<SUBMISSION>
<ACCESSION-NUMBER>0001137547-03-000020
<TYPE>10-K
<PUBLIC-DOCUMENT-COUNT>4
<PERIOD>20021231
<FILING-DATE>20030331
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>UNITED SECURITY BANCSHARES
<CIK>0001137547
<ASSIGNED-SIC>6021
<IRS-NUMBER>912112732
<STATE-OF-INCORPORATION>CA
<FISCAL-YEAR-END>1231
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>10-K
<ACT>34
<FILE-NUMBER>000-32897
<FILM-NUMBER>03628127
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>1525 E SHAW AVENUE
<CITY>FRESO
<STATE>CA
<ZIP>93710
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>1525 E SHAW AVENUE
<CITY>FRESNO
<STATE>CA
<ZIP>93710
</MAIL-ADDRESS>
</FILER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>a10k2002n.htm
<DESCRIPTION>10K - 12/31/2002
<TEXT>
<HTML>
<head>
<title>United Security Bancshares 10K December 31, 2002
</title>
</head>
<BODY>





<FONT FACE="Times New Roman, Times, Serif" SIZE=3><a href="#toc2001">Click here for Table of Contents</a></font>


<hr size=4 noshade width=100%><BR>

<p align=center><font size=4><b>SECURITIES AND EXCHANGE COMMISSION</b></font><br>
WASHINGTON, D.C. 20549</p>


<p align=center><font size=4><b>FORM 10-K</b></font></p>
<HR noshade width=20%><BR>


<table width=100% border=0 cellspacing=0 cellpadding=0>
<tr>
<td width=6% align=center valign=top><b>[X] </b></td>
<td width=93%> ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 <B><U>FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002</U></B></td>
</tr>
<tr>
<td><b>&nbsp; </b></td>
<td>&nbsp;</td>
</tr>

<tr>
<td width=6% align=center valign=top><b>[&nbsp;&nbsp;] </b></td>
<td width=93%> TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
  EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
  FROM _________ TO ________.</td>
</tr>
</table>






<p align=center><font size=2>
<u>Commission file number: 000-32897</u></font></p>
<BR>

<p align=center><font size=5><b><u>UNITED SECURITY BANCSHARES</u></b></font><BR>
<font size=2>(Exact name of registrant as specified in its charter)</font></p>

<table width=100% border=0 cellspacing=0 cellpadding=0>
<tr align=center>
<td width=35%><u>CALIFORNIA</u></td>
<td width=30%>&nbsp;</td>
<td width=45%><u>91-2112732</u></td>
</tr>
<tr align=center>
<td>(State or other jurisdiction of</td>
<td>&nbsp;</td>
<td>(I.R.S. Employer</td>
</tr>
<tr align=center>
<td>incorporation or organization)</td>
<td>&nbsp;</td>
<td>Identification No.)</td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr align=center>
<td width=35%><u>1525 East Shaw Ave., Fresno, California</u></td>
<td width=30%>&nbsp;</td>
<td width=45%><u>93710</u></td>
</tr>
<tr align=center>
<td>(Address of principal executive offices)</td>
<td>&nbsp;</td>
<td>(Zip Code)</td>
</tr>
</table>
<BR>

<table width=100% border=0 cellspacing=0 cellpadding=0>
<tr>
<td width=10%>&nbsp;</td>
<td width=90%>Registrants telephone number, including area code<u>&nbsp;(559) 248-4943&nbsp;</u></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td>&nbsp;</td>
<td>Securities registered pursuant to Section 12(g) of the Act (Title of Class):<u>&nbsp;Common Stock, no par value&nbsp;</u></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td>&nbsp;</td>
<td>Shares outstanding as of February 28, 2003:<u>&nbsp;&nbsp;5,418,153&nbsp;</u></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
</table>
<BR><BR>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Indicate by check mark
whether the registrant (1) has filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing for the past 90 days.
Yes [&nbsp; X&nbsp; ]  No [&nbsp;&nbsp;  ] </FONT></P>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Indicate by check mark if
disclosure of delinquent filers pursuant to item 405 of Regulation S-K is not
contained herein, and will not be contained, to the best of the registrants
knowledge, in the definitive proxy or information statements incorporated by
reference in Part III of this form 10-K or any amendment to this Form 10-K. [&nbsp;&nbsp; ] </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Aggregate market value of
the Common Stock held by non-affiliates as of the last business day of the
registrant's most recently completed second fiscal quarter - June 28, 2002:
$59,772,541 </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Indicate by check mark whether the registrant is an accelerated filer (as defined in
Rule 12b-2 of the Act). Yes [&nbsp;&nbsp;]  No  [&nbsp; X&nbsp; ]</FONT></P>

<p align=center><font size=3>DOCUMENTS INCORPORATED BY REFERENCE</font></p><BR>

<table width=100% border=0 cellspacing=0 cellpadding=0>
<tr valign=top>
<td width=50%>Certain portions of the Proxy Statement for the 2003 Meeting of
Shareholders (to be filed with the commission under regulation
14A within 120 days after the end of the registrant's fiscal year and,
upon such filing, to be incorporated by reference into Part III).</td>
<td width=20%>&nbsp;</td>
<td width=30%>Part III, Items 10, 11, 12 and 13</td>
</tr>
</table>
<BR><BR><BR><BR>

<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">
<BR>

<a name="toc2001"></a>
<p align=center><font size=3><b>UNITED SECURITY BANCSHARES AND SUBSIDIARIES<BR>
ANNUAL REPORT ON FORM 10K FOR THE YEAR ENDED<BR>DECEMBER 31, 2002<BR><BR>
TABLE OF CONTENTS</B></font></p>
<HR noshade width=100%>
<BR>

<!-- Index table begins here 3 columns -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<tr>
<TD WIDTH=7%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PART I</font></TD>
<TD WIDTH=78%>&nbsp;</td>
<td align=center width=15%><u>&nbsp;Page&nbsp;</u></td>
</tr>
<tr>
<td>&nbsp;</td>
<td><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Item 1 &nbsp;&nbsp;&nbsp;- <a href="#a001">Business</a></font></td>
<td align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td>&nbsp;</td>
<td><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Item 2&nbsp;&nbsp;&nbsp; - <a href="#a002">Properties</a></font></td>
<td align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td>&nbsp;</td>
<td><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Item 3 &nbsp;&nbsp;&nbsp;- <a href="#a003">Legal Proceedings</a></font></td>
<td align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td>&nbsp;</td>
<td><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Item 4 &nbsp;&nbsp;&nbsp;- <a href="#a004">Submission of Matters to a Vote of Security Holders</a></font></td>
<td align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PART II</font></TD>
<TD>&nbsp;</td>
<td><u>&nbsp;</u></td>
</tr>
<tr>
<td>&nbsp;</td>
<td><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Item 5 &nbsp;&nbsp;&nbsp;- <a href="#a005">Market for the Registrant's Common Equity and Related Stockholder Matters</a></font></td>
<td align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>13</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td>&nbsp;</td>
<td><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Item 6 &nbsp;&nbsp;&nbsp;- <a href="#a006">Selected Financial Data</a></font></td>
<td align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>14</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td>&nbsp;</td>
<td><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Item 7 &nbsp;&nbsp;&nbsp;- <a href="#a007">Management's Discussion and Analysis of Financial Condition
    and Results of Operations</a></font></td>
<td align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>15</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td>&nbsp;</td>
<td><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Item 7A - <a href="#a071">Quantitative and Qualitative Disclosure About Market Risk</a></font></td>
<td align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>33</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td>&nbsp;</td>
<td><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Item 8&nbsp;&nbsp;&nbsp; - <a href="#a008">Financial Statements and Supplementary Data</a></font></td>
<td align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>36</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td>&nbsp;</td>
<td><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Item 9&nbsp;&nbsp;&nbsp; - <a href="#a009">Changes
in and Disagreements with Accountants on Accounting and Financial Disclosure</a></font></td>
<td align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>61</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PART III</font></TD>
<TD>&nbsp;</td>
<td><u>&nbsp;</u></td>
</tr>
<tr>
<td>&nbsp;</td>
<td><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Item 10 &nbsp;- <a href="#a010">Directors and Executive Officers of the Registrant</a></font></td>
<td align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>61</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td>&nbsp;</td>
<td><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Item 11 &nbsp;- <a href="#a011">Executive Compensation</a></font></td>
<td align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>61</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td>&nbsp;</td>
<td><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Item 12 &nbsp;- <a href="#a012">Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters</a></font></td>
<td align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>61</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td>&nbsp;</td>
<td><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Item 13 &nbsp;- <a href="#a013">Certain Relationships and Related Transactions</a></font></td>
<td align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>61</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td>&nbsp;</td>
<td><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Item 14 &nbsp;- <a href="#a014">Controls and Procedures</a></font></td>
<td align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>61</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>

<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PART IV</font></TD>
<TD>&nbsp;</td>
<td><u>&nbsp;</u></td>
</tr>
<tr>
<td>&nbsp;</td>
<td><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Item 15 &nbsp;- <a href="#a015">Exhibits, Financial Statement Schedules and Reports on Form 8-K</a></font></td>
<td align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>62</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a016">Signatures</a></font></td>
<td align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>64</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a017">Certifications</a></font></td>
<td align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>66</font></td>
</tr>


</TABLE>
<BR><BR><BR><BR>

<p align=center><font size=2>2</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">


<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=3><b>PART 1</b></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<a name="a001"></a>
<b>Item 1 - Business</b></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><i>Certain matters discussed
or incorporated by reference in this Annual Report of Form 10-K including, but
not limited to, those described in &quot;Item 7 - Management's Discussion and
Analysis of Financial Condition and Results of Operations&quot;, are
forward-looking statements that are subject to risks and uncertainties that
could cause actual results to differ materially from those projected in the
forward-looking statements. Such risks and uncertainties include, among others,
(1) competitive pressure in the banking industry increases significantly; (2)
changes in the interest rate environment reduces margins; (3) general economic
conditions, either nationally or regionally, are less favorable than expected,
resulting in, among other things, a deterioration in credit quality; (4) changes
in the regulatory environment; (5) changes in business conditions and inflation;
and (6) changes in securities markets. Therefore, the information set forth
therein should be carefully considered when evaluating the business prospects of
the Company.</i></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><i>General</i></b></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>United Security Bancshares
(the &#147;Company&#148;) is a California corporation incorporated during March
of 2001and is registered with the Board of Governors of the Federal Reserve
System as a bank holding company under the Bank Holding Company Act of 1956, as
amended. The Company&#146;s stock is listed on NASDAQ under the symbol
&#147;UBFO&#148;. United Security Bank (the &#147;Bank&#148;) is a wholly-owned
bank subsidiary of the Company and was formed in 1987. United Security
Bancshares Capital Trust I (the &#147;Trust&#148;) is also a wholly-owned
subsidiary of the Company and was formed during June of 2001 as a Delaware
business trust for the sole purpose of issuing Trust Preferred securities. At
present, the Company does not engage in any material business activities other
than ownership of the Bank. References to the Company are references to United
Security Bancshares, Inc. (including the Bank), except for periods prior to June
12, 2001, in which case, references to the Company are references to the Bank. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><i>United Security Bank</i></b></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On June 12, 2001, the Bank
became the wholly owned subsidiary of United Security Bancshares, through a
tax-free holding company reorganization, accounted for on a basis similar to the
pooling of interest method. In the transaction, each share of Bank stock was
exchanged for a share of Company stock on a one-to-one basis. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Bank is a California
state-chartered bank headquartered in Fresno, California. It is also a member of
the Federal Reserve System (&#147;Fed member&#148;). The Bank originally
commenced business on December 21, 1987 as a national bank and, during the
fourth quarter of 1998, filed an application with the California State Banking
Department and other regulatory authorities to become a state-chartered bank.
The shareholders approved the conversion in January of 1999, and the Bank was
granted approval to operate as a state-chartered bank on February 3, 1999. The
Bank&#146;s operations are currently subject to federal and state laws
applicable to state-chartered, Fed member banks and its deposits are insured up
to the applicable limits by the Federal Deposit Insurance Corporation (the
&quot;FDIC&quot;). The Bank is also subject to the Federal Deposit Insurance Act
and regulatory reporting requirements of the FDIC. As a state-chartered bank and
a member of the Federal Reserve System, the Bank is subject to supervision and
regular examinations by the Board of Governors of the Federal Reserve System
(the &#147;FRB&#148;) and the California Department of Financial Institutions
(the &#147;DFI&#148;). In addition, the Bank is required to file reports with
the FRB and provide such additional information as the FRB may require. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Effective August 25, 1995,
the Bank consummated a merger with Golden Oak Bank, a two branch California
state chartered bank located in Oakhurst, California, with assets of
approximately $45 million at the date of merger. The merger was accounted for as
a pooling of interests. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During February of 1997,
the Bank completed the purchase of the deposits and certain assets of two
branches of Wells Fargo Bank located in Caruthers and San Joaquin, both located
in Fresno County. This brought the total branches operated at that time by the
Bank to six and the total assets to approximately $190 million. The Bank paid a
premium of approximately $1.2 million to purchase deposit accounts totaling
approximately $33.4 million. The Bank also purchased cash balances as well as
certain fixed assets of the branch operations. </FONT></P>

<p align=center><font size=2>3</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During October of 1997, the
Bank completed the purchase from Bank of America of two of its branches located
in Firebaugh and Coalinga, both located in Fresno County. The acquisition
brought the total branches operated by the Bank to eight at that time and the
total assets to approximately $238 million. The premium paid by the Bank totaled
approximately $3.0 million and the amount of deposits totaled approximately
$44.4 million. The transaction included the receipt of cash balances of
approximately $1.0 million and the purchase of premises and equipment totaling
approximately $600,000. </FONT></P>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>USB Investment Trust Inc.
was incorporated effective December 31, 2001 as a special purpose real estate
investment trust (&#147;REIT&#148;) under Maryland law. The REIT is a subsidiary
of the Bank and was funded with $133.0 million in real estate-secured loans
contributed by the Bank. USB Investment Trust will give the Bank flexibility in
raising capital, and will reduce the expenses associated with holding the assets
contributed to USB Investment Trust. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>At December 31, 2002, the
Company operated seven (7) bank branches and one (1) construction lending
office; seven (7) in Fresno County and one (1) in Madera County. The Bank
operates two branches (including its main office) and one construction lending
office in Fresno and one branch each, in Oakhurst, Caruthers, San Joaquin,
Firebaugh, and Coalinga. In addition, the Company and Bank have administrative
headquarters at 1525 East Shaw Avenue, Fresno, California, 93710. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>At December 31, 2002, the
consolidated Company had approximately $520.1 million in total assets, $343.0
million in net loans, $424.0 million in deposits, and $41.1 million in
shareholders' equity. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The following discussion of the Company's services should be read in conjunction
 with "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS."</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>Bank Services</i></b></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As a state-chartered
commercial bank, United Security Bank offers a full range of commercial banking
services primarily to the business and professional community and individuals
located in Fresno and Madera Counties. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Bank offers a wide
range of deposit instruments including personal and business checking accounts
and savings accounts, interest-bearing negotiable order of withdrawal
(&quot;NOW&quot;) accounts, money market accounts and time certificates of
deposit. Most of the Bank's deposits are attracted from individuals and from
small and medium-sized business-related sources. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Bank also engages in a
full complement of lending activities, including real estate mortgage,
commercial and industrial, real estate construction, as well as agricultural,
lease financing, and consumer loans, with particular emphasis on short and
medium-term obligations. The Bank's loan portfolio is not concentrated in any
one industry, although approximately 70% of the Bank's loans are secured by real
estate. A loan may be secured (in whole or in part) by real estate even though
the purpose of the loan is not to facilitate the purchase or development of real
estate. At December 31, 2002, the Bank had loans (net of unearned fees)
outstanding of $348.6 million, which represented approximately 82% of the Bank's
total deposits and approximately 67% of its total assets. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Real estate mortgage loans
are secured by deeds of trust primarily on commercial property. Repayment of
real estate mortgage loans is generally from the cash flow of the borrower.
Commercial and industrial loans have a high degree of industry diversification.
Loans may be originated in the Company&#146;s market area, or participated with
other financial institutions outside the Company&#146;s market area. A
substantial portion of the commercial and industrial loans are secured by
accounts receivable, inventory, leases or other collateral. The remainder are
unsecured; however extensions of credit are predicated on the financial capacity
of the borrower. Repayment of commercial loans is generally from the cash flow
of the borrower. Real estate construction loans consist of loans to residential
contractors which are secured by single family residential properties. All real
estate loans have established equity requirements. Repayment of real estate
construction loans is generally from long-term mortgages with other lending
institutions. Agricultural loans are generally secured by land, equipment,
inventory and receivables. Repayment of this loan category is from the cash flow
of the borrower. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In the normal course of
business, the Bank makes various loan commitments and incurs certain contingent
liabilities. At December 31, 2002 and 2001, loan commitments of the Bank
aggregated $114.2 million and $108.1 million, respectively. Of the $114.2
million in loan commitments outstanding at December 31, 2002, $87.5 million or
77% were on loans with maturities of one year or less. Due to the nature of the
business of the Bank's customers, there are no seasonal patterns or absolute
predictability to the utilization of unused loan commitments; therefore the Bank
is unable to forecast the extent to which these commitments will be exercised
within the current year. The Bank does not believe that any such utilization
will constitute a material liquidity demand. </FONT></P>

<p align=center><font size=2>4</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In addition to the loan and
deposit services discussed above, the Bank also offers a wide range of
specialized services designed to attract and service the needs of commercial
customers and account holders. These services include cashier's checks,
traveler's checks, money orders, and foreign drafts. The Bank does not operate a
trust department; however, it makes arrangements with its correspondent bank to
offer trust services to its customers on request. Most of the Bank's business
originates within Fresno and Madera Counties. Neither the Bank&#146;s business
or liquidity is seasonal, and there has been no material effect upon the Bank's
capital expenditures, earnings or competitive position as a result of federal,
state or local environmental regulation. </FONT></P>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><i>Competition and Market Share</i></b></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The banking business in
California generally, and in the market area served by the Company specifically,
is highly competitive with respect to both loans and deposits. The Company
competes for loans and deposits with other commercial banks, savings and loan
associations, finance companies, money market funds, credit unions and other
financial institutions, including a number that are substantially larger than
the Company. Deregulation of the banking industry, increased competition from
non-bank entities for the cash balances of individuals and businesses, and
continuing developments in the computer and communications industries have had,
and most likely will continue to have, a significant impact on the Company's
competitive position. With the enactment of interstate banking legislation in
California, bank holding companies headquartered outside of California may enter
the California market and provide further competition for the Company.
Additionally, with the Gramm-Leach-Bliley Act of 1999, traditional competitive
barriers between insurance companies, securities underwriters, and commercial
banks have been eased, allowing a greater number of financial intermediaries to
offer a wider assortment of financial services. Many of the major commercial
banks operating in the Company's market areas offer certain services such as
trust and international banking services, which the Company does not offer
directly. In addition, banks with larger capitalization have larger lending
limits and are thereby able to serve larger customers. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company&#146;s primary
market area is located in Fresno and Madera Counties, in which approximately 27
FDIC-insured financial institutions compete for business. The following table
sets forth information regarding deposit market share and ranking by county as
of June 30, 2002, which is the most current information available. </FONT></P>

<PRE>
                                                   Rank             Share
                                              ---------------- -----------------
  Fresno County                                      7              5.84%
  Madera County                                      6              5.55%
  Total of Fresno and Madera Counties                7              5.81%
</PRE>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><i>Supervision and Regulation</i></b></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<i>The Company</i></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company is a bank
holding company within the meaning of the Bank Holding Company Act of 1956, as
amended (the &#147;BHC Act&#148;), and is registered as such with the FRB. A
bank holding company is required to file with the FRB annual reports and other
information regarding its business operations and those of its subsidiaries and
is also subject to examination by the FRB. </FONT></P>

