FIRST COMMUNITY BANCORP /CA/, S-4/A, 2000-01-18

FIRST COMMUNITY BANCORP /CA/
S-4/A, 2000-01-18
NATIONAL COMMERCIAL BANKS

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As filed with the Securities and Exchange Commission on January 18, 2000

Registration No.: 333-93827
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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AMENDMENT NO. 1 TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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First Community Bancorp
(Exact name of registrant as specified in its charter)

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<CAPTION>
California 6712 33-0885320
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(State or other jurisdiction Identification Number) (I.R.S. Employer
of incorporation or organization) Classification Code Number) (Primary Standard Industrial
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6110 El Tordo
Rancho Santa Fe, California 92067
(858) 756-3023
(Address including zip code, and telephone number, including area code, of
registrant's principal executive office)

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James A. Boyce
President and Chief Executive Officer
6110 El Tordo
Rancho Santa Fe, California 92067
(858) 756-3023
(Name, address, including zip code, and telephone number, including area code,
of agent for service)

Copies to:
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Stanley F. Farrar Eileen Lyon
Sullivan & Cromwell Manatt, Phelps & Phillips, LLP
1888 Century Park East, 21st Floor 11355 West Olympic Boulevard
Los Angeles, California 90067 Los Angeles, California 90064
Telephone: (310) 712-6000 Telephone: (310) 312-4000
</TABLE>

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Approximate date of commencement of proposed sale to public:
As soon as practicable after this Registration Statement becomes effective.

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If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G check the following box: [_]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
CALCULATION OF REGISTRATION FEE
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<CAPTION>
Proposed
Proposed Maximum
Maximum aggregate Amount of
Title of Each Class of Amount to be Offering price offering Price Registration
Securities to be Registered Registered (1) per unit (2) fee (3)
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common stock, no par value........... 1,392,870 N/A $19,500,180 $5,148
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(1) This amount is based on the number of shares of common stock to be issued
upon consummation of the merger contemplated in the Agreement and Plan of
Merger dated as of October 22, 1999 between Rancho Santa Fe National Bank,
First Community Bancorp and First Community Bank of the Desert.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(c) and Rule 457(f)(1) of the
Securities Act of 1933, as amended, based on the product of the estimated
maximum number of shares of common stock of First Community Bank of the
Desert to be exchanged for the stock of First Community Bancorp.

(3) A registration fee of $5,136 was previously paid. The additional fee paid
herewith relates to an additional 3,289 shares at the proposed maximum
offering price.

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First Community Bancorp hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date until First
Community Bancorp shall file a further amendment which specifically states that
this Registration Statement shall thereafter become effective in accordance
with Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.

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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This Prospectus is not an +
+offer to sell these securities and it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

FIRST COMMUNITY BANCORP FIRST COMMUNITY BANK OF THE DESERT
Prospectus Proxy Statement

PROXY STATEMENT/PROSPECTUS

MERGER PROPOSED

YOUR VOTE IS VERY IMPORTANT

The Boards of Directors of First Community Bancorp and First Community Bank
of the Desert have unanimously approved an agreement to merge First Community
Bank of the Desert with and into a wholly owned subsidiary of First Community
Bancorp.

If we complete the merger, shareholders of First Community Bank of the Desert
will receive 0.30 of a share of First Community Bancorp common stock for each
share of First Community Bank of the Desert common stock plus cash for any
fractional shares. We estimate that, upon completion of the merger, current
First Community Bank of the Desert shareholders will own approximately 35.9% of
the outstanding First Community Bancorp common stock.

James A. Boyce
President and Chief Executive Officer
First Community Bancorp

This document gives you detailed information about the merger and includes a
copy of the merger agreement, and you should read it carefully. It is a proxy
statement that First Community Bank of the Desert is using to solicit proxies
for use at its annual shareholder meeting. It is also a prospectus relating to
the issuance of common stock by First Community Bancorp in connection with the
merger. Before you make a decision on how to vote on the merger, you should
consider the "Risk Factors" beginning on page 23 of the attached proxy
statement/ prospectus.

We are enthusiastic about the merger and the strength and capabilities we
expect from the combined companies. We join all the members of each company's
Board of Directors in recommending that you vote in favor of the merger.

William Powers
President
First Community Bank of the Desert

Neither the Securities and Exchange Commission nor
any state securities commission has approved or
disapproved of these securities or passed upon the
adequacy or accuracy of this document. Any
representation to the contrary is a criminal offense.
The securities offered through this document are not
savings accounts, deposits or other obligations of a
bank or savings association and are not insured by
the Federal Deposit Insurance Corporation or any
other government agency.

This Proxy Statement/Prospectus is dated , 2000 and was first
mailed to shareholders on or about , 2000.
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SOURCES FOR ADDITIONAL INFORMATION

If you want additional copies of this document, or if you want to ask any
questions about the merger, you should contact:

Corporate Secretary
First Community Bancorp
6110 El Tordo
Rancho Santa Fe, California 92067

Telephone: (858) 756-3023

If you are a shareholder of First Community Bank of the Desert and would
like to obtain additional copies of this document, please address your request
to:

Tay Fried
First Community Bank of the Desert
74-750 Highway 111
Indian Wells, California 92210
Telephone: (760) 836-0870

If you would like to request documents, please do so by , 2000 in
order to receive them before the annual meeting

Please see "WHERE YOU CAN FIND MORE INFORMATION" on page 106 where you can
find more important information about First Community Bancorp and First
Community Bank of the Desert.
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FIRST COMMUNITY BANK OF THE DESERT

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held On , 2000 at a.m.
At ,
Located at .

We are furnishing this document to shareholders of First Community Bank of
the Desert in connection with the solicitation of proxies by the First
Community Bank of the Desert Board of Directors for use at the annual meeting
of shareholders including any meeting adjournments or postponements, to be held
on , 2000 at : .m., local time, at , located at
.

The annual meeting will consider and vote upon the following proposals:

. To elect 6 directors of First Community Bank of the Desert to serve
until the next annual meeting.

. To ratify the appointment of KPMG LLP, as First Community Bank of the
Desert's independent auditors for the fiscal year ending December 31,
2000.

. To consider and vote on the acquisition of First Community Bank of the
Desert by First Community Bancorp and related matters as provided in the
Agreement and Plan of Merger dated October 22, 1999.

. To conduct other business if properly raised, including a motion to
adjourn the annual meeting to another time or place for the purpose of
soliciting additional proxies.

Only shareholders of First Community Bank of the Desert as of the close of
business on , 2000, may vote at the annual meeting.

In connection with the proposed merger, you may exercise dissenters' rights
as provided in the California General Corporation Law. If you meet all the
requirements of this law, and follow all of its required procedures, you may
receive cash in the amount equal to the fair market value, as determined by
First Community Bank of the Desert, or, if required, by a court of law, of your
shares of First Community Bank of the Desert common stock as of October 21,
1999, the day immediately preceding the announcement of the merger. For
additional details about dissenters' rights, please refer to "Dissenting
Shareholders' Rights" and Annex C in the accompanying proxy
statement/prospectus.

_____________________________
Tay Fried
Corporate Secretary

Indian Wells, California
, 2000

WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, WE URGE YOU TO
DATE, SIGN AND RETURN PROMPTLY THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE.
YOU MAY REVOKE YOUR PROXY PRIOR TO ITS EXERCISE IN THE MANNER PROVIDED IN THE
ACCOMPANYING DOCUMENT.
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TABLE OF CONTENTS

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QUESTIONS AND ANSWERS ABOUT THE MERGER..................................... 1

SUMMARY.................................................................... 3

SUMMARY HISTORICAL FINANCIAL DATA.......................................... 8

UNAUDITED PRO FORMA COMBINED FINANCIAL DATA................................ 12

RISK FACTORS............................................................... 23

A WARNING ABOUT FORWARD-LOOKING INFORMATION................................ 25

INFORMATION ABOUT FIRST COMMUNITY BANCORP AND RANCHO SANTA FE.............. 27

FIRST COMMUNITY BANCORP AND RANCHO SANTA FE MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION.................. 29

INFORMATION ABOUT FIRST COMMUNITY BANK OF THE DESERT....................... 48

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF FIRST COMMUNITY BANK OF THE DESERT.......................... 57

THE FIRST COMMUNITY BANK OF THE DESERT ANNUAL MEETING...................... 73

THE MERGER................................................................. 80
Structure of the Merger.................................................. 80
Background of and Reasons for the Merger................................. 80
Effects of the Merger and Recommendations of the Boards of Directors..... 83
Opinion of First Community Bank of The Desert's Financial Advisor........ 85
Pro Forma Analyses....................................................... 87
Professional Fees Paid to Advisors....................................... 90
Interests of Certain Directors and Executive Officers in the Merger...... 91
Nasdaq National Market Listing........................................... 92
Material Federal Income Tax Consequences................................. 92
Accounting Treatment of the Merger....................................... 93
Exchange of First Community Bank of the Desert Common Stock for First
Community Bancorp Common Stock.......................................... 94

THE MERGER AGREEMENT....................................................... 95
Conditions to the Merger................................................. 95
Acquisition Proposals.................................................... 96
Treatment of Options..................................................... 96
Termination.............................................................. 96
Covenants; Conduct of Business Prior to Completion of the Merger......... 96
Amendment and Waiver of the Merger Agreement............................. 97
Agreements with the Directors of First Community Bank of the Desert and
Rancho Santa Fe......................................................... 98
Resales of First Community Bancorp Common Stock by First Community Bank
of the Desert Shareholders.............................................. 98
Regulatory Approvals for the Mergers..................................... 98

DESCRIPTION OF FIRST COMMUNITY BANCORP COMMON STOCK AND FIRST COMMUNITY
BANK OF THE DESERT COMMON STOCK........................................... 99
Stock Description........................................................ 99
Material Differences Between Holders of First Community Bancorp Stock and
First Community Bank of the Desert Stock................................ 101
DISSENTING SHAREHOLDERS' RIGHTS............................................ 102
Demand for Purchase...................................................... 102

EXPERTS.................................................................... 105

LEGAL MATTERS.............................................................. 105
WHERE YOU CAN FIND MORE INFORMATION........................................ 105

ANNEXES
ANNEX A AGREEMENT AND PLAN OF MERGER
ANNEX B OPINION OF US BANCORP PIPER JAFFRAY
ANNEX C CHAPTER 13 OF THE CALIFORNIA GENERAL CORPORATION LAW ON
DISSENTERS' RIGHTS
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QUESTIONS AND ANSWERS ABOUT THE MERGER

Q: Who are the parties to this merger?

A: First Community Bank of the Desert will merge into a wholly owned merger
subsidiary of First Community Bancorp. After the merger, First Community Bank
of the Desert will be a subsidiary of First Community Bancorp. In a related
transaction, Rancho Santa Fe National Bank will merge with and into a
subsidiary interim national bank of First Community Bancorp. As a result of
this reorganization, Rancho Santa Fe National Bank will become a subsidiary of
First Community Bancorp and each share of Rancho Santa Fe common stock
outstanding will convert into one share of First Community Bancorp common
stock. First Community Bancorp was created to act as a holding company for
Rancho Santa Fe and, prior to the reorganization, has no other operations.

Q: Why are Rancho Santa Fe National Bank and First Community Bank of the Desert
combining?

A: We believe that the combination of the two banks under the holding company,
First Community Bancorp, provides a unique opportunity for enhancing earnings
through a combination of asset growth and operating cost reductions.

Q: What will I receive in the merger?

A: For each outstanding share of First Community Bank of the Desert that you
own before the merger, you will receive 0.30 shares of First Community Bancorp
common stock.

First Community Bancorp will not issue fractional shares in the merger.
Instead, you will receive a check, equal to the amount of any fractional share
of First Community Bancorp common stock that you would otherwise be entitled to
receive multiplied by $4.125.

After the merger, First Community Bank of the Desert's former shareholders will
own approximately 36% of First Community Bancorp's outstanding shares of common
stock.

Q: What risks should I consider before I vote on the merger?

A: You should review "Risk Factors" on page 23.

Q: What happens as the market price of First Community Bancorp common stock
fluctuates?

A: The value of the merger consideration will fluctuate. We have fixed the
merger consideration at at 0.30 shares of First Community Bancorp common stock
for each share of First Community Bank of the
Desert common stock. However, since the market values of First Community
Bancorp common stock and First Community Bank of the Desert common stock may
fluctuate before and after the closing of the merger, the value of the First
Community Bancorp common stock that First Community Bank of the Desert
shareholders will receive in the merger could increase or decrease. You should
obtain current market prices for shares of First Community Bancorp common stock
and First Community Bank of the Desert common stock.

Q: When is the merger expected to be completed?

A: We are working to complete the merger by March 31, 2000. We must first
obtain the necessary regulatory approvals and the approvals of our shareholders
at the annual meeting. We cannot assure you as to when or if all the conditions
to the merger will be met, and it is possible we will not complete the merger.

Q: How do the directors plan to vote?

A: All of your directors have committed that they will vote their shares in
favor of the merger. The First Community Bank of the Desert directors currently
collectively hold 1,558,378 shares or approximately 31.9% of the outstanding
First Community Bank of the Desert common stock.

Q: What are the tax consequences of the merger to me?

A: We expect that the exchange of shares by First Community Bank of the Desert
shareholders generally will be tax-free to First Community Bank of the Desert
shareholders for U.S. federal income tax purposes. Shareholders will, however,
have to pay taxes on cash received for fractional shares or, if you follow the
proper procedures, any cash you may receive as a dissenting shareholder.

1
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Your tax consequences will depend on your personal situation. You should
consult your tax advisor for a full understanding of the tax consequences of
the merger to you.

Q: What will I get if I dissent?

A: If you vote against the merger and follow the specific steps to perfect your
dissenters' rights, you will have the right to receive a cash amount as
determined under California law. For First Community Bank of the Desert
shareholders, the amount of cash may be less than the value of First Community
Bancorp common stock offered in the merger.

Q: What should I do now?

A: After you have read carefully this document, mail your signed proxy card in
the enclosed envelope following the instructions on or with the proxy card, so
that your shares will be represented at the First Community Bank of the Desert
annual meeting.

If you sign and send in your proxy and do not indicate how you want to vote,
your proxy will be voted in favor of the proposal to approve and adopt the
merger agreement. If you do not sign and send in your proxy or you abstain, it
will have the effect of a vote against the merger.

Q: When and where will the First Community Bank of the Desert annual meeting be
held?

A: The annual meeting for First Community Bank of the Desert shareholders will
take place at : .m. on , 2000. You may attend the meeting and
vote your shares in person, rather than voting by proxy.

Q: Can I change my vote after I have submitted my proxy with voting
instructions?

A: Yes. There are three ways in which you may revoke your proxy and change your
vote at any time before the meeting:

. You may send a written notice to the party you gave your proxy to stating
that you are revoking your proxy.

. You may complete and submit a new proxy card by mail. The latest vote
actually received prior to the shareholders' meeting will be recorded and
any earlier votes will be revoked.

. You may attend the annual meeting and vote in person. Simply attending the
shareholders' meeting, however, will not revoke your proxy. If you have
instructed a broker to vote your shares, you must follow directions received
from your broker to change or revoke your proxy.

Q: If my shares are held in "street name" by my broker, will my broker vote my
shares for me?

A: No. Your broker will vote your shares of First Community Bank of the Desert
common stock on the merger proposal only if you provide instructions on how to
vote. You should instruct your broker how to vote your shares, following the
directions your broker provides. If you do not provide instructions to your
broker, your broker will not be able to vote your shares and this will have the
effect of voting against the merger.

Q: Will the merger occur if shareholders of First Community Bank of the Desert
do not approve the merger?

A: No. The merger must be approved by a majority of the outstanding shares of
First Community Bank of the Desert. In the event shareholders of First
Community Bank of the Desert do not approve of the merger, it will not occur.

Q: Will shares of First Community Bancorp common stock be listed on the Nasdaq
National Market?

A: Yes. After the merger First Community Bancorp common stock will be listed on
the Nasdaq National Market under the symbol "FCBP."

Q: If I'm a First Community Bank of the Desert shareholder, should I send in my
stock certificates now?

A: No. After the merger is completed U.S. Stock Transfer Corporation will send
First Community Bank of the Desert shareholders written instructions for
exchanging their stock for shares of First Community Bancorp. First Community
Bancorp shareholders will keep their existing stock certificates.

Q: Whom should I call with questions?

A: First Community Bank of the Desert shareholders should call Tay Fried,
Executive Vice President, Secretary and Chief Financial Officer, at (760) 836-
0870 with any questions about the merger.

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SUMMARY

This summary highlights selected information from this document and may not
contain all the information that is important to you. For a more complete
understanding of the merger and for a more complete description of the legal
terms of the merger, you should read this entire document carefully, as well as
the additional documents we refer you to, including the merger agreement which
we have attached as Annex A. See "Where You Can Find More Information" (page
106).

General

We are proposing a merger between First Community Bank of the Desert and a
wholly owned subsidiary of First Community Bancorp. The merger will combine
First Community Bank of the Desert with Rancho Santa Fe National Bank, each of
which, upon completion of the merger, will be a wholly owned subsidiary of
First Community Bancorp. The merger will create opportunities for the combined
companies to realize enhanced earnings through a combination of asset growth
and operating efficiencies.

In the merger, each First Community Bank of the Desert shareholder will
receive 0.30 of a share of First Community Bancorp common stock for each share
of First Community Bank of the Desert common stock they own.

The Companies

First Community Bancorp
6110 El Tordo
Rancho Santa Fe, California 92067
(858) 756-3023

First Community Bancorp is a California bank holding company formed in
October 1999 to operate Rancho Santa Fe National Bank. Rancho Santa Fe is a
federally chartered commercial bank organized in 1982. Rancho Santa Fe is a
community bank established to serve the commercial, industrial, professional,
real estate and private banking markets of San Diego County. It operates full-
service banking offices in Rancho Santa Fe, the Golden Triangle, Escondido and
Carlsbad. In addition, it has a Small Business lending department in San Diego
and Corporate Loan Office in Claremont serving the Inland Empire market. On
September 30, 1999, Rancho Santa Fe National Bank had total assets of
approximately $174.2 million, loans of $127.6 million, deposits of $154.0
million and shareholders' equity of $16.5 million. Active full-time equivalent
employees totaled 58 at September 30, 1999.

First Community Bank of the Desert
74-750 Highway 111
Indian Wells, California 92210
(760) 836-0870

First Community Bank of the Desert is a state chartered commercial bank
organized under the laws of California in 1980. First Community Bank of the
Desert is a community bank that was established to serve the
commercial/industrial, professional, real estate and private banking markets of
San Bernardino and Riverside Counties. It operates six full-service banking
offices in Yucca Valley, Indian Wells, Cathedral City, Joshua Tree, Twenty-Nine
Palms and Palm Springs. On September 30, 1999, First Community Bank of the
Desert had total assets of approximately $119.5 million, loans of
$71.9 million, deposits of $110.6 million and shareholders' equity of $8.5
million. Active full-time equivalent employees totaled 59 at September 30,
1999.

The First Community Bank of the Desert Annual Meeting

First Community Bank of the Desert will hold its annual shareholders'
meeting on , 2000 at : .m., at , located at
. At the annual meeting, First Community Bank of the Desert
shareholders will vote upon proposals to elect directors, ratify the
appointment of independent accountants and approve the merger agreement.

First Community Bank of the Desert Record Date; Voting Power; Vote Required

You are entitled to vote at the First Community Bank of the Desert annual
meeting if you owned shares of First Community Bank of the Desert on

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, 2000, the First Community Bank of the Desert record date. As of that
date, there were shares of First Community Bank of the Desert common
stock issued and outstanding held by approximately 341 holders of record. Each
holder of First Community Bank of the Desert common stock will be entitled to
one vote per share on any matter that may properly come before the meeting,
except that in connection with the election of directors, you may, under
certain circumstances, cumulate your votes.

The 6 nominees receiving the most votes in the election of directors will be
elected.

A majority of the shares represented at the meeting must vote in favor of
ratifying KPMG LLP as First Community Bank of the Desert's independent
auditors.

Approval by the First Community Bank of the Desert shareholders of the
proposal to approve and adopt the merger agreement requires the affirmative
vote of a majority of the outstanding shares of First Community Bank of the
Desert common stock.

Share Ownership of First Community Bank of the Desert Management

On the First Community Bank of the Desert record date, the executive
officers and directors of First Community Bank of the Desert, including their
affiliates, had voting power with respect to an aggregate of 1,558,378 shares
of First Community Bank of the Desert common stock, or approximately 31.9% of
the shares of the common stock then outstanding.

We expect that such directors and executive officers of First Community Bank
of the Desert will vote the shares of First Community Bank of the Desert common
stock owned by them FOR the proposal to approve the merger agreement and the
transactions contemplated thereby.

Recommendation of First Community Bank of the Desert's Board of Directors

The First Community Bank of the Desert Board of Directors has unanimously
approved and adopted the merger agreement, and recommends a vote FOR approval
of the merger agreement and the transactions contemplated thereby. You also
should refer to the factors that the First Community Bank of the Desert Board
considered in determining whether to approve and adopt the merger agreement set
forth on pages 84 through 86 of this document.

Opinion of US Bancorp Piper Jaffray, Financial Advisors to First Community Bank
of the Desert

US Bancorp Piper Jaffray, financial advisor to First Community Bank of the
Desert, rendered a preliminary fairness opinion dated as of October 22, 1999 to
the First Community Bank of the Desert Board that as of such date, the merger
consideration to be paid was fair to the First Community Bank of the Desert
shareholders from a financial point of view. US Bancorp Piper Jaffray
subsequently confirmed its October 22, 1999 opinion by delivery to the First
Community Bank of the Desert Board of a written fairness opinion dated as of
, 2000. A copy of the fairness opinion, setting forth the information
reviewed, assumptions made and matters considered by US Bancorp Piper Jaffray,
is attached to this document as Annex B. First Community Bank of the Desert
shareholders should read the fairness opinion in its entirety.

Terms of the Merger Agreement

The merger agreement is attached to this document as Annex A. We encourage
you to read the merger agreement in its entirety. It is the legal document that
governs the merger. We also encourage you to read the Risk Factors beginning on
page 23.

General. The merger agreement provides that First Community Bank of the
Desert will merge with and into a wholly owned subsidiary of First Community
Bancorp, with First Community Bank of the Desert as the surviving subsidiary
corporation.

Merger Consideration. For each outstanding share of First Community Bank of
the Desert common stock, First Community Bank of the Desert shareholders will
receive 0.30 shares of First Community Bancorp common stock. First Community
Bancorp will not issue fractional shares. Instead, First Community Bank of the
Desert shareholders will receive an amount of cash determined by multiplying
such fraction by $4.125.

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First Community Bancorp will not pay interest on any such cash.

Completion of the Merger. The merger will become effective when we file an
agreement of merger with the California Secretary of State. The merger
agreement provides that we will file the agreement of merger as soon as
practicable following the satisfaction or waiver of the conditions to the
merger.

Conditions to the Merger. The completion of the merger depends upon the
satisfaction of a number of conditions, including:

. approval of the merger agreement by the shareholders of First Community
Bank of the Desert and First Community Bancorp shareholders;

. receipt of listing approval from the Nasdaq National Market for the First
Community Bancorp common stock we will issue in the merger;

. receipt of all necessary authorizations, orders and consents of
governmental authorities and the expiration of any regulatory waiting periods;

. effectiveness of the registration statement of First Community Bancorp
relating to the shares of First Community Bancorp common stock to be issued to
First Community Bank of the Desert shareholders in the merger, of which this
document forms a part;

. no injunction prohibiting the merger shall have been issued by any
governmental authority of competent jurisdiction;

. receipt from KPMG LLP of a letter confirming that the merger qualifies for
pooling of interests accounting treatment; and

. receipt of an opinion of counsel of both First Community Bancorp and First
Community Bank of the Desert that the merger will be treated for U.S. federal
income tax purposes as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code.

Unless prohibited by law, either First Community Bancorp or First Community
Bank of the Desert could elect to waive any condition that has not been
satisfied and complete the merger anyway.

Fees and Expenses. First Community Bancorp and First Community Bank of the
Desert will pay their own fees, costs and expenses incurred in connection with
the merger except that printing costs and filing fees associated with this
document will be shared.

Termination. Either First Community Bank of the Desert or First Community
Bancorp may call off the merger under certain circumstances, including if:

. we both consent in writing;

. the merger is not completed before March 31, 2000;

. we are not able to obtain required governmental approvals;

. the First Community Bank of the Desert or First Community Bancorp
shareholders do not approve the merger agreement;

. the other party breaches in a material manner any of the representations
or warranties or any covenant or agreement it has made under the merger
agreement; or

. any condition to such party's obligations under the merger agreement has
not been met or waived.

Interests of Certain Directors and Executive Officers of First Community Bank
of the Desert in the Merger

When you consider the First Community Bank of the Desert Board's
recommendation, you should be aware that certain executive officers and
directors of First Community Bank of the Desert have interests in the merger as
employees and/or directors that are different from, and may conflict with, your
interests as a First Community Bank of the Desert shareholder. The First
Community Bank of the Desert Board recognized these interests and determined
that they did not affect the benefits of the merger to the First Community Bank
of the Desert shareholders.

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Directors of First Community Bancorp and First Community Bank of the Desert
Following the Merger

Upon completion of the merger, Dale E. Walter, David S. Williams, Robert A.
Schoellhorn, William T. Powers, John M. Eggemeyer III, James A. Boyce, Robert
A. Stine, Paul I. Stevens and Robert E. Herrmann shall be elected as directors
of First Community Bancorp. The individuals elected as directors of First
Community Bank of the Desert at its annual meeting will continue to serve as
directors of First Community Bank of the Desert following the merger.

Material Federal Income Tax Consequences

Legal counsel for First Community Bancorp and First Community Bank of the
Desert have each delivered a legal opinion stating that the merger will be
treated as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended, and that First Community Bancorp and
First Community Bank of the Desert will each be a party to that reorganization
within the meaning of Section 368(b) of the Internal Revenue Code. The opinion
of legal counsel for First Community Bank of the Desert also states that
shareholders of First Community Bank of the Desert will not recognize gain or
loss upon the exchange of their First Community Bank of the Desert common stock
for First Community Bancorp common stock in the merger. If, however,
shareholders receive cash instead of fractional shares or as a result of their
exercise of dissenters' rights, that cash would be taxable.

Accounting Treatment

We expect the merger to be accounted for as a pooling of interests, which
means that we will treat First Community Bancorp and First Community Bank of
the Desert as if they had always been combined for accounting and financial
reporting purposes.

Resales of First Community Bancorp Common Stock

Shares of First Community Bancorp common stock that First Community Bank of
the Desert shareholders receive in the merger will be freely transferable by
the holders, except for those shares held by holders who may be "affiliates."
Affiliates generally include directors, certain executive officers and holders
of 10% or more of First Community Bank of the Desert common stock, under
applicable federal securities laws. First Community Bank of the Desert has
provided to First Community Bancorp the written agreement of each of its
"affiliates" that such "affiliate" will not dispose of its shares of First
Community Bank of the Desert common stock and, to the extent applicable, First
Community Bancorp common stock, except in compliance with the Securities Act of
1933 and applicable accounting rules governing pooling of interests.

Regulatory Approvals

We must make certain filings with or obtain approvals from certain
regulatory authorities to complete the merger. These include, without
limitation, the approval of or notice to the Federal Reserve Board, the Federal
Deposit Insurance Corporation, the Office of the Comptroller of the Currency
and the California Commissioner of Financial Institutions. In addition, First
Community Bancorp must list the common stock offered to First Community Bank of
the Desert shareholders with the Nasdaq National Market.

We will file the applications with the governmental regulators as soon as
practicable.

We cannot predict when or whether we will obtain all required regulatory
approvals.

First Community Bank of the Desert Dissenters' Rights

Shareholders of First Community Bank of the Desert will have dissenters'
rights under California law. This means that First Community Bank of the Desert
shareholders who vote against the merger may make a written demand to First
Community Bank of the Desert for payment in cash of the "fair market value" of
their shares. First Community Bank of the Desert must receive the demand no
later than 30 days after the mailing of the notice of approval.

The Board of Directors will determine the fair market value when it mails
the notice of approval required by Chapter 13. You may disagree with the Board
of Directors' determination on the fair market
6
<PAGE>

value. The procedure for exercising your dissenters' rights is summarized under
the heading "Dissenting Shareholders' Rights." The relevant provisions of
California Law on dissenters' rights are attached to this document as Annex C.

Differences in the Rights of Shareholders

There will be no significant differences in the rights of shareholders of
First Community Bank of the Desert once they become shareholders of First
Community Bancorp. Both First Community Bancorp and First Community Bank of the
Desert are California corporations. First Community Bank of the Desert
shareholders, upon completion of the merger, will become First Community
Bancorp shareholders, and their rights will be governed by First Community
Bancorp's articles of incorporation and bylaws and will continue to be subject
to California law.

7
<PAGE>

Comparative Market Price Information

Rancho Santa Fe formed First Community Bancorp as a bank holding company in
October 1999. Pursuant to the Agreement and Plan of Reorganization dated as of
, 2000, Rancho Santa Fe will become a subsidiary of First Community Bancorp
and all shares of common stock of Rancho Santa Fe shall be exchanged on a one-
for-one basis for shares of First Community Bancorp common stock. Prior to the
reorganization, First Community Bancorp will have no other operations, assets
or liabilities, therefore each share of First Community Bancorp common stock
represents the same economic value as each share of Rancho Santa Fe common
stock.

The following table presents the market value for Rancho Santa Fe common
stock on the OTC Bulletin Board and First Community Bank of the Desert common
stock on the OTC Bulletin Board on October 21, 1999 and , 2000.
October 21, 1999 was the last day prior to our announcement of the signing of
the merger agreement. , 2000 was the last practicable trading day for
which information was available prior to the date of this document.

<TABLE>
<CAPTION>
Rancho Santa Fe Common First Community Bank of
Stock the Desert Common Stock
(Dollars Per Share) (Dollars Per Share)
----------------------- --------------------------
High Low Close High Low Close
------- ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
October 21, 1999............. $13 1/2 $13 1/2 $13 1/2 $3 13/16 $3 13/16 $3 13/16
, 2000.............
</TABLE>

Also set forth below for each of the market values of Rancho Santa Fe common
stock on October 21, 1999 and , 2000 is the equivalent pro forma market
value of First Community Bank of the Desert stock, which we determined by
multiplying the applicable market value of Rancho Santa Fe common stock by the
number of shares of Rancho Santa Fe common stock we are issuing for each share
of First Community Bank of the Desert common stock (0.30).

<TABLE>
<CAPTION>
First Community Bank of the Desert Equivalent Pro Forma
-------------------------------------------------------
<S> <C>
Closing price on October
21, 1999............... $4 1/20
Closing price on
, 2000........ $
</TABLE>

We urge you to obtain current market quotations for Rancho Santa Fe common
stock (or First Community Bancorp common stock if the reorganization has been
completed) and First Community Bank of the Desert common stock. We expect that
the market prices of Rancho Santa Fe common stock and First Community Bank of
the Desert common stock will fluctuate between the date of this document and
the date on which the merger is completed and thereafter. Because the market
prices of Rancho Santa Fe common stock and First Community Bank of the Desert
common stock are subject to fluctuation, the value of the shares of Rancho
Santa Fe common stock that First Community Bank of the Desert shareholders will
receive in the merger may increase or decrease prior to and after the merger.

8
<PAGE>

Historical Market Prices and Dividend Information

Rancho Santa Fe. Rancho Santa Fe common stock is listed on the OTC Bulletin
Board under the symbol "RASF." The following table sets forth for the calendar
quarter indicated the high and low sales prices per share of Rancho Santa Fe
common stock as reported on the OTC Bulletin Board. Rancho Santa Fe has
declared a quarterly dividend since the first quarter of 1998. The trading
market for Rancho Santa Fe common stock is relatively small. The total trading
volume for Rancho Santa Fe common stock for the fourth quarter of 1999 was
11,700.

<TABLE>
<CAPTION>
Quarter Ended High Low Dividend
------------- ---------- ------- --------
1997:
-----
<S> <C> <C> <C>
First quarter................................. $ 10 1/2 $ 8 --
Second quarter................................ $ 11 1/2 $ 9 1/2 --
Third quarter................................. $ 15 $11 1/8 --
Fourth quarter................................ $ 17 $11 1/2 --
<CAPTION>
1998:
-----
<S> <C> <C> <C>
First quarter................................. $ 16 1/2 $ 14 $0.06
Second quarter................................ $ 19 1/2 $ 16 $0.06
Third quarter................................. $ 17 $13 1/2 $0.06
Fourth quarter................................ $ 15 $11 1/2 $0.06
<CAPTION>
1999:
-----
<S> <C> <C> <C>
First quarter................................. $13/3///4/ $11 3/4 $0.06
Second quarter................................ $14/3///8/ $ 11 $0.06
Third quarter................................. $14/7///8/ $13 1/8 $0.09
Fourth quarter................................ $15/1///2/ $13 1/2 $0.09
2000
----
First quarter (through January 13, 2000)......

First Community Bank of the Desert. First Community Bank of the Desert
common stock is traded on the OTC Bulletin Board under the symbol "FCDE." On
the First Community Bank of the Desert record date, there were approximately
341 holders of record of First Community Bank of the Desert common stock. The
following table sets forth for the calendar quarter indicated the high and low
bid prices per share of First Community Bank of the Desert common stock as
reported on the OTC Bulletin Board, and the dividends per share of First
Community Bank of the Desert common stock. The trading market for First
Community Bank of the Desert common stock is relatively small. The total
trading volume for First Community Bank of the Desert common stock for the
fourth quarter of 1999 was 281,200.

<CAPTION>
Quarter Ended High Low Dividend
------------- ---------- ------- --------
1997:
-----
<S> <C> <C> <C>
First quarter................................. $ 2 1/2 $ 1 1/4 --
Second quarter................................ $ 2 9/32 $ 2 1/4 --
Third quarter................................. $ 2 1/4 $ 2 1/4 --
Fourth quarter................................ $ 3 $ 2 1/2 --
<CAPTION>
1998:
-----
<S> <C> <C> <C>
First quarter................................. $ 3 5/8 $ 3 --
Second quarter................................ $ 4 $ 4 --
Third quarter................................. $ 4 $ 4 --
Fourth quarter................................ $ 5 1/16 $ 3 5/8 --
<CAPTION>
1999:
-----
<S> <C> <C> <C>
First quarter................................. $ 4 1/8 $ 3 1/2 --
Second quarter................................ $ 4 1/8 $ 3 1/2 --
Third quarter................................. $ 4 1/8 $ 3 1/2 --
Fourth quarter................................ $ 4 13/16 $ 3 5/8 --
2000
----
First quarter (through January 13, 2000)...... $ 4 5/16 $ 4 1/8 --
</TABLE>

9
<PAGE>

Summary Historical Financial Data of Rancho Santa Fe

The following summary historical financial data for the nine months ended
September 30, 1999 and 1998 is derived from unaudited financial statements of
Rancho Santa Fe and include, in the opinion of the management of Rancho Santa
Fe, all adjustments (consisting only of normal accruals) necessary to present
fairly the data for such periods. The results for the nine month period ended
September 30, 1999 are not necessarily indicative of the results to be expected
for the full fiscal year. The following summary historical financial data for
the five years ended December 31, 1998 are derived from the audited financial
statements of Rancho Santa Fe. The data should be read in conjunction with the
financial statements, related notes, and other financial information included
or incorporated by reference in this proxy statement/prospectus.

<TABLE>
<CAPTION>
For the Nine Months
Ended At or for the Years Ended
September 30, December 31,
-------------------- -----------------------------------------------
1999 1998 1998 1997 1996 1995 1994
--------- --------- -------- -------- -------- -------- -------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Results of Operations:
Interest Income.............. $ 10,502 $ 9,541 $ 12,541 $ 10,883 $ 9,262 $ 8,015 $ 6,996
Interest Expense............. 2,760 2,745 3,676 3,243 2,855 2,497 2,062
--------- --------- -------- -------- -------- -------- -------
NET INTEREST INCOME...... 7,742 6,796 8,865 7,640 6,407 5,518 4,934
Provision for loan losses.... 90 -- -- 50 40 -- 1,244
--------- --------- -------- -------- -------- -------- -------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES.. 7,652 6,796 8,865 7,590 6,367 5,518 3,690
Non-interest income.......... 1,196 1,126 1,644 1,563 1,815 1,914 2,241
Non-interest expense......... 5,188 4,784 6,238 5,661 5,923 7,024 7,960
--------- --------- -------- -------- -------- -------- -------
INCOME (LOSS) BEFORE INCOME
TAXES..................... 3,660 3,138 4,271 3,492 2,259 408 (2,029)
Income tax (benefit)......... 1,527 1,289 1,762 1,380 -- (842) --
--------- --------- -------- -------- -------- -------- -------
NET INCOME (LOSS)....... $ 2,133 $ 1,849 $ 2,509 $ 2,112 $ 2,259 $ 1,250 $(2,029)
========= ========= ======== ======== ======== ======== =======
Ending Balance Sheet Data:
Assets....................... $ 174,172 $ 158,501 $166,012 $134,830 $120,348 $106,956 $92,333
Securities................... 34,729 26,854 32,817 23,021 19,496 16,484 12,903
Loans, net of deferred
fees........................ 127,553 106,426 109,562 94,882 86,016 70,853 69,555
Allowance for loan losses.... 2,277 2,528 2,388 2,415 2,327 2,138 2,631
Deposits..................... 154,006 141,854 148,627 119,557 107,480 96,349 86,050
Borrowed funds............... 700 -- -- -- -- -- --
Common shareholders'
equity...................... 16,521 14,783 15,214 13,135 10,949 8,770 3,842
Per Share Data and Other
Selected Ratios:
Earnings per common share:
Basic...................... $ 0.86 $ 0.76 $ 1.03 $ 0.87 $ 0.93 $ 0.54 $ (1.54)
Diluted.................... 0.82 0.71 0.96 0.83 0.92 0.54 (1.54)
Dividends declared per
share....................... 0.21 0.18 0.24 -- -- -- --
Book value per share......... 6.67 6.01 6.18 5.41 4.51 3.62 2.92
Shareholders' equity to
assets at period end........ 9.49% 9.33% 9.16% 9.74% 9.10% 8.20% 4.16%
Return on average assets..... 1.67% 1.73% 1.71% 1.70% 2.06% 1.31% (2.04%)
Return on average equity..... 18.06% 17.82% 17.74% 17.85% 23.49% 15.76% (35.51%)
Average equity/average
assets...................... 9.26% 9.68% 9.63% 9.52% 8.78% 8.30% 5.75%
Net interest margin.......... 6.47% 6.77% 6.45% 6.57% 6.33% 6.33% 5.50%
</TABLE>

10
<PAGE>

Summary Historical Financial Data of First Community Bank of the Desert

The following summary historical financial data for the nine months ended
September 30, 1999 and 1998 is derived from unaudited consolidated financial
statements of First Community Bank of the Desert and include, in the opinion of
the management of First Community Bank of the Desert, all adjustments
(consisting only of normal accruals) necessary to present fairly the data for
such periods. The results for the nine month period ended September 30, 1999
are not necessarily indicative of the results to be expected for the full
fiscal year. The following summary historical financial data for the five years
ended December 31, 1998 are derived from the audited consolidated financial
statements of First Community Bank of the Desert. The data should be read in
conjunction with the consolidated financial statements, related notes, and
other financial information included or incorporated by reference in this proxy
statement/prospectus.

<TABLE>
<CAPTION>
For the
Nine Months Ended
September 30, At or for the Years Ended December 31,
------------------- ---------------------------------------------
1999 1998 1998 1997 1996 1995 1994
--------- -------- -------- ------- ------- ------- -------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Results of Operations:
Interest Income.............. $ 7,081 $ 5,842 $ 7,717 $ 5,824 $ 4,490 $ 3,690 $ 3,197
Interest Expense............. 1,444 1,215 1,714 1,321 1,087 1,068 938
--------- -------- -------- ------- ------- ------- -------
NET INTEREST INCOME........ 5,637 4,627 6,003 4,503 3,403 2,622 2,259

Provision for loan losses.... 323 691 941 260 320 361 547
--------- -------- -------- ------- ------- ------- -------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES.. 5,314 3,936 5,062 4,243 3,083 2,261 1,712

Non-interest income.......... 1,168 1,190 1,552 1,235 1,414 1,064 1,463
Non-interest expense......... 4,831 4,167 5,163 4,255 4,064 4,526 3,987
--------- -------- -------- ------- ------- ------- -------
INCOME (LOSS) BEFORE INCOME
TAXES..................... 1,651 959 1,451 1,223 433 (1,201) (812)

Income tax (benefit)......... 727 260 378 498 (479) (248) --
--------- -------- -------- ------- ------- ------- -------
NET INCOME (LOSS).......... $ 924 $ 699 $ 1,073 $ 725 $ 912 $ (953) $ (812)
========= ======== ======== ======= ======= ======= =======
Ending Balance Sheet Data:
Assets....................... $ 119,535 $ 96,239 $111,601 $80,016 $55,315 $48,998 $41,845
Time deposits in financial
institutions................ 7,514 5,439 5,440 4,160 -- -- 100
Securities................... 13,705 5,662 5,563 5,115 3,150 7,034 3,608
Loans, net of deferred
fees........................ 71,917 60,221 61,418 56,182 39,231 32,136 29,515
Allowance for loan losses.... 1,491 1,213 1,397 967 867 810 750
Deposits..................... 110,618 88,153 102,794 72,383 49,001 43,598 39,892
Borrowed funds............... -- -- -- -- -- 75 125
Common shareholders'
equity...................... 8,542 7,243 7,619 6,545 5,820 4,911 1,528

Per Share Data and Other
Selected Ratios:
Earnings per common share:
Basic...................... $ 0.20 $ 0.15 $ 0.23 $ 0.16 $ 0.20 $ (0.57) $ (1.75)
Diluted.................... 0.19 0.14 0.22 0.15 0.20 (0.57) (1.75)
Dividends declared per
share....................... -- -- -- -- -- -- --
Book value per share......... 1.84 1.56 1.64 1.41 1.25 1.06 2.66
Shareholders' equity to
assets at period end........ 7.15% 7.53% 6.83% 8.18% 10.52% 10.02 % 3.65 %
Return on average assets..... 1.04% 1.03% 1.13% 1.03% 1.69% (2.10)% (1.78)
Return on average equity..... 15.26% 13.52% 14.14% 11.08% 17.00% (29.60)% (40.36)
Average equity/average
assets...................... 6.78% 7.61% 7.97% 9.26% 9.94% 7.09 % 4.40
Net interest margin.......... 7.23% 7.86% 7.44% 7.42% 7.96 7.12 6.50
</TABLE>

11
<PAGE>

Summary Unaudited Pro Forma Combined Financial Data

The following table sets forth certain summary unaudited pro forma combined
financial data for First Community Bancorp after giving effect to the merger,
as if it had occurred as of the beginning of each of the periods presented,
using the conversion number 0.30 and accounting for the merger as a pooling of
interests. This information should be read in conjunction with the historical
financial statements of Rancho Santa Fe and First Community Bank of the Desert
appearing elsewhere in the proxy statement/prospectus.

The unaudited pro forma combined condensed balance sheets are not
necessarily indicative of the actual financial position that would have existed
had the merger been consummated on September 30, 1999 or December 31, 1998, or
that may exist in the future. The unaudited pro forma combined condensed
statements of income are not necessarily indicative of the results that would
have occurred had the merger been consummated on the dates indicated or that
may be achieved in the future.

<TABLE>
<CAPTION>
For the
Nine Months Ended At or for the Years Ended
September 30, December 31,
------------------ ----------------------------
1999 1998 1998 1997 1996
-------- -------- -------- -------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Results of Operations:
Interest Income............. $ 17,583 $ 15,383 $ 20,258 $ 16,707 $ 13,752
Interest Expense............ 4,204 3,960 5,390 4,564 3,942
-------- -------- -------- -------- --------
NET INTEREST INCOME....... 13,379 11,423 14,868 12,143 9,810

Provision for loan losses... 413 691 941 310 360
-------- -------- -------- -------- --------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN
LOSSES................... 12,966 10,732 13,927 11,833 9,450

Non-interest income......... 2,364 2,138 3,196 2,798 3,229
Non-interest expense........ 10,019 8,773 11,401 9,916 9,987
-------- -------- -------- -------- --------
INCOME BEFORE INCOME
TAXES.................... 5,311 4,097 5,722 4,715 2,692

Income tax (benefit)........ 2,254 1,549 2,140 1,878 (479)
-------- -------- -------- -------- --------
NET INCOME................ $ 3,057 $ 2,548 $ 3,582 $ 2,837 $ 3,171
======== ======== ======== ======== ========
Ending Balance Sheet Data:
Assets...................... $294,121 $254,740 $278,027 $214,846 $175,663
Time deposits in financial
institutions............... 7,514 5,439 5,440 4,160 --
Securities.................. 48,434 32,516 38,380 28,136 22,646
Loans, net of deferred
fees....................... 199,470 166,647 170,980 151,064 125,247
Allowance for loan losses... 3,768 3,741 3,785 3,382 3,194
Deposits.................... 264,624 230,007 251,421 191,940 156,481
Borrowed funds.............. 700 -- -- -- --
Common shareholders'
equity..................... 23,076 22,026 20,846 19,680 16,769

Per Share Data and Other
Selected Ratios:
Earnings per common share:
Basic..................... $ 0.79 $ 0.66 $ 0.93 $ 0.74 $ 0.83
Diluted................... 0.75 0.63 0.89 0.72 0.83
Dividends declared per
share...................... 0.21 0.18 0.24 -- --
Book value per share........ 5.96 5.72 5.41 5.15 4.39
Shareholders' equity to
assets at period end....... 7.85% 8.65% 7.50% 9.16% 9.55%
Return on average assets.... 1.41% 1.46% 1.48% 1.45% 1.94%
Return on average equity.... 17.11% 16.39% 16.49% 15.44% 21.16%
Average equity/average
assets..................... 8.24% 8.88% 8.98% 9.42% 9.16%
Net interest margin......... 6.77% 7.17% 6.82% 6.86% 6.82%
</TABLE>

12
<PAGE>

Selected Historical and Pro Forma Per Share Data

The following table sets forth for Rancho Santa Fe Common Stock and First
Community Bank of the Desert common stock certain selected historical and
unaudited pro forma equivalent per share data at September 30, 1999 and for the
nine months ended September 30, 1999 and 1998, and at the end of and for each
of the three years ended December 31, 1998, giving effect to the merger using
the pooling-of-interests method of accounting. The information is derived from
the historical financial statements of Rancho Santa Fe and the historical
consolidated financial statements of First Community Bank of the Desert,
including the related notes thereto, and the pro forma combined financial
information giving effect to the merger, including the related notes thereto,
appearing elsewhere herein. The information below should be read in conjunction
with the historical and pro forma combined financial information of Rancho
Santa Fe and First Community Bank of the Desert, including the notes thereto,
appearing elsewhere in this proxy statement/prospectus or incorporated herein
by reference.

<TABLE>
<CAPTION>
For the Nine Months Ended For the Years Ended
September 30, December 31,
-------------------------------- --------------------
1999 1998 1998 1997 1996
---------------- --------------- ------ ------ ------
<S> <C> <C> <C> <C> <C>
Diluted earnings per
share (1):
Rancho Santa Fe........ $0.82 $0.71 $ 0.96 $ 0.83 $ 0.92
First Community Bank of
the Desert............ 0.19 0.14 0.22 0.15 0.20
First Community Bancorp
combined pro forma.... 0.75 0.63 0.88 0.72 0.83
First Community Bank of
the Desert equivalent
pro forma............. 0.22 0.19 0.26 0.22 0.25
Dividends per share (2):
Rancho Santa Fe cash
dividends per share... 0.21 0.18 0.24 -- --
First Community Bank of
the Desert equivalent
pro forma dividends
per share............. 0.06 0.05 0.07 -- --
<CAPTION>
At September 30, At December 31,
1999 1998
---------------- ---------------
<S> <C> <C> <C> <C> <C>
Book value per share (3):
Rancho Santa Fe........ $6.67 $6.18
First Community Bank of
the Desert............ 1.84 1.64
First Community Bancorp
combined pro forma.... 5.96 5.41
First Community Bank of
the Desert equivalent
pro forma............. 1.79 1.62
</TABLE>
- --------
(1) The First Community Bancorp combined pro forma diluted earnings per share
were calculated by using aggregate historical income information divided
by the average pro forma diluted shares outstanding of the combined
entity. The average diluted pro forma shares of the combined entity were
calculated by combining the Rancho Santa Fe historical diluted shares with
the historical diluted shares of First Community Bank of the Desert as
adjusted by the conversion number of 0.30. The First Community Bank of the
Desert equivalent pro forma earnings per share amounts were computed by
multiplying the First Community Bancorp pro forma amounts by the
conversion number of 0.30.

(2) The First Community Bank of the Desert equivalent pro forma cash dividends
per share amounts were computed by multiplying the Rancho Santa Fe cash
dividends per share by the conversion number of 0.30.

(3) The First Community Bancorp combined pro forma book value per share is
based on the aggregate historical common shareholders' equity of the
companies divided by the total pro forma common shares of the combined
entity based on the conversion number of 0.30. The First Community Bank of
the Desert equivalent pro forma book value per share at period end
represents the First Community Bancorp pro forma amounts by the conversion
number of 0.30.

13
<PAGE>

Unaudited Pro Forma Combined Financial Data of First Community Bancorp

The following tables present summary financial data for Rancho Santa Fe and
First Community Bank of the Desert after giving effect to the merger, which we
refer to as "pro forma" information. The pro forma financial data give effect
to the merger under the pooling-of-interests accounting method in accordance
with generally accepted accounting principles. In presenting the pro forma
information for certain time periods, First Community Bancorp assumed that
Rancho Santa Fe and First Community Bank of the Desert had been merged
throughout those periods. The following unaudited pro forma combined financial
data combines the historical condensed financial statements of Rancho Santa Fe
and the historical consolidated condensed financial statements of First
Community Bank of the Desert, giving effect of the merger as if it had been
effective on September 30, 1999 and December 31, 1998, with respect to the Pro
Forma Combined Condensed Balance Sheets, and as of the beginning of the periods
indicated, with respect to the Pro Forma Combined Condensed Statements of
Income. The information for the nine months ended September 30, 1999 is derived
from the unaudited financial statements of the companies which includes, in the
opinion of the management of the companies, all adjustments (consisting only of
normal accruals) necessary to present fairly the data for such periods. This
information should be read in conjunction with the historical financial
statements of the companies, including their respective notes thereto, which
are included in this proxy statement/prospectus, and in conjunction with the
combined condensed historical selected financial data and other pro forma
combined financial information, included the notes thereto appearing elsewhere
in the proxy statement/prospectus.

First Community Bancorp expects that it will incur reorganization and
restructuring expenses as a result of combining Rancho Santa Fe and First
Community Bank of the Desert. The effect of the estimated merger and
reorganization costs expected to be incurred in connection with the merger have
been reflected in the pro forma combined balance sheets; however, since the
estimated costs are nonrecurring, they have not been reflected in the pro forma
combined statements of income. First Community Bancorp also anticipates that
the merger will provide the combined company with certain financial benefits
that include reduced operating expenses and opportunities to earn more revenue.
However, First Community Bancorp does not reflect any of these anticipated cost
savings or benefits in the pro forma information. Finally, the pro forma
financial information does not reflect any divestitures of branches or deposits
that may be required in connection with the merger. Therefore, the pro forma
information, while helpful in illustrating the financial characteristics of the
combined company under one set of assumptions, does not attempt to predict or
suggest future results. The pro forma information also does not attempt to show
how the combined company would actually have performed had the companies been
combined throughout these periods. All adjustments, consisting of only normal
recurring adjustments, necessary for a fair statement of results of the
unaudited historical interim periods have been included.

14
<PAGE>

Unaudited Pro Forma Combined Condensed Balance Sheets At September 30, 1999

<TABLE>
<CAPTION>
Rancho Santa Fe
and First
First Community Community Bank
Rancho Santa Fe Bank of the Desert Pro Forma of the Desert
(Historical) (Historical) Adjustments Pro Forma
--------------- ------------------ ----------- ---------------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Assets:
Cash and due from
banks................. $ 10,232 $ 8,474 $ -- $ 18,706
Federal funds sold..... -- 12,332 -- 12,332
-------- -------- ------- --------
Total cash and cash
equivalents......... 10,232 20,806 -- 31,038
Time deposits in
financial
institutions.......... -- 7,514 -- 7,514
Federal Reserve Bank
and Federal Home Loan
Bank stock, at cost... 992 -- -- 992
Securities held to
maturity.............. 365 13,705 -- 14,070
Securities available-
for-sale.............. 33,372 -- -- 33,372
-------- -------- ------- --------
Total securities..... 34,729 13,705 -- 48,434
Net loans.............. 125,276 70,426 -- 195,702
Property, plant and
equipment............. 1,505 3,943 -- 5,448
Other real estate
owned................. -- 1,315 -- 1,315
Deferred taxes......... 959 -- 414 1,373
Other assets........... 1,471 1,826 -- 3,297
-------- -------- ------- --------
Total Assets......... $174,172 $119,535 $ 414 $294,121
======== ======== ======= ========
Liabilities and
Shareholders' Equity:
Liabilities:
Non-interest bearing
deposits.............. $ 44,646 $ 43,206 $ -- $ 87,852
Interest bearing
deposits.............. 109,360 67,412 -- 176,772
-------- -------- ------- --------
Total deposits....... 154,006 110,618 -- 264,624
Borrowed funds......... 700 -- -- 700
Accrued interest
payable & other
liabilities........... 2,945 375 2,401 5,721
-------- -------- ------- --------
Total liabiltities... 157,651 110,993 2,401 271,045
Shareholders' Equity:
Common stock........... 6,192 7,291 -- 13,483
Additional paid-in-
capital............... 5,748 -- -- 5,748
Retained earnings...... 4,923 1,251 (1,987) 4,187
Accumulated other
comprehensive income
(loss):
Net unrealized gains
(losses) on
securities
available-for-sale,
net................. (342) -- -- (342)
-------- -------- ------- --------
Total Shareholders'
Equity.............. 16,521 8,542 (1,987) 23,076
-------- -------- ------- --------
Total Liabilities &
Shareholders'
Equity............ $174,172 $119,535 $ 414 $294,121
======== ======== ======= ========
Number of common shares
outstanding........... 2,476.8 4,642.9 3,869.7
Common shareholders'
equity per share...... $ 6.67 $ 1.84 $ 5.96
</TABLE>

See "Notes to Unaudited Pro Forma Combined Condensed Financial Information"

15
<PAGE>

Unaudited Pro Forma Combined Condensed Balance Sheets At December 31, 1998

<TABLE>
<CAPTION>
Rancho Santa Fe
and First
Community
First Community Bank of the
Rancho Santa Fe of the Desert Bank Pro Forma Desert
(Historical) (Historical) Adjustments Pro Forma
--------------- ------------------ ----------- ---------------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Assets:
Cash and due from banks......... $ 9,066 $ 9,777 $ -- $ 18,843
Federal funds sold.............. 12,254 23,869 -- 36,123
-------- -------- ------- --------
Total cash and cash
equivalents.................. 21,320 33,646 -- 54,966
Time deposits in financial
institutions................... -- 5,440 -- 5,440
Federal Reserve Bank and Federal
Home Loan Bank stock, at cost.. 856 -- -- 856
Securities held to maturity..... 370 5,563 -- 5,933
Securities available-for-sale... 31,591 -- -- 31,591
-------- -------- ------- --------
Total securities.............. 32,817 5,563 -- 38,380
Net loans....................... 107,174 60,021 -- 167,195
Property, plant and equipment... 1,467 3,764 -- 5,231
Investment in property held-for-
sale........................... -- 1,392 -- 1,392
Bank premises held-for-sale..... 1,176 -- -- 1,176
Other real estate owned......... -- 104 -- 104
Deferred taxes.................. 688 -- 414 1,102
Other assets.................... 1,370 1,671 -- 3,041
-------- -------- ------- --------
Total Assets.................. $166,012 $111,601 $ 414 $278,027
======== ======== ======= ========
Liabilities and Shareholders'
Equity:
Liabilities:
Non-interest bearing deposits... $ 42,236 $ 37,407 $ -- $ 79,643
Interest bearing deposits....... 106,391 65,387 -- 171,778
-------- -------- ------- --------
Total deposits................ 148,627 102,794 -- 251,421
Borrowed funds.................. -- -- -- --
Accrued interest payable & other
liabilities.................... 2,171 1,188 2,401 5,760
-------- -------- ------- --------
Total liabilities............. 150,798 103,982 2,401 257,181
Shareholders' Equity:
Common stock.................... 6,153 7,292 -- 13,445
Additional paid-in-capital...... 5,327 -- -- 5,327
Retained earnings............... 3,703 327 (1,987) 2,043
Accumulated other comprehensive
income (loss):
Net unrealized gains (losses)
on securities available-for-
sale, net.................... 31 -- 31
-------- -------- ------- --------
Total Shareholders' Equity.... 15,214 7,619 (1,987) 20,846
-------- -------- ------- --------
Total Liabilities &
Shareholders' Equity......... $166,012 $111,601 $ 414 $278,027
======== ======== ======= ========
Number of common shares
outstanding.................... 2,461.2 4,642.9 3,854.1
Common shareholders' equity per
share.......................... $ 6.18 $ 1.64 $ 5.41
</TABLE>

See "Notes to Unaudited Pro Forma Combined Condensed Financial Information"

16
<PAGE>

Unaudited Pro Forma Combined Condensed Income Statements for the Nine Months
Ended September 30, 1999

<TABLE>
<CAPTION>
Rancho
Santa Fe
and First
First Community
Community Bank of
Rancho Santa Bank of the the
Fe Desert Pro Forma Desert
(Historical) (Historical) Adjustments Pro Forma
------------ ----------- ----------- ---------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans... $ 8,650 $ 5,720 $ -- $14,370
Interest on interest-bearing
deposits in other banks..... -- 249 -- 249
Interest on investment
securities.................. 1,538 373 -- 1,911
Interest on federal funds
sold........................ 314 739 -- 1,053
------- ------- ----- -------
Total interest income...... 10,502 7,081 -- 17,583
Interest expense:
Interest expense on
deposits.................... 2,730 1,444 -- 4,174
Interest expense on
borrowings.................. 30 -- -- 30
------- ------- ----- -------
Total interest expense..... 2,760 1,444 -- 4,204
------- ------- ----- -------
Net interest income: 7,742 5,637 -- 13,379
Less: provision for loan
losses...................... 90 323 -- 413
------- ------- ----- -------
Net interest income after
provision for loan
losses.................... 7,652 5,314 -- 12,966
Non-interest income:
Service charges, commissions
and fees.................... 749 794 -- 1,543
Securities losses............ (2) -- -- (2)
Other income................. 449 374 -- 823
------- ------- ----- -------
Total non-interest income.. 1,196 1,168 -- 2,364
Non-interest expense:
Salaries and employee
benefits.................... 2,537 2,041 -- 4,578
Occupancy, furniture and
equipment................... 899 692 -- 1,591
Impairment loss on bank
premises held-for-sale...... -- -- -- --
Professional and other
services.................... 508 738 -- 1,246
Stationery, supplies and
printing.................... 55 224 -- 279
FDIC assessment.............. 13 5 -- 18
Merchant card processing..... 327 183 -- 510
Cost of other real estate
owned....................... -- 182 -- 182
Advertising.................. 135 152 -- 287
Insurance.................... 40 30 -- 70
Other........................ 674 584 -- 1,258
------- ------- ----- -------
Total non-interest
expense................... 5,188 4,831 -- 10,019
------- ------- ----- -------
Income before income taxes..... 3,660 1,651 -- 5,311
Income taxes................... 1,527 727 -- 2,254
------- ------- ----- -------
Net income................. $ 2,133 $ 924 $ -- $ 3,057
======= ======= ===== =======
Per share information:
Number of shares (weighted
average)
Basic...................... 2,470.9 4,642.9 3,863.8
Diluted.................... 2,601.1 4,921.9 4,077.7
Income per share
Basic...................... $ 0.86 0.20 0.79
Diluted.................... $ 0.82 0.19 0.75
</TABLE>

See "Notes to Unaudited Pro Forma Combined Condensed Financial Information"

17
<PAGE>

Unaudited Pro Forma Combined Condensed Income Statements For The First Nine
Months Ended September 30, 1998

<TABLE>
<CAPTION>
Rancho Santa Fe
and First
First Community Community
Bank of the Bank of the
Rancho Santa Fe Desert Pro Forma Desert
(Historical) (Historical) Adjustments Pro Forma
--------------- --------------- ----------- ---------------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on
loans................ $ 8,039 $ 5,031 $ -- $13,070
Interest on interest-
bearing deposits in
other banks.......... -- 233 -- 233
Interest on investment
securities........... 1,089 236 -- 1,325
Interest on federal
funds sold........... 413 342 -- 755
------- ------- ----- -------
Total interest
income.............. 9,541 5,842 -- 15,383
Interest expense:
Interest expense on
deposits............. 2,717 1,215 -- 3,932
Interest expense on
borrowings........... 28 -- -- 28
------- ------- ----- -------
Total interest
expense............. 2,745 1,215 -- 3,960
------- ------- ----- -------
Net interest income:.... 6,796 4,627 -- 11,423
Less: provision for
loan losses.......... -- 691 -- 691
------- ------- ----- -------
Net interest income
after provision for
loan losses......... 6,796 3,936 -- 10,732
Non-interest income:
Service charges,
commissions and
fees................. 677 804 -- 1,481
Securities losses..... -- -- -- --
Other income.......... 449 386 -- 835
------- ------- ----- -------
Total non-interest
income.............. 1,126 1,190 -- 2,316
Non-interest expense:
Salaries and employee
benefits............. 2,363 1,759 -- 4,122
Occupancy, furniture
and equipment........ 856 588 -- 1,444
Impairment loss on
bank premises held-
for-sale............. -- -- -- --
Professional and other
services............. 547 624 -- 1,171
Stationery, supplies
and printing......... 56 207 -- 263
FDIC assessment....... 11 8 -- 19
Merchant card
processing........... 197 178 -- 375
Cost of other real
estate owned......... (5) 93 -- 88
Advertising........... 138 183 -- 321
Insurance............. 44 46 -- 90
Other................. 577 481 -- 1,058
------- ------- ----- -------
Total non-interest
expense............. 4,784 4,167 -- 8,951
------- ------- ----- -------
Income before income
taxes.................. 3,138 959 -- 4,097
Income taxes............ 1,289 260 1,549
------- ------- ----- -------
Net income........... $ 1,849 $ 699 $ -- $ 2,548
======= ======= ===== =======
Per share information:
Number of shares
(weighted average)
Basic................ 2,445.8 4,642.4 3,838.5
Diluted.............. 2,587.2 4,920.2 4,063.3
Income per share
Basic................ $ 0.76 0.15 0.66
Diluted.............. $ 0.71 0.14 0.63
</TABLE>

See "Notes to Unaudited Pro Forma Combined Condensed Financial Information"

18
<PAGE>

Unaudited Pro Forma Combined Condensed Income Statements For The Year Ended
December 31, 1998

<TABLE>
<CAPTION>
Rancho Santa Fe
First Community and First
Bank of the Community Bank
Rancho Santa Fe Desert Pro Forma of the Desert
(Historical) (Historical) Adjustments Pro Forma
--------------- --------------- ----------- ---------------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on
loans................ $ 10,465 $ 6,506 $ -- $ 16,971
Interest on interest-
bearing deposits in
other banks.......... -- 314 -- 314
Interest on investment
securities........... 1,536 302 -- 1,838
Interest on federal
funds sold........... 540 595 -- 1,135
-------- -------- ----- --------
Total interest
income.............. 12,541 7,717 -- 20,258

Interest expense:
Interest expense on
deposits............. 3,640 1,714 -- 5,354
Interest expense on
borrowings........... 36 -- -- 36
-------- -------- ----- --------
Total interest
expense............. 3,676 1,714 -- 5,390
-------- -------- ----- --------
Net interest income:.... 8,865 6,003 -- 14,868
Less: provision for
loan losses.......... -- 941 -- 941
-------- -------- ----- --------
Net interest income
after provision for
loan losses......... 8,865 5,062 -- 13,927
Non-interest income:
Service charges,
commissions and
fees................. 939 1,058 -- 1,997
Securities losses..... -- -- -- --
Other income.......... 705 494 -- 1,199
-------- -------- ----- --------
Total non-interest
income.............. 1,644 1,552 -- 3,196

Non-interest expense:
Salaries and employee
benefits............. 3,029 2,455 -- 5,484
Occupancy, furniture
and equipment........ 1,135 839 -- 1,974
Impairment loss on
bank premises held-
for-sale............. 38 -- -- 38
Professional and other
services............. 739 679 -- 1,418
Stationery, supplies
and printing......... 77 139 -- 216
FDIC assessment....... 14 25 -- 39
Merchant card
processing........... 282 221 -- 503
Cost of other real
estate owned......... (5) 62 -- 57
Advertising........... 183 247 -- 430
Insurance............. 63 81 -- 144
Other................. 683 415 -- 1,098
-------- -------- ----- --------
Total non-interest
expense............. 6,238 5,163 -- 11,401
-------- -------- ----- --------
Income before income
taxes.................. 4,271 1,451 -- 5,722
Income taxes............ 1,762 378 -- 2,140
-------- -------- ----- --------
Net income........... $ 2,509 $ 1,073 $ -- $ 3,582
======== ======== ===== ========
Per share information:
Number of shares
(weighted average)
Basic................ 2,442.9 4,642.4 3,835.6
Diluted.............. 2,601.7 4,935.3 4,082.3
Income per share
Basic................ $ 1.03 $ 0.23 $ 0.93
Diluted.............. $ 0.96 $ 0.22 $ 0.88
</TABLE>

See "Notes to Unaudited Pro Forma Combined Condensed Financial Information"

19
<PAGE>

Unaudited Pro Forma Combined Condensed Income Statements For The Year
Ended December 31, 1997

<TABLE>
<CAPTION>
Rancho Santa Fe
and First
First Community Community
Bank of the Bank of the
Rancho Santa Fe Desert Pro Forma Desert
(Historical) (Historical) Adjustments Pro Forma
--------------- --------------- ----------- ---------------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on
loans................ $ 9,337 $ 4,884 $ -- $14,221
Interest on interest-
bearing deposits
in other banks....... 3 79 -- 82
Interest on investment
securities........... 1,224 232 -- 1,456
Interest on federal
funds sold........... 319 629 -- 948
------- ------- ----- -------
Total interest
income.............. 10,883 5,824 -- 16,707
Interest expense:
Interest expense on
deposits............. 3,202 1,321 -- 4,523
Interest expense on
borrowings........... 41 -- -- 41
------- ------- ----- -------
Total interest
expense............. 3,243 1,321 -- 4,564
------- ------- ----- -------
Net interest income:.... 7,640 4,503 -- 12,143
Less: provision for
loan losses.......... 50 260 -- 310
------- ------- ----- -------
Net interest income
after provision for
loan losses......... 7,590 4,243 -- 11,833
Non-interest income:
Service charges,
commissions and
fees................. 831 968 -- 1,799
Securities losses..... -- -- -- --
Other income.......... 732 267 -- 999
------- ------- ----- -------
Total non-interest
income.............. 1,563 1,235 -- 2,798
Non-interest expense:
Salaries and employee
benefits............. 2,914 1,842 -- 4,756
Occupancy, furniture
and equipment........ 1,091 643 -- 1,734
Impairment loss on
bank premises
held-for-sale........ -- -- -- --
Professional and other
services............. 515 769 -- 1,284
Stationery, supplies
and printing......... 86 90 -- 176
FDIC assessment....... 12 56 -- 68
Merchant card
processing........... 209 163 -- 372
Cost of other real
estate owned......... -- 73 -- 73
Advertising........... 213 181 -- 394
Insurance............. 60 77 -- 137
Other................. 561 361 -- 922
------- ------- ----- -------
Total non-interest
expense............. 5,661 4,255 -- 9,916
------- ------- ----- -------
Income before income
taxes.................. 3,492 1,223 -- 4,715
Income taxes............ 1,380 498 -- 1,878
------- ------- ----- -------
Net income........... $ 2,112 $ 725 $ -- $ 2,837
======= ======= ===== =======
Per share information:
Number of shares
(weighted average)
Basic................ 2,427.0 4,641.9 3,819.6
Diluted.............. 2,552.1 4,685.7 3,957.8
Income per share
Basic................ $ 0.87 $ 0.16 $ 0.74
Diluted.............. $ 0.83 $ 0.15 $ 0.72
</TABLE>

See "Notes to Unaudited Pro Forma Combined Condensed Financial Information"

20
<PAGE>

Unaudited Pro Forma Combined Condensed Income Statements For The Year Ended

December 31, 1996

<TABLE>
<CAPTION>
Rancho Santa Fe
and First
First Community Community
Bank of the Bank of the
Rancho Santa Fe Desert Pro Forma Desert
(Historical) (Historical) Adjustments Pro Forma
--------------- --------------- ----------- ---------------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on
loans................ $ 7,664 $ 4,028 $ -- $ 11,692
Interest on interest-
bearing deposits
in other banks....... 3 -- -- 3
Interest on investment
securities........... 1,247 257 -- 1,504
Interest on federal
funds sold........... 348 205 -- 553
-------- -------- ----- --------
Total interest
income.............. 9,262 4,490 -- 13,752
Interest expense:
Interest expense on
deposits............. 2,821 1,083 -- 3,904
Interest expense on
borrowings........... 34 4 -- 38
-------- -------- ----- --------
Total interest
expense............. 2,855 1,087 -- 3,942
-------- -------- ----- --------
Net interest income:.... 6,407 3,403 -- 9,810
Less: provision for
loan losses.......... 40 320 -- 360
-------- -------- ----- --------
Net interest income
after provision for
loan losses......... 6,367 3,083 -- 9,450
Non-interest income:
Service charges,
commissions and
fees................. 1,021 791 -- 1,812
Gain on sales of
securities, net...... 3 -- -- 3
Other income.......... 791 623 -- 1,414
-------- -------- ----- --------
Total non-interest
income.............. 1,815 1,414 -- 3,229
Non-interest expense:
Salaries and employee
benefits............. 2,943 1,447 -- 4,390
Occupancy, furniture
and equipment........ 1,097 506 -- 1,603
Impairment loss on
bank premises
held-for-sale........ 268 -- -- 268
Professional and other
services............. 425 830 -- 1,255
Stationery, supplies
and printing......... 112 84 -- 196
FDIC assessment....... 75 28 -- 103
Merchant card
processing........... 162 102 -- 264
Cost of other real
estate owned......... 15 459 -- 474
Advertising........... 150 168 -- 318
Insurance............. 79 71 -- 150
Other................. 597 369 -- 966
-------- -------- ----- --------
Total non-interest
expense............. 5,923 4,064 -- 9,987
-------- -------- ----- --------
Income before income
taxes (benefit)........ 2,259 433 -- 2,692
Income taxes (benefit).. -- (479) -- (479)
-------- -------- ----- --------
Net income........... $ 2,259 $ 912 $ -- $ 3,171
======== ======== ===== ========
Per share information:
Number of shares
(weighted average)
Basic................ 2,425.0 4,641.9 3,817.6
Diluted.............. 2,451.0 4,641.9 3,843.6
Income per share
Basic................ $ 0.93 $ 0.20 $ 0.83
Diluted.............. $ 0.92 $ 0.20 $ 0.83
</TABLE>

See "Notes to Unaudited Pro Forma Combined Condensed Financial Information"

21
<PAGE>

NOTES TO RANCHO SANTA FE--FIRST COMMUNITY BANK OF THE DESERT

UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA

NOTE 1: BASIS OF PRESENTATION FIRST COMMUNITY BANK OF THE DESERT

Certain historical data of First Community Bank of the Desert have been
reclassified on a pro forma basis to conform to Rancho Santa Fe's
classifications. Transactions between Rancho Santa Fe and First Community Bank
of the Desert are not material in relation to the unaudited pro forma combined
financial statements, and have not been eliminated from the pro forma combined
amounts. The unaudited pro forma number of common shares outstanding, common
shareholders' equity per share, number of shares (basic and diluted) and income
(loss) per share (basic and diluted) are based on the share amounts for Rancho
Santa Fe multiplied by the First Community Bank of the Desert exchange ratio of
0.30.

