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                                                                    EXHIBIT 10.3



                              EMPLOYMENT AGREEMENT

        Agreement made as of the first day of January, 2001, between THE BANK OF
HEMET with its administrative office at 3715 Sunnyside Drive, Riverside, CA
92506, hereinafter referred to as "EMPLOYER", and JAMES B. JAQUA, 440 Emerald
Bay, Laguna Beach, California 92651, hereinafter referred to as "EXECUTIVE".

                                   WITNESSETH

        WHEREAS, EMPLOYER is desirous of employing EXECUTIVE in the capacity
hereinafter stated, and EXECUTIVE is desirous of entering into the employ of
EMPLOYER in such capacity, for the period and on the terms and conditions set
forth herein;

        NOW, THEREFORE, in consideration of the promises and the mutual
covenants and conditions herein contained, the parties hereto, intending to be
legally bound, do hereby agree as follows:

        1.     EMPLOYMENT

               EMPLOYER hereby employs EXECUTIVE as President and Chief
               Executive Officer of EMPLOYER, and EXECUTIVE accepts the duties
               that are customarily performed by the President and Chief
               Executive Officer of a commercial bank in California, and accepts
               all other duties described herein, and agrees to discharge the
               same faithfully to the best of his ability and consistent with
               the customary standards of the banking industry, in accordance
               with the policies of the Board of Directors of EMPLOYER as
               established, and in compliance with all laws and EMPLOYER'S
               Articles of Incorporation and Bylaws. EXECUTIVE shall devote his
               full business time and attention to the business and affairs of
               EMPLOYER to which he may be elected or appointed and shall
               perform the duties thereof to the best of his ability. For the
               duration of this Agreement, EMPLOYER shall continue to nominate
               EXECUTIVE as a Director of EMPLOYER. In the event that EMPLOYER
               shall hire a new President and Chief Operating Officer of The
               Bank of Hemet, EMPLOYER and EXECUTIVE agree that EXECUTIVE shall
               assume the title of Chairman of the Board and Chief Executive
               Officer of The Bank of Hemet.

        2.     TERM


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               EMPLOYER hereby employs EXECUTIVE and EXECUTIVE hereby accepts
               employment with EMPLOYER for the period of three (3) years,
               hereinafter called the "TERM", commencing with the date of this
               Agreement, subject however, to prior termination of this
               Agreement as hereinafter provided. Where used herein, TERM shall
               refer to the entire three year period of employment of EXECUTIVE
               by EMPLOYER, whether for the period provided above, or whether
               terminated earlier as hereinafter provided, or extended by mutual
               agreement in writing by EMPLOYER and EXECUTIVE.

        3.     COMPENSATION

               In consideration for all services to be rendered by EXECUTIVE to
               EMPLOYER, EXECUTIVE'S base salary for 2001 shall be Two Hundred
               Thirty-Eight Thousand Three Hundred Dollars ($238,300).
               EXECUTIVE'S salary shall be paid semi-monthly as per the policy
               of EMPLOYER. EMPLOYER shall deduct from EXECUTIVE'S salary all
               taxes and withholding which may be required to be deducted or
               withheld under any provision of California law.

        4.     INCENTIVE COMPENSATION

               Immediately following each calendar year end throughout the term
               of this Agreement EXECUTIVE shall be given a performance
               evaluation by the Compensation Committee of EMPLOYER'S Board of
               Directors, which shall address his achievement of corporate
               goals, both quantitative and qualitative. Based upon this
               evaluation, the Committee shall make a decision concerning
               incentive compensation for EXECUTIVE. The granting of such
               compensation and the amount thereof shall be entirely
               discretionary on the part of the Committee and must be
               appropriate to the contribution and performance of EXECUTIVE and
               the performance of EMPLOYER as a whole. Such additional
               compensation, if any, shall be paid to EXECUTIVE no later than
               sixty (60) days after each year end, or thirty (30) days after
               release of EMPLOYER'S audited financial statements, whichever is
               later. If EXECUTIVE shall terminate employment prior to the
               termination of this Agreement, EXECUTIVE shall receive a pro-rata
               portion (based on the amount of time EXECUTIVE worked during the
               partial year, exclusive of any vacation or sick time) of the
               additional compensation, if any, provided in this paragraph.