<p align=center><font size=2>5</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The BHC Act requires, among
other things, prior approval before acquiring, directly or indirectly, ownership
or control of any voting shares of any bank, if after such acquisition it would
directly or indirectly own or control more than 5% of the voting stock of that
bank, unless it already owns a majority of the voting stock of that bank. The
BHC Act also provides that the FRB shall not approve any acquisition that would
result in or further the creation of a monopoly, or the effect of which may be
substantially to lessen competition, unless the anticompetitive effects of the
proposed transaction are clearly outweighed by the probable effect in meeting
the convenience and needs of the community served. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Furthermore, under the BHC
Act, a bank holding company is, with limited exceptions, prohibited from (i)
acquiring direct or indirect ownership or control of more than 5% of the voting
shares of any company which is not a bank or (ii) engaging in any activity other
than managing or controlling banks. With the prior approval of the FRB, however,
a bank holding company may own shares of a company engaged in activities which
the FRB has determined to be so closely related to banking or managing or
controlling banks as to be proper incident thereto. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The BHC Act requires a bank
holding company to serve as a source of financial and managerial strength to its
subsidiary banks. It is the FRB&#146;s policy that a bank holding company should
stand ready to use available resources to provide adequate capital funds to
subsidiary banks during periods of financial stress and should maintain the
financial flexibility and capital raising capacity to obtain additional
resources for assisting a subsidiary bank. Under certain conditions, the FRB may
conclude that certain actions of a bank holding company, such as payment of cash
dividends, would constitute unsafe and unsound banking practices because they
violate the FRB&#146;s &#147;source of strength&#148; doctrine. </FONT></P>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A bank holding company and
its subsidiaries are prohibited from certain tie-in arrangements in connection
with any extension of credit, sale or lease of property or furnishing of
services. For example, with certain exceptions, a bank may not condition an
extension of credit on a promise by its customer to obtain other services by it,
its holding company or other subsidiaries, or on a promise by its customer not
to obtain services from a competitor. In addition, federal law imposes certain
restrictions between the Company and its subsidiaries, including the Bank. As an
affiliate of the Bank, the Company is subject, with certain exceptions, to
provisions of federal law imposing limitations on, and requiring collateral for,
extensions of credit by the Bank to its affiliates. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In 1999 the
Gramm-Leach-Bliley Act (the &#147;GLBA&#148;) was enacted. The GLBA became
effective in March of 2000 and is a financial services modernization law that,
among other things, facilitates broad new affiliations among securities firms,
insurance companies and bank holding companies by repealing the 66-year old
provisions of the Glass-Steagall Act. The GLBA allows the formation of financial
holding companies (&#147;FHC&#146;s&#148;), which are bank holding companies
with substantially expanded powers. A bank holding company must acquire the
approval of the FRB to become a FHC. Under these expanded powers, affiliations
may occur between bank holding companies, securities firms and insurance
companies, subject to a blend of umbrella supervision and regulation of the
newly formed consolidated entity by the Federal Reserve, oversight of the
FHC&#146;s bank and thrift subsidiaries by their primary federal and state
banking regulators and financial regulation of the FHC&#146;s nonbank
subsidiaries by their respective specialized regulators. The Company has not
applied to become a FHC. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company is subject to
the periodic reporting requirements of the Securities Exchange Act of 1934, as
amended, which include but are not limited to the filing of annual, quarterly
and other current reports with the SEC. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<i>The Bank</i></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Bank as a
state-chartered bank, is subject to regulation, supervision and regular
examination by the California Department of Financial Institutions. In addition,
The Bank is also a member of the Federal Reserve System and, as such, is subject
to applicable provisions of the Federal Reserve Act and regulations issued
thereunder and, is subject to regulation, supervision and regular examination by
the Board of Governors. The Bank is subject to California law, insofar as they
are not preempted by federal banking law. Deposits of the Bank are insured by
the FDIC in an amount up to $100,000 per customer, and, as such, the Bank is
subject to the regulations of the FDIC and the Federal Deposit Insurance Act. As
a consequence of the extensive regulation of commercial banking activities in
California and the United States, the Bank&#146;s business is particularly
susceptible to changes in California and federal legislation and regulation,
which may have the effect of increasing the cost of doing business, limiting
permissible activities or increasing competition. </FONT></P>

<p align=center><font size=2>6</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Various other requirements
and restrictions under the laws of the United States and the State of California
affect the operations of the Bank. Federal and California statutes and
regulations relate to many aspects of the Bank&#146;s operations, including
capital requirements and disclosure requirements to depositors and borrowers,
requirements to maintain reserves against deposits, limitations on interest
rates payable on deposits, loans, investments, and restrictions on borrowings
and on payment of dividends. The DFI regulates the number and location of branch
offices of a state-chartered bank, and may permit a bank to maintain branches
only to the extent allowable under state law for state banks. California law
presently permits a bank to locate a branch in any locality in the state.
Additionally, California law exempts banks from California usury laws. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><i>
Effect of Governmental Policies and Recent Legislation</i></b></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Banking has traditionally
been a business that depends on rate differentials. In general, the difference
between the interest rate paid by the Company on its deposits and other
borrowings and the interest rate received on loans extended to its customers and
securities held in the Company's portfolio comprise the major portion of the
Company's earnings. These rates are highly sensitive to many factors which are
beyond the control of the Company. Accordingly, the earnings and growth of the
Company are subject to the influence of domestic and foreign economic
conditions, including, but not limited to, inflation, recession and
unemployment. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The earnings and growth of
the Company are affected not only by general economic conditions, both domestic
and foreign, but also by the monetary and fiscal policies of the United States
government and its agencies, particularly the Federal Reserve Board
(&#147;FRB&#148;). The FRB implements national monetary policies (with
objectives such as to curb inflation and combat recession) by its open market
operations in United States Government securities, by adjusting the required
level of reserves for financial institutions subject to reserve requirements,
and by varying the discount rates applicable to borrowing by banks which are
members of the Federal Reserve System. The actions of the FRB in these areas
influence the growth of bank loans, investments and deposits and also affect
interest rates charged on loans and paid on deposits. The nature and impact that
future changes in fiscal or monetary policies or economic controls may have on
the Company&#146;s business and earnings cannot be predicted. In addition,
adverse economic conditions could make a higher provision for loan losses a
prudent course and could cause higher loan charge-offs, thus adversely affecting
the Company&#146;s net income. </FONT></P>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>From time to time,
legislation is enacted which has the effect of increasing the cost of doing
business, limiting or expanding permissible activities or affecting the
competitive balance between banks and other financial institutions. Proposals to
change the laws and regulations governing the operations and taxation of banks
and other financial institutions are frequently made in Congress, in the
California legislature and before various bank regulatory agencies. The
likelihood of any major change and the impact such change may have on the
Company is impossible to predict. Certain of the potentially significant changes
which have been enacted recently and other which are currently under
consideration by Congress or various regulatory agencies or professional
agencies are discussed below. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><i>Recent Legislation and Other Changes</i></b></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During July 2002, President
Bush signed into law the Sarbanes-Oxley Act of 2002. The purpose of the
Sarbanes-Oxley Act is to protect investors by improving the accuracy and
reliability of corporate disclosures made pursuant to the securities laws, and
for other purposes. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Sarbanes-Oxley Act
amends the Securities Exchange Act of 1934 to prohibit a registered public
accounting firm from performing specified nonaudit services contemporaneously
with a mandatory audit. The Sarbanes-Oxley Act also vests the audit committee of
an issuer with responsibility for the appointment, compensation, and oversight
of any registered public accounting firm employed to perform audit services. It
requires each committee member to be a member of the board of directors of the
issuer, and to be otherwise independent. The Sarbanes-Oxley Act further requires
the chief executive officer and chief financial officer of an issuer to make
certain certifications as to each annual or quarterly report filed with the SEC. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In addition, the
Sarbanes-Oxley Act requires officers to forfeit certain bonuses and profits
under certain circumstances. Specifically, if an issuer is required to prepare
an accounting restatement due to the material noncompliance of the issuer as a
result of misconduct with any financial reporting requirement under the
securities laws, the chief executive officer and chief financial officer of the
issuer shall be required to reimburse the issuer for (1) any bonus or other
incentive-based or equity-based compensation received by that person from the
issuer during the 12-month period following the first public issuance or filing
with the SEC of the financial document embodying such financial reporting
requirement; and (2) any profits realized from the sale of securities of the
issuer during that 12-month period. </FONT></P>


<p align=center><font size=2>7</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The Sarbanes-Oxley Act also instructs the SEC to require by rule:</FONT></P>


<table width=100% border=0 cellspacing=0 cellpadding=0>
<tr valign="top">
<td width=3%><font size=2>&nbsp;-</font></td>
<td width=97%><font size=2>disclosure of all material  off-balance  sheet  transactions  and
 relationships  that may have a material  effect upon the financial status of an issuer; and</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr valign="top">
<td>&nbsp;-</td>
<td><font size=2>the presentation of pro forma financial information
in a manner that is not misleading, and which is reconcilable with the financial condition of the issuer
under generally accepted accounting principles.</font></td>
</tr>
</table>
<BR>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Sarbanes-Oxley Act also
prohibits insider transactions in the company&#146;s stock during lock out
periods of the company&#146;s pension plans, and any profits on such insider
transactions are to be disgorged. In addition, there is a prohibition of company
loans to its executives, except in certain circumstances. The Sarbanes-Oxley Act
also provides for mandated internal control report and assessment with the
annual report and an attestation and a report on such report by the
company&#146;s auditor. The SEC is also required to issue a code of ethics for
senior financial officers of the company. Further, the Sarbanes-Oxley Act adds a
criminal penalty of fines and imprisonment of up to 10 years for securities
fraud. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The FRB on October 31, 2002
approved a final Regulation W that comprehensively implements sections 23A and
23B of the Federal Reserve Act. Sections 23A and 23B and Regulation W restrict
loans by a depository institution to its affiliates, asset purchases by a
depository institution from its affiliates, and other transactions between a
depository institution and its affiliates. Regulation W unifies in one public
document the Board&#146;s interpretations of sections 23A and 23B. Regulation W
will have an effective date of April 1, 2003. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In December of 2001 and
January of 2002, the Office of the Comptroller of the Currency, FRB and the FDIC
adopted final rules governing the regulatory capital treatment of equity
investments in nonfinancial companies held by banks, bank holding companies and
financial holding companies. The final rules became effective on April 1, 2002.
The new capital requirements apply symmetrically to equity investments made by
banks and their holding companies in nonfinancial companies under the legal
authorities specified in the final rules. Among others, these include the
merchant banking authority granted by the Gramm-Leach-Bliley Act and the
authority to invest in small business investment companies (&#147;SBICs&#148;)
granted by the Small Business Investment Act. Covered equity investments will be
subject to a series of marginal Tier 1 capital charges, with the size of the
charge increasing as the organization&#146;s level of concentration in equity
investments increases. The highest marginal charge specified in the final rules
requires a 25 percent deduction from Tier 1 capital for covered investments that
aggregate more than 25 percent of an organization&#146;s Tier 1 capital. Equity
investments through SBICs will be exempt from the new charges to the extent such
investments, in the aggregate, do not exceed 15 percent of the banking
organization&#146;s Tier 1 capital. The new charges would not apply to
individual investments made by banking organizations prior to March 13, 2000.
Grandfathered investments made by state banks under section 24(f) of the Federal
Deposit Insurance Act also are exempted from coverage. </FONT></P>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The terrorist attacks in
September, 2001, have impacted the financial services industry and led to
federal legislation that attempts to address certain issues involving financial
institutions. On October&#160;26, 2001, President Bush signed into law the
Uniting and Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism Act of 2001. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Part of the USA Patriot Act
is the International Money Laundering Abatement and Financial Anti-Terrorism Act
of 2001 (&#147;IMLA&#148;). IMLA authorizes the Secretary of the Treasury, in
consultation with the heads of other government agencies, to adopt special
measures applicable to banks, bank holding companies, and/or other financial
institutions. These measures may include enhanced recordkeeping and reporting
requirements for certain financial transactions that are of primary money
laundering concern, due diligence requirements concerning the beneficial
ownership of certain types of accounts, and restrictions or prohibitions on
certain types of accounts with foreign financial institutions. </FONT></P>


<p align=center><font size=2>8</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Among its other provisions,
IMLA requires each financial institution to: (i) establish an anti-money
laundering program; (ii) establish due diligence policies, procedures and
controls with respect to its private banking accounts and correspondent banking
accounts involving foreign individuals and certain foreign banks; and (iii)
avoid establishing, maintaining, administering, or managing correspondent
accounts in the United States for, or on behalf of, a foreign bank that does not
have a physical presence in any country. In addition, IMLA contains a provision
encouraging cooperation among financial institutions, regulatory authorities and
law enforcement authorities with respect to individuals, entities and
organizations engaged in, or reasonably suspected of engaging in, terrorist acts
or money laundering activities. IMLA expands the circumstances under which funds
in a bank account may be forfeited and requires covered financial institutions
to respond under certain circumstances to requests for information from federal
banking agencies within 120 hours. IMLA also amends the Bank Holding Company Act
and the Bank Merger Act to require the federal banking agencies to consider the
effectiveness of a financial institution&#146;s anti-money laundering activities
when reviewing an application under these acts. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>IMLA became effective July
23, 2002. Additional regulations are to be adopted during 2002 to implement
minimum standards to verify customer identity, to encourage cooperation among
financial institutions, federal banking agencies, and law enforcement
authorities regarding possible money laundering or terrorist activities, to
prohibit the anonymous use of &#147;concentration accounts,&#148; and to require
all covered financial institutions to have in place a Bank Secrecy Act
compliance program. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Federal Reserve Board
and the Secretary of the Treasury in January 2001 jointly adopted a final rule
governing merchant banking investments made by financial holding companies. The
rule implements provisions of the Gramm-Leach-Bliley Act discussed below that
permit financial holding companies to make investments as part of a bona fide
securities underwriting or merchant or investment banking activity. The rule
provides that a financial holding company may not, without Federal Reserve Board
approval, directly or indirectly acquire any additional shares, assets or
ownership interests or make any additional capital contribution to any company
the shares, assets or ownership interests of which are held by the financial
holding company subject to the rule if the aggregate carrying value of all
merchant banking investments held by the financial holding company exceeds: </FONT></P>


<table width=100% border=0 cellspacing=0 cellpadding=0>
<tr valign="top">
<td width=3%><font size=2>&nbsp;-</font></td>
<td width=97%><font size=2>30 percent of the Tier 1 capital of the financial holding company, or</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr valign="top">
<td>&nbsp;-</td>
<td><font size=2>after excluding interests in private equity funds, 20 percent of the Tier 1 capital of
the financial holding company.</font></td>
</tr>
</table>
<BR>




<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
A separate final rule will establish the capital charge of merchant banking investments for the financial holding company.

The American  Homeownership  and Economic  Opportunity Act of 2000 was enacted in late 2000 and provides for certain  regulatory and
financial relief to depository  institutions.  With respect to savings and loan associations,  the Home Owners' Loan Act was amended
to:</FONT></P>


<table width=100% border=0 cellspacing=0 cellpadding=0>

<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr valign="top">
<td>&nbsp;-</td>
<td><font size=2>repeal the savings association liquidity requirements, and</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr valign="top">
<td width=3%><font size=2>&nbsp;-</font></td>
<td width=97%><font size=2>permit a savings and loan holding company with prior approval to acquire more than 5% of the voting shares of a
nonsubsidiary savings association or nonsubsidiary savings and loan holding company.</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr valign="top">
<td>&nbsp;-</td>
<td><font size=2>With respect to national banks, the Banking Act of 1933 was amended to allow a national bank to:</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr valign="top">
<td>&nbsp;-</td>
<td><font size=2>specifically reorganize into a bank holding company structure or merge with subsidiaries and nonbank affiliates;</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr valign="top">
<td>&nbsp;-</td>
<td><font size=2>have more than 25 directors as may be allowed by the Comptroller;</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr valign="top">
<td>&nbsp;-</td>
<td><font size=2>have director terms of up to three years;</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr valign="top">
<td>&nbsp;-</td>
<td><font size=2>have a classified board; and</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr valign="top">
<td>&nbsp;-</td>
<td><font size=2>allow the repurchase of stock to prevent loss upon a previously contracted debt without
having to dispose of it within a period of six months.</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
</table>
<BR>


<p align=center><font size=2>9</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In addition, federal
banking law was amended to authorize the Comptroller to waive the citizenship
requirement for a minority of the directors on national bank boards and to
repeal the 20% surplus requirement for national banks. As to depository
institutions, in general, the federal banking agencies are to develop a system
for the electronic filing and dissemination of depository institution call
reports. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Gramm-Leach-Bliley Act
(&#147;GLBA&#148;) was enacted in late 1999. GLBA, among other things, repeals
the Glass-Steagall Act. The Glass-Steagall Act enacted in the depression era
prohibited banks from affiliating with securities firms. In addition, GLBA
allows for a new type of bank holding company under the Bank Holding Company
Act. The new bank holding company will be allowed to engage in insurance and
securities underwriting, merchant banking and insurance company portfolio
investment activities. Currently, bank holding companies are strictly limited in
the amount of insurance and securities underwriting activities in which they may
engage. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>GLBA also allows bank
holding company companies to engage in any activity considered
&#147;financial&#148; in nature or incidental to such financial activities.
Under the existing Bank Holding Company Act, incidental activities are limited
to those that are &#147;banking&#148; in nature or incidental to such banking
activities. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Financial activities
include, as well as lending, providing insurance as an agent, broker or as
principal, issuing annuities, underwriting, and dealing in or making a market in
securities. All insurance activities that are to be conducted must be conducted
in compliance with applicable state laws. In connection with insurance sales the
United States Supreme Court case of Barnett Bank of Marion County N.A. v.
Nelson, 116 S. Ct. 1103 (1996) is followed by GLBA, and GLBA further provides
that &#147;no state may, by statute, regulation, order, interpretation, or other
action, prevent or significantly interfere with the ability of an insured
depository institution, or a subsidiary or affiliate thereof, to engage,
directly or indirectly, either by itself or in conjunction with a subsidiary,
affiliate, or any other party, in any insurance sales, solicitation, or
cross-marketing activity.&#148; </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Community Reinvestment
Act provisions in GLBA require that any new bank holding company that is formed
meet the conditions that all of the company&#146;s insured depository
institutions are well capitalized and well managed or received at least a
satisfactory rating in the most recent Community Reinvestment Act examination. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Other key aspects of GLBA include the following:</FONT></P>


<table width=100% border=0 cellspacing=0 cellpadding=0>


<tr valign="top">
<td>&nbsp;-</td>
<td><font size=2>streamlining bank holding company supervision by defining the roles of the Federal
Reserve and other federal and state regulators;</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr valign="top">
<td width=3%><font size=2>&nbsp;-</font></td>
<td width=97%><font size=2>prohibiting FDIC assistance to affiliates and subsidiaries of banks and thrifts;</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr valign="top">
<td>&nbsp;-</td>
<td><font size=2>allowing a national bank that is well capitalized and well managed to establish
new operating subsidiaries that may engage in financial activities other than
insurance underwriting, merchant banking, insurance company portfolio
investments, real estate development and real estate investment, so long as the
aggregate assets of all financial subsidiaries do not exceed 45% of the
parent&#146;s assets or $50 billion, whichever is less;</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr valign="top">
<td>&nbsp;-</td>
<td><font size=2>permitting national banks to underwrite municipal bonds;</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr valign="top">
<td>&nbsp;-</td>
<td><font size=2>providing that securities activities conducted by a bank subsidiary will be
subject to regulation by the Securities and Exchange Commission;</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
</table>

<p align=center><font size=2>10</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">


<table width=100% border=0 cellspacing=0 cellpadding=0>
<tr valign="top">
<td width=3%>&nbsp;-</td>
<td width=97%><font size=2>providing that insurance activities conducted by a bank subsidiary will be
subject to regulation by the applicable state insurance authority;</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr valign="top">
<td>&nbsp;-</td>
<td><font size=2>replacing broker-dealer exemptions allowed to banks with limited exemptions;</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr valign="top">
<td>&nbsp;-</td>
<td><font size=2>providing that de novo unitary thrift holding company applications received by
the Office of Thrift Supervision after May 4, 1999 shall not be approved;</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>

<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr valign="top">
<td>&nbsp;-</td>
<td><font size=2>providing that existing unitary thrift holding companies may only be sold to financial companies;</font></td>
</tr><tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr valign="top">
<td>&nbsp;-</td>
<td><font size=2>adopting new privacy provisions which allow customers to &#147;opt out&#148; of
sharing nonpublic personal information with nonaffiliated third parties subject
to certain exceptions;</font></td>
</tr><tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr valign="top">
<td>&nbsp;-</td>
<td><font size=2>requiring that ATM's which impose a fee on noncustomers to disclose on the ATM
screen the amount of the fee prior to a transaction becoming irrevocable on the ATM;</font></td>
</tr><tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr valign="top">
<td>&nbsp;-</td>
<td><font size=2>providing regulatory relief to smaller banks with less than $250 million in
total assets with respect to the frequency of CRA examinations. The time between
examinations may be as long as five years for small banks and savings and loans;
and</font></td>
</tr><tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr valign="top">
<td>&nbsp;-</td>
<td><font size=2>requiring plain language for federal banking agency regulations.</font></td>
</tr>

</table>
<BR>



<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>It is impossible to predict
what effect the enactment of certain of the above-mentioned legislation will
have on the Company. Moreover, it is likely that other bills affecting the
business of banks may be introduced in the future by the United States Congress
or California legislature. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><i>Employees</i></b></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>At December 31, 2002, the
Company employed 85 persons on a full-time equivalent basis. The Company
believes its employee relations are excellent. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<a name="a002"></a>
<b>Item 2 - Properties</b></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company's Main bank
branch is located at 2151 West Shaw Avenue, Fresno, California. The Company owns
the building and leases the land under a sublease dated December 1, 1986 between
Central Bank and USB. The current sublessor under the master ground lease is
Bank of the West, which acquired the position through the purchase of Central
Bank. The lessor under the ground lease (Master Lease) is Thomas F. Hinds. The
lease expires on December 31, 2015 and the Company has options to extend the
term for four (4) ten-year periods and one seven (7) year period. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company occupies the
banking premises of approximately 3,600 square feet for its East Shaw branch at
1041 E. Shaw Avenue, Fresno, California, under a lease extension expiring August
31, 2003 with additional extensions to August 31, 2011. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company owns the
Oakhurst bank branch located at the Old Mill Village Shopping Center, 40074
Highway 49, Oakhurst, California, which was completed during April of 1999. The
Company had originally maintained two branches in the Oakhurst area, and at this
time consolidated its two Oakhurst branches into the new facility. The current
facility, which consists of approximately 5,000 square feet, will be leased for
a term of 15 years with two five-year options to extend the lease term. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company leases the
Caruthers bank branch located at 13356 South Henderson, Caruthers, California
which consists of approximately 5,000 square feet of floor space. The branch was
acquired from Wells Fargo Bank in February 1997 under a lease which expires
January 19, 2006 with extensions to January 19, 2021. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company previously
leased the San Joaquin bank branch, which was also acquired from Wells Fargo
Bank during February of 1997. During 1999, the Company completed the
construction of new facilities at 21574 Manning Avenue, San Joaquin, California
and the branch operations were moved to that locality during November 1999. The
new bank branch is approximately 2,500 square feet and is owned by the Company. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company owns the
Firebaugh bank branch located at 1067 O Street, Firebaugh, California which was
purchased from Bank of America during October 1997 for a total consideration of
$211,500. The premises are comprised of approximately 4,666 of interior floor
space situated on land totaling approximately one-third of an acre. </FONT></P>

