matching

                                        72

<PAGE>

   contributions made by the Bank vest at different percentages based on
   years of service.  For the years ended December 31, 1997, 1996 and 1995,
   the Company contributed approximately $47,000, $27,100 and $38,000,
   respectively, to the Plan.

   The Company has a nonqualified Deferred Compensation Plan providing
   directors with the opportunity to participate in an unfunded, deferred
   compensation program.  Under the plan, directors may elect to defer some or
   all of their current compensation.  At December 31, 1997 and 1996, the total
   net deferrals included in other liabilities was approximately $515,000 and
   $518,000, respectively. In addition, in 1994, the Company established a
   salary continuation plan for three of the Bank's key executives which
   provides that upon retirement the Bank will continue to provide compensation
   to these executives for a period of 15 years.  Future compensation under the
   Plan is earned by the executives for services rendered through retirement
   and vests at a rate of 10% per year.  The Company accrues for the
   compensation based on anticipated years of service and the vesting schedule
   provided in the Plan.  At December 31, 1997 and 1996, $242,000 and $172,000,
   respectively, has been accrued.  In connection with the implementation of
   the Deferred Compensation and Salary Continuation Plans, single premium
   universal life insurance policies on the life of each participant were
   purchased by the Bank, which is beneficiary and owner of the policies.  The
   cash surrender value of the policies was $3,038,000 and $2,903,000 at
   December 31, 1997 and 1996.  The current annual tax-free interest rates on
   these policies range from 3.34% to 6.03%.  The assets of the Plan, under
   Internal Revenue Service regulations, are the property of the Company and
   are available to satisfy the Company's general creditors.

10. SHAREHOLDERS' EQUITY AND EARNINGS PER SHARE

    The following table provides a reconciliation of the numerator and
    denominator of the basic EPS computation with the numerator and
    denominator of the diluted EPS computation (In thousands, except
    per share data):

<TABLE>
<CAPTION>
                                                           1997            1996         1995
                                                       -------------------------------------
    <S>                                                <C>             <C>          <C>

    BASIC EPS COMPUTATION
      Net income (loss)                                $  (1,274)      $  1,008     $ (1,767)
      Average common shares outstanding                    1,860          1,818        1,805
                                                       -------------------------------------
    Basic EPS                                          $   (0.68)      $   0.55     $  (0.98)
                                                       -------------------------------------
                                                       -------------------------------------
    DILUTED EPS COMPUTATION
      Net income (loss)                                $  (1,274)      $  1,008     $ (1,767)
      Average common shares outstanding                    1,860          1,818        1,805
      Stock options (Anti dilutive in 1997 and 1995)                         54
                                                       -------------------------------------
                                                           1,860          1,872        1,805
                                                       -------------------------------------
    Diluted EPS                                        $   (0.68)      $   0.54     $  (0.98)
                                                       -------------------------------------
                                                       -------------------------------------
</TABLE>

   On December 31, 1997, the Company completed a private placement offering of
   750,000 new shares of its common stock.  The net proceeds of $5,927,000 were
   used to contribute capital to the Bank.  Warrants to purchase 26,211 shares
   of common stock at $9.90 and 150,000 shares of common stock at $10.00 per
   share were outstanding at December 31, 1997 but were not included in the
   computation of diluted EPS because the warrants exercise price was greater
   than the average market price of the common shares.  The warrants expire on
   January 1, 2003.  Options to purchase 60,000, 167,000, and 0 shares of
   common stock at various prices per share were outstanding at December 31,
   1997, 1996 and 1995, respectively but were not included in diluted EPS
   because the


                                      73


<PAGE>

options exercise price was greater than the average market price of the common
shares for the years then ended.

11. RELATED PARTY TRANSACTIONS

    Certain officers and directors of the Company and affiliates are customers
    of and have had other transactions with the Bank in the ordinary course of
    business.  In management's opinion, all loans and commitments included in
    such transactions were made on substantially the same terms, including
    interest rates and collateral, as those prevailing at the time for
    comparable transactions with other persons and did not involve more than
    normal risk of collectibility or present other unfavorable features.
    Changes in loans outstanding to directors, officers and affiliates were as
    follows (In thousands):

<TABLE>
<CAPTION>

                                                         YEAR ENDED    YEAR ENDED
                                                         DECEMBER 31   DECEMBER 31
                                                            1997          1996

<S>                                                       <C>          <C>
Balance, beginning of year                                $  998       $ 1,042
New loans                                                     87           367
Payments                                                    (576)         (411)
                                                          ---------    -----------
Balance, end of year                                      $  509       $   998
                                                          ---------    -----------
                                                          ---------    -----------
</TABLE>