NOTE 2: MERGER COSTS

The unaudited pro forma combined condensed financial data reflect First
Community Bancorp's, Rancho Santa Fe's and First Community Bank of the Desert's
management's current estimate, for purposes of pro forma presentation, of the
aggregate estimated merger costs of $2,401,000 ($1,987,000 net of taxes,
computed using the combined federal and state tax rate of 42.0%) expected to be
incurred in connection with the First Community Bank of the Desert merger. In
accordance with pooling-of-interests accounting, these costs will be recognized
upon the closing of the transaction. While a portion of these costs may be
required to be recognized over time, the current estimate of these costs has
been recorded in the pro forma combined balance sheets in order to disclose the
aggregate effect of these activities on First Community Bancorp's pro forma
combined financial position. The estimated aggregate costs include the
following:

<TABLE>
<S> <C>
Employee costs................................................. $ 415,000
Conversion costs............................................... 400,000
Other costs.................................................... 170,000
----------
985,000
Tax benefits................................................... 414,000
----------
571,000
Investment banking and other professional fees................. 1,416,000
----------
$1,987,000
==========
</TABLE>

First Community Bancorp management's cost estimates are forward-looking.
While the costs represent First Community Bancorp management's current estimate
of merger costs that will be incurred, the ultimate level and timing of
recognition of such costs will be based on the final merger and integration
plan to be completed prior to consummation of the merger of First Community
Bank of the Desert, which will be developed by various of Rancho Santa Fe's,
First Community Bancorp's and First Community Bank of the Desert's task forces
and integration committees. Readers are cautioned that the completion of the
merger and integration plan and the resulting management plans detailing
actions to be undertaken to effect the Merger and resultant integration of
operations will impact these estimates; the type and amount of costs incurred
could vary materially from these estimates if future developments differ from
the underlying assumptions used by management in determining the current
estimate of these costs.

22
<PAGE>

RISK FACTORS

In addition to the other information included in this document, including
the matters addressed in "A Warning About Forward-Looking Information," you
should consider the matters described below carefully in determining whether to
approve the merger agreement. Where "we" and "our" is used in this section, it
is meant to refer to both First Community Bancorp before the merger and to
First Community Bancorp following its proposed acquisition of First Community
Bank of the Desert.

The merger consideration is fixed despite potential change in relative stock
prices. This means First Community Bank of the Desert shareholders will not
know the value of the First Community Bancorp common stock they are receiving
in the merger until the date we consummate the merger. For each outstanding
share of First Community Bank of the Desert stock, shareholders of First
Community Bank of the Desert will receive 0.30 shares of First Community
Bancorp common stock. This merger consideration will not be adjusted for any
increase or decrease in the market prices of First Community Bank of the Desert
common stock or Rancho Santa Fe common stock or, after the reorganization,
First Community Bancorp common stock.

The market prices of First Community Bank of the Desert common stock and
Rancho Santa Fe (or after the reorganization, First Community Bancorp) common
stock before the merger takes place may vary from their prices at the date of
this document and at the date of the annual meeting. Such variations in the
market prices of Rancho Santa Fe (or after the reorganization, First Community
Bancorp) common stock and First Community Bank of the Desert common stock may
result from changes in the business, operations or prospects of Rancho Santa
Fe, First Community Bank of the Desert or the combined company, market
assessments of the likelihood that the merger will be consummated and the
timing thereof, regulatory considerations, general market and economic
conditions and other factors. We urge you to obtain current market quotations
for Rancho Santa Fe (or after the reorganization, First Community Bancorp)
common stock and First Community Bank of the Desert common stock.

There are uncertainties in integrating our business operations and realizing
enhanced earnings. If we are unable to integrate our businesses successfully,
this could hurt our business. The merger involves the integration of companies
that have previously operated independently. Successful integration of First
Community Bank of the Desert's consolidated operations will depend primarily on
First Community Bancorp's ability to consolidate operations, systems and
procedures and to eliminate redundancies and costs. No assurance can be given
that we will be able to integrate our operations without encountering
difficulties including, without limitation, the loss of key employees and
customers, the disruption of our respective ongoing businesses or possible
inconsistencies in standards, controls, procedures and policies.

An economic slowdown in Southern California could hurt our business. We
focus our business in Southern California. An economic slowdown in Southern
California could include the following consequences, any of which could hurt
our business:

. loan delinquencies may increase;

. problem assets and foreclosures may increase;

. demand for our products and services may decline; and

. collateral for loans made by us, especially real estate, may decline in
value, in turn reducing customers' borrowing power, and reducing the
value of assets and collateral associated with our existing loans.

A downturn in the real estate market could hurt our business because most of
our loans are secured by real estate. Our ability to recover on defaulted loans
by selling the real estate collateral would then be diminished, and we would be
more likely to suffer losses on defaulted loans. As of September 30, 1999,
approximately 59 percent of the value of the Rancho Santa Fe loan portfolio and
76 percent of the value of First Community Bank of the Desert Bank's loan
portfolio consisted of loans secured by various types of real estate. Most of
our real property collateral is located in Southern California. If there is a
significant decline in real estate values, especially in Southern California,
the collateral for our loans will provide less security.

23
<PAGE>

Changes in interest rates affect our profitability. Changes in prevailing
interest rates may hurt our business. We derive our income mainly from the
difference or "spread" between the interest earned on loans, securities and
other interest-earning assets, and interest paid on deposits, borrowings and
other interest-bearing liabilities. In general, the wider the spread, the more
we earn. When market rates of interest change, the interest we receive on our
assets and the interest we pay on our liabilities will fluctuate. This can
cause decreases on our spread and can greatly affect our income. In addition,
interest rates affect how much money we can lend. For example, when interest
rates rise, loan originations tend to decrease.

We face strong competition from financial service companies and other
companies that offer banking services which can hurt our business. After the
merger, we will conduct our banking operations primarily in Southern
California. Increased competition in our market may result in reduced loans and
deposits. Ultimately, we may not be able to compete successfully against
current and future competitors. Many competitors offer the banking services
that we offer in our service area. These competitors include national banks,
regional banks and other community banks. We also face competition from many
other types of financial institutions, including, without limitation, savings
and loans, finance companies, brokerage firms, insurance companies, credit
unions, mortgage banks and other financial intermediaries.

We will have a limited trading market. While First Community Bancorp common
stock is not subject to any specific restrictions on transfer, it is uncertain
whether an active public market will develop for First Community Bancorp common
stock after the merger.

We face potential uncertainties and changes to industry regulations. Both
First Community Bank of the Desert and First Community Bancorp are subject to
significant governmental supervision and regulation. These regulations are
intended primarily for the protection of depositors. Statutes and regulations
affecting First Community Bank of the Desert and First Community Bancorp may be
changed at any time, and the interpretation of these statutes and regulations
by examining authorities may also change. Congress recently passed and the
President signed the Gramm-Leach-Bliley Act, which makes significant changes to
federal statutes and regulations. There can be no assurance that any such
changes to the statutes and regulations or in their interpretation will not
adversely affect our business. First Community Bank of the Desert is subject to
regulation and examination by the California Department of Financial
Institutions and the Board of Governors of the Federal Reserve System. Rancho
Santa Fe is subject to regulation and examination by the Office of the
Comptroller of the Currency. First Community Bancorp is subject to regulation
and examination by the Board of Governors of the Federal Reserve System. In
addition to governmental supervision and regulation, First Community Bank of
the Desert and First Community Bancorp are subject to changes in other federal
and state laws, including changes in tax laws, which could materially affect
the financial services industry.

24
<PAGE>

A WARNING ABOUT FORWARD-LOOKING INFORMATION

First Community Bancorp, Rancho Santa Fe and First Community Bank of the
Desert have each made forward-looking statements in this document, and in
certain documents that we refer to in this document, that are subject to risks
and uncertainties. These statements are based on the beliefs and assumptions of
each respective company's management, and on information currently available to
such management. Forward-looking statements include the information concerning
possible or assumed future results of operations of First Community Bancorp,
Rancho Santa Fe and/or First Community Bank of the Desert set forth under
"Questions and Answers About the Merger," "Summary," "The Merger--Background of
and Reasons for the Merger," and "Unaudited Pro Forma Condensed Combined
Financial Statements," and statements preceded by, followed by or that include
the words "will," "believes," "expects," "anticipates," "intends," "plans,"
"estimates" or similar expressions.

In particular, we have made statements in this document regarding expected
cost savings from the merger, the anticipated effect of the merger and First
Community Bancorp's anticipated performance in future periods. With respect to
estimated cost savings, First Community Bancorp has made certain assumptions
regarding, among other things, the extent of operational overlap between Rancho
Santa Fe and First Community Bank of the Desert, the size of anticipated
reductions in fixed labor costs, the amount of severance expenses, and the
costs related to the merger. The realization of cost savings are subject to the
risk that the foregoing assumptions are not accurate.

Moreover, any statements in this document regarding the anticipated effect
of the merger and First Community Bancorp's anticipated performance in future
periods are subject to risks relating to, among other things, the following:

. First Community Bancorp may not realize expected cost savings from the
merger within the expected time frame;

. First Community Bancorp's revenues following the merger may be lower
than expected, or deposit attrition, operating costs or customer loss
and business disruption following the merger may be greater than
expected;

. competitive pressures among depository and other financial institutions
may increase significantly;

. First Community Bancorp may experience greater than expected costs or
difficulties relating to the integration of the businesses of Rancho
Santa Fe and First Community Bank of the Desert;

. changes in the interest rate environment may reduce profits;

. there may be less than favorable general economic or business
conditions, either nationally or in California, resulting in, among
other things, a deterioration in credit quality or a reduced demand for
credit;

. competitors of First Community Bancorp, Rancho Santa Fe and First
Community Bank of the Desert may have greater financial resources and
develop products that enable such competitors to compete more
successfully than First Community Bancorp, Rancho Santa Fe and First
Community Bank of the Desert; and

. legislation could be enacted or interpreted in a manner that might
negatively impact First Community Bancorp.

Management of First Community Bancorp, Rancho Santa Fe and First Community
Bank of the Desert believe that these forward-looking statements are
reasonable; however, you should not place undue reliance on such forward-
looking statements, which are based on current expectations.

25
<PAGE>

Forward-looking statements are not guarantees of performance. They involve
risks, uncertainties and assumptions. The future results and shareholder values
of First Community Bancorp following completion of the merger may differ
materially from those expressed in these forward-looking statements. Many of
the factors that will determine these results and values are beyond First
Community Bancorp's, Rancho Santa Fe's, and First Community Bank of the
Desert's ability to control or predict. For those statements, First Community
Bancorp, Rancho Santa Fe, and First Community Bank of the Desert claim the
protection of the safe harbor for forward-looking statements contained in the
Private Securities Litigation Reform Act of 1995.

26
<PAGE>

INFORMATION ABOUT FIRST COMMUNITY BANCORP

AND RANCHO SANTA FE

Business of First Community Bancorp

First Community Bancorp is a California bank holding company formed in
October 1999 to operate Rancho Santa Fe National Bank. First Community Bancorp
and Rancho Santa Fe entered into an Agreement and Plan of Reorganization, dated
as of , 2000 pursuant to which Rancho Santa Fe will merge with and into a
wholly-owned subsidiary interim national bank of First Community Bancorp. As a
result of the reorganization, Rancho Santa Fe will become a subsidiary of First
Community Bancorp and each share of Rancho Santa Fe common stock will be
exchanged for one share of First Community Bancorp common stock.

Business of Rancho Santa Fe

Rancho Santa Fe, a national banking association, commenced operations on
March 2, 1982. Rancho Santa Fe serves the commercial and industrial,
professional, real estate and private banking markets of San Diego County.
Rancho Santa Fe's main office is located at 6110 El Tordo, Rancho Santa Fe,
California. Rancho Santa Fe is a member of the Federal Reserve System and its
deposits are insured by the Federal Deposit Insurance Corporation up to the
maximum limits prescribed by law.

In addition to the main office in Rancho Santa Fe, Rancho Santa Fe operates
three full-service offices located in Golden Triangle (University Towne
Centre), Escondido and Carlsbad, all in San Diego County. In addition, it is an
active participant in the Small Business Administration (SBA) guaranteed
lending program through its lending department in San Diego and serves the
Inland Empire market through its Corporate Loan Office located in Claremont,
California.

Rancho Santa Fe concentrates on providing community banking services to, and
serving the needs of, small and medium-sized businesses, professionals, local
area residents and affluent individuals throughout San Diego County, with an
emphasis on cultivating long-term overall banking relationships. Rancho Santa
Fe offers a variety of lending activities including commercial, real estate
construction and real estate miniperm, government guaranteed SBA loans and
consumer loans. Rancho Santa Fe offers a variety of deposit instruments. These
include personal and business checking accounts and savings accounts, including
interest-bearing negotiable order of withdrawal (NOW) accounts, money market
accounts and time certificates of deposits. Rancho Santa Fe offers a wide range
of specialized services to its customers including internet banking, ATM
access, debit cards, travelers' checks, collections, night deposits facilities
and except for the Golden Triangle and Carlsbad offices, safe deposit boxes.
Rancho Santa Fe issues, through a correspondent, VISA(TM) and MasterCard(TM)
credit cards and accepts merchant drafts for both MasterCard(TM) and VISA(TM).

Rancho Santa Fe offers mortgage brokerage services. Rancho Santa Fe receives
fees for packaging and processing loan applications for financing the purchase
or refinance of single-family residences to several mortgage lenders for
funding.

Rancho Santa Fe derives its income primarily from interest received on real
estate loans, commercial loans, SBA loans and consumer loans and, to a lesser
extent, fees from the brokerage of mortgage loans, interest on investment
securities and fees received in connection with loans and other services
offered, including loan servicing and deposit services. Rancho Santa Fe's major
operating expenses are the interest it pays on deposits and other borrowings
and general operating expenses. Rancho Santa Fe relies on a foundation of
locally generated deposits. At September 30, 1999, deposits totaled
$154,006,000 of which approximately 29% were non-interest bearing and 71% were
interest bearing.

Lending Activities

Rancho Santa Fe's loans are primarily short-term and at adjustable rates. At
September 30, 1999, gross loans totaled $127,942,000 of which approximately 55%
consisted of commercial loans, 38% consisted of real estate loans, 6% consisted
of SBA loans and 1% consisted of consumer loans. Special services and requests
beyond the lending limits of Rancho Santa Fe National Bank can be arranged
through correspondent banks.

27
<PAGE>

Rancho Santa Fe's real estate loan portfolio is comprised of miniperm loans
secured by commercial real estate, consumer lines of credit secured by
residential properties and construction loans.

Construction loans are made primarily for the purposes of constructing or
improving residential real estate as well as commercial real estate. Commercial
loans to small and medium-sized business are made essentially to provide
working capital and equipment financing for small and medium-sized business
customers or for other business purposes. Rancho Santa Fe regularly makes SBA
loans, the guaranteed portion of which is generally sold in the secondary
market. Rancho Santa Fe retains the servicing rights of those loans sold in the
secondary market. Consumer loans are for household expenditures including
automobiles, recreation and other personal expenditures.

Rancho Santa Fe evaluates each borrower's credit-worthiness on a case-by-
case basis. The amount of collateral obtained by Rancho Santa Fe, if necessary,
is based upon management's credit evaluation of the borrower. Collateral held
varies but may include deposit accounts, accounts receivable, inventory,
property, plant and equipment, residential real estate and income-producing
commercial properties.

Competition

The banking business in California generally, and in Rancho Santa Fe's
market area specifically, is highly competitive with respect to both loans and
deposits and is dominated by a number of major banks which have offices
operating throughout the state and in Rancho Santa Fe's market area. Rancho
Santa Fe competes for deposits and loans principally with these major banks,
savings and loan associations, finance companies, credit unions, brokerage
companies and other financial institutions located in Rancho Santa Fe's market
area. There has been increased competition for deposit and loan business over
the past several years as a result of deregulation and the advent of interstate
banking. Bank holding companies headquartered outside of California have
entered the California market and have provided further competition for Rancho
Santa Fe.

Many of the major commercial banks operating in Rancho Santa Fe's market
area offer certain services which Rancho Santa Fe does not offer directly but
can provide through a correspondent bank or through other financial service
providers. Banks with a larger capitalization also have larger lending limits
and are thereby able to serve the higher dollar needs of larger customers.

28
<PAGE>

RANCHO SANTA FE
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION

The following discussion and analysis of Rancho Santa Fe's financial
condition and results of operation should be read in conjunction with our
financial statements and related notes included elsewhere in this Proxy
Statement/Prospectus.

Basis of Presentation

The following is Rancho Santa Fe National Bank's management discussion and
analysis of the results of operations and the historical financial condition of
Rancho Santa Fe National Bank. This discussion should be read in conjunction
with Rancho Santa Fe National Bank audited financial statements and
accompanying footnotes and other selected financial data presented elsewhere
herein.

Results of Operations

Earnings Performance. Rancho Santa Fe National Bank reported net earnings
for the year ended December 31, 1998 of $2,509,000, compared with $2,112,000
for 1997, an increase of $397,000 or 18.80%. Net earnings for the year ended
1997 were below net earnings of $2,259,000 for 1996 by $147,000. For the year
ended 1997, Rancho Santa Fe National Bank recorded a provision for income taxes
of $1,380,000 whereas for the year ended 1996, Rancho Santa Fe National Bank
recorded no income tax provision as a result of the reversal of the valuation
allowance on deferred tax assets due to the recognition of net operating loss
carry forwards. In 1998, basic earnings per share and diluted earnings per
share were $1.03 and $0.96, respectively, compared with $0.87 and $0.83,
respectively, in 1997. Rancho Santa Fe National Bank's improved earnings
performance between 1998 and 1997 is primarily attributable to an increase in
net interest income arising from a greater quantity of interest-earning assets
particularly in the loan segment of earning assets. Rancho Santa Fe National
Bank believes that the demand for loans increased in Rancho Santa Fe National
Bank's market area due to a strong local economy as well as low interest rates.
In addition to the growth in earning assets, general improvement in operating
efficiencies contributed to Rancho Santa Fe National Bank's earnings
performance.

Net earnings for the nine months ended September 30, 1999 were $2,133,000
compared with $1,849,000 for the same period in 1998, an increase of $284,000
or 15.36%. Basic earnings per share and diluted earnings per share for the nine
month period ended September 30, 1999 were $0.86 and $0.82, respectively,
compared with $0.76 and $0.71 per share, respectively, for the same period in
1998. Net interest income before provision for loan losses, the primary
contributor to the increase in earnings, rose $946,000 or 13.92% for the nine
months ended September 30, 1999 compared with the same period in 1998.

29
<PAGE>

The following is a condensed summary of the statement of operations along
with selected profitability ratios:

Rancho Santa Fe National Bank
Analysis of Net Income

(Dollars in thousands)

<TABLE>
<CAPTION>
Nine Months
Ended
September 30, Year Ended December 31,
-------------- -------------------------
1999 1998 1998 1997 1996
------ ------ ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net interest income................. $7,742 $6,796 $ 8,865 $ 7,640 $ 6,407
Provision for loan losses........... 90 -- -- 50 40
Other operating income.............. 986 915 1,253 1,122 1,350
Net gains on sales of SBA loans..... 210 211 391 441 465
Other operating expenses............ 5,188 4,784 6,238 5,661 5,923
Provision for income taxes.......... 1,527 1,289 1,762 1,380 --
Net income.......................... 2,133 1,849 2,509 2,112 2,259
Return on average assets............ 1.67% 1.73% 1.71% 1.70% 2.06%
Return on average equity............ 18.06% 17.82% 17.74% 17.85% 23.49%
Dividend payout ratio............... 24.41% 23.68% 23.30% -- --
Equity to assets.................... 9.26% 9.68% 9.63% 9.52% 8.78%
</TABLE>

Net Interest Income. Net interest income, which constitutes one of the
principal sources of income for Rancho Santa Fe National Bank, represents the
difference between interest earned on assets and interest paid on liabilities.
Net interest margin is net interest income expressed as a percentage of average
interest-earning assets. Net interest income is affected by changes in both
interest rates and the volume of average earning assets and interest-bearing
liabilities. The following tables provide information concerning average
interest-earning assets and interest-bearing liabilities, interest earned and
paid, and the related yields and rates on major categories for the periods
indicated:

30
<PAGE>

Rancho Santa Fe National Bank
Analysis of Average Rates and Balances
Nine Months Ended September 30,

(Dollars in thousands)

<TABLE>
<CAPTION>
1999 1998
---------------------------- ----------------------------
Interest Interest Interest Interest
Average Income/ Yields and Average Income/ Yields and
Balance Expense Rates Balance Expense Rates
-------- -------- ---------- -------- -------- ----------

<S> <C> <C> <C> <C> <C> <C>
ASSETS

Loans, net (1) (2)...... $116,479 $ 8,650 9.93% $ 99,854 $8,039 10.76%
Investment securities
(2).................... 34,556 1,538 5.96% 24,051 1,089 6.05%
Federal funds sold...... 9,070 314 4.63% 10,337 413 5.34%
Deposits with financial
institutions........... -- --
-------- ------- ---- -------- ------ -----
Total interest earning
assets............... 160,105 10,502 8.77% 134,242 9,541 9.50%
Noninterest earning
assets................. 10,431 9,062
-------- --------
Total assets.......... $170,536 $143,304
======== ========

LIABILITIES

Time deposits of
$100,000 or more....... $ 16,148 $ 583 4.83% $ 10,586 $ 429 5.42%
All other interest-
bearing deposits....... 94,208 2,147 3.05% 83,038 2,288 3.68%
Other................... 793 30 4.89% 651 28 5.75%
-------- ------- ---- -------- ------ -----
Total interest-bearing
liabilities.......... 111,149 2,760 3.32% 94,275 2,745 3.89%
Noninterest-bearing
deposits............... 42,421 34,242
Other liabilities....... 1,175 917
Shareholders' equity.... 15,791 13,870
-------- --------
Total liabilities and
shareholders' equity... $170,536 $143,304
======== ========
Net interest rate
spread................. 5.45% 5.61%
==== =====
Net interest income..... $ 7,742 $6,796
======= ======
Net yield on interest-
earning assets......... 6.47% 6.77%
==== =====
</TABLE>

- --------

(1) Includes nonaccrual loans and loan fees.

(2) Yields on loans and securities have not been adjusted to a tax-equivalent
basis.

31
<PAGE>

Rancho Santa Fe National Bank
Analysis of Average Rates and Balances
Years Ended December 31,
(Dollars in thousands)

<TABLE>
<CAPTION>
1998 1997
---------------------------- ----------------------------
Interest Interest Interest Interest
Average Income/ Yields and Average Income/ Yields and
Balance Expense Rates Balance Expense Rates
-------- -------- ---------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Loans, net (1) (2)...... $101,427 $10,465 10.32% $ 90,121 $9,337 10.36%
Investment securities
(2).................... 25,656 1,536 5.99% 19,949 1,224 6.14%
Federal funds sold...... 10,418 540 5.18% 6,095 319 5.23%
Deposits with financial
institutions........... -- -- 42 3 7.14%
-------- ------- ----- -------- ------ -----
Total interest earning
assets................ 137,501 12,541 9.12% 116,207 10,883 9.37%
Noninterest earning
assets................. 9,335 8,117
-------- --------
Total assets........... $146,836 124,324
======== ========
LIABILITIES
Time deposits of
$100,000 or more....... $ 11,368 $ 609 5.36% $ 9,678 $ 518 5.35%
All other interest-
bearing deposits....... 84,335 3,031 3.59% 72,575 2,684 3.70%
Other................... 624 36 7.03% 776 41 5.47%
-------- ------- ----- -------- ------ -----
Total interest-bearing
liabilities........... 96,327 3,676 3.82% 83,029 3,243 3.91%
Noninterest-bearing
deposits............... 35,350 28,355
Other liabilities....... 1,018 1,110
Shareholders' equity.... 14,141 11,830
-------- --------
Total liabilities and
shareholders' equity... $146,836 $124,324
======== ========
Net interest rate
spread................. 5.30% 5.46%
===== =====
Net interest income..... $ 8,865 $7,640
======= ======
Net yield on interest-
earning assets......... 6.45% 6.57%
===== =====
</TABLE>
- --------
(1) Includes nonaccrual loans and loan fees.

(2) Yields on loans and securities have not been adjusted to a tax-equivalent
basis.

Net interest income before provision for loan losses for the nine-month
period ended September 30, 1999 increased $946,000 or 13.92% compared with the
same prior-year period. The increase for the nine-month period in 1999 compared
to the same period in 1998 was due to the increase in average earning assets of
$25,863,000 or 19.27%. The rate earned on interest-earning assets for the first
nine months of 1999 declined to 8.78% from 9.52% for the same period in 1998.
The decline was primarily attributable to the effect of the overall decline in
market interest rates experienced at the end of 1998. Average loans outstanding
during the first nine months of 1999 were $116,479,000, which earned interest
at an average rate of 9.93%, compared with $99,854,000 and 10.76% for the same
period in 1998. This increase in loans was due primarily to the strong economic
climate in Rancho Santa Fe National Bank's market area and emphasis on business
development efforts to expand business in San Diego County resulting in growth
in all categories of loans.

Average investments outstanding for the first nine months of 1999 were
$34,556,000 and earned interest at an average rate of 5.96%, compared with
$24,051,000 and 6.05% for the same period in 1998. Average federal funds sold
declined to $9,070,000 during the first nine months of 1999 compared with
$10,337,000 for the

32
<PAGE>

same period of 1998 and earned average rates of 4.63% and 5.34%, respectively,
for the same periods. Short-term interest rates were lowered by the Federal
Reserve Bank during the fourth quarter of 1998 resulting in lower short-term
rates during the first nine months of 1999 compared with the same period of
1998.

Average outstanding interest-bearing liabilities of $111,149,000 for the
nine months ended September 30, 1999 paid an average rate of 3.32% during that
period, as compared to average outstanding interest-bearing liabilities of
$94,275,000, which paid an average rate of 3.89% for the nine months ended
September 30, 1998. This decrease in average rates paid in 1999 is a result of
the above mentioned decline in the general level of interest rates.

During 1998, average earning assets grew to $137,501,000, an increase of
$21,294,000 or 18.32% over 1997. Average loans increased $11,306,000 or 12.55%,
accounting for the largest dollar increase in average earning assets. During
1998, Rancho Santa Fe National Bank management increased its efforts to
generate loans through strong emphasis on business development in order to
expand its business in the San Diego area. In addition, the overall economic
conditions in Rancho Santa Fe National Bank's market area have been favorable
to customers' business interests, resulting in increased demand for loans. Low
interest rates, low unemployment and rising real estate values are some of the
factors that helped the local economy and contributed to Rancho Santa Fe
National Bank's operating results in 1998. Average securities increased
$5,707,000 or 28.61%. Average federal funds sold increased $4,323,000 or
70.93%.

Average earning assets grew to $116,207,000 in 1997, an increase of
$15,043,000 or 14.87% over 1996. This increase in earning assets was primarily
in loans and federal funds sold. In 1997, average loans grew $15,968,000 or
21.53% over 1996. The increase was due primarily to management's continued
strong emphasis on business development efforts to expand its business in the
San Diego area as well as increased loan demand resulting from an improving
economic environment in Rancho Santa Fe National Bank's market area. During the
first quarter of 1997, Rancho Santa Fe National Bank opened its fourth branch
office in the industrial area of Carlsbad in North San Diego County. Growth in
this office contributed to increased loan volume for Rancho Santa Fe National
Bank. In 1997 average securities decreased slightly compared with 1997 with
yields at approximately the same level as the prior year. In 1997 average
federal funds sold and average interest-earning deposits with other financial
institutions decreased $616,000 or 9.12% to $6,137,000 compared with 1996.
Yields on these short-term investments increased slightly compared with the
prior year.

As discussed above, Rancho Santa Fe National Bank's net interest income is
affected by the change in the amount and mix of interest-earning assets and
interest-bearing liabilities, referred as a "volume change," as well as by
changes in yields earned on interest-earning assets and rates paid on deposits
and other borrowed funds, referred to as a "rate change."

33
<PAGE>

The following table reflects changes in interest income and expense
attributable to changes in volume and interest rates of significant interest-
bearing assets and liabilities:

Rancho Santa Fe National Bank
Analysis of Volume and Interest Rates
For Periods Indicated

(Dollars in thousands)

<TABLE>
<CAPTION>
Nine Months Ended
September 30, 1999
Compared to 1998 1998 Compared to 1997 Compared to
Period 1997 1996
--------------------- -------------------- ---------------------
Attributable to Attributable to Attributable to
Change Change Change
--------------------- -------------------- ---------------------
Total In In Total In In Total In In
Change Volume Rate Change Volume Rate Change Volume Rate
------ ------ ----- ------ ------ ---- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loans, net.............. $ 611 $1,351 $(740) $1,128 $1,139 $(11) $1,453 $1,683 $(230)
Investment securities... 449 469 (20) 312 341 (29) (23) (31) 8
Federal funds sold...... (99) (51) (48) 221 226 (5) (29) (32) 3
Deposits with financial
institutions........... -- -- (3) (3) -- -- -- --
----- ------ ----- ------ ------ ---- ------ ------ -----
Total................. 961 1,769 (808) 1,658 1,703 (45) 1,401 1,620 (219)
Time deposits of
$100,000 or more....... 154 225 (71) 91 91 0 244 236 8
All other deposits...... (141) 307 (448) 347 422 (75) 137 144 (7)
Other................... 2 6 (4) (5) (17) 12 7 6 1
----- ------ ----- ------ ------ ---- ------ ------ -----
Total................. 15 538 (523) 433 496 (63) 388 386 2
Net interest income..... $ 946 $1,231 $(285) $1,225 $1,207 $ 18 $1,013 $1,234 $(221)
===== ====== ===== ====== ====== ==== ====== ====== =====
</TABLE>

The change in interest income/expense attributable to volume reflects the
change in volume times the prior year's rate and the change in interest
income/expense attributable to rate reflects the change in rates times the
current year's volume.

Provision for Loan Losses. The amount of the provision for loan losses in
each period is a charge against earnings in that period. The amount of
provision is based upon management's evaluation of the loan portfolio, past
loan loss experience, general economic conditions and other pertinent factors.

A provision for loan losses of $90,000 was made for the nine months ended
September 30, 1999, as compared to no provision for the same period in 1998.
The 1999 provision was deemed necessary largely as a result of management's
desire to provide adequate reserves for losses inherent in the increasing loan
portfolio.

There was no provision for loan losses made for the year ended December 31,
1998. A provision for loan losses of $50,000 was made for the year ended
December 31, 1997.

34
<PAGE>

Non-interest Income. The following table presents a summary of non-interest
income for the periods indicated:

Rancho Santa Fe National Bank
Analysis of Non-Interest Income
(In thousands)

<TABLE>
<CAPTION>
Nine Months
Ended
September 30, Years Ended December 31,
-------------- --------------------------
1999 1998 1998 1997 1996
------ ------ -------- -------- --------
<S> <C> <C> <C> <C> <C>
Service charges on deposit
accounts........................... $ 308 $ 257 $ 346 $ 295 $ 304
Gain (loss) on sale of securities... (2) -- -- -- 3
Escrow fees......................... -- -- -- 176 415
Merchant discount fees.............. 364 232 330 246 192
Mortgage fees....................... 77 188 263 114 110
Gain on sale of loans............... 210 211 391 441 465
Other............................... 239 238 314 291 326
------ ------ -------- -------- --------
Total............................. $1,196 $1,126 $ 1,644 $ 1,563 $ 1,815
====== ====== ======== ======== ========
</TABLE>

Noninterest income increased $70,000 or 6.22% to $1,196,000 at September 30,
1999 compared with $1,126,000 at September 30, 1998. This increase is primarily
the result of an increase of $51,000 in service charges on deposits due to the
growth in the number of accounts subject to service charge as well as an
increase of $132,000 in fees from processing merchant credit card deposits due
to a greater number of merchant accounts and transactions.

Mortgage brokerage fee income decreased $111,000 or 59.04% to $77,000 for
the first nine months of 1999 compared with $188,000 for the same period in
1998. Rancho Santa Fe National Bank receives fees for packaging and processing
loan applications for financing the purchase or refinance of single-family
residences. Funding is provided by various outside mortgage lenders. The volume
of transactions decreased during 1999 as a result of a less favorable interest
rate environment for refinance or purchase transactions.

Noninterest income in 1998 totaled $1,644,000, an increase of $81,000 or
5.18% over 1997. Increases were recognized in all categories of noninterest
income with the exception of gain on sale of loans as well as escrow fee
income. During the second quarter of 1997, Rancho Santa Fe National Bank
eliminated escrow services resulting in no additional recognition of escrow fee
income after 1997.

Service charges on deposit accounts increased $51,000 or 17.29% to $346,000
in 1998 compared with $295,000 in service charges realized for the same period
in 1997. Increase was primarily the result of growth in the number of accounts
subject to service charges.

Merchant processing fees increased $84,000 or 34.15% to $330,000 in 1998
compared with $246,000 for the same period in 1997 due to a greater number of
merchant accounts and transactions. Mortgage brokerage fee income increased
$149,000 or 130.70% to $263,000 in 1998 compared with $114,000 in 1997. The
volume of mortgage brokerage transactions increased during 1998 as a result of
an interest rate environment favorable to refinance and purchase transactions.
Income from gain on sale of loans decreased slightly by $50,000 or 11.34%
compared with 1997. Gain on sale of loans represents the premium earned on the
sale of the guaranteed portion of Small Business Administration loans. During
1998, a smaller volume of loans was sold compared to the same period in 1997.

35
<PAGE>

Noninterest income decreased $252,000 to $1,563,000 in 1997 compared with
$1,815,000 in 1996. This decrease was due primarily to a reduction in escrow
fees of $239,000 compared to escrow fees realized for the same period in 1996
for the reason mentioned previously.

Noninterest Expense. The following table presents a summary of noninterest
expense:

Rancho Santa Fe National Bank
Analysis of Non-Interest Expense
(In thousands)

<TABLE>
<CAPTION>
Nine Months
Ended Years Ended
September 30, December 31,
------------- ---------------------
1999 1998 1998 1997 1996
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Salaries and employee benefits........... $2,537 $2,363 $3,029 $2,914 $2,943
Occupancy expense........................ 611 584 771 762 808
Impairment loss on bank premises held-
for-sale................................ -- -- 38 -- 268
Furniture and equipment.................. 288 272 364 329 289
Professional and other services.......... 508 547 739 515 425
Stationery, supplies and printing........ 55 56 77 86 112
FDIC assessment.......................... 13 11 14 12 75
Merchant card processing................. 327 197 282 209 162
Cost of real estate owned, net........... -- (5) (5) -- 15
Advertising.............................. 135 138 183 213 150
Insurance................................ 40 44 63 60 79
Other.................................... 674 577 683 561 597
------ ------ ------ ------ ------
Total.................................. $5,188 $4,784 $6,238 $5,661 $5,923
====== ====== ====== ====== ======
</TABLE>

Total noninterest expenses increased $403,000 or 8.42% to $5,188,000 for the
first nine months of 1999 compared with $4,784,000 for the same period in 1998.
Salaries and employee benefits increased $174,000 or 7.36% to $2,537,000 during
this period of 1999 compared with $2,363,000 for the same prior year period.
This increase is primarily the result of pay increases, incentives and
promotions granted to employees for improved performance in their assigned
duties. On a full-time equivalent basis, staff levels were maintained at
approximately the same level over the past year.

Occupancy and furniture and fixture expenses increased $43,000 or 5.02%
during the first nine months of 1999 compared with the prior year period. The
increase is attributable primarily to additional banking office rental expenses
which generally increase annually according to lease agreements. In addition,
during the second quarter of 1999, sale of the bank building held-for-sale was
completed resulting in no further tenant rental income to Rancho Santa Fe
National Bank.

Professional and other services, consisting of audit, tax and accounting
services, legal, data processing and other outside services, decreased $39,000
or 7.13% for the period through September 30, 1999 compared with the same
period in 1998. Decrease is attributable to a reduction of costs related to
special services required to support Rancho Santa Fe National Bank deposit
customers.

Merchant card processing expenses increased $130,000 or 65.98% to $327,000
at September 30, 1999 compared with $197,000 for the same period in 1998 due to
increased numbers of accounts and transactions. In addition, other operating
expenses increased $96,000 or 16.64% during the first nine months of 1999
compared with the same prior year period as a result of the general growth of
Rancho Santa Fe National Bank as well as routine vendor price increases.

36
<PAGE>

Total noninterest expenses for the year ended December 31, 1998 increased
$577,000 or 10.19% to $6,238,000 from $5,661,000 for 1997. Salaries and
employee benefit expenses, the largest component of noninterest expenses,
increased $115,000 or 3.95% compared to 1997. Increase was due to higher
incentive compensation and commission expenses paid to employees during 1998
compared to 1997. In 1998, staff levels were maintained at approximately the
same level as those in 1997.

Occupancy and furniture and fixture expenses increased $44,000 or 4.03% to
$1,135,000 from $1,091,000 for 1997. During 1997 and the first quarter of
1998, refurbishment of three of Rancho Santa Fe National Bank's four offices
was completed resulting in increased depreciation and amortization of
furnishings and leasehold improvements compared to the prior year. During the
second quarter of 1998, a major portion of the building comprising bank
premises held-for-sale was leased. Lease income, which commenced May 1998,
partially offset increases to occupancy and furniture and fixture expenses.

Professional and other services, consisting of audit, tax and accounting
services, legal, data processing and other outside services, increased by
$224,000 or 43.50% for the year ended December 31, 1998 compared with the same
period in 1997. All categories in this segment of noninterest expense
increased compared to the prior year. The increases relate to special services
required to support Rancho Santa Fe National Bank's deposit customers as well
as, in general, greater business activity of Rancho Santa Fe National Bank in
1998 compared to the prior year.

Stationery, supplies and printing expense decreased $9,000 or 10.47% in
1998 compared with the same period in 1997. In addition, advertising expenses
decreased $30,000 or 14.08% for the year ended December 31, 1998 as a result
of Rancho Santa Fe National Bank's decision to reduce some segments of its
advertising program. Conversely, merchant credit card processing expenses
increased $73,000 or 34.93% in 1998 compared to the same period in 1997. This
increase is attributable to increased merchant credit card accounts and
transactions. Other noninterest expenses increased $122,000 or 21.75% to
$683,000 during 1998 compared to the same period in 1997. Expenses in this
category include general bank operating expenses such as travel, postage,
telephone and memberships and increases are related to Rancho Santa Fe
National Bank's growth during 1998.

Income Taxes. The provision for income taxes for the year ended December
31, 1998 was $1,762,000 compared to $1,380,000 for the same period in 1997.
For 1998, the effective tax rate was 41.25% compared with 39.52% for the same
period in 1997.

Financial Condition

Loans. The following table presents the balance of each major category of
loans at the dates indicated:

Rancho Santa Fe National Bank
Analysis of Loans

(In thousands)

<TABLE>
<CAPTION>
September 30, December 31,
------------------------------- ------------------------------
1999 1998 1998 1997
--------------- --------------- --------------- --------------
% of % of % of % of
Amount Loans Amount Loans Amount Loans Amount Loans
-------- ----- -------- ----- -------- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Loan Category:
Commercial and
industrial............. $70,777 55% $ 61,788 58% $ 63,423 58% $54,502 57%
Real estate--
construction........... 23,665 19% 19,920 19% 20,060 18% 13,278 14%
Real estate............. 24,742 19% 16,760 16% 18,190 17% 19,066 20%
Consumer................ 975 1% 1,186 1% 1,000 1% 1,115 1%
Small Business
Administration, portion
held for sale 1,206 1% 521 0% 995 0% 542 1%
Small Business
Administration,
unguaranteed portion
held for investment..... 6,577 5% 6,632 6% 6,241 6% 6,675 7%
-------- --- -------- --- -------- --- ------- ---
Total loans............. 127,942 100% 106,807 100% 109,909 100% 95,178 100%
=== === === ===
Less allowance for loan
losses................. (2,277) (2,528) (2,388) (2,415)
Less deferred loan
fees................... (389) (381) (347) (296)
-------- -------- -------- -------
Total gross loans....... $125,276 $103,898 $107,174 $92,467
======== ======== ======== =======
</TABLE>

37
<PAGE>

Rancho Santa Fe National Bank's loan portfolio net of allowance for loan
losses and deferred fees and costs totaled $125,276,000 as of September 30,
1999, an increase of $18,102,000 or 16.89% over December 31, 1998. Loans have
increased consistently over the past three years. Net loans increased
$14,707,000 or 15.91% to $107,174,000 at December 31, 1998 compared with the
prior year end. This increase followed loan growth of $8,778,000 or 10.49% to
$92,467,000 compared with December 31, 1996. Rancho Santa Fe National Bank
focuses on small to medium business commercial and real estate secured lending,
as well as loans guaranteed by the Small Business Administration. During 1998
as well as the first nine months of 1999, demand for commercial real estate and
construction lending has been strong primarily attributable to the strength of
the Southern California economy.

The following table presents Rancho Santa Fe National Bank's interest rate
sensitivity analysis at the dates indicated with respect to individual
categories of loans and provides separate analyses with respect to fixed
interest rate loans and floating interest rate loans:

Rancho Santa Fe National Bank
Loan Repricing or Maturing
As of September 30, 1999

(Dollars in thousands)

<TABLE>
<CAPTION>
Repricing or Maturing In
----------------------------------------------------
1 year or less Over 1 to 5 years Over 5 years Total
-------------- ----------------- ------------ ------
<S> <C> <C> <C> <C>
Loan Category:
Commercial and
industrial.............. $63,727 $ 5,076 $ 1,974 70,777
Real estate-
construction............ 23,665 -- -- 23,665
------- ------- ------- ------
Total.................. 87,392 5,076 1,974 94,442
======= ======= ======= ======
<CAPTION>
Fixed Rate Floating Rate Total
-------------- ----------------- ------------
<S> <C> <C> <C> <C>
Commercial and
industrial.............. 10,038 60,739 70,777
Real estate-
construction............ 1,509 22,156 23,665
------- ------- -------
Total.................. $11,547 $82,895 $94,442
======= ======= =======
</TABLE>

38
<PAGE>

Rancho Santa Fe National Bank
Loan Repricing or Maturing
As of December 31, 1998

(Dollars in thousands)

<TABLE>
<CAPTION>
Repricing or Maturing In
--------------------------------
Over 1
1 year to 5 Over 5
or less years years Total
------- -------- ------- -------
<S> <C> <C> <C> <C>
Loan Category:
Commercial and industrial..................... $56,172 $ 6,963 $ 288 $63,423
Real estate-construction...................... 20,060 -- -- 20,060
------- ------- ------- -------
Total....................................... $76,232 $ 6,963 $ 288 $83,483
======= ======= ======= =======
<CAPTION>
Fixed Floating
Rate Rate Total
------- -------- -------
<S> <C> <C> <C> <C>
Commercial and industrial..................... 8,878 54,545 63,423
Real estate-construction...................... 661 19,399 20,060
------- ------- -------
Total....................................... $ 9,539 $73,944 $83,483
======= ======= =======
</TABLE>

Nonperforming Assets. The following table sets forth certain information
with respect to Rancho Santa Fe National Bank's nonaccrual loans. For the
periods indicated, Rancho Santa Fe National Bank had no accruing loans for
which payments of principal and interest were contractually past due 90 days or
more as well as no real estate owned properties.

Rancho Santa Fe National Bank
Nonaccrual Loans

(In Thousands)

<TABLE>
<CAPTION>
September 30, December 31,
-------------- -------------
1999 1998 1998 1997
------- ------ ------ ------
<S> <C> <C> <C> <C>
Nonaccrual loans................................. $ 728 $ 167 $ 4 $ 243
------- ------ ----- ------
Total nonperforming loans...................... $ 728 $ 167 $ 4 $ 243
======= ====== ===== ======
</TABLE>

Loans are generally placed on nonaccrual status when the borrowers are past
due 90 days and when payment in full of principal or interest is not expected.
At the time a loan is placed on on nonaccrual status, any interest income
previously accrued but not collected is reversed against current period
interest income. Income on nonaccrual loans is subsequently recognized only to
the extent cash is received and the loan's principal balance is deemed
collectible. Loans are restored to accrual status when the loans become both
well secured and are in the process of collection.

On September 30, 1999, Rancho Santa Fe National Bank had $728,000 of loans
on nonaccrual status, compared to $4,000 at December 31, 1998 and $167,000 at
September 30, 1998.

Allowance for Loan Losses. Rancho Santa Fe National Bank's loan loss
allowance is available to absorb future loan losses. The current level of the
loan loss allowance is a result of management's assessment of the risk within
the loan portfolio based on the information revealed in the credit reporting
processes. Rancho Santa Fe National Bank utilizes a risk-rating system on loans
and a monthly credit review and reporting process. This assessment of risk
takes into account the composition of the loan portfolio, review of specific
problem loans, previous loan experience, current and anticipated economic
conditions and other factors that, in management's judgment, deserve
recognition.

39
<PAGE>

The following table presents the changes in Rancho Santa Fe National Bank's
allowance for loan losses as of the dates indicated:

Rancho Santa Fe National Bank
Analysis of Allowance for Loan Losses
(Dollars In Thousands)

<TABLE>
<CAPTION>
Nine Months
Ended Year Ended
September 30, December 31,
-------------- --------------
1999 1998 1998 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
Balance at beginning of period............... $2,388 $2,415 $2,415 $2,327
Loans charged off:
Commercial and industrial.................. (274) (1) (163) (121)
Real estate--construction.................. -- -- -- --
Real estate................................ -- -- -- --
Consumer................................... -- (3) (3) (11)
Small Business Administration, unguaranteed
portion held for Investment............... -- -- -- --
------ ------ ------ ------
Total loans charged off.................. (274) (4) (165) (132)
------ ------ ------ ------
Recoveries on loans charged off:
Commercial and industrial.................. 70 113 131 148
Real estate--construction.................. -- -- -- --
Real estate................................ -- -- -- 20
Consumer................................... 3 4 8 2
Small Business Administration, unguaranteed
portion held for Investment............... -- -- -- --
------ ------ ------ ------
Total recoveries on loans charged off.... 73 117 138 170
------ ------ ------ ------
Net loans charged off........................ (201) 113 (27) 38
------ ------ ------ ------
Provision for loan losses.................... 90 -- -- 50
Balance at end of period..................... $2,277 $2,528 $2,388 $2,415
====== ====== ====== ======
Ratios:
Allowance for loan losses as a percentage to
total loans at period end................... 1.79% 2.31% 2.18% 2.55%
Net loans charged off to average loans....... 0.17% (0.11%) 0.03% (0.04%)
</TABLE>

The allowance for loan losses at September 30, 1999 was $2,277,000 or 1.79%
of total loans, net of deferred fees and costs, a decrease from 2.18% at the
end of 1998. Despite the fact that the allowance for loan losses as a
percentage of total loans declined at September 30, 1999 compared with December
31, 1998, the percentage of nonperforming loans to total loans has remained low
and at September 30, 1999 and December 31, 1998 was less than 1% at both period
endings. As of September 30, 1999, management was negotiating recoveries on two
previously charged off loans and subsequently successfully recovered
approximately $175,000 on these loans during the fourth quarter of 1999. During
the first nine months of 1999, Rancho Santa Fe National Bank had net charge-
offs of $201,000 compared to $27,000 for the year ended December 31, 1998 and
net recoveries of $113,000 for the nine months ended September 30, 1998.
Management believes that the allowance for loan losses of $2,277,000 at
September 30, 1999 is adequate to cover known and inherent risks in the loan
portfolio.

40
<PAGE>

The following table allocates the allowance for loan losses based on
management's judgment of potential losses in the respective areas. While
management has allocated reserves to various portfolio segments for purposes of
this table, the reserve is general and is available for the portfolio in its
entirety.

Rancho Santa Fe National Bank
Allocation of Allowance for Loan Losses
(Dollars in thousands)

<TABLE>
<CAPTION>
Nine Months Ended Real Small Business
September 30, Commercial Estate Consumer Administration Unallocated Total
- ----------------- ---------- ------ -------- -------------- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
1999
Allowance for loan
losses................. $1,139 455 228 455 0 2,277
% of loans in each
category to total
loans.................. 55% 38% 1% 6% 0% 100%
1998
Allowance for loan
losses................. 1,264 506 253 505 -- 2,528
% of loans in each
category to total
loans.................. 58% 35% 1% 6% 0% 100%
<CAPTION>
Year Ended December 31,
- -----------------------
<S> <C> <C> <C> <C> <C> <C>
1998
Allowance for loan
losses................. 1,194 478 239 477 -- 2,388
% of loans in each
category to total
loans.................. 58% 35% 1% 6% 0% 100%
1997
Allowance for loan
losses................. 1,208 483 242 482 -- 2,415
% of loans in each
category to total
loans.................. 57% 34% 1% 8% 0% 100%
</TABLE>

Investment Portfolio. The investment activities of Rancho Santa Fe National
Bank are designed to assist in maximizing income consistent with quality and
liquidity requirements, supply collateral to secure public funds, provide a
means for balancing market and credit risks and to provide consistent income
and market value throughout changing economic times.

Rancho Santa Fe National Bank's portfolio consists of U.S. Treasury and U.S.
Government agency obligations, mortgage-backed securities, obligations of
states and political subdivisions and corporate debt. Rancho Santa Fe National
Bank's investment portfolio does not contain concentration of investments in
any one issuer in excess of 10% of Rancho Santa Fe National Bank's total
investment portfolio. Exempt from this calculation are securities of the U.S.
Treasury and U.S. government agencies.

The following table presents the composition of Rancho Santa Fe National
Bank's investment portfolio at the dates indicated.

Rancho Santa Fe National Bank
Investment Portfolio
(In thousands)

<TABLE>
<CAPTION>
September 30, December 31,
-------------- -------------
1999 1998 1998 1997
------- ------ ------ ------
<S> <C> <C> <C> <C>
U.S. Treasury and government agency securities.... $32,886 25,159 31,104 21,794
States and political subdivisions................. 350 351 351 352
Corporate bonds................................... 501 510 506 504
Federal Reserve Bank Stock........................ 488 424 440 371
Federal Home Loan Bank Stock...................... 504 410 416 --
------- ------ ------ ------
Total investments............................... $34,729 26,854 32,817 23,021
======= ====== ====== ======
</TABLE>

41
<PAGE>

For the investment portfolio as of September 30, 1999, the following table
presents a summary of yield and maturities:

Rancho Santa Fe National Bank
Analysis of Investment Yields and Maturities
September 30, 1999
(In thousands)

<TABLE>
<CAPTION>
One Year Five Years
One Year Through Through
or Less Five Years Ten Years Over 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. Treasury and
government agency
securities............. $1,061 5.30% 22,733 5.98% 6,664 5.98% 2,428 6.41% 32,886 5.99%
States and political
subdivisions........... -- -- 350 4.89% -- 350 4.89%
Corporate bonds......... -- 501 6.40% -- -- 501 6.40%
------ ---- ------ ---- ----- ---- ------- ------ ------ ----
Total investments(1).. $1,061 5.30% 23,234 5.98% 7,014 5.93% 2,428 6.41% 33,737 5.98%
====== ==== ====== ==== ===== ==== ======= ====== ====== ====
</TABLE>
- --------
(1) Yields on securities have not been adjusted to a fully tax-equivalent
basis.

Note: Federal Reserve Bank stock and Federal Home Loan Bank stock have no
maturity and have been excluded from this table.

For the investment portfolio as of December 31, 1998, the following table
presents a summary of yield and maturities:

Rancho Santa Fe National Bank
Analysis of Investment Yields and Maturities
December 31, 1998
(In thousands)

<TABLE>
<CAPTION>
One Year Five Years
One Year Through Through Over Ten
or Less Five Years Ten Years 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. Treasury and
government agency
securities............. $737 5.94% 19,160 5.88% 6,725 6.00% 4,482 6.18% 31,104 5.95%
States and political
subdivisions........... -- -- 351 4.89% -- 351 4.89%
Corporate bonds......... -- 506 6.40% -- -- 506 6.40%
---- ---- ------ ---- ----- ---- ----- ---- ------ ----
Total investments(1).. $737 5.94% 19,666 5.89% 7,076 5.95% 4,482 6.18% 31,961 5.98%
==== ==== ====== ==== ===== ==== ===== ==== ====== ====
</TABLE>
- --------
(1) Yields on securities have not been adjusted to a fully tax-equivalent
basis.

Note: Federal Reserve Bank stock and Federal Home Loan Bank stock have no
maturity and have been excluded from this table.

42
<PAGE>

Deposits. The following table presents a summary of Rancho Santa Fe National
Bank's average deposits as of the dates indicated and average rate paid:

Rancho Santa Fe National Bank
Analysis of Average Deposits
(Dollars in thousands)

<TABLE>
<CAPTION>
September 30, December 31,
---------------------------- ----------------------------
1999 1998 1998 1997
------------- ------------- ------------- -------------
Amount Rate Amount Rate Amount Rate Amount Rate
-------- ---- -------- ---- -------- ---- -------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Noninterest-bearing....... $ 42,421 $ 34,242 $ 35,350 $ 28,355
Savings deposits.......... 2,972 1.98% 3,076 1.96% 3,069 1.97% 2,394 1.98%
Market rate deposits...... 80,586 2.89% 70,535 3.57% 71,585 3.47% 61,065 3.57%
Time deposits < $100,000.. 10,650 4.56% 9,427 5.06% 9,681 5.02% 9,116 5.00%
Time deposits > $100,000.. 16,148 4.83% 10,586 5.42% 11,368 5.36% 9,678 5.35%
-------- -------- -------- --------
Total deposits.......... $152,777 $127,866 $131,053 $110,608
======== ======== ======== ========
</TABLE>

For time deposits $100,000 or more, the following table presents a summary
of maturities for the time periods indicated:

Rancho Santa Fe National Bank
Maturity of Time Deposits of $100,000 or More
(In thousands)

<TABLE>
<CAPTION>
(greater
than or (greater
=)3-6 than or
< 3 months months 6-12 months =)12 months Total
---------- -------- ----------- ----------- -------
<S> <C> <C> <C> <C> <C>
September 30, 1999.......... $11,052 $7,015 $3,659 $611 $22,337
December 31, 1998........... $ 7,016 $3,380 $3,420 $-- $13,816
</TABLE>

Deposits have increased consistently over the past three years. Average
deposits for the period through September 30, 1999 were $152,777,000 compared
with $127,866,000 for the same prior year period an increase of $24,911,000 or
19.48%. For 1998, average deposits were $131,053,000 compared with $110,608,000
for 1997, an increase of $20,445,000 or 18.48%. During the first nine months of
1999, time deposits of $100,000 or more increased at a faster rate than in
previous years due to higher rates paid for these deposits.

Capital. Bank regulatory agencies measure capital adequacy through
standardized risk-based capital guidelines which compare different levels of
capital (as defined by such guidelines) to risk-weighted assets and off-balance
sheet obligations. Banks are required to maintain a minimum total risk-based
capital ratio of 8% of which at least 4.0% must be Tier 1 capital. Banking
organizations considered to be among the most highly rated, based upon
examination results, also must maintain a minimum leverage ratio of 3% and a
minimum risk-based capital ratio of 10% of which at least 6.0% must be Tier 1
capital. Banks that are not the most highly rated are expected to maintain a
capital leverage ratio of at least 100 to 200 basis points above the minimum 3%
levels.

43
<PAGE>

The following table presents regulatory capital requirements and risk-based
capital levels of Rancho Santa Fe National Bank:

<TABLE>
<CAPTION>
Regulatory Requirements Actual
----------------------- -------------
Rancho
Adequately Well Santa Fe
Capitalized Capitalized National Bank
----------- ----------- -------------
<S> <C> <C> <C>
September 30, 1999

Detailed computations of:
Tier 1 leverage capital ratio........... 4.00% 5.00% 9.68%
Tier 1 risk-based capital ratio......... 4.00% 6.00% 11.25%
Total risk-based capital.................. 8.00% 10.00% 12.50%

December 31, 1998

Detailed Computations of:
Tier 1 leverage capital ratio........... 4.00% 5.00% 9.64%
Tier 1 risk-based capital ratio......... 4.00% 6.00% 11.60%
Total risk-based capital.................. 8.00% 10.00% 12.85%
</TABLE>

As of September 30, 1999, Rancho Santa Fe National Bank exceeded each of the
capital requirements of the Office of the Comptroller of the Currency and was
deemed to be well capitalized.

In January 1998 Rancho Santa Fe National Bank instituted a quarterly
dividend and thereafter declared the following dividends through the date
hereof:

<TABLE>
<CAPTION>
Record Date Pay Date Amount per Share
----------- -------- ----------------
<S> <C> <C>
February 13, 1998 February 27, 1998 $0.06
May 15, 1998 May 29, 1998 $0.06
August 14, 1998 August 31, 1998 $0.06
November 13, 1998 November 30, 1998 $0.06
February 12, 1999 February 26, 1999 $0.06
May 14, 1999 May 28, 1999 $0.06
August 13, 1999 August 31, 1999 $0.09
November 15, 1999 November 30, 1999 $0.09
</TABLE>

Liquidity and Funds Management. Liquidity management requires an ability to
meet financial commitments when contractually due and to respond to other
requirements for funds. Rancho Santa Fe National Bank has an Asset/Liability
Management Committee responsible for managing balance sheet and off-balance
sheet commitments to meet the needs of customers while achieving Rancho Santa
Fe National Bank's financial objectives. Rancho Santa Fe National Bank's
Asset/Liability Management Committee meets regularly to review funding
capacities, current and forecasted loan demand and investment opportunities.

Funds are held in cash and cash equivalents, which are comprised of cash and
due from banks plus federal funds sold. Cash and cash equivalents at September
30, 1999 totaled $10,232,000, or 5.87% of total assets, compared with
$21,320,000 at December 31, 1998. This decrease was the result of loans
increasing during the period at a faster rate than deposits. Loans net of
deferred loan fees increased $17,991,000 during the first nine months of 1999
as a result of significant loan demand, particularly in commercial real estate
and construction lending. Total deposits, by comparison, increased $5,379,000
during this same period, primarily in time deposits. Cash and cash equivalents
increased to $21,320,000 at December 31, 1998 compared with $15,131,000 and
$12,665,000 at December 31, 1997 and 1996, respectively, largely through
increased interest-bearing deposits. The only restriction on Rancho Santa Fe
National Bank's cash and cash equivalents is reserve requirements with the
Federal Reserve Bank.

44
<PAGE>

As an additional source of liquidity, Rancho Santa Fe National Bank
maintains lines of credit for $8,500,000 with correspondent banks for purchase
of overnight funds. These lines are subject to availability of funds. Rancho
Santa Fe National Bank also has a Fed discount window limit of approximately
$2,000,000 as well as a credit line with the Federal Home Loan Bank which would
allow Rancho Santa Fe National Bank to borrow up to $4,500,000. Historically,
Rancho Santa Fe National Bank has used its borrowing capabilities infrequently.

The ability of Rancho Santa Fe National Bank to obtain funds for the payment
of dividends and for other cash requirements is largely dependent upon the
Bank's earnings. Dividends paid by a national bank, like Rancho Santa Fe
National Bank, are regulated by the Office of the Comptroller of the Currency
under its general supervisory authority as it relates to a bank's requirement
to maintain adequate capital. A national banking association may declare a
dividend without the approval of the Office of the Comptroller of the Currency
as long as the total of dividends declared in a calendar year does not exceed
the total of net profits for that year combined with the retained profits for
the preceding two years.

Interest Rate Sensitivity. Significant changes in interest rates affect the
composition, yield and cost of balance sheet components. The rate sensitivity
of these assets and liabilities is monitored and matched to control the risk
associated with movements in rates. The Asset/Liability Management Committee
for Rancho Santa Fe National Bank meets quarterly to monitor and formulate
strategies and policies to provide sufficient levels of net interest income
while maintaining acceptable levels of interest rate sensitivity, risk and
liquidity. The primary object of rate sensitivity management is to ensure
earnings stability by minimizing the sensitivity of net interest income to
fluctuations in interest rates. Rancho Santa Fe National Bank uses gap analysis
and other systems to measure, monitor and adapt to changing interest rate
environments. Rancho Santa Fe National Bank monitors and evaluates its interest
rate risk position on a quarterly basis using traditional gap analysis. Gap
analysis calculates the mismatches over certain time periods between assets and
liabilities whose interest rates are subject to repricing at their contractual
maturity dates or repricing period.

45
<PAGE>

The following table presents Rancho Santa Fe National Bank's interest rate
sensitivity analysis by contractual repricing or maturity at September 30,
1999:

Rancho Santa Fe National Bank
Interest Rate Sensitivity
As of September 30, 1999

(Dollars in thousands)

<TABLE>
<CAPTION>
3
Less months
than 3 to 1 1 to 5 Over 5 Non-rate
months year years years Sensitive Total
-------- ------- ------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Repricing interval
Federal funds sold...... $ -- $ -- $ -- $ -- $ -- $ --
Investment securities... 401 660 23,235 10,433 -- 34,729
Loans, gross............ 100,979 5,925 11,744 9,294 -- 127,942
-------- ------- ------- -------- -------- --------
Total rate sensitive
assets............... 101,380 6,585 34,979 19,727 -- 162,671
All other assets........ -- -- -- -- 11,501 11,501
-------- ------- ------- -------- -------- --------
Total assets.......... $101,380 $ 6,585 $34,979 $ 19,727 $ 11,501 $174,172
======== ======= ======= ======== ======== ========
Savings & NOW deposits.. $ -- $ -- $ -- $ 19,189 $ -- $ 19,189
Money market deposits... 57,701 -- -- -- -- 57,701
Time Deposits under
$100,000............... 5,437 4,424 272 -- -- 10,133
Time Deposits of
$100,000 or more....... 11,052 10,674 611 -- -- 22,337
Other interest-bearing
liabilities............ 1,700 -- -- 1,700
-------- ------- ------- -------- -------- --------
Total rate sensitive
liabilities.......... 75,890 15,098 883 19,189 -- 111,060
All other liabilities... -- -- -- -- 46,591 46,591
Shareholders' equity.... -- -- -- -- 16,521 16,521
-------- ------- ------- -------- -------- --------
Total liabilities and
shareholders'
equity............... $ 75,890 $15,098 $ 883 $ 19,189 $ 63,112 $174,172
======== ======= ======= ======== ======== ========
Period gap.............. $ 25,490 $(8,513) $34,096 $ 538 $(51,611)
Cumulative gap.......... $ 25,490 $16,977 $51,073 $ 51,611 $ --
Cumulative rate
sensitive gap %........ 15% 10% 29% 30%
</TABLE>

Note: All amounts are reported at their contractual maturity or repricing
periods. This analysis makes certain assumptions as to interest rate
sensitivity of savings and NOW accounts which have no stated maturity and have
had very little price fluctuation in the past three years. Money market
accounts are repriced at discretion of management and generally are more rate
sensitive.