<p align=center><font size=2>11</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company owns the
Coalinga bank branch located at 145 East Durian, Coalinga, California which also
purchased from Bank of America during October 1997. The total price paid for the
premises was $268,000 which purchased 6,184 square feet of interior floor space
situated on approximately 0.45 acres. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The Company owns its administrative headquarters located at 1525 East Shaw Avenue, Fresno, California. The building consists of
approximately 10,000 square feet of interior floor space and was purchased from Security Mutual Life Insurance Company during
December of 1997.</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<a name="a003"></a>
<b>Item 3 - Legal Proceedings</b></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>From time to time, the
Company is party to claims and legal proceedings arising in the ordinary course
of business. At this time, the management of the Company is not aware of any
material pending litigation proceedings to which it is a party or has recently
been party to, which will have a material adverse effect on the financial
condition or results of operations of the Company. </FONT></P>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<a name="a004"></a>
<b>Item 4 - Submission of Matters to a Vote of Security Holders</b></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
No matters were submitted to a vote of shareholders during the fourth quarter of 2002.</FONT></P>
<BR>

<hr size=4 noshade width=100%><BR><BR>


<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<b>PART II</b></FONT></P>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<a name="a005"></a>
<b>Item 5 - Market for the Registrant's Common Equity and Related Stockholder Matters</b></FONT></P>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><i>Trading History</i></b></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company became a NASDAQ
National Market listed company on May 31, 2001. It is anticipated that the
NASDAQ listing will provide greater exposure for the Company. The Company's
common stock was previously quoted on the OTCBB (over-the-counter bulletin
board), a quotation service for securities not listed or traded on NASDAQ or a
national securities exchange. Volumes traded are shown below. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The Company currently has four market makers for its common stock. These include The Seidler Companies, Hoeffer &amp; Arnett, Sandler
O'Neill &amp; Partners, and Hill Thompson, Magid &amp; Company. The Company is aware of two other securities dealers: Smith Barney and Dean
Witter Reynolds Inc., which periodically act as brokers in the Company's stock.
</FONT></P>



<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<i>The following table sets forth the high and low closing prices by quarter for the Company's common stock, for the years ended
December 31, 2002 and 2001.</i></FONT></P>

<PRE>
                                  Closing Prices               Volume
                         --------------------------------------------------
        Quarter                High             Low
                         --------------------------------------------------
    4th Quarter 2002           $17.86          $15.38          133,400
    3rd Quarter 2002           $17.72          $15.99           97,100
    2nd Quarter 2002           $17.83          $16.48           56,600
    1st Quarter 2002           $16.92          $15.64           89,300

    4th Quarter 2001           $16.61          $15.30          170,000
    3rd Quarter 2001           $16.74          $15.30          203,900
    2nd Quarter 2001           $16.86          $15.33          102,000
    1st Quarter 2001           $16.74          $14.85          113,200
</PRE>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
At February 28, 2003, there were approximately 645 record holders of common stock of the Company. This does not reflect the number
of persons or entities who hold their stock in nominee or street name through various brokerage firms.</FONT></P>

<p align=center><font size=2>12</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><i>Dividends</i></b></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company's shareholders
are entitled to cash dividends when and as declared by the Company&#146;s Board
of Directors out of funds legally available therefore. Dividends paid to
shareholders by the Company are subject to restrictions set forth in California
General Corporation Law, which provides that a corporation may make a
distribution to its shareholders if retained earnings immediately prior to the
dividend payout are at least equal the amount of the proposed distribution. As a
bank holding company without significant assets other than its equity position
in the Bank, the Company&#146;s ability to pay dividends to its shareholders
depends primarily upon dividends it receives from the Bank. Such dividends paid
by the Bank to the Company are subject to certain limitations. See
&#147;Management&#146;s Discussion and Analysis of Financial and Results of
Operations &#150; Regulatory Matters&#148;. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company paid cash
dividends to shareholders of $ 0.13 per share on January 23, 2002, April 24,
2002, July 24, 2002 and October 23, 2002. During the previous year, the Company
paid cash dividends of $ 0.10 per share on January 24, 2001, and paid $0.115 per
share on April 25, 2001, July 25, 2001 and October 24, 2001. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The amount and payment of
dividends by the Company to shareholders are set by the Company's Board of
Directors with numerous factors involved including the Company's earnings,
financial condition and the need for capital for expanded growth and general
economic conditions. No assurance can be given that cash or stock dividends will
be paid in the future. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><i>Securities Authorized for Issuance under Equity Compensation Plans</i></b>
<BR><BR>

<i>The following table sets forth securities authorized for issuance under equity
compensation plans as for December 31, 2002.</i></FONT></P>

<pre>
                                                                                    Number of securities
                                     Number of securities     Weighted-average       remaining available
                                      to be issued upon       exercise price of      for future issuance
                                         exercise of        outstanding options,        under equity
                                     outstanding options,    warrants and rights     compensation plans
         Plan Category               warrants and rights                             (excluding securities
                                          (column a)                                  reflected in column
                                                                                               (a))
--------------------------------------------------------------------------------- ------------------------
Equity compensation plans approved
 by security holders                        211,800                $11.62                   130,000

Equity compensation plans not
 approved by security holders                 N/A                    N/A                      N/A
                                      --------------------------------------------------------------------

Total                                       211,800                $11.62                   130,000
                                      ====================================================================
</PRE>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A complete description of
the above plans is included in Note 10 of the Company&#146;s Financial
Statements in Item 8 of this Annual Report on Form 10K, and is hereby
incorporated by reference. </FONT></P>
<BR><BR><BR><BR><BR>

<p align=center><font size=2>13</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<a name="a006"></a>
<b>Item 6 - Selected Financial Data</b></FONT></P>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><i>The following table sets
forth certain selected financial data for the Bank for each of the years in the
five-year periods ended December 31, 2002 and should be read in conjunction with
the more detailed information and financial statements contained elsewhere
herein (in thousands except per share data and ratios).</i></FONT></P>

<PRE>
                                                                           December 31,
-------------------------------------------------------------------------------------------------------------
 (in 000's except per share data and ratios)   2002        2001         2000        1999        1998
-------------------------------------------------------------------------------------------------------------
 Summary of Year-to-Date Earnings:
  Interest income and loan fees               $28,672      $30,063     $28,941     $21,920      $21,519
  Interest expense                             10,697       13,411      11,544       7,925        8,605
                                              ---------------------------------------------------------------
    Net interest income                        17,975       16,652      17,397      13,995       12,914
  Provision for credit losses                   1,963        1,733       1,580       1,025        1,200
                                              ---------------------------------------------------------------
    Net interest income after
     Provision for credit losses               16,012       14,919      15,817      12,970       11,714
  Noninterest income                            5,368        4,277       2,538       2,781        2,797
  Noninterest expense                          10,860        9,818       8,648       7,898        7,591
                                              ---------------------------------------------------------------
    Income before taxes on income              10,520        9,378       9,707       7,853        6,920
  Taxes on income                               3,149        3,185       3,450       2,930        2,704
                                              ---------------------------------------------------------------
    Net Income                                 $7,371       $6,193      $6,257      $4,923       $4,216
                                              ===============================================================
 Per Share Data:
    Net Income - Basic                          $1.36        $1.14       $1.16       $0.95        $0.82
    Net Income - Diluted                        $1.34        $1.11       $1.12       $0.89        $0.77
   Average shares outstanding - Basic         5,400,751   5,443,734   5,374,734    5,202,324   5,154,748
   Average shares outstanding - Diluted       5,487,038   5,563,855   5,587,292    5,514,544   5,490,891
    Cash dividends paid                         $0.51        $0.45       $0.36       $0.28        $0.24
 Financial Position at Period-end:
    Total assets                               $520,091     $450,928    $356,832    $281,531     $279,950
    Total net loans and leases                  343,042      331,163     256,802     195,233      152,052
    Total deposits                              423,987      368,651     271,862     238,863      252,474
    Total shareholders' equity                   41,099       36,059      33,749      28,316       24,989
    Book value per share                          $7.60        $6.68       $6.23       $5.41        $4.83
 Selected Financial Ratios:
    Return on average assets                       1.48%        1.55%       1.95%       1.77%        1.58%
    Return on average shareholders' equity        19.03%       17.25%      20.05%      18.31%       17.85%
    Average shareholders' equity
      to average assets                            7.76%        9.00%       9.71%       9.69%        8.86%
    Net charge-offs to average loans               0.25%        0.35%       0.19%       0.17%        0.96%
    Allowance for credit losses as a
       percentage of period-end loans              1.59%        1.33%       1.45%       1.34%        1.24%
    Dividend payout ratio                         38.24%       40.09%      32.14%      31.50%       31.30%

</PRE>
<BR><BR><BR>

<p align=center><font size=2>14</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">



<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<a name="a007"></a>
<b>Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations</b>
</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><u>Overview</u></b></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><i>Certain matters discussed
or incorporated by reference in this Annual Report on Form 10-K are
forward-looking statements that are subject to risks and uncertainties that
could cause actual results to differ materially from those projected in the
forward-looking statements. Such risks and uncertainties include, but are not
limited to, those described in Management&#146;s Discussion and Analysis of
Financial Condition and Results of Operations. Therefore, the information set
forth therein should be carefully considered when evaluating the business
prospects of the Company.</i></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On June 12, 2001, the
United Security Bank (the &#147;Bank&#148;) became the wholly owned subsidiary
of United Security Bancshares (the &#147;Company&#148;) through a tax free
holding company reorganization, accounted for on a basis similar to the pooling
of interest method. In the transaction, each share of Bank stock was exchanged
for a share of Company stock on a one-to-one basis. No additional equity was
issued as part of this transaction. In the following discussion, references to
the Bank are references to United Security Bank. References to the Company are
references to United Security Bancshares (including the Bank), except for
periods prior to June 12, 2001, in which case, references to the Company are
references to the Bank. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On June 28, 2001, United
Security Bancshares Capital Trust I (the &#147;Trust&#148;) was formed as a
Delaware business trust for the sole purpose of issuing Trust Preferred
securities. On July 16, 2001, the Trust completed the issuance of $15 million in
Trust Preferred securities, and concurrently, the Trust used the proceeds from
that offering to purchase Junior Subordinated Debentures of the Company. The
Company contributed $13.7 million of the $14.5 million in net proceeds received
from the Trust to the Bank to increase its regulatory capital and used the rest
for the Company&#146;s business. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company currently has
seven banking branches and one construction lending office, which provide
financial services in Fresno and Madera counties. As a community-oriented bank,
the Company continues to seek ways to better meet its customers' needs for
financial services, and to expand its business opportunities in today's
ever-changing financial services environment. The Company's strategy is to be a
better low-cost provider of services to its customer base while enlarging its
market area and corresponding customer base to further its ability to provide
those services. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><u>Results of Operations</u></b></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>For the year ended December
31, 2002, the Company reported net income of $7.4 million or $1.36 per share
($1.34 diluted) as compared to $6.2 million or $1.14 per share ($1.11 diluted)
for the year ended December 31, 2001, and $6.3 million or $1.16 per share ($1.12
diluted) for the year ended December 31, 2000. Net income for 2002 increased
nearly $1.2 million from the previous year primarily as the result of increased
volumes in earning assets combined with a substantial decrease in the cost of
interest-bearing liabilities, which helped offset the overall decline in the
Company&#146;s net margin. Tax benefits from the Bank&#146;s REIT subsidiary
also contributed to the increase in net income for 2002. However, no assurance
can be given that the tax benefits available from the REIT will continue to be
available in the future. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company&#146;s return
on average assets was 1.48% for the year ended December 31, 2002 as compared to
1.55% and 1.95% for the same twelve-month periods of 2001 and 2000,
respectively. The Company&#146;s return on average equity was 19.03% for the
year ended December 31, 2002 as compared to 17.25% and 20.05% for the same
twelve-month periods of 2001 and 2000, respectively. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><i>Net Interest Income</i></b></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net interest income, the
most significant component of earnings, is the difference between the interest
and fees received on earning assets and the interest paid on interest-bearing
liabilities. Earning assets consist primarily of loans, and to a lesser extent,
investments in securities issued by federal, state and local authorities, and
corporations, as well as interest-bearing deposits and overnight funds with
other financial institutions. These earning assets are funded by a combination
of interest-bearing and noninterest-bearing liabilities, primarily customer
deposits and short-term and long-term borrowings. Net interest income before
provision for credit losses totaled $18.0 million for the year ended December
31, 2002 as compared to $16.7 million for the year ended December 31, 2001. This
represents an increase of $1.3 million or 8.0% between the years ended December
31, 2001 and 2002, as compared to a decrease of $745,000 or 4.3% between 2000
and 2001. The increase in net interest income between 2001 and 2002 is primarily
the result of substantial growth in net average earning assets and liabilities
which more than offset the decline in average market rates of interest between
those two twelve-month periods. Net interest income decreased between 2000 and
2001 primarily as the result of the substantial decline in market rates of
interest between those two twelve-month periods, which more than offset the
growth in average earning assets. </FONT></P>

<p align=center><font size=2>15</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b>Table 1. - Distribution of Average Assets, Liabilities and Shareholders' Equity:<BR>
Interest rates and interest differentials<BR>
Years Ended December 31, 2002, 2001, and 2000</b></FONT></P>

<PRE>

                                      ----------------------------------------------------------------------------------------
                                                   2002                          2001                           2000
                                      ----------------------------------------------------------------------------------------
                                      Average             Yield/   Average             Yield/   Average              Yield/
   (Dollars in thousands)             Balance   Interest   Rate    Balance  Interest    Rate    Balance   Interest    Rate
------------------------------------------------------------------------------------------------------------------------------
Assets:
Interest-earning assets:
 Loans (1)                           $347,192   $24,521   7.06%   $297,653  $26,412    8.87%   $230,305   $24,739   10.74%
 Investment Securities - taxable       84,904     3,617   4.26%     55,285    3,218    5.82%     54,652     3,798    6.95%
 Investment Securities -
  nontaxable (2)                        2,889       139   4.81%      3,357      155    4.62%      3,346       162    4.84%
 Interest on deposits in other
  banks                                 3,048        94   3.08%          0        0    0.00%          0         0    0.00%
 Federal funds sold and reverse
  repos                                18,322       301   1.64%      7,766      278    3.58%      4,080       242    5.93%
                                      ----------------------------------------------------------------------------------------
  Total interest-earning assets       456,355   $28,672   6.28%    364,061  $30,063    8.26%    292,383   $28,941    9.90%
                                               =================            =================             ====================

Allowance for possible loan losses     (5,372)                      (4,114)                      (3,206)
Noninterest-bearing assets:
   Cash and due from banks             17,728                       14,154                       13,455
   Premises and equipment, net          2,839                        3,265                        3,670
   Accrued interest receivable          2,891                        3,352                        2,792
   Other real estate owned              9,186                        4,179                          909
   Other assets                        15,580                       13,863                       11,442
                                     -----------                  ----------                   -----------
   Total average assets              $499,207                     $398,760                     $321,445
                                     ===========                  ==========                   ===========
Liabilities and Shareholders' Equity:
Interest-bearing liabilities:
   NOW accounts                       $27,275     $208    0.76%    $24,382     $360    1.48%    $24,025      $411     1.71%
   Money market accounts               60,573    1,131    1.87%     47,440    1,604    3.38%     43,665     1,701     3.90%
   Savings accounts                    20,106      165    0.82%     18,337      322    1.76%     19,286       416     2.16%
   Time deposits                      221,387    6,867    3.10%    169,720    8,917    5.25%    121,529     7,166     5.90%
   Other borrowings                    33,476    1,427    4.26%     33,752    1,667    4.94%     27,846     1,850     6.64%
   Trust Preferred securities          15,000      899    5.99%      6,945      541    7.79%          0         0     0.00%
                                      -----------------------------------------------------------------------------------------
     Total interest-bearing
       liabilities                    377,817  $10,697    2.83%    300,576  $13,411    4.46%    236,351   $11,544     4.88%
                                               =================            =================             =====================
Noninterest-bearing liabilities:
   Noninterest-bearing checking        79,974                       59,389                       51,554
   Accrued interest payable             1,141                        1,388                        1,035
   Other liabilities                    1,544                        1,504                        1,300
                                     -----------                   ----------                  -----------
       Total average liabilities      460,476                      362,857                      290,240

Total average shareholders' equity     38,731                       35,903                       31,205
                                     -----------                  ----------                   -----------
Total average liabilities and
       Shareholders' equity
                                     $499,207                     $398,760                     $321,445
                                     ===========                  ==========                   ===========
Interest income as a percentage
     of average earning assets         6.28%                         8.26%                        9.90%
Interest expense as a percentage
     of average earning assets         2.34%                         3.68%                        3.95%
                                     ----------                   ----------                    ----------
Net interest margin                    3.94%                         4.58%                        5.95%
                                     ==========                   ==========                    ==========
</PRE>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><i>(1)
Loan amounts include nonaccrual loans, but the related interest income has been
included only if collected for the period prior to the loan being placed on a
nonaccrual basis. Loan interest income includes loan fees of approximately
$1,352,000, $1,468,000 and $856,000 for the years ended December 31, 2002, 2001,
and 2000, respectively.</i></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><i>(2)
Applicable nontaxable securities yields have not been calculated on a
tax-equivalent basis because they are not material to the Company&#146;s results
of operations. </i></FONT></P>

<p align=center><font size=2>16</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As summarized in Table 2,
the increase in net interest income between the two twelve-month periods ended
December 31, 2002 and 2001 is comprised of a decrease in total interest income
of approximately $1.4 million, which was more than offset by a decrease in total
interest expense of approximately $2.7 million. The Bank's net interest margin,
as shown in Table 1, decreased to 3.94% at December 31, 2002 from 4.58% at
December 31, 2001, a decrease of 64 basis points (100 basis points = 1%) between
the two periods. The net margin reported during 2001 also represents a decrease
of 137 basis points from the 5.95% net margin realized by the Company during
2000. While assets have grown over the past three years and the balance sheet
mix has changed, interest rate movements over those three years have played a
significant role in net interest income trends. Market rates of interest
increased between the years ended December 31, 1999 and 2000, but then decreased
significantly between the years ended December 31, 2000 and 2001. During 2002,
rates remained stable throughout much of the year. The prime rate, for example
(the rate to which most of the Company&#146;s floating-rate loans are tied),
increased by 100 basis point during 2000, but declined by an unprecedented 475
basis points between December 31, 2000 and December 31, 2001, and then only
decreased 50 basis during the fourth quarter of 2002. As a result of the Federal
Reserve&#146;s actions, the prime rate averaged 4.63% for the year ended
December 31, 2002 as compared to 6.93% and 9.24% for the years ended December
31, 2001 and 2000. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Both the Company's net
interest income and net interest margin are affected by changes in the amount
and mix of interest-earning assets and interest-bearing liabilities, referred to
as &quot;volume change.&quot; Both are also affected by changes in yields on
interest-earning assets and rates paid on interest-bearing liabilities, referred
to as &quot;rate change&quot;. The following table sets forth the changes in
interest income and interest expense for each major category of interest-earning
asset and interest-bearing liability, and the amount of change attributable to
volume and rate changes for the years indicated. Changes in interest income and
expense, which are not attributable specifically to either rate or volume, are
allocated proportionately between the two variances based on the absolute dollar
amounts of the change in each. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b>Table 2.  Rate and Volume Analysis</b></FONT></P>

<pre>
                                                2002 compared to 2001             2001 compared to 2000
                                              ---------------------------------------------------------------
   (In thousands)                              Total      Rate      Volume     Total      Rate     Volume
-------------------------------------------------------------------------------------------------------------
Increase (decrease) in interest income:
  Loans                                      $(1,891)   $(5,884)    $3,993     $1,673   $(4,772)   $6,445
  Investment securities                          383     (1,010)     1,393       (587)     (631)       44
  Interest-bearing deposits in other banks        94          0         94
  Federal funds sold and securities
   purchased under agreements to resell           23       (209)       232         36      (122)      158

                                            -----------------------------------------------------------------
     Total interest income                    (1,391)    (7,103)     5,712      1,122    (5,525)    6,647

Increase (decrease) in interest expense:
  Interest-bearing demand accounts              (625)      (998)       373       (148)     (272)      124
  Savings accounts                              (157)      (186)        29        (94)      (74)      (20)
  Time deposits                               (2,050)    (4,290)     2,240      1,751      (848)    2,599
  Other borrowings                              (240)      (226)       (14)      (183)     (530)      347
  Trust Preferred securities                     358       (149)       507        541         0       541
                                            -----------------------------------------------------------------
     Total interest expense                   (2,714)    (5,849)     3,135      1,867    (1,724)    3,591
                                            -----------------------------------------------------------------
Increase in net interest income               $1,323    $(1,254)    $2,577      $(745)  $(3,801)   $3,056
                                            =================================================================
</PRE>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total interest income
decreased approximately $1.4 million or 4.6% for the year ended December 31,
2002 as compared to the previous year. The change is attributable primarily to
an increase in the overall volume of earning assets, which was more than offset
by a decrease in market rates of interest. Earning asset growth was mainly in
loans, which are traditionally the Company&#146;s highest earning asset and, to
a smaller degree, in investment securities, interest-bearing deposits and
federal funds sold. On average, loan growth totaled nearly $49.5 million or
16.6% during 2002. The Company continues to maintain a high percentage of loans
in its earning asset mix with loans averaging 76.1% of total earning assets for
the year ended December 31, 2002, as compared to 81.8% and 78.8% for the years
ended December 31, 2001 and 2000, respectively. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>For the year ended December
31, 2001, total interest income increased approximately $1.1 million or 3.9% as
compared to the year ended December 31, 2000. This increase is attributable to
an increase in the overall volume of earning assets, which was only partially
offset by a decrease in market rates of interest. Earning asset growth was
mainly in loans, which are traditionally the Company&#146;s highest earning
asset and, to a smaller degree, in federal funds sold, repurchase agreements,
and investment securities. On average, loan growth totaled nearly $67.4 million
or 29.2% during 2001. </FONT></P>