    Gary L. McDonald, a former director of the Company, owns Gary L. McDonald
    Real Estate and Development Inc., ("GLMRED").  During 1996, GLMRED was
    retained by RSC to manage the real estate projects in which RSC has an
    investment.  Prior  to 1996, Mr. McDonald through Peachwood Park
    ("Peachwood"), a California Limited Partnership in which McDonald
    Construction Inc. is the sole general partner, was retained by RSC to manage
    the real estate projects in which RSC had made an investment.  In 1997, 1996
    and 1995, the Company paid approximately $120,000, $488,000 and $243,000 to
    GLMRED and Peachwood respectively for these services.  In April 1997, the
    Company issued a press release which stated that Gary McDonald, a founding
    member of the board of Regency Bank and its parent holding company, Regency
    Bancorp, announced his decision to not stand for re-election and leave the
    board of both companies effective May 13, 1997.  Subsequent to year end
    1997, RSC completed the sale of  33 residential lots to GLMRED for an amount
    that approximated the adjusted book value of approximately $1.2 million
    under terms and conditions substantially the same as those of previous
    comparable RSC transactions, including the partial financing of the sale
    through a loan from RSC that is subordinate to GLMRED's primary financing on
    the property.

    The Company's Vice Chairman, David N. Price, administers the Company's
    401(k) and ESOP plans.  In 1997, 1996 and 1995, the Company paid
    approximately $19,000, $18,000 and $15,400, respectively, for these
    services.

12. FINANCIAL INSTRUMENTS FAIR VALUE DISCLOSURE

    The following summary disclosures are made in accordance with the provisions
    of SFAS No. 107, "Disclosures About Fair Value of Financial Instruments",
    which requires the disclosure of fair value information about both on- and
    off- balance sheet financial instruments where it is practical to estimate
    that value.  Fair value is defined in SFAS No. 107 as the amount at which an
    instrument could be exchanged in a current transaction between willing
    parties, other than in a forced or liquidation sale.  It is not the
    Company's intent to enter into such exchanges.

                                      74

<PAGE>

    In cases where quoted market prices were not available, fair values were
    estimated using present value or other valuation methods, as described
    below.  The use of different assumptions (e.g., discount rates and cash flow
    estimates) and estimation methods could have a significant effect on fair
    value amounts.  Accordingly, the estimates presented herein are not
    necessarily indicative of the amounts the Company could realize in a current
    market exchange.  Because SFAS No. 107 excludes certain financial
    instruments and all non-financial instruments from its disclosure
    requirements, any aggregation of the fair value amounts presented would not
    represent the underlying value of the Company.

<TABLE>
<CAPTION>

                                                            DECEMBER 31, 1997              DECEMBER 31, 1996
                                                      ----------------------------   --------------------------
                                                        CARRYING       ESTIMATED      CARRYING      ESTIMATED
                                                        AMOUNT         FAIR VALUE     AMOUNT        FAIR VALUE
                                                            (IN THOUSANDS)               (IN THOUSANDS)
<S>                                                     <C>            <C>            <C>           <C>
Assets:
  Cash and cash equivalents                             $  19,893      $  19,893      $  19,833     $  19,833
  Investment securities                                    36,986         36,986         33,270        33,270
  Loans, net                                              126,430        127,730         99,770       101,744
  Servicing asset                                             507            507            595           595
  Interest only strip                                         417            426              -             -

Liabilities:
  Deposits                                                176,279        176,190        159,802       159,578
  Notes payable and capital lease
    obligation                                                509            509          5,452         5,326

Commitments to extend credit                                    -              -              -             -

</TABLE>


    The following methods and assumptions were used in estimating the fair
    values of financial instruments:

    CASH AND DUE FROM BANKS - The carrying amounts reported in the balance
    sheets for cash and cash equivalents approximate their estimated fair
    values.

    INVESTMENT SECURITIES - Fair values for investment securities, including
    mortgage-backed securities, are based on quoted market prices.

    LOANS - Fair values of variable rate loans which reprice frequently and with
    no significant change in credit risk are discounted to their next repricing
    date.  Fair values for all other loans are estimated using discounted cash
    flow analyses over their remaining maturities, using a build-up approach
    which views the discount rate as consisting of the risk-free rate, credit
    quality, operating expense and prepayment option price.

    SERVICING ASSET AND INTEREST ONLY STRIP - The servicing asset and interest
    only strip related to the sale of SBA loans are valued at the estimated
    current rate paid by the market for SBA servicing assets and interest only
    strips at December 31, 1997.

    DEPOSITS - Fair values for transactions and savings accounts are equal to
    the respective amounts payable on demand at December 31, 1997 and 1996
    (i.e., carrying amounts).  Fair values of fixed-maturity certificates of
    deposit were estimated using discounted cash flows over their remaining
    maturities, using a build-up approach as discussed above with no component
    assigned for credit quality.

                                      75

<PAGE>

    NOTES - Fair values of notes payable were estimated using discounted cash
    flows over their remaining maturities using a build-up approach consisting
    of the risk free rate and operating expense components.