46
<PAGE>

Rancho Santa Fe National Bank
Interest Rate Sensitivity
As of December 31, 1998

(Dollars in thousands)

<TABLE>
<CAPTION>
3 months
Less than to 1 1 to Over Non-rate
3 months year 5 years 5 years sensitive Total
--------- -------- ------- ------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Repricing interval
Federal funds sold...... $ 12,254 $ -- $ -- $ -- $ -- $ 12,254
Investment securities... -- -- 20,400 12,417 -- 32,817
Loans, gross............ 89,374 4,517 10,765 5,253 -- 109,909
-------- -------- ------- ------- -------- --------
Total rate sensitive
assets............... 101,628 4,517 31,165 17,670 -- 154,980
All other assets........ -- -- -- -- 11,032 11,032
-------- -------- ------- ------- -------- --------
Total assets.......... $101,628 $ 4,517 $31,165 $17,670 $ 11,032 $166,012
======== ======== ======= ======= ======== ========
Savings & NOW deposits.. $ -- $ -- $ -- $19,721 $ -- $ 19,721
Money market deposits... 62,711 -- -- -- -- 62,711
Time Deposits under
$100,000............... 4,327 5,387 429 -- -- 10,143
Time Deposits of
$100,000 or more....... 7,016 6,800 -- -- -- 13,816
Other interest-bearing
liabilities............ 470 -- -- -- -- 470
-------- -------- ------- ------- -------- --------
Total rate sensitive
liabilities............ 74,524 12,187 429 19,721 -- 106,861
All other liabilities... -- -- -- -- 43,937 43,937
Shareholders' equity.... -- -- -- -- 15,214 15,214
-------- -------- ------- ------- -------- --------
Total liabilities and
shareholders'
equity............... $ 74,524 $ 12,187 $ 429 $19,721 $ 59,151 $166,012
======== ======== ======= ======= ======== ========
Period gap.............. $ 27,104 $ (7,670) $30,736 $(2,051) $(48,119)
Cumulative gap.......... $ 27,104 $ 19,434 $50,170 $48,119 --
Cumulative rate
sensitive gap %........ 16% 12% 30% 29%
</TABLE>

Note: All amounts are reported at their contractual maturity or repricing
periods. This analysis makes certain assumptions as to interest rate
sensitivity of savings and NOW accounts which have no stated maturity and
have had very little prior fluctuation in the past three years. Money
market accounts are repriced at discretion of management and generally are
more rate sensitive.

47
<PAGE>

INFORMATION ABOUT FIRST COMMUNITY BANK OF THE DESERT

Business of First Community Bank of the Desert

General

First Community Bank of the Desert opened in 1980 as Bank of Yucca Valley.
First Community Bank of the Desert is an independent, commercial bank that
accepts demand, savings, and time deposits and makes commercial, real estate
and consumer loans. First Community Bank of the Desert has always emphasized
consumer and small business banking. Most of First Community Bank of the
Desert's depositors are consumers and small business customers. First Community
Bank of the Desert has six offices:

<TABLE>
<C> <S>
Yucca Valley Office 7272 Joshua Lane, Yucca Valley, California 92284
Joshua Tree Office 61605 29 Palms Hwy., Joshua Tree, California 92252
Twentynine Palms Office 73700 Gorgonio Drive, Twentynine Palms, California
92277
Cathedral City Office 30-855 Date Palm Drive, Cathedral City, California
92234
Indian Wells Office 74-750 Highway 111, Indian Wells, California 92210
Palm Springs Office 601 E. Tahquitz Canyon Way, Palm Springs, California
92262
</TABLE>

First Community Bank of the Desert issues cashier's checks and money orders,
sells traveler's cheques and provides other customary banking services. First
Community Bank of the Desert sells to its customers, through a third party
broker/dealer, nondeposit investment products including mutual funds, fixed and
variable annuities, stocks, bonds, and other nondeposit investment products.

First Community Bank of the Desert does not operate or have any present
intention to seek authority to operate a trust department.

First Community Bank of the Desert also offers a variety of conventional
FHA/VA residential real estate loan products as well as commercial loan
products. As of September 30, 1999, First Community Bank of the Desert has
concentrated its lending activities in four areas:

<TABLE>
<S> <C>
Real estate loans....................................................... 66%
Commercial loans to small businesses.................................... 15%
SBA loans............................................................... 10%
Consumer loans.......................................................... 9%
---
Total................................................................. 100%
</TABLE>

First Community Bank of the Desert's real estate loan portfolio is comprised
of amortizing loans and consumer lines of credit secured by residential
properties, loans secured by commercial real estate, and construction loans.
These loans are made primarily for the purpose of purchasing or improving
residential real estate, to purchase or improve commercial real estate and to
construct owner-occupied single family residential real estate. Commercial
loans to small businesses, including Small Business Administration loans, are
made essentially to provide working capital and equipment financing for small
business customers. Consumer loans are for household expenditures including
automobiles, recreation and other personal expenditures.

First Community Bank of the Desert evaluates each borrower's credit
worthiness on a case-by-case basis. The amount of collateral obtained by First
Community Bank of the Desert, if necessary, is based upon management's credit
evaluation of the borrower. Collateral held varies but may include certificates
of deposit, accounts receivable, inventory, property, plant and equipment,
residential real estate and income-producing commercial properties. First
Community Bank of the Desert's lending activities are concentrated primarily in
San Diego County, Riverside County, and the High Desert area of San Bernardino
County.

48
<PAGE>

First Community Bank of the Desert provides 24-hour daily banking
transactional service through its electronic Automatic Teller Machines (ATMs)
at all of its office locations and is a member of the STAR SYSTEM, PLUS,
AMERICAN EXPRESS, CIRRUS, THE EXCHANGE and VISA ATM networks. In 1999, First
Community Bank of the Desert introduced its new Debit MasterCard, where
purchases are charged to the customer's checking account rather than a credit
card line. This card looks similar to a credit card and can be used anywhere a
MasterCard logo is displayed and accepted. First Community Bank of the Desert
also provides automated clearing house services for both origination and
receipt of funds through the Federal Reserve System.

Most of First Community Bank of the Desert's business originates from its
primary service areas, consisting of the immediate and surrounding communities
of Yucca Valley (San Bernardino County), Joshua Tree (San Bernardino County),
Twentynine Palms (San Bernardino County), Cathedral City (Riverside County),
Indian Wells (Riverside County), and Palm Springs (Riverside County).

First Community Bank of the Desert does not obtain a material portion of its
deposits from a single person or a few persons, nor is a material portion of
First Community Bank of the Desert's loans concentrated within a single
industry or group of related industries. First Community Bank of the Desert's
deposits are insured by the Federal Deposit Insurance Corporation to applicable
legal limits and First Community Bank of the Desert is supervised and regulated
by the Office of the Comptroller of the Currency.

Legal Proceedings

First Community Bank of the Desert is a party to routine litigation, none of
which, individually or in the aggregate, is likely in management's judgment to
result in a material adverse effect on the Bank's financial condition or
results of operations.

Competition

The banking and financial services industry in California generally, and in
First Community Bank of the Desert's market areas specifically, is highly
competitive. The increasingly competitive environment is a result primarily of
changes in regulation, changes in technology and product delivery systems, and
the accelerating pace of consolidation among financial services providers.
First Community Bank of the Desert competes for loans, deposits, and customers
with other commercial banks, savings and loan associations, securities and
brokerage companies, mortgage companies, insurance companies, finance
companies, money market funds, credit unions, and other nonbank financial
service providers. Many of these competitors are much larger in total assets
and capitalization, have greater access to capital markets and offer a broader
range of financial services than First Community Bank of the Desert. In
addition, recent federal legislation may have the effect of further increasing
the pace of consolidation within the financial services industry. See "Business
of First Community Bank of the Desert--Supervision and Regulation--Financial
Services Modernization Legislation."

In order to compete with the other financial services providers, First
Community Bank of the Desert principally relies upon local promotional
activities, personal relationships established by officers, directors, and
employees with its customers, and specialized services tailored to meet needs
of the communities served. In those instances where First Community Bank of the
Desert is unable to accommodate a customer's needs, First Community Bank of the
Desert may arrange for those services to be provided by its correspondents.
First Community Bank of the Desert has six (6) offices located in Yucca Valley,
Indian Wells, Cathedral City, Joshua Tree, Twenty-Nine Palms and Palm Springs.
Neither the deposits nor loans of the offices of First Community Bank of the
Desert exceed 1% of all financial services companies located in the counties in
which First Community Bank of the Desert operates.

49
<PAGE>

Economic Conditions, Government Policies, Legislation, and Regulation

First Community Bank of the Desert's profitability, like most financial
institutions, is primarily dependent on interest rate differentials. In
general, the difference between the interest rates paid by First Community Bank
of the Desert on interest-bearing liabilities, such as deposits and other
borrowings, and the interest rates received by First Community Bank of the
Desert on its interest-earning assets, such as loans extended to its clients
and securities held in its investment portfolio, comprise the major portion of
First Community Bank of the Desert's earnings. These rates are highly sensitive
to many factors that are beyond the control of First Community Bank of the
Desert, such as inflation, recession and unemployment, and the impact which
future changes in domestic and foreign economic conditions might have on First
Community Bank of the Desert cannot be predicted.

The business of First Community Bank of the Desert is also influenced by the
monetary and fiscal policies of the federal government and the policies of
regulatory agencies, particularly the Board of Governors of the Federal Reserve
System. The Board of Governors of the Federal Reserve System implements
national monetary policies (with objectives such as curbing inflation and
combating recession) through its open-market operations in U.S. Government
securities, by adjusting the required level of reserves for depository
institutions subject to its reserve requirements, and by varying the target
federal funds and discount rates applicable by depository institutions. The
actions of the Board of Governors of the Federal Reserve System in these areas
influence the growth of bank loans, investments, and deposits and also affect
interest rates earned on interest-earning assets and paid on interest-bearing
liabilities. The nature and impact on the First Community Bank of the Desert of
any future changes in monetary and fiscal policies cannot be predicted.

From time to time, legislative acts, as well as regulations, are enacted
which have the effect of increasing the cost of doing business, limiting or
expanding permissible activities, or affecting the competitive balance between
banks and other financial services providers. Proposals to change the laws and
regulations governing the operations and taxation of banks, bank holding
companies, and other financial institutions and financial services providers
are frequently made in the U.S. Congress, in the state legislatures, and before
various regulatory agencies. See "Business of First Community Bank of the
Desert--Supervision and Regulation."

Supervision and Regulation

General

Bank holding companies and banks are extensively regulated under both
federal and state law. This regulation is intended primarily for the protection
of depositors and the deposit insurance fund and not for the benefit of
shareholders of First Community Bank of the Desert. Set forth below is a
summary description of the material laws and regulations that relate to the
operations of First Community Bank of the Desert. The description is qualified
in its entirety by reference to the applicable laws and regulations.

First Community Bank of the Desert, as a California chartered bank, is
subject to primary supervision, periodic examination, and regulation by the
California Commissioner of Financial Institutions and, because it is a Federal
Reserve member, the Federal Reserve Board. If, as a result of an examination of
First Community Bank of the Desert, the Federal Reserve Board should determine
that the financial condition, capital resources, asset quality, earnings
prospects, management, liquidity, or other aspects of First Community Bank of
the Desert's operations are unsatisfactory or that First Community Bank of the
Desert or its management is violating or has violated any law or regulation,
various remedies are available to the Federal Reserve Board. Such remedies
include the power to enjoin "unsafe or unsound" practices, to require
affirmative action to correct any conditions resulting from any violation or
practice, to issue an administrative order that can be judicially enforced, to
direct an increase in capital, to restrict the growth of First Community Bank
of the Desert, to assess civil monetary penalties, to remove officers and
directors, and ultimately to terminate First Community Bank of the Desert's
deposit insurance, which for a California chartered bank would result in a
revocation of First Community Bank of the Desert's charter. The California
Commissioner of Financial Institutions has many of the same remedial powers.

50
<PAGE>

Various requirements and restrictions under the laws of the State of
California and the United States affect the operations of First Community Bank
of the Desert. State and federal statutes and regulations relate to many
aspects of First Community Bank of the Desert's operations, including reserves
against deposits, ownership of deposit accounts, interest rates payable on
deposits, loans, investments, mergers and acquisitions, borrowings, dividends,
locations of branch offices, and capital requirements. Further, First Community
Bank of the Desert is required to maintain certain levels of capital. See "--
Capital Standards."

Financial Services Modernization Legislation

On November 12, 1999, President Clinton signed into law the Gramm-Leach-
Bliley Act of 1999 (the "Financial Services Modernization Act"). The Financial
Services Modernization Act repeals provisions of the Glass-Steagall Act:
Section 20, which restricted the affiliation of Federal Reserve member banks
with firms "engaged principally" in specified securities activities; and
Section 32, which restricts officer, director, or employee interlocks between a
member bank and any company or person "primarily engaged" in specified
securities activities. In addition, the Financial Services Modernization Act
also contains provisions that expressly preempt any state law restricting the
establishment of financial affiliations, primarily related to insurance. The
general effect of the law is to establish a comprehensive framework to permit
affiliations among commercial banks, insurance companies, securities firms, and
other financial service providers by revising and expanding the Bank Holding
Company Act framework to permit a holding company system to engage in a full
range of financial activities through a new entity known as a Financial Holding
Company. "Financial activities" is broadly defined to include not only banking,
insurance, and securities activities, but also merchant banking and additional
activities that the Federal Reserve Board, in consultation with the Secretary
of the Treasury, determines to be financial in nature, incidental to such
financial activities, or complementary activities that do not pose a
substantial risk to the safety and soundness of depository institutions or the
financial system generally.

Generally, the Financial Services Modernization Act:

. repeals historical restrictions on, and eliminates many federal and
state law barriers to, affiliations among banks, securities firms,
insurance companies, and other financial service providers;

. provides a uniform framework for the functional regulation of the
activities of banks, savings institutions, and their holding companies;

. broadens the activities that may be conducted by national banks, banking
subsidiaries of bank holding companies, and their financial
subsidiaries;

. provides an enhanced framework for protecting the privacy of consumer
information;

. adopts a number of provisions related to the capitalization, membership,
corporate governance, and other measures designed to modernize the
Federal Home Loan Bank system;

. modifies the laws governing the implementation of the Community
Reinvestment Act ("CRA"); and

. addresses a variety of other legal and regulatory issues affecting both
day-to-day operations and long-term activities of financial
institutions.

The Financial Services Modernization Act also permits national banks to
engage in expanded activities through the formation of financial subsidiaries.
A national bank may have a subsidiary engaged in any activity authorized for
national banks directly or any financial activity, except for insurance
underwriting, insurance investments, real estate investment or development, or
merchant banking, which may only be conducted through a subsidiary of a
Financial Holding Company. Financial activities include all activities
permitted under new sections of the Bank Holding Company Act or permitted by
regulation.

A national bank seeking to have a financial subsidiary, and each of its
depository institution affiliates, must be "well-capitalized" and "well-
managed." The total assets of all financial subsidiaries may not exceed the
lesser of 45% of a bank's total assets, or $50 billion. A national bank must
exclude from its assets and equity

51
<PAGE>

all equity investments, including retained earnings, in a financial subsidiary.
The assets of the subsidiary may not be consolidated with the bank's assets.
The bank must also have policies and procedures to assess financial subsidiary
risk and protect the bank from such risks and potential liabilities.

The Financial Services Modernization Act also includes a new section of the
Federal Deposit Insurance Act governing subsidiaries of state banks that engage
in "activities as principal that would only be permissible" for a national bank
to conduct in a financial subsidiary. It expressly preserves the ability of a
state bank to retain all existing subsidiaries. Because California permits
commercial banks chartered by the state to engage in any activity permissible
for national banks, First Community Bank of the Desert will be permitted to
form subsidiaries to engage in the activities authorized by the Financial
Services Modernization Act, to the same extent as a national bank. In order to
form a financial subsidiary, First Community Bank of the Desert must be well-
capitalized, and First Community Bank of the Desert would be subject to the
same capital deduction, risk management and affiliate transaction rules as
applicable to national banks. However, due to the pending merger, First
Community Bank of the Desert does not intend to utilize to any of the new
powers granted under the Financial Services Modernization Act.

First Community Bank of the Desert does not believe that the Financial
Services Modernization Act will have a material adverse effect on our
operations in the near-term. However, to the extent that it permits banks,
securities firms, and insurance companies to affiliate, the financial services
industry may experience further consolidation. The Financial Services
Modernization Act is intended to grant to community banks certain powers as a
matter of right that larger institutions have accumulated on an ad hoc basis.
Nevertheless, this act may have the result of increasing the amount of
competition that First Community Bank of the Desert faces from larger
institutions and other types of companies offering financial products, many of
which may have substantially more financial resources than First Community Bank
of the Desert.

Dividends and Other Transfers of Funds

First Community Bank of the Desert is subject to various statutory and
regulatory restrictions on its ability to pay dividends to its shareholders.
Under such restrictions, the amount available for payment of dividends by First
Community Bank of the Desert totaled $ million at December 31, 1999. In
addition, the California Commissioner of Financial Institutions and the Federal
Reserve Board have the authority to prohibit First Community Bank of the Desert
from paying dividends, depending upon First Community Bank of the Desert's
financial condition, if such payment is deemed to constitute an unsafe or
unsound practice.

The Federal Reserve Board and the California Commissioner also have
authority to prohibit First Community Bank of the Desert from engaging in
activities that, in the Federal Reserve Board's and the California
Commissioner's opinion, constitute unsafe or unsound practices in conducting
its business. It is possible, depending upon the financial condition of the
bank in question and other factors, that the Federal Reserve Board and the
California Commissioner could assert that the payment of dividends or other
payments might, under some circumstances, be such an unsafe or unsound
practice. Further, the Federal Reserve Board has established guidelines with
respect to the maintenance of appropriate levels of capital by banks or bank
holding companies under their jurisdiction. Compliance with the standards set
forth in such guidelines and the restrictions that are or may be imposed under
the prompt corrective action provisions of federal law could limit the amount
of dividends that First Community Bank of the Desert may pay. An insured
depository institution is prohibited from paying management fees to any
controlling persons or, with certain limited exceptions, making capital
distributions if after such transaction the institution would be
undercapitalized. See "--Prompt Corrective Regulatory Action and Other
Enforcement Mechanisms" and "--Capital Standards" for a discussion of these
additional restrictions on capital distributions.

First Community Bank of the Desert is subject to certain restrictions
imposed by federal law on any extensions of credit to, or the issuance of a
guarantee or letter of credit on behalf of its affiliates, the purchase of, or
investments in, stock or other securities thereof, the taking of such
securities as collateral for loans, and the purchase of assets of its
affiliates. Such restrictions prevent such affiliates from borrowing from First

52
<PAGE>

Community Bank of the Desert unless the loans are secured by marketable
obligations of designated amounts. Further, such secured loans and investments
by First Community Bank of the Desert to or in any affiliate are limited,
individually, to 10.0% of First Community Bank of the Desert's capital and
surplus (as defined by federal regulations), and such secured loans and
investments are limited, in the aggregate, to 20.0% of First Community Bank of
the Desert's capital and surplus (as defined by federal regulations).
California law also imposes certain restrictions with respect to transactions
involving controlling persons of First Community Bank of the Desert. Additional
restrictions on transactions with affiliates may be imposed on First Community
Bank of the Desert under the prompt corrective action provisions of federal
law. See "Business of First Community Bank of the Desert--Supervision and
Regulation--Prompt Corrective Action and Other Enforcement Mechanisms."

Capital Standards

The Federal Reserve Board has adopted risk-based minimum capital guidelines
intended to provide a measure of capital that reflects the degree of risk
associated with a banking organization's operations for both transactions
reported on the balance sheet as assets and transactions, such as letters of
credit and recourse arrangements, which are recorded as off balance sheet
items. Under these guidelines, nominal dollar amounts of assets and credit
equivalent amounts of off balance sheet items are multiplied by one of several
risk adjustment percentages, which range from 0% for assets with low credit
risk, such as certain U.S. Treasury securities, to 100% for assets with
relatively high credit risk, such as commercial loans.

The federal banking agencies require a minimum ratio of qualifying total
capital to risk-adjusted assets of 8% and a minimum ratio of Tier 1 capital to
risk-adjusted assets of 4%. In addition to the risk-based guidelines, federal
banking regulators require banking organizations to maintain a minimum amount
of Tier 1 capital to total assets, referred to as the leverage ratio. For a
banking organization rated in the highest of the five categories used by
regulators to rate banking organizations, the minimum leverage ratio of Tier 1
capital to total assets must be 3%. In addition to these uniform risk-based
capital guidelines and leverage ratios that apply across the industry, the
regulators have the discretion to set individual minimum capital requirements
for specific institutions at rates significantly above the minimum guidelines
and ratios.

The following table presents the amounts of regulatory capital and the
capital ratios for First Community Bank of the Desert.

<TABLE>
<CAPTION>
Regulatory Requirements Actual
----------------------- -----------
First
Community
Adequately Well Bank of the
Capitalized Capitalized Desert
----------- ----------- -----------
<S> <C> <C> <C>
September 30, 1999
Detailed computations of:
Tier 1 leverage capital ratio............. 4.00% 5.00% 6.18%
Tier 1 risk-based capital ratio........... 4.00% 6.00% 9.32%
Total risk-based capital.................. 8.00% 10.00% 10.57%
December 31, 1998
Detailed Computations of:
Tier 1 leverage capital ratio............. 4.00% 5.00% 6.85%
Tier 1 risk-based capital ratio........... 4.00% 6.00% 7.66%
Total risk-based capital.................. 8.00% 10.00% 8.99%
</TABLE>

As of September 30, 1999, First Community Bank of the Desert exceeded each
of the capital requirements of the Federal Reserve Board and was deemed to be
well capitalized.

53
<PAGE>

Prompt Corrective Action and Other Enforcement Mechanisms

Federal banking agencies possess broad powers to take corrective and other
supervisory action to resolve the problems of insured depository institutions,
including but not limited to those institutions that fall below one or more
prescribed minimum capital ratios. Each federal banking agency has promulgated
regulations defining the following five categories in which an insured
depository institution will be placed, based on its capital ratios: well
capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized, and critically undercapitalized. At September 30, 1999, First
Community Bank of the Desert exceeded the required ratios for classification as
"well capitalized."

An institution that, based upon its capital levels, is classified as well
capitalized, adequately capitalized, or undercapitalized may be treated as
though it were in the next lower capital category if the appropriate federal
banking agency, after notice and opportunity for hearing, determines that an
unsafe or unsound condition or an unsafe or unsound practice warrants such
treatment. At each successive lower capital category, an insured depository
institution is subject to more restrictions. The federal banking agencies,
however, may not treat a significantly undercapitalized institution as
critically undercapitalized unless its capital ratio actually warrants such
treatment.

In addition to measures taken under the prompt corrective action provisions,
commercial banking organizations may be subject to potential enforcement
actions by the federal regulators for unsafe or unsound practices in conducting
their businesses or for violations of any law, rule, regulation, or any
condition imposed in writing by the agency or any written agreement with the
agency.

Safety and Soundness Standards

The federal banking agencies have adopted guidelines designed to assist the
federal banking agencies in identifying and addressing potential safety and
soundness concerns before capital becomes impaired. The guidelines set forth
operational and managerial standards relating to: (i) internal controls,
information systems and internal audit systems, (ii) loan documentation, (iii)
credit underwriting, (iv) asset growth, (v) earnings, and (vi) compensation,
fees and benefits. In addition, the federal banking agencies have also adopted
safety and soundness guidelines with respect to asset quality and earnings
standards. These guidelines provide six standards for establishing and
maintaining a system to identify problem assets and prevent those assets from
deteriorating. Under these standards, an insured depository institution should:
(i) conduct periodic asset quality reviews to identify problem assets, (ii)
estimate the inherent losses in problem assets and establish reserves that are
sufficient to absorb estimated losses, (iii) compare problem asset totals to
capital, (iv) take appropriate corrective action to resolve problem assets, (v)
consider the size and potential risks of material asset concentrations, and
(vi) provide periodic asset quality reports with adequate information for
management and the board of directors to assess the level of asset risk. These
new guidelines also set forth standards for evaluating and monitoring earnings
and for ensuring that earnings are sufficient for the maintenance of adequate
capital and reserves.

Premiums for Deposit Insurance

First Community Bank of the Desert's deposit accounts are insured by the
Bank Insurance Fund ("BIF"), as administered by the FDIC, up to the maximum
permitted by law. Insurance of deposits may be terminated by the FDIC upon a
finding that the institution has engaged in unsafe or unsound practices, is in
an unsafe or unsound condition to continue operations, or has violated any
applicable law, regulation, rule, order, or condition imposed by the FDIC or
the institution's primary regulator.

The FDIC charges an annual assessment for the insurance of deposits, which
as of December 31, 1999, ranged from 0 to 27 basis points per $100 of insured
deposits, based on the risk a particular institution poses to its deposit
insurance fund. The risk classification is based on an institution's capital
group and supervisory subgroup assignment. Pursuant to the Economic Growth and
Paperwork Reduction Act of 1996 (the

54
<PAGE>

"Paperwork Reduction Act"), at January 1, 1997, First Community Bank of the
Desert began paying, in addition to its normal deposit insurance premium as a
member of the BIF, an amount equal to approximately 1.3 basis points per $100
of insured deposits toward the retirement of the Financing Corporation bonds
("Fico Bonds") issued in the 1980s to assist in the recovery of the savings and
loan industry. Members of the Savings Association Insurance Fund ("SAIF"), by
contrast, pay, in addition to their normal deposit insurance premium,
approximately 6.4 basis points. Under the Paperwork Reduction Act, the FDIC is
not permitted to establish SAIF assessment rates that are lower than comparable
BIF assessment rates. Effective January 1, 2000, the rate paid to retire the
Fico Bonds will be equal for members of the BIF and the SAIF. The Paperwork
Reduction Act also provided for the merging of the BIF and the SAIF by January
1, 1999 provided there were no financial institutions still chartered as
savings associations at that time. However, as of January 1, 1999, there were
still financial institutions chartered as savings associations.

Interstate Banking and Branching

The Bank Holding Company Act permits bank holding companies from any state
to acquire banks and bank holding companies located in any other state, subject
to certain conditions, including certain nationwide- and state-imposed
concentration limits. First Community Bank of the Desert has the ability,
subject to certain restrictions, to acquire by acquisition or merger branches
outside its home state. The establishment of new interstate branches is also
possible in those states with laws that expressly permit it. Interstate
branches are subject to certain laws of the states in which they are located.
Competition may increase further as banks branch across state lines and enter
new markets.

Community Reinvestment Act and Fair Lending Developments

First Community Bank of the Desert is subject to certain fair lending
requirements and reporting obligations involving home mortgage lending
operations and Community Reinvestment Act activities. The Community
Reinvestment Act generally requires the federal banking agencies to evaluate
the record of a financial institution in meeting the credit needs of its local
communities, including low- and moderate-income neighborhoods. A bank may be
subject to substantial penalties and corrective measures for a violation of
certain fair lending laws. The federal banking agencies may take compliance
with such laws and Community Reinvestment Act obligations into account when
regulating and supervising other activities.

A bank's compliance with its Community Reinvestment Act obligations is based
a performance-based evaluation system which bases Community Reinvestment Act
ratings on an institution's lending service and investment performance. When a
bank holding company applies for approval to acquire a bank or other bank
holding company, the Federal Reserve Board will review the assessment of each
subsidiary bank of the applicant bank holding company, and such records may be
the basis for denying the application. Based on an examination conducted in
November 1998, First Community Bank of the Desert was rated satisfactory in
complying with its Community Reinvestment Act obligations.

Accounting Changes

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 requires companies to record
derivatives on the balance sheet as assets or liabilities, measured at fair
value. Gains or losses resulting from changes in the values of those
derivatives would be accounted for depending on the use of the derivative and
whether it qualifies for hedge accounting. The key criterion for hedge
accounting is that the hedging relationship must be highly effective in
achieving offsetting changes in fair value or cash flows. SFAS No. 133 was to
be effective for fiscal years beginning after June 15, 1999. However, in June
1999, the FASB issued SFAS No. 137 "Accounting for Derivative Instruments and
Hedging Activities--Deferral of the Effective Date of FASB Statement No. 133"
which deferred the effective date of SFAS No. 133 until fiscal years beginning
after June 15, 2000. Management believes that the adoption of SFAS No. 133 will
not have a material impact on First Community Bank of the Desert's results of
operations or financial position when adopted.

55
<PAGE>

In October 1998, the FASB issued SFAS No. 134, "Accounting for Mortgage-
Backed Securities Retained after the Securitization of Mortgage Loans Held for
Sale by a Mortgage Banking Enterprise." SFAS No. 134 amends SFAS No. 65,
"Accounting for Certain Mortgage Banking Activities," which establishes
accounting and reporting standards for certain activities of mortgage banking
enterprises and other enterprises that conduct operations that are
substantially similar. SFAS No. 134 requires that after the securitization of
mortgage loans held for sale, the resulting mortgage-backed securities and
other retained interests should be classified in accordance with SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," based on
the company's ability and intent to sell or hold those investments. SFAS No.
134 became effective for the first fiscal quarter beginning after December 15,
1998. The adoption of SFAS No. 134 did not have a material impact on First
Community Bank of the Desert's results of operations or financial position when
adopted.

56
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF FIRST COMMUNITY BANK OF THE DESERT

Basis of Presentation

The following is First Community Bank of the Desert's management discussion
and analysis of the results of operations and the historical financial
condition of First Community Bank of the Desert. This discussion should be read
in conjunction with First Community Bank of the Desert's audited consolidated
financial statements and accompanying footnotes and other selected financial
data presented elsewhere herein.

Results of Operations

Earnings Performance. First Community Bank of the Desert reported net
earnings for the year ended December 31, 1998 of $1,073,000, compared with
$725,000 for 1997, an increase of $348,000 or 48%. First Community Bank of the
Desert's improved earnings performance between 1998 and 1997 is primarily the
result of the increase in average interest earning assets of First Community
Bank of the Desert. First Community Bank of the Desert has grown for several
reasons, among them, its focus on and attention to customer service, opening of
a full service branch in the city of Palm Springs, California and its
participation in the local communities it serves. In addition, low interest
rates, low unemployment and rising real estate values have been the factors
that helped the local economy and contributed to First Community Bank of the
Desert's earnings performance.

Net earnings for the nine months ended September 30, 1999 were $924,000
compared with $699,000 for the same period in 1998, an increase of $225,000 or
32.1%. Basic earnings per share for the nine month period ended September 30,
1999 was $0.20 compared to $0.15 per share for the same period in 1998. Diluted
earnings per share for the nine-month period ended September 30, 1999 was $0.19
compared to $0.14 per share for the same period in 1998.

First Community Bank of the Desert
Analysis of Net Income

(Dollars in thousands)

<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
------------------ -------------------------
1999 1998 1998 1997 1996
-------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net interest income............ $ 5,637 $ 4,627 $ 6,003 $ 4,503 $3,403
Provision for loan losses...... 323 691 941 260 320
Other income................... 1,125 960 1,332 1,235 1,414
Net gains on sales of SBA
loans......................... 43 230 230 -- --
Other expenses................. 4,831 4,167 5,163 4,255 4,064
Income tax expense (benefit)... 727 260 378 498 (479)
Net earnings................... 924 699 1,073 725 912

Return on average assets....... 1.04% 1.03% 1.13% 1.03% 1.69%
Return on average equity....... 15.26% 13.52% 14.14% 11.08% 17.00%
Dividend payout ratio.......... 0.00% 0.00% 0.00% 0.00% 0.00%
Equity to assets............... 7.15% 7.53% 6.83% 8.18% 10.52%
</TABLE>

57
<PAGE>

Net Interest Income

Net Interest Income. Net interest income is affected by changes in both
interest rates and the volume of average earning assets and average interest-
bearing liabilities. The following table presents First Community Bank of the
Desert's average balance sheets, interest earned or paid, and the related
yields and rates on major categories of First Community Bank of the Desert's
earning assets and interest-bearing liabilities for the periods indicated.

First Community Bank of the Desert
Analysis of Average Rates and Balances
Nine months Ended September 30,

(Dollars in thousands)

<TABLE>
<CAPTION>
1999 1998
---------------------------- ---------------------------
Interest Interest Interest Interest
Average Income/ Yields and Average Income/ Yields and
Balance Expense Rates Balance Expense Rates
-------- -------- ---------- ------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Loans, net(1)........... $ 67,261 $5,720 11.37% $59,345 $5,031 11.33%
Investment securities... 10,041 373 4.97% 5,981 236 5.25%
Federal funds sold...... 20,767 739 4.76% 8,342 342 5.50%
Deposits with financial
institutions........... 6,165 249 5.42% 4,991 233 6.24%
-------- ------ ------- ------
Total interest earning
assets............... 104,234 7,081 9.08% 78,659 5,842 9.93%
Noninterest earning
assets................. 15,097 12,153
-------- -------
Total assets.......... $119,331 $90,812
======== =======
LIABILITIES
Time deposits of
$100,000 or more....... $ 7,829 276 4.71% $ 4,910 186 5.06%
All other interest-
bearing deposits....... 60,770 1,168 2.57% 47,468 1,029 2.90%
-------- ------ ----- ------- ------ -----
Total interest-bearing
liabilities.......... 68,599 1,444 2.81% 52,378 1,215 3.10%
Noninterest-bearing
deposits............... 42,300 30,847
Other liabilities....... 336 676
Stockholders' equity.... 8,096 6,911
-------- -------
Total liabilities and
stockholders'
equity............... $119,331 $90,812
======== =======
Net interest rate
spread................. 6.27% 6.83%
===== =====
Net interest income..... $5,637 $4,627
====== ======
Net yield on interest-
earning assets......... 7.23% 7.86%
===== =====
</TABLE>
- --------
(1) Includes nonaccrual loans and loan fees.

58
<PAGE>

First Community Bank of the Desert
Analysis of Average Rates and Balances
Years Ended December 31,

(Dollars in thousands)

<TABLE>
<CAPTION>
1998 1997
--------------------------- ---------------------------
Interest Interest Interest Interest
Average Income/ Yields and Average Income/ Yields and
Balance Expense Rates Balance Expense Rates
------- -------- ---------- ------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Loans, net(1)........... $58,543 $6,506 11.11% $42,964 $4,884 11.37%
Investment securities... 5,876 302 5.14% 4,432 232 5.23%
Federal funds sold...... 11,120 595 5.34% 11,766 629 5.35%
Deposits with financial
institutions........... 5,111 314 6.14% 1,544 79 5.12%
------- ------ ----- ------- ------ -----
Total interest earning
assets............... 80,650 7,717 9.57% 60,706 5,824 9.59%
Noninterest earning
assets................. 14,557 10,023
------- -------
Total assets.......... $95,207 $70,729
======= =======

LIABILITIES
Time deposits of
$100,000 or more....... $ 5,865 295 5.03% $ 2,692 151 5.61%
All other interest-
bearing deposits....... 48,721 1,419 2.91% 38,301 1,170 3.05%
------- ------ ----- ------- ------ -----
Total interest-bearing
liabilities.......... 54,586 1,714 3.14% 40,993 1,321 3.22%
Noninterest-bearing
deposits............... 31,967 22,887
Other liabilities....... 1,068 303
Stockholders' equity.... 7,586 6,546
------- -------
Total liabilities and
stockholders'
equity............... $95,207 $70,729
======= =======
Net interest rate
spread................. 6.43% 6.37%
===== =====
Net interest income..... $6,003 $4,503
====== ======
Net yield on interest-
earning assets......... 7.44% 7.42%
===== =====
</TABLE>
- --------
(1) Includes nonaccrual loans and loan fees.

59
<PAGE>

Average interest-earning assets grew to $80,650,000 in 1998, an increase of
$19,944,000 or 32.85% over 1997. Average interest-earning deposits with other
banks and loans accounted for the largest growth in earning assets in 1998,
increasing 231% and 36.26%, respectively. In 1998, average interest earning
deposits with other banks increased as a result of increases in deposits.
Average taxable securities, primarily governmental securities, grew in 1998,
but at a lesser rate. There was a minimal decrease in average federal funds
sold.

In 1998, First Community Bank of the Desert increased its efforts to
generate loans by focusing on small businesses, real estate, and consumer
lending. In addition, low interest rates, low unemployment and rising real
estate values are some of the factors that helped the local economy and
contributed to First Community Bank of the Desert's operating results in 1998.

In recent years, competition for loans has caused loan yields to decline,
which partially offset increases in interest income due to growth in assets. In
addition, the Federal Reserve Bank lowered short-term interest rates in the
fourth quarter of 1998, which affected most of First Community Bank of the
Desert's earning assets.

Average interest-bearing liabilities in 1998 grew by $13,593,000 or 33.16%.
Non-interest bearing deposits grew by $9,080,000 or 39.7% during 1998. During
1997, an average rate of 3.22% was paid on interest bearing liabilities,
compared to 3.14% during 1998, due primarily to decreases in market rates.

Net interest income before provision for loan losses for the nine-month
period ended September 30, 1999 increased by $1,010,000 or 21.83% compared with
the same prior year period. The increase for the nine-month period in 1999
compared to the same period in 1998 was due to the increase in average earning
assets of $25,575,000 or 32.5%. Average loans outstanding during the first nine
months of 1999 were $67,261,000 compared with $59,345,000 for the same period
in 1998. This increase in loans was due primarily to the strong economic
climate in First Community Bank's market area. The yield on interest-earning
assets for the first nine months of 1999 declined to 9.08% from 9.93% for the
same period in 1998, primarily due to decreased yields on federal funds sold as
a result of an overall decline in market interest rates experienced at the end
of 1998.

Also contributing to the increase in interest income was an increased volume
of average investments outstanding for the first nine months of 1999, despite a
decrease in the average yield of 4.97% compared with 5.25% for the same period
in 1998. The average rate paid on interest-bearing deposits of 2.81% for the
nine-month period ended September 30, 1999 decreased from 3.10% for the same
period in 1998.

Interest expense increased 18.8% in the nine months ended September 30, 1999
compared to the same period in 1998, due primarily to a higher volume of
deposits less than $100,000. This increase was attributable primarily to the
opening of the Palm Springs branch office in 1998 and the First Community Bank
of the Desert's marketing efforts.

In addition to the increase of earning assets, the decline in the average
rate paid on interest bearing deposits helped to increase the net interest
margin from 7.42% in 1997 to 7.44% in 1998.

As a result of the combination of the increased volume of lower yielding
federal funds sold and the lower yields thereon, net interest margin decreased
to 7.23% during the first nine months of 1999, compared with 7.86% for the same
period in 1998.

60
<PAGE>

The following table reflects changes in interest income and expense
attributable to changes in volume and interest rates of significant interest-
bearing assets and liabilities.

First Community Bank of the Desert
Analysis of Volume and Interest Rates

(Dollars in thousands)

<TABLE>
<CAPTION>
Nine Months Ended
September 30, 1999 Year Ended
Compared to 1998 December 31,1998
Period Compared to 1997
------------------- ---------------------
Attributable to Attributable to
Change Change
------------------- ---------------------
Total In In Total In In
Change Volume Rate Change Volume Rate
------ ------ ----- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C>
Loans, net........................ $ 689 $ 671 $ 18 $1,622 $1,771 $(149)
Investment securities............. 137 159 (19) 70 76 (6)
Federal funds sold................ 397 511 (114) (34) (34) --
Deposits with financial
institutions..................... 16 55 (39) 235 183 52
------ ------ ----- ------ ------ -----
Total........................... 1,239 1,393 (154) 1,893 1,996 (103)
------ ------ ----- ------ ------ -----
Time deposits of $100,000 or
more............................. 90 110 (20) 144 175 (31)
All other deposits................ 139 289 (150) 249 320 (71)
------ ------ ----- ------ ------ -----
Total........................... 229 399 (170) 393 495 (102)
------ ------ ----- ------ ------ -----
Net interest income............... $1,010 $ 994 $ 16 $1,500 $1,501 $ (1)
====== ====== ===== ====== ====== =====
</TABLE>

Provision For Loan Losses. First Community Bank of the Desert increased its
provision for loan losses for 1998 by $681,000 or 262% over 1997. The increased
provision for 1998 was due to a number of smaller balance commercial loans
(less than $75,000) becoming delinquent and either being charged-off or placed
on nonaccrual status. The provision for loan losses for the period ended
September 30, 1999 was $323,000 compared to $791,000 for the same period in
1998. The decreased provision in 1999 was attributable to the lack of a similar
delinquency experience in 1999 that would have necessitated additional
reserves.

Management continually assesses the adequacy of the allowance for loan loss
by evaluating the collectability of loans. This process includes assigning risk
ratings to loans and allowance percentages to these balances according to
allowance allocation formulas. This valuation process takes into consideration
such factors as changes in the nature and volume of First Community Bank of the
Desert's loan portfolio, prior loan loss experience, overall loan portfolio
quality, review of specific problem loans, current and anticipated economic
conditions that may affect a borrower's ability to pay and other factors that
in management's judgment, deserve recognition.

61
<PAGE>

Non-Interest Income

The following table presents a summary of non-interest income.

First Community Bank of the Desert
Analysis of Non-Interest Income
(In thousands)

<TABLE>
<CAPTION>
Nine Months
Ended Years
September 30, Ended December 31,
------------- --------------------
1999 1998 1998 1997 1996
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Service charges on deposit accounts..... $ 569 $ 603 $ 812 $ 756 $ 658
Merchant fees .......................... 225 201 246 212 133
Gain on sale of SBA loans............... 43 230 230 -- --
Other income............................ 331 156 264 267 623
------ ------ ------ ------ ------
Total................................. $1,168 $1,190 $1,552 $1,235 $1,414
====== ====== ====== ====== ======
</TABLE>

Service charges on deposit accounts increased by $44,000 for the year ended
1998 because First Community Bank of the Desert began charging fees for use of
its ATMs. Service charges on deposit accounts decreased to $569,000 in the
first nine months of 1999 compared to $603,000 in the same period in 1998. This
decrease resulted from depositors, especially small businesses, maintaining
higher average account balances, resulting in fewer account charges. First
Community Bank of the Desert did not change its service charge fees between
September 30, 1998 and 1999.

Merchant processing fees increased by $24,000 or 11.94% to $225,000 during
the period ended September 30, 1999 compared with $201,000 for the same period
in 1998.

Noninterest income in 1998 included $230,000 in gain on sale of SBA loans,
compared with no such sales in 1997.

Non-Interest Expense

The following table presents a summary of non-interest expense.

First Community Bank of the Desert
Analysis of Non-Interest Expense
(In thousands)

<TABLE>
<CAPTION>
Nine Months
Ended Year Ended
September 30, December 31,
------------- --------------------
1999 1998 1998 1997 1996
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Salaries and employee benefits........... $2,041 $1,759 $2,455 $1,842 $1,447
Occupancy, furniture and equipment ...... 489 422 611 502 506
Furniture and equipment.................. 203 166 228 141 98
Professional and other services.......... 738 624 679 769 830
Stationery, supplies and printing........ 224 207 139 90 84
FDIC assessment.......................... 5 8 25 56 28
Merchant card processing................. 183 178 221 163 102
Cost of other real estate owned.......... 182 93 62 73 459
Advertising.............................. 152 183 247 181 168
Insurance................................ 30 46 81 77 71
Other.................................... 584 481 415 361 369
------ ------ ------ ------ ------
Total.................................. $4,831 $4,167 $5,163 $4,255 $4,064
====== ====== ====== ====== ======
</TABLE>

In 1998 non-interest expense increased $908,000 or 21.34% compared to 1997.
As a percentage of average earning assets, noninterest expense was 5.42% in
1998, compared with 6.0% in 1997.

62
<PAGE>

Compensation and employee benefits increased to $2,041,000 or 16.03% in the
first nine months of 1999, compared to the same period in 1998. Compensation
and employee benefits increased in each of the periods presented as a result of
an increase in the number of employees, and salary increases for promotions,
opening a full service branch in Palm Springs, California in March 1998 and
cost of living adjustments.

In 1998, occupancy costs increased $109,000 or 21.71% compared to in 1997,
due to the opening of the new Palm Springs branch and the relocation of the
Cathedral City branch to a newly constructed, bank-owned location.

The furniture and equipment expense increase is directly related to the
opening of a new branch and the relocation of two existing branches. In 1998,
First Community Bank of the Desert also spent approximately $63,000 on software
upgrades and other equipment to address the Year 2000 issue.

Total non-interest expense increased $664,000 or 15.93% to $4,831,000 for
the first nine months of 1999 compared with $4,167,000 for the same period in
1998. As a percentage of average earning assets noninterest expense was 4.63%
in the first nine months of 1999, compared to 5.30% in the same period in 1998.

In 1999, professional services increased by $114,000 or 18.27% compared to
1998 as a result of the general growth of First Community Bank of the Desert,
consultant services for Y2K readiness and some modest price increases.

In 1998 stationery and supplies increased $49,000 or 54.44% compared to
1997. This increase was as a result of general growth. For the period ended
September 30, 1999 stationery and supplies was 8.21% above the same period
1998.

For the period ended September 30, 1999 other expenses increased $103,000 or
by 21.41% over the same period in 1998. This increase was mostly as a result of
$159,000 in write-downs of properties, primarily land acquired for development,
through First Community Bank of the Desert's real estate development
subsidiary, Desert Community Properties. At September 30, 1999, Desert
Community Properties owned 5 such properties, the carrying value of which was
$1,314,000. All of the properties are listed for sale. These write downs were
taken after management determined to reduce the asking prices on such
properties to sell them more quickly. Other increases are related to First
Community Bank of the Desert's growth during 1999.

Income Taxes The provision for income taxes for the year ended December 31,
1998 was $378,000 compared to $498,000 for the same period in 1997. This
decrease was the result of a refund received.

Loans:

The following table presents the balance of each major category of loans at
the dates indicated:

Analysis of Loans
(In thousands)

<TABLE>
<CAPTION>
September 30, December 31,
---------------------------- ---------------------------
1999 1998 1998 1997
-------------- ------------- ------------- -------------
% of % of % of % of
Amount Loans Amount Loans Amount Loans Amount Loans
------- ----- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Loan Category:
Commercial and
industrial............ $10,664 15% 15,456 25% 15,228 25% 19,615 35%
Real estate--
construction.......... 13,826 19% 9,452 18% 9,919 16% 9,130 16%
Real estate............ 33,693 47% 26,898 44% 27,954 45% 23,686 42%
Consumer............... 6,646 9% 4,011 7% 3,623 6% 2,134 4%
SBA Loans Real Estate.. 7,132 10% 4,720 8% 4,845 8% 1,754 3%
SBA Loans Commercial... 133 0% 151 0% 142 0% 212 0%
------- ---- ------ ---- ------ ---- ------ ----
Total loans........... 72,094 100% 60,688 100% 61,711 100% 56,531 100%

Less allowance for loan
losses................. (1,491) (1,313) (1,397) (967)
Less deferred loan
fees................... (177) (467) (293) (349)
------- ------ ------ ------
Total gross loans..... $70,426 58,908 60,021 55,215
======= ====== ====== ======
</TABLE>

63
<PAGE>

First Community Bank of the Desert's loan portfolio, net of the allowance
for loan losses and deferred loan fees totaled $70,426,000 as of September 30,
1999, an increase of $11,472,000 or 19.46% over the same period in 1998. Loans
have consistently increased over the past three years. Net loans increased
$4,806,000 or 8.70% to $60,021,000 at December 31, 1998 compared with the prior
year-end. This increase followed loan growth of $16,851,000 or 43.92% to
$55,215,000 compared with December 31, 1996.

Since 1996 demand for commercial real estate and construction lending has
been very strong, primarily attributable to improvements in the Southern
California general economy.

First Community Bank of the Desert's net loan charge-off's increased to
$511,000 in 1998 compared to $160,000 in 1997.

Due to lower net loan losses, delinquencies and classified loans the
provision for loan losses decreased in the first nine months of 1999 compared
to the same period in 1998. Loans charged off to the allowance for loan losses
totaled $266,000 for the nine month period ended September 30, 1999, with loan
recoveries totaling $37,000. By comparison, loans charged off to the allowance
for loan losses for the same period in 1998 totaled $460,000 and recoveries
totaled $15,000. Loans on non-accrual status were $93,000 as of September 30,
1999 compared to $555,000 as of December 31, 1998.

First Community Bank of the Desert
Nonaccrual and Past Due Loans
(In thousands)

<TABLE>
<CAPTION>
September 30, December 31,
-------------- --------------
1999 1998 1998 1997
------ ------- ------ ------
<S> <C> <C> <C> <C>
Nonaccrual loans.............................. $ 93 484 555 247
Loans past due 90 days or more................ 296 793 243 408
------ ------- ------ ------
Total nonperforming loans................... $ 389 1,277 798 655
====== ======= ====== ======
</TABLE>

Loans are generally placed on nonaccrual status when the borrowers are past
due 90 days and when payment in full of principal or interest is not expected.
At the time a loan is placed on nonaccrual status, any interest income
previously accrued but not collected is reversed against current period
interest income. Income on nonaccrual loans is subsequently recognized only to
the extent cash is received and the loan's principal balance is deemed
collectible. Loans are restored to accrual status when the loans become both
well secured and are in the process of collection.

64
<PAGE>

Allowance for Loan Losses

First Community Bank of the Desert's loan loss allowance is available to
absorb known and inherent loan losses. The current level of the loan loss
allowance is a result of management's assessment of the risk within the loan
portfolio based on the information revealed in the credit reporting processes.
First Community Bank of the Desert utilizes a risk-rating system on loans and a
monthly credit review and reporting process, which results in the calculation
of the guideline allowances based on the risk within the portfolio. This
assessment of risk takes into account the composition of the loan portfolio,
review of specific problem loans, previous loan experience, current and
anticipated economic conditions and other factors that in management's
judgment, deserve recognition.

The attached table presents the changes in First Community Bank of the
Desert's loan loss allowance as of the dates indicated.

First Community Bank of the Desert
Analysis of Allowance for Loan Losses
(In Thousands)

<TABLE>
<CAPTION>
Nine Months
Ended Year Ended
September 30, December 31,
-------------- --------------
1999 1998 1998 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
Balance at beginning of period................. 1,397 967 967 867
Loans charged off:
Commercial and industrial.................... (210) (438) (501) (153)
Real estate--construction.................... -- -- -- --
Real estate.................................. (23) -- -- --
Consumer..................................... (33) (22) (30) (14)
SBA, unguaranteed portion held for
investment.................................. -- -- -- --
------ ------ ------ -----
Total loans charged off.................... (266) (460) (531) (168)
------ ------ ------ -----
Recoveries on loans charged off:
Commercial and industrial.................... 29 15 19 5
Real estate--construction.................... -- -- -- --
Real estate.................................. -- -- -- --
Consumer..................................... 8 -- 1 2
SBA, unguaranteed portion held for
investment.................................. -- -- -- --
------ ------ ------ -----
Total recoveries on loans charged off...... 37 15 20 8
------ ------ ------ -----
Net loans charged off.......................... (229) (445) (511) (160)
------ ------ ------ -----
Provision for loan losses...................... 323 691 941 260
------ ------ ------ -----
Balance at end of period....................... 1,491 1,213 1,397 967
====== ====== ====== =====
Ratios:
Allowance for loan losses as a percentage to
total loans at period end..................... 2.07% 2.00% 2.26% 1.71%
Net loans charged off to average loans......... 0.34% 0.75% 0.87% 0.37%
</TABLE>

65
<PAGE>

Allocation of Allowance for Loan Losses

The attached table allocated the loan loss allowance based on management's
judgement of potential losses in the respective areas. While management has
allocated allowances to various portfolio segments for purposes of this table,
the allowance is general in nature and is available for the portfolio in its
entirety.

First Community Bank of the Desert
Allocation of Allowance for Loan Losses
(Dollars in thousands)

<TABLE>
<CAPTION>
SBA
Commercial Real Estate Consumer Real Estate Total
---------- ----------- -------- ----------- ------
<S> <C> <C> <C> <C> <C>
Nine Months Ended September 30,
1999
Allowance for loan losses.... 746 298 149 298 $1,491
% of loans in each category
to total loans.............. 15% 66% 9% 10% 100%
1998
Allowance for loan losses.... 557 263 131 262 $1,213
% of loans in each category
to total loans ............. 25% 60% 7% 8% 100%

Year Ended December 31,
1998
Allowance for loan losses.... 699 279 140 278 $1,397
% of loans in each category
to total loans.............. 25% 61% 6% 8% 100%
1997
Allowance for loan losses.... 484 193 97 192 $ 967
% of loans in each category
to total loans ............. 35% 58% 4% 3% 100%
</TABLE>

Investment Portfolio

Investment Portfolio. The investment activities of First Community Bank of
the Desert are designed to assist in maximizing income consistent with quality
and liquidity requirements, supply collateral to secure public funds, provide a
means for balancing market and credit risks, and provide consistent income and
market value throughout changing economic times. First Community Bank of the
Desert's portfolio consists of U.S. Treasury and government agency securities.

The attached table presents the composition of First Community Bank of the
Desert's investment portfolio at the dates indicated.

First Community Bank of the Desert
Investment Portfolio
(In thousands)

<TABLE>
<CAPTION>
September 30, December 31,
-------------- -------------
1999 1998 1998 1997
------- ------ ------ ------
<S> <C> <C> <C> <C>
U.S. Treasury and government agency securities.... 13,700 5,662 5,563 5,115
Other ............................................ 5 -- -- --
------- ------ ------ ------
Total investments............................... 13,705 5,662 5,563 5,115
======= ====== ====== ======
</TABLE>

66
<PAGE>

Analysis of Investment Yields and Maturities

For the investment portfolio as of September 30, 1999, the attached table
presents a summary of yield and maturities.

First Community Bank of the Desert
Analysis of Investment Yields and Maturities
September 30, 1999

(Dollars in thousands)

<TABLE>
<CAPTION>
One Year
One Year or Through Through Over Ten
Less Five Years Ten Years 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. Treasury government
agency securities...... $6,700 5.25% $7,000 5.50% $ -- 0.00% $ -- 0.00% $13,700 5.37%
Other................... -- -- -- 5 5 --
------ ---- ------ ---- ----- ---- ----- ---- ------- ----
Total investments..... $6,700 5.25% $7,000 5.50% $ -- $ 5 $13,705 5.37%
====== ==== ====== ==== ===== ==== ===== ==== ======= ====
</TABLE>

Analysis of Investment Yields and Maturities

For the investment portfolio as of December 31, 1998, the attached table
presents a summary of yield and maturities.

First Community Bank of the Desert
Analysis of Investment Yields and Maturities
December 31, 1998

(Dollars in thousands)

<TABLE>
<CAPTION>
One Year
One Year or Through Through Over
Less 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. Treasury and
government agency
securities............. $5,563 4.75% $ -- $ -- $ -- $5,563 4.75%
------ ---- ----- --- ----- --- ----- --- ------
Total investments..... $5,563 4.75% $ -- $ -- $ $5,563 4.75%
====== ===== === ===== === ===== === ======
</TABLE>

67
<PAGE>

Analysis of Deposits

Average deposits for September 30, 1999 were $110,899,000 as compared to
$86,553,000 for year-end December 31, 1998 and $63,879,000 for year-end
December 31, 1997. At September 30, 1999, total average deposits were
$110,899,000 compared to $83,225,000 at September 30, 1998. Deposits have
steadily increased over the past three years due to First Community Bank of the
Desert's reputation in the local community and its business development and
marketing efforts.

First Community Bank of the Desert
Analysis of Average Deposits
(Dollars in thousands)

<TABLE>
<CAPTION>
September 30, December 31,
----------------------------- ----------------------------
1999 1998 1998 1997
-------------- ------------- ------------- -------------
Amount Yield Amount Yield Amount Yield Amount Yield
-------- ----- ------- ----- ------- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Noninterest-bearing..... $ 42,300 -- $30,847 -- $31,967 -- $22,887 --
Savings deposits........ 8,524 1.52% 7,740 1.97% 7,822 1.94% 6,147 1.98%
Market rate deposits.... 34,522 1.56% 26,443 2.07% 26,771 2.04% 19,243 2.01%
Time deposits<$100,000.. 17,724 4.67% 13,285 5.09% 14,128 5.10% 12,911 5.14%
Time deposits>$100,000.. 7,829 4.71% 4,910 5.06% 5,865 5.03% 2,692 5.57%
-------- ------- ------- -------
Total average
deposits............. $110,899 $83,205 $86,553 $63,880
======== ======= ======= =======
</TABLE>

Maturity of Time Deposits

The attached table presents a summary of First Community Bank of the
Desert's average deposits as of the dates indicated and the maturity of time
deposits over $100,000.

First Community Bank of the Desert
Maturity of Time Deposits of $100,000 or More
(In thousands)

<TABLE>
<CAPTION>
<3 months 13-6 months 6-12 months 112 months Total
--------- ----------- ----------- ---------- ------
<S> <C> <C> <C> <C> <C>
September 30, 1999.......... 5,186 1,833 1,024 569 8,612
December 31, 1998........... 5,774 1,334 2,817 150 10,075
</TABLE>

Regulatory Capital Requirements

Capital. Bank regulatory agencies measure capital adequacy through
standardized risk-based capital guidelines, which compare different levels of
capital (as defined by such guidelines) to risk-weighted asset and off-balance
sheet obligations. Banks are required to maintain a minimum risk-based capital
ratio of 8%. Banking organizations considered to be among the most highly
rated, based upon examination results also must maintain a minimum leverage
ratio of 3% and a minimum risk based capital ratio of 8%. Banks that are not
the most highly rated are expected to maintain a capital leverage ratio of at
least 100 to 200 basis points above the minimum 3% levels.

The regulatory capital requirements and risk-based capital levels of First
Community Bank of the Desert are set forth on page 54 under Information About
First Community Bank of the Desert. As of September 30, 1999, First Community
Bank of the Desert exceeded each of the capital requirements of the Federal
Reserve Board and was deemed to be well capitalized.

68
<PAGE>

Liquidity and Funds Management.

Liquidity management requires an ability to meet financial commitments when
contractually due and to respond to other requirements for funds. First
Community Bank of the Desert has an Asset/Liability Management Committee (ALCO)
responsible for managing balance sheet and off-balance sheet commitments to
meet the needs of customers while achieving First Community Bank of the
Desert's financial objectives. First Community Bank of the Desert's ALCO meets
regularly to review funding capacities, current and forecasted loan demand, and
investment opportunities.

Funds are held in cash and cash equivalents, which are comprised of cash and
due from banks plus federal funds sold. Cash and cash equivalents decreased to
$20,806,000 at September 30, 1999, or 17.4 of total assets compared to
$33,646,000 at December 31, 1998 or 30.2% of total assets, largely through
increased loan originations. Net loans increased to $70,426,000, compared to
$60,021,000 at December 31, 1998 as a result of improved loan demand,
especially in commercial real estate and construction lending. Total deposits,
by comparison, increased to $110,618,000 at September 30, 1999, compared to
$102,794,000 at December 31, 1998, primarily in non-interest bearing deposits.
The only restriction on First Community Bank of the Desert's cash and cash
equivalents are reserve requirements and a $1,500,000 compensating balance
arrangement with the Federal Reserve Bank.

As an additional source of liquidity, First Community Bank of the Desert
maintains lines of credit for $3,000,000 with correspondent banks for the
purchase of overnight funds. These lines are subject to availability of funds.
First Community Bank of the Desert also has the capability of borrowing
overnight funds from the Federal Reserve's Discount Window. Historically, First
Community Bank of the Desert has used its borrowing capabilities as a
supplemental source of liquidity.

Interest Rate Sensitivity

Interest Rate Sensitivity. Significant changes in interest rates affect the
composition, yield and cost of balance sheet components. The rate sensitivity
of these assets and liabilities is monitored and matched to control the risk
associated with movements in rates. The ALCO for First Community Bank of the
Desert meets monthly to monitor and formulate strategies and policies to
provide sufficient levels of net interest income while maintaining acceptable
levels of interest rate sensitivity, risk, and liquidity. The primary object of
rate sensitivity management is to ensure earnings stability by minimizing the
sensitivity of net interest income to fluctuations in interest rates. First
Community Bank of the Desert uses GAP analysis and other systems to measure,
monitor and adapt to changing interest rate environments. First Community Bank
of the Desert monitors and evaluates its interest rate risk position on a
quarterly basis using traditional GAP analysis. GAP analysis calculates the
mismatches over certain time periods between assets and liabilities whose
interest rates are subject to repricing at their contractual maturity dates or
repricing period.

69
<PAGE>

The following table presents First Community Bank of the Desert's interest
rate sensitivity analysis by contractual repricing or maturity at December 31,
1998.

First Community Bank of the Desert
Interest Rate Sensitivity
As of December 31, 1998

(Dollars in thousands)

<TABLE>
<CAPTION>
3 months
Less than to 1 1 to Over Non-rate
3 months year 5 years 5 years sensitive Total
--------- -------- ------- ------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Repricing interval
Deposits with financial
institutions........... $ -- $ 5,440 $ -- $ -- $ 5 $ 5,440
Federal funds sold...... 23,869 -- -- -- -- 23,869
Investment securities... 987 4,571 -- -- -- 5,933
Loans, gross............ 37,368 11,235 9,845 2,948 -- 61,416
------- ------- ------- ------- -------- --------
Total rate sensitive
assets............... 62,244 21,246 9,845 2,948 5 96,288
All other assets........ -- -- -- -- 15,313 15,313
------- ------- ------- ------- -------- --------
Total assets.......... $62,244 $21,246 $ 9,845 $ 2,948 $ 15,313 $111,601
======= ======= ======= ======= ======== ========

Savings deposits........ $ -- $ -- $ 7,828 $ -- $ -- $ 7,828
Money market & Now
deposits............... 28,806 -- -- -- -- 28,806
Time Deposits under
$100,000............... 5,985 10,098 1,885 -- -- 17,968
Time Deposits of
$100,000 or more....... 5,775 4,353 657 -- -- 10,785
Other interest-bearing
liabilities............ -- -- -- -- -- --
------- ------- ------- ------- -------- --------
Total rate sensitive
liabilities.......... 40,566 14,451 10,370 -- -- 65,387
All other liabilities... -- -- -- -- 38,595 38,595
Stockholders' equity.... -- -- -- -- 7,619 7,619
------- ------- ------- ------- -------- --------
Total liabilities and
stockholders'
equity............... $40,566 $14,451 $10,370 $ -- $ 48,215 $ 11,601
======= ======= ======= ======= ======== ========
Period gap.............. $21,678 $ 6,795 $ (526) $ 2,948 $(30,902)
Cumulative gap.......... $21,678 $28,473 $27,948 $30,896 --
Cumulative rate
sensitive gap %........ 19% 26% 25% 28%
</TABLE>

Note: All amounts are reported at their contractual maturity or repricing
periods. For purposes of this analysis, First Community Bank of the Desert
assumes that savings deposits, which have no stated maturity, are assumed to be
in the 1 to 5 year category. Money Market accounts are repriced at the
discretion of management and generally are more rate sensitive.

70
<PAGE>

The following table presents First Community Bank of the Desert's interest
rate sensitivity analysis by contractual repricing or maturity at September 30,
1999.

First Community Bank of the Desert
Interest Rate Sensitivity
As of September 30, 1999

(Dollars in thousands)

<TABLE>
<CAPTION>
Non-
Less than 3 months 1 to 5 Over rate
3 months to 1 year years 5 years sensitive Total
--------- --------- ------- ------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Repricing interval
Deposits with financial
institutions........... $ 495 $ 5,940 $ 1,079 $ -- $ -- $ 7,514
Federal funds sold...... 12,332 -- -- -- -- 12,332
Investment securities... -- 6,700 7,005 -- -- 13,705
Loans, gross............ 44,196 9,514 12,466 -- -- 71,917
------- ------- ------- ------- -------- --------
Total rate sensitive
assets............... 57,023 22,154 20,550 5,741 -- 105,468
All other assets........ -- -- -- -- 14,067 14,067
------- ------- ------- ------- -------- --------
Total assets.......... $57,023 $22,154 $20,550 $ 5,741 $ 14,067 $119,535
======= ======= ======= ======= ======== ========
Savings & NOW deposits.. $ -- $ -- $ 8,703 $ -- $ -- $ 8,703
Money market deposits... 33,816 -- -- -- -- 33,816
Time Deposits under
$100,000............... 8,573 6,283 1,367 58 -- 16,281
Time Deposits of
$100,000 or more....... 5,156 2,867 589 -- -- 8,612
Other interest-bearing
liabilities............ -- -- -- -- -- --
------- ------- ------- ------- -------- --------
Total rate sensitive
liabilities.......... 47,545 9,150 10,659 58 -- 67,412
All other liabilities... -- -- -- -- 43,581 43,581
Stockholders' equity.... -- -- -- -- 8,542 8,542
------- ------- ------- ------- -------- --------
Total liabilities and
stockholders'
equity............... $47,545 $ 9,150 $10,659 $ 58 $ 52,123 $119,535
======= ======= ======= ======= ======== ========
Period gap.............. $ 9,478 $13,004 $ 9,891 $ 5,683 $(38,056)
Cumulative gap.......... $ 9,478 $22,482 $32,373 $38,056 --
Cumulative rate
sensitive gap %........ 8% 19% 27% 32%
</TABLE>

Note: All amounts are reported at their contractual maturity or repricing
periods. For purposes of this analysis, First Community Bank of the Desert
assumes that savings deposits, which have no stated maturity, are assumed to be
in the 1 to 5 year category. Money market accounts are repriced at the
discretion of management and generally are more rate sensitive.

71
<PAGE>

Loan Repricing or Maturity

The attached table presents First Community Bank of the Desert's interest
rate sensitivity analysis at the dates indicated with respect to individual
categories of loans and provides separate analyses with respect to fixed
interest rate loans and floating interest rate loans.

First Community Bank of the Desert

Loan Repricing or Maturing

As of September 30, 1999

(in thousands)

<TABLE>
<CAPTION>
Repricing or Maturing in
--------------------------------
Over 1
1 year to 5 Over 5
or less years years Total
------- -------- ------- -------
<S> <C> <C> <C> <C>
Loan Category:
Commercial and industrial..................... $ 5,399 $ 4,103 $ 1,295 $10,797
Real estate-construction...................... 25,139 15,302 14,209 54,650
------- ------- ------- -------
Total....................................... 30,538 19,405 15,504 65,447
======= ======= ======= =======

<CAPTION>
Fixed Floating
Rate Rate Total
------- -------- -------
<S> <C> <C> <C> <C>
Commercial and industrial..................... $ 2,267 $ 8,530 $10,797
Real estate-construction...................... 14,209 40,441 54,650
------- ------- -------
Total....................................... $16,476 $48,971 $65,447
======= ======= =======

First Community Bank of the Desert
Loan Repricing or Maturing
As of December 31, 1998

(in thousands)

<CAPTION>
Repricing or Maturing in
--------------------------------
Over 1
1 year to 5 Over 5
or less years years Total
------- -------- ------- -------
<S> <C> <C> <C> <C>
Loan Category:
Commercial and industrial..................... $ 7,687 $ 5,842 $ 1,845 $15,374
Real estate-construction...................... 19,680 11,981 11,107 42,718
------- ------- ------- -------
Total....................................... $27,337 $17,803 $12,952 $58,092
======= ======= ======= =======

<CAPTION>
Fixed Floating
Rate Rate Total
------- -------- -------
<S> <C> <C> <C> <C>
Commercial and industrial..................... $ 3,229 $12,145 $15,374
Real estate-construction...................... 11,107 31,611 42,716
------- ------- -------
Total....................................... $14,336 $43,756 $58,092
======= ======= =======
</TABLE>

72
<PAGE>

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
OF
FIRST COMMUNITY BANK OF THE DESERT

The following table sets forth information as to shares of common stock of
First Community Bank of the Desert beneficially owned, as of record date by (i)
each director and executive officer (1) of First Community Bank of the Desert,
(ii) directors and executive officers, as a group and (iii) each person who, to
First Community Bank of the Desert's knowledge, beneficially owned more than
five percent (5%) of First Community Bank of the Desert's outstanding common
stock.

Common Stock Beneficially Owned

<TABLE>
<CAPTION>
Number of Percent of
Shares Class
Name and Title /(2)/ /(3)/
-------------- --------- ----------
<S> <C> <C>
Peter C. Cook/(4)/.............................. 234,544 5.00%
J. Peter Ministrelli/(5)/....................... 250,000 5.39%
Kensett J. Moyle, III, Director................. 86,755 /(7)/ 1.87%
William T. Powers, President, Chief Executive
Officer and Director........................... 63,100 /(7)/ 1.36%
Castle Creek Capital Fund I, LP/(6)/............ 459,552 9.90%
William J. Ruh, Director........................ 11,106 *
Robert A. Schoellhorn, Director ................ 440,000 9.50%
Dale E. Walter, Director........................ 147,360 /(8)/ 3.20%
David S. Williams Chairman of the Board of
Directors...................................... 91,636 /(7)/ 2.00%
Tay Fried Executive Vice President And Chief
Financial Officer.............................. 4,275 /(7)/ *
Directors and principal officers as a group (7
persons)....................................... 844,232 /(7)/ 18.19%
</TABLE>
- --------
* Individually less than 1%

(1) As used in this Proxy Statement, the term "principal officer" means the
President/Chief Executive Officer and, the Executive Vice President/Chief
Financial Officer.