<p align=center><font size=2>17</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total interest expense
decreased approximately $2.7 million or 20.3% for the year ended December 31,
2002 as compared to the year ended December 31, 2001. The decrease between these
two periods is primarily the result of a substantial decrease in the average
rates paid on all interest-bearing categories, which more than offset the $77.2
million total increase in average balances during the year. While average time
deposit balances increased $51.7 million during 2002, the total cost of those
time deposits declined $2.1 million and the average rate paid declined 215 basis
points, when compared to the year ended December 31, 2001. All other interest
bearing-liability categories experienced increases in average volumes during
2002, while realizing declines in interest expense and the average rates paid on
those liabilities. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>For the year ended December
31, 2001, total interest expense of $13.4 million represents an increase of
approximately $1.9 million or 16.2% as compared to the year ended December 31,
2000. The increase between these two periods is primarily the result of an
increase in average time deposits of more than $48.2 million, which more than
offset the 65 basis point decrease in the average cost of those deposits. As a
result of the increased volume in time deposits, interest expense on those
deposits increased by almost $1.8 million for the year. Other borrowings,
including federal funds purchased and repurchase agreements, as well as
trust-preferred securities, increased by $12.9 million on average between the
years ended December 31, 2000 and December 31, 2001. Being short-term in nature,
the cost of other borrowings declined by 170 basis points between those two
twelve-month periods as market rates of interest dropped significantly during
2001. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Provisions for credit
losses and the amount added to the allowance for credit losses is determined on
the basis of management's continuous credit review of the loan portfolio,
consideration of past loan loss experience, current and future economic
conditions, and other pertinent factors. Such factors consider the allowance for
credit losses to be adequate when it covers estimated losses inherent in the
loan portfolio. Based on the condition of the loan portfolio, management
believes the allowance is sufficient to cover risk elements in the loan
portfolio. For the year ended December 31, 2002 the provision to the allowance
for credit losses amounted to $2.0 million as compared to $1.7 and $1.6 million
for the years ended December 31, 2001 and 2000, respectively. The provision made
during the fourth quarter of 2002 totaled $744,000, or approximately 39.4% of
the total provision made during 2002. The additional provision was made in
response to increased levels of nonperforming loans. For further discussion, see
the &#147;Asset Quality and Allowance for Credit Losses&#148; section of this
financial review. The amount provided to the allowance for credit losses during
2002 brought the allowance to 1.59% of net outstanding loan balances at December
31, 2002, as compared to 1.33% of net outstanding loan balances at December 31,
2001, and 1.45% at December 31, 2000. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><i>Noninterest Income</i></b></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<i>The following table summarizes significant components of noninterest income for the years indicted and the net changes between
those years:</i></FONT></P>
<PRE>
                                     Years Ended December 31,           Change during Year
                                 --------------------------------------------------------------
   (In thousands)                 2002          2001        2000         2002         2001
-----------------------------------------------------------------------------------------------
Customer service fees            $3,895        $3,086      $2,234        $809         $852
Gain on sale of securities          485           770           6        (285)         764
Gain on sale of loans               103             0           0         103            0
Gain on sale of OREO                  4            34          62         (30)         (28)
Gain on sale of fixed assets         10             8           2           2            6
Other                               871           379         234         492          145
                               ----------------------------------------------------------------
   Total                         $5,368        $4,277      $2,538      $1,091       $1,739
                               ================================================================
</PRE>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Noninterest income consists
primarily of fees and commissions earned on services that are provided to the
Company&#146;s banking customers and, to a lesser extent, gains on Company
assets and other miscellaneous income. Noninterest income for the year ended
December 31, 2002 increased $1.1 million when compared to the same period last
year, and increased $2.8 million when compared to the year ended December 31,
2000. Increases in customer service fees accounted for $809,000 or 74.2% of the
total increase in noninterest income between those two periods. Increases in
customer service fees are attributable to growth in ATM fee income, as well as
checking service charges and overdraft charges. The Company has not only
increased its number of ATM&#146;s, but has also experienced an increase in
transaction volume over the past several years. Gains from sales of
available-for-sale securities accounted for $485,000 of the total noninterest
income for the year ended December 31, 2002, but represented a decline of
$285,000 or 37.0% when compared to the securities gains realized during 2001.
Increases of $492,000 in other noninterest income were largely comprised of OREO
income, shared appreciation income on loans, and dividends paid from the
Company&#146;s equity investment in a title company. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total noninterest income
for the year ended December 31, 2001 increased $1.7 million or 68.5% when
compared to the year ended December 31, 2000. Customer service fees, the primary
category of total noninterest income, increased $852,000 or 38.1% during 2001,
and as with 2002, were primarily as the result of increases in ATM fees and
checking service charges. In addition, gains from the sales of
available-for-sale securities totaled $770,000 during 2001, representing an
increase of $764,000 when compared to the year ended December 31, 2000. </FONT></P>

<p align=center><font size=2>18</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><i>Noninterest Expense</i></b></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><i>The following table sets
forth the components of total noninterest expense in dollars and as a percentage
of average earning assets for the years ended December 31, 2002, 2001 and 2000: </i></FONT></P>

<PRE>
                                        2002                      2001                      2000
                                       --------------------------------------------------------------------------
                                                   % of                      % of                      % of
                                                  Average                   Average                   Average
                                                  Earning                   Earning                   Earning
 (Dollars in thousands)                Amount      Assets        Amount      Assets        Amount      Assets
----------------------------------------------------------------------------------------- -----------------------
Salaries and employee benefits         $4,895       1.07%        $4,525       1.24%        $3,954       1.35%
Occupancy expense                       1,730       0.38%         1,731       0.48%         1,608       0.55%
Data processing                           553       0.12%           544       0.15%           540       0.18%
Professional fees                         965       0.21%           591       0.15%           312       0.11%
Directors fees                            201       0.04%           202       0.06%           174       0.06%
Amortization of intangibles               360       0.08%           360       0.10%           360       0.12%
Correspondent bank service charges        289       0.06%           218       0.06%           202       0.07%
Other                                   1,867       0.41%         1,647       0.46%         1,498       0.51%
                                    -----------------------------------------------------------------------------
   Total                              $10,860       2.38%        $9,818       2.70%        $8,648       2.96%
                                    =============================================================================
</PRE>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Noninterest expense,
excluding provision for credit losses and income tax expense, totaled $10.9
million for the year ended December 31, 2002 as compared to $9.8 million and
$8.6 million for the years ended December 31, 2001 and 2000, respectively. These
figures represent an increase of $1.0 million or 10.6% between the years ended
December 31, 2002 and 2001 and an increase of $1.2 million or 13.5% between the
years ended December 31, 2001 and 2000. Expense increases between the three
years presented are associated primarily with normal, anticipated growth of the
Company. As a percentage of average earning assets, total noninterest expense
has actually declined over the past three years as the Company has controlled
overhead expenses while experiencing profitable growth. Noninterest expense
declined to 2.38% of average earning assets for the year ended December 31, 2002
from 2.70% at December 31, 2001 and 2.96% at December 31, 2000. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Increases in salaries and
employee benefits over the three years presented were the result of additional
staff to support the Company&#146;s strategic long-term growth objectives, as
well as normal wage and benefit increases combined with increased medical
insurance costs incurred. Professional fees increased over the three years
presented as the result of additional legal expenses associated with impaired
loans, increased audit fees, and the formation of the Bank&#146;s subsidiary
REIT during 2002, as well as additional expenses incurred during 2001 related to
the Company&#146;s becoming listed on NASDAQ, the formation of the holding
company, and the issuance of Trust Preferred securities. Increases in other
noninterest expense over the three years presented are associated with normal
business growth and, include a number of items such as telephone, postage,
insurance, and armored car expenses. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><u>Financial Condition</u></b></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total assets increased by
$69.2 million or 15.3% during the year to $520.1 million at December 31, 2002,
up from $450.9 million at the end of the same period last year, and up from the
balance of $356.8 million at December 31, 2000. Substantial asset growth during
2002 was primarily the result of an increase in deposits and borrowings, which
were utilized to fund loan growth and the investment portfolio, thus enhancing
the Company&#146;s overall liquidity position. During the year ended December
31, 2002, loan growth totaled $12.8 million, while securities and other
short-term investments increased $42.6 million, and interest-bearing deposits in
other banks increased $10.2 million. Total deposits of $424.0 million at
December 31, 2002 increased $55.3 million or 15.0% from the balance reported at
December 31, 2001, and increased $152.1 million or 56.0% from the balance of
$271.9 million reported at December 31, 2000. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Earning assets averaged
approximately $456.4 million during the year ended December 31, 2002, as
compared to $364.1 million and $292.4 million for the years ended December 31
2001 and 2000, respectively. Average interest-bearing liabilities increased to
$377.8 million for the year ended December 31, 2002, as compared to $300.6
million for the year ended December 31, 2001, and $236.4 million for the year
ended December 31, 2000. </FONT></P>

<p align=center><font size=2>19</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><i>Loans</i></b></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company's primary
business is that of acquiring deposits and making loans, with the loan portfolio
representing the largest and most important component of its earning assets.
Loans totaled $349.1 million at December 31, 2002, an increase of $12.8 million
or 3.8% when compared to the balance of $336.3 million at December 31, 2001, and
an increase of $87.7 million or 33.6% when compared to the balance of $261.4
million reported at December 31, 2000. Average loans totaled $347.2 million,
$297.7 million, and $230.3 million for the years ended December 31, 2002, 2001
and 2000, respectively. During 2002 average loans increased 16.6% when compared
to the year ended December 31, 2001 and increased 50.8% compared to the year
ended December 31, 2000. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<i>The following table sets forth the amounts of loans outstanding by category and the category percentages as of the year-end dates
indicated:</i></FONT></P>

<PRE>
                                 2002              2001               2000              1999              1998
                           -------------------------------------------------------------------------------------------
                            Dollar   % of     Dollar    % of    Dollar     % of    Dollar    % of    Dollar    % of
   (In thousands)           Amount   Loans    Amount    Loans   Amount    Loans    Amount    Loans   Amount    Loans
----------------------------------------------------------------------------------------------------------------------
Commercial and industrial  $117,293  33.6%   $102,280   30.4%  $66,435    25.4%   $52,275    26.4%  $43,358    28.1%
Real estate - mortgage      100,417  28.9     111,425   33.1   113,140    43.3     77,694    39.2    65,833    42.6
Real estate - construction   95,024  27.2      92,764   27.6    61,038    23.4     55,574    28.0    33,913    22.0
Agricultural                 16,877   4.8      12,987    3.9     7,240     2.8      7,003     3.5     6,479     4.2
Installment/other             7,811   2.2       6,647    2.0    10,291     3.9      5,723     2.9     4,837     3.1
Lease financing              11,632   3.3      10,184    3.0     3,225     1.2          0     0.0         0     0.0
                           --------------------------------------------------------------------------------------------
Total Loans                $349,054 100.0%   $336,287  100.0% $261,369   100.0%  $198,269   100.0% $154,420   100.0%
                           ============================================================================================
</PRE>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Loan volume continues to be
greatest in what has historically been the Bank&#146;s primary lending emphasis:
commercial, real estate mortgage, and construction lending. Much of the loan
growth experienced during 2002 again occurred in commercial and industrial
loans, which increased by $15.0 million or 14.7% during the year as compared to
an increase of $35.8 million or 54.0% during 2001. At December 31, 2002,
approximately 59% of commercial and industrial loans have floating rates and,
although some may be secured by real estate, many are secured by accounts
receivable, inventory, and other business assets. Growth also continues in
construction loans, which increased $2.3 million or 2.4% during 2002, and
increased $31.7 million or 52.0% during 2001. Construction loans are generally
short-term, floating-rate obligations, which consist of both residential and
commercial projects. Agricultural loans consisting of mostly short-term,
floating rate loans for crop financing, increased $3.9 million or 30.0% between
December 31, 2001 and December 31, 2002, while installment loans decreased $1.2
million or 17.5% during that same period. Since 2000, the Company has done lease
financing, with growth of $1.4 million or 14.5% experienced during 2002, as
compared to $7.0 million or 215.8% during the year ended December 31, 2001. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The real estate mortgage
loan portfolio totaling $100.4 million at December 31, 2002 consists of
commercial real estate, residential mortgages, and home equity loans. Commercial
real estate is the core of this segment of the portfolio, with balances of $82.6
million, $83.3 million, and $89.5 million at December 31, 2002, 2001, and 2000,
respectively. Commercial real estate loans are generally a mix of short to
medium-term, fixed and floating rate instruments and, are mainly tied to
commercial income and multi-family residential properties. The Company does not
currently offer residential mortgage loans and, as a result, that portion of the
portfolio generally has declined over time with balances of $7.8 million, $13.4
million, and $6.1 million at December 31, 2002, 2001 and 2000, respectively. The
Company purchased a portfolio of fixed-rate jumbo mortgages during 2001, which
accounted for $8.7 million of the outstanding mortgage loans at December 31,
2001. With substantial prepayments experienced during 2002, that jumbo mortgage
portfolio declined during the year to a balance of $1.9 million at December 31,
2002. The Company began offering short to medium-term, fixed-rate, home equity
loans early in 1997 and during the last three years balances have declined
moderately, with $10.0 million at December 31, 2002, $14.8 million at December
31, 2001, and $17.5 million at December 31, 2000. </FONT></P>
<BR><BR><BR>
<p align=center><font size=2>20</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">



<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<i>The following table sets forth the maturities of the Bank's loan portfolio at December 31, 2002. Amounts presented are shown by
maturity dates rather than repricing periods:</i></FONT></P>

<PRE>
                                                   Due after one
                                     Due in one     Year through     Due after
   (In thousands)                   year or less     Five years      Five years      Total
-----------------------------------------------------------------------------------------------
Commercial and agricultural           $67,860         $41,469         $24,841       $134,170
Real estate - construction             77,176          17,848               0         95,024
                                    -----------------------------------------------------------
                                      145,036          59,317          24,841        229,194
Real estate - mortgage                  5,413          58,691          36,313        100,417
All other loans                         4,952          12,906           1,585         19,443
                                    -----------------------------------------------------------
Total Loans                          $155,401        $130,914         $62,739       $349,054
                                    ===========================================================
</PRE>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The average yield on loans
was 7.06% for the year ended December 31, 2002, representing a decrease of 181
basis points when compared to the year ended December 31, 2001 and was a result
of a significant decline in average market rates of interest between those two
periods. For the year ended December 31, 2001, the overall average yield on the
loan portfolio was 8.87%, representing a decrease of 187 basis points when
compared to 10.74% for the same twelve-month period of 2000 and again was a
result of a significant decrease in average market rates of interest during
2001. The Bank&#146;s loan portfolio is generally comprised of short-term or
floating rate loans and is therefore susceptible to fluctuations in market rates
of interest. At December 31, 2002, 2001 and 2000, approximately 68.7%, 65.2% and
65.5% of the Bank's loan portfolio consisted of floating rate instruments, with
the majority of those tied to the prime rate. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><i>The following table sets
forth the contractual maturities of the Bank's fixed and floating rate loans at
December 31, 2002. Amounts presented are shown by maturity dates rather than
repricing periods, and do not consider renewals or prepayments of loans: </i></FONT></P>

<PRE>
                                                  Due after one
                                     Due in one    Year through     Due after
   (In thousands)                   year or less    Five years      Five years       Total
------------------------------------------------------------------------------------------------
Accruing loans:
  Fixed rate loans                    $32,572        $38,543         $29,638       $100,753
  Floating rate loans                 116,551         83,771          32,547        232,869
                                  --------------------------------------------------------------
    Total accruing loans              149,123        122,314          62,185        333,622
Nonaccrual loans:
  Fixed rate loans                         77          8,598               0          8,675
  Floating rate loans                   6,201              2             554          6,757
                                  --------------------------------------------------------------
    Total nonaccrual loans              6,278          8,600             554         15,432
                                  --------------------------------------------------------------
Total Loans                          $155,401       $130,914         $62,739       $349,054
                                  ==============================================================
</PRE>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><i>Securities</i></b></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<i>Following is a comparison of the amortized cost and approximate fair value of available-for-sale and held-to-maturity securities
for the three years indicated:</i></FONT></P>

<PRE>
                                            December 31, 2002                          December 31, 2001
                                ------------------------------------------  -----------------------------------------
                                             Gross     Gross   Fair Value               Gross     Gross    Fair Value
                                Amortized  UnrealizedUnrealized(Carrying    Amortized UnrealizedUnrealized (Carrying
   (In thousands)                  Cost      Gains    Losses    Amount)       Cost      Gains     Losses    Amount)
---------------------------------------------------------------------------------------------------------------------
Available-for-sale:
 U.S. Government agencies        $63,794    $1,570       $0     $65,364      $42,341     $360      $(74)   $42,627
 U.S. Government agency
   collateralized mortgage
    obligations                       84         4        0          88          211        1        (2)       210
 Obligations of state and
    political subdivisions         2,795       178        0       2,973        3,464       72        (4)     3,532
 Other investment securities      36,158         5      (21)     36,142       17,164        0      (168)    16,996
                                ------------------------------------------  -----------------------------------------
    Total available-for-sale    $102,831    $1,757     $(21)   $104,567      $63,180     $433     $(248)   $63,365
                                ==========================================  =========================================
</PRE>

<p align=center><font size=2>21</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">

<PRE>
                                                         December 31, 2000
                                            ---------------------------------------------
                                                          Gross      Gross
                                            Amortized  Unrealized  Unrealized    Fair
  (In thousands)                               Cost       Gains      Losses     Value
-----------------------------------------------------------------------------------------
Available-for-sale:
  U.S. Government agencies                   $42,523       $489       $(79)    $42,933
  U.S. Government agency
    collateralized mortgage obligations        1,357          0        (16)      1,341
  Obligations of state and
    political subdivisions                     3,317         72          0       3,389
  Other investment securities                  2,000         95          0       2,095
                                           ---------------------------------------------
    Total available-for-sale                 $49,197       $656       $(95)    $49,758
                                           =============================================
Held-to-maturity:
   U.S. Government agencies                  $10,248         $0       $(74)    $10,174                                                                $0      $(74)
                                            =============================================
</PRE>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Realized gains on
securities available-for-sale totaled $509,000 during 2002, $769,000 during
2001, and $6,000 during 2000. Realized losses on securities available-for-sale
totaled $24,000 during 2002. There were no realized losses for such securities
during either 2001 or 2000. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Investment securities
increased $41.2 million between December 2001 and December 2002, as deposits and
borrowings grew faster than loans, and excess funds were utilized to enhance the
Company&#146;s liquidity position. The increase was divided almost evenly
between U.S. Government-sponsored agencies and other investment securities.
Included in the increase in other investment securities was a short-term money
market mutual fund with Janus Investments totaling $23.0 million, which can be
liquidated as needed for loan growth or deposit runoff. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Most of the $14.0 million
increase in available-for-sale securities experienced during 2001 was in the
other debt securities category. Included in other debt securities at December
31, 2001 are a short-term government securities mutual fund with Federated
Securities Corporation totaling $10.0 million, a CRA qualified investment fund
totaling $4.0 million, and Trust Preferred securities pools totaling $3.1
million. At December 31, 2000, other debt securities consisted solely of
investments in Trust Preferred securities. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><i>The contractual maturities
of investment securities as well as yields based on amortized cost of those
securities at December 31, 2002 are shown below. Actual maturities may differ
from contractual maturities because issuers have the right to call or prepay
obligations with or without call or prepayment penalties. </i></FONT></P>

<PRE>
                                              After one year   After five years
                            One year or less   to five years     to ten years    After ten years        Total
                            -----------------------------------------------------------------------------------------
  (Dollars in thousands)     Amount  Yield    Amount  Yield     Amount  Yield    Amount  Yield     Amount   Yield
                                       (1)              (1)               (1)              (1)                (1)
---------------------------------------------------------------------------------------------------------------------
Available-for-sale:
 U.S. Government agencies     $---    ---%  $42,971    4.42%   $1,028    6.66% $21,365    5.32%   $65,364    4.80%
 U.S. Government agency
  collateralized
    mortgage obligations       ---    ---      ---      ---      ---      ---       88    5.15%        88    5.15%
 Obligations of state and
    political subdivisions     185   4.30%      793    4.34%      137    4.17%   1,858    4.99%     2,973    5.04%
 Other debt securities -
    corporate bonds         32,999   2.43%      ---      ---      ---      ---   3,143    9.29%    36,142    3.03%
                            -----------------------------------------------------------------------------------------
Total estimated fair value $33,184   2.44%  $43,764    4.42%   $1,165    6.37% $26,454    5.76%  $104,567    4.18%
                            =========================================================================================
</PRE>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<i>(1) Weighted average yields are not computed on a tax equivalent basis</i>
</FONT></P>

<p align=center><font size=2>22</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">



<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>At December 31, 2002,
available-for-sale securities with an amortized cost of approximately $65.0
million (fair value of $66.7 million) were pledged as collateral for public
funds, FHLB borrowings, and treasury tax and loan balances. At December 31,
2001, available-for-sale securities with an amortized cost of approximately
$43.9 million (fair value of $44.2 million) were pledged as collateral for
public funds and treasury tax and loan balances. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><i>Deposits</i></b>
</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Bank attracts
commercial deposits primarily from local businesses and professionals, as well
as retail checking accounts, savings accounts and time deposits. Total deposits
increased $55.3 million or 15.0% during the year to a balance of $424.0 million
at December 31, 2002 and increased $96.8 million or 35.6% between December 31,
2000 and December 31, 2001. Core deposits, consisting of all deposits other than
time deposits of $100,000 or more and brokered deposits, continue to provide the
foundation for the Bank's principal sources of funding and liquidity. These core
deposits amounted to 69.4%, 65.5% and 71.4% of the total deposit portfolio at
December 31, 2002, 2001 and 2000, respectively. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><i>The following table sets
forth the year-end amounts of deposits by category for the years indicated, and
the dollar change in each category during the year: </i></FONT></P>