    COMMITMENTS TO EXTEND CREDIT - Fair values of commitments to extend credit
    are estimated using the fees currently charged to enter into similar
    agreements, taking into account the remaining terms of the agreements and
    the present counterparties' credit standing.  Fair values of standby letters
    of credit are based on fees currently charged for similar agreements.  There
    was no material difference between the carrying amount and the estimated
    value of commitments to extend credit at December 31, 1997 and 1996.

13. REGULATORY MATTERS

    CAPITAL GUIDELINES - The Company and Bank are subject to various regulatory
    capital requirements administered by the federal banking agencies.  Failure
    to meet minimum capital requirements can initiate certain mandatory and
    possible additional discretionary actions by regulators that, if undertaken,
    could have a material direct effect on the Company's financial statements.
    Capital adequacy guidelines for the Company and the Bank and the regulatory
    framework for prompt corrective action for the Bank require that the Company
    and Bank meet specific capital guidelines that involve quantitative measures
    of the Company's and the Bank's assets, liabilities, and certain off-
    balance-sheet items as calculated under regulatory accounting practices. The
    Bank's capital classification as well as the Company's and the Bank's
    capital adequacy are also subject to qualitative judgments by the regulators
    about components, risk weightings, and other factors.

    Quantitative measures established by regulation to ensure capital adequacy
    require the Company and Bank to maintain minimum ratios (set forth in the
    table below) of total and Tier I capital (as defined in the regulations) to
    risk-weighted assets (as defined), and of Tier I capital to average assets
    (as defined).  As of December 31, 1997 and 1996, the Company and Bank meet
    all capital adequacy requirements to which  they are subject and management
    believes that, under the current regulations, both will continue to meet
    their minimum capital requirements in the foreseeable future.

                                      76

    <PAGE>

    As of  December 31, 1997 and 1996 respectively, the Bank's capital ratios
    are considered "Well Capitalized" and "Adequately Capitalized" under the
    regulatory framework for prompt corrective action.   The Company and Bank's
    actual capital amounts (in thousands) and ratios are also presented in the
    following table:

<TABLE>
<CAPTION>

                                                                                                                  TO BE WELL
                                                                                       FOR CAPITAL            CAPITALIZED UNDER
                                                                                        ADEQUACY              PROMPT CORRECTIVE
                                                            ACTUAL                      PURPOSES:             ACTION PROVISIONS:
                                                     -----------------------------------------------------------------------------
                                                      AMOUNT          RATIO      AMOUNT        RATIO      AMOUNT        RATIO
                                                     -----------------------------------------------------------------------------
   AS OF DECEMBER 31, 1997
   <S>                                                <C>             <C>        <C>           <C>        <C>           <C>
   Total Capital (to Risk Weighted Assets:)
     Company                                          $  18,779       13.87%     >=$10,828     >=8.00%           N/A
     Regency Bank                                     $  16,003       11.79%     >=$10,860     >=8.00%    >=$ 13,576   >=10.00%

   Tier 1 Capital (to Risk Weighted Assets):
     Company                                          $  17,081       12.62%     >=$ 5,414     >=4.00%           N/A
     Regency Bank                                     $  14,300       10.53%     >=$ 5,430     >=4.00%    >=$  8,145   >= 6.00%

   Tier 1 Capital (to Average Assets):
     Company                                          $  17,081        8.89%     >=$ 7,686     >=4.00%           N/A
     Regency Bank                                     $  14,300        7.46%     >=$ 7,663     >=4.00%    >=$  9,579   >= 5.00%



                                                                                                              TO BE ADEQUATELY
                                                                                       FOR CAPITAL            CAPITALIZED UNDER
                                                                                        ADEQUACY              PROMPT CORRECTIVE
                                                            ACTUAL                      PURPOSES:             ACTION PROVISIONS:
                                                     -----------------------------------------------------------------------------
                                                      AMOUNT          RATIO      AMOUNT        RATIO      AMOUNT        RATIO
                                                     -----------------------------------------------------------------------------
   AS OF DECEMBER 31, 1996
   <S>                                                <C>             <C>        <C>           <C>        <C>           <C>
   Total Capital (to Risk Weighted Assets:)
     Company                                          $14,306         10.21%     >=$11,207     >=8.00%           N/A
     Regency Bank                                     $13,944          9.97%     >=$11,193     >=8.00%    >=$11,193     >=8.00%

   Tier 1 Capital (to Risk Weighted Assets):
     Company                                          $12,691          9.06%     >=$ 5,604     >=4.00%           N/A
     Regency Bank                                     $12,329          8.81%     >=$ 5,596     >=4.00%    >=$ 5,596     >=4.00%