(2) Each person directly or indirectly has sole or shared voting and investment
power with respect to the shares indicated.

(3) In computing the percentage of shares beneficially owned, the number of
shares which the person (or group) has a right to acquire within 60 days
after the Record Date are deemed outstanding for the purpose of computing
the percentage of Common Stock owned by such person (or group), but are not
deemed outstanding for the purpose of computing the percentage of shares
beneficially owned by any other person.

(4) The address of Mr. Peter C. Cook is c/o Mazda Great Lakes, 618 Kenmoor
Avenue, S.E., Grand Rapids, Michigan 49501.

(5) The address of Mr. Ministrelli is 50-445 Mountain Shadows Road, La Quinta,
California, 92253.

(6) The address of Castle Creek Capital is 6051 El Tordo, Rancho Santa Fe,
California 92067. Mr. Ruh is a principal of Castle Creek Capital, LLC.

(7) Includes 4,400, 17,000, 4,400, 2,000 and 27,800 shares which Messrs. Moyle,
Powers, Williams, and Ms. Fried and all directors and principal officers as
a group, respectively, have the right to acquire within 60 days after the
Record Date through the exercise of stock options held pursuant to First
Community Bank of the Desert's 1987 Incentive Stock Option Plan.

(8) Includes 83,375, 43,106, 11,656 and 9,223 shares, respectively, held by Mr.
Walter and Donna L. Walter, as trustees for the Walter Family Trust, UA DTD
4/29/92. Guarantee & Trust Co. as custodian for the Dale E. Walter IRA and
Guarantee & Trust Co., as custodian for the Donna L. Walter IRA.

73
<PAGE>

THE FIRST COMMUNITY BANK OF THE DESERT ANNUAL MEETING

General

At the annual meeting you will consider and vote upon the following
proposals:

. To elect 6 persons to the board of directors of First Community Bank of
the Desert. The board has nominated the following individuals, all of
whom currently serve as directors of First Community Bank of the Desert:

Kensett J. Moyle, III
William T. Powers
William J. Ruh
Robert A. Schoellhorn
Dale E. Walter
David S. Williams

. To ratify the appointment of KPMG LLP, as First Community Bank of the
Desert's independent auditors for the fiscal year ending December 31,
2000.

. To approve the Agreement and Plan of Merger, dated as of October 22,
1999, providing for the merger of First Community Bank of the Desert
with and into a wholly owned subsidiary of First Community Bancorp, the
holding company for Rancho Santa Fe National Bank.

The merger agreement is attached to this document as Annex A and is
incorporated in this document by this reference. For a description of the
merger agreement, see "The Merger--Structure of the Merger" on page 78.

The merger agreement provides that First Community Bank of the Desert will
merge with and into a wholly owned subsidiary of First Community Bancorp. In
the merger, for each outstanding share of First Community Bank of the Desert
common stock, you will receive 0.30 shares of common stock of First Community
Bancorp. First Community Bancorp will pay cash in lieu of any fractional
shares.

Record Date; Voting Power. If you were a First Community Bank of the Desert
shareholder at the close of business on , 2000, you may vote at the
meeting. As of , 2000, there were issued and outstanding
shares of First Community Bank of the Desert common stock held by approximately
shareholders. These shareholders have one vote per share on any matter
that may properly come before the annual meeting, except that all shareholders
may cumulate their votes for candidates nominated to be directors if any
shareholder present at the annual meeting has given notice prior to the voting
that he or she intends to vote his or her shares cumulatively. Cumulative
voting entitles a shareholder to give one nominee as many votes as is equal to
the number of directors to be elected, multiplied by the number of shares he or
she owns, or to distribute his or her votes on the same principle between two
or more nominees as he or she sees fit. Discretionary authority to cumulate
votes is sought and return of the proxy shall be deemed to grant such authority
to the proxy holders.

Brokers who hold shares of First Community Bank of the Desert common stock
as nominees will not have discretionary authority to vote such shares for the
merger without instructions from the beneficial owners. Brokers may, in their
discretion, vote shares of First Community Bank of the Desert common stock in
the election of directors and the proposal to ratify the appointment of
independent accountants. Any shares of First

74
<PAGE>

Community Bank of the Desert common stock for which a broker has submitted an
executed proxy but for which the beneficial owner has not given instructions on
voting to such broker are referred to as "broker non-votes" and will count as
votes against the proposal to approve the merger agreement.

Vote Required. The presence in person or by proxy of the holders of a
majority of the shares of First Community Bank of the Desert common stock
outstanding on the record date will constitute a quorum for the transaction of
business at the annual meeting. First Community Bank of the Desert will count
abstentions and broker non-votes for purposes of establishing the presence of a
quorum at the meeting.

For the election of directors, you have the right to cumulate your votes and
give one properly nominated candidate a number of votes equal to the number of
directors to be elected multiplied by the number of shares you are entitled to
vote. In the election of directors, the 6 candidates receiving the highest
number of votes will be elected. Accordingly, abstentions and broker non-votes
will have no effect on the election of directors.

Ratification of the appointment of KPMG LLP as First Community Bank of the
Desert's independent accountants for the fiscal year ending December 31, 2000
will require the affirmative vote of the holders of a majority of the
outstanding shares of common stock represented in person or by proxy and
entitled to vote at the meeting. Because abstentions and broker non-votes are
not affirmative votes but are counted as being present at the meeting, they
will have the effect of a vote against the proposal to ratify KPMG LLP as First
Community Bank of the Desert's independent accountants.

The approval of the proposal to approve the merger agreement requires the
affirmative vote of a majority of the shares of First Community Bank of the
Desert common stock outstanding on the First Community Bank of the Desert
record date. Because broker non-votes and abstentions are not affirmative
votes, they will have the effect of a vote against the proposal to approve the
merger agreement.

On the record date, the executive officers and directors of First Community
Bank of the Desert, including their affiliates, had voting power with respect
to an aggregate of 1,558,378 shares of First Community Bank of the Desert
common stock or approximately 31.9% of the shares of First Community Bank of
the Desert common stock then outstanding, which includes shares beneficially
owned by Mssrs. Eggemeyer and Ruh through their interests in Castle Creek
Capital. We currently expect that such directors and officers will vote all of
their shares in favor of the proposal to approve the merger agreement.

Recommendation of the First Community Bank of the Desert Board. The First
Community Bank of the Desert board has unanimously approved and adopted the
merger agreement and the transactions contemplated thereby. The First Community
Bank of the Desert board believes that the merger is fair to and in the best
interests of First Community Bank of the Desert and the First Community Bank of
the Desert shareholders and unanimously recommends that you vote FOR approval
of the merger agreement and the transactions contemplated thereby.

The board also recommends a vote FOR the board's 6 nominees for director,
and FOR ratification of KPMG LLP as First Community Bank of the Desert's
independent accountants for the year ending December 31, 2000.

Solicitation and Revocation of Proxies. We have enclosed a form of proxy
with this document. Shares represented by a proxy will be voted at the annual
meeting as specified in the proxy. Proxies that are properly signed and dated
but that do not have voting instructions will be voted by the proxy holders FOR
the merger, FOR election of the board's 6 nominees for director and FOR
ratification of of KPMG LLP as First Community Bank of the Desert's independent
accountants, and in the discretion of the proxy holder as to any other matter
that may properly come before the meeting.

First Community Bank of the Desert asks you to vote by completing, dating
and signing the accompanying proxy card and returning it promptly to First
Community Bank of the Desert in the

75
<PAGE>

enclosed, postage-paid envelope even if you plan to attend the meeting in
person. First Community Bank of the Desert shareholders should not send stock
certificates with their proxy cards.

If you are a First Community Bank of the Desert shareholder who delivers a
properly executed proxy, you may revoke such proxy at any time before its
exercise. You may revoke your proxy by:

. filing with the Secretary of First Community Bank of the Desert prior to
the annual meeting, at First Community Bank of the Desert's principal
executive offices, either a written revocation of such proxy or a duly
executed proxy bearing a later date, or

. attending the annual meeting and voting in person. Presence at the
meeting will not revoke your proxy unless and until you vote in person.
If your shares are held in the name of your broker, bank or other
nominee, and you wish to vote in person, you must bring an account
statement and authorization from your nominee so that you can vote your
shares.

First Community Bank of the Desert is soliciting proxies for use at its
annual meeting. First Community Bank of the Desert will bear the cost of
solicitation of proxies from its own shareholders. First Community Bank of the
Desert and First Community Bancorp will share equally the cost of printing and
mailing this document. In addition to solicitation by mail, First Community
Bank of the Desert directors, officers and employees may solicit proxies from
shareholders by telephone, in person or through other means. These persons will
not receive additional compensation, but they will be reimbursed for the
reasonable out-of-pocket expenses they incur in connection with this
solicitation. First Community Bank of the Desert also will make arrangements
with brokerage firms, fiduciaries and other custodians who hold shares of
record to forward solicitation materials to the beneficial owner of these
shares. First Community Bank of the Desert will reimburse these brokerage
firms, fiduciaries and other custodians for their reasonable out-of-pocket
expenses in connection with this solicitation.

Other Matters. First Community Bank of the Desert is unaware of any matter
to be presented at the annual meeting other than the proposals to elect
directors, ratify the appointment of independent accountants and approve the
merger agreement. If other matters are properly presented at the annual
meeting, the persons named in the proxy will have authority to vote all
properly executed proxies in accordance with their judgment on any such matter,
including, without limitation, any proposal to adjourn or postpone the annual
meeting. Proxies that have been designated to vote against approval of the
merger agreement will not be voted in favor of any proposal to adjourn or
postpone the annual meeting for the purpose of soliciting additional proxies to
approve the merger agreement.

ELECTION OF DIRECTORS

Nominees

The bylaws of First Community Bank of the Desert provide that the number of
directors shall be not less than 5 nor more than 9 until changed by a bylaw
amendment approved by the shareholders. The exact number of directors is fixed
from time to time, within the foregoing range, by a bylaw or bylaw amendment
approved by First Community Bank of the Desert's board of directors. Currently,
the number of directors is fixed at 6.

All nominees for directors are currently members of the board of directors
of First Community Bank of the Desert. If the merger is completed prior to the
2001 annual meeting of First Community Bank of the Desert, the directors
elected at the annual meeting will resign in favor of First Community Bancorp's
nominees.

The enclosed proxy will be voted in such a way as to effect the election of
the board's 6 nominees, or as many of them as possible, under applicable voting
rules. If any of the nominees is unable or unwilling to accept nomination for
election as a director, the proxy holders will vote for the election of
substitute nominees who are designated by the board of directors. All nominees
have informed the board that they are willing and able to serve if elected.

76
<PAGE>

The biographical information of the nominees is set forth below.

<TABLE>
<CAPTION>
Year
First
Elected
or
Principal Occupation for Past Five Appointed Position held With
Name Years Age Director the Bank
---- --------------------------------------- --- --------- ---------------------
<S> <C> <C> <C> <C>
Kensett J. Moyle, III President, Moyle's Health Care, Inc. 56 1980 Director

William T. Powers President and Chief Executive 58 1993 President, Chief
Officer of First Community Bank of Executive Officer and
the Desert, October 1993 to present; Director
Senior Vice resident and Regional
Branch Administrator, El Dorado
Bank, September 1989 to
October 1993

William J. Ruh Senior Vice President, Belle 38 1995 Director
Plaine Financial and Senior Vice
President, Castle Creek Capital,
March 1996 to present. Vice
President, Belle Plaine Partners, Inc.,
January 1995 to March 1996
Assistant Vice President, Mabon
Securities Corp., July 1992 to
December 1994.

Robert A. Schoellhorn Chairman and Chief Executive 70 1995 Director
Officer, Marathon Coach, Inc.,
January 1993 to present. Chairman
and Chief Executive Officer,
Abbott Laboratories, retired
August 31, 1990.

Dale E. Walter Retired; President and Chief 64 1995 Director
Executive Officer, Guardian Bank,
October 1994 to February 1995.
Chairman, President and Chief
Executive Officer, Commerce Bank,
January 1993 to August 1994.
President and Chief Executive
Officer, Bank of Industry,
August 1980 to June 1992.

David S. Williams President, Williams Plumbing, Inc. 57 1980 Director
</TABLE>

The Board of Directors and Committees

First Community Bank of the Desert has a standing Stock Option Committee,
Executive Committee, Loan Committee, Retirement Plans/Compensation Committee,
Community Reinvestment Act Committee and Audit Committee. First Community Bank
of the Desert has no standing nominating committee; however, the procedures for
nominating directors, other than by the Board of Directors itself, are set
forth in First Community Bank of the Desert's Bylaws and in the Notice of
Annual Meeting of Shareholders.

77
<PAGE>

During the fiscal year ended December 31, 1998, the board of directors of
First Community Bank of the Desert held a total of eleven (11) meetings. All of
the persons who were directors of First Community Bank of the Desert during
1998 attended at least 75% of the aggregate of (i) the total number of such
meetings of the board of directors and (ii) the total number of meetings held
by all committees of the board on which he served during the year.

REMUNERATION OF DIRECTORS AND PRINCIPAL OFFICERS

Principal Officer Remuneration

The following table sets forth the aggregate remuneration paid or accrued
for services rendered during 1999: to William T. Powers, the Bank's President
and Chief Executive Officer and the only person who served as principal officer
of the Bank during such year whose aggregate remuneration exceeded $100,000.

<TABLE>
<CAPTION>
Annual Compensation
----------------------------
Other Annual All Other
Name of Individual Salary Bonus Compensation Compensation
------------------ ------ ------ ------------ ------------
<S> <C> <C> <C> <C>
William T. Powers..................... $136,000 $6,000 $13,100(1) $2,583(2)
</TABLE>
- --------
(1) Represents premiums on new insurance policy coverage in excess of the
coverage generally provided to bank employees, automobile allowance, and
reimbursement for country club dues.
(2) Represents Bank's matching contributions to the 401(k).

Stock Options

On April 22, 1987, the shareholders approved the First Community Bank of the
Desert 1987 Incentive Stock Option Plan, which is intended to advance the
interests of First Community Bank of the Desert by encouraging high levels of
performance and stock ownership on the part of directors and key Bank
personnel. The Stock Option Plan is administered and interpreted by the Stock
Option Committee of the board of directors. Options under the Stock Option Plan
may be granted to full-time salaried employees, employee directors, and non-
employee directors of First Community Bank of the Desert or its subsidiaries.
Option exercise prices may not be less than 100% of the fair market value of
the stock at the date of grant. The purchase price of common stock acquired
pursuant to an option must be paid in cash or checks payable to the order of
First Community Bank of the Desert at the time the option is exercised. Options
granted under the Stock Option Plan may not extend more than ten (10) years
from the date of grant. First Community Bank of the Desert believes that the
ability to grant non-qualified options under the Stock Option Plan will provide
the Bank with tax benefits that are not ordinarily available in connection with
incentive stock options. During 1998, 242,500 stock options were granted by
First Community Bank of the Desert.

Director Compensation

During 1998, First Community Bank of the Desert paid each director $5,000
per year, pro-rated for time in office during the year, for serving on the
board of directors. Each director also received $250 for each board meeting
attended and $100 for each committee meeting attended outside of regular board
meetings. During 1998, First Community Bank of the Desert paid aggregate
compensation of $45,000 pursuant to these arrangements. Non-employee directors
of First Community Bank of the Desert may also elect to participate in First
Community Bank of the Desert's health and life insurance programs at the
director's expense and to receive options under the 1987 Stock Option Plan.

78
<PAGE>

Certain Transactions

Certain directors and executive officers of First Community Bank of the
Desert and companies with which they were associated were customers of, and
have had transactions with, First Community Bank of the Desert in the ordinary
course of business. First Community Bank of the Desert provides automatic
overdraft protection of up to $500 to directors and officers who have checking
accounts with First Community Bank of the Desert. As of August 19, 1999, this
secondary line of credit was closed.

On December 29, 1998, Kensett J. Moyle, III was granted a real estate loan
in the amount of $750,000. Additionally, in August of 1999, Mr. Moyle was
granted a real estate loan, as a co-borrower, in the amount of $200,000.

In March of 1998, First Community Bank of the Desert granted Outdoor Resorts
a construction loan for a maximum amount of $3,039,900. This loan was
subsequently paid and closed on April 29, 1999. Additionally, in March of 1999,
Outdoor Resorts was granted a construction loan for a maximum amount of
$4,325,096. As of September 1, 1999, the principal amount outstanding under
this facility was $3,431,065.97. Robert A. Schoellhorn, a Bank director, is the
sole shareholder of Four Seasons, Inc., which is a 50% limited partner in
Outdoor Resorts.

Each of the above transactions have been on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other persons of similar creditworthiness and, in
the opinion of management of First Community Bank of the Desert, did not
involve more than a normal risk repayment or present other unfavorable
features.

THE BOARD OF DIRECTORS OF FIRST COMMUNITY
BANK OF THE DESERT RECOMMENDS THAT YOU VOTE FOR
THE NOMINEES FOR DIRECTOR

INDEPENDENT PUBLIC ACCOUNTANTS

First Community Bank of the Desert has selected KPMG LLP, independent public
accountants, as its principal accountants for the fiscal year ending December
31, 2000. KPMG LLP has served as independent accountants for First Community
Bank of the Desert since 1996. This firm performed audit and tax services for
First Community Bank of the Desert at customary rates and terms. All
professional services by KPMG LLP were approved in advance by the board of
directors. Representative of KPMG LLP will be present at the annual meeting to
make a statement if they desire to do so and will be available to respond to
appropriate questions from shareholders at the annual meeting.

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<PAGE>

THE MERGER

The detailed terms of the merger are contained in the merger agreement
attached as Annex A to this document. The following discussion and the
discussion under "The Merger Agreement" describe the more important aspects of
the merger and all of the material terms of the merger agreement. These
descriptions are qualified by reference to the merger agreement, which is
attached as Annex A. We encourage you to read the merger agreement carefully.

Structure of the Merger

General. The merger agreement provides that, after approval by the First
Community Bank of the Desert shareholders and the satisfaction or waiver of the
other conditions to the merger, First Community Bank of the Desert will merge
with and into FCB Merger Sub, Inc., a wholly owned, non-operating subsidiary of
First Community Bancorp. The Articles of Incorporation and Bylaws of First
Community Bank of the Desert, as in effect immediately prior to the merger,
will be the Articles of Incorporation and Bylaws of First Community Bank of the
Desert after the merger. The directors and officers of First Community Bank of
the Desert immediately prior to the merger will be the directors and officers
of First Community Bank of the Desert after the merger until they resign or
until their respective successors are duly elected and qualified.

Timing of Closing. The closing of the merger will occur on the third
business day after the satisfaction or waiver of all conditions to the merger
agreement and after all regulatory approvals have been obtained, unless another
date is agreed to by Rancho Santa Fe, First Community Bancorp and First
Community Bank of the Desert.

Conversion of Shares. At the completion of the merger, each issued and
outstanding share of First Community Bank of the Desert common stock, other
than shares held by dissenters, will convert into the right to receive 0.30
shares of First Community Bancorp common stock. First Community Bancorp will
pay cash instead of fractional shares of First Community Bancorp common stock
in an amount equal to such fraction multiplied by $4.125. Assuming that the
holders of First Community Bank of the Desert stock options exercise their
options before the merger, First Community Bancorp will issue approximately
1,389,581 shares of First Community Bancorp common stock in the merger.

If First Community Bancorp changes the number of outstanding shares of First
Community Bancorp common stock before the merger through any stock split or
other combination, or if First Community Bancorp declares a stock dividend,
then First Community Bancorp will adjust the conversion ratio appropriately.

First Community Bancorp was recently organized and a market for its common
stock does not yet exist. First Community Bank of the Desert shareholders may
obtain current market quotations for Rancho Santa Fe National Bank common stock
and First Community Bank of the Desert common stock, both of which are traded
on the OTC bulletin board. We expect that the market price of Rancho Santa Fe
National Bank common stock will fluctuate between the date of this document and
the date of the merger. Because the number of shares of First Community Bancorp
common stock that First Community Bank of the Desert shareholders will receive
in the merger is fixed and the market price of Rancho Santa Fe National Bank
common stock fluctuates, the value of the shares of First Community Bancorp
common stock that First Community Bank of the Desert shareholders receive in
the merger may increase or decrease prior to and after the merger.

Background of and Reasons for the Merger

Background of the Merger--First Community Bancorp.

First Community Bancorp is a California corporation formed in October 1999
to own Rancho Santa Fe National Bank and, if the merger is completed, First
Community Bank of the Desert. First Community Bancorp

80
<PAGE>

was therefore specifically formed by Rancho Santa Fe National Bank in order to
facilitate the combination of Rancho Santa Fe National Bank and First Community
Bank of the Desert under one holding company.

Reasons for the Merger--First Community Bancorp.

The Board of Directors of First Community Bancorp believes that the merger
with First Community Bank of the Desert will provide greater operating and
financial flexibility in connection with certain financing, investment, and
other business and corporate activities than is currently enjoyed by First
Community Bancorp alone.

Background of the Merger--First Community Bank of the Desert

In July 1995, First Community Bank of the Desert signed a letter of
engagement with Belle Plaine Partners, Inc., pursuant to which Belle Plaine
Partners would act as the exclusive financial advisor to First Community Bank
of the Desert to advise it about ways to enhance shareholder value and improve
its performance. From time to time, Belle Plaine Partners contacted certain
financial institutions to explore various strategic options, including possible
mergers or other business combinations with First Community Bank of the Desert.

To enhance First Community Bank of the Desert's strength in such discussions
and to continue to enhance shareholder value, the First Community Bank of the
Desert's board of directors continued to review potential strategic
alternatives for improving its performance. First Community Bank of the Desert
pursued a strategic course seeking:

. to strengthen First Community Bank of the Desert's position in the
communities it serves;

. growth and increased profitability; and

. the achievement of greater operating efficiencies.

First Community Bank of the Desert took numerous steps in an effort to
achieve these objectives, including increasing First Community Bank of the
Desert's local promotional activities, encouraging personal contact by First
Community Bank of the Desert's officers, directors and shareholders with the
communities they serve, and implementing programs offering extended hours and
specialized services.

As First Community Bank of the Desert continued to implement programs aimed
at achieving growth and increased profitability, the board of directors of
First Community Bank of the Desert from time to time considered alternative
strategies for enhancing First Community Bank of the Desert's ability to
achieve those strategic objectives. With financial advice from Belle Plaine,
First Community Bank of the Desert considered the possibility of affiliating
with a larger, more diversified bank or bank holding company with a similar
strategic focus. At First Community Bank of the Desert's direction, Belle
Plaine approached institutions that First Community Bank of the Desert and
Belle Plaine considered to be potentially interested in pursuing a merger or
other business combination with First Community Bank of the Desert:

. on terms and conditions, including price, that would offer significant
value to First Community Bank of the Desert shareholders;

. that would pursue a business strategy and conduct operations compatible
with those in place at First Community Bank of the Desert; and

. that, in combination with First Community Bank of the Desert's business,
would build a stronger, more valuable banking franchise.

In August 1999, representatives of Rancho Santa Fe National Bank, through
arrangements by Belle Plaine, met with First Community Bank of the Desert's
President, William Powers, regarding a potential merger of the institutions.

81
<PAGE>

The Rancho Santa Fe representatives and Mr. Powers subsequently met to
explore the potential transaction structure and the value of a merger between
First Community Bank of the Desert and Rancho Santa Fe.

After various discussions and negotiations among certain directors, officers
and financial and legal advisors, First Community Bank of the Desert received a
nonbinding expression of interest letter from Rancho Santa Fe, through Belle
Plaine, on September 1, 1999, whereby Rancho Santa Fe offered to exchange each
share of First Community Bank of the Desert common stock for 0.275 shares of
Rancho Santa Fe common stock. Each party then conducted a due diligence
examination of the other.

Because Belle Plaine was financial advisor to both First Community Bank of
the Desert and Rancho Santa Fe and because affiliates of Castle Creek Capital
were shareholders and directors of both banks, First Community Bank of the
Desert's board of directors appointed a special committee to consider the
proposal from Rancho Santa Fe and to negotiate on behalf of First Community
Bank of the Desert. The special committee consisted of David S. Williams,
Kensett J. Moyle III and Dale E. Walter. On September 29, 1999, the special
committee engaged US Bancorp Piper Jaffray to act as an independent financial
advisor to First Community Bank of the Desert in connection with evaluating the
terms and financial fairness of the proposed agreement and merger.

Pursuant to its engagement, representatives of US Bancorp Piper Jaffray
conducted due diligence and reviewed financial information provided by First
Community Bank of the Desert and Rancho Santa Fe. On October 19, 20 and 21,
1999, the special committee discussed the proposed transaction with
representatives of US Bancorp Piper Jaffray. During the course of these
discussions, the special committee determined that the merger consideration
should be increased to 0.30 shares of First Community Bancorp stock for each
share of First Community Bank of the Desert common stock, and Rancho Santa Fe
agreed.

On October 22, 1999, the special committee reported to the full board of
directors regarding its review of the terms of the transaction, and unanimously
recommended that the revised offer from Rancho Santa Fe National Bank be
approved subject to receipt of a fairness opinion from US Bancorp Piper
Jaffray. Thereafter, the board of First Community Bank of the Desert received
an oral opinion from US Bancorp Piper Jaffray to the effect that the
consideration of 0.30 shares of First Community Bancorp stock for each share of
First Community Bank of the Desert common stock was fair to First Community
Bank of the Desert shareholders (other than affiliates of Castle Creek
Capital), from a financial point of view.

After discussion, the board of directors unanimously approved the merger
agreement as revised. On October 22, 1999, First Community Bank of the Desert
executed the merger agreement.

Reasons for the Merger--First Community Bank of the Desert. The First
Community Bank of the Desert board believes that the merger agreement and the
merger are in the best interest of First Community Bank of the Desert and its
shareholders. Accordingly, the First Community Bank of the Desert Board has
unanimously approved and adopted the merger agreement and recommends approval
of the merger agreement by the First Community Bank of the Desert shareholders.
In reaching its decision, the board consulted with members of the special
committee, management, legal counsel and US Bancorp Piper Jaffray. The Board
considered a number of factors, to which relative weights were not assigned,
including the following:

. the First Community Bank of the Desert board's familiarity with and
review of Rancho Santa Fe's business, operations, financial condition
and earnings;

. the First Community Bank of the Desert board's familiarity with and
review of Rancho Santa Fe's and First Community Bancorp's prospects, and
factors that might affect Rancho Santa Fe's and First Community
Bancorp's ability to enhance revenues and obtain revenue source
diversification on a stand-alone basis, including:

the effect on Rancho Santa Fe's operating margins in a higher
interest rate environment in light of the highly competitive banking
business in Southern California;

82
<PAGE>

the dominance in the Southern California market by a relatively
small number of major banks with many offices operating over a wide
geographic area;

the competition for loans and deposits by Rancho Santa Fe with other
commercial banks, including many which are much larger than Rancho
Santa Fe and First Community Bank of the Desert, as well as with
savings and loan associations, finance companies, credit unions,
brokerage houses and other financial institutions; and

the ability of larger commercial banks to offer larger loans based
on substantially higher lending limits due to a larger capital base;

. the current and prospective economic, regulatory and competitive
environment facing financial institutions, including First Community
Bank of the Desert's and Rancho Santa Fe's earnings;

. the review by the board of directors of First Community Bank of the
Desert, based in part on the advice of US Bancorp Piper Jaffray, of
alternatives to the merger with Rancho Santa Fe and First Community
Bancorp, the range of possible values to First Community Bank of the
Desert's shareholders that might be obtained in the future if those were
chosen and the timing and likelihood of actually receiving such values.
This review included consideration of the alternatives of remaining
independent or engaging in a merger or a similar transaction with
another bank, bank holding company or other financial holding company;

. the review by the board of directors of First Community Bank of the
Desert, based in part on the advice of US Bancorp Piper Jaffray and
reports from management, of (a) the business, operations, earnings, and
financial condition of First Community Bank of the Desert on both an
historical and a prospective basis and (b) the historical market price
and potential future value of First Community Bank of the Desert common
stock;

. the belief of the Board of Directors of First Community Bank of the
Desert that the terms of the merger agreement are attractive;

. the liquidity that would be offered to shareholders of First Community
Bank of the Desert upon exchange of their shares of First Community Bank
of the Desert common stock for shares of First Community Bancorp common
stock, which will be traded on the Nasdaq National Market System;

. the presentations of US Bancorp Piper Jaffray and the October 22, 1999
oral opinion of US Bancorp Piper Jaffray that the merger consideration
is fair to the shareholders of First Community Bank of the Desert from a
financial point of view;

. the expectation that the merger will generally be a tax-deferred
reorganization to First Community Bank of the Desert and its
shareholders;

. the terms of the merger agreement and certain other information
regarding the merger, including the terms and structure of the merger,
the proposed arrangements with respect to the board of directors of
First Community Bancorp, and the management structure following the
merger; and

. the effect of the merger on First Community Bank of the Desert's other
constituencies, including its employees, customers and the communities
it serves.

The foregoing discussion of the information and factors considered by the
First Community Bank of the Desert board is not intended to be exhaustive but
includes all material factors considered by the First Community Bank of the
Desert board. In deciding to approve the merger, the First Community Bank of
the Desert board did not assign any relative or specific weights to the
foregoing factors, and individual directors may have given differing weights to
different factors.

Effects of the Merger and Recommendations of the Boards of Directors

Among the reasons for First Community Bank of the Desert and First Community
Bancorp's recommending approval of the merger is their belief that, over the
long-term, the merger will benefit First

83
<PAGE>

Community Bancorp shareholders, including Rancho Santa Fe shareholders and
First Community Bank of the Desert shareholders who will become First Community
Bancorp shareholders when the reorganization and the merger are completed.
First Community Bancorp believes that one of the potential benefits of the
merger is that the cost savings that may be realized as a result of the merger
will enhance First Community Bancorp's earnings.

First Community Bancorp currently expects to reduce expenses by
consolidating external data-processing costs and by combining accounting, data
processing, retail and lending support and other functions after the merger,
which will enable First Community Bancorp to eventually eliminate duplicative
positions. Promptly following the completion of the merger, which is expected
to occur at the end of the first quarter of 2000, First Community Bancorp plans
to begin the process of eliminating redundant functions, such as external data
processing, and identifying and eliminating duplicative personnel.

First Community Bancorp believes that it will achieve cost savings based on
the assumption that it will be able to:

. reduce compensation and benefits costs;

. reduce external data processing costs;

. achieve economies of scale in advertising and marketing budgets; and

. achieve other savings through reduction or elimination of miscellaneous
items such as insurance premiums, travel and automobile expense, and
investor relations expenses.

We have based these assumptions on our present assessment of where savings
could be realized based upon the present independent operations of the two
companies. Actual savings in some or all of these areas could be higher or
lower than we currently expect. We also recognize that some of these savings
will be offset by certain additional costs resulting from the adoption of a
holding company structure.

The companies have prepared financial statements that show the combined
operations and financial condition of the two companies as if the merger had
occurred on September 30, 1999. These are known as "pro forma" financial
statements. The pro forma financial statements are set forth beginning on page
12. The pro forma financial statements do not reflect the fact that First
Community Bancorp believes the merger will create significant opportunities for
increasing its revenues through mortgage, commercial and consumer loan growth.
First Community Bancorp has not quantified the increase in revenues that it
hopes to achieve; thus we cannot predict what effect it will have on our post-
merger results of operations.

The pro forma financial statements show that the merger would have caused a
"dilution" (reduction) in Rancho Santa Fe's earnings per share. This dilution
is reflected in the pro forma financial statements and can be seen in the
section labeled "Selected Historical and Pro Forma Per Share Data" on page 13
by comparing the section labeled "Summary Historical Financial Data of Rancho
Santa Fe" with the selection labeled "Summary Unaudited Pro Forma Combined
Financial Data."

Each of the First Community Bancorp board of directors, the Rancho Santa Fe
board of directors and First Community Bank of the Desert board of directors
believes the merger is in the best interests of their respective institutions,
shareholders and banking customers. The parties also anticipate that the merger
will present significant revenue enhancement opportunities for the combined
entity. These opportunities result from, among other factors, an increased
ability to offer a wider variety of banking products and services which will
result in the potential to increase overall market share in the communities
presently served by Rancho Santa Fe and First Community Bank of the Desert Bank
as a result of the wider range of products and services to be offered through
the combined entity under First Community Bancorp.

For the reasons set forth above, the board of directors of First Community
Bank of the Desert unanimously recommends that you vote FOR the merger and the
transactions contemplated thereby.

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<PAGE>

Opinion of First Community Bank of the Desert's Financial Advisor

Pursuant to an engagement letter dated September 30, 1999, First Community
Bank of the Desert retained US Bancorp Piper Jaffray to render to the Special
Committee of the board of directors an opinion as to the fairness, from a
financial point of view, of the consideration to be received by First Community
Bank of the Desert shareholders (other than affiliates of Castle Creek Capital
Fund I, LP) in the merger.

US Bancorp Piper Jaffray delivered to the board of directors of First
Community Bank of the Desert on October 22, 1999 its oral opinion (subsequently
confirmed in writing), as of that date and based upon and subject to the
assumptions, factors and limitations set forth in the written opinion and
described below, the consideration proposed to be received by First Community
Bank of the Desert shareholders (other than affiliates of Castle Creek Capital
Fund I, LP) in the proposed merger was fair, from a financial point of view, to
those shareholders. A copy of US Bancorp Piper Jaffray's written opinion is
attached to this proxy statement/prospectus as Annex B and is incorporated into
this proxy statement/prospectus by reference.

Although US Bancorp Piper Jaffray rendered its opinion and provided certain
analyses to the board of directors, US Bancorp Piper Jaffray was not requested
to and did not make any recommendation to the board of directors as to the
specific form or amount of the consideration to be received by First Community
Bank of the Desert shareholders in the proposed merger, which was determined
through negotiations among First Community Bank of the Desert, First Community
Bancorp and Rancho Santa Fe National Bank. US Bancorp Piper Jaffray's written
opinion, which was directed to the First Community Bank of the Desert board of
directors, addresses only the fairness, from a financial point of view, of the
proposed consideration to be received by First Community Bank of the Desert
shareholders (other than affiliates of Castle Creek Capital Fund I, LP) in the
proposed merger, does not address First Community Bank of the Desert's
underlying business decision to participate in the merger and does not
constitute a recommendation to any First Community Bank of the Desert
shareholder as to how a shareholder should vote with respect to the merger.

In arriving at its opinion, US Bancorp Piper Jaffray's reviewed:

. a draft of the merger agreement dated September 30, 1999 (US Bancorp
Piper Jaffray having been advised of subsequent changes to the exchange
ratio);

. selected financial, operating and business information related to Rancho
Santa Fe National Bank and First Community Bank of the Desert;

. publicly available market and securities data of Rancho Santa Fe
National Bank, First Community Bank of the Desert and of selected public
companies deemed comparable to Rancho Santa Fe National Bank and First
Community Bank of the Desert;

. to the extent publicly available, financial information relating to
selected transactions deemed comparable to the proposed merger; and

. internal financial information of First Community Bank of the Desert,
First Community Bancorp and Rancho Santa Fe National Bank prepared for
financial planning purposes and furnished by First Community Bank of the
Desert and Rancho Santa Fe National Bank management.

In addition, US Bancorp Piper Jaffray visited the headquarters of First
Community Bank of the Desert and Rancho Santa Fe National Bank and conducted
discussions with members of senior management of both Rancho Santa Fe National
Bank and First Community Bank of the Desert concerning the financial condition,
current operating results and business outlook of Rancho Santa Fe National
Bank, First Community Bank of the Desert and the combined company following the
merger.

In delivering its opinion to the board of directors of First Community Bank
of the Desert, US Bancorp Piper Jaffray prepared and delivered to the board of
directors written materials containing various analyses and other information
material to the opinion. Here is a summary of the analyses contained in the
materials:

85
<PAGE>

Implied Consideration

Giving effect to the exchange ratio will result in an implied value of First
Community Bancorp stock consideration of $4.16 per share of First Community
Bank of the Desert common stock (based on the closing trading price for Rancho
Santa Fe National Bank common stock on October 22, 1999 of $13.88) and the
outstanding First Community Bank of the Desert common shares and common share
equivalents. US Bancorp Piper Jaffray calculated the aggregate implied value of
the stock consideration payable in the transaction for First Community Bank of
the Desert common stock to be approximately $20.657 million. US Bancorp
Piper Jaffray also calculated that shareholders of First Community Bank of the
Desert would be issued an aggregate of 36.2% of the total First Community
Bancorp common stock and common stock equivalents outstanding after the merger.

First Community Bank of the Desert Market Analysis

US Bancorp Piper Jaffray reviewed the stock trading history of First
Community Bank of the Desert common stock. US Bancorp Piper Jaffray presented
the recent common stock trading information contained in the following table:

<TABLE>
<S> <C>
Closing price on October 21, 1999..................................... $3.81
30 calendar day closing average....................................... 3.87
60 calendar day closing average....................................... 3.83
90 calendar day closing average....................................... 3.81
180 calendar day closing average...................................... 3.84
52 week high trade.................................................... 5.06
52 week low trade..................................................... 3.50
</TABLE>

US Bancorp Piper Jaffray also presented selected price and volume
distribution data and illustrated the relative stock price performance of First
Community Bank of the Desert against the comparable groups described below, the
NASDAQ Stock Market and the S & P Bank Index.

First Community Bank of the Desert Comparable Company Analysis

US Bancorp Piper Jaffray compared First Community Bank of the Desert's
financial information and valuation ratios with those of eleven publicly traded
companies deemed comparable to First Community Bank of the Desert. This group
included BYL Bancorp, Bank of the Sierra, Capital Corp of the West, Civic
BanCorp, Community West Bancshares, Desert Community Bank, North Valley
Bancorp, Pacific Crest Capital, Redwood Empire Bancorp, SJNB Financial Corp.
and Wilshire State Bank. This group was selected from companies that are
commercial banks or bank holding companies which operate in California and have
assets between $100 million and $600 million.

This analysis produced multiples of selected valuation data as follows:

<TABLE>
<CAPTION>
First Comparable Companies
Community --------------------------
Bancorp Low Mean Median High
--------- ----- ------ ------ ------
<S> <C> <C> <C> <C> <C>
Share price to latest twelve months net
income per share........................ 17.29x 7.57x 11.97x 11.71x 21.69x
Share price to estimated calendar 1999
Net income per shares................... 13.19x 7.23x 11.62x 10.71x 20.77x
Share price to estimated calendar 2000
Net income per share.................... 9.43x 6.47x 10.25x 9.70x 16.76x
Market capitalization to book value...... 2.31x 0.99x 1.59x 1.35x 3.04x
Market capitalization to tangible book
value................................... 2.31x 1.01x 1.71x 1.39x 3.40x
</TABLE>

Merger and Acquisition Analyses

US Bancorp Piper Jaffray reviewed 18 pooling of interest merger and
acquisition transactions (the "Comparable Transactions") that it deemed
comparable to the merger. It selected these transactions by

86
<PAGE>

searching SEC filings, public company disclosures, press releases, industry and
popular press reports, databases and other sources, and by applying the
following criteria:

. transactions that were announced between January 1, 1996 and October 22,
1999;

. transactions in which the issuing company acquired 100% of the target;

. transactions in which the target company operates in the banking
industry;

. transactions in which the target company is located in California;

. transactions in which the target company had total assets greater than
$100 million and less than $500 million.

US Bancorp Piper Jaffray compared the resulting multiples of selected
valuation data to multiples for First Community Bank of the Desert derived from
the implied value payable in the merger.

<TABLE>
<CAPTION>
First Comparable Transactions
Community ---------------------------
Bancorp Low Mean Median High
--------- ----- ----- ------ -----
<S> <C> <C> <C> <C> <C>
Transaction value to assets............ 0.16x 0.16x 0.25x 0.24x 0.40x
Transaction value to book value........ 2.36x 1.95x 2.79x 2.69x 3.87x
Transaction value to tangible book
value................................. 2.36x 1.99x 2.93x 2.75x 4.52x
Transaction value to latest twelve
months net income..................... 17.66x 14.36x 22.03x 21.32x 37.68x
</TABLE>

US Bancorp Piper Jaffray also reviewed the Comparable Transactions to
determine the implied premiums payable in the mergers over recent trading
prices. The table below shows a comparison of premiums paid in the Comparable
Transactions to the premium that would be paid to First Community Bank of the
Desert shareholders based on the implied value payable in the merger. The
premium calculations for First Community Bank of the Desert stock are based
upon an assumed announcement date of October 22, 1999.

<TABLE>
<CAPTION>
Implied Premium (Discount)
--------------------------------------
First Comparable Transactions
Community ----------------------------
Bancorp Low Mean Median High
--------- ----- ----- ------ ------
<S> <C> <C> <C> <C> <C>
One day before announcement............. 5.71% -- 24.99% 16.06% 90.96%
Thirty days before announcement......... 10.08 (2.75) 36.76 36.97 117.65
</TABLE>

Pro Forma Analyses

US Bancorp Piper Jaffray analyzed pro forma effects resulting from the
impact of the transaction on the projected earnings per share and tangible book
value of the combined company at and for the fiscal years ending 1999, 2000 and
2001 using management estimates for First Community Bank of the Desert, Rancho
Santa Fe National Bank and First Community Bancorp. Without consideration of
certain synergies that management estimates the combined company may realize
following consummation of the transaction, US Bancorp Piper Jaffray determined
that the transaction could be:

. neutral to accretive in 1999, 2000 and 2001 to the projected stand-alone
earnings per share of First Community Bank of the Desert;

. dilutive in 1999 and accretive in 2000 and 2001 to the projected stand-
alone earnings per share of Rancho Santa Fe National Bank;

. accretive in 1999 and 2000 and dilutive in 2001 to the projected stand-
alone tangible book value of First Community Bank of the Desert; and

. dilutive in 1999 and 2000 and accretive in 2001 to the projected stand-
alone tangible book value of Rancho Santa Fe National Bank.

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<PAGE>

Considering certain synergies that management estimates the combined company
may realize following consummation of the transaction, US Bancorp Piper Jaffray
determined that the transaction could be

. accretive in each of 1999, 2000 and 2001 to the projected stand-alone
earnings per share of both First Community Bank of the Desert and Rancho
Santa Fe National Bank;

. accretive in each of 1999 and 2000 and dilutive in 2001 to the projected
stand-alone tangible value of First Community Bank of the Desert; and

. dilutive in each of 1999 and 2000 and accretive in 2001 to the projected
stand-alone tangible book value of Rancho Santa Fe National Bank.

US Bancorp Piper Jaffray analyzed the expected contributions of each of
First Community Bank of the Desert and Rancho Santa Fe National Bank to pre-tax
income, net income, total assets, total deposits, total net loans, loan loss
reserves and tangible book value of the combined company for the years ending
December 31, 1999, 2000 and 2001 based on internal financial planning data of
First Community Bank of the Desert and Rancho Santa Fe National Bank furnished
by First Community Bank of the Desert and Rancho Santa Fe National Bank
management. The analysis indicated that during these periods First Community
Bank of the Desert would contribute to the combined entity pre-tax income
ranging from 32.7% to 37.6%, net income ranging from 32.7% to 37.7%, total
assets ranging from 41.7% to 43.0%, total deposits ranging from 42.4% to 43.9%,
total net loans ranging from 36.2% to 37.7%, loan loss reserves ranging from
41.6% to 43.1%, and tangible book value ranging from 33.9% to 36.3%. First
Community Bank of the Desert shareholders will receive an aggregate of
approximately 36.2% of the shares of the combined company.

First Community Bank of the Desert Discounted Dividend Analysis

US Bancorp Piper Jaffray performed a discounted dividend analysis for First
Community Bank of the Desert in which it calculated the present value of the
projected hypothetical future dividends of First Community Bank of the Desert
using internal financial planning data prepared by First Community Bank of the
Desert management and assumed hypothetical payout of dividends while
maintaining certain levels of capital. US Bancorp Piper Jaffray estimated a
range of theoretical values for First Community Bank of the Desert based on the
net present value of its implied annual dividend flows and a terminal value for
First Community Bank of the Desert in 2003 calculated based upon a multiple of
net income. US Bancorp Piper Jaffray applied a range of discount rates of 13%
to 19% and a range of terminal value multiples of 10x to 14x of forecasted 2003
net income. This analysis yielded the following results:

<TABLE>
<CAPTION>
Per Share Equity Value of First Community Bank of the Desert
------------------------------------------------------------
<S> <C>
Low................................................................. $3.27
High................................................................ 5.41
<CAPTION>
Aggregate Equity Value of First Community Bank of the Desert
------------------------------------------------------------
(in thousands)
<S> <C>
Low................................................................. $16,205
High................................................................ 26,850
</TABLE>

88
<PAGE>

Analysis of Rancho Santa Fe National Bank Common Stock

US Bancorp Piper Jaffray reviewed general background information concerning
Rancho Santa Fe National Bank, including recent financial and operating results
and outlook, the price performance of Rancho Santa Fe National Bank common
stock over the previous twelve months relative to the NASDAQ, to the S&P Bank
Index and to a comparable company group, and the stock price and volume over
selected periods. US Bancorp Piper Jaffray also reviewed the stock trading
history of Rancho Santa Fe National Bank common stock at the dates or for the
periods indicated below.

<TABLE>
<S> <C>
Closing price on October 21, 1999.................................... $13.88
30 calendar day closing average...................................... 13.86
60 calendar day closing average...................................... 13.75
90 calendar day closing average...................................... 13.85
180 calendar day closing average..................................... 13.56
52 week high trade................................................... 15.00
52 week low trade.................................................... 11.00
</TABLE>

In addition, US Bancorp Piper Jaffray compared selected financial data and
ratios for Rancho Santa Fe National Bank to the corresponding data and ratios
for the same comparable company group described above. The stock price used in
the calculations was Rancho Santa Fe National Bank's closing price of $13.88 on
October 21, 1999.

This analysis produced multiples of selected valuation data as follows:

<TABLE>
<CAPTION>
Comparable Companies
--------------------------
Rancho Low Mean Median High
------ ---- ----- ------ -----
<S> <C> <C> <C> <C> <C>
Price to latest twelve months net income
per share................................ 12.81x 7.57x 11.97x 11.71x 21.69x
Price to estimated calendar 1999 net
income per share......................... 11.56x 7.23x 11.62x 10.71x 20.77x
Price to estimated calendar 2000 net
income per share......................... 10.28x 6.47x 10.25x 9.70x 16.76x
Price to book value....................... 2.15x 0.99x 1.59x 1.35x 3.04x
Price to tangible book value.............. 2.15x 1.01x 1.71x 1.39x 3.40x
</TABLE>

In reaching its conclusion as to the fairness of the merger consideration
and in its presentation to the board of directors, US Bancorp Piper Jaffray did
not rely on any single analysis or factor described above, assign relative
weights to the analyses or factors considered by it, or make any conclusion as
to how the results of any given analysis, taken alone, supported its opinion.
The preparation of a fairness opinion is a complex process and not necessarily
susceptible to partial analysis or summary description. US Bancorp Piper
Jaffray believes that its analyses must be considered as a whole and that
selection of portions of its analyses and of the factors considered by it,
without considering all of the factors and analyses, would create a misleading
view of the processes underlying the opinion.

The analyses of US Bancorp Piper Jaffray are not necessarily indicative of
actual values or future results, which may be significantly more or less
favorable than suggested by the analyses. Analyses relating to the value of
companies do not purport to be appraisals or valuations or necessarily reflect
the price at which companies may actually be sold. No company or transaction
used in any analysis for purposes of comparison is identical to First Community
Bank of the Desert, Rancho Santa Fe National Bank, First Community Bancorp or
the merger. Accordingly, an analysis of the results of the comparisons is not
mathematical; rather, it involves complex considerations and judgments about
differences in the companies to which First Community Bank of the Desert,
Rancho Santa Fe National Bank and First Community Bancorp were compared and
other factors that could affect the public trading value of the companies.

For purposes of its opinion, US Bancorp Piper Jaffray relied upon and
assumed the accuracy, completeness and fairness of the financial statements and
other information provided to it by First Community Bank of the Desert and
Rancho Santa Fe National Bank or otherwise made available to it and did not
assume responsibility

89
<PAGE>

for the independent verification of that information. Information prepared for
financial planning purposes was not prepared with the expectation of public
disclosure. US Bancorp Piper Jaffray relied upon the assurances of the
management of First Community Bank of the Desert and Rancho Santa Fe National
Bank that the information provided to it by First Community Bank of the Desert
and Rancho Santa Fe National Bank was prepared on a reasonable basis, the
financial planning data and other business outlook information reflects the
best currently available estimates of management, and management was not aware
of any information or facts that would make the information provided to US
Bancorp Piper Jaffray incomplete or misleading.

For purposes of its opinion, US Bancorp Piper Jaffray assumed that the
merger will constitute a reorganization for federal income tax purposes and
will be treated as a pooling of interests for accounting purposes. US Bancorp
Piper Jaffray also assumed that, in the course of obtaining the necessary
regulatory approvals and consents for the merger, no restrictions will be
imposed that have a material adverse effect on the contemplated benefits of the
merger to First Community Bank of the Desert and its shareholders.

In arriving at its opinion, US Bancorp Piper Jaffray did not perform any
appraisals or valuations of any specific assets or liabilities of First
Community Bank of the Desert or Rancho Santa Fe National Bank, and was not
furnished with any such appraisals or valuations. US Bancorp Piper Jaffray was
not authorized to solicit, and did not solicit, any other party relative to a
possible business combination with First Community Bank of the Desert. US
Bancorp Piper Jaffray analyzed First Community Bank of the Desert as a going
concern and accordingly expressed no opinion as to the liquidation value of any
entity. US Bancorp Piper Jaffray expressed no opinion as to the price at which
shares of First Community Bank of the Desert or Rancho Santa Fe National Bank
common stock have traded or at which the shares of First Community Bank of the
Desert, Rancho Santa Fe National Bank or the combined company may trade at any
future time. The opinion is based on information available to US Bancorp Piper
Jaffray and the facts and circumstances as they existed and were subject to
evaluation on the date of the opinion. Events occurring after that date could
materially affect the assumptions used in preparing the opinion. US Bancorp
Piper Jaffray has not undertaken to and is not obligated to affirm or revise
its opinion or otherwise comment on any events occurring after the date it was
given.

US Bancorp Piper Jaffray, as a customary part of its investment banking
business, evaluates businesses and their securities in connection with mergers
and acquisitions, underwritings and secondary distributions of securities,
private placements and valuations for estate, corporate and other purposes. The
Board of Directors selected US Bancorp Piper Jaffray because of its expertise,
reputation and familiarity with the banking industry.

Professional Fees Paid to Advisors

Under the terms of the engagement letter dated September 30, 1999, First
Community Bank of the Desert paid US Bancorp Piper Jaffray $75,000 upon the
rendering of its opinion. Whether or not the transaction is consummated, First
Community Bank of the Desert has agreed to pay the reasonable out-of-pocket
expenses of US Bancorp Piper Jaffray and to indemnify US Bancorp Piper Jaffray
against liabilities incurred. These liabilities include liabilities under the
federal securities laws in connection with the engagement of US Bancorp Piper
Jaffray by the board of directors. No portion of US Bancorp Piper Jaffray's fee
is contingent upon the conclusion reached in either the October 22, 1999 oral,
preliminary fairness opinion or the , 2000 confirming fairness
opinion.

Although First Community Bank of the Desert has engaged Belle Plaine
Partners as its exclusive financial advisor and agreed to pay Belle Plaine
Partners a fee equal 2% of the aggregate consideration payable in connection
with an acquisition of First Community Bank of the Desert by another
institution, Belle Plaine Partners has agreed to waive any fee that it might
otherwise be entitled to in connection with the merger of First Community Bank
of the Desert with and into First Community Bancorp. First Community Bank of
the Desert continues to pay quarterly advisory fees to Belle Plaine Partners
and to reimburse Belle Plaine Partners for its out-of-pocket expenses through
completion of the merger.

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<PAGE>

Interests of Certain Directors and Executive Officers in the Merger

When considering the recommendations of the First Community Bank of the
Desert board of directors, you should be aware that some of the directors,
management and employees of First Community Bank of the Desert may have
interests that differ from, or conflict with, your interests. The board of
directors was aware of these interests when it approved the merger and the
merger agreement. Except as described below, to the knowledge of First
Community Bank of the Desert, the executive officers and directors of First
Community Bank of the Desert do not have any material interest in the merger
apart from their interests as shareholders.

Accelerated Vesting of Stock Options

Outstanding but unvested options under First Community Bank of the Desert's
stock option plan, including options held by directors and executive officers,
will automatically vest according to their terms. As of the date hereof there
were 347,350 options outstanding to purchase First Community Bank of the Desert
common stock. In addition, First Community Bancorp has agreed to convert the
First Community Bank of the Desert stock options that are not exercised by the
completion of the merger into options to acquire First Community Bancorp common
stock by adopting the First Community Bank of the Desert stock option plan.

Employment Contracts and Deferred Compensation Plans

William Powers, President and Chief Executive Officer of First Community
Bank of the Desert and First Community Bank of the Desert Bank has rights under
an employment agreement dated January 1, 1998 with First Community Bank of the
Desert that will continue following the merger. Mr. Powers' employment
agreement has an initial period of two years, with one-year automatic renewals
occurring unless either party gives written notice to the other six months'
prior to the then-current expiration date. The employment agreement will
continue in full force and effect through January 1, 2001 unless one of the
parties gives notice to the other party prior to June 11, 2000 of its intent to
terminate the employment agreement.

Under the terms of the existing employment agreement with First Community
Bank of the Desert, Mr. Powers' base salary is $125,000 per annum, although it
may be increased at any time by the Board of Directors. For the year ending
December 31, 1999, Mr. Powers' salary was $136,000. In addition, Mr. Powers is
entitled to receive discretionary bonuses and incentive payments when and as
declared by the Board. First Community Bancorp will continue to honor all
provisions of Mr. Powers' employment agreement following completion of the
merger.

Appointment of Certain Directors to First Community Bancorp's Board.

Subject to approval of the First Community Bancorp board, upon completion of
the merger, Dale E. Walter, David S. Williams, Robert A. Schoellhorn, William
T. Powers, John M. Eggemeyer III, James A. Boyce, Robert A. Stine, Paul I.
Stevens and Robert E. Herrmann will become members of the Board of Directors of
First Community Bancorp upon completion of the merger. First Community Bancorp
will not provide direct remuneration to its directors (with the exception of
Mr. Boyce and Mr. Eggemeyer), other than fees for meeting attendance. Each
Board member will receive $500 for attendance at each regular Board meeting
(for each director other than Mr. Eggemeyer and Mr. Boyce) and $150 for each
Board committee member in attendance at each committee meeting (for each
director other than Mr. Eggemeyer and Mr. Boyce). Directors who are committee
Chairmen will receive an additional $100 per quarter, regardless of committee
meeting attendance. The Chairman of the Directors' Executive Committee will
receive $1,000 per quarter in lieu of other committee fees. The Chairman of the
Board will receive $3,000 per month for his services as Chairman. In addition,
each director will receive an annual fee of $5,000 for his or her service as a
director (for each director other than Mr. Eggemeyer and Mr. Boyce).

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<PAGE>

Interests in Affiliates

John M. Eggemeyer III was appointed to the Rancho Santa Fe Board on February
27, 1995 and was appointed Chairman of the Board on that date. Mr. Eggemeyer
received fees of $40,000 during 1998 for his services as Chairman of the Board.
Rancho Santa Fe also has entered into a contract with Belle Plaine, a company
involving Mr. Eggemeyer, retaining Belle Plaine as Rancho Santa Fe's exclusive
financial advisor, which may be cancelled by either party on 30 days' notice.
The contract with Belle Plaine provides for the payment of the following fees
upon the close of certain transactions: (a) 2% of the aggregate consideration
paid in the event that Rancho Santa Fe is sold; and (b) in the event of an
acquisition of another financial institution by Rancho Santa Fe: 3% of the
aggregate value of the transaction if the aggregate value is less than
$20 million; if the aggregate value is $20 million or more but is equal to or
less than $50 million, then 3% of the first $20 million plus 2% of the amount
in excess of $20 million; and if the aggregate value is more than $50 million,
then 3% of the first $20 million, plus 2% of the next $30 million, plus 1% of
the amount in excess of $50 million. Belle Plaine also is entitled to
reimbursement of its reasonable expenses incurred on behalf of Rancho Santa Fe.
No fees were paid under the contract with Belle Plaine during 1998, however,
expenses of $12,297 were reimbursed to Belle Plaine for 1998 under the
contract. Upon consummation of the acquisition of First Community Bank of the
Desert, Rancho Santa Fe will pay to Belle Plaine the fees and expenses required
under the contract between Rancho Santa Fe and Belle Plaine.

Nasdaq National Market Listing

First Community Bancorp will make an application to list the shares of First
Community Bancorp common stock to be issued in the merger on the Nasdaq
National Market. The stock must be authorized for listing on the Nasdaq
National Market for the merger to proceed.

Material Federal Income Tax Consequences

The following summary discusses the material federal income tax consequences
of the merger. The discussion may not be applicable to certain classes of
taxpayers, including securities dealers and other that use mark-to-market
method of accounting for federal income tax purposes, tax-exempt organizations
or trusts, foreign persons, persons who hold shares of First Community Bank of
the Desert as part of a straddle or conversion transaction and persons who
acquire shares of First Community Bank of the Desert common stock pursuant to
the exercise of employee stock options or rights or otherwise as compensation.
The respective obligations of the parties to consummate are conditioned upon:

. First Community Bancorp receiving an opinion of its counsel, Sullivan &
Cromwell, dated the effective date, to the effect that,

. for federal income tax purposes, the merger will be treated as a
reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended, and

. each of First Community Bancorp and First Community Bank of the
Desert will be a party to the reorganization within the meaning of
Section 368(b) of the code,

. First Community Bank of the Desert receiving an opinion of its counsel,
Manatt, Phelps & Phillips, LLP, dated the effective date, to the effect
that,

. for federal income tax purposes, the merger will be treated as a
reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended,

. each of First Community Bancorp and First Community Bank of the
Desert will be a party to the reorganization within the meaning of
Section 368(b) of the code, and

. no gain or loss will be recognized by First Community Bank of the
Desert shareholders who receive First Community Bancorp common stock
in the merger in exchange for their shares of First Community Bank
of the Desert common stock except with respect to cash received in
lieu of a fractional share interest in First Community Bancorp
common stock.

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<PAGE>

The respective opinions of Sullivan & Cromwell and Manatt, Phelps &
Phillips, LLP will not be binding on the Internal Revenue Service and
there can be no assurance that the Internal Revenue Service will not
contest the conclusions expressed therein. The respective opinions will
be based upon, among other things, representations of First Community
Bancorp, First Community Bank of the Desert and/or officers and
principal shareholders of First Community Bancorp and First Community
Bank of the Desert customarily given in transactions of this type.

In the opinion of Manatt, Phelps & Phillips, LLP, the following accurately
summarizes the material federal income tax consequences of the merger:

. the shareholders of First Community Bank of the Desert will not
recognize any gain or loss on the surrender of their First Community
Bank of the Desert common stock solely in exchange for First Community
Bancorp common stock pursuant to the merger (except as described below)
with respect to cash received for fractional shares of First Community
Bancorp common stock;

. First Community Bank of the Desert shareholders who receive cash in lieu
of fractional shares of First Community Bancorp will be treated as
having received such fractional share interest, and such cash amount
will be treated as received in redemption of the fractional share
interest. In general, U.S. shareholders that held their surrendered
shares in First Community Bank of the Desert as a capital asset will
recognize capital gain or loss equal to the cash amount received for the
fractional share of First Community Bancorp common stock reduced by the
portion of the holder's tax basis in shares of First Community Bank of
the Desert common stock surrendered that is allocable to the fractional
share interest in First Community Bancorp common stock. The capital gain
or loss will be long-term capital gain or loss if the shareholder's
holding period in the fractional share interest for federal income tax
purposes is more than one year. Long-term capital gain of a non-
corporate U.S. shareholder is generally subject to a maximum tax rate of
20%;

. the aggregate tax basis of the shares of First Community Bancorp common
stock received by the First Community Bank of the Desert shareholders in
the merger will be the same as the aggregate tax basis of their shares
of First Community Bank of the Desert common stock surrendered in the
merger, less any basis attributable to fractional shares for which cash
is received; and

. the holding period of the First Community Bancorp common stock the First
Community Bank of the Desert shareholders receive in the merger will
include the holding period of the shares of First Community Bank of the
Desert common stock surrendered in the merger so long as their First
Community Bank of the Desert common stock is held as a capital asset.

This summary is based on current federal tax law and is for general
information only. The tax treatment of each First Community Bank of the Desert
shareholder will depend in part on such shareholder's particular situation and
each shareholder is urged to consult with his or her own tax advisor concerning
the specific tax consequences of the merger to the shareholder, including the
applicability and effect of foreign, state, local or other tax laws and of any
future changes in the Internal Revenue Code, the Treasury Regulations, tax
rulings or court decisions or other laws concerning taxes.

Accounting Treatment of the Merger

The merger is expected to qualify as a pooling of interests for accounting
and financial reporting purposes. Accordingly, after the merger, the assets,
liabilities and shareholders' equity of First Community Bank of the Desert will
be added to the corresponding balance sheet categories of First Community
Bancorp at their recorded book values, subject to any adjustments required to
conform the accounting policies and financial statement classifications of the
two companies. In future financial statements, the results of operations of
First Community Bancorp will include the results of both First Community Bank
of the Desert and First Community Bancorp for the entire fiscal year in which
the merger occurs and all prior fiscal periods presented therein. First
Community Bancorp must treat certain expenses incurred to effect the merger as
current charges against income rather than as adjustments to its balance sheet.

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<PAGE>

The unaudited pro forma condensed combined financial information contained
in this document has been prepared using the pooling of interests accounting
method to account for the merger. See "Summary --Selected Unaudited Pro Forma
Combined Financial Data" and "Unaudited Pro Forma Condensed Combined Balance
Sheets" on pages 12 and 15.

Exchange of First Community Bank of the Desert Common Stock for First Community
Bancorp Common Stock

At or prior to the completion of the merger, First Community Bancorp will
deposit with U.S. Stock Transfer Corporation, acting as the exchange agent
certificates representing shares of First Community Bancorp common stock to
which holders of First Community Bank of the Desert common stock are entitled
under the terms of the merger agreement. Promptly after the completion of the
merger, First Community Bancorp will instruct U.S. Stock Transfer Corporation
to send to each holder of First Community Bank of the Desert common stock
transmittal materials for use in exchanging all of their certificates
representing shares of First Community Bank of the Desert common stock for a
certificate or certificates representing shares of First Community Bancorp
common stock and a check for any fractional share interest. The transmittal
materials will contain information and instructions with respect to the
surrender of certificates of shares of First Community Bank of the Desert
common stock in exchange for certificates representing shares of First
Community Bancorp common stock.

First Community Bank of the Desert shareholders should not send in their share
certificates until they receive the letter of transmittal form and
instructions.

Following the completion of the merger and upon surrender of all of the
certificates representing shares of First Community Bank of the Desert common
stock registered in the name of First Community Bank of the Desert common stock
shareholders, or a satisfactory indemnity if any of such certificates are lost,
stolen or destroyed, together with a properly completed letter of transmittal,
U.S. Stock Transfer Corporation will mail to each holder a certificate or
certificates representing the number of shares of First Community Bancorp
common stock to which they are entitled, together with all undelivered
dividends or distributions, less the amount of any withholding taxes which may
be required for the shares and, where applicable, a check in the amount of any
cash to be paid in lieu of fractional shares. Holders of shares of First
Community Bank of the Desert common stock who would otherwise be entitled to a
fractional share of First Community Bancorp common stock will receive from
First Community Bancorp an amount of cash determined by multiplying such
fraction by $4.125. First Community Bancorp will not pay interest on any such
cash.

Declaration of dividends by First Community Bancorp after the completion of
the merger will include dividends on all First Community Bancorp common stock
issued in the merger, but no dividend or other distribution payable to the
holders of record of First Community Bancorp common stock at or as of any time
after the completion of the merger will be paid to holders of First Community
Bank of the Desert common stock until they physically surrender all
certificates as described above. After the completion of the merger, the stock
transfer books of First Community Bank of the Desert will close and there will
be no transfers on the transfer books of First Community Bank of the Desert.

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<PAGE>

THE MERGER AGREEMENT

Conditions to the Merger

The obligation of First Community Bancorp and First Community Bank of the
Desert to consummate the merger is subject to the satisfaction or waiver on or
before the completion of the merger of many conditions, including the
following:

. the merger agreement must receive all required approvals of governmental
authorities;

. the merger must receive the required approvals of the shareholders of
First Community Bancorp and First Community Bank of the Desert;

. no judgment, decree, injunction, order or proceeding will be outstanding
or threatened by any governmental authority which prohibits or restricts
or threatens to invalidate or set aside the merger;

. First Community Bancorp will have received all state and federal
securities permits and other authorizations necessary to issue the First
Community Bancorp common stock to First Community Bank of the Desert
shareholders;

. the First Community Bancorp common stock issuable to First Community
Bank of the Desert shareholders shall have been approved for quotation
on Nasdaq;

. KPMG LLP will have confirmed that the merger will qualify for pooling of
interests accounting treatment.

The obligation of First Community Bancorp to consummate the merger is also
subject to fulfillment of other conditions, including the following:

. between September 30, 1999 and the completion of the merger, there will
be no material adverse change in First Community Bank of the Desert's
business, financial condition, results of operations or prospects;

. First Community Bancorp will perform all the obligations required of it
by the Merger Agreement prior to the merger;

. First Community Bancorp will receive the fairness opinion of The Findley
Group; and

. First Community Bancorp will have received an opinion of Sullivan &
Cromwell that the merger will be treated as a reorganization within the
meaning of Section 368(a).

The obligations of First Community Bank of the Desert to consummate the
merger are also subject to the fulfillment of certain other conditions,
including the following:

. between September 30, 1999 and the completion of the merger, there will
be no material adverse change in First Community Bancorp's business,
financial condition, results of operations or prospects;

. First Community Bank of the Desert will perform all the obligations
required of it by the Merger Agreement prior to the merger;

. First Community Bank of the Desert will receive the fairness opinion of
US Bancorp Piper Jaffray; and

. First Community Bank of the Desert will have received an opinion of
Manatt, Phelps & Philips LLP that the merger will be treated as a
reorganization within the meaning of Section 368(a) of the Code.

Additionally, the completion of the merger is subject to the performance of
covenants, the delivery of documents, the accuracy of representations and
warranties and the receipt of other documents.

If these and other conditions are not satisfied or waived, First Community
Bancorp or First Community Bank of the Desert may terminate the merger
agreement.

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<PAGE>

Acquisition Proposals

Under the terms of the merger agreement, First Community Bancorp and First
Community Bank of the Desert have agreed not to solicit, initiate or encourage
any competing transaction. In addition, First Community Bank of the Desert has
agreed not to participate in any negotiations or discussions, or furnish any
information, or otherwise cooperate in any way in connection with, any effort
or attempts to effect any competing transaction with or involving any person
regarding an acquisition proposal.

Treatment of Options

Each option to purchase First Community Bank of the Desert common stock
issued and outstanding immediately prior to the completion of the merger and
all obligations of First Community Bank of the Desert under the First Community
Bank of the Desert stock option plans will, on and after the completion of the
merger, be assumed by and be deemed to be options granted by First Community
Bancorp to purchase that number of shares of First Community Bancorp common
stock equal to 0.30 times the number of shares of First Community Bank of the
Desert common stock subject to the option rounded down to the nearest whole
number of First Community Bancorp common stock. The per share exercise price
for the shares of First Community Bancorp common stock issuable upon exercise
of such First Community Bank of the Desert option will be determined by
dividing the exercise price immediately prior to the completion of the merger
by 0.30.