<PRE>
                                                  December 31,                Change during Year
                                     --------------------------------------------------------------
   (In thousands)                       2002        2001        2000            2002        2001
---------------------------------------------------------------------------------------------------
Noninterest-bearing deposits          $89,000     $72,413     $52,898         $16,587     $19,515
Interest-bearing deposits:
 NOW and money market accounts        100,199      83,316      62,143          16,883      21,173
 Savings accounts                      21,138      19,883      18,347           1,255       1,536
 Time deposits:
   Under $100,000                      85,564      68,414      63,567          17,150       4,847
   $100,000 and over                  128,086     124,625      74,908           3,461      49,717
                                   ----------------------------------------------------------------
Total interest-bearing deposits       334,987     296,238     218,965          38,749      77,273
                                   ----------------------------------------------------------------
Total deposits                       $423,987    $368,651    $271,863         $55,336     $96,788
                                   ================================================================
</PRE>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During the year ended
December 31, 2002, increases were experienced in all deposit categories, with
substantial increases in time deposits, as well as interest-bearing and
noninterest-bearing checking accounts. The increase experienced in total
deposits between December 31, 2000 and December 31, 2001 was again in all
deposit categories with the largest increases experienced in the same categories
as those in 2002. Much of the increase in time deposits over the years presented
has been the result of wholesale and brokered deposits, as well as time deposits
from the State of California. A wholesale deposit program was initiated during
2002 to bring in certificates of deposit, and resulted in a balance of $20.4
million at December 31, 2002. The Company has utilized brokered deposits over
the past several years to enhance its deposit growth, with brokered deposits
totaling $26.3 million, $51.3 million and $12.5 million at December 31, 2002,
2001 and 2000, respectively. In addition, the Company has been able to obtain
time deposits from the State of California, which totaled $40.0 million, $30.0
million, and $25.0 million at December 31, 2002, 2001 and 2000, respectively.
The time deposits of the State of California are collateralized by pledged
securities in the Company&#146;s investment portfolio. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company's deposit base
consists of two major components represented by noninterest-bearing (demand)
deposits and interest-bearing deposits. Interest-bearing deposits consist of
time certificates, NOW and money market accounts and savings deposits. Total
interest-bearing deposits increased $38.7 million or 13.1% between December 31,
2001 and December 31, 2002, while noninterest-bearing deposits increased $16.6
million or 22.9% between the same two periods presented. Between December 31,
2000 and December 31, 2001, total interest-bearing deposits increased $77.3
million or 35.3%, while noninterest-bearing deposits increased $19.5 million or
36.9%. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On a year-to-date average,
the Company experienced an increase of $90.0 million or 28.2% in total deposits
between the years ended December 31, 2001 and December 31, 2002. Between these
two periods, average interest-bearing deposits increased $69.5 million or 26.7%,
while total noninterest-bearing checking increased $20.6 million or 34.7% on a
year-to-date average basis. On average, the Company experienced increases in all
other deposit categories between the years ended December 31, 2001 and December
31, 2002, with the most significant increases being in time deposits and money
market accounts. On a year-to-date average basis, total deposits increased $59.2
million or 22.8% between the years ended December 31, 2000 and December 31,
2001. Of that total, interest-bearing deposits increased by $51.4 million or
24.6%, while noninterest-bearing deposits increased $7.8 million or 15.2% during
2001. As with 2002, the most significant increases experienced in average
deposits during 2001 were in time deposits and money market accounts. </FONT></P>

<p align=center><font size=2>23</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<i>The following table sets forth the average deposits and average rates paid on those deposits for the years ended December 31,
2002, 2001 and 2000:</i></FONT></P>

<PRE>
                                        2002                   2001                 2000
                            ---------------------------------------------------------------------
                                 Average               Average              Average
  (Dollars in thousands)         Balance     Rate %    Balance     Rate %   Balance     Rate %
-------------------------------------------------------------------------------------------------
Interest-bearing deposits:
 Checking accounts               $87,848     1.52%     $71,822     2.73%    $67,690     3.12%
 Savings                          20,106     0.82%      18,337     1.76%     19,286     2.16%
 Time deposits (1)               221,387     3.10%     169,720     5.25%    121,529     5.90%
Noninterest-bearing deposits      79,974                59,389               51,554
</pre>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<i>(1) Included at December 31, 2002, are $128.1 million in time certificates of deposit of $100,000 or more, of which $42.9
million matures in three months or less, $44.4 million matures in 3 to 6 months, $25.8 million matures in 6 to 12 months,
and $15.0 million matures in more than 12 months.</i></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><i>Short-term Borrowings</i></b>
</FONT></P>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The Company has the ability to obtain borrowed funds consisting of federal funds purchased, securities sold under agreements to
repurchase ("repurchase agreements") and Federal Home Loan Bank ("FHLB") advances as alternatives to retail deposit funds. The
Company has established collateralized and uncollateralized lines of credit with several correspondent banks, as well as a
securities dealer, for the purpose of obtaining borrowed funds as needed. The Company may continue to borrow funds in the future
as part of its asset/liability strategy, and may use these funds to acquire certain other assets as deemed appropriate by
management for investment purposes and to better utilize the capital resources of the Bank. Federal funds purchased represent
temporary overnight borrowings from correspondent banks and are generally unsecured. Repurchase agreements are collateralized by
mortgage backed securities and securities of U.S. Government agencies, and generally have maturities of one to six months, but may
have longer maturities if deemed appropriate as part of the Company's asset/liability management strategy. FHLB advances are
collateralized by the Company's stock in the FHLB, securities, and certain qualifying mortgage loans. In addition, the Company has
the ability to obtain borrowings from the Federal Reserve Bank of San Francisco, which would be collateralized by certain pledged
loans in the Company's loan portfolio. The lines of credit are subject to periodic review of the Company's financial statements by
the grantors of the credit lines. Lines of credit may be modified or revoked at any time if the grantors feel there are adverse
trends in the Company's financial position.</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The Company had collateralized and uncollateralized lines of credit aggregating $157.5 million and $119.6 million, as well as FHLB
lines of credit totaling $36.7 million and $35.6 million at December 31, 2002 and 2001, respectively. The Company had repurchase
agreement lines of credit totaling $5.3 million at December 2001. These lines of credit generally have interest rates tied to the
Federal Funds rate or are indexed to short-term U.S. Treasury rates or LIBOR.</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<i>The table below provides further detail of the Company's federal funds purchased, repurchase agreements and FHLB advances for the
years ended December 31, 2002, 2001 and 2000:</i></FONT></P>
<PRE>
                                                            December 31,
                                 ------------------------------------------------------
 (Dollars in thousands)                      2002           2001           2000
---------------------------------------------------------------------------------------
 At period end:
   Federal funds purchased                   $0              $0          $22,630
   Repurchase agreements                      0           5,300           11,694
   FHLB advances                         35,400          22,200           23,200
                                   ----------------------------------------------------
      Total                             $35,400         $27,500          $47,524
                                   ====================================================
  Average ending interest
     rate - total                         4.17%           4.13%           6.35%
                                   ====================================================
 Average for the year:
   Federal funds purchased                  $77          $1,480           $2,793
   Repurchase agreements                    218          12,048           17,077
   FHLB advances                         32,398          19,255            7,800
                                   ----------------------------------------------------
       Total                            $32,693         $32,783          $27,669
                                   ====================================================
    Average interest rate - total         4.22%           4.82%            6.61%
                                   ====================================================
 Maximum total borrowings
  outstanding atn ny month-end
  during the year:
   Federal funds purchased              $1,995          $19,870          $22,630
   Repurchase agreements
     /FHLB advances                     35,400           24,350           24,894
                                   -----------------------------------------------------
         Total                         $37,395          $44,220          $47,524
                                   =====================================================
</PRE>

<p align=center><font size=2>24</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><i>Asset Quality and Allowance for Credit Losses</i></b></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Lending money is the
Company's principal business activity, and ensuring appropriate evaluation,
diversification, and control of credit risks is a primary management
responsibility. Implicit in lending activities is the fact that losses will be
experienced and that the amount of such losses will vary from time to time,
depending on the risk characteristics of the loan portfolio as affected by local
economic conditions and the financial experience of borrowers. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The allowance for credit
losses is maintained at a level deemed appropriate by management to provide for
known and inherent risks in existing loans and commitments to extend credit. The
adequacy of the allowance for credit losses is based upon management's
continuing assessment of various factors affecting the collectibility of loans
and commitments to extend credit; including current economic conditions, past
credit experience, collateral, and concentrations of credit. There is no precise
method of predicting specific losses or amounts which may ultimately be charged
off on particular segments of the loan portfolio. The collectibility of a loan
is subjective to some degree, but must relate to the borrower&#146;s financial
condition, cash flow, quality of the borrower&#146;s management expertise,
collateral and guarantees, and state of the local economy. When determining the
adequacy of the allowance for credit losses, the Company follows the guidelines
set forth in the Interagency Policy Statement on the Allowance for Loan and
Lease Losses (&#147;Statement&#148;) issued jointly by banking regulators during
July 2001. The Statement outlines characteristics that should be used in
segmentation of the loan portfolio for purposes of the analysis including risk
classification, past due status, type of loan, industry or collateral. It also
outlines factors to consider when adjusting the loss factors for various
segments of the loan portfolio. Securities and Exchange Commission Staff
Accounting Bulletin No. 102 was also released at this time which represents the
SEC staff&#146;s view relating to methodologies and supporting documentation for
the Allowance for Loan and Lease Losses that should be observed by all public
companies in complying with the federal securities laws and the
Commission&#146;s interpretations. It is also generally consistent with the
guidance published by the banking regulators. </FONT></P>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The Company's methodology for assessing the adequacy of the allowance for credit losses consists of several key elements, which
include:</FONT></P>


<table width=100% border=0 cellspacing=0 cellpadding=0>

<tr valign="top">
<td>&nbsp;-</td>
<td><font size=2>the formula allowance,</font></td>
</tr>
<tr valign="top">
<td width=3%><font size=2>&nbsp;-</font></td>
<td width=97%><font size=2>specific allowances for problem graded loans ("classified loans")</font></td>
</tr>
<tr valign="top">
<td>&nbsp;-</td>
<td><font size=2>and the unallocated allowance</font></td>
</tr>
</table>



<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
In addition, the allowance analysis also incorporates the results of measuring impaired loans as provided in:
</FONT></P>

<table width=100% border=0 cellspacing=0 cellpadding=0>
<tr valign="top">
<td>&nbsp;-</td>
<td><font size=2>Statement of Financial Accounting Standards ("SFAS") No. 114, "Accounting by Creditors
for Impairment of a Loan"  and</font></td>
</tr>
<tr valign="top">
<td width=3%><font size=2>&nbsp;-</font></td>
<td width=97%><font size=2>SFAS 118, "Accounting by Creditors for Impairment of a Loan - Income Recognition and Disclosures."</font></td>
</tr>
</table>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The formula allowance is
calculated by applying loss factors to outstanding loans and certain unfunded
loan commitments. Loss factors are based on the Company&#146;s historical loss
experience and on the internal risk grade of those loans and, may be adjusted
for significant factors that, in management's judgment, affect the
collectibility of the portfolio as of the evaluation date. Management determines
the loss factors for problem graded loans (substandard, doubtful, and loss),
special mention loans, and pass graded loans, based on a loss migration model.
The migration analysis incorporates loan losses over the past twelve quarters
(three years) and loss factors are adjusted to recognize and quantify the loss
exposure from changes in market conditions and trends in the Company&#146;s loan
portfolio. For purposes of this analysis, loans are grouped by internal risk
classifications which are &#147;pass&#148;, &#147;special mention&#148;,
&#147;substandard&#148;, &#147;doubtful&#148;, and &#147;loss&#148;. Certain
loans are homogenous in nature and are therefore pooled by risk grade. These
homogenous loans include consumer installment and home equity loans. Special
mention loans are currently performing but are potentially weak, as the borrower
has begun to exhibit deteriorating trends, which if not corrected, could
jeopardize repayment of the loan and result in further downgrade. Substandard
loans have well-defined weaknesses which, if not corrected, could jeopardize the
full satisfaction of the debt. A loan classified as &#147;doubtful&#148; has
critical weaknesses that make full collection of the obligation improbable.
Classified loans, as defined by the Company, include loans categorized as
substandard, doubtful, and loss. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Specific allowances are
established based on management&#146;s periodic evaluation of loss exposure
inherent in classified loans, impaired loans, and other loans in which
management believes there is a probability that a loss has been incurred in
excess of the amount determined by the application of the formula allowance. </FONT></P>

<p align=center><font size=2>25</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The unallocated portion of
the allowance is based upon management&#146;s evaluation of various conditions
that are not directly measured in the determination of the formula and specific
allowances. The conditions may include, but are not limited to, general economic
and business conditions affecting the key lending areas of the Company, credit
quality trends, collateral values, loan volumes and concentrations, and other
business conditions. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company&#146;s
methodology includes features that are intended to reduce the difference between
estimated and actual losses. The specific allowance portion of the analysis is
designed to be self-correcting by taking into account the current loan loss
experience based on that portion of the portfolio. By analyzing the probable
estimated losses inherent in the loan portfolio on a quarterly basis, management
is able to adjust specific and inherent loss estimates using the most recent
information available. In performing the periodic migration analysis, management
believes that historical loss factors used in the computation of the formula
allowance need to be adjusted to reflect current changes in market conditions
and trends in the Company&#146;s loan portfolio. There are a number of other
factors which are reviewed when determining adjustments in the historical loss
factors. They include 1) trends in delinquent and nonaccrual loans, 2) trends in
loan volume and terms, 3) effects of changes in lending policies, 4)
concentrations of credit, 5) competition, 6) national and local economic trends
and conditions, 7) experience of lending staff, 8) loan review and Board of
Directors oversight, 9) high balance loan concentration, and 10) other business
conditions. During 2002, the ninth factor listed above, high balance loan
concentration, was added to the analysis process in response to expanded
regulatory guidelines, as well as an increase in large loan balances in the
Company&#146;s portfolio. Other than the added factor just mentioned, there were
no changes in estimation methods or assumptions during 2002 that affected the
methodology for assessing the adequacy of the allowance for credit losses. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Management and the
Company&#146;s lending officers evaluate the loss exposure of classified and
impaired loans on a weekly/monthly basis and through discussions and officer
meetings as conditions change. The Company&#146;s Loan Committee meets weekly
and serves as a forum to discuss specific problem assets that pose significant
concerns to the Company, and to keep the Board of Directors informed through
committee minutes. All special mention and classified loans are reported
quarterly on Criticized Asset Reports which are reviewed by senior management.
With this information, the migration analysis and the impaired loan analysis are
performed on a quarterly basis and adjustments are made to the allowance as
deemed necessary. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Impaired loans are measured
based on the present value of the expected future cash flows discounted at the
loan's effective interest rate or the fair value of the collateral if the loan
is collateral dependent. The amount of impaired loans is not directly comparable
to the amount of nonperforming loans disclosed later in this section. The
primary differences between impaired loans and nonperforming loans are: i) all
loan categories are considered in determining nonperforming loans while impaired
loan recognition is limited to commercial and industrial loans, commercial and
residential real estate loans, construction loans, and agricultural loans, and
ii) impaired loan recognition considers not only loans 90 days or more past due,
restructured loans and nonaccrual loans but also may include problem loans other
than delinquent loans. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company considers a
loan to be impaired when, based upon current information and events, it believes
it is probable the Company will be unable to collect all amounts due according
to the contractual terms of the loan agreement. Impaired loans include
nonaccrual loans, restructured debt, and performing loans in which full payment
of principal or interest is not expected. Management bases the measurement of
these impaired loans on the fair value of the loan's collateral or the expected
cash flows on the loans discounted at the loan's stated interest rates. Cash
receipts on impaired loans not performing to contractual terms and that are on
nonaccrual status are used to reduce principal balances. Impairment losses are
included in the allowance for credit losses through a charge to the provision,
if applicable. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>At December 31, 2002 and
2001, the Company's recorded investment in loans for which impairment has been
recognized totaled $15.3 million and $13.1 million, respectively. Included in
total impaired loans at December 31, 2002, is $8.4 million of impaired loans for
which the related specific allowance is $1.3 million, as well as $6.9 million of
impaired loans that as a result of write-downs or the fair value of the
collateral, did not have a specific allowance. Total impaired loans at December
31, 2001 included $1.3 million of impaired loans for which the related specific
allowance is $115,000, as well as $11.8 million of impaired loans that as a
result of write-downs or the fair value of the collateral, did not have a
specific allowance. The average recorded investment in impaired loans was $11.3
million and $5.7 million during the years ended December 31, 2002 and 2001,
respectively. In most cases, the Company uses the cash basis method of income
recognition for impaired loans. In the case of certain troubled debt
restructuring for which the loan is performing under the current contractual
terms, income is recognized under the accrual method. For the years ended
December 31, 2002, 2001 and 2000, the Company recognized $3,000, $23,000 and
$270,000, respectively, of income on such loans. </FONT></P>

<p align=center><font size=2>26</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Other factors that continue
to gain management&#146;s attention are competition in the Company&#146;s market
area and economic conditions, which may ultimately affect the risk assessment of
the portfolio. The Company has experienced increased competition from major
banks, local independents and non-bank institutions creating pressure on loan
pricing. In an effort to avoid recession, the Federal Reserve reduced interest
rates an unprecedented 475 basis points during 2001, and an additional 50 basis
points during November of 2002. With interest rates at historical lows, the
economic recovery has been slow in coming, with increasing energy costs,
declining consumer confidence, State budget deficits, and job layoffs at major
corporations across the country. With events since the World Trade Center
disaster, and expanding conflict in the Middle East, it is difficult to
determine what continued impact these changes will have on consumer confidence
and the domestic economy or whether the Federal Reserve will continue to adjust
interest rates in an effort to control the economy. It is likely that the
business environment in California will continue to be influenced by these
domestic as well as global events, although the overall economy of California
has generally improved over the past several years. San Francisco, the Silicon
Valley, and adjacent areas continue to feel the effect of the high-tech decline
as occupancy rates drop, along with rental rates of available commercial office
space. Occupancy rates for commercial real estate in other parts of the state
may also suffer as a result of the drag on the economy. The local economy has
been impacted to some degree over the past several years by such things as
decreased exports and adverse weather patterns, which has increased worries
about the future economic trends in the state. Local unemployment rates, as well
as foreclosures in Fresno and Madera counties have increased during the past
several years and persist to the current time. Despite the Central Valley's
traditionally high unemployment, it is Management&#146;s belief that the Central
San Joaquin Valley will continue to grow and diversify as property and housing
costs remain reasonable relative to other areas of the state, although this
growth may begin to slow as the Federal Reserve seeks to control what it
perceives as a potential recession in the economy. Management recognizes
increased risk of loss due to the Company's exposure from local and worldwide
economic conditions, as well as soft real estate markets, and takes these
factors into consideration when analyzing the adequacy of the allowance for
credit losses. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><i>The following table
provides a summary of the Company's allowance for credit losses, provisions made
to that allowance, and charge-off and recovery activity affecting the allowance
for the years indicated. </i></FONT></P>

<PRE>
                                                          December 31,
  (Dollars in thousands)               2002       2001        2000       1999        1998
---------------------------------------------------------------------------------------------
Total loans outstanding at end
  of period before deducting
  allowances for credit losses       $348,598   $335,620    $260,575   $197,876    $153,960
                                    =========================================================
Average net loans outstanding
 during period                       $347,192   $297,653    $230,305   $175,324    $149,100
                                    =========================================================

Balance of allowance at
 beginning of period                   $4,457     $3,773      $2,642     $1,907      $2,144

Loans charged off:
  Real estate                               0          0           0          0          (9)
  Commercial and industrial              (659)      (874)       (430)      (285)     (1,497)
  Lease financing                        (238)      (162)         (0)        (0)         (0)
  Installment and other                   (36)       (40)        (44)       (27)        (80)
                                    ---------------------------------------------------------
      Total loans charged off            (933)    (1,076)       (474)      (312)     (1,586)
 Recoveries of loans previously
  charged off:
   Real estate                              0          0           0          0         150
   Commercial and industrial               37         23          11         19          33
   Lease financing                         31          4           0          0           0
   Installment and other                    1          0          14          3          11
                                    ---------------------------------------------------------
      Total loan recoveries                69         27          25         22         149
                                    ---------------------------------------------------------
Net loans charged off                    (864)    (1,049)       (449)      (290)     (1,437)

Provision charged to
  operating expense                     1,963      1,733       1,580      1,025       1,200
                                    ---------------------------------------------------------
Balance of allowance for
credit losses at end of period         $5,556     $4,457      $3,773     $2,642      $1,907
                                    =========================================================

Net loan charge-offs to
 total average loans                   0.25%       0.35%       0.19%      0.17%      0.96%
Net loan charge-offs to
 loans at end of period                0.25%       0.31%       0.17%      0.15%      0.93%
Allowance for credit losses to
 total loans at end of period          1.59%       1.33%       1.45       1.34%      1.24%
Net loan charge-offs to
 allowance for credit losses          15.55%      23.54%      11.90%     10.98%     75.35%
Net loan charge-offs to
 provision for credit losses          44.01%      60.53%      28.42%     28.29%    119.75%
</PRE>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Management believes that
the 1.59% credit loss allowance at December 31, 2002 is adequate to absorb known
and inherent risks in the loan portfolio. No assurance can be given, however,
that the economic conditions which may adversely affect the Company's service
areas or other circumstances will not be reflected in increased losses in the
loan portfolio. </FONT></P>