   Tier 1 Capital (to Average Assets):
     Company                                          $  12,691        7.66%     >=$ 6,630     >=4.00%           N/A
      Regency Bank                                    $  12,329        7.12%     >=$ 6,923     >=4.00%    >=$ 6,923     >=4.00%
</TABLE>


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

    The FDIC Order provides that the Bank must: (a) retain qualified management;
    (b) increase on or before December 31, 1997 and thereafter maintain Tier 1
    capital equal to the greater of $14,000,000 or the equivalent of a Tier 1
    capital to average assets ratio of at least 7.0%; (c) eliminate from its
    books classified assets not previously collected or charged off; (d) not
    extend additional credit to borrowers with previous classified or charged
    off credits which are uncollected; (e) not engage in any activities not
    permissible for a national bank subsidiary, except that the Bank and RSC may
    continue real estate activities as permitted by the FDIC's letter of
    November 29, 1996, to the Bank

                                      77

<PAGE>

    requiring, among other things, that RSC divest all properties held by it
    not later than December, 31, 1998;  (f) review the adequacy of the
    Bank's allowance for loan and lease losses and establish  a
    comprehensive policy for determining its adequacy on a quarterly basis;
    (g) develop a plan to control overhead and other expenses and restore
    the Bank to profitability; (h) prepare a business/strategic plan for the
    operation of the Bank acceptable to the FDIC; (i) not pay cash dividends
    in any amount except with the prior written consent of the FDIC and the
    Commissioner; and (j) furnish quarterly written progress reports to the
    FDIC and the Commissioner detailing the form and manner of any actions
    taken to comply with the Administrative Orders.

    As a result of an examination of the Bank as of June 30, 1997, the
    Department of Financial Institutions and the Bank have stipulated to the
    issuance of the State Order by the Department of Financial Institutions
    which State Order is a final order pursuant to Section 1913 of the
    California Financial Code.

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

    Management believes the Bank is in substantial compliance with the terms and
    conditions of the agreements as of December 31, 1997.

    DIVIDENDS - As indicated in Note 1, effective March 1, 1995, the Bank became
    a wholly-owned subsidiary of the Company.  Under California law,
    shareholders of the Company may receive dividends when and as declared by
    its Board of Directors out of funds legally available.  With certain
    exceptions, a California corporation may not pay a dividend to its
    shareholders unless its retained earnings equal at least the amount of the
    proposed dividend.  California law further provides that, in the event that
    sufficient retained earnings are not available for the proposed
    distribution, a corporation may nevertheless make a distribution to its
    shareholders if it meets the following two generally stated conditions:  (i)
    the corporation's assets equal at least 1 1/4 times its liabilities; and
    (ii) the corporation's current assets equal at least its current liabilities
    or, if the average of the corporation's earnings before taxes on income and
    before interest expense for the two preceding fiscal years was less than the
    average of the corporation's interest expense for such fiscal years, then
    the corporation's current assets must equal at least 1 1/4 times its current
    liabilities.

    The Company expects to receive substantially all of its income initially
    from dividends from the Bank and/or RIA.  Under California state banking
    law, the Bank may not pay cash dividends in an amount which exceeds the
    lesser of the retained earnings of the Bank or the Bank's net income for its
    last three fiscal years (less the amount of any distributions to
    shareholders made during that period).  If the above test is not met, cash
    dividends may only be paid with the prior approval of the California  State
    Department of Financial Institutions ("DFI"), in an amount not exceeding the
    Bank's net income for its last fiscal year or the amount of its net income
    for its current fiscal year.

                                      78

<PAGE>

    Accordingly, the future payment of cash dividends may depend on the Bank's
    earnings, its ability to meet capital requirements and/or the Company's
    ability to generate income from other sources.  At December 31, 1997,  based
    on the criteria set forth above, as well as certain agreements between the
    Bank and the DFI, additional dividends from the Bank to the parent company
    must be approved by the DFI.

    CASH RESTRICTION - The FDIC requires banks to maintain average reserve
    balances on deposits, consisting of vault cash and actual balances held by
    the Federal Reserve Bank of San Francisco.  The Bank's average FDIC reserve
    requirements were $1,683,000 and $1,261,000 in 1997 and 1996, respectively.
    The Bank maintained average balances of $1,815,000 and $1,629,000 in 1997
    and 1996, respectively.