Termination

The merger agreement may be terminated at any time prior to the completion
of the merger:

. by mutual consent of First Community Bancorp and First Community Bank of
the Desert in writing;

. by First Community Bank of the Desert or First Community Bancorp
immediately on the failure of the shareholders of First Community Bank
of the Desert or First Community Bancorp to approve the merger
agreement;

. by First Community Bancorp or First Community Bank of the Desert if any
material breach or default by the other party is not cured within 30
days after notice thereof;

. by First Community Bancorp or First Community Bank of the Desert if any
governmental or regulatory authority denies or refuses to grant any
approval, consent or authorization required to be obtained to consummate
the transactions contemplated by the merger agreement;

. by First Community Bank of the Desert or First Community Bancorp if the
mutual conditions set forth in the merger agreement are not satisfied by
March 31, 2000; or

. by First Community Bank of the Desert if any of the conditions to its
obligations in the merger agreement are not satisfied, or by First
Community Bancorp if any of the conditions to its obligations in the
merger agreement are not satisfied by March 31, 2000, or such earlier
time as it becomes apparent that such conditions shall not be met.

The merger agreement may also terminate if we have not completed the merger
by March 31, 2000.

Covenants; Conduct of Business Prior to Completion of the Merger

The merger agreement provides that, during the period from the date of the
merger agreement to the completion of the merger, First Community Bancorp and
First Community Bank of the Desert will conduct their businesses only in the
normal and customary manner and in accordance with sound banking practices and
will not, without the prior written consent of the other party, which consent
may not be unreasonably withheld, take any of the following actions:

. issue any securities except pursuant to the exercise of options
outstanding as of the date of the merger agreement;

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. declare, set aside or pay any dividend, other than dividends from their
wholly-owned subsidiaries to them or another of their wholly-owned
subsidiaries, or in the case of First Community Bancorp, regular
quarterly dividends on its common stock, or make any other distribution
upon, or purchase or redeem any shares of its stock;

. amend its articles of incorporation, articles of association or bylaws,

. grant any general or uniform increase in the rate of pay of employees or
employee benefits, except in the ordinary course of business and
consistent with past practice;

. grant any increase in salary, incentive compensation or employee
benefits or pay any bonus to any person, except any increases in the
ordinary course of business and consistent with past practice;

. make any capital expenditure in excess of $50,000 per project or
$100,000 in the aggregate, except for ordinary repairs, renewals and
replacements;

. compromise, settle or adjust any claim, action or proceeding against it
for a material amount;

. adopt or amend any employment agreement or employee benefit or other
benefit plan or arrangement of any type except such amendments as are
required by law;

. make any material change to any policies and practices with respect to
accounting, except such changes as may be required by generally accepted
accounting principles or by applicable governmental authorities;

. make any acquisitions, other than in the satisfaction of debts or in the
ordinary course of business;

. amend, modify or terminate, except in accordance with its terms, any
material contract or enter into any material agreement or contract that
calls for aggregate annual payments of $50,000 or more and which does
not terminate at will on 60 days' notice;

. sell, lease or otherwise dispose of any assets or release any claims,
except in the ordinary course of business consistent with past practice;

. settle any claim or proceeding involving any material liability;

. incur any indebtedness; or

. except as required by law, knowingly take or cause to be taken any
action which would prevent the transactions contemplated by the merger
agreement from qualifying as tax-free reorganizations under Section 368
of the Code or prevent First Community Bancorp from accounting for the
business combination to be effected by the merger as a pooling of
interests.

In addition, from October 22, 1999, through the date on which the merger
will be completed, each of First Community Bancorp and First Community Bank of
the Desert will:

. use its best efforts to take, or cause to be taken, all actions and to
do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate the transactions
contemplated by the merger agreement as promptly as practical and to
qualify the merger for pooling of interests accounting treatment; and

. obtain the consent of the other before it issues any press release or
makes any public statement with respect to the merger agreement or the
transactions contemplated thereby.

Amendment and Waiver of the Merger Agreement

Subject to applicable law, any provision of the merger agreement may be
amended or waived by First Community Bancorp or First Community Bank of the
Desert prior to closing if the parties mutually agree in writing to the
amendment. In addition, either First Community Bancorp or First Community Bank
of the Desert may waive the other party's performance of covenants or
conditions to the merger agreement.

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Agreements with the Directors of First Community Bank of the Desert and Rancho
Santa Fe

First Community Bancorp has entered into shareholder's agreements with each
director of First Community Bank of the Desert. These directors have agreed to
vote all shares of First Community Bank of the Desert common stock which they
own or have the right to vote in favor of the approval of the merger agreement,
thereby increasing the likelihood that the First Community Bank of the Desert
shareholders will approve the merger agreement. As of the record date, First
Community Bank of the Desert directors own or have the right to vote 31.9% of
the outstanding shares of First Community Bank of the Desert common stock.

Resales of First Community Bancorp Common Stock by First Community Bank of the
Desert Shareholders

The shares of First Community Bancorp common stock to be issued to First
Community Bank of the Desert shareholders in the merger will be registered
under the Securities Act. These shares may be traded freely and without
restriction by those shareholders not deemed to be "affiliates" of First
Community Bank of the Desert. An affiliate of a corporation, as defined by the
Securities Act, is a person who directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with,
that corporation. Any subsequent transfer by an affiliate of First Community
Bank of the Desert must be one permitted by the resale provisions of Rule 145
promulgated under the Securities Act or as otherwise permitted under the
Securities Act.

Commission guidelines regarding qualifying for the pooling of interests
method of accounting also limit sales of shares of the acquiring company and
acquired company by affiliates of either company in a business combination such
as the merger. These guidelines indicate that the pooling of interests method
of accounting generally will not be challenged on the basis of sales by such
affiliates if these persons do not dispose of any of the shares of the
corporation they own or any shares of the corporation they receive in
connection with a merger during the period beginning 30 days prior to the
merger and ending after financial results covering at least 30 days of post-
merger operations of the combined entity have been published.

First Community Bank of the Desert has delivered to First Community Bancorp
and Rancho Santa Fe an agreement to be signed by each affiliate of First
Community Bank of the Desert that such person will not dispose of:

. any First Community Bancorp common stock in violation of the Securities
Act; or

. any First Community Bank of the Desert common stock or First Community
Bancorp common stock during the pooling restricted period.

Regulatory Approvals for the Mergers

Under the merger agreement, First Community Bancorp and First Community Bank
of the Desert have agreed to use their commercially reasonable efforts to
obtain all necessary actions or nonactions, extensions, waivers, consents and
approvals from any governmental authority necessary, proper or advisable to
consummate the transactions contemplated by the merger agreement. Such
approvals include notices to, and/or the approvals of the Federal Reserve
Board, the Office of the Comptroller of the Currency and the Commissioner of
Financial Institutions of California.

The closing of the merger is conditioned upon the receipt of all approvals
of regulatory authorities required for the merger without the imposition of any
conditions or requirements that would materially and adversely impact the
economic or business benefits to First Community Bancorp or First Community
Bank of the Desert of the transactions contemplated by the merger agreement.

Federal Reserve Board and FDIC. The merger of First Community Bank of the
Desert and FCB Merger Sub is subject to prior notice to the Federal Deposit
Insurance Corporation under the Bank Merger Act. In addition, the prior
approval of the Federal Reserve Board is required for the acquisition of First
Community Bank of the Desert by First Community Bancorp under the Bank Holding
Company Act.

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First Community Bancorp filed notice on behalf of FCB Merger Sub with the
Federal Deposit Insurance Corporation, on , 2000, and an application for
approval to acquire First Community Bank of the Desert on , 2000.

Office of the Comptroller of the Currency. The reorganization whereby Rancho
Santa Fe National Bank will become a subsidiary of First Community Bancorp is
subject to the approval of the Office of the Comptroller of the Currency. An
application for such approval was filed on , 2000.

Commissioner of Financial Institutions. The merger is an acquisition of
control under California law, and is therefore subject to the approval of the
Commissioner of Financial Institutions of California. In determining whether to
approve the merger, the Commissioner of Financial Institutions will consider
factors such as:

. the effects of the merger on competition;

. the effects of the merger on the convenience and needs of the
communities to be served;

. the financial condition of Rancho Santa Fe and First Community Bancorp;

. whether the merger is fair, just and equitable to the depositors,
creditors and shareholders of First Community Bank of the Desert; and

. the competence, experience and integrity of First Community Bancorp
management.

First Community Bancorp filed an application seeking approval of the merger
with the Commissioner of Financial Institutions on , 2000.

DESCRIPTION OF FIRST COMMUNITY BANCORP COMMON STOCK
AND FIRST COMMUNITY BANK OF THE DESERT COMMON STOCK

In the merger, First Community Bank of the Desert shareholders will exchange
their shares of First Community Bank of the Desert common stock for shares of
First Community Bancorp common stock. Both First Community Bancorp and First
Community Bank of the Desert are California corporations subject to the
provisions of the California General Corporation Law. Upon consummation of the
merger, First Community Bank of the Desert shareholders will become First
Community Bancorp shareholders. The articles of incorporation and bylaws of
First Community Bancorp, in addition to the California general corporation law,
will govern their rights as First Community Bancorp shareholders.

Set forth below is a summary of the material features of the First Community
Bancorp common stock and the First Community Bank of the Desert common stock.
Also set forth below is a summary of the material differences between the
rights of a holder of First Community Bancorp common stock and a holder of
First Community Bank of the Desert common stock. This summary is not a complete
discussion of the charter documents and other instruments of First Community
Bancorp and First Community Bank of the Desert that create the rights of the
security holders.

Stock Description

First Community Bancorp.

The following summary description of the capital stock of First Community
Bancorp does not purport to be complete and is qualified in its entirety by
reference to the certificate of incorporation and by-laws of First Community
Bancorp.

Pursuant to the certificate of incorporation of First Community Bancorp, the
authorized capital stock of First Community Bancorp consists of 15,000,000
shares of common stock and 5,000,000 shares of preferred stock. Currently, no
shares of the capital stock of First Community Bancorp are outstanding. Prior
to the reorganization, one share of First Community Bancorp common stock will
be issued to Rancho Santa Fe. After the reorganization is consummated, such
share will be canceled. First Community Bancorp common stock, like Rancho Santa
Fe common stock, will represent non-withdrawable capital and will not be
insured by the FDIC.

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In the future, the authorized but unissued and unreserved shares of First
Community Bancorp common stock and the authorized but unissued and unreserved
shares of First Community Bancorp preferred stock will be available for general
corporate purposes, including but not limited to, possible issuance as stock
dividends or stock splits, in future mergers or acquisitions, pursuant to stock
compensation plans of First Community Bancorp or in future private placements
or public offerings. First Community Bancorp has no present plans for the
issuance of additional authorized shares of its capital stock, other than as
pursuant to the 1992 Stock Option Plan or that are assumed under the First
Community Bank of the Desert 1987 Stock Option Plan. Except as otherwise may be
required to approve a merger or other transaction in which the additional
authorized shares of First Community Bancorp common stock or authorized shares
of First Community Bancorp preferred stock would be issued, no approval of
Rancho Santa Fe shareholders will be required for the issuance of those shares.

Common Stock. Each share of First Community Bancorp common stock has the
same relative rights, and is identical in all respects with, each other share
of First Community Bancorp common stock. Holders of First Community Bancorp
common stock will be entitled to one vote per share on all matters requiring
shareholder action, including, but not limited to, the election of, and any
other matters relating to, directors. Holders of First Community Bancorp common
stock will be entitled to cumulate their votes for the election of directors.

The holders of First Community Bancorp common stock will be entitled to
receive dividends, out of funds legally available therefor, subject to any
restrictions imposed by federal regulators and the payment of any preferential
amounts to which any class of preferred stock may be entitled. Upon
liquidation, dissolution or winding up of First Community Bancorp, holders of
First Community Bancorp common stock will be entitled to share ratably in all
assets remaining after the payment of all liabilities of First Community
Bancorp and of preferential amounts to which any preferred stock may be
entitled.

The holders of the First Community Bancorp common stock will have no
preemptive or other subscription rights. First Community Bancorp common stock
will not be subject to call or redemption, and, upon receipt by First Community
Bancorp of the full purchase price therefor, each share of First Community
Bancorp common stock will be fully paid and non-assessable.

Preferred Stock. First Community Bancorp is currently authorized by its
certificate of incorporation to issue up to 5,000,000 shares of preferred
stock. The Board of Directors has broad authority to designate and establish
the terms of one or more series of preferred stock. Among other matters, the
Board is authorized to establish voting powers, designations, preferences and
special rights of each such series and any qualifications, limitations and
restrictions thereon. First Community Bancorp preferred stock may rank prior to
First Community Bancorp common stock as to dividend rights, liquidation
preferences, or both, may have full or limited voting rights, and may be
convertible into First Community Bancorp common stock. The holders of any class
or series of First Community Bancorp preferred stock also may have the right to
vote separately as a class or series under the terms of the class or series as
hereafter fixed by the Board or otherwise required by California law.

First Community Bank of the Desert. First Community Bank of the Desert has
authority to issue 15,000,000 shares of common stock and 2,000,000 shares of
serial preferred stock. At the record date, there were 4,631,937 shares of
First Community Bank of the Desert common stock issued and outstanding and no
shares of serial preferred shares outstanding. Holders of First Community Bank
of the Desert common are entitled to one vote, in person or by proxy, for each
share of common stock held of record in the shareholder's name on the books of
First Community Bank of the Desert as of the record date on any matter
submitted to the vote of the shareholders, except that in connection with the
election of directors, the shares may be voted cumulatively. Each share of
First Community Bank of the Desert common stock has the same rights, privileges
and preferences as every other share. First Community Bank of the Desert common
stock has no preemptive, conversion or redemption rights or sinking fund
provisions.

California law prohibits a California state-chartered bank from lending on
the security of its own stock and from purchasing shares of its own stock
unless such purchase is necessary to prevent loss to the bank on debts
previously contracted in good faith.

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First Community Bank of the Desert's Board of Directors, without shareholder
approval, may authorize one or more classes of serial preferred stock with
preferences or voting rights that could adversely affect the rights of holders
of its common stock, however, pursuant to the terms of the merger agreement,
First Community Bank of the Desert agreed that it would not authorize or issue
any shares of preferred stock prior to the consummation of the merger.

Shareholders of First Community Bank of the Desert are entitled to the
dividends declared by the Board of Directors, if any, out of funds legally
available for such dividends subject to certain restrictions on payment of
dividends imposed by the California Financial Code. However, pursuant to the
terms of the merger agreement, First Community Bank of the Desert agreed that
it would not authorize any dividends prior to the consummation of the merger.

The transfer agent and registrar for First Community Bank of the Desert
common stock is Continental Stock Transfer & Trust Co. The transfer agent and
registrar for First Community Bancorp is U.S. Stock Transfer Corporation.

Material Differences Between Holders of First Community Bancorp Stock and First
Community Bank of the Desert Stock

Dividend Restrictions. Because First Community Bank of the Desert is a
state-chartered bank, its ability to pay dividends or make distributions to its
shareholders is subject to restrictions set forth in the California Financial
Code. The California Financial Code provides that neither a bank nor any
majority-owned subsidiary of a bank may make a distribution to its shareholders
in an amount which exceeds the lesser of (i) the bank's retained earnings, or
(ii) 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 or a
majority-owned subsidiary of a bank may, with the prior approval of the
Commissioner, make a distribution to the shareholders of the bank in an amount
not exceeding the greatest of (i) its retained earnings, (ii) its net income
for its last fiscal year, or (iii) its net income for its current fiscal year.
In the event that the Commissioner determines that the shareholders' equity of
a bank is inadequate or that the making of a distribution by a bank would be
unsafe or unsound, the Commissioner may order the bank to refrain from making a
proposed distribution.

The ability of First Community Bancorp to pay cash dividends is limited by
the provisions of Section 500 of the General Corporation Law of California,
which prohibits the payment of dividends unless (i) the retained earnings of
the corporation immediately prior to the distribution exceeds the amount of the
distribution; (ii) the assets of the corporation exceed its liabilities by 25%;
or (iii) the current assets of the corporation exceed its current liabilities,
but if the average pre-tax net earnings of the corporation before interest
expense for the two years preceding the distribution was less than the average
interest expense of the corporation for those years, the current assets of the
corporation must exceed its current liabilities by 25%.

Notice Provisions. First Community Bank of the Desert shareholders must
receive notice of shareholder meetings not less than 35 nor more than 60 days
prior to such meetings. Under the First Community Bancorp bylaws, shareholders
are entitled to received notice of special meetings not less than 10 nor more
than 60 days prior to such meetings. In addition, First Community Bank of the
Desert shareholders may nominate individuals as directors by providing the
Secretary of First Community Bank of the Desert with notice of their nominee up
to 10 days prior to the proposed meeting. Under the bylaws of First Community
Bancorp, shareholders must provide notice of their proposed nominees to the
Secretary of First Community Bancorp not less than 60 and no more than 90 days
prior to the proposed meeting.

Voting Rights. First Community Bank of the Desert shareholders are entitled
to cumulate their votes for directors. No such rights exist under the First
Community Bancorp bylaws. In addition, First Community Bank of the Desert
shareholders may take action by unanimous written consent without holding a
meeting, while no provisions for action in lieu of a meeting exist in First
Community Bancorp's bylaws.

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DISSENTING SHAREHOLDERS' RIGHTS

If you are a shareholder of First Community Bank of the Desert, then you are
entitled to dissenters' rights in connection with the merger. The procedures
for you to obtain dissenters' rights are set forth in Chapter 13 of the General
Corporation Law of California. The information set forth below is a general
summary of Chapter 13 dissenters' rights as they apply to you. This summary is
not a complete discussion of Chapter 13 and is qualified in its entirety by
reference to Chapter 13, which is attached hereto as Annex C. If you wish to
exercise dissenters' rights or wish to preserve the right to do so you should
carefully read Annex C. You must follow exactly the required procedures set
forth in Chapter 13 of the General Corporation Law of California or else you
may lose your dissenters' rights.

If the merger is consummated and you elect to exercise your dissenters'
rights and if you comply with the procedures set forth in Chapter 13, you will
be entitled to receive an amount equal to the fair market value of your shares.
Chapter 13 provides the fair market value shall be determined as of October 21,
1999, the day before the public announcement of the merger.

You must satisfy each of the following requirements for your shares to be
considered dissenting shares under Chapter 13. First Community Bank of the
Desert must purchase shares of its common stock from a dissenting shareholder
if you comply with all applicable requirements.

In addition, First Community Bank of the Desert is required to purchase
dissenting shares only if:

. You have shares of First Community Bank of the Desert common stock
outstanding as of , 2000, the record date of the special
shareholder's meeting.

. You did not vote the shares in favor of the merger. It is sufficient to
abstain from voting for this purpose. If you return a proxy without
voting instructions or with instructions to vote FOR the proposal to
approve the principal terms of the merger agreement, your shares will
automatically be voted in favor of the merger and you will lose your
dissenters' rights.

. You wish to have purchased shares that were not voted in favor of the
merger, in which case you must make a written demand to have First
Community Bank of the Desert purchase those shares of First Community
Bank of the Desert for cash at their fair market value. The demand must
include the information specified below and must be received by First
Community Bank of the Desert, no later than , 2000, the date of
the special shareholders' meeting.

If the merger is approved by the First Community Bank of the Desert
shareholders, First Community Bank of the Desert will have 10 days after the
approval to mail those shareholders who did not vote in favor of the merger and
made a timely demand for purchase, written notice of the approval along with a
copy of Sections 1300 through 1304 of Chapter 13. In the notice of approval,
First Community Bank of the Desert must state the price it determines
represents the fair market value of the dissenting shares. This price
constitutes an offer by First Community Bank of the Desert to purchase the
dissenting shares at the price stated. Additionally, First Community Bank of
the Desert must set forth in the approval notice a brief description of the
procedures a shareholder must follow if he or she desires to exercise
dissenters' rights.

Demand for Purchase

A written demand is essential for dissenters' rights. In the written demand,
Chapter 13 requires you to specify the number shares that you hold of record
and that you demand First Community Bank of the Desert to purchase. In the
written demand, you also must also include a statement of the price you claim
to be the fair market value of those shares as of the day before the terms of
the merger were first announced, excluding any appreciation or depreciation
because of the proposed merger. It is First Community Bank of the Desert's
position that this date is October 21, 1999. You may take the position in the
written demand that a different date is applicable. This price constitutes an
offer by you to sell the dissenting shares at the price stated.

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In addition, it is recommended that you comply with the following conditions
to ensure that the demand is properly executed and delivered:

. The demand should be sent by registered or certified mail, return
receipt requested.

. You or your duly authorized representative should sign the demand
exactly as your name appears on the stock certificate(s) evidencing the
shares.

. If you jointly own shares of First Community Bank of the Desert common
stock with more than one person, then your demand for the purchase of
such shares should identify and be signed by all such holders.

. Any person signing a demand for purchase in any representative capacity,
such as attorney-in-fact, executor, administrator, trustee or guardian,
should indicate his or her title, and, if First Community Bank of the
Desert so requests, furnish written proof of his or her capacity and
authority to sign the demand.

. You may not withdraw your demand for payment without the consent of
First Community Bank of the Desert.

Under California law, a demand by a shareholder is not effective for any
purpose unless it is received by First Community Bank of the Desert no later
than 30 days after the date on which First Community Bank of the Desert mails
the notice of approval of the merger.

Within 30 days after the date on which First Community Bank of the Desert
mails the notice of the approval of the merger, dissenting shareholders also
must submit the certificates representing the dissenting shares to First
Community Bank of the Desert at the office it designates in the notice of
approval. First Community Bank of the Desert will stamp or endorse the
certificates with a statement that the shares are dissenting shares or First
Community Bank of the Desert will exchange the certificates with certificates
of appropriate denomination that are so stamped or endorsed. If a shareholder
transfers any shares of First Community Bank of the Desert common stock before
submitting the shares for endorsement, then such shares will lose their status
as dissenting shares.

If First Community Bank of the Desert and you agree that the surrendered
shares are dissenting shares and agree upon the price of the shares, you are
entitled to receive the agreed-upon price together with interest thereon at the
legal rate on judgments from the date of the agreement between you and First
Community Bank of the Desert. First Community Bank of the Desert will pay the
fair value of the respective dissenting shares within 30 days after you and
First Community Bank of the Desert agree upon the price of the shares or within
30 days after any statutory or contractual conditions to the merger have been
satisfied, whichever is later. First Community Bank of the Desert's duty to pay
is subject to you surrendering the certificates and is also subject to the
restrictions imposed under California law on the ability of First Community
Bank of the Desert to purchase its outstanding shares.

If First Community Bank of the Desert denies that the shares surrendered are
dissenting shares or if First Community Bank of the Desert and you fail to
agree upon the fair market value of such shares, then you may, within six
months after the notice of approval is mailed, file a complaint in the Superior
Court of the proper county requesting the court to make such determinations. In
the alternative, you may intervene in any pending action brought by any other
dissenting shareholder. If you fail to file such a complaint or fail to
intervene in a pending action within the specified six-month period, you will
lose your dissenting rights. If the fair market value of the dissenting shares
is at issue, the court will determine, or will appoint one or more impartial
appraisers to determine, such fair market value. The costs of the action will
be assessed or apportioned as the court considers equitable, but if the fair
market value is determined to exceed 125% of the price offered to the
shareholder, then First Community Bank of the will be required to pay such
costs.

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This summary has already described certain situations where shareholders of
First Community Bank of the Desert will cease to have dissenters' appraisal
rights. In addition to the situations described above, you will cease to have
dissenters' appraisal rights if:

. First Community Bank of the Desert abandons the merger, in which case
First Community Bank of the Desert will pay any dissenting shareholder
who has filed a complaint, as described above, all necessary expenses
and reasonable attorneys' fees incurred in such proceedings;

. you surrender your shares for conversion into shares of another class;
or

. you withdraw your demand for the purchase of the dissenting shares with
the consent of First Community Bank of the Desert.

Any demands, notices, certificates or other documents required to be
delivered to First Community Bank of the Desert may be sent to:

Ms. Tay Fried
Corporate Secretary
First Community Bank of the Desert
74-750 Highway 111
Indian Wells, California 92210

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EXPERTS

The financial statements of Rancho Santa Fe National Bank as of December 31,
1998 and 1997, and for each of the years in the three-year period ended
December 31, 1998, have been included herein and in the registration statement
in reliance upon the report of KPMG LLP, independent auditors, appearing
elsewhere herein, and upon authority of said firm as experts in accounting and
auditing.

The consolidated financial statements of First Community Bank of the Desert
as of December 31, 1998 and 1997, and for each of the years in the three-year
period ended December 31, 1998, have been included herein and in the
registration statement in reliance upon the report of KPMG LLP, independent
auditors, appearing elsewhere herein, and upon authority of said firm as
experts in accounting and auditing.

Representatives of KPMG LLP are expected to be present at the First
Community Bank of the Desert annual meeting. Such representatives will have the
opportunity to make a statement if they desire to do so and are expected to be
available to respond to appropriate questions.

LEGAL MATTERS

The validity of the shares of First Community Bancorp common stock to be
issued pursuant to the terms of the merger agreement and the material federal
income tax consequences of the merger on First Community Bancorp will be passed
upon for First Community Bancorp by Sullivan & Cromwell. The material federal
income tax consequences of the merger on First Community Bank of the Desert and
its shareholders will be passed upon for First Community Bank of the Desert by
Manatt, Phelps & Phillips LLP.

WHERE YOU CAN FIND MORE INFORMATION

First Community Bancorp has filed the Registration Statement to register
with the Commission the shares of First Community Bancorp common stock to be
issued to First Community Bank of the Desert shareholders in the merger. This
document is a part of the Registration Statement and constitutes a prospectus
of First Community Bancorp and a proxy statement of First Community Bank of the
Desert for its annual meeting.

As allowed by Commission rules, this document does not contain all the
information that shareholders can find in the Registration Statement or the
exhibits to the Registration Statement. The Commission allows First Community
Bancorp to "incorporate by reference" certain information into this document,
which means First Community Bancorp can disclose important information to you
by referring you to another document filed separately with the Commission. The
information incorporated by reference is deemed to be a part of this document,
except for any information that contradicts information contained directly in
this document.

You may read and copy any reports, statements or other information that
First Community Bancorp files at the Commission's public reference rooms in
Washington, D.C., New York, New York and Chicago, Illinois. Please call the
Commission at 1-800-SEC-0330 for further information on the public reference
rooms. First Community Bancorp's public filings are also available to the
public from commercial document retrieval services and at the Internet World
Wide Web site maintained by the Commission at "http:// www.sec.gov."

First Community Bancorp incorporates by reference additional documents that
it may file with the Commission between the date of this document and the date
of the annual shareholder meeting. These include Current Reports on Form 8-K.

First Community Bancorp has supplied all information contained or
incorporated by reference in this document relating to First Community Bancorp,
and First Community Bank of the Desert has supplied all information contained
in this document and relating to First Community Bank of the Desert.

105
<PAGE>

Shareholders of First Community Bancorp may obtain documents incorporated by
reference through First Community Bancorp or the Commission or the Commission's
Internet World Wide Web site described above. Documents incorporated by
reference are available from First Community Bancorp without charge, excluding
all exhibits, unless specifically incorporated by reference as an exhibit to
this document. You may obtain documents incorporated by reference in this
document by requesting them in writing or by telephone at the following:

Corporate Secretary
FIRST COMMUNITY BANCORP
6110 El Tordo
Rancho Santa Fe, California 92067
(858) 756-3023

If you are a shareholder of First Community Bank of the Desert and would
like to obtain additional copies of this document, please address your request
to:

Corporate Secretary
FIRST COMMUNITY BANK OF THE DESERT
74-750 Highway 111
Indian Wells, California 92210
(760) 836-0870

If you would like to request documents from First Community Bancorp or First
Community Bank of the Desert, please do so at least five business days before
the date of the shareholders' meeting in order to receive timely delivery of
such documents prior to the shareholders' meeting.

You should rely only on the information contained or incorporated by
reference in this document to vote your shares at the First Community Bank of
the Desert annual meeting. First Community Bancorp and First Community Bank of
the Desert have not authorized anyone to provide you with information that is
different from what is contained in this document. This document is dated
, 2000. You should not assume that the information contained in this
document is accurate as of any date other than the date indicated, and neither
the mailing of this document to shareholders of First Community Bank of the
Desert nor the issuance of First Community Bancorp common stock in the merger
creates any implication to the contrary.

106
<PAGE>

INDEX TO FINANCIAL STATEMENTS

The following financial statements of Rancho Santa Fe National Bank are
included in this proxy statement/prospectus:

<TABLE>
<CAPTION>
Page
----
<S> <C>
Years Ended December 31, 1998, 1997 and 1996:

Balance Sheets as of December 31, 1998 and 1997........................... F-2
Statements of Earnings for the years ended December 31, 1998, 1997 and
1996..................................................................... F-3
Statements of Changes in Stockholders' Equity and Comprehensive Income for
the years ended December 31, 1998, 1997 and 1996......................... F-4
Statements of Cash Flows for the years ended December 31, 1998, 1997 and
1996..................................................................... F-5
Notes to Financial Statements............................................. F-6
Report of KPMG LLP, Independent Auditors.................................. F-22

Nine months ended September 30, 1999 and 1998 (unaudited):

Balance Sheets as of September 30, 1999 and December 31, 1998............. F-23
Statements of Earnings for the nine months ended September 30, 1999 and
1998..................................................................... F-24
Statements of Cash Flows for the nine months ended September 30, 1999 and
1998..................................................................... F-25
Notes to Financial Statements............................................. F-26

The following consolidated financial statements of First Community Bank of
the Desert are included in this proxy statement/prospectus:

Years Ended December 31, 1998, 1997 and 1996:

Report of KPMG LLP, Independent Auditors.................................. F-36
Consolidated Balance Sheets as of December 31, 1998 and 1997.............. F-37
Consolidated Statements of Operations for the years ended December 31,
1998, 1997 and 1996...................................................... F-38
Consolidated Statements of Changes in Stockholders' Equity for the years
ended December 31, 1998, 1997 and 1996................................... F-39
Consolidated Statements of Cash Flows for the years ended December 31,
1998, 1997 and 1996...................................................... F-40
Notes to Consolidated Financial Statements................................ F-41

Nine months ended September 30, 1999 and 1998 (unaudited):

Consolidated Balance Sheets as of September 30, 1999 and 1998............. F-55
Consolidated Statements of Operations for the nine months ended September
30, 1999 and 1998........................................................ F-56
Consolidated Statements of Cash Flows for the nine months ended September
30, 1999 and 1998........................................................ F-57
Notes to Unaudited Consolidated Financial Statements...................... F-58
</TABLE>

F-1
<PAGE>

RANCHO SANTA FE NATIONAL BANK

BALANCE SHEETS

December 31, 1998 and 1997

<TABLE>
<CAPTION>
December 31, December 31,
1998 1997
------------ ------------
<S> <C> <C>
ASSETS
Cash and due from banks (note 16).................... $ 9,066,000 7,813,000
Federal funds sold................................... 12,254,000 7,318,000
Investments:
Securities available-for-sale, at fair value (note
2)................................................. 32,447,000 22,475,000
Securities held-to-maturity, at amortized cost (note
3)................................................. 370,000 546,000
Loans (note 4)....................................... 109,562,000 94,882,000
Less allowance for loan losses...................... 2,388,000 2,415,000
------------ -----------
Net loans.......................................... 107,174,000 92,467,000
Premises and equipment, net (note 5)................. 1,467,000 1,698,000
Bank premises held-for-sale (note 6)................. 1,176,000 725,000
Other real estate owned, net (note 7)................ -- 45,000
Deferred income taxes (note 10)...................... 688,000 494,000
Interest receivable and other assets................. 1,370,000 1,249,000
------------ -----------
Total assets....................................... $166,012,000 134,830,000
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits (notes 3 and 8)
Non-interest bearing................................ 42,236,000 32,178,000
Interest bearing.................................... 106,391,000 87,379,000
------------ -----------
Total deposits..................................... 148,627,000 119,557,000
Interest payable and other liabilities............... 2,171,000 2,138,000
------------ -----------
Total liabilities.................................. 150,798,000 121,695,000
Shareholders' equity: (notes 11, 17 and 19)
Common stock, $2.50 par value; authorized
3,350,000 shares, issued and outstand ing 2,461,218
and 2,430,051 shares as of December 31, 1998 and
1997, respectively................................. 6,153,000 6,075,000
Additional paid-in capital.......................... 5,327,000 4,792,000
Accumulated other comprehensive income-
net unrealized gains (losses)
on securities available-for-sale, net (note 2)..... 31,000 (12,000)
Retained earnings................................... 3,703,000 2,280,000
------------ -----------
Total shareholders' equity......................... 15,214,000 13,135,000
------------ -----------
Commitments and contingencies (notes 14, 15, and 18)
Total liabilities and shareholders' equity......... $166,012,000 134,830,000
============ ===========
</TABLE>

See accompanying notes to financial statements.

F-2
<PAGE>

RANCHO SANTA FE NATIONAL BANK

STATEMENTS OF EARNINGS

Years ended December 31, 1998, 1997 and 1996

<TABLE>
<CAPTION>
1998 1997 1996
----------- ---------- ---------
<S> <C> <C> <C>
Interest income:
Interest and fees on loans:
Taxable.................................... $10,441,000 9,330,000 7,664,000
Exempt from federal income taxes........... 24,000 7,000 --
Interest on federal funds sold.............. 540,000 319,000 348,000
Interest on interest earning deposits....... -- 3,000 3,000
Interest on investment securities:
Taxable.................................... 1,519,000 1,215,000 1,247,000
Exempt from federal taxes.................. 17,000 9,000 --
----------- ---------- ---------
Total interest income..................... 12,541,000 10,883,000 9,262,000
----------- ---------- ---------
Interest expense:
Deposits (note 8)........................... 3,640,000 3,202,000 2,821,000
Other....................................... 36,000 41,000 34,000
----------- ---------- ---------
Total interest expense.................... 3,676,000 3,243,000 2,855,000
----------- ---------- ---------
Net interest income before provision for
loan losses............................... 8,865,000 7,640,000 6,407,000
----------- ---------- ---------
Provision for loan losses (note 4)........... -- 50,000 40,000
----------- ---------- ---------
Net interest income after provision for
loan losses............................... 8,865,000 7,590,000 6,367,000
Noninterest income:
Service charges on deposit accounts......... 346,000 295,000 304,000
Gain on sale of securities, net............. -- -- 3,000
Escrow fees................................. -- 176,000 415,000
Merchant discount fees...................... 330,000 246,000 192,000
Mortgage fees............................... 263,000 114,000 110,000
Gain on sale of loans....................... 391,000 441,000 465,000
Other....................................... 314,000 291,000 326,000
----------- ---------- ---------
Total noninterest income.................. 1,644,000 1,563,000 1,815,000
----------- ---------- ---------
Noninterest expenses:
Salaries and employee benefits............. 3,029,000 2,914,000 2,943,000
Occupancy.................................. 771,000 762,000 808,000
Impairment loss on bank premises held-for-
sale (note 6)............................. 38,000 -- 268,000
Furniture and equipment.................... 364,000 329,000 289,000
Professional and other services............ 739,000 515,000 425,000
Stationery, supplies and printing.......... 77,000 86,000 112,000
FDIC assessment............................ 14,000 12,000 75,000
Merchant card processing................... 282,000 209,000 162,000
Costs of real estate owned, net............ (5,000) -- 15,000
Advertising................................ 183,000 213,000 150,000
Insurance.................................. 63,000 60,000 79,000
Other...................................... 683,000 561,000 597,000
----------- ---------- ---------
Total noninterest expenses................ 6,238,000 5,661,000 5,923,000
----------- ---------- ---------
Earnings before income taxes................. 4,271,000 3,492,000 2,259,000
Income taxes (note 10)....................... 1,762,000 1,380,000 --
----------- ---------- ---------
Net earnings............................... $ 2,509,000 2,112,000 2,259,000
=========== ========== =========
Basic earnings per share (note 13).......... $ 1.03 .87 .93
=========== ========== =========
Diluted earnings per share (note 13)........ $ .96 .83 .92
=========== ========== =========
</TABLE>

See accompanying notes to financial statements.

F-3
<PAGE>

RANCHO SANTA FE NATIONAL BANK

STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME

Years ended December 31, 1998, 1997 and 1996

<TABLE>
<CAPTION>
Accumulated Retained
Additional other earnings
Common Stock paid-in comprehensive (accumulated Comprehensive
Shares Amount capital income deficit) Total Income
--------- ---------- ---------- ------------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1995................... 2,425,050 $6,063,000 4,780,000 18,000 (2,091,000) 8,770,000
Net earnings........... -- -- -- -- 2,259,000 2,259,000 2,259,000
Other comprehensive
income, net unrealized
losses on securities
available-for-sale,
net of tax effect of
$45,000 and
reclassification
adjustment............ -- -- -- (80,000) -- (80,000) (80,000)
--------- ---------- --------- -------- ---------- ---------- ---------
Balance at December 31,
1996................... 2,425,050 6,063,000 4,780,000 (62,000) 168,000 10,949,000 2,179,000
=========
Exercise of stock
options............... 5,001 12,000 12,000 -- -- 24,000
Net earnings........... -- -- -- -- 2,112,000 2,112,000 2,112,000
Other comprehensive
income, net unrealized
gains on securities
available-for-sale,
net of tax effect of
$9,000................ -- -- -- 50,000 -- 50,000 50,000
--------- ---------- --------- -------- ---------- ---------- ---------
Balance at December 31,
1997................... 2,430,051 6,075,000 4,792,000 (12,000) 2,280,000 13,135,000 2,162,000
=========
Exercise of stock
options............... 31,167 78,000 38,000 -- -- 116,000
Net earnings........... -- -- -- -- 2,509,000 2,509,000 2,509,000
Transfer pursuant to
regulatory guidelines
(note 17)............. -- -- 497,000 -- (497,000) --
Cash dividends paid
$0.24 per share....... -- -- -- -- (589,000) (589,000)
Other comprehensive
income, net unrealized
gains on securities
available-for-sale,
net of tax effect of
$22,000............... -- -- -- 43,000 -- 43,000 43,000
--------- ---------- --------- -------- ---------- ---------- ---------
Balance at December 31,
1998................... 2,461,218 $6,153,000 5,327,000 31,000 3,703,000 15,214,000 2,552,000
========= ========== ========= ======== ========== ========== =========
Disclosure of 1996
reclassification
amount:
Unrealized holding
losses arising during
the period, net....... $(81,000)
Less: reclassification
adjustment for gains
included in net
earnings............. 1,000
--------
Net unrealized losses
on securities
available-for-sale... $(80,000)
========
</TABLE>

See accompanying notes to financial statements.

F-4
<PAGE>

RANCHO SANTA FE NATIONAL BANK

STATEMENTS OF CASH FLOWS

Years ended December 31, 1998, 1997 and 1996

<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings........................... $ 2,509,000 2,112,000 2,259,000
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation and amortization......... 635,000 347,000 258,000
Impairment loss on bank premises held-
for-sale............................. 38,000 -- 268,000
Provision for loan losses............. -- 50,000 40,000
Gain on sale of loans................. (391,000) (441,000) (465,000)
Gain on sale of securities, net....... -- -- (3,000)
Proceeds on sale of SBA loans......... 5,866,000 4,654,000 2,616,000
Originations of SBA loans............. (4,073,000) (2,999,000) (2,678,000)
Decrease (increase) in interest
receivable and other assets.......... (121,000) 71,000 (219,000)
Decrease (increase) in deferred income
taxes................................ (194,000) 411,000 (78,000)
Increase in interest payable and other
liabilities.......................... 33,000 219,000 82,000
----------- ----------- -----------
Net cash provided by operating
activities......................... 4,302,000 4,424,000 2,080,000
----------- ----------- -----------
Cash flows from investing activities:
Net increase in loans outstanding..... (16,109,000) (10,006,000) (14,532,000)
Net maturities of interest-earning
deposits............................. -- 100,000 820,000
Maturities of securities held-to-
maturity............................. 176,000 615,000 3,882,000
Purchases of securities held-to-
maturity............................. -- (353,000) --
Proceeds from sale of securities
available-for-sale................... -- -- 2,506,000
Maturities of securities available-
for-sale............................. 28,552,000 4,500,000 13,065,000
Purchases of securities available-for-
sale................................. (38,733,000) (8,308,000) (22,568,000)
Proceeds from sale of other real
estate owned......................... 45,000 277,000 311,000
Purchases of premises and equipment... (377,000) (945,000) (888,000)
Proceeds from sale of premises and
equipment............................ 225,000 172,000 179,000
Additions to bank premises held-for-
sale................................. (489,000) (111,000) --
----------- ----------- -----------
Net cash used in investing
activities......................... (26,710,000) (14,059,000) (17,225,000)
----------- ----------- -----------
Cash flows from financing activities:
Net increase in deposits:
Non-interest bearing.................. 10,058,000 1,680,000 658,000
Interest bearing...................... 19,012,000 10,397,000 10,473,000
Proceeds from exercise of stock
options............................... 116,000 24,000 --
Cash dividends paid.................... (589,000) -- --
----------- ----------- -----------
Net cash provided by financing
activities............................ 28,597,000 12,101,000 11,131,000
Net increase (decrease) in cash and
cash equivalents...................... 6,189,000 2,466,000 (4,014,000)
Cash and cash equivalents at beginning
of year................................ 15,131,000 12,665,000 16,679,000
----------- ----------- -----------
Cash and cash equivalents at end of
year................................... $21,320,000 15,131,000 12,665,000
=========== =========== ===========
Supplemental disclosure of cash flow
information:
Cash paid during the year for:
Interest.............................. $ 3,631,000 3,210,000 2,860,000
Income taxes.......................... $ 1,748,000 762,000 52,000
</TABLE>

Supplemental disclosure of noncash investing and financing activities:

During 1996, a transfer of $45,000 was made from loans to other real estate
owned.

During 1996, the Bank transferred $882,000 from premises and equipment to
bank premises held-for-sale.

During 1998, a transfer of $497,000 was made from retained earnings to
additional paid-in capital.

See accompanying notes to financial statements.

F-5
<PAGE>

RANCHO SANTA FE NATIONAL BANK

NOTES TO FINANCIAL STATEMENTS

December 31, 1998 and 1997

Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting and reporting policies of Rancho Santa Fe National Bank (the
Bank) conform to generally accepted accounting principles and to general
practices within the banking industry. The Bank serves the commercial,
industrial, professional, construction and individual markets of San Diego
County. The Bank operates four full-service offices located in Rancho Santa Fe,
Golden Triangle (University Towne Centre) Escondido and Carlsbad. The following
is a description of the more significant accounting policies:

a. Investment Securities and Securities Available-for-Sale:

Management determines the appropriate classification of securities at the
time of purchase. If management has the intent and the Bank has the ability at
the time of purchase to hold securities until maturity, they are classified as
held-to-maturity. Investment securities held-to-maturity are stated at cost,
adjusted for amortization of premiums and accretion of discounts over the
period to call or maturity of the related security using a method which
approximates the interest method. Securities to be held for indefinite periods
of time, but not necessarily to be held-to-maturity or on a long-term basis,
are classified as available-for-sale and carried at fair value with unrealized
gains or losses reported as a separate component of shareholders' equity in
accumulated other comprehensive income, net of applicable income taxes.
Realized gains or losses on the sale of securities available-for-sale, if any,
are determined using the amortized cost of the specific securities sold.
Securities available-for-sale include securities that management intends to use
as part of its asset/liability management strategy and that may be sold in
response to changes in interest rates, prepayment risk and other related
factors. Securities are individually evaluated for appropriate classification,
when acquired; consequently, similar types of securities may be classified
differently depending on factors existing at the time of purchase.

b. Loans and Loan Fees:

Loans are stated at the principal amount outstanding. Interest income is
recorded on an accrual basis in accordance with the terms of the respective
loan. Loans on which the accrual of interest has been discontinued are
designated as nonaccrual loans. The accrual of interest on loans is
discontinued when principal or interest payments are past due 90 days or when,
in the opinion of management, there is a reasonable doubt as to the
collectibility in the normal course of business. When loans are placed on
nonaccrual status, all interest previously accrued but not collected is
reversed against current period interest income. Income on nonaccrual loans is
subsequently recognized only to the extent that cash is received and the loan's
principal balance is deemed collectible. Loans are restored to accrual status
when the loans become both well-secured and are in the process of collection.

Nonrefundable loan 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 or costs are recognized as an adjustment
to interest income over the contractual life of the loans using a method which
approximates the interest method or taken into income when the related loans
are sold. The amortization of loan fees is discontinued on nonaccrual loans.

c. Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities:

On January 1, 1997, the Bank adopted Statement of Financial Accounting
Standards (SFAS) No. 125, "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities" (Statement 125), which established
accounting for transfers and servicing of financial assets and extinguishments
of liabilities. Statement 125 was effective for transfers and servicing of
financial assets and extinguishments of liabilities occurring after December
31, 1996 and has been applied prospectively. This statement provides accounting
and reporting standards for transfers and servicing of financial assets and
extinguishments of liabilities based on consistent application of the
financial-components approach that focuses on control. It

F-6
<PAGE>

RANCHO SANTA FE NATIONAL BANK

NOTES TO FINANCIAL STATEMENTS--(Continued)

December 31, 1998 and 1997

distinguishes transfers of financial assets that are sales from transfers that
are secured borrowings. The Bank records the cash gain on the sale of the
guaranteed portion of SBA loans and the fair value of the servicing rights has
been deemed to be immaterial.

d. Comprehensive Income:

On January 1, 1998, the Bank adopted SFAS No. 130, "Reporting Comprehensive
Income" (Statement 130). Statement 130 establishes standards for reporting and
presentation of comprehensive income and its components in a full set of
financial statements. Comprehensive income consists of net income and net
unrealized gains (losses) on securities available-for-sale and is presented in
the statements of shareholders' equity and comprehensive income. Statement 130
requires only additional disclosures in the financial statements: it does not
affect the Bank's financial position or results of operations. Prior year
financial statements have been reclassified to conform to the requirements of
Statement 130.

e. Allowance for Loan Losses:

An allowance for loan losses is maintained at a level deemed appropriate by
management to adequately provide for known and inherent risks in the loan
portfolio and other extensions of credit, including off-balance sheet credit
extensions. The allowance is based upon a continuing review of the portfolio,
past loan loss experience, current economic conditions which may affect the
borrowers' ability to pay, and the underlying collateral value of the loans.
Loans which are deemed to be uncollectible are charged off and deducted from
the allowance. The provision for loan losses and recoveries on loans previously
charged off are added to the allowance.

A loan is considered impaired when it is probable that a creditor will be
unable to collect all amounts due according to the original contractual terms
of the loan agreement. If the measurement of impairment for the loan is less
than the recorded investment in the loan, a valuation allowance is established
with a corresponding charge to the provision for loan losses.

Management believes that the allowance for loan losses is adequate. In
making its evaluation of the adequacy of the allowance for loan losses,
management considers the Bank's historical experience, the volume and type of
lending conducted by the Bank, the amounts of classified and nonperforming
assets, regulatory policies, general economic conditions and other factors
regarding the collectibility of loans in the Bank's portfolio. In addition,
various regulatory agencies, as an integral part of their examination process,
periodically review the Bank's allowance for loan losses. These agencies may
require the Bank to recognize additions to the allowance based on their
judgments related to information available to them at the time of their
examinations.

f. Premises and Equipment:

Premises and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation is charged to operating expense using the straight-
line method over the estimated useful lives of the assets which range from two
to twenty-five years. Leasehold improvements are capitalized and amortized to
operating expense on a straight-line basis over the terms of the leases or the
estimated useful lives of the improvements, whichever is shorter.

g. Bank Premises Held-for-Sale:

F-7
<PAGE>

RANCHO SANTA FE NATIONAL BANK

NOTES TO FINANCIAL STATEMENTS--(Continued)

December 31, 1998 and 1997

of an asset to future net cash flows expected to be generated by the asset. If
such assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets exceeds the
fair value of the assets. Assets to be disposed of are reported at the lower of
the carrying amount or fair value less costs to sell.

Bank premises held-for-sale are reported at the lower of the carrying amount
or fair value less costs to sell in accordance with Statement 121 as Bank
management has adopted a certain plan to dispose of these premises. The fair
value of the property is measured as the amount at which the property could be
bought or sold in a current transaction between willing parties, other than in
a forced or liquidation sale and is based on a recent appraisal.

h. Other Real Estate Owned:

Other real estate owned is recorded at the fair value of the property less
selling costs at the time of acquisition. Fair value is based on current
appraisals less estimated selling and holding costs. The excess of the recorded
loan balance over the estimated fair value of the property at the time of
acquisition is charged to the allowance for loan losses. Any subsequent write
downs are charged to operating expenses and recognized as a valuation
allowance. Subsequent increases in the fair value of the asset less selling
costs reduces the valuation allowance, not below zero, and is credited to
income. Operating expenses of such properties, net of related income, and gains
and losses on their disposition are included in other operating expenses.

i. Cash and Cash Equivalents:

For purposes of the statements of cash flows, cash and cash equivalents
consist of cash, due from banks and federal funds sold. Generally, federal
funds are sold for one-day periods.

j. Income Taxes:

Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.

k. Stock Option Plan:

Prior to January 1, 1996, the Bank accounted for its stock option plan in
accordance with the provisions of Accounting Principles Board (APB) Opinion No.
25, "Accounting for Stock Issued to Employees," and related interpretations. As
such, compensation expense would be recorded on the date of grant only if the
current market price of the underlying stock exceeded the exercise price. On
January 1, 1996, the Bank adopted SFAS No. 123, "Accounting for Stock-Based
Compensation" (Statement 123) which permits entities to recognize as expense
over the vesting period the fair value of all stock-based awards on the date of
grant. Alternatively, Statement 123, also allows entities to continue to apply
the provisions of APB Opinion No. 25 and provide pro forma net earnings and pro
forma basic and diluted earnings per share disclosures for employee stock
option grants made in 1995 and future years as if the fair-value-based method
defined in Statement 123 had been applied. The Bank has elected to continue to
apply the provisions of APB Opinion No. 25 and provide the pro forma disclosure
provisions of Statement 123.

F-8
<PAGE>

RANCHO SANTA FE NATIONAL BANK

NOTES TO FINANCIAL STATEMENTS--(Continued)

December 31, 1998 and 1997

l. Use of Estimates:

Management of the Bank has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period to
prepare these financial statements in conformity with generally accepted
accounting principles. Material estimates that are particularly susceptible to
significant change in the near term relate to the determination of the
allowance for loan losses. Actual results could differ from those estimates.

m. Year 2000:

The Bank has developed a remediation plan and is in the process of
converting computer systems and applications for the Year 2000. Expenditures
related to Year 2000 issues are expensed as incurred.

n. Reclassifications:

Certain prior year amounts have been reclassified to conform to the current
year's presentations.

Note 2 SECURITIES AVAILABLE -FOR -SALE

The amortized cost, gross unrealized gains and losses and fair value of
securities available-for-sale as of December 31, 1998 and 1997 are as follows:

<TABLE>
<CAPTION>
1998
--------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. Government
Securities............. $17,101,000 34,000 19,000 17,116,000
Mortgage-backed
Securities............. 13,937,000 70,000 38,000 13,969,000
Corporate Bonds......... 500,000 6,000 -- 506,000
Federal Reserve Bank
Stock.................. 440,000 -- -- 440,000
Federal Home Loan Bank
Stock ................. 416,000 -- -- 416,000
----------- ------- ------ ----------
$32,394,000 110,000 57,000 32,447,000
=========== ======= ====== ==========
</TABLE>

<TABLE>
<CAPTION>
1997
--------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. Government Securities.... $18,585,000 14,000 48,000 18,551,000
Mortgage-backed Securities.... 3,040,000 9,000 -- 3,049,000
Corporate Bonds............... 500,000 4,000 -- 504,000
Federal Reserve Bank Stock.... 371,000 -- -- 371,000
----------- ------ ------ ----------
$22,496,000 27,000 48,000 22,475,000
=========== ====== ====== ==========
</TABLE>

The maturity distribution based on amortized cost and fair value (excluding
Federal Reserve Bank Stock and Federal Home Loan Bank Stock) as of December 31,
1998, by contractual maturity, is shown below. Mortgage-backed securities have
contractual terms to maturity, but require periodic payments to reduce
principal. In addition, expected maturities may differ from contractual
maturities because issuers may have the right to call or prepay obligations
with or without call or prepayment penalties.

F-9
<PAGE>

RANCHO SANTA FE NATIONAL BANK

NOTES TO FINANCIAL STATEMENTS--(Continued)

December 31, 1998 and 1997

<TABLE>
<CAPTION>
Maturity Distribution
----------------------
Amortized Fair
Cost Value
----------- ----------
<S> <C> <C>
Due after one year through five years................. $20,348,000 20,404,000
Due after five years through ten years................ 6,721,000 6,725,000
Due after ten years................................... 4,469,000 4,462,000
----------- ----------
$31,538,000 31,591,000
=========== ==========
</TABLE>

There were no sales of securities during 1998 or 1997. Proceeds from the
sale of securities available-for-sale during 1996 were $2,506,000. Gross gains
of $3,000 were realized on sales in 1996.

The Bank has had only limited involvement in derivative financial
instruments. The Bank had invested in U.S. Government agency "step up" bonds,
which provided a higher initial yield than U.S. Treasury bonds or straight
agency bonds. In return for the higher yield, the issuer reserves the right to
call the bond at a given date prior to maturity. If the issuer does not
exercise this "call option," the coupon rate of the bond will "step up" to a
contractually agreed upon rate. Step up bonds mitigate interest rate risk
through the exercise of the call option or, in a rising rate environment,
through the increase in coupon rates. Step up bonds have no risk of loss of
principal, and as such are considered by management to be low risk derivative
investments. As of December 31, 1997, the amount of step up bonds included in
U.S. Government Securities available-for-sale was $500,000. The Bank held no
step up bonds as of December 31, 1998.

Note 3 INVESTMENT SECURITIES HELD-TO-MATURITY

The amortized cost, gross unrealized gains and losses and fair value of
investment securities held-to-maturity as of December 31, 1998 and 1997 are as
follows:

<TABLE>
<CAPTION>
1998
---------------------------------------
Gross Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- -------
<S> <C> <C> <C> <C>
U.S. Government Securities........... $ 19,000 -- -- 19,000
Municipal Securities................. 351,000 17,000 -- 368,000
-------- ------ ----- -------
$370,000 17,000 -- 387,000
======== ====== ===== =======
<CAPTION>
1997
---------------------------------------
Gross Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- -------
<S> <C> <C> <C> <C>
U.S. Government Securities........... $194,000 -- -- 194,000
Municipal Securities................. 352,000 12,000 -- 364,000
-------- ------ ----- -------
$546,000 12,000 -- 558,000
======== ====== ===== =======
</TABLE>

The maturity distribution based on amortized cost and fair value as of
December 31, 1998 by contractual maturity, is shown below. Expected maturities
may differ from contractual maturities because issuers may have the right to
call or prepay obligations with or without call or prepayment penalties.

F-10
<PAGE>

RANCHO SANTA FE NATIONAL BANK

NOTES TO FINANCIAL STATEMENTS--(Continued)

December 31, 1998 and 1997

<TABLE>
<CAPTION>
Maturity
Distribution
-----------------
Amortized Fair
Cost Value
--------- -------
<S> <C> <C>
Due after five years through ten years.................... $ 351,000 368,000
Due after ten years....................................... 19,000 19,000
--------- -------
$ 370,000 387,000
========= =======
</TABLE>

As of December 31, 1998 and 1997, investment securities held-to-maturity
with an amortized cost of $370,000 and $194,000, respectively, and securities
available-for-sale with a fair value of $13,634,000 and $14,457,000,
respectively, (Note 2) totaling $14,006,000 and $14,651,000, espectively, were
pledged as security for public deposits and other purposes as required by
various statutes and agreements.

Note 4 LOANS AND RELATED ALLOWANCE FOR LOAN LOSSES

As of December 31, 1998 and 1997, loans consist of the following:

<TABLE>
<CAPTION>
1998 1997
------------- ------------
<S> <C> <C>
Commercial...................................... $ 63,423,000 54,502,000
Construction.................................... 20,060,000 13,278,000
Consumer........................................ 1,000,000 1,115,000
Real Estate..................................... 18,190,000 19,066,000
Small Business Administration, portion held for
sale, at cost which approximates market........ 995,000 542,000
Small Business Administration, unguaranteed
portion held for investment.................... 6,241,000 6,675,000
------------- ------------
109,909,000 95,178,000
Less:
Deferred loan fees.............................. 347,000 296,000
Allowance for loan losses....................... 2,388,000 2,415,000
------------- ------------
$ 107,174,000 92,467,000
============= ============

The sensitivity of loans as of December 31, 1998 to changes in interest
rates is as follows:

Fixed rate loans................................ $ 16,687,000
Variable rate loans............................. 93,222,000
------------
$109,909,000
============
</TABLE>

The Bank's loan portfolio consists primarily of loans to borrowers within
San Diego County. As of December 31, 1998, the Bank had approximately
$44,258,000 of commercial, construction, consumer, real estate and SBA loans
which were secured by real estate located in San Diego County. Generally, these
loans are secured by first trust deeds and do not exceed 75% of the properties'
appraised values at origination. The portfolio is well diversified in both
project type and areas within the San Diego County region. Project types
include single-family residences, multi-family residences, commercial office
buildings and centers, industrial buildings and special purpose projects.
Generally, loans are expected to be repaid from the cash flows of the business,
the proceeds of permanent financing, or proceeds from the sale of the project
or other assets of the borrowers.

F-11
<PAGE>

RANCHO SANTA FE NATIONAL BANK

NOTES TO FINANCIAL STATEMENTS--(Continued)

December 31, 1998 and 1997

Nonaccrual loans totaling $4,000, $243,000, and $739,000 were outstanding as
of December 31, 1998, 1997 and 1996, respectively. Interest income of $1,000,
$18,000 and $34,000 would have been recorded for the years ended December 31,
1998, 1997 and 1996 respectively, if nonaccrual loans had been performing in
accordance with their original terms. Interest income of $5,000 and $6,000 was
recorded on loans subsequently transferred to a nonaccrual status for the years
ended December 31, 1997 and 1996, respectively. No interest income was recorded
on loans subsequently transferred to nonaccrual status for the year ended
December 31, 1998.

A summary of the activity in the allowance for loan losses is as follows:

<TABLE>
<CAPTION>
1998 1997 1996
---------- --------- ---------
<S> <C> <C> <C>
Balance, beginning of year............... $2,415,000 2,327,000 2,138,000
Provision charged to operating expense... -- 50,000 40,000
Loans charged-off........................ (165,000) (132,000) (227,000)
Recoveries on loans previously charged
off..................................... 138,000 170,000 376,000
---------- --------- ---------
Loans charged-off, net of recoveries..... (27,000) 38,000 149,000
---------- --------- ---------
Balance, end of year..................... $2,388,000 2,415,000 2,327,000
========== ========= =========
</TABLE>

The Bank's impaired loans comprise all internally classified loans,
including nonaccrual loans with specified outstanding balances. The Bank
measures its impaired loans by using the fair value of the collateral if the
loan is collateral-dependent and the present value of the expected future cash
flows discounted at the loan's effective interest rate if the loan is not
collateral-dependent. As of December 31, 1998 and 1997, all impaired loans were
collateral-dependent.

The Bank's allowance for loan losses consists of a specific and general
allowance. The specific allowance is further broken down to provide for those
impaired loans and the remaining internally classified loans. The impairment
allowance is defined as the difference between the recorded value and the fair
value of the impaired loan. For the remaining internally classified loans,
management allocates a specific allowance to each loan based on the percentage
assigned and the current financial condition of the borrowers and guarantors,
the prevailing value of the underlying collateral and the general economic
conditions. The general allowance is determined by an assessment of the overall
quality of the unclassified portion of the loan portfolio as a whole, and by
loan type. Management maintains the percentage assigned to the general
allowance based on historical charge-off history and management's knowledge of
the quality of the portfolio. The Bank recognizes income from impaired loans on
the accrual basis unless the loan is on nonaccrual status. Income from loans on
nonaccrual status is recognized to the extent cash is received and the loan's
principal balance is deemed collectible. The following table presents a
breakdown of impaired loans and any impairment allowance related to impaired
loans as of December 31, 1998 and 1997:

Impaired loans:

<TABLE>
<CAPTION>
1998 1997
---------------------- ----------------------
Recorded Impairment Recorded Impairment
Investment Allowance Investment Allowance
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Loans with
impairment allowance:
Real estate................... $ -- -- $ 177,000 79,000
Other collateral.............. 1,141,000 278,000 1,020,000 242,000
----------- ------- ----------- -------
Total impaired loans.............. $ 1,141,000 278,000 $ 1,197,000 321,000
=========== ======= =========== =======
</TABLE>

F-12
<PAGE>

RANCHO SANTA FE NATIONAL BANK

NOTES TO FINANCIAL STATEMENTS--(Continued)

December 31, 1998 and 1997

Based on the Bank's evaluation process to determine the level of the
allowance for loan losses mentioned previously and the fact that a majority of
the Bank's non-performing loans are secured, management believes the allowance
level to be adequate as of December 31, 1998 to absorb the estimated known and
inherent risks identified through its analysis. For the years ended December
31, 1998, 1997 and 1996, interest income of $125,000, $66,000 and $0 was
recorded on impaired loans, respectively, and the average balance of impaired
loans was $1,178,000, $272,000 and $652,000, respectively.

Note 5 PREMISES AND EQUIPMENT

Premises and equipment as of December 31, 1998 and 1997 are as follows:

<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Furniture, fixtures and equipment..................... $1,946,000 $1,914,000
Leasehold improvements................................ 998,000 986,000
Vehicles.............................................. 77,000 71,000
---------- ----------
3,021,000 2,971,000
Less accumulated amortization and depreciation........ 1,554,000 1,273,000
---------- ----------
$1,467,000 $1,698,000
========== ==========
</TABLE>

Depreciation expense for the years ended December 31, 1998, 1997 and 1996
was $384,000, $294,000 and $206,000, respectively.

Note 6 BANK PREMISES HELD-FOR-SALE

During 1996, the Bank committed to a plan to dispose of the premises
previously occupied by the Bank's escrow function. The fair value of this
property was less than the carrying value and accordingly the Bank recorded a
provision for impairment loss to write down the carrying value of the property
to the amount of the estimated fair value, less estimated selling costs to
dispose of the property. The impairment provision totaled approximately
$268,000 for the year ended December 31, 1996. During 1998, the Bank took an
additional writedown of $38,000 to bring the impairment allowance to
approximately $306,000 at December 31, 1998 and made improvements of $489,000.

The Bank entered a sale escrow during February 1999 for the sale of these
premises to an affiliate. The sale is expected to close during March 1999.
Following the sale of the premises, the Bank will receive no further lease
rental income (Note 14).

Note 7 OTHER REAL ESTATE OWNED

A summary of the activity in the allowance for OREO is as follows:

<TABLE>
<CAPTION>
1998 1997 1996
---- -------- --------
<S> <C> <C> <C>
Balance, beginning of year.......................... $-- 361,000 826,000
Charge-offs......................................... -- (361,000) (465,000)
---- -------- --------
Balance, end of year................................ $-- -- 361,000
==== ======== ========
</TABLE>

F-13
<PAGE>

RANCHO SANTA FE NATIONAL BANK

NOTES TO FINANCIAL STATEMENTS--(Continued)

December 31, 1998 and 1997

Note 8 DEPOSITS

Interest bearing deposits as of December 31, 1998 and 1997 are comprised of
the following:

<TABLE>
<CAPTION>
1998 1997
------------- ----------
<S> <C> <C>
Savings deposits.................................... $ 2,991,000 3,944,000
Market rate deposits................................ 79,441,000 65,067,000
Time deposits under $100,000........................ 10,143,000 8,609,000
Time deposits of $100,000 or more................... 13,816,000 9,759,000
------------- ----------
$ 106,391,000 87,379,000
============= ==========
</TABLE>

The following summarizes the maturity of time deposits as of December 31,
1998:

<TABLE>
<S> <C>
Three months or less........................................... $11,343,000
Over three months through six months........................... 6,940,000
Over six months through twelve months.......................... 5,247,000
Over twelve months through five years.......................... 429,000
-----------
$23,959,000
===========
</TABLE>

Interest expense on deposits for the years ended December 31, 1998, 1997 and
1996 is comprised of the following:

<TABLE>
<CAPTION>
1998 1997 1996
---------- --------- ---------
<S> <C> <C> <C>
Savings deposits.............................. $ 60,000 87,000 113,000
Market rate deposits.......................... 2,485,000 2,142,000 1,960,000
Time deposits under $100,000.................. 486,000 455,000 474,000
Time deposits of $100,000 or more............. 609,000 518,000 274,000
---------- --------- ---------
$3,640,000 3,202,000 2,821,000
========== ========= =========
</TABLE>

Note 9 FAIR VALUE OF FINANCIAL INSTRUMENTS

Estimated fair values for the Bank's financial instruments and a description
of the methodologies and assumptions used to determine such amounts follows:

Cash and Due from Banks and Federal Funds Sold

The carrying amount is assumed to be the fair value because of the liquidity
of these instruments.

Investment Securities

Fair values are based on quoted market prices available as of the balance
sheet date. If a quoted market price is not available, fair value is estimated
using quoted market prices for similar securities.

Loans

Fair values are estimated for portfolios of loans with similar financial
characteristics. Loans are segregated by type and further segmented into fixed
and adjustable rate interest terms and by credit risk categories. The fair
value estimates do not take into consideration the value of the loan portfolio
in the event the loans had to be sold outside the parameters of normal
operating activities.

F-14
<PAGE>

RANCHO SANTA FE NATIONAL BANK

NOTES TO FINANCIAL STATEMENTS--(Continued)

December 31, 1998 and 1997

The fair value of fixed rate loans and non-performing or adversely
classified adjustable rate loans is calculated by discounting scheduled cash
flows through the estimated maturity using estimated market discount rates that
reflect the credit and interest rate risk inherent in the loans. The discount
rates used for performing fixed rate loans are the Bank's current offer rates
for comparable instruments with similar terms.

The fair value of performing adjustable rate loans is estimated to be
carrying value. These loans reprice frequently at market rates and the credit
risk is not considered to be greater than normal.

Deposit Liabilities

The fair value of deposits with no stated maturity, such as non-interest
bearing demand deposits, savings and checking accounts, is equal to the amount
payable on demand as of the balance sheet date. The fair value of time deposits
is based on the discounted value of contractual cash flows. The discount rate
is estimated using the rates currently offered for deposits of similar
remaining maturities. No value has been assigned to the Bank's long-term
relationships with its deposit customers (core deposit intangible).

Commitments to Extend Credit, Standby Letters of Credit and Financial
Guarantees Written

The fair value of commitments to extend credit is estimated using the fees
currently charged to enter into similar agreements taking into account the
remaining terms of the agreements and the present creditworthiness of the
counterparties. The fair value of letters of credit is based on fees currently
charged for similar agreements or on the estimated cost to terminate them or
otherwise settle the obligations with the counterparties.

Limitations

Fair value estimates are made at a specific point in time and are based on
relevant market information and information about the financial instrument.
These estimates do not reflect any premium or discount that could result from
offering for sale at one time the Bank's entire holdings of a particular
financial instrument. Because no market exists for a portion of the Bank's
financial instruments, fair value estimates are based on what management
believes to be conservative judgments regarding expected future cash flows,
current economic conditions, risk characteristics of various financial
instruments, and other factors. These estimates are subjective in nature and
involve uncertainties and matters of significant judgment and therefore cannot
be determined with precision. Changes in assumptions could significantly affect
the estimates. Since the fair values have been estimated as of December 31,
1998 and 1997, the amounts that will actually be realized or paid at settlement
or maturity of the instruments could be significantly different.