<p align=center><font size=2>27</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><i>Although the Company does
not normally allocate the allowance for credit losses to specific loan
categories, an allocation to the major categories has been made for the purposes
of this report as set forth in the following table. The allocations are
estimates based on the same factors as considered by management in determining
the amount of additional provisions to the credit loss allowance and the overall
adequacy of the allowance for credit losses. </i></FONT></P>

<PRE>
                                 2002              2001               2000              1999               1998
                           --------------------------------------------------------------------------------------------
                           Allowance         Allowance         Allowance          Allowance         Allowance
                           for Loan   % of    for Loan   % of   For Loan   % of   for Loan   % of    for Loan   % of
  (Dollars in thousands)    Losses    Loans    Losses   Loans    Losses    Loans   Losses    Loans    Losses    Loans
-----------------------------------------------------------------------------------------------------------------------
Commercial and industrial     $3,080   33.6%     $1,951  30.4%     $1,328   25.4%    $1,028   26.4%       $570   28.1%
Real estate - mortgage           803   28.9%        899  33.1%      1,141   43.3%     1.061   39.2%        520   42.6%
Real estate - construction     1,046   27.2%        893  27.6%        606   23.4%       436   28.0%        289   22.0%
Agricultural                     229    4.8%        123   3.9%         65    2.8%        54    3.5%         48    4.2%
Installment/other                 99    2.2%        102   2.0%         72    3.9%        63    2.9%         28    3.1%
Lease financing                  298    3.3%        120   3.0%         82    1.2%         0      --          0      --
Not allocated                      1      --        369     --        479      --         0      --        452      --
                           --------------------------------------------------------------------------------------------
                              $5,556  100.0%     $4,457 100.0%     $3,773  100.0%    $2,642  100.0%     $1,907  100.0%
                           ============================================================================================
</PRE>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>At December 31, 2002, the
Company&#146;s allowance for credit losses was $5.6 million, consisting of $5.5
million in formula allowance, $18,000 in specific allowance, and $1,000 in
unallocated allowance. At December 31, 2002, the specific allowance was
allocated entirely to commercial and industrial loans. At December 31, 2001, the
Company&#146;s allowance for credit losses was $4.5 million, consisting of $4.1
million in formula allowance and $369,000 in unallocated allowance. No specific
allowance was allocated in excess of the formula allowance at December 31, 2001. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The formula allowance
increased in all loan categories except mortgage and installment loans during
2002 as the result of increases in loan balances during the year, as well as
increases in the level of classified loans. The formula allowance increased by
approximately $1.5 million between December 31, 2001 and December 31, 2002 with
about $1.1 million or 77% of that increase being allocated to commercial and
industrial loans. The increase in the formula allowance during 2002 was the
result of several factors including, an increase of $5.7 million in substandard
loans, an increase of $677,000 in doubtful loans, and an increase of
approximately $13.6 million in &#147;pass&#148; loans during 2002. Special
mention loans decreased by about $506,000 between December 31, 2001 and December
31, 2002. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Although in some instances,
the downgrading of a loan resulting from the factors used by the Company in its
allowance analysis has been reflected in the formula allowance, management
believes that in some instances, the impact of material events and trends has
not yet been reflected in the level of nonperforming loans or the internal risk
grading process regarding these loans. Accordingly, the Company&#146;s
evaluation of probable losses related to these factors may be reflected in the
unallocated allowance. The evaluation of the inherent losses concerning these
factors involve a higher degree of uncertainty because they are not identified
with specific problem credits, and therefore the Company does not spread the
unallocated allowance among segments of the portfolio. At December 31, 2002 the
Company had an unallocated allowance of $1,000, reflecting a decrease from the
balance of $369,000 at December 31, 2001. Management&#146;s estimates of the
unallocated allowance are based upon a number of underlying factors including 1)
the effect of deteriorating national and local economic trends, 2) the effects
of export market conditions on certain agricultural and manufacturing borrowers,
3) the effects of abnormal weather patterns on agricultural borrowers, as well
as other borrowers that may be impacted by such conditions, 4) the effect of
increased competition in the Company&#146;s market area and the resultant
potential impact of more relaxed underwriting standards to borrowers with
multi-bank relationships, 5) the effect of soft real estate markets, and 6) the
effects of having a larger number of borrowing relationships which are close to
the Company&#146;s lending limit, any one if which were not to perform to
contractual terms, would have a material impact on the allowance. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company's loan
portfolio has concentrations in commercial real estate, commercial, and
construction loans, however these portfolio percentages fall within the
Company's loan policy guidelines. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>It is the Company's policy
to discontinue the accrual of interest income on loans for which reasonable
doubt exists with respect to the timely collectibility of interest or principal
due to the inability of the borrower to comply with the terms of the loan
agreement. Such loans are placed on nonaccrual status whenever the payment of
principal or interest is 90 days past due or earlier when the conditions
warrant, and interest collected is thereafter credited to principal to the
extent necessary to eliminate doubt as to the collectibility of the net carrying
amount of the loan. Management may grant exceptions to this policy if the loans
are well secured and in the process of collection. </FONT></P>


<p align=center><font size=2>28</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<i>The following table sets forth the Company's nonperformong assets as of the dates indicated:</i>
</FONT></P>
<pre>
                                                             December 31,
 (Dollars in 000's, except footnote)   2002         2001         2000         1999         1998
----------------------------------------------------------------------------------------------------
Nonaccrual loans (1)                 $15,432      $13,019       $2,810       $4,373       $1,485
Restructured loans                         0            0            0        2,401        2,443
                                   -----------------------------------------------------------------
  Total nonperforming loans           15,432       13,019        2,810        6,774        3,928
Other real estate owned                9,685        5,390        2,959          663          697
                                   -----------------------------------------------------------------
  Total nonperforming assets         $25,117      $18,409       $5,769       $7,437       $4,625
                                   =================================================================

Loans, past due 90 days
  or more, still accruing                 $0           $0         $595           $0         $210
                                   =================================================================

Nonperforming loans to
  total gross loans                    4.42%        3.87%        1.08%        3.42%        2.54%
                                   =================================================================
Nonperforming assets
  to total gross loans                 7.20%        5.47%        2.21%        3.75%        3.00%
                                   =================================================================
</PRE>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)
Included in nonaccrual loans at December 31, 2002, 2001 and 2000 are
restructured loans totaling $21,400, $37,600 and $57,800, respectively. The
interest income that would have been earned on nonaccrual loans outstanding at
December 31, 2002 in accordance with their original terms is approximately
$931,000. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The overall level of
nonperforming assets, including both nonaccrual loans and other real estate
owned through foreclosure, has increased between December 31, 2001 and December
31, 2002 as commercial and commercial real estate delinquencies have increased.
A substantial portion of the nonaccural loans at December 31, 2002 are
collateralized by real estate. Loans past due more than 30 days are receiving
increased management attention and are monitored for increased risk. The Company
continues to move past due loans to nonaccrual status in its ongoing effort to
recognize loan problems at an earlier point in time when they may be dealt with
more effectively. As impaired loans, nonaccrual and restructured loans are
reviewed for specific reserve allocations and the allowance for credit losses is
adjusted accordingly. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Except for the loans
included in the above table, there were no loans at December 31, 2002 where the
known credit problems of a borrower caused the Company to have serious doubts as
to the ability of such borrower to comply with the present loan repayment terms
and which would result in such loan being included as a nonaccrual, past due or
restructured loan at some future date. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><u>Application of Critical Accounting Policies</u></b></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company&#146;s
consolidated financial statements are prepared in accordance with generally
accepted accounting principles and follow general practices within the industry
in which it operates. Application of these principles requires management to
make estimates, assumptions, and judgments that affect the amounts reported in
the financial statements and accompanying notes. These estimates, assumptions,
and judgments are based on information available as of the date of the financial
statements; accordingly, as this information changes, the financial statements
could reflect different estimates, assumptions, and judgments. Certain policies
inherently have a greater reliance on the use of estimates, assumptions, and
judgments and as such have a greater possibility of producing results that could
be materially different than originally reported. Estimates, assumptions, and
judgments are necessary when assets and liabilities are required to be recorded
at fair value, when a decline in the value of an asset not carried on the
financial statements at fair value warrants an impairment write-down or
valuation reserve to be established, or when an asset or liability needs to be
recorded contingent upon a future event. Carrying assets and liabilities at fair
value inherently results in more financial statement volatility. The fair values
and the information used to record valuation adjustments for certain assets and
liabilities are based either on quoted market prices or are provided by other
third-party sources, when available. When third-party information is not
available, valuation adjustments are estimated in good faith by management
primarily through the use of internal cash flow modeling techniques. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The most significant
accounting policies followed by the Company are presented in Note 1 to the
Company&#146;s consolidated financial statements included herein. These
policies, along with the disclosures presented in the other financial statement
notes and in this financial review, provide information on how significant
assets and liabilities are valued in the financial statements and how those
values are determined. Based on the valuation techniques used and the
sensitivity of financial statement amounts to the methods, assumptions, and
estimates underlying those amounts, management has identified the determination
of the allowance for loan losses to be the accounting area that requires the
most subjective or complex judgments, and as such could be most subject to
revision as new information becomes available. </FONT></P>

<p align=center><font size=2>29</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The allowance for loan
losses represents management's estimate of probable credit losses inherent in
the loan portfolio. Determining the amount of the allowance for loan losses is
considered a critical accounting estimate because it requires significant
judgment and the use of estimates related to the amount and timing of expected
future cash flows on impaired loans, estimated losses on pools of homogeneous
loans based on historical loss experience, and consideration of current economic
trends and conditions, all of which may be susceptible to significant change.
The loan portfolio also represents the largest asset type on the consolidated
balance sheet. Note 1 to the consolidated financial statements describes the
methodology used to determine the allowance for loan losses and a discussion of
the factors driving changes in the amount of the allowance for loan losses is
included in the Asset Quality and Allowance for Credit Losses section of this
financial review. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><u>Liquidity and Asset/Liability Management</u></b></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The primary function of
asset/liability management is to provide adequate liquidity and maintain an
appropriate balance between interest-sensitive assets and interest-sensitive
liabilities. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><i>Liquidity</i></b></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Liquidity management may be
described as the ability to maintain sufficient cash flows to fulfill both on-
and off-balance sheet financial obligations, including loan funding commitments
and customer deposit withdrawals, without straining the Company&#146;s equity
structure. To maintain an adequate liquidity position, the Company relies on, in
addition to cash and cash equivalents, cash inflows from deposits and short-term
borrowings, repayments of principal on loans and investments, and interest
income received. The Company's principal cash outflows are for loan origination,
purchases of investment securities, depositor withdrawals and payment of
operating expenses. Other sources of liquidity not on the balance sheet at
December 31, 2002 include unused collateralized and uncollateralized lines of
credit from other banks, the Federal Home Loan Bank, and from the Federal
Reserve Bank totaling $158.8 million. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Liquidity risk arises from
the possibility the Company may not be able to satisfy current or future
financial commitments, or the Company may become unduly reliant on alternative
funding sources. The Company maintains a liquidity risk management policy to
address and manage this risk. The policy identifies the primary sources of
liquidity, establishes procedures for monitoring and measuring liquidity, and
establishes minimum liquidity requirements which comply with regulatory
guidance. The policy also includes a contingency funding plan to address
liquidity needs in the event of an institution-specific or a systemic financial
market crisis. The liquidity position is continually monitored and reported on a
monthly basis to the Board of Directors. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company continues to
emphasize liability management as part of its overall asset/liability management
strategy. Through the discretionary acquisition of short term borrowings, the
Company has been able to provide liquidity to fund asset growth while, at the
same time, better utilizing its capital resources, and better controlling
interest rate risk. The borrowings are generally short-term and more closely
match the repricing characteristics of floating rate loans, which comprise
approximately 68.7% of the Company&#146;s loan portfolio at December 31, 2002.
This does not preclude the Company from selling assets such as investment
securities to fund liquidity needs but, with favorable borrowing rates, the
Company has maintained a positive yield spread between borrowed liabilities and
the assets which those liabilities fund. If, at some time, rate spreads become
unfavorable, the Company has the ability to utilize an asset management approach
and, either control asset growth or, fund further growth with maturities or
sales of investment securities. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company's liquid asset
base which generally consists of cash and due from banks, federal funds sold,
securities purchased under agreements to resell (&#147;reverse repos&#148;) and
investment securities, is maintained at a level deemed sufficient to provide the
cash outlay necessary to fund loan growth as well as any customer deposit runoff
that may occur. Within this framework is the objective of maximizing the yield
on earning assets. This is generally achieved by maintaining a high percentage
of earning assets in loans, which historically have represented the Company's
highest yielding asset. At December 31, 2002, the Bank had 66.04% of total
assets in the loan portfolio and a loan to deposit ratio of 82.2%. Liquid assets
at December 31, 2002 include cash and cash equivalents totaling $31.5 million as
compared to $29.3 million at December 31, 2001. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Liabilities used to fund
liquidity sources include core and non-core deposits as well as short-term
borrowings. Core deposits, which comprise approximately 69.4% of total deposits
at December 31, 2002, provide a significant and stable funding source for the
Company. At December 31, 2002, short-term Federal Home Loan Bank borrowings
totaling $35.4 million, and unused lines of credit with the Federal Home Loan
Bank and the Federal Reserve Bank totaling $145.8 million are collateralized in
part by certain qualifying loans in the Company&#146;s loan portfolio. The
carrying value of loans pledged on these used and unused borrowing lines totaled
$231.1 million at December 31, 2002. For further discussion of the
Company&#146;s borrowing lines, see &#147;Short Term Borrowings&#148; included
in previously in the financial condition section of this financial review. </FONT></P>

<p align=center><font size=2>30</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The liquidity of the parent
company, United Security Bancshares, is primarily dependent on the payment of
cash dividends by its subsidiary, United Security Bank, subject to limitations
imposed by the Financial Code of the State of California. During 2002 and 2001,
total dividends paid by the Bank to the parent company totaled $4.4 million and
$4.3 million, respectively. As a bank holding company formed under the Bank
Holding Act of 1956, United Security Bancshares is to provide a source of
financial strength for its subsidiary bank(s). To help provide financial
strength, United Security Bancshares&#146; trust subsidiary, United Security
Bancshares Capital Trust I completed a $15 million offering in Trust Preferred
Securities during 2001, the proceeds of which were used to purchase Junior
Subordinated Debentures of the Company. Of the $14.5 million in net proceeds
received by the Company, $13.7 million was used to enhance the liquidity and
capital positions of the Bank, and the remainder provided liquidity to the
holding company. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><i>Contractual Obligations, Commitments, Contingent Liabilities, and Off-Balance Sheet Arrangements</i></b>
</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><i>The following table
presents, as of December 31, 2002, the Company's significant fixed and
determinable contractual obligations by payment date. The payment amounts
represent those amounts contractually due to the recipient and do not include
any unamortized premiums or discounts, or other similar carrying value
adjustments. Further discussion of the nature of each obligation is included in
the referenced note to the consolidated financial statements. </i></FONT></P>

<PRE>
                                                                     Payments Due In
                                                   ------------------------------------------------------
                                                                One to     Three to     Over
                                         Note      One Year     Three        Five       Five
    (In thousands)                    Reference     Or Less     Years       Years       Years      Total
---------------------------------------------------------------------------------------------------------
Deposits without a stated maturity                 $210,337    $ ----      $ ----      $ ----    $210,337
Time Deposits                                       185,095     26,874       1,571        110     213,650
FHLB Borrowings                           7          35,400                                        35,400
Trust Preferred securities                8                                            15,000      15,000
Leveraged ESOP - line of credit           7             210        440                                650
Operating Leases                         12             234        404         229        803       1,670
</PRE>
<BR>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<i>A schedule of significant commitments at December 31, 2002 follows:</i>
</FONT></P>

<pre>
    (In thousands)
--------------------------------------------------------------------
Commitments to extend credit:
    Commercial and industrial                             $27,126
    Real estate - mortgage                                  4,485
    Real estate - construction                             73,994
    Agricultural                                            6,765
    Installment                                             1,369
    Revolving home equity and credit card lines               414

Standby letters of credit                                     814

</pre>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Further discussion of these commitments is included in Note 3 to the consolidated financial statements.
</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><u>Regulatory Matters</u></b></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><i>Capital Adequacy</i></b></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Capital adequacy for bank holding companies and their subsidiary banks has become increasingly important in recent years.
Continued deregulation of the banking industry since the 1980's has resulted in, among other things, a broadening of business
activities allowed beyond that of traditional banking products and services. Because of this volatility within the banking and
financial services industry, regulatory agencies have increased their focus upon ensuring that banking institutions meet certain
capital requirements as a means of protecting depositors and investors against such volatility.</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
During July 2001, the Company completed an offering of Trust Preferred Securities in an aggregate amount of $15.0 million to
enhance its regulatory base, while providing additional liquidity. Subsequent to the completion of the offering, the Company
contributed $13.7 million of that offering to the Bank to enhance its capital position. Under applicable regulatory guidelines,
the Trust Preferred Securities qualify as Tier 1 capital up to a maximum of 25% of Tier 1 capital. Any additional portion will
qualify as Tier 2 capital. As shareholders' equity increases, the amount of Tier 1 capital that can be comprised of Trust
Preferred Securities will increase.</FONT></P>

<p align=center><font size=2>31</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The Board of Governors of the Federal Reserve System ("Board of Governors") has adopted regulations requiring insured institutions
to maintain a minimum leverage ratio of Tier 1 capital (the sum of common stockholders' equity, noncumulative perpetual preferred
stock and minority interests in consolidated subsidiaries, minus intangible assets, identified losses and investments in certain
subsidiaries, plus unrealized losses or minus unrealized gains on available for sale securities) to total assets. Institutions
which have received the highest composite regulatory rating and which are not experiencing or anticipating significant growth are
required to maintain a minimum leverage capital ratio of 3% Tier 1 capital to total assets. To be considered well capitalized, the
institution must maintain a leverage capital ratio of 5%. All other institutions are required to maintain a minimum leverage
capital ratio of at least 100 to 200 basis points above the minimum requirements.</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The Board of Governors has also adopted a statement of policy, supplementing its leverage capital ratio requirements, which
provides definitions of qualifying total capital (consisting of Tier 1 capital and Tier 2 supplementary capital, including the
allowance for loan losses up to a maximum of 1.25% of risk-weighted assets) and sets forth minimum risk-based capital ratios of
capital to risk-weighted assets. The most highly rated insured institutions are required to maintain a minimum ratio of qualifying
total capital to risk weighted assets of 8%, at least one-half (4%) of which must be in the form of Tier 1 capital. To be
considered well capitalized, institutions must maintain a ratio of qualifying total capital to risk weighted assets of 10%, at
least one-half (6%) of which must be in the form of Tier 1 capital.</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<i>The following table sets forth the Company's and the Bank's actual capital positions at December 31, 2002 and the regulatory
minimums for the Company and the Bank to be well capitalized under the guidelines discussed above:</i></FONT></P>
<PRE>
                                             Company            Bank
                                        ------------------------------------    Regutatory
                                              Actual            Actual           Minimums -
                                          Capital Ratios    Capital Ratios    Well Capitalized
                                       -------------------------------------------------------
Total risk-based capital ratio                13.20%           12.74%              10.00%
Tier 1 capital to risk-weighted assets        11.40%           11.49%               6.00%
Leverage ratio                                 9.54%            9.61%               5.00%
</PRE>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Under Federal Reserve
guidelines, the Company and the Bank are required to maintain a total risk-based
capital ratio of 10%, tier 1 capital to risk-weighted assets of 8%, and a
leverage ratio of 7%, to be considered well capitalized. As is indicated by the
above table, the Company and the Bank exceeded all applicable regulatory capital
guidelines at December 31, 2002. Management believes that, under the current
regulations, both will continue to meet their minimum capital requirements in
the foreseeable future. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><i>Dividends</i></b></FONT></P>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dividends paid to
shareholders by the Company are subject to restrictions set forth in the
California General Corporation Law. The California General Corporation Law
provides that a corporation may make a distribution to its shareholders if
retained earnings immediately prior to the dividend payout are at least equal
the amount of the proposed distribution. The primary source of funds with which
dividends will be paid to shareholders will come from cash dividends received by
the Company from the Bank. During the year ended December 31, 2002, the Company
received $4.4 million in cash dividends from the Bank, from which the Company
declared $2.8 million in dividends to shareholders. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Bank as a
state-chartered bank is subject to dividend restrictions set forth in California
state banking law, and administered by the California Commissioner of Financial
Institutions (&#147;Commissioner&#148;). Under such restrictions, the Bank may
not pay cash dividends in an amount which exceeds the lesser of the retained
earnings of the Bank or the Bank&#146;s net income for the last three fiscal
years (less the amount of distributions to shareholders during that period of
time). If the above test is not met, cash dividends may only be paid with the
prior approval of the Commissioner, in an amount not exceeding the Bank&#146;s
net income for its last fiscal year or the amount of its net income for the
current fiscal year. Such restrictions do not apply to stock dividends, which
generally require neither the satisfaction of any tests nor the approval of the
Commissioner. Notwithstanding the foregoing, if the Commissioner finds that the
shareholders&#146; equity is not adequate or that the declarations of a dividend
would be unsafe or unsound, the Commissioner may order the state bank not to pay
any dividend. The FRB may also limit dividends paid by the Bank. This is not the
case with the Bank. Year-to-date dividends of $2.8 million and $4.4 million paid
to shareholders and the Company, respectively, through December 31, 2002 were
well within the maximum allowed under those regulatory guidelines, without
approval of the Commissioner. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><i>Reserve Balances</i></b></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The Bank is required to maintain average reserve balances with the Federal Reserve Bank. At December 31, 2002 the Bank's
qualifying balance with the Federal Reserve was approximately $6.6 million, consisting of vault cash and balances.</FONT></P>