14. SUPPLEMENTAL CASH FLOW INFORMATION

    Following is a summary of amounts paid for interest and taxes and of non-
    cash transactions for the years ended 1997, 1996 and 1995 (In thousands):

<TABLE>
<CAPTION>

                                                                FOR THE YEAR ENDED DECEMBER 31
                                                       -------------------------------------------
                                                            1997           1996           1995
<S>                                                      <C>            <C>            <C>
Cash paid during the period for:
  Interest on deposits and other borrowings              $  5,328       $  4,597       $  5,062
  Income taxes                                                  -            316             21

Noncash transactions:
  Transfer of loans to other real
    estate owned                                              390            218            232
  Stock dividend                                                -              -            866
Net assets acquired through acquisition of
    partnerships less cash received:
    Land and real estate under construction                     -          6,272          4,265
    Notes receivable                                            -          2,025              -
    Other residential property                                  -              -            291
    Other assets                                                -            227            342
    Notes payable                                               -          8,614          4,062
    Accrued interest and other liabilities                      -            714            560
  Loan made to finance sale of building                         -              -          2,150
  Deferred gain on sale of building                             -              -            264

</TABLE>

                                      79

<PAGE>

15. PARENT COMPANY ONLY FINANCIAL STATEMENTS

    As discussed in Note 1, Regency Bancorp was formed on March 1, 1995 to act
    as a holding company for Regency Bank and subsequently Regency Investment
    Advisors.  Following are the condensed balance sheets of Regency Bancorp at
    December 31, 1997, and 1996, and condensed statements of income and cash
    flow statements for the years ended December 31, 1997 and 1996, and for the
    period from March 1 to December 31, 1995 (In thousands):


<TABLE>
<CAPTION>

      BALANCE SHEETS
                                                              DECEMBER 31
                                                          -------------------
                                                           1997         1996
      <S>                                                 <C>         <C>
      ASSETS

      Cash and short-term investments                     $ 2,794     $   192
      Investment in bank subsidiary                        15,805      13,149
      Investment in investment subsidiary                     308           -
      Other assets                                            107         129
                                                          -------     -------
                                                                -           -
                 Total assets                             $19,014     $13,470
                                                          -------     -------
                                                          -------     -------

      LIABILITIES AND SHAREHOLDERS' EQUITY

      Other liabilities                                   $   280     $     -
                                                          -------     -------

           Total liabilities

      SHAREHOLDERS' EQUITY:
        Common stock                                       15,203       8,868
        Retained earnings                                   3,327       4,601
        Unrealized gain on securities                         204           1
                                                          -------     -------

            Total shareholders' equity                    18,734      13,470
                                                          -------     -------

            Total liabilities and shareholders' equity    $19,014     $13,470
                                                          -------     -------
                                                          -------     -------

</TABLE>


                                      80

<PAGE>

<TABLE>
<CAPTION>

      STATEMENTS OF INCOME
          (In thousands)                                        DECEMBER 31,
                                                      -----------------------------
                                                         1997      1996      1995
<S>                                                   <C>       <C>       <C>
      INCOME:
         Regency Bank income (loss)                    $(1,291)   $1,122   $(1,637)
         Regency Investment Advisors income                103         -         -
                                                       -------    ------   -------
            Total income                                (1,188)    1,122    (1,637)

      EXPENSES:
         Management fees to bank subsidiary                 66        66        55
         Other                                              79       133       167
                                                       -------    ------   -------
            Total expenses                                 145       199       222

      NET INCOME (LOSS) BEFORE INCOME TAXES             (1,333)      923    (1,859)

      INCOME TAX (BENEFIT)                                 (59)      (85)      (92)
                                                       -------    ------   -------

      NET INCOME (LOSS)                                $(1,274)   $1,008   $(1,767)
                                                       -------    ------   -------
                                                       -------    ------   -------

</TABLE>


                                      81

<PAGE>

<TABLE>
<CAPTION>

STATEMENTS OF CASH FLOWS
(In thousands)                                                                   DECEMBER 31,
                                                                        -----------------------------
                                                                           1997      1996      1995
<S>                                                                     <C>       <C>       <C>
OPERATING ACTIVITIES:
  Net income (loss)                                                      $(1,274)  $ 1,008   $(1,767)
  Adjustments to reconcile net income (loss) to net cash
    provided by operating activities:
      Equity in undistributed (income) losses of bank subsidiary           1,291    (1,122)    1,637
      Equity in undistributed (income) loss of Investment subsidiary        (103)        -         -
      Decrease (increase) in other assets                                     22       (11)       (6)
      Increase (decrease) in other liabilities                               281       (10)        9
                                                                         -------   -------   -------

           Net cash (used in) provided by operating activities               217      (135)     (127)

INVESTING ACTIVITIES:
  Capital contribution to subsidiary bank                                 (3,950)        -         -
  Capital distribution from subsidiary bank                                    -       491       750
                                                                         -------   -------   -------

   Net cash (used in) provided by investing activities                    (3,950)      491       750

FINANCING ACTIVITIES:
  Issuance of common stock                                                 5,927         -        31
  Cash dividends                                                               -      (437)     (266)
  Proceeds from the issuance of common stock under the
     employee stock option plan                                               75         -         -
  Proceeds from the issuance of common stock to
     employee stock ownership plan                                           333         -         -
  Payments on notes payable                                                    -         -      (150)
                                                                         -------   -------   -------