        5.     REIMBURSEMENT

               EMPLOYER agrees to reimburse EXECUTIVE for all ordinary and
               necessary expenses incurred by EXECUTIVE on behalf of EMPLOYER,
               including entertainment, meals and


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               travel expenses. Any costs incurred by EXECUTIVE for conventions,
               meetings, and seminars will be reimbursed, as will special social
               entertainment expenses, provided the Board of Directors of
               EMPLOYER approves such. EXECUTIVE agrees to maintain and provide
               EMPLOYER with adequate records of expenses incurred in connection
               with any cost which EMPLOYER has agreed to provide reimbursement.
               EMPLOYER also agrees to pay the cost of an annual Executive
               Physical Examination at a location of EXECUTIVE'S choice.

        6.     INSURANCE

               EMPLOYER agrees to provide EXECUTIVE and his wife with such
               medical insurance benefits as are provided by the group insurance
               programs of EMPLOYER which are now or hereinafter be in effect.
               EMPLOYER may apply for a "Keyman" life insurance policy with
               EMPLOYER as beneficiary of the policy.

        7.     VACATION

               EXECUTIVE shall be entitled to five (5) weeks of vacation, two
               (2) weeks of which shall be consecutive, during each year of the
               TERM. EXECUTIVE shall not be entitled to vacation pay in lieu of
               vacation, and any vacation time not used shall be deemed waived.
               EMPLOYER may waive the provision with respect to unused vacation
               time.

        8.     TERMINATION

               EMPLOYER shall have the right to terminate this Employment
               Agreement for any of following reasons by serving written notice
               upon EXECUTIVE:


               (a)    Willful breach of, or acts amounting to gross negligence
                      with respect to, or willful misconduct in the performance
                      of EXECUTIVE'S duties and obligations as President or
                      Chairman of the Board and Chief Executive Officer;

               (b)    Conviction of a felony;

               (c)    Removal order from a banking regulatory agency;

               (d)    Physical or mental disability rendering EXECUTIVE
                      incapable of performing his duties;

               (e)    Determination by a majority of EMPLOYER'S Board of
                      Directors that the continued employment of EXECUTIVE is
                      detrimental to the best interest of EMPLOYER'S
                      shareholders, or for any reason whatsoever as determined
                      by a majority of EMPLOYER'S Board of Directors and in
                      their sole and absolute discretion.


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        (f)    Death

               In the event this Agreement is terminated for any of the reasons
               specified in the paragraphs (a), (b), or (c) above, EXECUTIVE
               shall be paid no further salary, but shall receive any pay in
               lieu of vacation accrued but not taken, as of the date of
               termination. The medical insurance benefits provided herein shall
               be extended at EMPLOYEE'S sole cost, pursuant to C.O.B.R.A.
               regulations.

               In the event this Agreement is terminated for the reasons
               specified in paragraph (d) above, EMPLOYER shall be responsible
               for continuing the base salary and benefits due EXECUTIVE for a
               period of twelve (12) months from the date of the disability, to
               be offset by any disability insurance proceeds received during
               the twelve (12) month period. In the event this Agreement is
               terminated for the reason specified in paragraph (f) above,
               EMPLOYER shall have no obligation to pay any salary or benefits
               after the date of EXECUTIVE'S death, other than any pay in lieu
               of vacation, accrued but not taken, prior to EXECUTIVE'S death,
               which shall be paid to EXECUTIVE'S estate within thirty (30)
               days. In the event this Agreement is terminated for the reasons
               specified in paragraph (e) above, EXECUTIVE shall, within thirty
               (30) days, be paid lump-sum termination pay in the amount of the
               remainder of the base salary called for in this Agreement. Where
               termination is pursuant to paragraph (e) above, any pay in lieu
               of vacation accrued to, but not taken as of the date of
               termination, shall be paid within thirty (30) days. In such case,
               the medical insurance benefits provided herein shall be extended
               at EMPLOYER'S sole cost for twelve (12) months following the date
               of termination.

               EXECUTIVE shall give one hundred twenty (120) days prior notice,
               in writing, to EMPLOYER in the event EXECUTIVE resigns or
               voluntarily terminates employment. The Board of Directors, at its
               sole discretion, may reduce the number of days of prior notice
               required or may waive the provision in its entirety.