<p align=center><font size=2>32</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<a name="a071"></a>
<b>Item 7a. Quantitative and Qualitative Disclosures about Market Risk</b></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><i>Interest Rate Sensitivity and Market Risk</i></b></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>An interest rate-sensitive
asset or liability is one that, within a defined time period, either matures or
is subject to interest rate adjustments as market rates of interest change.
Interest rate sensitivity is the measure of the volatility of earnings from
movements in market rates of interest, which is generally reflected in interest
rate spread. As interest rates change in the market place, yields earned on
assets do not necessarily move in tandem with interest rates paid on
liabilities. Interest rate sensitivity is related to liquidity in that each is
affected by maturing assets and sources of funds. Interest rate sensitivity is
also affected by assets and liabilities with interest rates that are subject to
change prior to maturity. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The object of interest rate
sensitivity management is to minimize the impact on earnings from interest rate
changes in the marketplace. In recent years, deregulation, causing liabilities
to become more interest rate sensitive, combined with interest rate volatility
in the capital markets, has placed additional emphasis on this principal. When
management decides to maintain repricing imbalances, it usually does so on the
basis of a well- conceived strategy designed to ensure that the risk is not
excessive and that liquidity is properly maintained. The Company's interest rate
risk management is the responsibility of the Asset/Liability Management
Committee (ALCO) which reports to the Board of Directors on a periodic basis,
pursuant to established operating policies and procedures. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company's
asset/liability profile is not complex. The Company does not currently engage in
trading activities or use derivatives to control interest rate risk, although it
has the ability to do so if deemed necessary by ALCO and approved by the Board
of Directors. From the &#147;gap&#148; report below, the Company is apparently
subject to interest rate risk to the extent that its liabilities have the
potential to reprice more quickly than its assets within the next year. At
December 31, 2002, the Company had a cumulative 12 month gap of $-2.1 million
(repricing assets less repricing liabilities) or -0.5% of total earning assets.
In theory, with a negative gap, the interest margin would increase with
declining interest rates. Management believes the gap analysis shown below is
not entirely indicative of the Company&#146;s actual interest rate sensitivity,
because certain interest-sensitive liabilities would not reprice to the same
degree as interest-sensitive assets. For example, if the prime rate were to
change by 50 basis points, the floating rate loans included in the $216.4
million immediately adjustable category would change by the full 50 basis
points. Interest bearing checking and savings accounts which are also included
in the immediately adjustable column probably would move only a portion of the
50 basis point rate change and, in fact, might not even move at all. In
addition, many of the floating rate time deposits are at their floors, or have
repricing rates below their current floors, which means that they might act as
fixed-rate instruments in either a rising or a declining rate environment (see
below for a discussion of the Bank&#146;s floating rate time deposits). The
effects of market value risk have been mitigated to some degree by the makeup of
the Bank's balance sheet. Loans are generally short-term or are floating-rate
instruments. At December 31, 2002, $276.4 million or 82.8% of the loan portfolio
matures or reprices within one year, and only 1.7% of the portfolio matures or
reprices in more than 5 years. Total investment securities including call
options and prepayment assumptions, have a duration of approximately 3.0 years.
Nearly $359.4 million or 93.1% of interest-bearing liabilities mature or can be
repriced within the next 12 months, even though the rate elasticity of deposits
with no defined maturities may not necessarily be the same as interest-earning
assets. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Since May of 1994, the Bank
has offered a two-year floating rate certificate of deposit product to its
customers which adjusts with changes in the Prime Rate, but which has an
interest rate floor below which the rate paid cannot drop. These floating rate
certificates of deposit totaled $7.2 million at December 31, 2002. The current
rates below which the rates on this product cannot drop range from 1.00% to
6.50%, with approximately $2.3 million or 31.3% of those at or above a 5.25%
floor. With the significant decrease in market rates of interest during the
recent past, all but $318,000 of the floating-rate CD&#146;s are priced at their
floors making them fixed-rate instruments in a declining rate environment. In
addition, because most of the CD&#146;s repricing rates are below their current
floors, they behave as fixed rate instruments even in a rising rate environment.
In fact, $4.9 million or 67.4% of them would remain fixed rate instruments even
if the prime rate were to increase 200 BP or less, $3.7 million or 52.9% would
remain fixed rate instruments even if the prime rate were to increase 300 BP or
less, and $2.3 million or 30.4% of them would remain fixed rate instruments even
if the prime rate were to increase 400 BP or less. This $3.7 million in two-year
floating rate certificates of deposit has been treated as fixed-rate instruments
for the purpose of the following gap report. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Interest rate risk can be
measured through various methods including gap, duration and market value
analysis as well as income simulation models, which provides a dynamic view of
interest rate sensitivity based on the assumptions of the Company&#146;s
Management. The Company employs each of these methods and refines these
processes to make the most accurate measurements possible. The information
provided by these calculations is the basis for management decisions in managing
interest rate risk. </FONT></P>

<p align=center><font size=2>33</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><i>The following table sets
forth the Company's gap, or estimated interest rate sensitivity profile based on
ending balances as of December 31, 2002, representing the interval of time
before earning assets and interest-bearing liabilities may respond to changes in
market rates of interest. Assets and liabilities are categorized by remaining
interest rate maturities rather than by principal maturities of obligations.
$3.7 million in two-year, floating rate time deposits which would behave as
fixed rate instruments if rates were to increase or decrease 300 basis points,
and have therefore been treated as fixed rate instruments for purposes of this
gap report. </i></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b>Maturities and Interest Rate Sensitivity</b>
</FONT></P>

<pre>
                                                               December 31, 2002
                                       ------------------------------------------------------------------------
                                                                After Three   After One
                                                   Next Day But    Months     Year But      After
                                                   Within Three  Within 12   Within Five     Five
  (In thousands)                       Immediately    Months       Months       Years       Years      Total
---------------------------------------------------------------------------------------------------------------
Interest Rate Sensitivity Gap:
 Loans (1)                               $216,436    $27,715      $32,215      $51,776     $5,480     $333,622
Investment securities                                 46,941        8,982       42,030      6,614      104,567
Interest bearing deposits in other                                 10,224                               10,224
Federal funds sold  and reverse repos      14,735                                                       14.735
                                       ----------------------------------------------------------------------------
  Total Earning Assets                   $231,171    $74,656      $51,421      $93,806    $12,094     $463,148
                                       ============================================================================
Interest-bearing
  transaction accounts                    100,199                                                      100,199
Savings accounts                           21,138                                                       21,138
Time deposits  (2)                          4,063     66,764      116,161       26,552       110       213,650
Federal funds purchased/other
  borrowings                                  650                  35,400                               36,050
Trust Preferred securities                            15,000                                            15,000
                                       ----------------------------------------------------------------------------
  Total interest-bearing
    Liabilities                          $126,050    $81,764     $151,561      $26,552      $110      $386,038
                                       ============================================================================

Interest rate sensitivity gap            $105,121    ($7,108)   ($100,140)     $67,254   $11,984       $77,110
Cumulative gap                           $105,121    $98,013      ($2,127)     $65,127   $77,111
Cumulative gap percentage to
  total earning assets                     22.7%       21.2%       -0.5%        14.1%      16.6%
</pre>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<i>(1) Loan balance does not include nonaccrual loans of $15.432 million.<BR>
(2) See above for discussion of the impact of floating rate CD's.</i>
</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company utilizes a
vendor-purchased simulation model to analyze net interest income sensitivity to
movements in interest rates. The simulation model projects net interest income
based on both a 100 and 200 basis point rise and a 100 and 200 basis point fall
in interest rates ramped over a twelve month period, with net interest impacts
projected out as far as twenty four months. The model is based on the actual
maturity and repricing characteristics of the Company's interest-sensitive
assets and liabilities. The model incorporates assumptions regarding the impact
of changing interest rates on the prepayment of certain assets and liabilities.
Projected net interest income is calculated assuming customers will reinvest
maturing deposit accounts and the Company will originate new loans. The balance
sheet growth assumptions utilized correspond closely to the Company's strategic
growth plans and annual budget. Excess cash is invested in overnight funds or
other short-term investments such as U.S. Treasuries. Cash shortfalls are
covered through additional borrowing of overnight or short-term funds. The Board
of Directors has adopted an interest rate risk policy which establishes maximum
decreases in net interest income of 12% and 15% in the event of a 100 BP and 200
BP increase or decrease in market interest rates over a twelve month period.
Based on the information and assumptions utilized in the simulation model at
December 31, 2002, the resultant projected impact on net interest income falls
within policy limits set by the Board of Directors for all rate scenarios
simulated. </FONT></P>

<p align=center><font size=2>34</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company also utilizes
the same vendor-purchased simulation model to project the impact of changes in
interest rates on the underlying market value of all the Company's assets,
liabilities, and off-balance sheet accounts under alternative interest rate
scenarios. The resultant net value, as impacted under each projected interest
rate scenario, is referred to as the market value of equity (&quot;MV of
Equity&quot;). This technique captures the interest rate risk of the Company's
business mix across all maturities. The market analysis is performed using an
immediate rate shock of 200 basis points up and down calculating the present
value of expected cash flows under each rate environment at applicable discount
rates. The market value of loans is calculated by discounting the expected
future cash flows over either the term to maturity for fixed rate loans or
scheduled repricing for floating rate loans using the current rate at which
similar loans would be made to borrowers with similar credit ratings. The market
value of investment securities is based on quoted market prices obtained from
reliable independent brokers. The market value of time deposits is calculated by
discounting the expected cash flows using current rates for similar instruments
of comparable maturities. The market value of deposits with no defined
maturites, including interest-bearing checking, money market and savings
accounts is calculated by discounting the expected cash flows at a rate equal to
the difference between the cost of these deposits and the alternate use of the
funds, federal funds in this case. Assumed maturities for these deposits are
estimated using decay analysis and are generally assumed to have implied
maturities of less than five years. For noninterest sensitive assets and
liabilities, the market value is equal to their carrying value amounts at the
reporting date. The Company's interest rate risk policy establishes maximum
decreases in the Company's market value of equity of 12% and 15% in the event of
an immediate and sustained 100 BP and 200 BP increase or decrease in market
interest rates. As shown in the table below, the percentage changes in the net
market value of the Company's equity are within policy limits for both rising
and falling rate scenarios. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><i>The following sets forth
the analysis of the Company's market value risk inherent in its
interest-sensitive financial instruments as they relate to the entire balance
sheet at December 31, 2002 and December 31, 2001 ($ in thousands). Fair value
estimates are subjective in nature and involve uncertainties and significant
judgment and, therefore, cannot be determined with absolute precision.
Assumptions have been made as to the appropriate discount rates, prepayment
speeds, expected cash flows and other variables. Changes in these assumptions
significantly affect the estimates and as such, the obtained fair value may not
be indicative of the value negotiated in the actual sale or liquidation of such
financial instruments, nor comparable to that reported by other financial
institutions. In addition, fair value estimates are based on existing financial
instruments without attempting to estimate future business. </i></FONT></P>

<PRE>
                         December 31, 2002                     December 31, 2001
                 ---------------------------------------------------------------------------
                Estimated    Change in    Change in    Estimated   Change in    Change in
  Change in         MV           MV           MV           MV          MV           MV
    Rates       of Equity   of Equity $   Of Equity %  of Equity  of Equity $   of Equity %
--------------------------------------------------------------------------------------------
 + 200 BP        $43,084      $1,628        3.93%       $33,884    ($1,768)       -4.96%
 + 100 BP         42,692       1,236        2.98%        35,206       (446)       -1.25%
     0 BP         41,456           0        0.00%        35,652          0         0.00%
 - 100 BP         39,709      (1,747)      -4.22%        35,478       (174)       -0.49%
 - 200 BP         42,903       1,447        3.49%        34,717       (935)       -2.62%
</PRE>
<BR><BR><BR>
<p align=center><font size=2>35</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">


<a name="a008"></a>
<b>Item 8 - Financial Statements and Supplementary Data</b><BR><BR>

<b>Index to Consolidated Financial Statements:</b>

<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR>
<td width=50%>&nbsp;</td>
<td width=40%>&nbsp;</td>
<td align=center valign=bottom width=10%><u>&nbsp;Page&nbsp;</u></td>
</tr>
<TR>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td align=center>&nbsp;</td>
</tr>
<TR>
<td><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a035">Independent Auditor's Report - Moss Adams LLP,</a></font></td>
<td>&nbsp;</td>
<td align=center valign=bottom><FONT FACE="Times New Roman, Times, Serif" SIZE=2>37</font></td>
</tr>
<TR>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td align=center>&nbsp;</td>
</tr>
<TR>
<td><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a036">Consolidated Balance Sheets - December 31, 2002 and 2001</a></font></td>
<td>&nbsp;</td>
<td align=center valign=bottom><FONT FACE="Times New Roman, Times, Serif" SIZE=2>38</font></td>
</tr>
<TR>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td align=center>&nbsp;</td>
</tr>
<TR>
<td><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a037">Consolidated Statements of Income and Comprehensive Income -
Years Ended December 31, 2002, 2001 and 2000</a></font></td>
<td>&nbsp;</td>
<td align=center valign=bottom><FONT FACE="Times New Roman, Times, Serif" SIZE=2>39</font></td>
</tr>
<TR>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td align=center>&nbsp;</td>
</tr>
<TR>
<td><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a038">Consolidated Statements of Shareholders' Equity - Years Ended December 31, 2002, 2001 and 2000</a></font></td>
<td>&nbsp;</td>
<td align=center valign=bottom><FONT FACE="Times New Roman, Times, Serif" SIZE=2>40</font></td>
</tr>
<TR>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td align=center>&nbsp;</td>
</tr>
<TR>
<td><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a039">Consolidated Statements of Cash Flows - Years Ended December 31, 2002, 2001 and 2000</a></font></td>
<td>&nbsp;</td>
<td align=center valign=bottom><FONT FACE="Times New Roman, Times, Serif" SIZE=2>41</font></td>
</tr>
<TR>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td align=center>&nbsp;</td>
</tr>
<TR>
<td><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a040">Notes to Consolidated Financial Statements</a></font></td>
<td>&nbsp;</td>
<td align=center valign=bottom><FONT FACE="Times New Roman, Times, Serif" SIZE=2>42</font></td>
</tr>
<TR>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td align=center>&nbsp;</td>
</tr>
</table>
<BR><BR><BR>

<p align=center><font size=3>36</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">


<a name="a035"></a>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<b>Moss Adams LLP</b></FONT></P>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b>Certified Public Accountants</b></FONT></P>

<hr size=2 noshade width=100%><BR>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
<B>INDEPENDENT AUDITOR'S REPORT</B></FONT></P>
<BR><BR><BR>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
To <b>The Board of Directors and Shareholders<BR>
United Security Bancshares</B></FONT></P>
<BR>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
We have audited the  accompanying  consolidated  balance sheets of United  Security  Bancshares and  Subsidiaries as of December 31,
2002 and 2001, and the related  consolidated  statements of income and comprehensive  income,  shareholders'  equity, and cash flows
for each of the three years in the period  ended  December  31, 2002.  These  financial  statements  are the  responsibility  of the
Company's management.  Our responsibility is to express an opinion on these financial statements based on our audits.</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
We conducted our audits in accordance with auditing standards  generally  accepted in the United States of America.  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.</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
In our opinion,  the financial  statements  referred to above present fairly, in all material respects,  the consolidated  financial
position of United  Security  Bancshares  and  Subsidiaries  at  December 31,  2002 and 2001,  and the  consolidated  results of its
operations and its  consolidated  cash flows for each of the three years in the period ended  December 31, 2002, in conformity  with
accounting principles generally accepted in the United States of America.</FONT></P>
<BR>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b>/s/ Moss Adams LLP</b></FONT></P>
<BR>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Stockton, California<BR>
January 8, 2003</FONT></P>

<BR><BR><BR><BR><BR><BR>
<p align=center><font size=2>37</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">








<a name="a036"></a>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b>United Security Bancshares  and Subsidiaries<BR>
Consolidated Statements of Condition - Balance Sheets<BR>
December 31, 2002 and 2001</b></FONT></P>

<PRE>
                                                           December 31,         December 31,
   (In thousands except shares)                               2002                 2001
------------------------------------------------------------------------------------------------
Assets
 Cash and due from banks (Note 14)                           $16,750              $15,945
 Federal funds sold and securities purchased
   under agreements to resell                                 14,735               13,310
                                                      ------------------------------------------
     Cash and cash equivalents                                31,485               29,255

 Interest-bearing deposits in other banks                     10,224                    0

 Securities available for sale (Note 2)                      104,567               63,365

 Loans and leases (Note 3)                                   349,054              336,287
   Unearned fees                                                (456)                (667)
   Allowance for credit losses                                (5,556)              (4,457)
                                                      ------------------------------------------
     Net loans                                               343,042              331,163
 Accrued interest receivable                                   2,437                3,751
 Premises and equipment - net (Note 4)                         2,647                3,057
 Other real estate owned                                       9,685                5,390
 Intangible assets                                             2,300                2,660
 Cash surrender value of life insurance (Note 11)              2,518                2,411
 Investment in limited partnership (Note 5)                    2,584                2,772
 Deferred income taxes (Note 9)                                1,638                1,730
 Other assets                                                  6,964                5,374
                                                       ------------------------------------------
Total Assets                                                $520,091             $450,928
                                                       ==========================================
Liabilities &amp; Shareholders' Equity
Liabilities:
 Deposits (Note 6)
   Noninterest-bearing                                       $89,000              $72,413
   Interest-bearing                                          334,987              296,238
                                                       ------------------------------------------
     Total deposits                                          423,987              368,651
 Federal funds purchased and securities sold
   under agreements to repurchase (Note 7)                    35,400               27,500
 Other borrowings (Notes 7 and 11)                               650                  916
 Accrued interest payable                                      1,203                1,270
 Accounts payable and other liabilities                        2,752                1,532
                                                       ------------------------------------------
     Total liabilities                                       463,992              399,869
Company obligated mandatorily redeemable cumulative
 trust preferred securities of subsidiary trust
 holding solely junior subordinated debentures
 (Trust Preferred securities) (Note 8)                        15,000               15,000

Commitments and Contingent Liabilities
  (Notes 10, 14 and 18)

Shareholders' Equity (Notes 10, 14 and 18):
  Common  stock, no par value
    10,000,000 shares authorized, 5,406,666
     and 5,397,298 issued and outstanding,
     in 2002 and 2001, respectively                           17,553               18,239
   Retained earnings                                          23,114               18,582
   Unearned ESOP shares (Note 11)                               (609)                (873)
   Accumulated other comprehensive income                      1,041                  111
                                                       ------------------------------------------
          Total shareholders' equity                          41,099               36,059
                                                       ------------------------------------------
Total liabilities and shareholders' equity                  $520,091             $450,928
                                                       ==========================================
      See notes to financial statements
</pre>

<p align=center><font size=2>38</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">

<a name="a037"></a>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b>United Security Bancshares and Subsidiaries<BR>
Consolidated Statements of Income and Comprehensive Income<BR>
Years Ended December 31, 2002, 2001 and 2000</b></FONT></P>

<PRE>
   (In thousands except shares and EPS)                  2002            2001             2000
-----------------------------------------------------------------------------------------------------
Interest Income:
 Loans, including fees                                 $24,521          $26,412         $24,739
 Investment securities - AFS - taxable                   3,617            3,016           3,196
 Investment securities - HTM - taxable                       0              202             602
 Investment securities - AFS - nontaxable                  139              155             162
 Federal funds sold and securities purchased
   under agreements to resell                              301              278             242
 Interest on deposits in other banks                        94                0               0
                                                   --------------------------------------------------
     Total interest income                              28,672           30,063          28,941
Interest Expense:
 Interest on deposits                                    8,371           11,203           9,694
 Interest on other borrowings                            2,326            2,208           1,850
                                                   --------------------------------------------------
     Total interest expense                             10,679           13,411          11,544
                                                   --------------------------------------------------
Net Interest Income Before
 Provision for Credit Losses                            17,975           16,652          17,397
Provision for Credit Losses (Note 3)                     1,963            1,733           1,580
                                                   --------------------------------------------------
Net Interest Income                                     16,012           14,919          15,817

Noninterest Income:
 Customer service fees                                   3,895            3,086           2,234
 Gain on sale of securities                                485              770               6
 Gain on sale of loans                                     103                0               0
 Gain on sale of other real estate owned                     4               34              62
 Gain on sale of fixed assets                               10                8               2
 Other                                                     871              379             234
                                                   --------------------------------------------------
    Total noninterest income                             5,368            4,277           2,538
Noninterest Expense (Notes 11 and 12):
 Salaries and employee benefits                          4,895            4,525           3,954
 Occupancy expense                                       1,730            1,731           1,608
 Data processing                                           553              544             540
 Professional fees                                         965              591             312
 Director fees                                             201              202             174
 Amortization of intangibles                               360              360             360
 Correspondent bank service charges                        289              218             202
 Other                                                   1,867            1,647           1,498
                                                   --------------------------------------------------
     Total noninterest expense                          10,860            9,818           8,648
                                                   --------------------------------------------------
Income Before Taxes on Income                           10,520            9,378           9,707
Taxes on Income (Note 9)                                 3,149            3,185           3,450
                                                   --------------------------------------------------
Net Income                                              $7,371           $6,193          $6,257
                                                   ==================================================
Other comprehensive income, net of tax
 (Note 17): Unrealized (loss) gain on
 available for sale securities - net income
 tax (benefit) of $620, $(150), and $489                   931             (226)            734
                                                   --------------------------------------------------
Comprehensive Income                                    $8,302           $5,967          $6,991
                                                   ==================================================
Net Income per common share (Note 16):
  Basic                                                 $1.36             $1.14           $1.16
                                                   ==================================================
  Diluted                                               $1.34             $1.11           $1.12
                                                   ==================================================
Shares on which net income per
 common share were based (Note 16):
  Basic                                               5,400,751         5,443,734       5,374,734
                                                   ==================================================
  Diluted                                             5,487,038         5,563,855       5,587,292
                                                   ==================================================
     See notes to financial statements
</pre>