 Net cash (used in) provided by financing activities                       6,335      (437)     (385)
                                                                         -------   -------   -------

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                           2,602       (81)      238

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                               192       273        35
                                                                         -------   -------   -------

CASH AND CASH EQUIVALENTS AT END OF YEAR                                 $ 2,794   $   192   $   273
                                                                         -------   -------   -------
                                                                         -------   -------   -------

SUPPLEMENTAL CASH FLOW INFORMATION:
  Income taxes paid                                                      $     -   $     -   $   113
  Stock dividend                                                         $     -   $     -   $   866
  Transfer of Bank's equity in undistributed income
     in investment subsidiary to Regency Bancorp                         $   205   $     -   $     -

</TABLE>

                                  * * * * * *


                                      82


<PAGE>

Item 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
          ACCOUNTING AND FINANCIAL DISCLOSURE

          Not Applicable


                                  PART III


Item 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The information required by Item 10 of Form 10-K is incorporated by
reference to the information contained in the Company's definitive proxy
statement for the 1998 Annual Meeting of Shareholders which will be filed
pursuant to Regulation 14A.

Item 11.  EXECUTIVE COMPENSATION

     The information required by Item 11 of Form 10-K is incorporated by
reference to the information contained in the Company's definitive proxy
statement for the 1998 Annual Meeting of Shareholders which will be filed
pursuant to Regulation 14A.

Item 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information required by Item 12 of Form 10-K is incorporated by
reference to the information contained in the Company's definitive proxy
statement for the 1998 Annual Meeting of Shareholders which will be filed
pursuant to Regulation 14A.

Item 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information required by Item 13 of Form 10-K is incorporated by
reference to the information contained in the Company's definitive proxy
statement for the 1998 Annual Meeting of Shareholders which will be filed
pursuant to Regulation 14A.

                                      83

<PAGE>

                                      PART IV

Item 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM-8-K

     (a)  (1)  Financial Statements.  Listed and included in Part II, Item 8.

          (2)  Financial Statement Schedules.  Not Applicable.

          (3)  Exhibits.

          (2)  Plan of Reorganization and Merger Agreement dated July 21, 1994
               by and among Regency Bank, Regency Merger Corporation and Regency
               Bancorp, incorporated by reference from exhibit 2 of registration
               statement number 33-82150 on Form S-4, filed with the Commission
               on July 27, 1994.

        (3.1)  Articles of Incorporation dated June 9, 1994, incorporated by
               reference from exhibit 3.1 of registrant's Annual Report on Form
               10-K for the year ended December 31, 1994, filed with the
               Commission on February 27, 1995.

        (3.2)  Bylaws, as amended, incorporated by reference from exhibit 3.2
               of registrant's Annual Report on Form 10-K for the year ended
               December 31, 1994, filed with the Commission on February 27,
               1995.

        (4.1)  Specimen form of Regency Bancorp stock certificate incorporated
               by reference from exhibit 4.1 of registrant's Annual Report on
               Form 10-K for the year ended December 31, 1994, filed with the
               Commission on February 27, 1995.

      *(10.1)  401(k) Pension and Profit Sharing Plan, incorporated by reference
               from exhibit 10.3 of registration statement number 33-82150 on
               Form S-4, filed with the Commission on July 27, 1994.

      *(10.2)  Employee Stock Ownership Plan, incorporated by reference from
               exhibit 10.4 of registration statement number 33-82150 on Form
               S-4, filed with the Commission on July 27, 1994.

      *(10.3)  Directors Deferred Fee Plan, incorporated by reference from
               exhibit 10.5 of registration statement number 33-82150 on
               Form S-4, filed with the Commission on July 27, 1994.

      *(10.4)  Form of Directors Deferred Fees Agreement for Regency Bank,
               incorporated by reference  from exhibit 10.6 of registration
               statement number 33-82150 on Form S-4, filed with the Commission
               on July 27, 1994.

                                      84

<PAGE>

     (10.5)    Lease agreement dated December 22, 1988 for premises located at
               5240 N. Palm Avenue, Fresno, California, incorporated by
               reference from exhibit 10.10 of registration statement number
               33-82150 on Form S-4, filed with the Commission on July 27, 1994.

     (10.6)    Electronic Financial Services Agreement dated June 9, 1992,
               between Regency Bank and Fiserv, incorporated by reference from
               exhibit 10.12 of registration statement number 33-82150 on Form
               S-4, filed with the Commission on July 27, 1994.

     (10.7)    Comprehensive Banking System License and Service Agreement dated
               April 13, 1992, between Regency Bank and Fiserv, incorporated by
               reference from exhibit 10.13 of registration statement number
               33-82150 on Form S-4, filed with the Commission on July 27, 1994.