F-15
<PAGE>

RANCHO SANTA FE NATIONAL BANK

NOTES TO FINANCIAL STATEMENTS--(Continued)

December 31, 1998 and 1997

The fair values of the Bank's financial instruments as of December 31, 1998
and 1997 are as follows:

<TABLE>
<CAPTION>
1998 1997
------------------------ -----------------------
Carrying or Carrying or
Contract Fair Value Contract Fair Value
Amount Estimates Amounts Estimates
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Financial Assets:
Cash and due from banks..... $ 9,066,000 9,066,000 7,813,000 7,813,000
Federal funds sold.......... 12,254,000 12,254,000 7,318,000 7,318,000
Securities available-for-
sale....................... 32,447,000 32,447,000 22,475,000 22,475,000
Securities held-
to-maturity................ 370,000 387,000 546,000 558,000
Loans, net.................. 107,174,000 107,166,000 92,467,000 92,453,000
Financial Liabilities
Deposits.................... 148,627,000 148,631,000 119,557,000 119,557,000
Off -Balance Sheet
Financial Instruments:
Commitments to extend
credit..................... 47,409,000 711,000 31,415,000 471,000
Standby letters of credit... 1,202,000 18,000 301,000 5,000
</TABLE>

Note 10 INCOME TAXES

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities as of December
31, 1998 and 1997 are as follows:

<TABLE>
<CAPTION>
1998 1997
-------- -------
<S> <C> <C>
Deferred tax assets:
Nonaccrual interest recognized as income for taxes but
not for books........................................ $ -- 31,000
Deferred gain on sale of loans........................ 17,000 --
Deferred compensation................................. 118,000 19,000
Accrued liabilities................................... 73,000 --
Unrealized loss on securities available-for-sale...... -- 9,000
Loan loss allowance, due to differences in computation
of bad debts......................................... 392,000 486,000
State tax benefit..................................... 113,000 --
-------- -------
Total gross deferred tax assets....................... 713,000 545,000
-------- -------
Deferred tax liabilities:
Unrealized gain on securities available-for-sale...... (22,000) --
Premises and equipment, principally due to differences
in depreciation...................................... (3,000) (18,000)
Accrued liabilities................................... -- (33,000)
-------- -------
Total gross deferred tax liabilities.................. (25,000) (51,000)
-------- -------
Total net deferred tax assets......................... $688,000 494,000
======== =======
</TABLE>

Based upon projections for future taxable income over the next twelve month
period in which the deferred tax assets are deductible, management believes it
is more likely than not the Bank will realize the benefits of these deductible
differences.

F-16
<PAGE>

RANCHO SANTA FE NATIONAL BANK

NOTES TO FINANCIAL STATEMENTS--(Continued)

December 31, 1998 and 1997

For the years ended December 31, 1998, 1997 and 1996, the components of
income taxes consist of the following:

<TABLE>
<CAPTION>
1998 1997 1996
---------- --------- --------
<S> <C> <C> <C>
Current income taxes:
Federal................... $1,484,000 799,000 35,000
State..................... 503,000 170,000 2,000
---------- --------- --------
Deferred income taxes:.... 1,987,000 969,000 37,000
---------- --------- --------
Federal................... (287,000) 355,000 675,000
State..................... 62,000 56,000 253,000
---------- --------- --------
(225,000) 411,000 928,000
---------- --------- --------
Change in valuation
allowance................ -- -- (965,000)
---------- --------- --------
$1,762,000 1,380,000 --
========== ========= ========

A reconciliation of total income taxes for the years ended December 31,
1998, 1997 and 1996 to the amount computed by applying the applicable statutory
federal income tax rate of 34% to income before income taxes follows:

<CAPTION>
1998 1997 1996
---------- --------- --------
<S> <C> <C> <C>
Computed expected income
taxes.................... $1,452,000 1,187,000 768,000
Increase (decrease) in
taxes resulting from:
State tax, net of
federal tax benefit.... 307,000 149,000 168,000
Reduction in valuation
allowance.............. -- -- (965,000)
Other, net.............. 3,000 44,000 29,000
---------- --------- --------
Total income tax.......... $1,762,000 1,380,000 --
========== ========= ========
</TABLE>

As of December 31, 1998 and 1997 taxes payable totaled $398,000 and
$190,000, respectively.

Note 11 STOCK OPTION PLAN

In 1992, the Bank adopted a stock option plan (the Plan) pursuant to which
the Bank's Board of Directors may grant stock options to officers and key
employees. The Plan authorizes grants of options to purchase up to 400,000
shares of authorized but unissued common stock. Stock options are granted with
an exercise price equal to the stock's fair market value at the date of grant.
Stock options have terms not to exceed 10 years from the date of the grant and
vest and become fully exercisable in installments determined at the date of
grant.

As of December 31, 1998, there were 54,000 additional shares available for
grant under the Plan. The per share weighted-average fair value of stock
options granted during 1998, 1997 and 1996 was $2.13, $2.33 and $1.36,
respectively, on the date of grant using the Black-Scholes options-pricing
model with the following weighted-average assumptions: 1998--expected dividend
yield 1.50%, risk-free interest rate of 4.69%, and an expected life of 5 years;
1997--no expected dividend yield, risk-free interest rate of 5.71%, and an
expected life of 5 years; 1996--no expected dividend yield, risk-free interest
rate of 6.38%, and an expected life of 5 years.

F-17
<PAGE>

RANCHO SANTA FE NATIONAL BANK

NOTES TO FINANCIAL STATEMENTS--(Continued)

December 31, 1998 and 1997

The Bank applies APB Opinion No. 25 in accounting for its Plan and,
accordingly, no compensation cost has been recognized for its stock options in
the financial statements. Had the Bank determined compensation cost based on
the fair value at the grant date for its stock options under Statement 123, the
Bank's net earnings would have been reduced to the pro forma amounts indicated
below:

<TABLE>
<CAPTION>
1998 1997 1996
---------- --------- ---------
<S> <C> <C> <C>
Net earnings, as reported.................... $2,509,000 2,112,000 2,259,000
Pro forma net earnings....................... 2,423,000 2,042,000 2,235,000
Basic earnings per share, as reported........ 1.03 .87 .93
Pro forma basic earnings per share........... .99 .84 .92
Diluted earnings per share, as reported...... .96 .83 .92
Pro forma diluted earnings per share......... .93 .80 .91
</TABLE>

Stock option activity during the periods indicated is as follows:

<TABLE>
<CAPTION>
Weighted
Number of Average
Shares Exercise Price
--------- --------------
<S> <C> <C>
Balance as of December 31, 1995................ 91,000 $ 3.60
Granted........................................ 75,000 5.05
Exercised...................................... -- --
Forfeited...................................... (5,000) 3.60
Expired........................................ ---- --
------- ------
Balance as of December 31, 1996................ 161,000 3.95
Granted........................................ 150,000 9.50
Exercised...................................... (5,001) 5.00
Forfeited...................................... -- --
Expired........................................ -- --
------- ------
Balance as of December 31, 1997................ 305,999 6.75
Granted........................................ 35,000 15.86
Exercised...................................... (31,167) 3.70
Forfeited...................................... -- --
Expired........................................ -- --
------- ------
Balance as of December 31, 1998................ 309,832 $ 8.08
======= ======
</TABLE>

As of December 31, 1998, the range of exercise prices and weighted-average
remaining contractual life of outstanding options was $3.60-$16.00 and 4.5
years respectively. As of December 31, 1998 and 1997, the number of options
exercisable was 207,838 and 195,000, respectively, and the weighted-average
exercise price of those options was $7.97 and $6.75, respectively.

Note 12 EMPLOYEE BENEFIT PLAN

The Bank's 401(k) plan is for the benefit of substantially all employees.
Contributions to the plan by the Bank are at the discretion of the Board of
Directors and are subject to certain limitations described in the plan. There
were no contributions made by the Bank to the plan in 1998, 1997 or 1996.

F-18
<PAGE>

RANCHO SANTA FE NATIONAL BANK

NOTES TO FINANCIAL STATEMENTS--(Continued)

December 31, 1998 and 1997

Note 13 NET EARNINGS PER SHARE

In accordance with SFAS 128, the following is a reconciliation of the
numerators and denominators of the basic and diluted EPS computations:

<TABLE>
<CAPTION>
Earnings Shares Per-Share
(Numerator) (Denominator) Amount
----------- ------------- ---------
<S> <C> <C> <C>
Basic 1998 EPS
Net income.............................. $ 2,509,000 2,443,000 $ 1.03
Effect of dilutive stock options........ -- 159,000 (0.07)
----------- --------- ------
Diluted EPS............................. $ 2,509,000 2,602,000 $ 0.96
----------- --------- ------
Basic 1997 EPS
Net income.............................. $ 2,112,000 2,427,000 $ 0.87
Effect of dilutive stock options........ -- 125,000 (0.04)
----------- --------- ------
Diluted EPS............................. $ 2,112,000 2,552,000 $ 0.83
----------- --------- ------
Basic 1996 EPS
Net income.............................. $ 2,259,000 2,425,000 $ 0.93
Effect of dilutive stock options........ -- 26,000 (0.01)
----------- --------- ------
Diluted EPS............................. $ 2,259,000 2,451,000 $ 0.92
=========== ========= ======
</TABLE>

Note 14 LEASE COMMITMENTS

As of December 31, 1998, aggregate minimum rental commitments for certain
real property under noncancelable operating leases having an initial or
remaining term of more than one year are as follows:

<TABLE>
<S> <C>
1999.............................................................. $ 529,000
2000.............................................................. 484,000
2001.............................................................. 435,000
2002.............................................................. 293,000
2003.............................................................. 166,000
Thereafter........................................................ 189,000
----------
$2,096,000
==========

Total gross rental expense for the years ended December 31, 1998, 1997 and
1996 was $536,000, $528,000 and $629,000, respectively. There are no contingent
rental payments applicable to any of the leases. Most of the leases provide
that the Bank pay maintenance, insurance and certain other operating expenses
applicable to the leased premises in addition to the monthly minimum payments.
Management expects that in the normal course of business, leases that expire
will be renewed or replaced by other leases.

The Bank has leased its premises held-for-sale to an affiliate under a ten-
year noncancelable operating lease (Note 6). Future minimum rental income as of
December 31, 1998 is estimated as follows:

1999.............................................................. $ 106,000
2000.............................................................. 106,000
2001.............................................................. 106,000
2002.............................................................. 106,000
2003.............................................................. 107,000
Thereafter........................................................ 467,000
----------
$ 998,000
==========
</TABLE>

F-19
<PAGE>

RANCHO SANTA FE NATIONAL BANK

NOTES TO FINANCIAL STATEMENTS--(Continued)

December 31, 1998 and 1997

Total rental income for the year ended December 31, 1998 was approximately
$74,000.

Note 15 COMMITMENTS AND CONTINGENCIES

The Bank is a party to financial instruments with off-balance-sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit, standby
letters of credit and financial guarantees. Those instruments involve, to
varying degrees, elements of credit risk in excess of the amount recognized in
the balance sheets. The contract or notional amounts of those instruments
reflect the extent of involvement the Bank has in particular classes of
financial instruments.

Commitments to extend credit amounting to $47,409,000 and $31,415,000 were
outstanding as of December 31, 1998 and 1997, respectively. Commitments to
extend credit are agreements to lend to a customer as long as there is no
violation of any condition established in the contract. Commitments generally
have fixed expiration dates or other termination clauses and may require
payment of a fee. Since many of the commitments are expected to expire without
being drawn upon, the total commitment amounts do not necessarily represent
future cash requirements.

Standby letters of credit and financial guarantees amounting to $1,202,000
and $301,000 were outstanding as of December 31, 1998 and 1997, respectively.
Standby letters of credit and financial guarantees are conditional commitments
issued by the Bank to guarantee the performance of a customer to a third party.
Those guarantees are primarily issued to support private borrowing
arrangements. Most guarantees will expire within one year. The Bank generally
requires collateral or other security to support financial instruments with
credit risk. Management does not anticipate that any material loss will result
from the outstanding commitments to extend credit, standby letters of credit or
financial guarantees.

As of December 31, 1998 and 1997, the Bank had lines of credit in the amount
of $8,500,000 and $4,500,000, respectively, from correspondent banks, none of
which were outstanding as of December 31, 1998 or 1997. These lines are
renewable annually. The Bank also has a Fed discount limit of $2,000,000 as of
December 31, 1998. The availability of the lines of credit, as well as
adjustments in deposit programs, provide for liquidity in the event that the
level of deposits should fall abnormally low. These sources provide that
funding thereof may be withdrawn depending upon the financial strength of the
Bank.

Note 16 RESTRICTED CASH BALANCES

The Bank is required to maintain reserve balances with the Federal Reserve
Bank. Reserve requirements are based on a percentage of deposit liabilities.
The average reserves held at the Federal Reserve Bank for the years ended
December 31, 1998 and 1997 were approximately $604,000 and $473,000,
respectively.

Note 17 DIVIDEND AVAILABILITY

Under federal banking law, dividends declared by the Bank in any calendar
year may not, without the approval of The Office of the Comptroller of the
Currency (OCC), exceed its net income for that year combined with its retained
income from the preceding two years. However, the OCC has previously issued a
bulletin to all national banks outlining new guidelines limiting the
circumstances under which national banks may pay dividends even if the banks
are otherwise statutorily authorized to pay dividends. The limitations impose a
requirement or in some cases suggest that prior approval of the OCC should be
obtained before a dividend is paid if a national bank is the subject of
administrative action or if the payment could be viewed by the OCC as unsafe or
unsound.

F-20
<PAGE>

RANCHO SANTA FE NATIONAL BANK

NOTES TO FINANCIAL STATEMENTS--(Continued)

December 31, 1998 and 1997

During 1998, the Bank paid $589,000 in dividends and transferred $497,000
from retained earnings to additional paid-in capital in accordance with
regulatory guidelines.

Note 18 LITIGATION

The Bank is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Bank's financial position, results of operations or liquidity.

Note 19 REGULATORY MATTERS

The Bank is subject to various regulatory capital requirements administered
by the federal banking agencies. Failure to meet minimum capital requirements
can initiate certain mandatory and possibly additional discretionary actions by
regulators that, if undertaken, could have a direct material effect on the
Bank's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve quantitative measures of the Bank's assets,
liabilities, and certain off-balance sheet items as calculated under regulatory
accounting practices. The Bank's capital amounts and classification 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 Bank to maintain minimum amounts and ratios (set forth in the table
below) of total and Tier 1 capital (as defined in the regulations) to risk-
weighted assets (as defined), and of Tier 1 capital (as defined) to average
assets (as defined). Management believes, as of December 31, 1998, that the
Bank meets all capital adequacy requirements to which it is subject.

As of December 31, 1998, the most recent notification from the Office of the
Comptroller of the Currency categorized the Bank as well capitalized under the
regulatory framework for prompt corrective action. To be categorized as well
capitalized the Bank must maintain minimum total risk-based, Tier 1 risk-based
and Tier 1 leverage ratios as set forth in the table. There are no conditions
or events since that notification that management believes have changed the
Bank's category.

The Bank's actual capital amounts and ratios are also presented in the
table.

<TABLE>
<CAPTION>
Actual Adequacy Purposes
----------------- -----------------------------------------------------
Amount Ratio Amount Ratio
----------- ----- ------------------------------ ----------------------
<S> <C> <C> <C> <C>
As of December
31, 1998
Total Capital
(to Risk-
Weighted
Assets)........ $16,828,000 12.9% (greater than or =)$10,469,000 (greater than or =)8.0%
Tier 1 Capital
(to Risk-
Weighted
Assets)........ $15,183,000 11.6% (greater than or =) $5,235,000 (greater than or =)4.0%
Tier 1 Capital
(to Average
Assets)........ $15,183,000 9.6% (greater than or =) $6,297,000 (greater than or =)4.0%
As of December
31, 1997
Total Capital
(to Risk-
Weighted
Assets)........ $14,496,000 13.5% (greater than or =)$ 8,555,000 (greater than or =)8.0%
Tier 1 Capital
(to Risk-
Weighted
Assets)........ $13,147,000 12.3% (greater than or =)$ 4,278,000 (greater than or =)4.0%
Tier 1 Capital
(to Average
Assets)........ $13,147,000 9.9% (greater than or =)$ 5,287,000 (greater than or =)4.0%
<CAPTION>
To Be Well
Capitalized Under
Prompt Corrective
Action Provisions
-------------------------------------------------------
Amount Ratio
------------------------------ ------------------------
<S> <C> <C>
As of December
31, 1998
Total Capital
(to Risk-
Weighted
Assets)........ (greater than or =)$13,086,000 (greater than or =)10.0%
Tier 1 Capital
(to Risk-
Weighted
Assets)........ (greater than or =)$ 7,852,000 (greater than or =) 6.0%
Tier 1 Capital
(to Average
Assets)........ (greater than or =)$ 7,872,000 (greater than or =) 5.0%
As of December
31, 1997
Total Capital
(to Risk-
Weighted
Assets)........ (greater than or =)$10,694,000 (greater than or =)10.0%
Tier 1 Capital
(to Risk-
Weighted
Assets)........ (greater than or =)$ 6,416,000 (greater than or =) 6.0%
Tier 1 Capital
(to Average
Assets)........ (greater than or =)$ 6,608,000 (greater than or =) 5.0%
</TABLE>

F-21
<PAGE>

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Shareholders
Rancho Santa Fe National Bank, Rancho Santa Fe, California:

We have audited the accompanying balance sheets of Rancho Santa Fe National
Bank (the Bank) as of December 31, 1998 and 1997, and the related statements of
earnings, shareholders' equity and comprehensive income and cash flows for each
of the years in the three-year period ended December 31, 1998. These financial
statements are the responsibility of the Bank's management. Our responsibility
is to express an opinion on these 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, the financial statements referred to above present fairly,
in all material respects, the financial position of Rancho Santa Fe National
Bank as of December 31, 1998 and 1997, and the results of its operations and
its cash flows for each of the years in the three-year period ended December
31, 1998, in conformity with generally accepted accounting principles.

San Diego, California
January 8, 1999

F-22
<PAGE>

RANCHO SANTA FE NATIONAL BANK

BALANCE SHEETS

<TABLE>
<CAPTION>
(Unaudited)
September 30, 1999 December 31, 1998
------------------ -----------------
<S> <C> <C>
ASSETS
Cash and due from banks................... $ 10,232,000 9,066,000
Federal funds sold........................ -- 12,254,000
Investments:
Securities available-for-sale, at fair
value (note 2).......................... 34,364,000 32,447,000
Securities held-to-maturity, at amortized
cost (note 3)........................... 365,000 370,000
Loans (note 4)............................ 127,553,000 109,562,000
Less allowance for loan losses........... 2,277,000 2,388,000
------------ -----------
Net loan................................ 125,276,000 107,174,000
Premises and equipment, net (note 5)...... 1,505,000 1,467,000
Bank premises held-for-sale (note 6)...... -- 1,176,000
Deferred income taxes..................... 959,000 688,000
Interest receivable and other assets...... 1,471,000 1,370,000
------------ -----------
Total assets............................ $174,172,000 166,012,000
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits (notes 3 and 7)
Non-interest bearing..................... 44,646,000 42,236,000
Interest bearing......................... 109,360,000 106,391,000
------------ -----------
Total deposits.......................... 154,006,000 148,627,000
Interest payable and other liabilities.... 3,645,000 2,171,000
------------ -----------
Total liabilities....................... 157,651,000 150,798,000
Shareholders' equity:
Common stock, $2.50 par value; authorized
3,350,000 shares, issued and outstanding
2,476,885 and 2,461,218 shares as of
September 30, 1999 and December 31,
1998, respectively...................... 6,192,000 6,153,000
Additional paid-in capital............... 5,748,000 5,327,000
Accumulated other comprehensive income
(loss) net unrealized gains (losses) on
securities available-for-sale, net (note
2)...................................... (342,000) 31,000
Retained earnings........................ 4,923,000 3,703,000
------------ -----------
Total shareholders' equity.............. 16,521,000 15,214,000
------------ -----------
Commitments and contingencies (note 8)
Total liabilities and shareholders'
equity................................. $174,172,000 166,012,000
============ ===========
</TABLE>

See accompanying notes to financial statements.

F-23
<PAGE>

RANCHO SANTA FE NATIONAL BANK

STATEMENTS OF EARNINGS
(Unaudited)

<TABLE>
<CAPTION>
For the nine months
ended September 30,
---------------------
1999 1998
---------- ---------
<S> <C> <C>
Interest income:
Interest and fees on loans:
Taxable................................................ $8,637,000 8,018,000
Exempt from federal income taxes....................... 13,000 21,000
Interest on federal funds sold.......................... 314,000 413,000
Interest on interest earning deposits................... -- --
Interest on investment securities:
Taxable................................................ 1,525,000 1,076,000
Exempt from federal income taxes....................... 13,000 13,000
---------- ---------
Total interest income................................ 10,502,000 9,541,000
---------- ---------
Interest expense:
Deposits (note 7)....................................... 2,730,000 2,717,000
Other................................................... 30,000 28,000
---------- ---------
Total interest expense............................... 2,760,000 2,745,000
---------- ---------
Net interest income before provision for loan losses... 7,742,000 6,796,000
Provision for loan losses (note 4)....................... 90,000 0
---------- ---------
Net interest income after provision for loan losses.... 7,652,000 6,796,000
Noninterest income:
Service charges on deposit accounts..................... 308,000 257,000
Loss on sale of securities, net......................... (2,000) --
Merchant discount fees.................................. 364,000 232,000
Mortgage fees........................................... 77,000 188,000
Gain on sale of loans................................... 210,000 211,000
Other................................................... 239,000 238,000
---------- ---------
Total noninterest income............................... 1,196,000 1,126,000
---------- ---------
Noninterest expenses:
Salaries and employee benefits.......................... 2,537,000 2,363,000
Occupancy............................................... 611,000 584,000
Furniture and equipment................................. 288,000 272,000
Professional and other services......................... 508,000 547,000
Stationery, supplies and printing....................... 55,000 56,000
FDIC assessment......................................... 13,000 11,000
Merchant card processing................................ 327,000 197,000
Costs of real estate owned, net......................... -- (5,000)
Advertising............................................. 135,000 138,000
Insurance............................................... 40,000 44,000
Other................................................... 674,000 577,000
---------- ---------
Total noninterest expenses............................. 5,188,000 4,784,000
---------- ---------
Earnings before income taxes............................. 3,660,000 3,138,000
Income taxes............................................. 1,527,000 1,289,000
---------- ---------
Net earnings........................................... $2,133,000 1,849,000
========== =========
Basic earnings per share (note 1)....................... $ .86 .76
========== =========
Diluted earnings per share (note 1)..................... $ .82 .71
========== =========
</TABLE>

See accompanying notes to financial statements.

F-24
<PAGE>

RANCHO SANTA FE NATIONAL BANK

STATEMENTS OF CASH FLOWS
(Unaudited)

<TABLE>
<CAPTION>
For the nine months
ended
September 30,
------------------------
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings....................................... $ 2,133,000 1,849,000
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization.................... 365,000 436,000
Impairment loss on bank premises held-for-sale... -- --
Provision for loan losses........................ 90,000 --
Gain on sale of loans............................ (210,000) (211,000)
Gain on sale of securities, net.................. (2,000) --
Proceeds on sale of SBA loans.................... 3,265,000 1,615,000
Originations of SBA loans........................ (1,499,000) (646,000)
Increase in interest receivable and other
assets.......................................... (101,000) (177,000)
Increase in deferred income taxes................ (271,000) --
Increase (decrease) in interest payable and other
liabilities..................................... 1,474,000 (274,000)
----------- -----------
Net cash provided by operating activities...... 5,244,000 2,592,000
----------- -----------
Cash flows from investing activities:
Net increase in loans outstanding.................. (19,748,000) (12,189,000)
Maturities of securities held-to-maturity.......... -- 176,000
Proceeds from sale of securities available-for-
sale.............................................. 1,502,000 --
Maturities of securities available-for-sale........ 13,006,000 19,871,000
Purchases of securities available-for-sale......... (16,851,000) (23,905,000)
Proceeds from sale of other real estate owned...... -- 45,000
Purchases of premises and equipment................ (352,000) (294,000)
Proceeds from sale of premises and equipment....... 9,000 212,000
Proceeds from sale of bank premises held-for-sale.. 1,176,000 --
Additions to bank premises held-for-sale........... -- (483,000)
----------- -----------
Net cash used in investing activities.......... (21,258,000) (16,567,000)
----------- -----------
Cash flows from financing activities:
Net increase in deposits:
Non-interest bearing............................. 2,410,000 9,071,000
Interest bearing................................. 2,969,000 13,226,000
Proceeds from exercise of stock options............ 66,000 111,000
Cash dividends paid................................ (519,000) (440,000)
----------- -----------
Net cash provided by financing activities........ 4,926,000 21,968,000
----------- -----------
Net increase (decrease) in cash and cash
equivalents..................................... (11,088,000) 7,993,000
Cash and cash equivalents at beginning of year....... 21,320,000 15,131,000
----------- -----------
Cash and cash equivalents at end of year............. $10,232,000 23,124,000
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest......................................... $ 2,756,000 3,189,000
Income taxes..................................... $ 1,805,000 1,293,000
</TABLE>

Supplemental disclosure of noncash investing and financing activities:
During 1999 and 1998, transfers of $394,000 and $373,000, respectively, were
made
from retained earnings to additional paid-in-capital.

See accompanying notes to financial statements.

F-25
<PAGE>

RANCHO SANTA FE NATIONAL BANK

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Investment Securities and Securities Available-for-Sale:

b. Loans and Loan Fees:

c. Comprehensive Income (loss):

Comprehensive income for the nine months ended September 30, 1999 and 1998
is as follows:

<TABLE>
<CAPTION>
For the nine months
ended September 30,
---------------------
1999 1998
---------- ---------
<S> <C> <C>
Net earnings........................................ $2,133,000 1,849,000
Change in unrealized gains (losses) on securities
available-for-sale................................. (644,000) 221,000
Income tax benefit (loss)........................... 271,000 (93,000)
---------- ---------
Comprehensive net income............................ $1,760,000 1,977,000
========== =========
</TABLE>

F-26
<PAGE>

RANCHO SANTA FE NATIONAL BANK

NOTES TO FINANCIAL STATEMENTS--(Continued)
(Unaudited)

d. Allowance for Loan Losses:

e. Premises and Equipment:

g. Bank Premises Held-for-Sale:

The Bank accounts for long-lived assets in accordance with the provisions of
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to Be Disposed Of" (Statement 121). This Statement requires that
long-lived assets and certain identifiable intangibles be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset
to future net cash flows expected to be generated by the asset. If such assets
are considered to be impaired, the impairment to be recognized is measured by
the amount by which the carrying amount of the assets exceeds the fair value of
the assets. Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell.

F-27
<PAGE>

RANCHO SANTA FE NATIONAL BANK

NOTES TO FINANCIAL STATEMENTS--(Continued)
(Unaudited)

h. Cash and Cash Equivalents:

For purposes of the statements of cash flows, cash and cash equivalents
consist of cash, due from banks and federal funds sold. Generally, federal
funds are sold for one-day periods.

i. Income Taxes:

j. Earnings per Share:

Basic earnings per share is computed by dividing net earnings by the
weighted-average number of shares of common stock outstanding during the
period. Diluted earnings per share is computed by dividing net earnings by the
weighted-average number of shares of common stock equivalents and other
potentially dilutive securities outstanding during the period.

The weighted-average number of shares used for the earnings per share
calculation was:

<TABLE>
<CAPTION>
For the nine months ended
September 30,
-------------------------
1999 1998
------------ ------------
<S> <C> <C>
Basic.............................................. 2,470,898 2,445,780
Diluted............................................ 2,601,126 2,587,203
</TABLE>

k. Use of Estimates:

l. Year 2000:

The Bank has developed a remediation plan and is in the process of
converting computer systems and applications for the Year 2000. Expenditures
related to Year 2000 issues are expensed as incurred.

m. Reclassifications:

Certain prior year amounts have been reclassified to conform to the current
year's presentations.

F-28
<PAGE>

RANCHO SANTA FE NATIONAL BANK

NOTES TO FINANCIAL STATEMENTS--(Continued)
(Unaudited)

Note 2 SECURITIES AVAILABLE-FOR-SALE

The amortized cost, gross unrealized gains and losses and fair value of
securities available-for-sale as of September 30, 1999 and December 31, 1998
are as follows:

<TABLE>
<CAPTION>
September 30, 1999
--------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. Government Securities........ $20,507,000 7,000 272,000 20,242,000
Mortgage-backed Securities........ 12,956,000 2,000 329,000 12,629,000
Corporate Bonds................... 500,000 1,000 -- 501,000
Federal Reserve Bank Stock........ 488,000 -- -- 488,000
Federal Home Loan Bank Stock ..... 504,000 -- -- 504,000
----------- ------ ------- ----------
$34,955,000 10,000 601,000 34,364,000
=========== ====== ======= ==========
</TABLE>

<TABLE>
<CAPTION>
December 31, 1998
--------------------------------------------
Gross Gross
Amortized Unrealized Unrealized
Cost Gains Losses Fair Value
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. Government Securities........ $17,101,000 34,000 19,000 17,116,000
Mortgage-backed Securities........ 13,937,000 70,000 38,000 13,969,000
Corporate Bonds................... 500,000 6,000 -- 506,000
Federal Reserve Bank Stock........ 440,000 -- -- 440,000
Federal Home Loan Bank Stock...... 416,000 -- -- 416,000
----------- ------- ------ ----------
$32,394,000 110,000 57,000 34,447,000
=========== ======= ====== ==========
</TABLE>

The maturity distribution based on amortized cost and fair value (excluding
Federal Reserve Bank Stock and Federal Home Loan Bank Stock) as of September
30, 1999, by contractual maturity, is shown below. Mortgage-backed securities
have contractual terms to maturity, but require periodic payments to reduce
principal. In addition, expected maturities may differ from contractual
maturities because issuers may have the right to call or prepay obligations
with or without call or prepayment penalties.

<TABLE>
<CAPTION>
Maturity Distribution
-----------------------
Amortized
Cost Fair Value
------------ ----------
<S> <C> <C>
Due in one year or less.............................. $ 1,069,000 1,061,000
Due after one year through five years................ 23,551,000 23,234,000
Due after five years through ten years............... 6,881,000 6,664,000
Due after ten years.................................. 2,462,000 2,413,000
------------ ----------
$ 33,963,000 33,372,000
============ ==========
</TABLE>

Proceeds from the sale of securities available-for-sale during the first
nine months of 1999 were $1,499,000. Gross losses of $2,000 were realized on
sales in 1999. There were no sales of securities during 1998.

F-29
<PAGE>

RANCHO SANTA FE NATIONAL BANK

NOTES TO FINANCIAL STATEMENTS--(Continued)
(Unaudited)

Note 3 INVESTMENT SECURITIES HELD-TO-MATURITY

The amortized cost, gross unrealized gains and losses and fair value of
investment securities held-to-maturity as of September 30, 1999 and December
31, 1998 are as follows:

<TABLE>
<CAPTION>
September 30, 1999
---------------------------------------
Gross Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- -------
<S> <C> <C> <C> <C>
U.S. Government Securities........... $ 15,000 -- -- 15,000
Municipal Securities................. 350,000 3,000 -- 353,000
--------- ------ --- -------
$ 365,000 3,000 -- 368,000
========= ====== === =======
<CAPTION>
December 31, 1998
---------------------------------------
Gross Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- -------
<S> <C> <C> <C> <C>
U.S. Government Securities........... $ 19,000 -- -- 19,000
Municipal Securities................. 351,000 17,000 -- 368,000
--------- ------ --- -------
$ 370,000 17,000 -- 387,000
========= ====== === =======
</TABLE>

The maturity distribution based on amortized cost and fair value as of
September 30, 1999 by contractual maturity, is shown below. Expected maturities
may differ from contractual maturities because issuers may have the right to
call or prepay obligations with or without call or prepayment penalties.

<TABLE>
<CAPTION>
Maturity
Distribution
-----------------
Amortized Fair
Cost Value
--------- -------
<S> <C> <C>
Due after five years through ten years..................... $ 350,000 353,000
Due after ten years........................................ 15,000 15,000
--------- -------
$ 365,000 368,000
========= =======
</TABLE>

As of September 30, 1999, investment securities held-to-maturity with an
amortized cost of $365,000 and securities available-for-sale with a fair value
of $16,222,000, (Note 2) totaling $16,587,000, were pledged as security for
public deposits and other purposes as required by various statutes and
agreements.

F-30
<PAGE>

RANCHO SANTA FE NATIONAL BANK

NOTES TO FINANCIAL STATEMENTS--(Continued)
(Unaudited)

Note 4 LOANS AND RELATED ALLOWANCE FOR LOAN LOSSES

As of September 30, 1999 and December 31, 1998, loans consist of the
following:

<TABLE>
<CAPTION>
September 30, December
1999 31, 1998
------------- -----------
<S> <C> <C>
Commercial....................................... $ 70,777,000 63,423,000
Construction..................................... 23,665,000 20,060,000
Consumer......................................... 975,000 1,000,000
Real Estate...................................... 24,742,000 18,190,000
SBA, portion held for sale, at cost which
approximates market............................. 1,206,000 995,000
SBA, unguaranteed portion held for investment.... 6,577,000 6,241,000
------------- -----------
127,942,000 109,909,000
Less:
Deferred loan fees............................... 389,000 347,000
Allowance for loan losses........................ 2,277,000 2,388,000
------------- -----------
$ 125,276,000 107,174,000
============= ===========
</TABLE>

The Bank's loan portfolio consists primarily of loans to borrowers within
San Diego County. As of September 30, 1999, the Bank had approximately
$57,811,000 of commercial, construction, consumer, real estate and SBA loans
which were secured by real estate located in San Diego County. Generally, these
loans are secured by first trust deeds and do not exceed 75% of the properties'
appraised values at origination. The portfolio is well diversified in both
project type and areas within the San Diego County region. Project types
include single-family residences, multi-family residences, commercial office
buildings and centers, industrial buildings and special purpose projects.
Generally, loans are expected to be repaid from the cash flows of the business,
the proceeds of permanent financing, or proceeds from the sale of the project
or other assets of the borrowers.

Nonaccrual loans totaling $725,000 and $4,000 were outstanding as of
September 30, 1999 and December 31, 1998 respectively. Interest income of
$67,000 and $1,000 would have been recorded for the nine months ended September
30, 1999 and December 31, 1998, respectively, if nonaccrual loans had been
performing in accordance with their original terms. Interest income of $3,000
was recorded on loans subsequently transferred to a nonaccrual status for the
nine months ended September 30, 1999.

A summary of the activity in the allowance for loan losses for the nine
months ended September 30, 1999 is as follows:

<TABLE>
<CAPTION>
September 30,
---------------------
1999 1998
---------- ---------
<S> <C> <C>
Balance, beginning of year............................ $2,388,000 2,415,000
Provision charged to operating expense................ 90,000 --
Loans charged-off..................................... (275,000) (4,000)
Recoveries on loans previously charged off............ 74,000 117,000
---------- ---------
Loans charged-off, net of recoveries.................. (201,000) 113,000
---------- ---------
Balance, end of year.................................. $2,277,000 2,528,000
========== =========
</TABLE>

F-31
<PAGE>

RANCHO SANTA FE NATIONAL BANK

NOTES TO FINANCIAL STATEMENTS--(Continued)
(Unaudited)

The Bank's impaired loans comprise all internally classified loans,
including nonaccrual loans with specified outstanding balances. The Bank
measures its impaired loans by using the fair value of the collateral if the
loan is collateral-dependent and the present value of the expected future cash
flows discounted at the loan's effective interest rate if the loan is not
collateral-dependent. As of September 30, 1999 and December 31, 1998, all
impaired loans were collateral-dependent.

Impaired loans:

<TABLE>
<CAPTION>
September 30, 1999 December 31, 1998
--------------------- ---------------------
Recorded Impairment Recorded Impairment
Investment Allowance Investment Allowance
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Loans with impairment
allowance:
Real estate.................. $ -- -- $ -- --
Other collateral............. 709,000 230,000 1,141,000 278,000
Loans without impairment
allowance:
Real estate.................. $1,334,000 -- -- --
---------- ------- ---------- -------
Total impaired loans........... $2,043,000 230,000 $1,141,000 278,000
========== ======= ========== =======
</TABLE>

Based on the Bank's evaluation process to determine the level of the
allowance for loan losses mentioned previously and the fact that a majority of
the Bank's non-performing loans are secured, management believes the allowance
level to be adequate as of September 30, 1999 to absorb the estimated known and
inherent risks identified through its analysis. For the nine months ended
September 30, 1999, the average balance of impaired loans was $985,000. For the
nine months ended September 30, 1999, interest income of $12,000 was recognized
on these loans during the period of impairment.

F-32
<PAGE>

RANCHO SANTA FE NATIONAL BANK

NOTES TO FINANCIAL STATEMENTS--(Continued)
(Unaudited)

Note 5 PREMISES AND EQUIPMENT

Premises and equipment consist of the following:

<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- ------------
<S> <C> <C>
Furniture, fixtures and equipment................ $ 2,001,000 $1,946,000
Leasehold improvements........................... 1,164,000 998,000
Vehicles......................................... 77,000 77,000
----------- ----------
3,242,000 3,021,000
Less accumulated amortization and depreciation... 1,737,000 1,554,000
----------- ----------
$ 1,505,000 $1,467,000
=========== ==========
</TABLE>

Note 6 BANK PREMISES HELD-FOR-SALE

The building was sold in April 1999 at book value which approximated market.

Note 7 DEPOSITS

The maturity distribution of time deposits as of September 30, 1999 is as
follows:

<TABLE>
<S> <C>
Three months or less........................................... $ 16,210,000
Over three months through six months........................... 12,780,000
Over six months through twelve months.......................... 2,568,000
Over twelve months through five years.......................... 912,000
------------
$ 32,470,000
============
</TABLE>

Note 8 COMMITMENTS AND CONTINGENCIES

Commitments to extend credit amounting to $52,276,000 and $47,409,000 were
outstanding as of September 30, 1999 and December 31, 1998, respectively.
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements.

F-33
<PAGE>

RANCHO SANTA FE NATIONAL BANK

NOTES TO FINANCIAL STATEMENTS--(Continued)
(Unaudited)

Standby letters of credit and financial guarantees amounting to $2,041,000
and $1,202,000 were outstanding as of September 30, 1999 and December 31, 1998,
respectively. Standby letters of credit and financial guarantees are
conditional commitments issued by the Bank to guarantee the performance of a
customer to a third party. Those guarantees are primarily issued to support
private borrowing arrangements. Most guarantees will expire within one year.
The Bank generally requires collateral or other security to support financial
instruments with credit risk. Management does not anticipate that any material
loss will result from the outstanding commitments to extend credit, standby
letters of credit or financial guarantees.

As of September 30, 1999 and December 31, 1998, the Bank had lines of credit
in the amount of $8,500,000, from correspondent banks, none of which were
outstanding as of September 30, 1999 or December 31, 1998. These lines are
renewable annually. The Bank also has a Fed discount limit of $2,000,000 as
well as a Federal Home Loan Bank (FHLB) limit of $4,500,000 as of September 30,
1999. An overnight borrowing of $700,000 was outstanding on the FHLB line of
credit as of September 30, 1999. The availability of the lines of credit, as
well as adjustments in deposit programs, provide for liquidity in the event
that the level of deposits should fall abnormally low. These sources provide
that funding thereof may be withdrawn depending upon the financial strength of
the Bank.

Note 9 DIVIDEND AVAILABILITY

As of September 30, 1999, the Bank paid $519,000 in dividends and
transferred $394,000 from retained earnings to additional paid-in capital in
accordance with regulatory guidelines.

Note 10 REGULATORY MATTERS

Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the table
below) of total and Tier 1 capital (as defined in the regulations) to risk-
weighted assets (as defined), and of Tier 1 capital (as defined) to average
assets (as defined). Management believes, as of September 30, 1999, that the
Bank meets all capital adequacy requirements to which it is subject.

F-34
<PAGE>

RANCHO SANTA FE NATIONAL BANK

NOTES TO FINANCIAL STATEMENTS--(Continued)
(Unaudited)

As of September 30, 1999, the most recent notification from the Federal
Deposit Insurance Corporation categorized the Bank as well capitalized under
the regulatory framework for prompt corrective action. To be categorized as
well capitalized the Bank must maintain minimum total risk-based, Tier 1 risk-
based and Tier 1 leverage ratios as set forth in the table. There are no
conditions or events since that notification that management believes have
changed the Bank's category.

The Bank's actual capital amounts and ratios are also presented in the
table.

<TABLE>
<CAPTION>
For Capital
Actual Adequacy Purposes
----------------- -----------------------------------------------------
Amount Ratio Amount Ratio
----------- ----- ------------------------------ ----------------------
<S> <C> <C> <C> <C>
As of September
30, 1999
Total Capital
(to Risk-
Weighted
Assets)........ $18,742,000 12.5% (greater than or =)$11,991,000 (greater than or =)8.0%
Tier 1 Capital
(to Risk-
Weighted
Assets)........ $16,863,000 11.3% (greater than or =)$ 5,995,000 (greater than or =)4.0%
Tier 1 Capital
(to Average
Assets)........ $16,863,000 9.7% (greater than or =)$ 6,985,000 (greater than or =)4.0%
<CAPTION>
To Be Well
Capitalized Under
Prompt Corrective
Action Provision
-------------------------------------------------------
Amount Ratio
------------------------------ ------------------------
<S> <C> <C>
As of September
30, 1999
Total Capital
(to Risk-
Weighted
Assets)........ (greater than or =)$14,988,000 (greater than or =)10.0%
Tier 1 Capital
(to Risk-
Weighted
Assets)........ (greater than or =)$ 8,993,000 (greater than or =) 6.0%
Tier 1 Capital
(to Average
Assets)........ (greater than or =)$ 8,732,000 (greater than or =) 5.0%
</TABLE>

F-35
<PAGE>

Independent Auditors' Report

The Board of Directors
First Community Bank of the Desert:

We have audited the accompanying consolidated balance sheets of First
Community Bank of the Desert and subsidiary as of December 31, 1998 and 1997
and the related consolidated statements of operations, changes in stockholders'
equity and cash flows for each of the years in the three-year period ended
December 31, 1998. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of First
Community Bank of the Desert and subsidiary as of December 31, 1998 and 1997
and the results of their operations and their cash flows for each of the years
in the three-year period ended December 31, 1998, in conformity with generally
accepted accounting principles.

KPMG LLP

Los Angeles, California
February 19, 1999

F-36
<PAGE>

FIRST COMMUNITY BANK OF THE DESERT AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

December 31, 1998 and 1997

<TABLE>
<CAPTION>
1998 1997
------------ ----------
<S> <C> <C>
ASSETS
------

Cash and cash equivalents:
Cash and due from banks............................. $ 9,776,716 7,060,379
Federal funds sold.................................. 23,869,000 3,537,000
------------ ----------
Total cash and cash equivalents................. 33,645,716 10,597,379
Time deposits in financial institutions............... 5,440,000 4,160,000
Securities held-to-maturity (fair value of $5,506,357
in 1998 and $5,113,462 in 1997)...................... 5,562,656 5,114,619
Loans (net of allowance for loan losses of $1,397,022
in 1998 and $966,966 in 1997)........................ 60,021,321 55,214,677
Bank premises and equipment........................... 3,764,591 1,718,856
Investment in property held for sale.................. 1,392,022 1,524,532
Other real estate owned............................... 103,597 207,271
Accrued interest...................................... 391,966 390,894
Other assets.......................................... 1,278,685 1,088,242
------------ ----------
Total assets.................................... $111,600,554 80,016,470
============ ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------

Liabilities:
Deposits:
Non-interest bearing deposits..................... $ 37,407,352 27,943,998
Interest-bearing deposits......................... 65,386,538 44,438,880
------------ ----------
Total deposits.................................. 102,793,890 72,382,878
Accrued interest and other liabilities................ 1,187,523 1,088,807
------------ ----------
Total liabilities............................... 103,981,413 73,471,685
------------ ----------

Commitments and contingent liabilities

Stockholders' equity:
Serial preferred stock, no par value. Authorized
2,000,000 shares; none issued and outstanding...... -- --
Common stock, no par value. Authorized 15,000,000
shares; issued and outstanding 4,642,912 and
4,641,937 shares in 1998 and 1997, respectively.... 7,292,055 7,290,643
Retained earnings (accumulated deficit)............. 327,086 (745,858)
------------ ----------
Total stockholders' equity...................... 7,619,141 6,544,785
------------ ----------
Total liabilities and stockholders' equity...... $111,600,554 80,016,470
============ ==========
</TABLE>

See accompanying notes to consolidated financial statements.

F-37
<PAGE>

FIRST COMMUNITY BANK OF THE DESERT AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

Years ended December 31, 1998, 1997 and 1996

<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Interest income:
Loans...................................... $6,506,179 $4,884,134 $4,027,897
Securities................................. 302,175 232,069 257,302
Deposits in financial institutions......... 314,132 79,084 --
Federal funds sold......................... 594,413 629,159 205,217
---------- ---------- ----------
7,716,899 5,824,446 4,490,416
---------- ---------- ----------
Interest expense:
Interest on time deposits of $100,000 or
more...................................... 295,591 151,484 97,628
Other deposits............................. 1,418,740 1,169,755 985,464
Borrowings................................. -- -- 4,000
---------- ---------- ----------
1,714,331 1,321,239 1,087,092
---------- ---------- ----------
Net interest income...................... 6,002,568 4,503,207 3,403,324
Provision for loan losses.................... 941,000 260,000 320,000
---------- ---------- ----------
Net interest income after provision for
loan losses............................. 5,061,568 4,243,207 3,083,324
---------- ---------- ----------
Other income:
Fees and service charges................... 812,397 768,232 657,909
Gain on sale of SBA loans.................. 230,000 -- --
Other income............................... 509,542 466,343 756,014
---------- ---------- ----------
1,551,939 1,234,575 1,413,923
---------- ---------- ----------
Other expenses:
Salaries, wages and employee benefits...... 2,454,801 1,842,017 1,447,305
Occupancy and equipment expense............ 839,777 642,712 506,054
Other expenses............................. 1,867,985 1,769,811 2,110,955
---------- ---------- ----------
5,162,563 4,254,540 4,064,314
---------- ---------- ----------
Earnings before income tax expense....... 1,450,944 1,223,242 432,933
Income tax expense (benefit)................. 378,000 498,013 (478,807)
---------- ---------- ----------
Net earnings............................. $1,072,944 $ 725,229 $ 911,740
========== ========== ==========
Basic earnings per common share.............. $ .23 $ .16 $ .20
========== ========== ==========
Diluted earnings per common share............ .22 .15 .20
========== ========== ==========
</TABLE>

See accompanying notes to consolidated financial statements.

F-38
<PAGE>

FIRST COMMUNITY BANK OF THE DESERT AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

Years ended December 31, 1998, 1997 and 1996

<TABLE>
<CAPTION>
Unrealized gain
Number of Retained (loss) on
common earnings securities
shares Common (acccumulated available-for-sale,
outstanding stock deficit) net of taxes Total
----------- ---------- ------------- ------------------- ---------
<S> <C> <C> <C> <C> <C>
Balance, December 31,
1995................... 4,641,937 7,290,643 (2,382,827) 3,408 4,911,224
Net income.............. -- -- 911,740 -- 911,740
Change in unrealized
loss on securities
available-for-sale, net
of taxes............... -- -- -- (3,408) (3,408)
--------- ---------- ---------- ------ ---------
Balance, December 31,
1996................... 4,641,937 $7,290,643 (1,471,087) -- 5,819,556
Net income.............. -- -- 725,229 -- 725,229
--------- ---------- ---------- ------ ---------
Balance, December 31,
1997................... 4,641,937 7,290,643 (745,858) -- 6,544,785
Stock options
exercised.............. 975 1,412 -- -- 1,412
Net income.............. -- -- 1,072,944 -- 1,072,944
--------- ---------- ---------- ------ ---------
Balance, December 31,
1998................... 4,642,912 $7,292,055 327,086 -- 7,619,141
========= ========== ========== ====== =========
</TABLE>

See accompanying notes to consolidated financial statements.

F-39
<PAGE>

FIRST COMMUNITY BANK OF THE DESERT AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended December 31, 1998, 1997 and 1996

<TABLE>
<CAPTION>
1998 1997 1996
------------ ----------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income............................ $ 1,072,944 725,229 911,740
------------ ----------- ----------
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization....... 348,713 204,187 155,797
Net accretion on investment
securities......................... (188,891) (193,562) (309,049)
Provision for loan losses........... 941,000 260,000 320,000
Deferred tax expense (benefit)...... 169,766 145,247 (662,171)
Net gain on disposition of other
real estate owned.................. -- -- (225,180)
Real estate valuation adjustments... (53,512) (35,712) 225,000
Decrease (Increase) in accrued
interest and other assets.......... (191,515) (178,218) 205,097
(Decrease) increase in accrued
interest and other liabilities..... (71,050) 449,430 79,578
------------ ----------- ----------
Total adjustments................. 954,511 651,372 (210,928)
------------ ----------- ----------
Net cash provided by operating
activities....................... 2,027,455 1,376,601 700,812
------------ ----------- ----------
Cash flows from investing activities:
Proceeds from maturity of securities.. 11,200,000 8,200,000 14,000,000
Purchases of securities............... (11,459,146) (14,131,415) (9,810,076)
Proceeds from maturity of time
deposits in financial institutions... 4,160,000 -- --
Purchases of time deposits in
financial institutions............... (5,440,000) -- --
Net increase in loans to customers.... (5,747,644) (17,216,843) (7,570,999)
Net charge-offs ...................... -- -- (262,990)
Increase in property held for sale.... -- -- (262,151)
Acquisition of bank premises and
equipment............................ (2,394,448) (341,678) (745,337)
Proceeds from sales of property held
for sale............................. 26,791 919,152 --
Proceeds from sale of other real
estate owned......................... 262,905 396,524 946,201
------------ ----------- ----------
Net cash used in investing
activities....................... (9,391,542) (22,174,260) (3,705,352)
------------ ----------- ----------
Cash flows from financing activities:
Net increase in demand deposits, NOW
accounts and savings deposits........ 9,463,354 22,370,734 4,313,270
Net increase in certificates of
deposit.............................. 20,947,658 1,010,673 1,090,484
Principal payment on notes............ -- -- (75,000)
Proceeds from stock issuance.......... 1,412 -- --
------------ ----------- ----------
Net cash provided by financing
activities....................... 30,412,424 23,381,407 5,328,754
------------ ----------- ----------
Net increase in cash and cash
equivalents...................... 23,048,337 2,583,748 2,324,214
Cash and cash equivalents, beginning of
year................................... 10,597,379 8,013,631 5,689,417
------------ ----------- ----------
Cash and cash equivalents, end of year.. $ 33,645,716 10,597,379 8,013,631
============ =========== ==========
Supplemental disclosures of cash flow
information:
Cash paid for interest................ $ 1,687,092 1,282,840 768,734
Cash paid for income taxes............ 505,000 64,930 50,000
Transfer of loans to other real estate
owned................................ 103,597 106,573 475,108
Transfer of reserve from other real
estate owned to investment in
property held for sale............... -- 102,776 --
============ =========== ==========
</TABLE>

See accompanying notes to consolidated financial statements.

F-40
<PAGE>

FIRST COMMUNITY BANK OF THE DESERT AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1998, 1997 and 1996

(1) Summary of Significant Accounting Policies

(a) Principles of Consolidation

The consolidated financial statements include the accounts of First
Community Bank of the Desert (the Bank) and its wholly owned subsidiary, Desert
Community Properties, Inc. All material inter-company accounts and transactions
have been eliminated.

The accounting and reporting policies of the Bank conform to generally
accepted accounting principles and to general practices within the banking
industry. A summary of the Bank's significant accounting and reporting policies
consistently applied in the preparation of the accompanying consolidated
financial statements follows.

(b) Use of Estimates

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 reporting.
Actual results could differ from those estimates.

Estimates that are particularly susceptible to significant change relate to
the determination of the allowance for losses on loans, the valuation of real
estate acquired in connection with foreclosures or in satisfaction of loans and
deferred tax assets. In connection with the determination of the allowances for
losses on loans and foreclosed real estate, management obtains independent
appraisals for significant properties.

While management uses available information to recognize losses on loans and
foreclosed real estate, future additions to the allowances may be necessary
based on changes in local economic conditions. In addition, regulatory
agencies, as an integral part of their examination process, periodically review
the Bank's allowances for losses on loans and foreclosed real estate. Such
agencies may require the Bank to recognize additions to the allowances based on
their judgments about information available to them at the time of their
examination. Because of these factors, it is reasonably possible that the
allowances for losses on loans and foreclosed real estate may change. When a
decline in value has occurred and is deemed to be other than temporary, such
decline is charged to operations.

The Bank accounts for securities in accordance with Statement of Financial
Accounting Standards (SFAS) No. 115, Accounting for Certain Investments in Debt
and Equity Securities, which addresses the accounting for investments in equity
securities that have readily determinable fair value and for investments in all
debt securities. Pursuant to SFAS No. 115, securities that the Bank has the
positive intent and ability to hold to maturity are classified as held-to-
maturity and are measured at amortized cost with any, other than temporary,
declines in fair value included in earnings and the cost basis of the security
adjusted accordingly.

(d) Loans and Interest on Loans

Loans are stated at unpaid principal balances, less the allowance for loan
losses and net deferred loan fees and unearned discounts. Nonrefundable loan
fees and related direct costs associated with the origination of loans are
deferred and netted against outstanding loan balances. The net deferred fees or
costs are recognized as an adjustment to interest income over the contractual
life of the loans using a method that approximates the interest method. The
amortization of loan fees is discontinued on nonaccrual loans.

F-41
<PAGE>

FIRST COMMUNITY BANK OF THE DESERT AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

December 31, 1998, 1997 and 1996

The Bank adopted SFAS No. 125, Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities, on January 1, 1997. This
statement provides accounting and reporting standards for transfers and
servicing of financial assets and extinguishments of liabilities based on
consistent application of a financial-components approach that focuses on
control. It distinguishes transfers of financial assets that are sales from
transfers that are secured borrowings. The adoption of SFAS No. 125 did not
have a material impact on the Bank's financial position, results of operations
or liquidity.

A loan is impaired when it is probable the creditor will not be able to
collect all contractual principal and interest payments due in accordance with
the terms of the loan agreement. The Bank recognizes interest income on
impaired loans based on its existing methods of recognizing interest income. If
the measure of impaired loans is less than the recorded investment in the loan,
a valuation allowance is established with a corresponding charge to the
provision for loan losses.

Loans are placed on a nonaccrual status when a loan is specifically
determined to be impaired or when principal or interest is delinquent for 90
days or more. Any unpaid interest previously accrued on those loans is reversed
from income. Interest income generally is not recognized on specific impaired
loans unless the likelihood of further loss is remote. Interest payments
received on such loans are applied as a reduction of the loan principal
balance.

(e) Allowance for Loan Losses

The allowance for loan losses is maintained at a level which, in
management's judgment, is adequate to absorb credit losses inherent in the loan
portfolio. The amount of the allowance is based on management's evaluation of
the collectibility of the loan portfolio, including the nature of the
portfolio, credit concentrations, trends in historical loss experience,
specific impaired loans and economic conditions.

Allowances for impaired loans are generally determined based on collateral
values or the present value of estimated cash flows. Because of uncertainties
associated with regional economic conditions, collateral values and future cash
flows on impaired loans, it is reasonably possible that management's estimate
of credit losses inherent in the loan portfolio and the related allowance may
change materially in the near term. The allowance is increased by a provision
for loan losses, which is charged to expense and reduced by charge-offs, net of
recoveries. Changes in the allowance relating to impaired loans are charged or
credited to the provision for loan losses.

(f) Bank Premises and Equipment

Premises and equipment are stated at cost, less accumulated depreciation.
Depreciation expense is computed using the straight-line method over the
estimated useful lives of the assets, ranging from 2 to 30 years. Improvements
to leased property are amortized over the term of the lease or the useful life
of the improvements, whichever is shorter. Costs incurred for maintenance,
repairs and minor improvements are charged to operations.

(g) Lease Financing

Income on leveraged leases is recognized by a method that yields a level
rate of return on the lease investment.

F-42
<PAGE>

FIRST COMMUNITY BANK OF THE DESERT AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

December 31, 1998, 1997 and 1996

(h) Investment in Property Held for Sale

Investment in property held for sale consists of land purchased and held for
sale or development. These properties are recorded at the lower of cost or fair
value. Costs include the acquisition costs of the land, direct costs of
development and interest and real estate taxes during periods in which
activities necessary to get the property ready for sale are in progress.
Interest and property taxes are charged to expense after the property is
substantially ready for sale.

(i) Other Real Estate Owned

Other real estate owned (OREO) represents real estate obtained through
foreclosure. OREO is recorded at fair value, less costs to sell. Any write-
downs based on the asset's fair value at the date of acquisition are charged to
the allowance for loan losses. Costs incurred in maintaining OREO are included
in expenses of OREO and property held for sale.

(j) Income Taxes

Provisions for income taxes are based on amounts reported in the
consolidated statements of operations (after exclusion of nontaxable income
such as interest on state and municipal securities) and include deferred taxes
on temporary differences in the recognition of income and expense for tax and
financial statement purposes. Deferred taxes are computed on the liability
method as prescribed in SFAS No. 109, Accounting for Income Taxes.

(k) Stock Option Plan

On January 1, 1996, the Bank adopted SFAS No. 123, Accounting for Stock-
Based Compensation, which permits entities to recognize as expense over the
vesting period the fair value of all stock-based awards on the date of grant.
Alternatively, SFAS No. 123 also allows entities to continue to apply the
provisions of APB Opinion No. 25 and provide pro forma net income and pro forma
earnings per share disclosures for employee stock option grants made in 1995
and future years as if the fair-value-based method defined in SFAS No. 123 had
been applied. The Bank has elected to continue to apply the provisions of APB
Opinion No. 25 and provide the pro forma disclosure provisions of SFAS No. 123.

(l) Cash and Cash Equivalents

For purposes of reporting cash flows, cash and cash equivalents include cash
on hand, amounts due from banks and federal funds sold. Generally, federal
funds sold are purchased and sold for one-day periods.

(m) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of

Long-lived assets and certain identifiable intangibles are reviewed for
impairment periodically or whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Recoverability of
assets to be held and used is measured by a comparison of the carrying amount
of an asset to future net cash flows expected to be generated by the asset. If
such assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets exceeds the
fair value of the assets. Assets to be disposed of are reported at the lower of
the carrying amount or fair value, less costs to sell.

F-43
<PAGE>

FIRST COMMUNITY BANK OF THE DESERT AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

December 31, 1998, 1997 and 1996

(n) Reclassifications

Certain prior year amounts have been reclassified to conform with the
current year presentation.

(o) New Accounting Pronouncements

Reporting Comprehensive Income

In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS
No. 130, Reporting Comprehensive Income, which is effective for fiscal years
beginning after December 15, 1997. This statement establishes standards for the
reporting and display of comprehensive income and its components in a full set
of general-purpose financial statements; it does not change the display or
components of present-day net earnings. The adoption of SFAS No. 130 did not
have a material impact on the consolidated disclosures.

Accounting for Derivative Instruments and Hedging Activities

In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred to as
derivatives) and for hedging activities. It requires that an entity recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. If certain conditions are
met, a derivative may be specifically designated as (a) a hedge of the exposure
to changes in the fair value of a recognized asset or liability or an
unrecognized firm commitment, (b) a hedge of the exposure to variable cash
flows of a forecasted transaction, or (c) a hedge of the foreign currency
exposure of a net investment in a foreign operation, an unrecognized firm
commitment, an available-for-sale security or a foreign-currency-denominated
forecasted transaction.

Under SFAS No. 133, an entity that elects to apply hedge accounting is
required to establish at the inception of the hedge the method it will use for
assessing the effectiveness of the hedging derivative and the measurement
approach for determining the ineffective aspect of the hedge. These methods
must be consistent with the entity's approach to managing risk.

SFAS No. 133 amends SFAS No. 32, Foreign Currency Translation, to permit
special accounting for a hedge of a foreign currency forecasted transaction
with a derivative. It supersedes SFAS No. 80, "Accounting for Futures
Contracts," SFAS No. 105, "Disclosure of Information about Financial
Instruments with Off-Balance Sheet Risk and Financial Instruments with
Concentrations of Credit Risk," and SFAS No. 119, "Disclosure about Derivative
Financial Instruments and Fair Value of Financial Instruments." It amends SFAS
No. 107, "Disclosures about Fair Value of Financial Instruments," to include in
SFAS No. 107 the disclosure provisions about concentrations of credit risk from
SFAS No. 105. This statement also nullifies or modifies the consensuses reached
in a number of issues addressed by the Emerging Issues Task Force. This
statement is effective for all fiscal quarters of fiscal years beginning after
June 15, 1999. The FASB has voted to postpone the implementation date to all
fiscal quarters of fiscal years beginning after June 15, 2000. The Bank has not
yet determined the impact of adopting SFAS No. 133.

Accounting for Mortgage-Backed Securities Retained

In October 1998, the FASB issued SFAS No. 134, Accounting for Mortgage-
Backed Securities Retained after the Securitization of Mortgage Loans Held-for-
Sale by a Mortgage Banking Enterprise. SAFS No. 134 is an amendment to SFAS No.
65, which required that after the securitization of a mortgage loan held-for-
sale, an

F-44
<PAGE>

FIRST COMMUNITY BANK OF THE DESERT AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

December 31, 1998, 1997 and 1996

entity engaged in mortgage banking activities classify the resulting mortgage-
backed security as trading securities. SFAS No. 134 further amends SFAS No. 65
and requires that after the securitization of mortgage loans held-for-sale, an
entity engaged in mortgage banking activities classify the resulting mortgage-
backed securities or other retained interests based on its ability and intent
to sell or to hold those investments. SFAS No. 134 conforms the subsequent
accounting for securities retained after the securitization of mortgage loans
by a mortgage banking enterprise with the subsequent accounting for securities
retained after the securitization of other types of assets by nonmortgage
banking enterprises. SFAS No. 134 is effective for the first fiscal quarter
beginning after December 15, 1998.

(2) Restricted Cash Balances

Aggregate cash balances (in the form of deposits with the Federal Reserve
Bank) of approximately $2,819,000 and $917,000 were maintained to satisfy
federal regulatory requirements at December 31, 1998 and 1997, respectively.

(3) Securities

The amortized cost and fair values of securities held-to-maturity at
December 31, 1998 and 1997 were:

<TABLE>
<CAPTION>
Gross Gross
unrealized unrealized
1998 Amortized cost gains losses Fair value
--------------------------- -------------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. Treasury securities... $5,562,656 -- (56,299) 5,506,357
========== === ======= =========
<CAPTION>
Gross Gross
unrealized unrealized
1997 Amortized cost gains losses fair value
--------------------------- -------------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. Treasury securities... $5,114,619 -- (1,157) 5,113,462
========== === ======= =========
</TABLE>

Proceeds from the maturity of investment securities held-to-maturity during
1998 and 1997 were $11,200,000 and $8,200,000, respectively. There were no
sales of securities during the years ended December 31, 1998 or 1997.

All investment securities are scheduled to mature within one year.

(4) Loans

The Bank grants commercial, residential and consumer loans to its
customers, substantially all of whom are local businesses or residents. The
Bank has a diversified loan portfolio, and the concentrations of credit by
type of loan are outlined below. These loans are collateralized in accordance
with Bank policy.

F-45
<PAGE>

FIRST COMMUNITY BANK OF THE DESERT AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

December 31, 1998, 1997 and 1996

The following is a summary of loans by major category:

<TABLE>
<CAPTION>
1998 1997
----------- ----------
<S> <C> <C>
Real estate construction and mortgage............. $41,302,061 35,173,608
Commercial........................................ 16,286,899 18,527,742
Loans to individuals for household, family and
other consumer expenditures...................... 3,923,429 2,488,255
Investment in leveraged and direct leases......... 198,641 340,914
----------- ----------
61,711,030 56,530,519
Less unearned discounts and deferred fees, net.... (292,687) (348,876)
----------- ----------
Total loans................................... 61,418,343 56,181,643
Less allowance for loan losses.................... (1,397,022) (966,966)
----------- ----------
Loans, net.................................... $60,021,321 55,214,677
=========== ==========
</TABLE>

A loan is impaired when, based on current information and events, a creditor
will be unable to collect all amounts contractually due under a loan agreement.
When a loan is determined to be impaired, a valuation allowance is established
based upon the difference between the Bank's investment in the loan and the
fair value of the collateral securing the loan. The Bank's impaired loans
totaled approximately $288,000 and $393,000 at December 31, 1998 and 1997,
respectively, which had specific valuation allowances of approximately $68,000
and $109,000, respectively. For the years then ended, the average investment in
impaired loans was approximately $341,000 and $569,000, respectively. There was
no commitment to lend additional funds to borrowers whose terms have been
modified.

The Bank places a loan on nonaccrual status as required by the deterioration
in the financial condition of the borrower or when payment in full of principal
or interest is not expected or the loan is in default on either principal or
interest for a period of 90 days or more. A loan is returned to accrual status
when deemed collectible by management. All nonaccrual loans as of December 31,
1998, 1997 and 1996 were identified as impaired. Nonaccrual loans were
approximately $555,000, $247,000 and $1,142,000 at December 31, 1998, 1997, and
1996 respectively. The reduction in interest income related to loans on
nonaccrual status if the loans had been performing in accordance with their
original terms and had been outstanding throughout the period was approximately
$54,000, $40,000 and $82, 000 for the years ended December 31, 1998, 1997 and
1996, respectively.

An analysis of the allowance for loan losses is shown below:

<TABLE>
<CAPTION>
1998 1997 1996
---------- -------- --------
<S> <C> <C> <C>
Balance, beginning of year................... $ 966,966 866,801 809,791
Provisions charged to operations............. 941,000 260,000 320,000
Recoveries credited to allowance............. 20,000 7,770 26,944
Losses charged to allowance.................. (530,944) (167,605) (289,934)
---------- -------- --------
Balance, end of year......................... $1,397,022 966,966 866,801
========== ======== ========
</TABLE>

In the ordinary course of business, the Bank has granted loans to certain
directors and officers and the companies with which they are associated. All
such loans were made under the terms which are consistent with the Bank's
normal lending policies.