               Should EXECUTIVE resign or voluntarily terminate employment,
               EXECUTIVE shall, for a period of one year, not become employed
               with another banking institution whose Head Office is within a
               fifty (50) mile radius of the Head Office of EMPLOYER. As the
               degree of damage to EMPLOYER, should EXECUTIVE violate the
               preceding non-competition clause, would be difficult and
               impractical to determine, EXECUTIVE and EMPLOYER agree that any
               sums owed by EMPLOYER to EXECUTIVE at the time a


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               violation might occur would constitute the total liquidated
               damages owed by EXECUTIVE to EMPLOYER.

               EXECUTIVE may exercise his right to exercise any stock options
               vested prior to termination or resignation, if any, and as
               provided in a Stock Option Plan and a Stock Option Agreement to
               which EXECUTIVE is a party.

        9.     ACQUISITION OR DISSOLUTION OF EMPLOYER

               This Employment Agreement shall not be terminated by the
               voluntary or involuntary dissolution of EMPLOYER or by any merger
               of consolidation affecting EMPLOYER. In the event of any merger
               or consolidation, or upon transfer of all or substantially all of
               the assets of EMPLOYER, the provisions of this Employment
               Agreement shall be binding upon and inure to the benefit of the
               surviving or resulting corporation or the corporation to which
               such assets shall be transferred. Notwithstanding the foregoing,
               in the event proceedings for liquidation of EMPLOYER are
               commenced by a banking regulatory agency, this Agreement and all
               rights and benefits hereunder shall terminate.

        10.    INDEMNIFICATION

               To the fullest extent permitted by law, EMPLOYER shall indemnify
               EXECUTIVE, who may be a party or is threatened to be made a party
               to any action brought by a third party against the EXECUTIVE
               (whether or not EMPLOYER is joined as a party defendant), against
               expenses, judgements, fines, settlements, and other amounts
               actually and reasonably incurred in connection with said action
               if EXECUTIVE acted in good faith and in a manner EXECUTIVE
               reasonably believed to be in the best interest of the EMPLOYER,
               provided that the alleged conduct of EXECUTIVE arose out of and
               was within the course and scope of his employment as an officer
               of EMPLOYER.

        11.    RETURN OF DOCUMENTS

               EXECUTIVE expressly agrees that all manuals, documents, files,
               reports, studies, instruments or other materials used or
               developed by EXECUTIVE during the TERM are solely the property of
               EMPLOYER, and EXECUTIVE has no right, title or interest therein.
               Upon termination of this Agreement, EXECUTIVE or EXECUTIVE'S
               representative shall promptly deliver possession of all said
               property to EMPLOYER in good condition.

        12.    NOTICES


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               Any notice, request, or demand, or other communication required
               or permitted hereunder shall be deemed to be properly given when
               personally served in writing, when deposited in the United States
               mail, postage prepaid, addressed to the party at the address
               given at the beginning of the Agreement or at any other address
               as EMPLOYER or EXECUTIVE may designate to the other in writing.

        13.    BENEFIT OF AGREEMENT

               This Agreement shall inure to the benefit of and be binding upon
               the parties hereto and their respective executors,
               administrators, successors and assigns.

        14.    APPLICABLE LAW

               This agreement is to be governed by and construed under the laws
               of the State of California.

        15.    CAPTIONS AND PARAGRAPH HEADINGS

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

        16.    INVALID PROVISIONS

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

        17.    ENTIRE AGREEMENT

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


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        18.    ARBITRATION

               Any controversy or claim arising out of or relating to this
               Employment Agreement, breach thereof, shall be settled in
               accordance with the rules of the American Arbitration Assoc and
               judgement upon the award rendered by the arbitrator(s) may be
               entered into any court having jurisdiction thereof.

        19.    LEGAL COSTS

               If either party commences an action against the other party
               arising out of, or in connection with this Agreement, the
               prevailing party shall be entitled to have and recover from the
               losing party reasonable attorney's fees, costs of arbitration,
               and costs of suit.

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

                                    THE BANK OF HEMET, "EMPLOYER"

                                    By: /s/ Eric J. Gosch            Director
                                        -------------------------

                                    By: /s/ John J. McDonough        Director
                                        -------------------------

                                    By: /s/ James B. Jaqua           "EXECUTIVE"
                                        -------------------------



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