     (10.8)    Lease agreement dated February 20, 1995 for premises located at
               3501 Coffee Road, Suite 3, Modesto, California, incorporated by
               reference from exhibit 10.19 of registrant's Annual Report on
               Form 10-K for the year ended December 21, 1995, filed with the
               Commission on March 29, 1996.

     (10.9)    Lease agreement dated August 17, 1995 for premises located at
               7060 N. Fresno Street, Fresno, California, incorporated by
               reference from exhibit 10.21 of registrant's Annual Report on
               Form 10-K for the year ended December 21, 1995, filed with the
               Commission on March 29, 1996.

     (10.10)   Lease agreement dated December 14, 1995 for premises located at
               726 W. Shaw Avenue, Fresno, California., incorporated by
               reference from exhibit 10.23 of registrant's Annual Report on
               Form 10-K for the year ended December 21, 1995, filed with the
               Commission on March 29, 1996.

   * (10.11)   Form of Indemnification Agreement, incorporated by reference from
               exhibit 10.3 of registrant's Quarterly Report on Form 10-Q for
               the quarter ended June 30, 1996, filed with the Commission on
               August 2, 1996.

     (10.12)   Lease agreement dated May 13, 1996 for premises located at 126
               "D" Street, Madera, California, incorporated by reference from
               exhibit 10.4 of registrant's Quarterly Report on Form 10-Q for
               the quarter ended June 30, 1996, filed with the Commission on
               August 2, 1996.

     *(10.13)  Employment Agreement made and entered into as of August 22, 1996
               between Regency Bank, a California Corporation, and Steven F.
               Hertel, President/Chief Executive Officer, incorporated by
               reference from exhibit 10.2 of registrant's Quarterly Report on
               Form 10-Q/A-1 for the quarter ended  September 31, 1996, filed
               with the Commission on November 16, 1996.

                                      85

<PAGE>

     *(10.14)  Employment Agreement made and entered into as of August 22, 1996
               between Regency Bank, a California Corporation, and Steven R.
               Canfield, Executive Vice President/Chief Financial Officer
               incorporated by reference from exhibit 10.3 of registrant's
               Quarterly Report on Form 10-Q/A-1 for the quarter ended September
               31, 1996, filed with the Commission on November 16, 1996.

     *(10.15)  Employment Agreement made and entered into as of August 22, 1996
               between Regency Bank, a California Corporation, and Robert J.
               Longatti, Executive Vice President/Chief Credit Officer
               incorporated by reference from exhibit 10.4 of registrant's
               Quarterly Report on Form 10-Q/A-1 for the quarter ended
               September 31, 1996, filed with the Commission on November 16,
               1996.

     *(10.16)  Employment Agreement made and entered into as of August 22, 1996
               between Regency Bank, a California Corporation, and Regency
               Investment Advisors Incorporated, a California Corporation, and
               Alan R. Graas, President, Incorporated by reference from exhibit
               10.5 of registrant's Quarterly Report on Form 10-Q/A-1 for the
               quarter ended September 31, 1996, filed with the Commission on
               November 16, 1996.

     *(10.17)  Regency Bancorp 1990 Stock Option Plan, as amended, and Form of
               Nonstatatory Stock Option Agreement, Form of Incentive Stock
               Option Agreement and Form of Nonstatutory Stock Option Agreement
               for Outside Directors, under the Regency Bancorp 1990 Stock
               Option Plan, as amended, incorporated by reference on
               registration statement number 33-3848 on Form  S-8, filed with
               the Commission on April 19, 1996.

     *(10.18)  Incentive Stock Option Agreement entered into with Steven F.
               Hertel, dated December 16, 1996 incorporated by reference from
               exhibit 10.29 of registrant's Annual Report on Form 10-K for the
               year ended December 31, 1996, filed with the Commission on March
               31, 1997.

     *(10.19)  Incentive Stock Option Agreement entered into with Steven R.
               Canfield, dated December 16, 1996 incorporated by reference from
               exhibit 10.30 of registrant's Annual Report on Form 10-K for the
               year ended December 31, 1996, filed with the Commission on March
               31, 1997.

     *(10.20)  Incentive Stock Option Agreement entered into with Robert J.
               Longatti, dated December 16, 1996 incorporated by reference from
               exhibit 10.31 of registrant's Annual Report on Form 10-K for the
               year ended December 31, 1996, filed with the Commission on
               March 31, 1997.

     *(10.21)  Form of Director Deferred Fees Agreement for Regency Bancorp
               incorporated by reference from exhibit 10.32 of registrant's
               Annual Report on Form 10-K for the year ended December 31, 1996,
               filed with the Commission on March 31, 1997.

                                      86

<PAGE>

     *(10.22)  Form of Director Deferred Fees Agreement for Regency Service
               Corporation incorporated by reference from exhibit 10.33 of
               registrant's Annual Report on Form 10-K for the year ended
               December 31, 1996, filed with the Commission on March 31, 1997.