F-46
<PAGE>

FIRST COMMUNITY BANK OF THE DESERT AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

December 31, 1998, 1997 and 1996

An analysis of the activity with respect to such aggregate loans to related
parties during 1998 and 1997 is shown below:

<TABLE>
<CAPTION>
1998 1997
---------- ---------
<S> <C> <C>
Outstanding balance, beginning of year................ $2,398,228 199,000
Credits granted, including renewals................... -- 2,433,372
Payments received..................................... (1,162,228) (234,144)
---------- ---------
Outstanding balance, end of year...................... $1,236,000 2,398,228
========== =========
</TABLE>

(5) Bank Premises and Equipment

The major classifications of bank premises, equipment and accumulated
depreciation follow:

<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Land................................................. $ 429,100 174,100
Buildings............................................ 3,147,947 1,677,364
Furniture and equipment.............................. 2,518,126 1,798,360
Construction in progress............................. 106,993 157,894
---------- ----------
6,202,166 3,807,718
Less accumulated depreciation........................ (2,437,575) (2,088,862)
---------- ----------
$3,764,591 1,718,856
========== ==========
</TABLE>

(6) Interest-Bearing Deposits

Interest-bearing deposits were as follows:

<TABLE>
<CAPTION>
1998 1997
----------- ----------
<S> <C> <C>
Regular savings deposits.............................. $ 7,827,787 6,652,397
NOW accounts.......................................... 15,786,139 12,849,773
Money market checking accounts........................ 13,019,274 9,165,450
Time deposits, $100,000 or more....................... 10,075,489 3,050,834
Time deposits, other.................................. 18,677,849 12,720,426
----------- ----------
$65,386,538 44,438,880
=========== ==========
</TABLE>

As of December 31, 1998 and 1997, all securities and mortgage loans were
pledged as collateral for deposits. The following table indicates the
maturities of the Bank's interest-bearing deposits at December 31, 1998:

<TABLE>
<CAPTION>
Under $100,000
$100,000 or more Total
----------- ---------- ----------
<S> <C> <C> <C>
Less than one year......................... $53,425,152 9,417,673 62,842,825
One to two years........................... 1,393,076 507,317 1,900,393
Two to five years.......................... 455,741 150,499 606,240
Five to ten years.......................... 17,021 -- 17,021
Over ten years............................. 20,059 -- 20,059
----------- ---------- ----------
$55,311,049 10,075,489 65,386,538
=========== ========== ==========
</TABLE>

F-47
<PAGE>

FIRST COMMUNITY BANK OF THE DESERT AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

December 31, 1998, 1997 and 1996

(7) Retirement Plan

During 1991, the Bank converted its profit sharing plan to a 401(k) plan
(the Plan) with an Employee Stock Ownership Plan (ESOP) provision. The Plan
covers all employees meeting certain eligibility requirements pertaining to age
and length of employment. The Bank matches employee contributions to the Plan
at a rate of fifty cents on the dollar up to the lesser of $4,000 or 8% of
compensation. The Bank accrued a contribution of $25,704, $36,000 and $20,000
for the Plan for the years ended December 31, 1998, 1997 and 1996,
respectively.

(8) Stock Options and Warrants

The Board of Directors has granted options to certain key employees and
directors to purchase shares of the Bank's common stock under a stock option
plan which was originally adopted by the stockholders in 1982. An amendment and
restatement of the plan was adopted by the stockholders in 1988, which was then
amended in 1998. Options are granted at the market value on the date of the
grant and are exercisable in cumulative installments over such periods of time
as established by the Board of Directors for each option. No option may expire
later than ten years after the date of grant. There are no credits or charges
to income in connection with the grant or exercise of options. In 1998 and
1997, 242,500 and 270,625 options were granted, respectively.

During 1995, the Bank issued to certain stockholders warrants for 278,515
shares of the Banks' common stock. The warrants entitle these stockholders to
acquire a like number of shares of common stock for an exercise price of $1.44
per share. The warrants are eligible for exercise and expire in 2000.

Transactions for the two years ended December 31, 1998 are summarized as
follows:

<TABLE>
<CAPTION>
Number of shares
outstanding Price per share
---------------- ---------------
<S> <C> <C>
Balance, December 31, 1996.................. 58,825 $1.20 to 17.00
Options granted............................. 96,625 1.50 to 2.75
Options canceled............................ (3,175) 1.44 to 13.50
-------
Balance, December 31, 1997.................. 151,275 1.20 to 17.00
Options granted............................. 242,500 3.00
Options exercised........................... (975) 1.44 to 1.50
Options canceled............................ (65,450) 1.44 to 17.00
-------
Balance, December 31, 1998.................. 327,350 1.20 to 13.50
=======
</TABLE>

The Bank had 79,375 options that were exercisable at December 31, 1998. The
per share weighted-average fair value of stock options granted during 1998 and
1997 was $0.71 and $0.61, respectively, on the date of grant using the Black-
Scholes option-pricing model with the following weighted-average assumptions:
for 1998, expected dividend yield of zero, risk-free interest rate of 5.65%,
volatility of zero and an expected life of five years; and for 1997, expected
dividend yield of zero, risk-free interest rate of 5.93%, volatility of zero
and an expected life of five years. The Bank applies APB Opinion No. 25 in
accounting for its Plan, and accordingly, no compensation cost has been
recognized for its stock options in the consolidated financial statements. Had
the Company determined compensation cost based on the fair value at the grant
date for its stock options under SFAS No. 123, the Bank's net income for the
years ended December 31, 1998 and 1997 would have been reduced by $54,103 and
$14,049 to a pro forma net income of $1,018,861 and $711,180, respectively.

F-48
<PAGE>

FIRST COMMUNITY BANK OF THE DESERT AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

December 31, 1998, 1997 and 1996

(9) Net Earnings per Common and Common Equivalent Share

Basic earnings per common share is computed by dividing net earnings by the
weighted-average number of shares of common stock outstanding during the
period. The weighted-average number of shares used to compute the basic
earnings per common share was 4,642,425 during 1998 and 4,641,937 during 1997
and 1996, respectively.

Diluted earnings per share is computed by dividing net earnings by the
weighted-average number of shares of common stock, common stock equivalents and
other potentially dilutive securities outstanding during the period. The stock
options outstanding are considered to be other potentially dilutive securities
and are included in the diluted earnings per share calculations unless the
effect is determined to be antidilutive. The market price of the Bank's common
stock was $4.375 and $2.75 at December 31, 1998 and 1997, respectively. During
1998 and 1997, the warrants are also considered to be other potentially
dilutive securities, and included in the diluted earnings per share
calculations. The weighted average numbers of shares used for the diluted
earnings per share calculations were 4,736,171 and 4,735,255 in 1998 and 1997,
respectively. At December 31, 1998 and 1997, there were 10,450 and 15,950
options, respectively, that were considered antidilutive and, therefore,
excluded from the calculation above.

(10) Income Taxes

The components of the consolidated income tax expense (benefit) for the
years ended December 31, 1998, 1997 and 1996 are as follows:

<TABLE>
<CAPTION>
1998 1997 1996
-------- ------- --------
<S> <C> <C> <C>
Current:
Federal........................................ $314,773 291,440 148,624
State.......................................... 232,993 61,326 34,740
-------- ------- --------
547,766 352,766 183,364
-------- ------- --------
Deferred (benefit):
Federal........................................ (97,897) 56,751 (542,679)
State.......................................... (71,869) 88,496 (119,492)
-------- ------- --------
(169,766) 145,247 (662,171)
-------- ------- --------
Total income tax expense..................... $378,000 498,013 478,807
======== ======= ========
</TABLE>

F-49
<PAGE>

FIRST COMMUNITY BANK OF THE DESERT AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

December 31, 1998, 1997 and 1996

The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and liabilities at December 31, 1998 and 1997
are presented below:

<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Deferred tax assets:
Loans, principally due to allowance for losses..... $ 429,239 256,081
Other real estate and investment in property held-
for-sale.......................................... 280,868 497,792
Interest on nonaccrual loans....................... 191,161 239,885
Net operating loss................................. 126,815 152,288
--------- ---------
Deferred tax assets.............................. 1,028,083 1,146,046
--------- ---------
Deferred tax liabilities:
Federal liability for state deferred tax asset..... (54,143) --
Deferred loan fees and costs....................... 147,117 (103,927)
Premises and equipment............................. (230,241) (197,363)
Other.............................................. 106,663 (17,043)
--------- ---------
Deferred tax liabilities......................... (30,604) (318,333)
--------- ---------
Net deferred tax asset........................... $ 997,479 827,713
========= =========
</TABLE>

In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable income
and tax planning strategies in making this assessment. Based upon the level of
historical taxable income and projections for future taxable income over the
periods which the deferred tax assets are deductible, management believes it is
more likely than not the Bank will realize the benefits of these deductible
differences at December 31, 1998.

The income tax expense differs from that which would result from applying
the U.S. statutory rate as follows:

<TABLE>
<CAPTION>
1998 1997 1996
-------- ------- --------
<S> <C> <C> <C>
Federal income tax expense
at statutory rate.......... $493,321 415,902 147,197
Increase (reduction) in
taxes resulting from:
State income taxes, net of
federal benefit.......... 103,903 98,883 32,219
Reduction of liabilities
from prior years......... (146,593) -- --
Change in valuation
allowance................ -- -- (759,625)
Other, net................ (72,631) (16,772) 101,402
-------- ------- --------
Total income tax expense
(benefit).............. $378,000 498,013 (478,807)
======== ======= ========
</TABLE>

The Bank has available at December 31, 1998 and 1997 approximately $487,000
and $528,000, respectively, of unused federal operating loss carryforwards that
may be applied against future taxable income through 2009. The applications of
the net operating loss and other carryforwards are assumed to be subject to
annual IRC Section 382 limitations.

F-50
<PAGE>

FIRST COMMUNITY BANK OF THE DESERT AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

December 31, 1998, 1997 and 1996

(11) Related Party Transactions

Certain directors and principal officers of the Bank and companies with
which they were associated were customers of and have had transactions with the
Bank in the ordinary course of business.

During 1997, the Bank leased the land on which the Twenty-nine Palms branch
was located from a Bank director. During 1998, the Twenty-nine Palms branch was
relocated to a parcel owned by the Bank. Rent expense during the years ended
December 31, 1998 and 1997 was $2,030 and $10,910, respectively.

(12) Commitments and Contingencies

In the normal course of business, the Bank is a party to financial
instruments with off-balance sheet risk. These financial instruments include
commitments to extend credit and standby and commercial letters of credit. To
varying degrees, these instruments involve elements of credit and interest rate
risk in excess of the amount recognized in the consolidated balance sheets. The
Bank's exposure to credit loss in the event of nonperformance by the other
party to the financial instruments for commitments to extend credit and standby
letters of credit represented by the contractual amount of those instruments.
At December 31, 1998 and 1997, the Bank had commitments to extend credit of
approximately $22,469,000 and $12,417,000, respectively, and obligations under
standby letters of credit of $132,000 in 1998 and $466,000 in 1997.

Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Bank evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral obtained, if
deemed necessary by the Bank upon extension of credit, is based on management's
credit evaluation. Collateral held varies but may include accounts receivable,
inventory, property, plant and equipment, income-producing commercial
properties, residential properties and properties under construction.

Standby letters of credit are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third party. Substantially all
guarantees expire within one year. The credit risk involved in issuing letters
of credit is essentially the same as that involved in extending loans to
customers. The Bank holds collateral supporting these commitments as management
deems necessary.

The Bank is involved in various legal proceedings. Management believes the
aggregated liability, if any, resulting from them will not be material.

The Bank is obligated under noncancelable operating leases for periods
ranging from 8 to 20 years. Minimum rental commitments at December 31, 1998
under noncancelable leases are as follows:

<TABLE>
<S> <C>
Year ending December 31:
1999.......................................................... $ 198,515
2000.......................................................... 200,592
2001.......................................................... 200,592
2002.......................................................... 200,592
2003.......................................................... 200,592
Thereafter.................................................... 692,864
----------
$1,693,747
==========
</TABLE>

F-51
<PAGE>

FIRST COMMUNITY BANK OF THE DESERT AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

December 31, 1998, 1997 and 1996

Payments under these leases were $225,831 and $201,276 for the years ended
December 31, 1998 and 1997, respectively.

(13) Other Income

The major items included in other income were:

<TABLE>
<CAPTION>
1998 1997 1996
-------- ------- -------
<S> <C> <C> <C>
Bankcard merchant fees............................ $245,841 212,904 133,119
Loan department fees.............................. 19,285 32,950 34,668
Rental income..................................... 63,055 65,500 74,378
Gain on sale of other real estate owned........... -- -- 225,180
Other............................................. 181,361 154,989 288,669
-------- ------- -------
$509,542 466,343 756,014
======== ======= =======
</TABLE>

(14) Other Expenses

The major items included in other expenses were:

<TABLE>
<CAPTION>
1998 1997 1996
---------- --------- ---------
<S> <C> <C> <C>
Advertising and promotional................. $ 246,750 181,203 168,134
Data processing............................. 465,847 414,078 461,232
Other professional fees and outside
services................................... 212,786 355,100 368,442
Stationery and supplies..................... 139,467 89,551 84,495
Postage..................................... 43,884 33,666 24,900
Regulatory fees............................. 25,164 55,603 69,838
Insurance................................... 81,402 77,186 70,815
Bankcard merchant expense................... 221,432 162,616 101,545
Loan department costs....................... 28,034 10,191 15,337
Expenses of OREO and property held for
sale....................................... 62,442 73,216 459,372
Other....................................... 340,777 317,401 286,845
---------- --------- ---------
$1,867,985 1,769,811 2,110,955
========== ========= =========
</TABLE>

(15) Fair Value of Financial Instruments

The following methods and assumptions were used to estimate the fair value
of each class of financial instruments;

(a) Cash and Due from Banks and Federal Funds Sold

The carrying amount is assumed to be the fair value because of the liquidity
of these instruments.

(b) Time Deposits in Financial Institutions

The carrying amount is assumed to be the fair value given the short-term
nature of these deposits.

F-52
<PAGE>

FIRST COMMUNITY BANK OF THE DESERT AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

December 31, 1998, 1997 and 1996

(d) Loans

The fair value of fixed rate loans and nonperforming or adversely classified
adjustable rate loans is calculated by discounting scheduled cash flows through
the estimated maturity using estimated market discount rates that reflect the
credit and interest rate risk inherent in the loans. The discount rates used
for performing fixed rate loans are the Company's current offer rates for
comparable instruments with similar terms.

The fair value of performing adjustable rate loans is estimated to be
carrying value. These loans reprice frequently at market rates and the credit
risk is not considered to be greater than normal.

(e) Deposits

The fair value of deposits with no stated maturity, such as non-interest
bearing demand deposits, savings and NOW accounts, and money market checking
accounts is equal to the amount payable on demand as of December 31, 1998. The
fair value of time deposits is based on the discounted value of contractual
cash flows. The discount rate is estimated using the rates currently offered
for deposits of similar remaining maturities.

(f) Commitments to Extend Credit and Standby Letters of Credit

The fair value of commitments to extend credit is estimated using the fees
currently charged to enter into similar agreements, taking into account the
remaining terms of the agreements and the present creditworthiness of the
counterparties. The fair value of letters of credit is based on fees currently
charged for similar agreements or on the estimated cost to terminate them or
otherwise settle the obligations with the counterparties.
<TABLE>
<CAPTION>
December 31, 1998
-----------------------
Carrying or
contract Fair value
amount estimates
----------- -----------
<S> <C> <C>
Financial assets:
Cash and due from banks............................... $ 9,776,716 9,776,716
Federal funds sold.................................... 23,869,000 23,869,000
Time deposits in financial institutions............... 5,440,000 5,440,000
Investment securities held-to-maturity................ 5,562,656 5,506,357
Loans, net............................................ 60,021,361 60,725,836
Financial liabilities;
Deposits.............................................. 102,793,890 102,953,252
Commitments to extend credit.......................... 22,469,000 337,035
Standby letters of credit............................. 132,000 1,980
</TABLE>

(16) Regulatory Matters

F-53
<PAGE>

FIRST COMMUNITY BANK OF THE DESERT AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

December 31, 1998, 1997 and 1996

liabilities and certain off-balance sheet items as calculated under regulatory
accounting practices. The Bank's capital amounts and classifications 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 Bank to maintain minimum amounts and 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 (as defined) to average
assets (as defined). Management believes, as of December 31, 1998 and 1997,
that the Bank meets all capital adequacy requirements to which it is subject.

As of December 31, 1998 and 1997, the Bank was categorized as "adequately-
capitalized" under the prompt corrective action regulations of the Federal
Deposit Insurance Corporation Improvement Act of 1991.

The Bank's actual capital amounts and ratios are also presented in the table
below:

<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>
December 31, 1998:
Total capital (to risk-
weighted assets)............ $7,691 8.99% $6,843 18% $ 8,554 110%
Tier I capital (to risk-
weighted assets)............ 6,550 7.66 3,422 14 5,132 16
Tier I capital (to average
assets)..................... 6,550 6.85 3,825 14 4,781 15
====== ===== ====== === ========== =======
December 31, 1997:
Total capital (to risk-
weighted assets)............ $7,409 10.72% $5,530 18% $ 7,083 110%
Tier I capital (to risk-
weighted assets)............ 6,545 9.47 2,765 14 4,148 16
Tier I capital (to average
assets)..................... 6,545 9.24 2,833 14 3,457 15
====== ===== ====== === ========== =======
</TABLE>

F-54
<PAGE>

FIRST COMMUNITY BANK OF THE DESERT

CONSOLIDATED BALANCE SHEET
(Unaudited)

<TABLE>
<CAPTION>
As of September 30,
------------------------
1999 1998
------------ -----------
<S> <C> <C>
ASSETS
Cash and due from banks............................... $ 8,474,000 $ 9,472,000
Held-to-maturity securities........................... 13,705,000 5,662,000
Federal funds sold.................................... 12,332,000 9,851,000
Interest-bearing deposits in banks.................... 7,514,000 5,439,000
Loans................................................. 71,917,000 60,221,000
Less: Allowance for credit losses.................... 1,491,000 1,213,000
------------ -----------
Net loans........................................... 70,426,000 59,008,000
Premises and equipment, net........................... 3,943,000 3,842,000
Investment in property held-for-sale.................. 1,315,000 1,392,000
Other real estate owned............................... -- --
Other assets.......................................... 1,826,000 1,573,000
------------ -----------
Total assets........................................ $119,535,000 $96,239,000
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing................................. 43,206,000 $32,751,000
Interest-bearing..................................... 67,412,000 55,402,000
------------ -----------
Total deposits...................................... 110,618,000 88,153,000
Other liabilities..................................... 375,000 843,000
------------ -----------
Total liabilities................................... 110,993,000 88,996,000
Stockholders' equity:
Common stock......................................... 7,291,000 7,291,000
Retained earnings.................................... 1,251,000 (48,000)
------------ -----------
Total stockholders' equity.......................... 8,542,000 7,243,000
------------ -----------
Total liabilities and stockholders' equity.......... $119,535,000 $96,239,000
============ ===========
</TABLE>

See accompanying notes to financial statements.

F-55
<PAGE>

FIRST COMMUNITY BANK OF THE DESERT

CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)

<TABLE>
<CAPTION>
Nine-months ended
September 30,
---------------------
1999 1998
---------- ----------
<S> <C> <C>
INTEREST INCOME
Loans, including fees.................................... $5,720,000 $5,031,000
Held to-maturity securities.............................. 373,000 236,000
Federal funds sold....................................... 739,000 342,000
Interest-bearing deposits................................ 249,000 233,000
---------- ----------
Total interest income................................... 7,081,000 5,842,000

INTEREST EXPENSE
Deposits................................................. 1,444,000 1,215,000
---------- ----------
Total interest expense.................................. 1,444,000 1,215,000
---------- ----------
Net interest income..................................... 5,637,000 4,627,000
Provision for credit losses.............................. 323,000 691,000
---------- ----------
Net interest income after provision for credit losses... 5,314,000 3,936,000

NONINTEREST INCOME
Deposit account fees..................................... 568,000 603,000
Other income............................................. 417,000 409,000
---------- ----------
Total noninterest income................................ 985,000 1,012,000

NONINTEREST EXPENSE
Salaries and employee benefits........................... 2,041,000 1,759,000
Occupancy and equipment.................................. 692,000 588,000
Other expenses........................................... 1,915,000 1,642,000
---------- ----------
Total noninterest expense............................... 4,648,000 3,989,000
---------- ----------
Income before income taxes.............................. 1,651,000 959,000
Provision for income taxes............................... 727,000 260,000
---------- ----------
Net income............................................ $ 924,000 $ 699,000
========== ==========
Basic earnings per common share....................... .20 .15
========== ==========
Diluted earnings per common share..................... .19 .14
========== ==========
</TABLE>

F-56
<PAGE>

FIRST COMMUNITY BANK OF THE DESERT

STATEMENT OF CASH FLOWS
(Unaudited)

<TABLE>
<CAPTION>
For the nine months ended
September 30,
--------------------------
1999 1998
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income...................................... $ 924,000 $ 699,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and Amortization................... 299,000 226,000
Provision for loan losses....................... 323,000 691,000
Increase in interest receivable and other
assets......................................... (547,000) (485,000)
Decrease (increase) in interest payable and
other liabilities.............................. 813,000 246,000
------------ ------------
Net cash provided by operating activities... 1,812,000 1,377,000
------------ ------------
Cash flows from investing activities:
Proceeds from maturity of securities............ 5,700,000 11,200,000
Purchases of securities......................... (13,700,000) (11,386,000)
Proceeds from maturity of time deposits in
financial institutions......................... 3,667,000 4,160,000
Purchases of time deposits in financial
institutions................................... (7,514,000) (5,440,000)
Net increase in loans outstanding............... (10,499,000) (4,039,000)
Acquisition of bank premises and equipment...... (180,000) (2,394,000)
Proceeds from sales of property held for sale... 50,000 --
Proceeds from sale of other real estate owned... -- --
------------ ------------
Net cash used in investing activities....... (22,476,000) (7,899,000)
------------ ------------
Cash flows from financing activities:
Net increase in deposits:
Non-interest bearing.......................... 5,799,000 4,807,000
Interest bearing.............................. 2,025,000 10,963,000
Net cash provided by financing activities... 7,824,000 15,770,000
------------ ------------
Net increase (decrease) in cash and cash
equivalents................................ (12,840,000) 9,248,000
Cash and cash equivalents at beginning of period.. 33,646,000 10,579,000
------------ ------------
Cash and cash equivalents at end of period........ $ 20,806,000 $ 19,827,000
============ ============
</TABLE>

F-57
<PAGE>

FIRST COMMUNITY BANK OF THE DESERT

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 1999 and 1998

Note (1)--Basis of Financial Statement Presentation

In the opinion of First Community Bank of the Desert and subsidiary ("First
Community"), the accompanying consolidated financial statements contain all
adjustments (consisting of only normal recurring accruals) necessary for a fair
presentation of First Community's financial condition as of September 30, 1999
and 1998, and the results of operations and cash flows for the nine months
ended September 30, 1999 and 1998. Certain prior period amounts have been
reclassified to conform to the current period presentation.

The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
operations and therefore do not include all information and footnotes necessary
for a fair presentation of financial position, results of operations,
comprehensive income and cash flows. The information under the heading
Management's Discussion and Analysis of Financial Condition and Results of
Operations is written with the presumption that the interim consolidated
financial statements will be read in conjunction with First Community's Annual
Report for the year ended December 31, 1998, which contains among other things,
the latest audited consolidated financial statements and notes thereto.

Note (2)--Net Income Per Share

Net income per share is calculated on both a basic and diluted basis. Basic
net income per share excludes dilution and is computed by dividing net income
available to common stockholders by the weighted average number of common
shares outstanding for the period. Diluted net income per share 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 from
issuance of common stock that then shared in earnings.

F-58
<PAGE>

ANNEX A

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

AGREEMENT AND PLAN OF MERGER

dated as of October 22, 1999

by and among

RANCHO SANTA FE NATIONAL BANK,

FIRST COMMUNITY BANCORP

and

FIRST COMMUNITY BANK OF THE DESERT

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
ARTICLE I
Definitions; Interpretations
1.01 Certain Definitions................................................. 2
1.02 Interpretation...................................................... 7

ARTICLE II
The Merger
2.01 The Merger.......................................................... 8
2.02 Closing............................................................. 8
2.03 Effective Time...................................................... 8
2.04 Effects of the Merger............................................... 8
2.05 Articles of Incorporation and By-laws............................... 8
2.06 Board of Directors and Officers..................................... 9

ARTICLE III
Consideration; Exchange Procedures
3.01 Effect on Capital Stock............................................. 9
3.02 Rights as Shareholders; Stock Transfers............................. 10
3.03 Exchange Procedures................................................. 10
3.04 Fractional Shares................................................... 11
3.05 Anti-Dilution Provisions............................................ 11
3.06 Stock Options and Warrants.......................................... 11
3.07 Dissenters' Rights.................................................. 12

ARTICLE IV
Conduct of Business Pending Merger
4.01 Forebearances....................................................... 12
4.02 Reorganization...................................................... 15

ARTICLE V
Representations and Warranties
5.01 Disclosure Schedules................................................ 15
5.02 Standard............................................................ 15
5.03 Representations and Warranties...................................... 15

ARTICLE VI
Covenants
6.01 Reasonable Best Efforts............................................. 26
6.02 Stockholder Approvals............................................... 26
6.03 Registration Statement and Joint Proxy Statement.................... 26
6.04 Press Releases...................................................... 27
6.05 Access; Information................................................. 28
6.06 Acquisition Proposals............................................... 28
6.07 Affiliate Agreements................................................ 29
6.08 Shareholder Agreements.............................................. 29
6.09 Nasdaq.............................................................. 29
6.10 Regulatory Applications............................................. 29
6.11 Indemnification..................................................... 30
6.12 Benefit Plans....................................................... 31
6.13 Accountants' Letters................................................ 32
</TABLE>

A-i
<PAGE>

<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
6.14 Notification of Certain Matters..................................... 32
6.15 Certain Policies.................................................... 32

ARTICLE VII
Conditions to Consummation of the Merger
7.01 Conditions to Each Party's Obligation to Effect the Merger.......... 32
7.02 Conditions to Obligation of FCB..................................... 33
7.03 Conditions to Obligation of the Holding Company..................... 34

ARTICLE VIII
Termination
8.01 Termination......................................................... 35
8.02 Effect of Termination and Abandonment............................... 36

ARTICLE IX
Miscellaneous
9.01 Survival............................................................ 36
9.02 Waiver; Amendment................................................... 36
9.03 Counterparts........................................................ 36
9.04 Governing Law....................................................... 36
9.05 Expenses............................................................ 36
9.06 Notices............................................................. 36
9.07 Entire Understanding; No Third Party Beneficiaries.................. 37
9.08 Effect.............................................................. 38
9.09 Severability........................................................ 38
9.10 Alternative Structure............................................... 38
9.11 Enforcement of the Agreement........................................ 38
</TABLE>

<TABLE>
<C> <S>
EXHIBIT A Surviving Corporation Directors
EXHIBIT B The Holding Company Affiliate Letter
EXHIBIT C FCB Affiliate Letter
EXHIBIT D Form of Shareholder Letter
</TABLE>

A-ii
<PAGE>

AGREEMENT AND PLAN OF MERGER, dated as of October 22, 1999 (this
"Agreement"), by and among Rancho Santa Fe National Bank, a national banking
association ("Rancho Santa Fe"), First Community Bancorp, a California
corporation (the "Holding Company" and together with Rancho Santa Fe, the
"Rancho Parties"), and First Community Bank of the Desert ("FCB"), a California
corporation ("FCB").

RECITALS

A. The Holding Company. Rancho Santa Fe has formed the Holding Company as
its wholly owned subsidiary for purposes of creating a bank holding company.
This Agreement contemplates that the reorganization (the "Reorganization")
providing for Rancho Santa Fe to become a wholly owned subsidiary of the
Holding Company shall have been accomplished, with each outstanding share of
Rancho Santa Fe common stock, $2.50 par value ("Rancho Santa Fe Common Stock"),
being converted into one share of common stock, no par value, of the Holding
Company (the "Holding Company Common Stock").

B. The Proposed Transaction. This Agreement provides for a business
combination to be effected through the merger (the "Merger") of FCB with a
wholly-owned merger subsidiary (the "Merger Sub") of the Holding Company, with
FCB as the survivor (the "Surviving Corporation"), whereby each outstanding
share of common stock, no par value, of FCB ("FCB Common Stock"), other than
certain excluded shares, will be converted into 0.3 shares of Holding Company
Common Stock.

C. Board Approvals. The respective boards of directors of Rancho Santa Fe,
the Holding Company and FCB have each determined that the Merger and the other
transactions contemplated hereby are consistent with, and in furtherance of,
their respective business strategies and goals.

D. Intended Tax Treatment. For federal income tax purposes, it is intended
that the Merger will be treated as a reorganization under the provisions of
Section 368 of the Internal Revenue Code of 1986, as amended, and the rules and
regulations promulgated thereunder (the "Code").

E. Intended Accounting Treatment. For financial accounting purposes, it is
intended that the Merger will be accounted for as a pooling-of-interests
transaction.

NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, representations, warranties and agreements contained herein, the
parties agree as follows:

ARTICLE I

Definitions; Interpretations

1.01 Certain Definitions. The following terms are used in this Agreement
with the meanings set forth below:

"Acquisition Proposal", with respect to any of Rancho Santa Fe, the Holding
Company or FCB, means any tender or exchange offer, proposal for a merger,
consolidation or other business combination involving Rancho Santa Fe, the
Holding Company or FCB, as the case may be, or any of their respective
Significant Subsidiaries or any proposal or offer to acquire in any manner a
substantial equity interest in, or a substantial portion of the assets or
deposits of, Rancho Santa Fe, the Holding Company or FCB, as the case may be,
or any of their respective Significant Subsidiaries, other than the
transactions contemplated by this Agreement.

"Agreement" means this Agreement, as amended or modified from time to time
in accordance with Section 9.02.

"Agreement of Merger" has the meaning set forth in Section 2.03.

A-1
<PAGE>

"Benefit Plans" has the meaning set forth in Section 5.03(n).

"California Secretary" means the Secretary of State of California.

"CGCL" means the California General Corporation Law.

"Closing" has the meaning set forth in Section 2.02.

"Closing Date" has the meaning set forth in Section 2.02.

"Code" has the meaning set forth in the Recitals.

"Constituent Documents" means, with respect to any entity its articles of
incorporation and bylaws or similar charter documents.

"Costs" has the meaning set forth in Section 6.11(a).

"Disclosure Schedule" has the meaning set forth in Section 5.01.

"Dissenting Shareholder" means holders of shares of FCB Common Stock who
perfect their rights to dissent under Chapter 13 of the CGCL.

"Dissenting Shares" means shares of FCB Common Stock with respect to which
the holder or holders thereof perfect their rights to dissent under Chapter 13
of the CGCL.

"Effective Date" means the date on which the Effective Time occurs.

"Effective Time" has the meaning set forth in Section 2.03.

"Employees" has the meaning set forth in Section 5.03(n).

"Environmental Laws" means any federal, state or local law, regulation,
order, decree, permit, authorization, opinion, common law or agency requirement
relating to: (i) the protection or restoration of the environment, health,
safety, or natural resources, (ii) the handling, use, presence, disposal,
release or threatened release of any Hazardous Substance or (iii) noise, odor,
wetlands, indoor air, pollution, contamination or any injury or threat of
injury to persons or property in connection with any Hazardous Substance
including, without limitation, the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response, Compensation, and Liability Act, the
Clean Water Act, the Federal Clean Air Act, and the Occupational Safety and
Health Act, each as amended, regulations promulgated thereunder, and state
counterparts.

"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.

"ERISA Affiliate" has the meaning set forth in Section 5.03(n).

"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder.

"Exchange Agent" has the meaning set forth in Section 3.03(a).

"FCB" has the meaning set forth in the preamble to this Agreement.

"FCB Affiliate" has the meaning set forth in Section 6.07(a).

"FCB Benefit Plans" has the meaning set forth in Section 6.12.

"FCB Board" means the Board of Directors of FCB.

A-2
<PAGE>

"FCB Common Stock" has the meaning set forth in the Recitals.

"FCB Common Stock Option" has the meaning set forth in Section 3.06.

"FCB Meeting" has the meaning set forth in Section 6.02.

"FCB Stock" means collectively FCB Common Stock and serial preferred stock.

"FCB Stock Plan" has the meaning set forth in Section 5.03(b).

"FCB Warrants" has the meaning set forth in Section 3.06.

"FDIA" means the Federal Deposit Insurance Act.

"FDIC" means the Federal Deposit Insurance Corporation.

"GAAP" means generally accepted accounting principles applied on a
consistent basis.

"Governmental Authority" means any court, administrative agency or
commission or other federal, state or local governmental authority or
instrumentality.

"Hazardous Substance" means any substance in any concentration that is: (i)
listed, classified or regulated pursuant to any Environmental Law; (ii) any
petroleum product or by-product, asbestos-containing material, lead-containing
paint or plumbing, polychlorinated biphenyls, radioactive materials or radon;
or (iii) any other substance which is or may be the subject of regulatory
action by any Governmental Authority in connection with any Environmental Law.

"Holding Company" has the meaning set forth in the preamble to this
Agreement.

"Holding Company Affiliate" has the meaning set forth in Section 6.07(a).

"Holding Company Benefit Plans" has the meaning set forth in Section 6.12.

"Holding Company Board" means the Board of Directors of the Holding
Company.

"Holding Company Common Stock" has the meaning set forth in the Recitals.

"Holding Company Meeting" has the meaning set forth in Section 6.02.

"Holding Company Stock Plan" has the meaning set forth in Section 6.12(a).

"Indemnified Party" has the meaning set forth in Section 6.11(a).

"Insurance Policies" has the meaning set forth in Section 5.03(t).

"Joint Proxy Statement" has the meaning set forth in Section 6.03(a).

"Lien" means any charge, mortgage, pledge, security interest, restriction,
claim, lien, or encumbrance.

"Loan" has the meaning set forth in Section 5.03(y).

"Material Adverse Effect" means, with respect to the Rancho Parties or FCB,
any effect that (a) is material and adverse to the financial condition,
results of operations or business of the Rancho Parties and their
Subsidiaries, taken as a whole, or FCB and its Subsidiaries, taken as a whole,
respectively, excluding the impact of (i) changes in banking and other laws of
general applicability or interpretations thereof by Governmental Authorities,
(ii) changes in GAAP or regulatory accounting requirements applicable to banks
and

A-3
<PAGE>

their holding companies generally, (iii) changes in general economic conditions
affecting banks and their holding companies generally, provided that, with
respect to each of clause (i), (ii) or (iii), to the extent that a change does
not materially affect it in a way that materially differs from other banking
organizations, (iv) actions or omissions of a party to this Agreement taken
with the prior written consent of the other party to this Agreement, in
contemplation of the transactions contemplated hereby, and (v) any
modifications or changes to valuation policies and practices in connection with
the Merger or restructuring charges, in each case taken with the prior approval
of Rancho Santa Fe or FCB, as the case may be, in connection with the Merger,
in each case in accordance with GAAP; or (b) would materially impair the
ability of the Rancho Parties or FCB to perform their respective obligations
under this Agreement or to consummate the transactions contemplated hereby.

"Merger" has the meaning set forth in the Recitals.

"Merger Consideration" has the meaning set forth in Section 3.01(b).

"Merger Sub" has the meaning set forth in the Recitals.

"Nasdaq" means the Nasdaq National Market.

"New Certificate" has the meaning set forth in Section 3.03(a).

"OCC" means the Office of the Comptroller of the Currency.

"Old Certificate" has the meaning set forth in Section 3.03(a).

"Pension Plan" has the meaning set forth in Section 5.03(n).

"Person" means any individual, savings association, bank, corporation,
limited liability company, partnership, association, joint-stock company,
business trust or unincorporated organization.

"Plan" has the meaning set forth in Section 5.03(n).

"Previously Disclosed" by a party means information set forth in the
applicable paragraph of its Disclosure Schedule, or any other paragraph of its
Disclosure Schedule so long as it is clear from the context of the disclosure
that the disclosure in such other paragraph of its Disclosure Schedule is also
applicable to the section of this Agreement in question.

"Rancho Parties" has the meaning set forth in the preamble to this
Agreement.

"Rancho Santa Fe" has the meaning set forth in the preamble to this
Agreement.

"Rancho Santa Fe Common Stock" has the meaning set forth in the Recitals.

"Rancho Santa Fe Common Stock Plan" means the 1992 Rancho Santa Fe National
Bank Stock Option Plan.

"Registration Statement" has the meaning set forth in Section 6.03(a).

"Regulatory Authorities" has the meaning set forth in Section 5.03(j).

"Regulatory Filings" has the meaning set forth in Section 5.03(h).

"Reorganization" has the meaning set forth in the Recitals.

"Replacement Option" has the meaning set forth in Section 3.06.

A-4
<PAGE>

"Replacement Warrant" has the meaning set forth in Section 3.06.

"Representatives" means, with respect to any Person, such Person's
directors, officers, employees, legal or financial advisors or any
representatives of such legal or financial advisors.

"Rights" means, with respect to any Person, securities or obligations
convertible into or exercisable or exchangeable for, or giving any other
Person any right to subscribe for or acquire, or any options, calls or
commitments relating to, or any stock appreciation right or other instrument
the value of which is determined in whole or in part by reference to the
market price or value of, shares of capital stock of such first Person.

"SEC" means the Securities and Exchange Commission.

"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations thereunder.

"Subsidiary" and "Significant Subsidiary" have the meaning ascribed to
those terms in Rule 1-02 of Regulation S-X of the SEC.

"Surviving Corporation" has the meaning set forth in the Recitals.

"Tax" and "Taxes" means all federal, state, local or foreign taxes,
charges, fees, levies or other assessments, however denominated, including,
without limitation, all net income, gross income, gains, gross receipts,
sales, use, ad valorem, goods and services, capital, production, transfer,
franchise, windfall profits, license, withholding, payroll, employment,
disability, employer health, excise, estimated, severance, stamp, occupation,
property, environmental, unemployment or other taxes, custom duties, fees,
assessments or charges of any kind whatsoever, together with any interest and
any penalties, additions to tax or additional amounts imposed by any taxing
authority whether arising before, on or after the Effective Date.

"Tax Returns" means any return, amended return or other report (including
elections, declarations, disclosures, schedules, estimates and information
returns) required to be filed with respect to any Tax.

1.02 Interpretation. (a) In this Agreement, unless the context otherwise
requires, references:

(i) to the Recitals, Sections, Exhibits or Schedules are to a Recital or
Section of, or Exhibit or Schedule to, this Agreement;

(ii) to any agreement (including this Agreement), contract, statute or
regulation are to the agreement, contract, statute or regulation as
amended, modified, supplemented or replaced from time to time, and to any
section of any statute or regulation are to any successor to the section;

(iii) to any Governmental Authority include any successor to that
Governmental Authority; and

(iv) to this Agreement are to this Agreement, the Exhibits and Schedules
to it, taken as a whole.

(b) The table of contents and headings contained herein are for reference
purposes only and do not limit or otherwise affect any of the provisions of
this Agreement.

(c) Whenever the words "include," "includes" or "including" are used in
this Agreement, they will be deemed to be followed by the words "without
limitation."

(d) Whenever the words "herein" or "hereunder" are used in this Agreement,
they will be deemed to refer to this Agreement as a whole and not to any
specific Section.

(e) This Agreement is the product of negotiation by the parties, having the
assistance of counsel and other advisers. It is the intention of the parties
that this Agreement not be construed more strictly with regard to one party
than with regard to the other party.

A-5
<PAGE>

ARTICLE II

The Merger

2.01 The Merger. Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the CGCL, Merger Sub shall be merged
with and into FCB at the Effective Time with FCB as the Surviving Corporation.
The Surviving Corporation shall retain the FCB name and will be headquartered
in Indian Wells, California.

2.02 Closing. The closing of the Merger (the "Closing") will take place at
10:00 a.m. on the third business day after satisfaction or waiver of the
conditions set forth in Article VII (other than those conditions that by their
nature are to be satisfied at the Closing, but subject to the fulfillment or
waiver of those conditions), unless another time or date is agreed to by the
parties hereto (the "Closing Date").

2.03 Effective Time. Subject to the provisions of this Agreement, as soon
as practicable on the Closing Date, the parties shall certify and file an
agreement of merger or other appropriate documents (in any such case, the
"Agreement of Merger") executed in accordance with the relevant provisions of
the CGCL. The parties shall make all other filings or recordings required
under the CGCL and the Merger shall become effective at such time as the
Agreement of Merger is duly filed with the California Secretary, or at such
subsequent date or time as the Holding Company and FCB shall agree and specify
in the Agreement of Merger (the time the Merger becomes effective being
hereinafter referred to as the "Effective Time").

2.04 Effects of the Merger. The Merger shall have the effect set forth in
Section 1107 of the CGCL.

2.05 Articles of Incorporation and By-laws. The FCB Constituent Documents
as in effect immediately prior to the Effective Time shall be the Constituent
Documents of the Surviving Corporation until thereafter changed or amended as
provided therein or by applicable law.

2.06 Board of Directors and Officers. The board of directors and certain
officers of the Surviving Corporation shall be as set forth on or designated
in accordance with Exhibit A hereto until the earlier of the resignation or
removal of any individual set forth on or designated in accordance with
Exhibit A or until their respective successors are duly elected and qualified,
as the case may be, it being agreed that if any director shall be unable or
unwilling to serve as a director of the Surviving Corporation at the Effective
Time the party which designated such individual as indicated in Exhibit A
shall designate another individual to serve in such individual's place. If any
officer set forth on or designated in accordance with Exhibit A ceases to be a
full-time employee of either one of the Rancho Parties or FCB at or before the
Effective Time or shall be unable or unwilling to serve as an officer of the
Surviving Corporation at the Effective Time, the parties will agree upon
another individual to serve in such individual's stead.

ARTICLE III

Consideration; Exchange Procedures

3.01 Effect on Capital Stock. As of the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any shares of
Holding Company Stock or FCB Common Stock:

(a) Holding Company and FCB Common Stock and Serial Preferred Stock. Each
issued and outstanding share of FCB Common Stock immediately prior to the
Effective Time shall be converted into 0.300 of a fully paid and nonassessable
share of Holding Company Common Stock (the "Merger Consideration"). As of the
Effective Time, all shares of FCB Common Stock shall no longer be outstanding
and shall automatically be canceled and shall cease to exist, and from and
after the Effective Time, certificates representing FCB Common Stock
immediately prior to the Effective Time shall be deemed for all purposes to
represent the number of shares of Holding Company Common Stock into which they
were converted pursuant to this subparagraph (a).

A-6
<PAGE>

(b) Each share of Holding Company Common Stock issued and outstanding
immediately prior to the Effective Time shall remain an issued and outstanding
share of Holding Company Common Stock.

3.02 Rights as Shareholders; Stock Transfers. At the Effective Time, holders
of FCB Common Stock shall cease to be, and shall have no rights as,
shareholders of FCB, other than the conversion rights provided under this
Article III. After the Effective Time, there shall be no transfers on the stock
transfer books of FCB or the Holding Company of shares of FCB Common Stock.

3.03 Exchange Procedures.

(a) At or prior to the Effective Time, the Holding Company shall deposit, or
shall cause to be deposited, with the Holding Company's transfer agent or a
depository or trust institution of recognized standing selected by the Holding
Company and reasonably satisfactory to FCB (in such capacity, the "Exchange
Agent"), which may be an affiliate of the Holding Company, for the benefit of
the holders of certificates formerly representing shares of FCB Common Stock
("Old Certificates") to be exchanged in accordance with this Article III,
certificates representing the shares of Holding Company Common Stock ("New
Certificates") to which the holders of the Old Certificates are entitled
pursuant to this Agreement.

(b) Promptly after the Effective Date, the Holding Company shall send or
cause to be sent to each former holder of record of shares of FCB Common Stock
immediately prior to the Effective Time transmittal materials for use in
exchanging such shareholder's Old Certificates for the New Certificates
provided for in this Article III. The Holding Company shall cause the New
Certificates and/or any check in respect of dividends or distributions which
such Person shall be entitled to receive to be delivered to such shareholder
upon delivery to the Exchange Agent of Old Certificates representing such
shares of FCB Common Stock (or indemnity reasonably satisfactory to the Holding
Company and the Exchange Agent, if any of such certificates are lost, stolen or
destroyed) owned by such shareholder. No interest will be paid on any such cash
to be paid in respect of dividends or distributions which any such Person shall
be entitled to receive pursuant to this Article III upon such delivery.

(c) Neither the Exchange Agent nor any party hereto shall be liable to any
former holder of FCB Common Stock for any amount properly delivered to a public
official pursuant to applicable abandoned property, escheat or similar laws.

(d) From and after the Effective Date, no dividends or other distributions
with respect to Holding Company Common Stock with a record date occurring after
the Effective Date shall be paid in respect of any unsurrendered Old
Certificate representing shares of FCB Common Stock converted in the Merger
into the right to receive shares of Holding Company Common Stock. Upon
surrender of Old Certificates (or declaration of loss and indemnity reasonably
satisfactory to the Holding Company and the Exchange Agent, if any of such
certificates are lost, stolen or destroyed) in accordance with this Section
3.03, the record holder thereof shall be entitled to receive any such dividends
or other distributions, without any interest thereon, which theretofore had
become payable with respect to shares of FCB Common Stock such holder had the
right to receive upon surrender of Old Certificates (or delivery of such
indemnity).

3.04 Fractional Shares. Notwithstanding any other provision hereof, no
fractional shares of Holding Company Common Stock and no certificates or scrip
therefor, or other evidence of ownership thereof, will be issued in the Merger;
instead, the Holding Company shall pay to each holder of FCB Common Stock who
would otherwise be entitled to a fractional share of Holding Company Common
Stock (after taking into account all Old Certificates delivered by such holder)
an amount in cash (without interest) determined by multiplying such fraction by
$4.125.

3.05 Anti-Dilution Provisions. In the event that, with the other party's
consent, the Holding Company or FCB changes (or establishes a record date for
changing) the number or kind of shares of Holding Company Common Stock or FCB
Common Stock, as the case may be, issued and outstanding prior to the Effective
Date as a result of a stock split, stock dividend, recapitalization,
reclassification, reorganization or similar transaction with respect to the
outstanding Holding Company Common Stock or FCB Common Stock, as the case may
be,

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and the record date therefor shall be prior to the Effective Date, the ratio
contemplated by Section 3.01(b) shall be proportionately adjusted in such
manner as the Holding Company and FCB shall agree, which adjustment may
include, as appropriate, the issuance of securities, property or cash on the
same basis as that on which any of the foregoing shall have been issued,
distributed or paid to the holders of Holding Company Common Stock or FCB
Common Stock, as the case may be, generally.

3.06 Stock Options and Warrants. (a) At the Effective Time, each outstanding
option to purchase shares of FCB Common Stock under the FCB Stock Plan (each, a
"FCB Stock Option"), whether vested or unvested, shall automatically be
converted into an option to acquire, on the same terms and conditions as were
applicable under such FCB Stock Option, the number of shares of Holding Company
Common Stock equal to (a) the number of shares of FCB Common Stock subject to
the FCB Stock Option, multiplied by (b) the Merger Consideration (such product
rounded down to the nearest whole number) (a "Replacement Option"), at an
exercise price per share (rounded down to the nearest whole cent) equal to (y)
the aggregate exercise price for the shares of FCB Common Stock which were
purchasable pursuant to such FCB Stock Option divided by (z) the number of full
shares of Holding Company Common Stock subject to such Replacement Option in
accordance with the foregoing. Notwithstanding the foregoing, each FCB Stock
Option which is intended to be an "incentive stock option" (as defined in
Section 422 of the Code) shall be adjusted in accordance with the requirements
of Section 424 of the Code. At or prior to the Effective Time, FCB shall take
all action, if any, necessary with respect to the FCB Stock Plan to permit the
replacement of the outstanding FCB Stock Options by the Holding Company
pursuant to this Section. Prior to the Effective Time, the Holding Company
shall reserve for issuance the number of shares of the Holding Company Common
Stock necessary to satisfy the Holding Company's obligations under this Section
3.06(a). At the Effective Time, the Holding Company shall assume the FCB Stock
Plan; provided, that such assumption shall be only in respect of the
Replacement Options and that the Holding Company shall have no obligation with
respect to any awards under the Company Stock Plan other than the Replacement
Options and shall have no obligation to make any additional grants or rewards
under such assumed FCB Stock Plan. Promptly after the Effective Time, the
Holding Company shall file a registration statement on Form S-8 with respect to
the shares of Holding Company Common Stock issuable in connection with the
Replacement Options and shall use its best efforts to maintain the current
status of the prospectus contained therein, as well as comply with applicable
state securities on "blue sky" laws, for so long as such Replacement Options
remain outstanding.

(b) At the Effective Time, each outstanding warrant to purchase shares of
FCB Common Stock ("FCB Warrants") shall automatically be converted into a
warrant to acquire, on the same terms and conditions as were applicable under
the FCB Warrant, the number of shares of Holding Company Common Stock equal to
(a) the number of shares of FCB Common Stock subject to the FCB Warrant,
multiplied by (b) the Merger Consideration (such product rounded down to the
nearest whole number) (a "Replacement Warrant"), at an exercise price per share
(rounded down to the nearest whole cent) equal to (y) the aggregate exercise
price for the shares of FCB Common Stock which were purchasable pursuant to
such FCB Warrant divided by (z) the number of full shares of Holding Company
Common Stock subject to such Replacement Warrant in accordance with the
foregoing.

3.07 Dissenters' Rights. Any Dissenting Shareholder who shall be entitled to
be paid the "fair value" of his or her Dissenters' Shares, as provided in
Chapter 13 of the CGCL, shall not be entitled to the Merger Consideration in
respect thereof unless and until such Dissenting Shareholder shall have failed
to perfect or shall have effectively withdrawn or lost such Dissenting
Shareholder's right to dissent from the Merger under the CGCL, and shall be
entitled to receive only the payment provided for by Chapter 13 of the CGCL
with respect to such Dissenters' Shares. If any Dissenting Shareholder shall
fail to perfect or shall have effectively withdrawn or lost such right to
dissent, the Dissenters' Shares held by such Dissenting Shareholder shall
thereupon be treated as though such Dissenters' Shares had been converted into
the right to receive the Merger Consideration pursuant to Section 3.01 hereof.

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ARTICLE IV

Conduct of Business Pending Merger

4.01 Forebearances. Each of the Rancho Parties and FCB agrees that from the
date hereof until the Effective Time, except as expressly contemplated by this
Agreement or as set forth in paragraph 4.01 of the Rancho Parties Disclosure
Schedule or paragraph 4.01 of FCB's Disclosure Schedule, as the case may be,
without the prior written consent of the other party hereto (which consent
shall not be unreasonably withheld), it will not, and will cause each of its
Subsidiaries not to:

(a) Ordinary Course. Conduct its business and the business of its
Subsidiaries other than in the ordinary and usual course or fail to use
reasonable efforts to preserve intact their business organizations and assets
and maintain their rights, franchises, leases and existing relations with
customers, suppliers, employees and business associates, or take any action
reasonably likely to have an adverse effect upon its ability to perform any of
its material obligations under this Agreement.

(b) Capital Stock. Other than pursuant to Rights outstanding on the date
hereof and pursuant to the Reorganization, (i) issue, sell or otherwise permit
to become outstanding, or authorize the creation of, any additional shares of
its stock or any Rights, (ii) enter into any agreement with respect to the
foregoing or (iii) permit any additional shares of its stock to become subject
to new grants of employee or director stock options, other Rights or other
stock-based employee rights.

(c) Dividends, Etc. (i) Make, declare, pay or set aside for payment any
dividend (other than (A) dividends from its wholly owned Subsidiaries to it or
another of its wholly owned Subsidiaries and (B) in the case of the Rancho
Parties regular quarterly dividends on their common stock at a rate equal to
the rate paid by Rancho Santa Fe during the fiscal quarter immediately
preceding the date hereof or (ii) directly or indirectly adjust, split,
combine, redeem, reclassify, purchase or otherwise acquire, any shares of its
capital stock.

(d) Compensation; Employment Agreements; Etc. Enter into or amend any
employment, consulting, severance or similar agreements or arrangements with
any of its directors, officers or employees or those of its Subsidiaries, or
hire any new employees above the rank of vice president, or grant any salary or
wage increase or increase any employee benefit (including incentive or bonus
payments), except (i) for normal individual increases in compensation to
employees (including, without limitation, annual salary increases and annual
bonus payments) in the ordinary course of business consistent with past
practice, (ii) for other changes that are required by applicable law and (iii)
to satisfy Previously Disclosed contractual obligations existing as of the date
hereof.

(e) Benefit Plans. Enter into, establish, adopt or amend (except (i) as may
be required by applicable law or (ii) to satisfy Previously Disclosed
contractual obligations existing as of the date hereof) any pension,
retirement, stock option, stock purchase, savings, profit sharing, deferred
compensation, consulting, bonus, group insurance or other employee benefit,
incentive or welfare contract, plan or arrangement, or any trust agreement (or
similar arrangement) related thereto, in respect of any of its directors,
officers or employees or those of its Subsidiaries, or take any action to
accelerate the vesting or exercisability of stock options, restricted stock or
other compensation or benefits payable thereunder.

(f) Dispositions. Sell, transfer, mortgage, encumber or otherwise dispose of
or discontinue any of its assets, deposits, business or properties except for
sales, transfers, mortgages, encumbrances or other dispositions or
discontinuances in the ordinary course of business consistent with past
practice and in a transaction that, together with other such transactions, is
not material to it and its Subsidiaries, taken as a whole.

(g) Acquisitions. Acquire (other than by way of foreclosures or acquisitions
of control in a bona fide fiduciary capacity or in satisfaction of debts
previously contracted in good faith, in each case in the ordinary and usual
course of business consistent with past practice) all or any portion of the
assets, business, deposits or properties of any other entity except in the
ordinary course of business consistent with past practice and in a

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transaction that, together with other such transactions, is not material to it
and its Subsidiaries, taken as a whole.

(h) Constituent Documents. Amend its Constituent Documents or the
Constituent Documents of any of its Subsidiaries.

(i) Accounting Methods. Implement or adopt any change in its accounting
principles, practices or methods, other than as may be required by GAAP or
regulatory accounting requirements.

(j) Contracts. Enter into, renew or terminate, or make any payment not then
required under, any contract or agreement that calls for aggregate annual
payments of $50,000 or more and which is not terminable at will on 60 days or
less notice without payment of a premium penalty, other than loans and other
transactions made in the ordinary course of the banking business.

(k) Claims. Other than in the ordinary course of business, settle any claim,
action or proceeding against it, except for any claim, action or proceeding in
an amount or for such consideration, individually or in the aggregate for all
such settlements, that is not material to it and its Subsidiaries, taken as a
whole, and would not impose any material restriction on the business of the
Holding Company or create precedent for claims that are reasonably likely to be
material to it and its Subsidiaries, taken as a whole.

(l) Adverse Actions. Notwithstanding anything herein to the contrary, (i)
take any action that would, or is reasonably likely to, prevent or impede the
Merger from qualifying as a reorganization within the meaning of Section 368(a)
of the Code or qualifying for pooling-of-interests accounting treatment or (ii)
take any action that is intended or is reasonably likely to result in (A) any
of the conditions to the Merger set forth in Article VII not being satisfied or
(B) a material violation of any provision of this Agreement except, in each
case, as may be required by applicable law or regulation.

(m) Capital Expenditures. Other than in the ordinary course of business,
make any capital expenditures in excess of (i) $50,000 per project or related
series of projects or (ii) $100,000 in the aggregate.

(n) Indebtedness. Incur any indebtedness for borrowed money other than in
the ordinary course of business.

(o) Commitments. Agree or commit to do any of the foregoing.

4.02 Reorganization. Rancho Santa Fe agrees to use its commercially
reasonable efforts to cause the Reorganization to occur as promptly as
practicable.

ARTICLE V

Representations and Warranties

5.01 Disclosure Schedules. On or prior to the date hereof, FCB has delivered
to the Rancho Parties a schedule and the Rancho Parties have delivered to FCB a
schedule (respectively, its "Disclosure Schedule") setting forth, among other
things, items the disclosure of which is necessary or appropriate either in
response to an express disclosure requirement contained in a provision hereof
or as an exception to one or more representations or warranties contained in
Section 5.03 or to one or more of its covenants contained in Article IV;
provided, that the mere inclusion of an item in a Disclosure Schedule as an
exception to a representation or warranty shall not be deemed an admission by a
party that such item was required to be disclosed therein.

5.02 Standard. No representation or warranty of the Rancho Parties or FCB
contained in Section 5.03 (other than the representations and warranties
contained in Section 5.03(b) and 5.03(c)) shall be deemed untrue or incorrect
for any purpose under this Agreement and no party hereto shall be deemed to
have breached a representation or warranty, for any purpose under this
Agreement as a consequence of the existence of any fact, event or circumstance
unless such fact, circumstance or event, individually or taken together with
all other

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facts, events or circumstances inconsistent with any representation or warranty
contained in Section 5.03 has had or is reasonably likely to have a Material
Adverse Effect with respect to the Rancho Parties or FCB, as the case may be.

5.03 Representations and Warranties. Subject to Section 5.01 and Section
5.02 and except as Previously Disclosed, FCB hereby represents and warrants to
the Rancho Parties, and each of the Rancho Parties hereby represents and
warrants to FCB, to the extent applicable, in each case with respect to itself
and its Subsidiaries, as follows:

(a) Organization, Standing and Authority. (i) In the case of FCB and the
Holding Company only, it is a corporation duly organized, validly existing and
in good standing under the laws of the State of California. It is duly
qualified to do business and is in good standing in the states of the United
States and any foreign jurisdictions where its ownership or leasing of property
or assets or the conduct of its business requires it to be so qualified. (ii)
In the case of Rancho Santa Fe only, it is a national banking association
validly existing under the laws of the United States of America. (iii) In the
case of FCB and Rancho Santa Fe, its deposits are insured to the maximum extent
under the BIF.

(b) FCB Stock. In the case of FCB only, the authorized capital stock of FCB
consists of 15,000,000 shares of FCB Common Stock and 2,000,000 shares of
serial preferred stock. At the close of business on September 30, 1999, (i)
4,631,937 shares of FCB Common Stock plus any shares of FCB Common Stock issued
upon exercise or conversion of outstanding Rights since September 30, 1999 and
no shares of serial preferred stock were issued and outstanding and (ii) no
shares of FCB Common Stock were held by FCB in its treasury. As of September
30, 1999, 336,900 shares of FCB Common Stock were subject to FCB Common Stock
Options granted under the FCB Stock Option Plan (the "FCB Stock Plan"). As of
September 30, 1999, there were 920,000 shares of FCB Common Stock reserved for
issuance under the FCB Stock Plan. The outstanding shares of FCB Common Stock
have been duly authorized and are validly issued and outstanding, fully paid
and nonassessable, and subject to no preemptive rights (and were not issued in
violation of any preemptive rights). Except as set forth above, as of the date
hereof, there are no shares of FCB Stock authorized and reserved for issuance,
FCB does not have any Rights issued or outstanding with respect to FCB Stock,
and FCB does not have any commitment to authorize, issue or sell any FCB Stock
or Rights, except pursuant to this Agreement, outstanding FCB Common Stock
Options and the FCB Stock Plan.

(c) The Rancho Parties Stock. (i) In the case of the Holding Company only,
the authorized capital stock of the Holding Company consists of 15,000,000
shares of Holding Company Common Stock and 5,000,000 shares of preferred stock.
As of September 30, 1999, no shares of such stock were issued and outstanding.
Following the Reorganization, the Holding Company will have outstanding shares
of Holding Company Common Stock equal to the shares of Rancho Santa Fe Common
Stock outstanding immediately prior to the Reorganization.

(ii) In the case of Rancho Santa Fe only, the authorized capital stock
consists of 3,350,000 shares of Rancho Santa Fe Common Stock. As of
September 30, 1999, 2,476,885 shares of Rancho Santa Fe Common Stock were
issued and outstanding and no shares of Rancho Santa Fe Common Stock were
held by Rancho Santa Fe in its treasury. As of September 30, 1999, there
were 500,000 shares of Rancho Santa Fe Common Stock reserved for issuance
under the Rancho Santa Fe Common Stock Plan. The outstanding shares of
Rancho Santa Fe Common Stock have been duly authorized and are validly
issued and outstanding, fully paid and nonassessable, and subject to no
preemptive rights (and were not issued in violation of any preemptive
rights). Except as set forth above, as of the date hereof, there are no
shares of Rancho Santa Fe Common Stock authorized and reserved for
issuance, Rancho Santa Fe does not have any Rights issued or outstanding
with respect to Rancho Santa Fe Common Stock, and Rancho Santa Fe does not
have any commitment to authorize, issue or sell any Rancho Santa Fe Common
Stock or Rights, except pursuant to this Agreement, outstanding Rancho
Santa Fe Common Stock Options and the Rancho Santa Fe Common Stock Plan.

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(d) Significant Subsidiaries. The Disclosure Schedule sets forth a true and
correct list of each of the Subsidiaries of the Rancho Parties and FCB, as the
case may be, including a listing of the jurisdiction of incorporation thereof.
(i)(A) It owns, directly or indirectly, all the issued and outstanding equity
securities of each of its Significant Subsidiaries, (B) no equity securities of
any of its Significant Subsidiaries are or may become required to be issued
(other than to it or its wholly owned Subsidiaries) by reason of any Right or
otherwise, (C) there are no contracts, commitments, understandings or
arrangements by which any of such Subsidiaries is or may be bound to sell or
otherwise transfer any equity securities of any such Subsidiaries (other than
to it or its wholly-owned Subsidiaries), (D) there are no contracts,
commitments, understandings, or arrangements relating to its rights to vote or
to dispose of such securities and (E) all the equity securities of each
Significant Subsidiary held by it or its Subsidiaries have been duly authorized
and are validly issued and outstanding, fully paid and nonassessable (except as
provided in 12 U.S.C. (S) 55) and are owned by it or its Subsidiaries free and
clear of any Liens.

(ii) Each of its Significant Subsidiaries has been duly organized and is
validly existing in good standing under the laws of the jurisdiction of its
organization, and is duly qualified to do business and in good standing in
the jurisdictions where its ownership or leasing of property or the conduct
of its business requires it to be so qualified.

(e) Corporate Power. It and each of its Significant Subsidiaries has the
corporate power and authority to carry on its business as it is now being
conducted and to own all its properties and assets; and it has the corporate
power and authority to execute, deliver and perform its obligations under this
Agreement, and to consummate the transactions contemplated hereby and thereby.

(f) Corporate Authority. (i) Subject to receipt of the stockholder approval
described in paragraph (ii) of this Section 5.03(f), this Agreement and the
transactions contemplated hereby have been authorized by all necessary
corporate action on or prior to the date hereof. This Agreement is a valid and
legally binding obligation of such party, enforceable in accordance with its
terms (except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and similar laws of
general applicability relating to or affecting creditors' rights or by general
equity principles) and Section 1812 of the FDIA. In the case of FCB, the
Special Committee of the FCB Board has received the written opinion of U.S.
Bancorp Piper Jaffray to the effect that as of the date hereof the Merger
Consideration is fair to the holders of FCB Common Stock from a financial point
of view. In the case of the Rancho Parties, the Rancho Santa Fe Board has
received the written opinion of The Findley Group to the effect that as of the
date hereof the Merger Consideration is fair to the holders of Rancho Santa Fe
Common Stock from a financial point of view.

(ii) The affirmative vote of the holders of a majority of the voting
power of all outstanding shares of FCB Common Stock or Holding Company
Common Stock, as the case may be, to adopt this Agreement is the only vote
of the holders of any class or series of its capital stock necessary to
approve and adopt this Agreement and the transactions contemplated hereby
and thereby.

(g) Regulatory Approvals; No Defaults. (i) No consents or approvals of, or
filings or registrations with, any Governmental Authority or with any third
party are required to be made or obtained by it or any of its Subsidiaries in
connection with the execution, delivery or performance by it of this Agreement
or to consummate the Merger except for (A) filings and approvals of
applications with and by federal and state banking authorities, (B) filings
with the SEC and state securities authorities, (C) the stockholder approval
described in paragraph (ii) of Section 5.03(f), (D) the filing of the Agreement
of Merger with the California Secretary pursuant to the CGCL, (E) such filings
with Nasdaq to obtain the authorizations for listing contemplated by this
Agreement and (F) such third party consents, of which the failure to obtain
would not individually or in the aggregate have a material adverse effect.

(ii) Subject to receipt of the regulatory approvals referred to in the
preceding paragraph, and the expiration of related waiting periods, and
required filings under federal and state securities laws, the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby and thereby do not and will not (A)
constitute a breach or violation of, or a default

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under, or give rise to any Lien, any acceleration of remedies or any right
of termination under, any law, rule or regulation or any judgment, decree,
order, governmental permit or license, or agreement, indenture or
instrument of it or of any of its Subsidiaries or to which it or any of its
Subsidiaries or properties is subject or bound, (B) constitute a breach or
violation of, or a default under, its Constituent Documents, or (C) require
any consent or approval under any such law, rule, regulation, judgment,
decree, order, governmental permit or license, agreement, indenture or
instrument.

(h) Financial Reports and Regulatory Documents; Material Adverse Effect. (i)
In the case of FCB and Rancho Santa Fe only, its Call Reports for the fiscal
years ended December 31, 1998, 1997 and 1996, and all other reports,
registration statements, definitive proxy statements or information statements
filed by it or any of its Subsidiaries subsequent to December 31, 1996 under
the securities regulations of the FDIC or the OCC, as the case may be, in the
form filed (collectively, its "Regulatory Filings") as of the date filed, (A)
complied in all material respects as to form with the applicable requirements
under such regulation, and (B) any Exchange Act reports did not contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading; and each of
the balance sheets contained in or incorporated by reference into any such
Regulatory Filing (including the related notes and schedules thereto) fairly
presented in all material respects, its financial position and that of its
Subsidiaries as of its date, and each of the statements of income and changes
in shareholders' equity and cash flows or equivalent statements in such
Regulatory Filings (including any related notes and schedules thereto) fairly
presented in all material respects, the results of operations, changes in
shareholders' equity and changes in cash flows, as the case may be, of it and
its Subsidiaries for the periods to which they relate, in each case in
accordance with GAAP consistently applied during the periods involved, except
in each case as may be noted therein, subject to normal year-end audit
adjustments in the case of unaudited statements.

(ii) Since December 31, 1998, it and its Subsidiaries have not incurred
any liability other than in the ordinary course of business consistent with
past practice.

(iii) Since December 31, 1998, (A) it and its Subsidiaries have
conducted their respective businesses in the ordinary and usual course
consistent with past practice (excluding the incurrence of expenses related
to this Agreement and the transactions contemplated hereby) and (B) no
event has occurred or circumstance arisen that, individually or taken
together with all other facts, circumstances and events (described in any
paragraph of Section 5.03 or otherwise), is reasonably likely to have a
Material Adverse Effect with respect to it.

(i) Litigation. Except as Previously Disclosed or set forth in its Annual
Report for the fiscal year ended December 31, 1998, there is no suit, action or
proceeding pending or, to the knowledge of it, threatened against or affecting
it or any of its Subsidiaries (and it is not aware of any basis for any such
suit, action or proceeding) that, individually or in the aggregate, is (i)
material to it and its Subsidiaries, taken as a whole, or (ii) that is
reasonably likely to prevent or delay it in any material respect from
performing its obligations under, or consummating the transactions contemplated
by, this Agreement.

(j) Regulatory Matters. (i) Neither it nor any of its Subsidiaries is a
party to or is subject to any written order, decree, agreement, memorandum of
understanding or similar arrangement with, or a commitment letter or similar
submission to, or extraordinary supervisory letter from, any federal or state
Governmental Authority charged with the supervision or regulation of financial
institutions or issuers of securities or engaged in the insurance of deposits
or the supervision or regulation of it or any of its Subsidiaries
(collectively, the "Regulatory Authorities").

(ii) Neither it nor any of its Subsidiaries has been advised by any
Regulatory Authority that such Regulatory Authority is contemplating
issuing or requesting (or is considering the appropriateness of issuing or
requesting) any such written order, decree, agreement, memorandum of
understanding, commitment letter, supervisory letter or similar submission.

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(k) Compliance with Laws. It and each of its Subsidiaries:

(i) is in compliance with all applicable federal, state, local and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders
or decrees applicable thereto or to the employees conducting such
businesses, including, without limitation, the Equal Credit Opportunity
Act, the Fair Housing Act, the Community Reinvestment Act, the Home
Mortgage Disclosure Act and all other applicable fair lending laws and
other laws relating to discriminatory business practices;

(ii) has all permits, licenses, authorizations, orders and approvals of,
and has made all filings, applications and registrations with, all
Governmental Authorities that are required in order to permit it to own or
lease its properties and to conduct its business as presently conducted;
all such permits, licenses, certificates of authority, orders and approvals
are in full force and effect and, to its knowledge, no suspension or
cancellation of any of them is threatened; and

(iii) has received, since December 31, 1998, no written notification
from any Governmental Authority (A) asserting that it or any of its
Subsidiaries is not in compliance with any of the statutes, regulations or
ordinances which such Governmental Authority enforces or (B) threatening to
revoke any license, franchise, permit or governmental authorization.

(l) Material Contracts; Defaults. Except for those agreements and other
documents identified in its Disclosure Schedule, neither it nor any of its
Subsidiaries is a party to, bound by or subject to any agreement, contract,
arrangement, commitment or understanding (whether written or oral) (i) that is
a "material contract" within the meaning of Item 601(b)(10) of the SEC's
Regulation S-K, (ii) that materially restricts the conduct of business by it or
any of its Subsidiaries or (iii) which, upon consummation of the transactions
contemplated by this Agreement, will (either alone or upon the occurrence of
any additional acts or events) result in any payment or benefits (whether of
severance pay or otherwise) becoming due, or the acceleration or vesting of any
rights to any payment or benefits from it, its subsidiaries or the Surviving
Company to any director, officer or employee thereof. The respective Disclosure
Schedule indicates the maximum monetary amounts payable (including any tax
indemnification payments in respect of income and/or excise taxes) due under
any contracts described in Section 5.03(l)(iii). Neither it nor any of its
Subsidiaries is in default under any material contract, agreement, commitment,
arrangement, lease, insurance policy or other instrument to which it is a
party, by which its respective assets, business, or operations may be bound or
affected, or under which it or its respective assets, business, or operations
receives benefits, and there has not occurred any event that, with the lapse of
time or the giving of notice or both, would constitute such a default.

(m) No Brokers. No action has been taken by it or any of its Subsidiaries
that would give rise to any valid claim against any party hereto for a
brokerage commission, finder's fee or other like payment with respect to the
transactions contemplated by this Agreement, excluding Previously Disclosed
fees to be paid to Belle Plaine Partners for advisory services and The Findley
Group for its fairness opinion in the case of the Rancho Parties and a
Previously Disclosed fee to be paid to U.S. Bancorp Piper Jaffray for its
fairness opinion in the case of FCB.

(n) Employee Benefit Plans.

(i) All material benefit and compensation plans, contracts, policies or
arrangements covering its current employees or former employees and those
of its Subsidiaries (its "Employees") and its current or former directors,
including, but not limited to, "employee benefit plans" within the meaning
of Section 3(3) of ERISA, and deferred compensation, stock option, stock
purchase, stock appreciation rights, stock based, incentive and bonus plans
(its "Benefit Plans"), are Previously Disclosed. True and complete copies
of all Benefit Plans, including, but not limited to, any trust instruments
and insurance contracts forming a part of any Benefit Plans, and all
amendments thereto, have been made available to the other party hereto.

(ii) All employee benefit plans, other than "multiemployer plans" within
the meaning of Section 3(37) of ERISA, covering its Employees (its
"Plans"), to the extent subject to ERISA, are in

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<PAGE>

substantial compliance with ERISA. Each of its Plans which is an "employee
pension benefit plan" within the meaning of Section 3(2) of ERISA ("Pension
Plan"), and which is intended to be qualified under Section 401(a) of the
Code has received a favorable determination letter from the Internal
Revenue Service with respect to "TRA" (as defined in Section 1 of Rev.
Proc. 93-39), and it is not aware of any circumstances reasonably likely to
result in revocation of any such favorable determination letter. There is
no material pending or, to its knowledge, threatened litigation relating to
its Plans. Neither it nor any of its Subsidiaries has engaged in a
transaction with respect to any of its Plans that, assuming the taxable
period of such transaction expired as of the date hereof, could be
reasonably likely to subject it or any of its Subsidiaries to a tax or
penalty imposed by either Section 4975 of the Code or Section 502(i) of
ERISA in an amount which would be material.

(iii) No liability under Subtitle C or D of Title IV of ERISA has been
or is reasonably expected to be incurred by it or any of its Subsidiaries
with respect to any ongoing, frozen or terminated "single-employer plan,"
within the meaning of Section 4001(a)(15) of ERISA, currently or formerly
maintained by any of them, or the single-employer plan of any entity which
is considered one employer with it under Section 4001 of ERISA or Section
414 of the Code (an "ERISA Affiliate"). None of it, any of its Subsidiaries
or any of its ERISA Affiliates has contributed to a "multiemployer plan,"
within the meaning of Section 3(37) of ERISA, at any time on or after
September 26, 1980. No notice of a "reportable event," within the meaning
of Section 4043 of ERISA for which the 30-day reporting requirement has not
been waived, has been required to be filed for any of its Pension Plans or
by any of its ERISA Affiliates within the 12-month period ending on the
date hereof or will be required to be filed solely as a result of the
transactions contemplated by this Agreement.

(iv) All contributions required to be made under the terms of any of its
Plans have been timely made or have been reflected on its consolidated
financial statements included in its Regulatory Filings. None of its
Pension Plans or any single-employer plan of any of its ERISA Affiliates
has an "accumulated funding deficiency" (whether or not waived) within the
meaning of Section 412 of the Code or Section 302 of ERISA and none of its
ERISA Affiliates has an outstanding funding waiver. Neither it nor any of
its Subsidiaries has provided, or is required to provide, security to any
of its Pension Plans or to any single-employer plan of any of its ERISA
Affiliates pursuant to Section 401(a)(29) of the Code.

(v) Under each of its Pension Plans which is a single-employer plan, as
of the last day of the most recent plan year ended prior to the date
hereof, the actuarially determined present value of all "benefit
liabilities", within the meaning of Section 4001(a)(16) of ERISA (as
determined on the basis of the actuarial assumptions contained in its
Plan's most recent actuarial valuation), did not exceed the then current
value of the assets of such Plan, and there has been no material change in
the financial condition of such Plan since the last day of the most recent
plan year.

(vi) Neither it nor any of its Subsidiaries has any obligations for
retiree health and life benefits under any of its Benefit Plans. It or its
Subsidiaries may amend or terminate any of its Benefit Plans at any time
without incurring any liability thereunder.

(vii) Neither its execution of this Agreement, the performance of its
obligations hereunder, the consummation of the transactions contemplated by
this Agreement, the termination of the employment of any of its employees
within a specified time after the Effective Date, nor any other action
taken or failed to be taken by it prior to the execution of this Agreement
will (w) limit its right, in its sole discretion, to administer or amend in
any respect or terminate any of its Benefit Plans or any related trust, (x)
entitle any of its employees or any employees of its Subsidiaries to
severance pay, (y) accelerate the time of payment or vesting or trigger any
payment of compensation or benefits under, increase the amount payable or
trigger any other material obligation pursuant to, any of its Benefit Plans
or (z) result in any breach or violation of, or a default under, any of its
Benefit Plans. Without limiting the foregoing, as a result of the
consummation of the transactions contemplated by this Agreement (including,
without limitation, as a result of the termination of the employment of any
of its employees within a specified time of the Effective Date) neither it
nor any of its Subsidiaries will be obligated to make a payment to an
individual

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<PAGE>

that would be a "parachute payment" to a "disqualified individual" as those
terms are defined in Section 280G of the Code, without regard to whether
such payment is reasonable compensation for personal services performed or
to be performed in the future.

(o) Labor Matters. Neither it nor any of its Subsidiaries is a party to or
is bound by any collective bargaining agreement, contract or other agreement or
understanding with a labor union or labor organization, nor is it or any of its
Subsidiaries the subject of a proceeding asserting that it or any such
Subsidiary has committed an unfair labor practice (within the meaning of the
National Labor Relations Act) or seeking to compel it or any of its
Subsidiaries to bargain with any labor organization as to wages or conditions
of employment, nor is there any strike or other material labor dispute
involving it or any of its Subsidiaries pending or, to its knowledge,
threatened, nor to its knowledge is there any activity involving its or any of
its Subsidiaries' employees seeking to certify a collective bargaining unit or
engaging in other organizational activity.

(p) Environmental Matters. To its knowledge, neither its conduct nor its
operation or the conduct or operation of its Subsidiaries nor any condition of
any property presently or previously owned, leased or operated by any of them
(including, without limitation, in a fiduciary or agency capacity), violates or
violated Environmental Laws and no condition has existed or event has occurred
with respect to any of them or any such property that, with notice or the
passage of time, or both, is reasonably likely to result in liability under
Environmental Laws. To its knowledge, no property on which it or any of its
Subsidiaries holds a Lien, violates or violated Environmental Laws and no
condition has existed or event has occurred with respect to any such property
that, with notice or the passage of time, or both, is reasonably likely to
result in liability under Environmental Laws. Neither it nor any of its
Subsidiaries has received any written notice from any person or entity that it
or its Subsidiaries or the operation or condition of any property ever owned,
leased, operated, or held as collateral or in a fiduciary capacity by any of
them are or were in violation of or otherwise are alleged to have liability
under any Environmental Law, including, but not limited to, responsibility (or
potential responsibility) for the cleanup or other remediation of any
pollutants, contaminants, or hazardous or toxic wastes, substances or materials
at, on, beneath, originating from or affecting any such property.

(q) Tax Matters. (i) (A) All Tax Returns that are required to be filed
(taking into account any extensions of time within which to file) by or with
respect to it and its Subsidiaries have been duly and timely filed, and all
such Tax Returns are complete and accurate in all material respects, (B) all
Taxes shown to be due on the Tax Returns referred to in clause (A) have been
paid in full, (C) all Taxes that it or any of its Subsidiaries is obligated to
withhold from amounts owing to any employee, creditor or third party have been
paid over to the proper Governmental Authority in a timely manner, to the
extent due and payable, (D) the Tax Returns referred to in clause (A) have been
examined by the Internal Revenue Service or the appropriate Tax authority or
the period for assessment of the Taxes in respect of which such Tax Returns
were required to be filed has expired, (E) all deficiencies asserted or
assessments made as a result of such examinations have been paid in full, (F)
no issues that have been raised by the relevant taxing authority in connection
with the examination of any of the Tax Returns referred to in clause (A) are
currently pending, and (G) no extensions or waivers of statutes of limitation
have been given by or requested with respect to any of its Taxes or those of
its Subsidiaries. It has made available to the other party hereto true and
correct copies of the U.S. federal income Tax Returns filed by it and its
Subsidiaries for each of the three most recent fiscal years ended on or before
December 31, 1997. It has made provision in accordance with GAAP, in the
financial statements included in the Regulatory Filings filed prior to the date
hereof, for all Taxes that accrued on or before the end of the most recent
period covered by its Regulatory Filings filed prior to the date hereof.
Neither it nor any of its Subsidiaries is a party to any Tax allocation or
sharing agreement, is or has been a member of an affiliated group filing
consolidated or combined Tax returns (other than a group over which it is or
was the common parent) or otherwise has any liability for the Taxes of any
person (other than its own Taxes and those of its Subsidiaries). As of the date
hereof, neither it nor any of its Subsidiaries has any reason to believe that
any conditions exist that could reasonably be expected to prevent or impede the
Merger from qualifying as a reorganization within the meaning of Section 368(a)
of the Code. No Liens for Taxes exist with respect to any of its assets or
properties

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<PAGE>

or those of its Subsidiaries, except for statutory Liens for Taxes not yet due
and payable or that are being contested in good faith and reserved for in
accordance with GAAP. Neither it nor any of its Subsidiaries has been a party
to any distribution occurring during the last three years in which the parties
to such distribution treated the distribution as one to which Section 355 of
the Code applied.

(ii) No Tax is required to be withheld pursuant to Section 1445 of the
Code as a result of the transfer contemplated by this Agreement.

(iii) Neither it nor any of its Subsidiaries (A) has made an election
under Section 341(f) of the Code, (B) except as Previously Disclosed has
made any payment, is obligated to make any payment, or is a party to any
agreement that could obligate it to make any payment that would not be
deductible under Section 280G of the Code, (C) has issued or assumed any
obligation under Section 279 of the Code, any high yield discount
obligation as described in Section 163(i) of the Code or any registration-
required obligation within the meaning of Section 163(f)(2) of the Code
that is not in registered form, or (D) is or has been a United States real
property holding corporation within the meaning of Section 897(c)(2) of the
Code.

(r) Derivative Instruments. All interest rate swaps, caps, floors, option
agreements, futures and forward contracts and other similar risk management
arrangements, whether entered into for its own account, or for the account of
one or more of its Subsidiaries or their customers, if any, were entered into
(i) in accordance with prudent business practices and all applicable laws,
rules, regulations and regulatory policies and (ii) with counterparties
believed to be financially responsible at the time; and each of them
constitutes the valid and legally binding obligation of such party or one of
its Subsidiaries, enforceable in accordance with its terms (except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws of general
applicability relating to or affecting creditors' rights or by general equity
principles), and are in full force and effect. Neither it nor its Subsidiaries,
nor to its knowledge, any other party thereto, is in breach of any of its
obligations under any such agreement or arrangement.

(s) Books and Records. Its books and records and those of its Subsidiaries
have been fully, properly and accurately maintained in all material respects,
and there are no material inaccuracies or discrepancies of any kind contained
or reflected therein.

(t) Insurance. It has made available to the other party hereto all of the
insurance policies, binders, or bonds maintained by it or its Subsidiaries (its
"Insurance Policies"). It and its Subsidiaries are insured with reputable
insurers against such risks and in such amounts as its management reasonably
has determined to be prudent in accordance with industry practices. All of its
Insurance Policies are in full force and effect; it and its Subsidiaries are
not in material default thereunder; and all claims thereunder for which a basis
is known, or reasonably should be known, by it have been filed in due and
timely fashion.

(u) Accounting Treatment. As of the date hereof, to its knowledge, there is
no reason why the Merger will fail to qualify for "pooling-of-interests"
accounting treatment.

(v) Year 2000. To its knowledge, the mission critical computer software
operated by it and/or any of its Subsidiaries is currently capable of
providing, or is being adapted to provide, uninterrupted millennium
functionality to record, store, process and present calendar dates falling on
or after January 1, 2000 in substantially the same manner and with
substantially the same functionality as such mission critical software records,
stores, processes and presents such calendar dates falling on or before
December 31, 1999. To its knowledge, the costs of adaptations referred to in
this clause will not have a Material Adverse Effect with respect to it. Neither
it nor any of its Subsidiaries has received, nor to its knowledge are there
facts that would reasonably be expected to form the basis for the issuance of,
a "Year 2000 Deficiency Notification Letter" (as such term is employed in the
Federal Reserve's Supervision and Regulatory Letter No. SR 98-3 (SUP), dated
March 4, 1998) or similar notice from any state banking authority. It has made
available to the other party hereto a complete and accurate copy of its and its
Subsidiaries' plan, including an estimate of anticipated associated costs, for
addressing the issues set forth in the Year 2000 guidance papers issued by the
Federal Financial Institutions Examination Council, including the statements
dated May 5, 1997, entitled "Year 2000

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<PAGE>

Project Management Awareness," December 17, 1997, entitled "Safety and
Soundness Guidelines Concerning the Year 2000 Business Risk," and October 14,
1998, entitled "Interagency Guidelines Establishing Year 2000 Standards for
Safety and Soundness," as such issues affect any of it or its Subsidiaries.
Between the date of this Agreement and the Effective Time, it shall use
commercially reasonable and practicable efforts to implement such plan.

(w) Approvals. As of the date hereof, it knows of no reason why all
regulatory approvals required for the consummation of the transactions
contemplated hereby should not be obtained.

(x) Reorganization. As of the date hereof, it has no reason to believe that
the Merger will fail to qualify as a reorganization under Section 368(a) of the
Code.

(y) Loan Portfolio. Except as Previously Disclosed, with respect to each
loan owned by it or its Subsidiaries in whole or in part (each, a "Loan"), to
its best knowledge:

(i) the note and the related security documents are legal, valid and
binding obligations of the maker or obligor thereof, enforceable against
such maker or obligor in accordance with their terms;

(ii) neither it nor any of its Subsidiaries nor any prior holder of a
Loan has modified the note or any of the related security documents in any
material respect or satisfied, canceled or subordinated the note or any of
the related security documents except as Previously Disclosed;

(iii) the note and the related security documents, copies of which are
included in the Loan files, are true and correct copies of the documents
they purport to be and have not been suspended, amended, modified, canceled
or otherwise changed except as otherwise disclosed by documents in the
applicable Loan file;

(iv) there is no pending or threatened condemnation proceeding or
similar proceeding affecting the property which serves as security for a
Loan, except as otherwise referenced on its books and records;

(v) there is no pending or threatened litigation or proceeding relating
to the property which serves as the security for the Loan;

(vi) with respect to a Loan held in the form of a participation, the
participation document is legal, valid, binding and enforceable.

(vii) except as Previously Disclosed, neither it nor its Subsidiaries is
a party to any written or oral (a) Loan, under the terms of which the
obligor was, as of June 30, 1999, 90 days or more delinquent in payment of
principal or interest, or (b) Loan with any director, executive officer, or
five percent or greater shareholder of it or its Subsidiaries, or to its
knowledge, any person, corporation or enterprise controlling, controlled by
or under common control with any of the foregoing.

(z) Indemnification. Except as provided in its Constituent Documents,
neither it nor any of its Subsidiaries is a party to any indemnification
agreement with any of its present or former directors, officers, employees,
agents or other persons who serve or served in any other capacity with any
other enterprise at its request (a "Covered Person"), and, to its best
knowledge, there are no claims for which any Covered Person would be entitled
to indemnification.

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ARTICLE VI

Covenants

6.01 Reasonable Best Efforts. Subject to the terms and conditions of this
Agreement, each of the Rancho Parties and FCB agrees to use its respective
commercially reasonable efforts in good faith to take, or cause to be taken,
all actions, and to do, or cause to be done, all things necessary, proper or
desirable, or advisable under applicable laws, so as to permit consummation of
the Merger as promptly as practicable and otherwise to enable consummation of
the transactions contemplated hereby and shall cooperate fully with the other
party hereto to that end.

6.02 Stockholder Approvals. (a) Each of the Holding Company and FCB agrees
to take in accordance with applicable law and its respective Constituent
Documents all action reasonably necessary to convene a meeting of its
respective stockholders (including any adjournment or postponement, the
"Holding Company Meeting" and the "FCB Meeting", respectively), as promptly as
practicable, to consider and vote upon (i) the approval of the issuance of
Holding Company Common Stock as contemplated by this Agreement, and (ii) the
approval and adoption of this Agreement, as well as any other matters required
to be approved by such entity's stockholders for consummation of the Merger, in
the case of both the Holding Company Meeting and the FCB Meeting.

(b) Following execution of this Agreement, and prior to the preparation of
the Joint Proxy Statement, the boards of directors of the Holding Company and
FCB shall adopt resolutions recommending to the shareholders of the Holding
Company and the shareholders of FCB, respectively, adoption of this Agreement
and the other matters required to be approved or adopted in order to carry out
the intentions of this Agreement. Such boards of directors shall at all times
continue such recommendations in effect without qualification and shall use,
and cause the Holding Company and FCB, respectively, to use commercially
reasonable efforts to obtain such adoption (it being understood and agreed that
the obligations under this sentence shall not be altered by the commencement,
proposal, disclosure or communication of any Acquisition Proposal).

6.03 Registration Statement and Joint Proxy Statement. (a) The parties agree
jointly to prepare a registration statement on Form S-4 or other applicable
form (the "Registration Statement") to be filed by the Holding Company with the
SEC in connection with the issuance of Holding Company Common Stock in the
Merger (including the proxy statement and prospectus and other proxy
solicitation materials of the Holding Company and FCB constituting a part
thereof (the "Joint Proxy Statement") and all related documents). The parties
agree to cooperate, and to cause their Subsidiaries to cooperate, with the
other party, its counsel and its accountants, in the preparation of the
Registration Statement and the Joint Proxy Statement; and provided that both
parties and their respective Subsidiaries have cooperated as required above,
the Holding Company and FCB agree to file the Joint Proxy Statement in
preliminary form with the SEC as promptly as reasonably practicable, and the
Holding Company agrees to file the Registration Statement with the SEC as soon
as reasonably practicable after any SEC comments with respect to the
preliminary Joint Proxy Statement are resolved. Each of the Holding Company and
FCB agrees to use all reasonable efforts to cause the Registration Statement to
be declared effective under the Securities Act as promptly as reasonably
practicable after filing thereof. The Holding Company also agrees to use all
reasonable efforts to obtain all necessary state securities law or "Blue
Sky"permits and approvals required to carry out the transactions contemplated
by this Agreement. FCB agrees to furnish to the Holding Company all information
concerning FCB, its Subsidiaries, officers, directors and stockholders as may
be reasonably requested in connection with the foregoing.

(b) Each of the Holding Company and FCB agrees, as to itself and its
Subsidiaries, that none of the information supplied or to be supplied by it for
inclusion or incorporation by reference in (i) the Registration Statement will,
at the time the Registration Statement and each amendment or supplement
thereto, if any, becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading and
(ii) the Joint Proxy Statement and any amendment or supplement thereto will, at
the date of mailing to

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stockholders and at the time of the Holding Company Meeting or the FCB Meeting,
as the case may be, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which such
statement was made, not misleading. Each of the Holding Company and FCB further
agrees that if it shall become aware prior to the Effective Date of any
information furnished by it that would cause any of the statements in the Joint
Proxy Statement or the Registration Statement to be false or misleading with
respect to any material fact, or to omit to state any material fact necessary
to make the statements therein not false or misleading, to promptly inform the
other party thereof and to take the necessary steps to correct the Joint Proxy
Statement or the Registration Statement.

(c) The Holding Company agrees to advise FCB, promptly after the Holding
Company receives notice thereof, of the time when the Registration Statement
has become effective or any supplement or amendment has been filed, of the
issuance of any stop order or the suspension of the qualification of Holding
Company Common Stock for offering or sale in any jurisdiction, of the
initiation or threat of any proceeding for any such purpose, or of any request
by the SEC for the amendment or supplement of the Registration Statement or for
additional information.

6.04 Press Releases. The Rancho Parties and FCB shall consult with each
other before issuing any press release with respect to the Merger or this
Agreement and shall not issue any such press release or make any such public
statement without the prior consent of the other party, which shall not be
unreasonably withheld; provided, however, that a party may, without the prior
consent of the other party (but after prior consultation, to the extent
practicable in the circumstances) issue such press release or make such public
statement as may upon the advice of outside counsel be required by law or the
rules and regulations of Nasdaq. The Rancho Parties and FCB shall cooperate to
develop all public announcement materials and make appropriate management
available at presentations related to the transactions contemplated by this
Agreement as reasonably requested by the other party.

6.05 Access; Information (a) Each of the Rancho Parties and FCB agrees that
upon reasonable notice and subject to applicable laws relating to the exchange
of information, it shall afford the other party, and the other party's
officers, employees, counsel, accountants and other authorized representatives,
such access during normal business hours throughout the period prior to the
Effective Time to the books, records (including, without limitation, tax
returns and work papers of independent auditors), properties, personnel and to
such other information as any party may reasonably request and, during such
period, it shall furnish promptly to such other party (i) a copy of each
material report, schedule and other document filed by it pursuant to the
requirements of federal or state securities or banking laws, and (ii) all other
information concerning the business, properties and personnel of it as the
other may reasonably request.

(b) Each party agrees that it will not, and will cause its representatives
not to, use any information obtained pursuant to this Section 6.05 (as well as
any other information obtained prior to the date hereof in connection with the
entering into of this Agreement) for any purpose unrelated to the consummation
of the transactions contemplated by this Agreement. Subject to the requirements
of law, each party will keep confidential, and will cause its representatives
to keep confidential, all information and documents obtained pursuant to this
Section 6.05 (as well as any other information obtained prior to the date
hereof in connection with the entering into of this Agreement) unless such
information (i) was already known to such party, (ii) becomes available to such
party from other sources not known by such party to be bound by a
confidentiality obligation, (iii) is disclosed with the prior written approval
of the providing party or (iv) is or becomes readily ascertainable from
publicly available sources. In the event that this Agreement is terminated or
the transactions contemplated by this Agreement shall otherwise fail to be
consummated, each party shall promptly cause all copies of documents or
extracts thereof containing information and data as to the other party to be
returned to the other party.

(c) No investigation by either party of the business and affairs of the
other party, pursuant to this Section 6.05 or otherwise, shall affect or be
deemed to modify or waive any representation, warranty, covenant

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or agreement in this Agreement, or the conditions to either party's obligation
to consummate the transactions contemplated by this Agreement.

6.06 Acquisition Proposals. Each of Rancho Santa Fe, the Holding Company and
FCB agrees that it shall not, and shall cause its Subsidiaries and its and its
Subsidiaries'officers, directors, agents, advisors and affiliates not to,
solicit or encourage inquiries or proposals with respect to, or engage in any
negotiations concerning, or provide any confidential information to, or have
any discussions with, any Person relating to, any Acquisition Proposal in
respect of an Acquisition Proposal. Each of Rancho Santa Fe, the Holding
Company and FCB shall immediately cease and cause to be terminated any
activities, discussions or negotiations conducted prior to the date of this
Agreement with any Persons other than the Rancho Parties or FCB, as the case
may be, with respect to any of the foregoing and shall use its reasonable best
efforts to enforce any confidentiality or similar agreement relating to an
Acquisition Proposal. Each of the Rancho Parties and FCB shall promptly (within
24 hours) advise the other party following the receipt by the Rancho Parties or
FCB, as the case may be, of any Acquisition Proposal and the substance thereof
(including the identity of the person making such Acquisition Proposal), and
shall keep such other party apprised of any developments in respect thereof on
a constant basis.

6.07 Affiliate Agreements. (a) Not later than the 15th day prior to the
mailing of the Joint Proxy Statement, (i) the Holding Company shall deliver to
FCB a schedule of each Person that, to the best of its knowledge, is or is
reasonably likely to be, as of the date of the Holding Company Meeting, deemed
to be an "affiliate" of the Holding Company (each, a "Holding Company
Affiliate"), as that term is used in SEC Accounting Series Releases 130 and
135; and (ii) FCB shall deliver to the Holding Company a schedule of each
Person that, to the best of its knowledge, is or is reasonably likely to be, as
of the date of the FCB Meeting, deemed to be an "affiliate" of FCB (each, an
"FCB Affiliate") as that term is used in Rule 145 under the Securities Act or
SEC Accounting Series Releases 130 and 135.

(b) Each of the Holding Company and FCB shall use its respective
commercially reasonable efforts to cause each Person who may be deemed to be a
Holding Company Affiliate or a FCB Affiliate to execute and deliver to the
Holding Company and FCB on or before the date of mailing of the Joint Proxy
Statement an agreement in substantially the form attached hereto as Exhibit B
or Exhibit C, respectively.

6.08 Shareholder Agreements. Not later than the 15th day prior to the
mailing of the Joint Proxy Statement, the directors and certain officers and
shareholders of Rancho Santa Fe and FCB, respectively, in exchange for good and
valuable consideration, shall have executed and delivered to FCB and Rancho
Santa Fe, as the case may be, shareholder agreements substantially in the form
of Exhibit D hereto (the "Shareholder Agreements").

6.09 Nasdaq. The Holding Company shall use commercially reasonable efforts
to cause the Holding Company Common Stock to be issued in the Merger to be
approved for quotation on the Nasdaq, subject to official notice of issuance,
as promptly as practicable after the date hereof, and in any event prior to the
Effective Date.

6.10 Regulatory Applications. (a) The Holding Company and FCB and their
respective Subsidiaries shall cooperate and use their respective commercially
reasonable efforts to prepare as promptly as possible all documentation, to
effect all filings and to obtain all permits, consents, approvals and
authorizations of all third parties and Governmental Authorities necessary to
consummate the transactions contemplated by this Agreement and the Holding
Company shall make all necessary regulatory filings as soon as practicable.
Each of the Holding Company and FCB shall have the right to review in advance,
and to the extent practicable each will consult with the other, in each case
subject to applicable laws relating to the exchange of information, with
respect to all material written information submitted to any third party or any
Governmental Authority in connection with the transactions contemplated by this
Agreement. In exercising the foregoing right, each of the parties hereto agrees
to act reasonably and as promptly as practicable. Each party hereto agrees that
it will consult with the other party hereto with respect to the obtaining of
all material permits, consents, approvals and

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authorizations of all third parties and Governmental Authorities necessary or
advisable to consummate the transactions contemplated by this Agreement and
each party will keep the other party appraised of the status of material
matters relating to completion of the transactions contemplated hereby.

(b) Each party agrees, upon request, to furnish the other party with all
information concerning itself, its Subsidiaries, directors, officers and
stockholders and such other matters as may be reasonably necessary or advisable
in connection with any filing, notice or application made by or on behalf of
such other party or any of its Subsidiaries with or to any third party or
Governmental Authority.

6.11 Indemnification. (a) Following the Effective Date, the Holding Company
shall indemnify, defend and hold harmless the present and former directors and
officers of FCB and their respective Subsidiaries (each, an "Indemnified
Party") against all costs or expenses (including reasonable attorneys' fees),
judgments, fines, losses, claims, damages or liabilities (collectively,
"Costs") as incurred, in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative,
arising out of actions or omissions occurring at or prior to the Effective Time
(including, without limitation, the transactions contemplated by this
Agreement) to the fullest extent that the Holding Company, FCB and their
respective Subsidiaries are permitted to indemnify (and advance expenses to)
their respective directors and officers under the laws of their respective
jurisdictions of incorporation, their respective Constituent Documents.

(b) For a period of four years from the Effective Time, the Holding Company
shall use its reasonable best efforts to provide director's and officer's
liability insurance that serves to reimburse the present and former officers
and directors of FCB or any of their respective Subsidiaries (determined as of
the Effective Time) with respect to claims against such directors and officers
arising from facts or events occurring at or prior to the Effective Time
(including, without limitation, the transactions contemplated by this
Agreement) which insurance shall contain at least the same coverage and
amounts, and contain terms and conditions no less advantageous, as that
coverage currently provided by FCB.

(c) Any Indemnified Party wishing to claim indemnification under Section
6.11(a), upon learning of any claim, action, suit, proceeding or investigation
described above, shall promptly notify the Holding Company thereof; provided
that the failure so to notify shall not affect the obligations of the Holding
Company under Section 6.11(a) unless and to the extent that the Holding Company
is actually and materially prejudiced as a result of such failure.

(d) If the Holding Company or any of its successors or assigns shall
consolidate with or merge into any other entity and shall not be the continuing
or surviving entity of such consolidation or merger or shall transfer all or
substantially all of its assets to any other entity, then and in each case, the
Holding Company shall cause proper provision to be made so that the successors
and assigns of the Holding Company shall assume the obligations set forth in
this Section 6.11.

(e) The provisions of this Section 6.11 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party and his or her heirs
and representatives.

6.12 Benefit Plans. (a) The Holding Company shall, from and after the
Effective Time, (i) comply with the Benefit Plans of FCB (the "FCB Benefit
Plans") in accordance with their terms, (ii) provide former employees of FCB
who remain as employees of the Holding Company with employee benefit plans no
less favorable in the aggregate than those provided to similarly situated
employees of the Holding Company ("Holding Company Benefit Plans"), (iii)
provide employees of FCB who remain as employees of the Holding Company credit
for years of service with FCB or any of its Subsidiaries prior to the Effective
Time for the purpose of eligibility and vesting (iv) cause any and all pre-
existing condition limitations (to the extent such limitations did not apply to
a pre-existing condition under comparable FCB Benefit Plans) and eligibility
waiting periods under group health plans of the Holding Company to be waived
with respect to former employees of FCB who remain as employees of the Holding
Company (and their eligible dependents) and who become participants in such
group health plans and (v) cause to be credited to any deductible or out-of-
pocket

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expense of the Holding Company Benefit Plans any deductibles or out-of-pocket
expenses incurred by employees of FCB and their beneficiaries and dependents
during the portion of the calendar year prior to their participation in the
Holding Company Benefit Plans.

(b) The Holding Company shall honor in accordance with their terms, all
vested or accrued benefit obligations to, and contractual rights of, current
and former employees of FCB and its Subsidiaries, including, without
limitation, any benefits or rights under the agreements listed on Section 6.12
of the FCB Disclosure Schedule or that arise as a result of the transactions
contemplated by this Agreement (either alone or in combination with any other
event).

(c) Notwithstanding anything contained herein to the contrary, prior to the
Effective Time, the Holding Company and FCB shall take all actions necessary
with respect to the Holding Company Stock Plan and the Holding Company Benefit
Plans or the FCB Stock Plan and FCB Benefit Plans, as the case may be, and the
rights thereunder to the extent required in order for the Merger to qualify for
pooling-of-interests accounting treatment.

6.13 Accountants' Letters. Each of the Holding Company and FCB shall use its
respective commercially reasonable efforts to cause to be delivered to the
other party a letter of KPMG LLP, independent auditors, dated (i) the date on
which the Registration Statement shall become effective and (ii) a date shortly
prior to the Effective Date, and addressed to such other party, in form and
substance customary for "comfort" letters delivered by independent accountants
in accordance with Statement of Accounting Standards No. 72.

6.14 Notification of Certain Matters. Each of the Holding Company and FCB
shall give prompt notice to the other of any fact, event or circumstance known
to it that (i) is reasonably likely, individually or taken together with all
other facts, events and circumstances known to it, to result in any Material
Adverse Effect with respect to it or (ii) would cause or constitute a material
breach of any of its representations, warranties, covenants or agreements
contained herein.

6.15 Certain Policies. Prior to the Effective Date, FCB shall, consistent
with GAAP and on a basis mutually satisfactory to it and the Holding Company,
modify and change its loan, litigation and real estate valuation policies and
practices (including, without limitation, loan classifications and levels of
reserves) so as to be applied on a basis that is consistent with that of the
Rancho Parties, provided, however, that in any event, no accrual or reserve
made by FCB pursuant to this Section, shall constitute or be deemed to be a
breach, violation of or failure to satisfy any representation, warranty,
covenant, condition or other provision of this Agreement or otherwise be
considered in determining whether any such breach, violation or failure to
satisfy shall have occurred. The recording of such adjustments shall not be
deemed to imply any misstatement of previously furnished financial statements
or information, shall not be construed as concurrence of FCB's management with
any such adjustments, and shall not affect the Financial Tests that are a
condition to closing under Section 7.03.

6.16 Appointment. Prior to the Effective Date, the Holding Company shall
take all actions to appoint four persons selected by FCB to become additional
directors of the Holding Company.

ARTICLE VII

Conditions to Consummation of the Merger

7.01 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each of the Holding Company and FCB to consummate the
Merger is subject to the fulfillment or written waiver by the Holding Company
and FCB prior to the Effective Time of each of the following conditions:

(a) Stockholder Approvals. This Agreement and the Merger shall have been
duly adopted by the requisite vote of the shareholders of the Holding Company
and FCB.

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(b) Regulatory Approvals. Any consents, waivers, clearances, approvals and
authorizations of Governmental Authorities that are necessary to permit
consummation of the Merger and Reorganization shall have been obtained and
shall remain in full force and effect and all statutory waiting periods in
respect thereof shall have expired.

(c) No Injunction. No Governmental Authority of competent jurisdiction shall
have enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, judgment, decree, injunction or other order (whether temporary,
preliminary or permanent) which is in effect and prohibits consummation of the
Merger. No statute, rule, regulation, order, injunction or decree shall have
been enacted, entered, promulgated or enforced by any Governmental Authority
which prohibits or makes illegal the consummation of the Merger.

(d) Registration Statement. The Registration Statement shall have become
effective under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and be in
effect and no proceedings for that purpose shall have been initiated by the SEC
and not withdrawn.

(e) Listing. The Holding Company Common Stock to be issued in the Merger
shall have been approved for quotation on Nasdaq.

(f) Pooling-of-Interests. Each of the Holding Company and FCB shall have
received a letter from KPMG LLP, dated the Closing Date, in form and substance
reasonably satisfactory to the Holding Company and FCB, respectively, to the
effect that the Merger will qualify for pooling-of-interests accounting
treatment.

7.02 Conditions to Obligation of FCB. The obligation of FCB to consummate
the Merger is also subject to the fulfillment or written waiver by FCB prior to
the Effective Time of each of the following conditions:

(a) Representations and Warranties. The representations and warranties of
each of the Rancho Parties set forth in this Agreement shall be true and
correct in all respects as of the date of this Agreement and (except to the
extent such representations and warranties speak as of an earlier date) as of
the Closing Date as though made on and as of the Closing Date; provided,
however, that for purposes of determining the satisfaction of this condition,
no effect shall be given to any exception in such representations and
warranties relating to materiality or a Material Adverse Effect, and provided,
further, however, that, for purposes of this condition, such representations
and warranties (other than the representations and warranties contained in
Section 5.03(c), which shall be true and correct in all material respects)
shall be deemed to be true and correct in all respects unless the failure or
failures of such representations and warranties to be so true and correct,
individually or in the aggregate, results or would reasonably be expected to
result in a Material Adverse Effect on the Rancho Parties and their
Subsidiaries taken as a whole. FCB shall have received a certificate signed on
behalf of each of the Rancho Parties by the Chief Executive Officer and Chief
Financial Officer of each of the Rancho Parties to the foregoing effect.

(b) Performance of Obligations. Each of the Rancho Parties shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Effective Time, and FCB shall have
received a certificate, dated the Effective Date, signed on behalf of each of
the Rancho Parties by the Chief Executive Officer and the Chief Financial
Officer of each of the Rancho Parties to such effect.

(c) Opinion of FCB's Counsel. FCB shall have received an opinion of Manatt,
Phelps & Philips LLP, special counsel to FCB, dated the Effective Date, to the
effect that, on the basis of facts, representations and assumptions set forth
in such opinion, (i) the Merger will be treated as a reorganization within the
meaning of Section 368(a) of the Code, (ii) the Holding Company and FCB will
each be a party to that reorganization within the meaning of Section 368(b) of
the Code and (iii) no gain or loss will be recognized by holders of FCB Common
Stock who receive shares of Holding Company Common Stock in the Merger, except
with respect to cash received in lieu of a fractional share interest in Holding
Company Common Stock. In rendering

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<PAGE>

its opinion, such counsel may require and rely upon representations contained
in letters from FCB, the Holding Company and shareholders of the Holding
Company.

(d) Between the date of this Agreement and the Effective Time, there shall
not have occurred any event related to the business condition (financial or
otherwise), prospects, operations or properties of the Rancho Parties that has
had a Material Adverse Effect on the Rancho Parties.

(e) FCB shall have received an updated fairness opinion of US Bancorp Piper
Jaffray within five (5) days prior to the mailing of the Proxy
Statement/Prospectus to the shareholders of FCB confirming that the financial
terms of the merger are fair from a financial point of view to such
shareholders.

7.03 Conditions to Obligation of the Rancho Parties. The obligation of the
Rancho Parties to consummate the Merger is also subject to the fulfillment, or
written waiver by the Holding Company, prior to the Effective Time of each of
the following conditions:

(a) Representations and Warranties. The representations and warranties of
FCB set forth in this Agreement shall be true and correct in all respects as of
the date of this Agreement and (except to the extent such representations and
warranties speak as of an earlier date) as of the Closing Date as though made
on and as of the Closing Date; provided, however, that for purposes of
determining the satisfaction of this condition, no effect shall be given to any
exception in such representations and warranties relating to materiality or a
Material Adverse Effect, and provided, further, however, that, for purposes of
this condition, such representations and warranties (other than the
representations and warranties contained in Section 5.03(b), which shall be
true and correct in all material respects) shall be deemed to be true and
correct in all respects unless the failure or failures of such representations
and warranties to be so true and correct, individually or in the aggregate,
results or would reasonably be expected to result in a Material Adverse Effect
on FCB and its Subsidiaries taken as a whole. The Holding Company shall have
received a certificate signed on behalf of FCB by the Chief Executive Officer
and Chief Financial Officer of FCB to the foregoing effect.

(b) Performance of Obligations. FCB shall have performed in all material
respects all obligations required to be performed by it under this Agreement at
or prior to the Effective Time, and the Holding Company shall have received a
certificate, dated the Effective Date, signed on behalf of FCB by the Chief
Executive Officer and the Chief Financial Officer of FCB to such effect.

(c) Opinion of the Holding Company's Counsel. The Holding Company shall have
received an opinion of Sullivan & Cromwell, counsel to the Holding Company,
dated the Effective Date, to the effect that, on the basis of facts,
representations and assumptions set forth in such opinion, (i) the Merger will
be treated as a reorganization within the meaning of Section 368(a) of the Code
and (ii) the Holding Company and FCB will each be a party to that
reorganization within the meaning of Section 368(b) of the Code. In rendering
its opinion, Sullivan & Cromwell may require and rely upon written
representations from FCB, the Holding Company and shareholders of the Holding
Company.

(e) The Rancho Parties shall have received an updated fairness opinion of
The Findley Group within five (5) days prior to the mailing of the Proxy
Statement/Prospectus to the shareholders of FCB confirming that the
consideration to be paid to the FCB shareholders in the Merger is fair from a
financial point of view to such shareholders.

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<PAGE>

ARTICLE VIII

Termination

8.01 Termination. This Agreement may be terminated, and the Merger may be
abandoned:

(a) Mutual Consent. At any time prior to the Effective Time, by the mutual
consent of Rancho Santa Fe and FCB, if the Board of Directors of each so
determines by vote of a majority of the members of its entire Board.

(b) Breach. At any time prior to the Effective Time, by Rancho Santa Fe or
FCB, if its Board of Directors so determines by vote of a majority of the
members of its entire Board, in the event of either: (i) a breach by the other
party of any representation or warranty contained herein, which breach cannot
be or has not been cured within 30 calendar days after the giving of written
notice to the breaching party of such breach; or (ii) a breach by the other
party of any of the covenants or agreements contained herein, which breach
cannot be or has not been cured within 30 calendar days after the giving of
written notice to the breaching party of such breach, provided that any such
breach under clause (i) or (ii) would entitle the non-breaching party not to
consummate the Merger under Article VII hereof.

(c) Delay. At any time prior to the Effective Time, by Rancho Santa Fe or
FCB, if its Board of Directors so determines by vote of a majority of the
members of its entire Board, in the event that the Merger is not consummated by
March 31, 2000, except to the extent that the failure of the Merger then to be
consummated arises out of or results from the knowing action or inaction of the
party seeking to terminate pursuant to this Section 8.01(c), which action or
inaction is in violation of its obligations under this Agreement.

(d) No Approval. By Rancho Santa Fe or FCB, if its Board of Directors so
determines by a vote of a majority of the members of its entire Board, in the
event the approval of any Governmental Authority required for consummation of
the Merger and the other transactions contemplated by this Agreement shall have
been denied by final nonappealable action of such Governmental Authority.

(e) No Stockholder Approval. By FCB or the Rancho Parties if any approval of
the stockholders of either of them contemplated by this Agreement shall not
have been obtained by reason of the failure to obtain the required vote at a
duly held meeting of stockholders or any adjournments or postponement thereof.

8.02 Effect of Termination and Abandonment. In the event of termination of
this Agreement and the abandonment of the Merger pursuant to this Article VIII,
no party to this Agreement shall have any liability or further obligation to
the other party hereto except as set forth below and except that termination
will not relieve a breaching party from liability for any breach of this
Agreement giving rise to such termination and except that Sections 6.05, 8.02
and Section 9.05 shall survive any termination of this Agreement.

ARTICLE IX

Miscellaneous

9.01 Survival. No representations, warranties, agreements and covenants
contained in this Agreement shall survive the Effective Time (other than
Sections 6.11 and 6.12 and this Article IX which shall survive the Effective
Time).

9.02 Waiver; Amendment. Prior to the Effective Time, any provision of this
Agreement may be (a) waived by the party benefitted by the provision, or (b)
amended or modified at any time, by an agreement in writing between the parties
hereto executed in the same manner as this Agreement, except that (i) after the
Holding Company Meeting, this Agreement may not be amended if it would violate
California law and (ii) after the FCB Meeting, this Agreement may not be
amended if it would violate California law.

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9.03 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to constitute an original.

9.04 Governing Law. This Agreement shall be governed by, and interpreted in
accordance with, the laws of the State of California applicable to contracts
made and to be performed entirely within such State (except to the extent that
mandatory provisions of federal law are applicable).

9.05 Expenses. Each party hereto will bear all expenses incurred by it in
connection with this Agreement and the transactions contemplated hereby, except
that printing expenses and SEC fees shall be shared equally between Rancho
Parties, on the one hand, and FCB, on the other hand.

9.06 Notices. All notices, requests and other communications hereunder to a
party shall be in writing and shall be deemed given if personally delivered,
telecopied (with confirmation) or mailed by registered or certified mail
(return receipt requested) to such party at its address set forth below or such
other address as such party may specify by notice to the parties hereto.

If to the Rancho Parties, to:

Rancho Santa Fe National Bank
6110 El Tordo
Rancho Santa Fe, California 92067
Attention: James A. Boyce
Facsimile: (858) 756-2980

With a copy to:

Sullivan & Cromwell
1888 Century Park East, Suite 2100
Los Angeles, California 90067
Attention: Stanley F. Farrar
Facsimile: (310) 712-8800

If to FCB, to:

First Community Bank of the Desert
74-750 Highway 111
Indian Wells, CA 92210
Attention: William Powers, President
Facsimile: (760) 836-0878

With a copy to:

Manatt Phelps & Phillips
11355 W. Olympic Boulevard
Los Angeles, California 90064
Attention: Eileen Lyon
Facsimile: (310) 312-4224

9.07 Entire Understanding; No Third Party Beneficiaries. This Agreement,
including the Exhibits and Schedules to this Agreement, represents the entire
understanding of the parties hereto with reference to the transactions
contemplated hereby and thereby and this Agreement supersedes any and all other
oral or written agreements heretofore made. No representation, warranty,
inducement, promise, understanding or condition not set forth in this Agreement
has been made or relied on by any party in entering into this Agreement. Except
for Section 6.11 and 6.12, nothing in this Agreement expressed or implied is
intended to confer upon any Person, other than the parties hereto or their
respective successors, any rights, remedies, obligations or liabilities under
or by reason of this Agreement.

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9.08 Effect. No provision of this Agreement shall be construed to require
Rancho Santa Fe, FCB or any of their respective Subsidiaries, affiliates or
directors to take any action or omit to take any action which action or
omission would violate applicable law (whether statutory or common law), rule
or regulation.

9.09 Severability. Except to the extent that application of this Section
9.09 would have a Material Adverse Effect on the Rancho Parties or FCB, any
term or provision of this Agreement which is invalid or unenforceable in any
jurisdiction shall, as to that jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without rendering invalid or unenforceable
the remaining terms and provisions of this Agreement or affecting the validity
or enforceability of any of the terms or provisions of this Agreement in any
other jurisdiction. If any provision of this Agreement is so broad as to be
unenforceable, the provision shall be interpreted to be only so broad as is
enforceable.

9.10 Alternative Structure. Notwithstanding anything to the contrary
contained in this Agreement, prior to the Effective Time, the parties may
mutually agree to revise the structure of the Merger and related transactions
provided that each of the transactions comprising such revised structure shall
(i) not change the amount or form of consideration to be received by the
shareholders of FCB and the holders of FCB Common Stock Options and FCB
Warrants, (ii) be capable of consummation in as timely a manner as the
structure contemplated herein and (iii) not otherwise be prejudicial to the
interests of the stockholders of either party. This Agreement and any related
documents shall be appropriately amended in order to reflect any such revised
structure.

9.11 Enforcement of the Agreement. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state having jurisdiction, this being in addition to any other remedy to
which they are entitled at law or in equity.

* * *

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in counterparts by their duly authorized officers, all as of the day
and year first above written.

RANCHO SANTA FE NATIONAL BANK

By: /s/ James A. Boyce
___________________________________

Name: James A. Boyce
Title: President and Chief
Executive Officer

FIRST COMMUNITY BANCORP

By: /s James A. Boyce
___________________________________

Name: James A. Boyce
Title: President and Chief
Executive Officer

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<PAGE>

FIRST COMMUNITY BANK OF THE
DESERT

By: /s/ William Powers
___________________________________
Name: William Powers
Title: President and
Chief Executive Officer

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<PAGE>

ANNEX B

October 22, 1999

The Board of Directors
First Community Bank of the Desert
7272 Joshua Lane
Yucca Valley, CA 92284

Members of the Board:

In connection with the transaction (the "Transaction") pursuant to the
Agreement and Plan of Merger (the "Agreement" to be entered into) by and among
Rancho Santa Fe National Bank ("Rancho"), First Community Bancorp ("Holding
Company"), and First Community Bank of the Desert ("FCB"), whereby a business
combination is to be effected through the merger of FCB with a wholly-owned
merger subsidiary of the Holding Company through the conversion of each share
of FCB common stock into 0.30 shares of Holding Company common stock, you have
requested our opinion as to the fairness, from a financial point of view, to
the shareholders of FCB (other than affiliates of Castle Creek Capital Fund I,
L.P.) of the consideration to be received in the Transaction.

U.S. Bancorp Piper Jaffray Inc. ("U.S. Bancorp Piper Jaffray"), as a
customary part of its investment banking business, is engaged in the valuation
of businesses and their securities in connection with mergers and acquisitions,
underwritings and secondary distributions of securities, private placements,
and valuations for estate, corporate and other purposes. For our services in
rendering this opinion, FCB will pay us a fee and indemnify us against certain
liabilities.

In arriving at our opinion, we have undertaken such reviews, analyses and
inquiries as we deemed necessary and appropriate under the circumstances. Among
other things, we have:

1. Reviewed a draft of the Agreement dated as of September 30, 1999.
(Piper Jaffray having been advised of the proposed change in the exchange
ratio referred to above.)

2. Reviewed audited financial statements of FCB for the years ended
December 31, 1996 through 1998;

3. Reviewed unaudited financial statements of FCB for the six-month
period ended June 30, 1999, and for the eight-month period ended August 31,
1999;

4. Reviewed audited financial statements of Rancho for the years ended
December 31, 1996 through 1998;

5. Reviewed unaudited financial statements of Rancho for the six month
period ended June 30, 1999, and for the eight-month period ended August 31,
1999;

6. Reviewed financial forecasts for FCB for the years ending December
31, 1999 through December 31, 2003;

7. Reviewed financial forecasts for Rancho for the years ending December
31, 1999 through December 31, 2003;

8. Reviewed financial forecasts for the Holding Company for the years
ending December 31, 1999 through 2003 reflecting the combined operations of
FCB and Rancho, including certain potential synergies estimated by
management of Rancho to be realized;

9. Conducted discussions with certain members of management of FCB.
Topics discussed included, but were not limited to, the background and
rationale for the Transaction, the financial condition, operating
performance balance sheet characteristics and prospects of FCB (and Rancho
and the prospects for the combined company after consummation of the
Transaction);

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<PAGE>

10. Conducted discussions with certain members of management of Rancho.
Topics discussed included, but were not limited to, the background and
rationale for the Transaction and the financial condition, operating
performance, balance sheet characteristics and prospects of Rancho and FCB
and the prospects for the combined company after consummation of the
Transaction;

11. Considered certain projected pro forma effects of the Transaction;

12. Performed discounted dividend analyses with respect to FCB;

13. Reviewed the financial terms, to the extent publicly available, of
certain merger and acquisition transactions;

14. Compared certain financial data of FCB and Rancho with certain
financial data of companies deemed similar to FCB and Rancho or operating
in a business sector deemed similar to that in which FCB and Rancho
operate; and

15. Reviewed such other financial data, performed such other analyses
and considered such other information as we deemed necessary and
appropriate under the circumstances.

We have relied upon and assumed the accuracy and completeness of the
financial statements and other information provided by FCB and Rancho or
otherwise made available to us and have not assumed responsibility to
independently verify such information. We have further relied upon the
assurances of FCB's and Rancho's management that the information provided has
been prepared on a reasonable basis and, with respect to financial planning
data, reflects the best currently available estimates and that they are not
aware of any information or facts that would make the information provided to
us incomplete or misleading. Without limiting the generality of the foregoing,
we have assumed that neither FCB nor Rancho is a party to any material pending
transaction, including external financing, recapitalizations, acquisitions or
merger discussions, other than the Transaction.

In arriving at our opinion, we have not performed nor been furnished any
appraisals or valuations of the specific assets or liabilities of FCB or
Rancho. We express no opinion regarding the liquidation value of FCB. We have
undertaken no independent analysis of any pending or threatened litigation,
possible unasserted claims or other contingent liabilities, to which either
FCB, Rancho or their affiliates is a party or may be subject and, at FCB's
direction and with its consent, our opinion makes no assumption concerning, and
therefore does not consider, the possible assertion of claims, outcomes or
damages arising out of any such matters.

Our opinion is necessarily based upon information available to us, facts and
circumstances and economic, market and other conditions as they exist, and is
subject to evaluation on the date hereof. Events occurring after the date
hereof could materially affect the assumptions used in preparing this opinion.
Except as provided in the engagement letter between us and FCB, we have not
undertaken to reaffirm or revise this opinion or otherwise comment upon any
events occurring after the date hereof. We express no opinion herein as to the
prices at which shares of FCB, Rancho or the Holding Company common stock have
traded or may trade at any future time.

This opinion is directed to the Board of Directors of FCB and shall not be
published or otherwise used, nor shall any public references to U.S. Bancorp
Piper Jaffray be made except in accordance with our engagement letter. The
opinion is not intended to be and does not constitute a recommendation to any
shareholder of FCB. We were not requested to opine as to, and this opinion does
not address, the basic business decision to proceed with or effect the
Transaction. We were not authorized to solicit, and did not solicit, any other
party relative to a possible business combination with FCB.

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<PAGE>

Based upon and subject to the foregoing, and based upon such other factors
as we consider relevant, it is our opinion that the consideration to be
received by the shareholders of FCB (other than affiliates of Castle Creek
Capital Fund I, L.P.) in the Transaction pursuant to the Agreement is fair,
from a financial point of view, to such shareholders as of the date hereof.

Sincerely,

/s/ U.S. BANCORP PIPER JAFFRAY INC.

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<PAGE>

ANNEX C

CALIFORNIA GENERAL CORPORATION LAW
CHAPTER 13--DISSENTERS' RIGHTS

(S)1300. Right to Require Purchase--"Dissenting Shares" and "Dissenting
Shareholder" Defined.

(a) If the approval of the outstanding shares (Section 152) of a corporation
is required for a reorganization under subdivisions (a) and (b) or subdivision
(e) or (f) of Section 1201, each shareholder of the corporation entitled to
vote on the transaction and each shareholder of a subsidiary corporation in a
short-form merger may, by complying with this chapter, require the corporation
in which the shareholder holds shares to purchase for cash at their fair market
value the shares owned by the shareholder which are dissenting shares as
defined in subdivision (b). The fair market value shall be determined as of the
day before the first announcement of the terms of the proposed reorganization
or short-form merger, excluding any appreciation or depreciation in consequence
of the proposed action, but adjusted for any stock split, reverse stock split
or share dividend which becomes effective thereafter.

(b) As used in this chapter, "dissenting shares" means shares which come
within all of the following descriptions:

(1) Which were not immediately prior to the reorganization or short-form
merger either (A) listed on any national securities exchange certified by
the Commissioner of Corporations under subdivision (o) of Section 25100 or
(B) listed on the OTC margin stocks issued with the Board of Governors of
the Federal Reserve System, and the notice of meeting of shareholders to
act upon the reorganization summarizes this section and Sections 1301,
1302, 1303 and 1304; provided, however, that this provision does not apply
to any shares with respect to which there exists any restriction on
transfer imposed by the corporation or by any law or regulation; and
provided, further, that this provision does not apply to any class of
shares described in subparagraph (A) or (B) if demands for payment are
filed with respect to 5 percent or more of the outstanding shares of that
class.

(2) Which were outstanding on the date for determination of shareholders
entitled to vote on the reorganization and (A) were not voted in favor of
the reorganization or (B) if described in subparagraph (A) or (B) of
paragraph (1) (without regard to the provisos in that paragraph), were
voted against the reorganization, or which were held or record on the
effective date of a short-form merger; provided, however, that subparagraph
(A) rather than subparagraph (B) of this paragraph applied in any case
where the approval required by Section 1021 is sought by written consent
rather than at a meeting.

(3) Which the dissenting shareholder has demanded that the corporation
purchase at their fair market value, in accordance with Section 1301.

(4) Which the dissenting shareholder has submitted for endorsement, in
accordance with Section 1302.

(c) As used in this chapter, "dissenting shareholder" means the recordholder
of dissenting shares and includes a transferee of record.

(S)1301. Demand for Purchase.

(a) If, in the case of a reorganization, any shareholders of a corporation
have a right under Section 1300, subject to compliance with paragraphs (3) and
(4) of subdivision (b) thereof, to require the corporation to purchase their
shares for cash, such corporation shall mail to each such shareholder a notice
of approval of the reorganization by its outstanding shares (section 152)
within 10 days after the date of such approval, accompanied by a copy of
Section 1300, 1302, 1303, 1304 and this section, a statement or price
determined by the corporation to represent the fair market value of the
dissenting shares, and a brief description of the procedure to be followed if
the shareholder desires to exercise the shareholder's right under such
sections. The

C-1
<PAGE>

statement of price constitutes an offer by the corporation to purchase at the
price stated any dissenting shares as defined in subdivision (b) of Section
1300, unless they lose their status as dissenting shares under Section 1309.

(b) Any shareholder who has a right to require the corporation to purchase
the shareholder's shares for cash under Section 1300, subject to compliance
with paragraphs (3) and (4) of subdivision (b) thereof, and who desires the
corporation to purchase such shares shall make written demand upon the
corporation for the purchase of such shares and payment to the shareholder in
cash of their fair market value. The demand is not effective for any purpose
unless it is received by the corporation or any transfer agent thereof (1) in
the case of shares described in clause (i) or (ii) or paragraph (1) of
subdivision (b) of Section 1300 (without regard to the provisos in that
paragraph), not later than the date of the shareholders' meeting to vote upon
the reorganization, or (2) in any other case within 30 days after the date on
which the notice of the approval by the outstanding shares pursuant to
subdivision (a) or the notice pursuant to subdivision (i) of Section 1110 was
mailed to the shareholder.

(b) The demand shall state the number and class of the shares held of record
by the shareholder with the shareholder remands hat the corporation purchase
and shall contain a statement of what such shareholder claims to be the fair
market value of those shares as of the day before the announcement of the
proposed reorganization or short-form merger. The statement of fair market
value constitutes an offer by the shareholder to sell the shares at such price.

(S)1302. Endorsement of Shares.

Within 30 days after the date on which notice of the approval by the
outstanding shares or the notice pursuant to subdivision (i) of Section 1110
was mailed to the shareholder, the shareholder shall submit to the corporation
at its principal office or at the office of any transfer agent thereof, (a) if
the shares are certificated securities, the shareholder's certificates
representing any shares which the shareholder demands that the corporation
purchase, to be stamped or endorsed with a statement that the shares are
dissenting shares or to be exchanged for certificates of appropriate
denomination so stamped or endorsed or (b) if the shares are uncertificated
securities, written notice of the number of shares which the shareholder
demands that the corporation purchase. Upon subsequent transfers of the
dissenting shares on the books of the corporation, the new certificates,
initial transaction statement, and other written statements issues therefor
shall bear a like statement, together with the name of the original dissenting
holder of the shares.

(S)1303. Agreed Price--Time for Payment.

(a) If the corporation and the shareholder agree that the shares are
dissenting shares and agree upon the price of the shares, the dissenting
shareholder is entitled to the agreed price with interest thereon at the legal
rate on judgments from the date of the agreement. Any agreements fixing the
fair market value of any dissenting shares as between the corporation and the
holders thereof shall be filed with the secretary of the corporation.

(b) Subject to the provisions of Section 1306, payment of the fair market
value of dissenting shares shall be made within 30 days after the amount
thereof has been agreed or within 30 days after any statutory or contractual
conditions to the reorganization are satisfied, whichever is later, and in the
case of certificated securities, subject to surrender of the certificates
therefor, unless provided otherwise by agreement.

(S)1304. Dissenter's Action to Enforce Payment.

(a) If the corporation denies that the shares are dissenting shares, or the
corporation and the shareholder fail to agree upon the fair market value of the
shares, then the shareholder demanding purchase of the shares as dissenting
shares or any interested corporation, within six months after the date on which
notice of the approval by the outstanding shares (Section 152) or notice
pursuant to subdivision (i) of Section 1110 was mailed to the shareholder, but
not thereafter, may file a complaint in the superior court of the proper county
praying the court

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<PAGE>

to determine whether the shares are dissenting shares or the fair market value
of the dissenting shares or both or may intervene in any action pending on such
a complaint.

(b) Two or more dissenting shareholders may join as plaintiffs or be joined
as defendants in any such action and two or more such actions may be
consolidated.

(c) On the trial of the action, the court shall determine the issues. If the
status of the shares as dissenting shares is in issue, the court shall first
determine that issues. If the fair market value of the dissenting shares is in
issues, the court shall determine, or shall appoint one or more impartial
appraisers to determine, the fair market value of the shares.

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<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Article Five of First Community Bancorp's articles of incorporation provides
that First Community Bancorp shall eliminate the liability of its directors for
monetary damages to the fullest extent permissible under California law.
Article Five also provides that First Community Bancorp is authorized to
provide indemnification for its agents. If agents of First Community Bancorp
breach a duty to First Community Bancorp and its shareholders, then Article
Five authorizes First Community Bancorp, to the extent permissible under
California Law, to indemnify such agents in excess of the indemnification
expressly permitted by Section 317 of the California general corporation law.

Section 317 sets forth the provisions pertaining to the indemnification of
corporate "agents." For purposes of this law, an agent is any person who is or
was a director, officer, employee or other agent of a corporation, or is or was
serving at the request of First Community Bancorp in such capacity with respect
to any other corporation, partnership, joint venture, trust or other
enterprise. Section 317 mandates First Community Bancorp's indemnification of
agents where the agent's defense is successful on the merits. In other cases,
Section 317 allows First Community Bancorp to indemnify agents for expenses,
including amounts paid to defend, settle or otherwise dispose of a threatened
or pending action, if the indemnification is authorized by (1) a majority vote
of a quorum of First Community Bancorp's Board of Directors consisting of
directors who are not party to the proceedings; (2) approval of the
shareholders, with the shares owned by the person to be indemnified not being
entitled to vote thereon; or (3) the court in which the proceeding is or was
pending upon application by designated parties. Under certain circumstances,
First Community Bancorp can indemnify an agent even when the agent is found
liable. Section 317 also allows First Community Bancorp to advance expenses to
its agents for certain actions upon receiving an undertaking by the agent that
he or she will reimburse First Community Bancorp if the agent is found liable.

To the extent that indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons controlling
First Community Bancorp, pursuant to the foregoing provisions or otherwise,
First Community Bancorp understands that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable. If a claim for indemnification against such
liabilities (other than the payment by First Community Bancorp of expenses
incurred or paid by a director, officer or controlling person of First
Community Bancorp in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection with
the securities being registered, First Community Bancorp will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against a public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.

II-1
<PAGE>

ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

<TABLE>
<CAPTION>
Exhibit No. Exhibit
----------- -------

<C> <S>
2.1* Agreement and Plan of Merger by and among Rancho Santa Fe National
Bank, First Community Bancorp and First Community Bank of the
Desert dated October 22, 1999.

5.1** Opinion of Sullivan & Cromwell.

8.1** Opinion of Sullivan & Cromwell as to certain federal income tax
matters.

8.2** Opinion of Manatt, Phelps & Phillips LLP as to certain federal
income tax matters.

23.1 Consent of KPMG LLP relating to Rancho Santa Fe National Bank.

23.2 Consent of KPMG LLP relating to First Community Bank of the
Desert.

23.3** Consent of Sullivan & Cromwell (included in Exhibits 5.1 and 8.1).

23.4** Consent of Manatt, Phelps & Phillips (included in Exhibit 8.2).

23.5** Consent of Dale E. Walter.

23.6** Consent of David S. Williams.

23.7** Consent of Robert A. Schoellhorn.

23.8** Consent of William T. Powers.

23.9** Consent of John M. Eggemeyer III.

23.10** Consent of James A. Boyce.

23.11** Consent of Robert A. Stine.

23.12** Consent of Paul I. Stevens.

23.13** Consent of Robert E. Hermmann.

99.1** Form of First Community Bank of the Desert proxy.
</TABLE>
- --------
* Included as Annex A to the proxy statement/prospectus.

** To be filed by amendment.

ITEM 22. UNDERTAKINGS

The undersigned Registrant hereby undertakes as follows:

(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement. This amendment
will:

(a) include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Securities Act");

(b) reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the Calculation of Registration
Fee table in the effective registration statement; and

II-2
<PAGE>

(c) include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement.

(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered herein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.

(4) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this Registration
Statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other Items of the applicable form.

(5) That every prospectus that is filed pursuant to paragraph (4)
immediately preceding, or that purports to meet the requirements of Section
10(a)(3) of the Securities Act and is used in connection with an offering
of securities subject to Rule 415, will be filed as a part of an amendment
to this Registration statement and will not be used until such amendment is
effective, and that, for purposes of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.

(6) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions of this Item
22, or otherwise, the registrant has been advised that in the opinion of
the Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of such registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered,
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.

(7) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this
Form, within one business day of receipt of such request, and to send the
incorporated documents by first-class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request.

(8) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective.

II-3
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the Rancho Santa Fe, California, on
January 18, 2000.

FIRST COMMUNITY BANCORP

By: /s/ James A. Boyce
_______________________________
James A. Boyce
President and Chief Executive
Officer

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----

<S> <C> <C>
/s/ James A. Boyce President and Chief January 18, 2000
____________________________________ Executive Officer (Principal
James A. Boyce Executive, Financial and
Accounting Officer),
Director
</TABLE>

II-4
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit No. Exhibit
----------- -------
<C> <S>
2.1* Agreement and Plan of Merger by and among Rancho Santa Fe National
Bank, First Community Bancorp and First Community Bank of the
Desert dated October 22, 1999.

5.1** Opinion of Sullivan & Cromwell.

8.1** Opinion of Sullivan & Cromwell as to certain federal income tax
matters.

8.2** Opinion of Manatt, Phelps & Phillips LLP as to certain federal
income tax matters.

23.1 Consent of KPMG LLP relating to Rancho Santa Fe National Bank.

23.2 Consent of KPMG LLP relating to First Community Bank of the
Desert.

23.3** Consent of Sullivan & Cromwell (included in Exhibits 5.1 and 8.1).

23.4** Consent of Manatt, Phelps & Phillips (included in Exhibit 8.2).

23.5** Consent of Dale E. Walter.

23.6** Consent of David S. Williams.

23.7** Consent of Robert A. Schoellhorn.

23.8** Consent of William T. Powers.

23.9** Consent of John M. Eggemeyer III.

23.10** Consent of James A. Boyce.

23.11** Consent of Robert A. Stine.

23.12** Consent of Paul I. Stevens.

23.13** Consent of Robert E. Hermmann.

99.1** Form of First Community Bank of the Desert proxy.
</TABLE>
- --------
* Included as Annex A to the proxy statement/prospectus.

** To be filed by amendment.

<PAGE>

EXHIBIT 23.1

CONSENT OF INDEPENDENT AUDITORS

The Board of Directors

Rancho Santa Fe National Bank:

We consent to the inclusion in the Registration Statement of First Community
Bancorp on Form S-4, of our report dated January 8, 1999, relating to the
balance sheets as of December 31, 1998 and 1997, and the related statements of
earnings, shareholders' equity and comprehensive income and cash flows of
Rancho Santa Fe National Bank for each of the years in the three-year period
ended December 31, 1998, and to the reference to our firm under the heading
"Experts" in the Proxy Statement, which is part of such Registration Statement.

/s/ KPMG, LLP

San Diego, California

January 18, 2000

<PAGE>

EXHIBIT 23.2

CONSENT OF INDEPENDENT AUDITORS

The Board of Directors
First Community Bank of the Desert:

We consent to the inclusion in the Registration Statement of First Community
Bancorp on Form S-4, of our report dated February 19, 1999, relating to the
consolidated balance sheets as of December 31, 1998 and 1997, and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows of First Community Bank of the Desert for each of the years in the three-
year period ended December 31, 1998, and to the reference to our firm under the
heading "Experts" in the Proxy Statement, which is part of such Registration
Statement.

/s/ KPMG, LLP

Los Angeles, California

January 18, 2000