      (10.23)   Construction and Sales Agreement, dated March 31, 1997,
                incorporated by reference from exhibit 10.1 of registrant's
                Quarterly Report on Form 10-Q for the quarter ended March 31,
                1997, filed with the Commission on May 14, 1997.

     *(10.24)   Amended and Restated Executive Salary Continuation Agreement
                dated September 23, 1997, made by and between Regency Bank and
                Steven F. Hertel, incorporated by reference from exhibit 99.1
                of registrant's current report on Form 8-K, filed with the
                Commission on October 9, 1997.

     *(10.25)   Amended and Restated Executive Salary Continuation Agreement
                dated September 26, 1997, made by and between Regency Bank
                and Robert J. Longatti, incorporated by reference from exhibit
                99.2 of the Form 8-K, filed with the Commission on October 9,
                1997.

     *(10.26)   Amended and Restated Executive Salary Continuation Agreement
                dated September 30, 1997, made by and between Regency Bank
                and Steven R. Canfield, incorporated by reference from exhibit
                99.3 of the Form 8-K, filed with the Commission on October 9,
                1997.

      (10.27)   Stipulation and Consent to the Issuance of an Order to Cease
                and Desist and Order to Cease and Desist executed by the
                registrant and the FDIC, incorporated by reference from
                exhibit 99.1 of the Form 8-K, filed with the Commission on
                December 12, 1997.

      (10.28)   Waiver and Consent and Final Order, executed by the registrant
                and the  California Department of Financial Institutions,
                incorporated by reference from exhibit 99.2 of the Form 8-K,
                filed with the Commission on December 12, 1997.

      (10.29)   Form of Warrant Agreement and Warrant Certificate.

       (21.1)   The Company has two subsidiaries, Regency Bank (the "Bank"),
                a California banking corporation and Regency Investment Advisors
                ("RIA"), which provides investment management and consulting
                services.  The Bank has only one subsidiary, Regency Service
                Corporation, a California corporation ("RSC") which engages in
                the business of real estate development primarily in the
                Fresno/Clovis area.

       (23.1)   Consent of Deloitte & Touche LLP.

       (27.1)   Financial Data Schedule

                                      87

<PAGE>

     * Denotes management contracts, compensatory plans or arrangements.

         (b)  Reports on Form 8-K

          The Company filed a Form 8-K dated November 6, 1997, in which it
          reported its third quarter results of operations and consent to orders
          issued by the Federal Deposit Insurance Corporation and the California
          Department of Financial Institutions.


                                      88

<PAGE>

                                     SIGNATURES


Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.



                                       REGENCY BANCORP



Date: March 26, 1998                   By: /s/ STEVEN F. HERTEL
                                           -----------------------------------
                                           Steven F. Hertel
                                           President and Chief Executive Officer
                                           (Principal Executive Officer)



Date: March 26, 1998                   By: /s/ STEVEN R. CANFIELD
                                           -----------------------------------
                                           Steven R. Canfield
                                           Executive Vice President and
                                           Chief Financial Officer (Principal
                                           Financial and Accounting Officer)

                                      89

<PAGE>

Pursuant to the requirements of the Securities exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
         Name                 Date                  Title
         ----                 ----                  -----
<S>                      <C>                 <C>

/s/ STEVEN F. HERTEL     March  26, 1998     Director, Chairman of the Board,
-----------------------                      President & CEO
Steven F. Hertel

/s/ DAVID N. PRICE       March  26, 1998     Director and Vice Chairman
-----------------------
David N. Price

/s/ ROY JURA             March  26, 1998     Director and Secretary
-----------------------
Roy Jura

/s/ JOSEPH L. CASTANOS   March  26, 1998     Director
-----------------------
Joseph L. Castanos

/s/ WAYMON E. WATTS      March  26, 1998     Director
-----------------------
Waymon E. Watts

/s/ DANIEL R. SUCHY      March  26, 1998     Director
-----------------------
Daniel R. Suchy

/s/ BARBARA PALMQUIST    March  26, 1998     Director
-----------------------
Barbara Palmquist

/s/ DANIEL RAY           March  26, 1998     Director
-----------------------
Daniel Ray

/s/ WILLIAM J. ALESSINI  March  26, 1998     Director
-----------------------
William J. Alessini

/s/ WILLIAM  J. RUH      March  26, 1998     Director
-----------------------
William J. Ruh
</TABLE>

                                      90

<PAGE>

                                   EXHIBIT INDEX

<TABLE>
<CAPTION>
                                                                   Sequentially
Exhibit Number              Description                            Page Number
--------------              -----------                            ------------
<S>            <C>                                                 <C>
 10.29          Form of Warrant Agreement and Warrant Certificate.     90-102

 23.1           Consent of Deloitte & Touche LLP                        103

 27.1           Financial Data Schedule                                 104
</TABLE>


                                      91