<p align=center><font size=2>39</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">

<a name="a038"></a>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b>United Security Bancshares and Subsidiaries<BR>
Consolidated Statements of Shareholders' Equity<BR>
Years Ended December 31, 2002</b></FONT></P>


<PRE>
                                                Common stock   Common stock
                                                ------------------------------                                 Other
                                                   Number                   Retained       Unearned    Comprehensive
  (In thousands except number of shares)         of Shares      Amount      Earnings     ESOP Shares   Income (Loss)    Total
----------------------------------------------------------------------------------------------------------------------------------------
Balance January 1, 2000                          5,230,949     $17,987      $10,726             $0       $ (397)       $28,316

  Director/Employee stock options exercised        227,657       1,050                                                   1,050
  Tax benefit of stock options exercised                           141                                                     141
  Net changes in unrealized gain
     (loss) on available for sale securities
     (net of income tax of $489 )                                                                           734            734
  Dividends on common stock ($0.36 per share)                                (2,067)                                    (2,067)
  Unearned ESOP shares purchased                   (46,861)                                   (817)                       (817)
  Release of unearned ESOP shares                    7,742                                     135                         135
  Net Income                                                                  6,257                                      6,257
                                              ------------------------------------------------------------------------------------------
Balance December 31, 2000                        5,419,487      19,178       14,916           (682)         337         33,749

  Director/Employee stock options exercised        104,830         806                                                     806
  Tax benefit of stock options exercised                           145                                                     145
  Net changes in unrealized gain
     (loss) on available for sale securities
     (net of income tax benefit of $150)                                                                   (226)          (226)
  Dividends on common stock ($0.46 per share)                                (2,527)                                    (2,527)
  Repurchase and cancellation of common shares    (115,786)     (1,884)                                                 (1,884)
  Unearned ESOP shares purchased                   (23,185)                                   (399)                       (399)
  Release of unearned ESOP shares                   11,952          (6)                        208                         202
  Net Income                                                                  6,193                                      6,193
                                              ------------------------------------------------------------------------------------------
Balance December 31, 2001                        5,397,298      18,239       18,582           (873)         111         36,059

  Director/Employee stock options exercised         58,800         416                                                     416
  Tax benefit of stock options exercised                             7                                                       7
  Net changes in unrealized gain
     (loss) on available for sale securities
     (net of income tax benefit of $620)                                                                    930            930
  Dividends on common stock ($0.52 per share)                                (2,839)                                    (2,839)
  Repurchase and cancellation of common shares     (64,676)     (1,107)                                                 (1,107)
  Release of unearned ESOP shares                   15,244          (2)                        264                         262
  Net Income                                                                  7,371                                      7,371
                                              ------------------------------------------------------------------------------------------
Balance December 31, 2002                        5,406,666     $17,553      $23,114          $(609)      $1,041        $41,099
                                              ==========================================================================================
  See notes to financial statements
</pre>
<BR><BR><BR>
<p align=center><font size=2>40</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">







<a name="a039"></a>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b>United Security Bancshares and Subsidiaries<BR>
Consolidated Statements of Cash Flows<BR>
Years Ended December 31, 2002, 2001 and 2000</b></FONT></P>

<PRE>
   (In thousands)                                                  2002          2001          2000
---------------------------------------------------------------------------------------------------------
Cash Flows From Operating Activities:
 Net income                                                       $7,371        $6,193        $6,257
 Adjustments to reconcile net earnings to
  cash provided by operating activities:
   Provision for credit losses                                     1,963         1,733         1,580
   Depreciation and amortization                                   1,199         1,207         1,163
   Amortization (accretion) of investment securities                 369           394           (25)
   Gain on sale of securities                                       (485)         (770)           (6)
   Decrease (increase) in accrued interest receivable              1,134          (206)       (1,497)
   (Decrease) increase in accrued interest payable                   (67)           26           165
   (Decrease) increase in unearned fees                             (211)         (127)          401
   Increase (decrease) in income taxes payable                       434          (564)           80
   Deferred income taxes                                            (527)         (339)         (698)
   Decrease in accounts payable and accrued liabilities              704           256           192
   Write-down of other investments                                    40             0             0
   Write-down of other real estate owned                             132            19             6
   Gain on sale of other real estate owned                            (4)          (34)          (62)
   Gain on sale of assets                                            (10)           (8)           (2)
   Gain on sale of loans                                            (103)            0             0
   Increase in surrender value of life insurance                    (107)         (109)          (96)
   Loss in limited partnership interest                              210           247           173
   Net (increase) decrease in other assets                          (198)          146          (176)
                                                               ------------------------------------------
  Net cash provided by operating activities                       12,024         8,064         7,455
Cash Flows From Investing Activities:
  Net increase in interest-bearing deposits with banks           (10,224)            0             0
  Purchases of  available-for-sale securities                   (107,172)      (83,303)      (21,562)
  (Purchase) redemption of FHLB/FRB and other bank stock            (718)       (1,042)          242
  Maturities and calls of available-for-sale securities           51,563        41,594        12,128
  Maturities and calls of held-to-maturity securities                  0        10,250             0
  Proceeds from sales of available-for-sale securities            16,074        28,099         7,477
  Investment in limited partnership                                   23          (903)            0
  Investment in title company                                          0        (1,500)            0
  Net increase in loans                                          (20,466)      (78,407)      (66,135)
  Proceeds from sales of loans                                     1,602             0             0
  Proceeds from sales of leased assets                                95             0             0
  Proceeds from sales of other real estate owned                     325           150           476
  Capital expenditures for premises and equipment                   (431)         (514)         (311)
  Proceeds from sales of premises and equipment                       15            23             2
                                                                ------------------------------------------
  Net cash used in investing activities                          (69,314)      (85,553)      (67,683)
Cash Flows From Financing Activities:
  Net increase in demand deposits and savings accounts            34,725        42,225           630
  Net increase in certificates of deposit                         20,611        54,564        32,370
  Net (decrease) increase in federal funds purchased                   0       (22,630)       20,492
  Net increase in repurchase agreements                            7,900         2,606        15,119
  Proceeds from obligated mandatorily redeemable
    preferred securities of subsidiary trust holding
    solely junior subordinated debentures                              0        14,505             0
  Director/Employee stock options exercised                          416           806         1,050
  Repurchase and retirement of common stock                       (1,108)       (1,884)            0
  Proceeds from ESOP borrowings                                        0           399           817
  Repayment of ESOP borrowings                                      (269)         (176)         (133)
  Purchase of unearned ESOP shares                                     0          (399)         (817)
  Payment of dividends on common stock                            (2,755)       (2,448)       (1,939)
                                                                ------------------------------------------
  Net cash provided by financing activities                       59,520        87,568        67,589
                                                                ------------------------------------------
Net increase in cash and cash equivalents                          2,230        10,079         7,361
Cash and cash equivalents at beginning of period                  29,255        19,176        11,815
                                                                ------------------------------------------
Cash and cash equivalents at end of period                       $31,485       $29,255       $19,176
                                                                ==========================================
See notes to financial statements
</pre>

<p align=center><font size=2>41</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>

<a name="a040"></a>
<b>Notes to Consolidated Financial Statements<BR>
Years Ended December 31, 2002, 2001, and 2000</b></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><i>1. Organization and Summary of Significant Accounting and Reporting Policies</i></b></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Basis of Presentation - The consolidated financial statements include the accounts of United Security Bancshares, and its wholly
owned subsidiaries, United Security Bank and subsidiary (the "Bank"), and United Security Bancshares Capital Trust I (the
"Trust"), (collectively the "Company" or "USB"). Intercompany accounts and transactions have been eliminated in consolidation.
In the following notes, references to the Bank are references to United Security Bank. References to the Company are references
to United Security Bancshares, (including the Bank), except for periods prior to June 12, 2001, in which case, references to the
Company are references to the Bank. United Security Bancshares operates as one business segment providing banking services to
commercial establishments and individuals primarily in the San Joaquin Valley of California.</FONT></P>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Nature of Operations - United Security Bancshares is a bank holding company, incorporated in the state of California for the
purpose of acquiring all the capital stock of the Bank through a holding company reorganization (the "Reorganization") of the
Bank. The Reorganization, which was accounted for in a manner similar to a pooling of interests, was completed on June 12, 2001.
Management believes the Reorganization will provide the Company greater operating and financial flexibility and will permit
expansion into a broader range of financial services and other business activities.</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
United Security Bancshares Capital Trust I, a subsidiary of United Security Bancshares, is a Delaware statutory business trust
formed for the exclusive purpose of issuing and selling Trust Preferred Securities. The Trust was formed on June 28, 2001 (See
Note 8. "Trust Preferred Securities").</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
USB Investment Trust Inc was incorporated effective December 31, 2001as a special purpose real estate investment trust ("REIT")
under Maryland law. The REIT is a subsidiary of the Bank and was funded with $133.0 million in real estate-secured loans
contributed by the Bank. USB Investment Trust will give the Bank flexibility in raising capital, and will reduce the expenses
associated with holding the assets contributed to USB Investment Trust.</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The Bank was founded in 1987 and currently operates seven branches and one construction lending office in an area from eastern
Madera County to western Fresno County. The Bank's primary source of revenue is providing loans to customers, who are
predominantly small and middle-market businesses and individuals. The Bank engages in a full compliment of lending activities,
including real estate mortgage, commercial and industrial, real estate construction, agricultural and consumer loans, with
particular emphasis on short and medium term obligations.</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The Bank offers a wide range of deposit instruments. These include personal and business checking accounts and savings accounts,
interest-bearing negotiable order of withdrawal ("NOW") accounts, money market accounts and time certificates of deposit. Most
of the Bank's deposits are attracted from individuals and from small and medium-sized business-related sources.
</FONT></P>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The Bank also offers a wide range of specialized services designed to attract and service the needs of commercial customers and
account holders. These services include cashiers checks, travelers checks, money orders, and foreign drafts. In addition, the
Bank recently began to offer Internet banking services to its commercial and retail customers. The Bank does not operate a trust
department, however it makes arrangements with its correspondent bank to offer trust services to its customers upon request.
</FONT></P>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Neither the Company's business or liquidity is seasonal, and there has been no material effect upon the Company's capital
expenditures, earnings or competitive position as a result of federal, state or local environmental regulation.
</FONT></P>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Use of Estimates in the Preparation of Financial Statements - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
</FONT></P>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Material estimates that are particularly susceptible to significant change, relate to the determination of the allowance for
loan losses, deferred income taxes, and the valuation of real estate acquired in connection with foreclosures or in satisfaction
of loans. In connection with the determination of the allowance for loan losses and the valuation of foreclosed assets held for
sale, management obtains independent appraisals for significant properties.</FONT></P>

<p align=center><font size=2>42</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<B><I>Significant Accounting Policies</I></B> - The accounting and reporting policies of the Company conform to generally accepted accounting
principles and to prevailing practices within the banking industry. The following is a summary of significant policies:
</FONT></P>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><u>a. Cash and cash equivalents</u></b> - Cash and cash equivalents include cash on hand, amounts due from banks, federal funds sold and
repurchase agreements. Generally, federal funds sold and repurchase agreements are sold for one-day periods. Repurchase
agreements are with a registered broker-dealer affiliated with a correspondent bank and work much like federal funds sold,
except that the transaction is collateralized by various investment securities. The securities collateralizing such
transactions generally consist of U.S. Treasuries, U.S. Government and U.S. Government-sponsored agencies. The Bank did not
have any repurchase agreements during 2002, nor at December 31, 2002 or December 31, 2001.</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><u>b. Securities</u></b> - Debt and equity securities classified as available for sale are reported at fair value, with unrealized gains
and losses excluded from net income and reported, net of tax, as a separate component of comprehensive income and
shareholders' equity. Debt securities classified as held to maturity are carried at amortized cost. Gains and losses on
disposition are reported using the identified certificate method for the adjusted basis of the securities sold.</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The Company classifies its securities as available for sale or held to maturity, and periodically reviews its investment
portfolio on an individual security basis. Securities that are to be held for indefinite periods of time (including, but
not limited to, those that management intends to use as part of its asset/liability management strategy, those which may be
sold in response to changes in interest rates, changes in prepayments or any such other factors) are classified as
securities available for sale. Securities which the Company has the ability and intent to hold to maturity are classified as
held to maturity.</FONT></P>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><u>c. Loans</u></b> - Interest income on loans is credited to income as earned and is calculated by using the simple interest method on
the daily balance of the principal amounts outstanding. Loans are placed on non-accrual status when principal or interest
is past due for 90 days and/or when management believes the collection of amounts due is doubtful. For loans placed on
nonaccrual status, the accrued and unpaid interest receivable may be reversed at management's discretion based upon
management's assessment of collectibility, and interest is thereafter credited to principal to the extent necessary to
eliminate doubt as to the collectibility of the net carrying amount of the loan.</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Nonrefundable fees and related direct costs associated with the origination or purchase of loans are deferred and netted
against outstanding loan balances. The net deferred fees and costs are generally amortized into interest income over the
loan term using a method which approximates the interest method. Other credit-related fees, such as standby letter of
credit fees, loan placement fees and annual credit card fees are recognized as noninterest income during the period the
related service is performed.</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Impaired loans are measured based on the present value of expected future cash flows discounted at the loan's effective
interest rate or as a practical expedient at the loan's observable market rate or the fair value of the collateral if the
loan is collateral dependent.</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><u>d. Allowance for Credit Losses</u></b> - The allowance for credit losses is maintained to provide for losses that can reasonably be
anticipated. The allowance is based on ongoing quarterly assessments of the probable losses inherent in the loan portfolio,
and to a lesser extent, unfunded loan commitments.</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The allowance for credit losses is increased by provisions charged to operations during the current period and reduced by
loan charge-offs net of recoveries. Loans are charged against the allowance when management believes that the collection of
the principal is unlikely. The allowance is an amount that management believes will be adequate to absorb losses inherent
in existing loans and commitments to extend credit, based on evaluations of the probability of collection. In evaluating
the probability of collection, management is required to make estimates and assumptions that affect the reported amounts of
loans, allowance for credit losses and the provision for credit losses charged to operations. Actual results could differ
significantly from those estimates. These evaluations take into consideration such factors as the composition of the
portfolio, overall portfolio quality, loan concentrations, specific problem loans, and current economic conditions that may
affect the borrowers' ability to pay. The Company's methodology for assessing the adequacy of the allowance for credit
losses consists of several key elements, which include the formula allowance, specific allowances, and the unallocated
allowance.</FONT></P>

<p align=center><font size=2>43</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The formula allowance is calculated by applying loss factors to outstanding loans and certain unfunded loan commitments.
Loss factors are based on the Company's historical loss experience and may be adjusted for significant factors that, in
management's judgment, affect the collectibility of the portfolio as of the evaluation date. The Company determines the loss
factors for problem graded loans (substandard, doubtful, and loss), special mention loans, and pass graded loans, based on a
loss migration model. The migration analysis incorporates the Company's losses over the past twelve quarters (three years)
and loss factors are adjusted to recognize and quantify the loss exposure from changes in market conditions and trends in
the loan portfolio. For purposes of this analysis, loans are grouped by internal risk classifications which are "pass",
"special mention", "substandard", "doubtful", and "loss". Certain loans are homogenous in nature and are therefore pooled by
risk grade. These homogenous loans include consumer installment and home equity loans. Special mention loans are currently
performing but are potentially weak, as the borrower has begun to exhibit deteriorating trends, which if not corrected,
could jeopardize repayment of the loan and result in further downgrade. Substandard loans have well-defined weaknesses
which, if not corrected, could jeopardize the full satisfaction of the debt. A loan classified as "doubtful" has critical
weaknesses that make full collection of the obligation improbable. Classified loans, as defined by the Company, include
loans categorized as substandard, doubtful, and loss.</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Specific allowances are established based on management's periodic evaluation of loss exposure inherent in classified loans,
impaired loans, and other loans in which management believes there is a probability that a loss has been incurred in excess
of the amount determined by the application of the formula allowance.</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The unallocated portion of the allowance is based upon management's evaluation of various conditions that are not directly
measured in the determination of the formula and specific allowances. The conditions may include, but are not limited to,
general economic and business conditions affecting the key lending areas of the Company, credit quality trends, collateral
values, loan volumes and concentration, and other business conditions.</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The allowance analysis also incorporates the results of measuring impaired loans as provided in Statement of Financial
Accounting Standards ("SFAS") No. 114, "Accounting by Creditors for Impairment of a Loan" and SFAS 118, "Accounting by
Creditors for Impairment of a Loan - Income Recognition and Disclosures". A loan is considered impaired when management
determines that it is probable that the Company will be unable to collect all amounts due according to the original
contractual terms of the loan agreement. Impairment is measured by the difference between the original recorded investment
in the loan and the estimated present value of the total expected cash flows, discounted at the loan's effective rate, or
the fair value of the collateral, if the loan is collateral dependent. Any differences in the specific allowance amounts
calculated in the impaired loan analysis and the migration analysis are reconciled by management and changes are made to the
allowance as deemed necessary.</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><u>e.Premises and Equipment</u></b> - Premises and equipment are carried at cost less accumulated
depreciation. Depreciation expense is computed principally on the straight-line method over
the estimated useful lives of the assets. Estimated useful lives are as follows:</font></p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Buildings 31 Years<BR><BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Furniture and equipment3-7 Years</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><u>f. Other Real Estate Owned</u></b> - Real estate properties acquired through, or in lieu of, loan foreclosure are to be sold and are
initially recorded at the lower of the book value of the loan, or fair value of the property, less estimated costs to sell.
The excess, if any, of the loan amount over the fair value is charged to the allowance for credit losses. Subsequent
declines in the fair value of other real estate owned, along with related revenue and expenses from operations, are charged
to noninterest expense.</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><u>g. Intangible Assets</u></b> - Intangible assets are comprised of core deposit intangibles and goodwill acquired in business
combinations. Core deposit intangibles of $963,000 and $1.2 million (net of accumulated amortization of $1,172,000 and
$958,000) at December 31, 2002 and 2001 are amortized over the estimated useful lives of the existing deposit bases (7
years) using a method which approximates the interest method. Goodwill of $1.3 million and $1.5 million (net accumulated
amortization of $809,000 and $664,000) at December 31, 2002 and 2001, respectively is amortized on a straight-line basis
over 15 years.</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><u>h. Income Taxes</u></b> - Deferred income taxes are provided for the temporary differences between the financial reporting basis and
the tax basis of the Company's assets and liabilities.</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><u>i. Net Income per Share</u></b> - Basic income per common share is computed based on the weighted average number of common shares
outstanding. Diluted income per share includes the effect of stock options and other potentially dilutive securities. ESOP
shares are only considered outstanding for earnings per share calculations when they
are committed to be released (Note 16).</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><u>j. Cash Flow Reporting</u></b> - For purposes of reporting cash flows, cash and cash equivalents include cash on hand,
noninterest-bearing amounts due from banks, federal funds sold and securities purchased under agreements to resell. Federal
funds and securities purchased under agreements to resell are generally sold for one-day
periods.</FONT></P>

<p align=center><font size=2>44</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><u>k. Stock Based Compensation</u></b> - At December 31, 2002, the company has a stock-based employee compensation plan, which is
described more fully in Note 10. The Company accounts for stock-based awards to employees using the intrinsic value method
in accordance with APB No. 25, "Accounting for Stock Issued to Employees", and related interpretations. No stock-based
employee compensation cost is reflected in net income, as all options granted under those plans had an exercise price equal
to the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net
income and earnings per share if the company had applied the fair value recognition provisions of SFAS No. 148, "Accounting
for Stock-Based Compensation - Transition and Disclosure an amendment of FASB Statement No. 123".</FONT></P>

<PRE>
                                                         Years Ended December 31,
  (In thousands except earnings per share)         2002            2001             2000
--------------------------------------------------------------------------------------------------
Net income, as reported                           $7,371          $6,193           $6,257
Deduct: Total stock-based employee
 Compensation expense determined under fair
 Value based method for all awards, net of
 Related tax effects                                 (27)            (53)             (61)
                                                --------------------------------------------------
Pro forma net income                              $7,344          $6,140           $6,196
                                                ==================================================
Earnings per share:
 Basic - as reported                               $1.36           $1.14            $1.16
                                                ==================================================
 Basic - pro forma                                 $1.36           $1.13            $1.15
                                                ==================================================
 Diluted - as reported                             $1.34           $1.11            $1.12
                                                ==================================================
 Diluted - pro forma                               $1.34           $1.10            $1.11
                                                ==================================================
</PRE>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><u>l. Long-Lived Assets</u></b> - The Company periodically evaluates the carrying value of long-lived assets to be held and used,
including goodwill and other intangible assets in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal
of Long-Lived Assets". It does not apply to financial instruments, long-term customer relationships of a financial
institution (i.e. core deposit intangibles), mortgage and other servicing rights, or deferred tax assets. Based on such
evaluation, the Bank determined that there is no impairment loss to be recognized in 2002 or 2001.</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><u>m. Employee Stock Ownership Plan ("ESOP")</u></b> - The Bank accounts for shares acquired by its ESOP in accordance with the
guidelines established by the American Institute of Certified Public Accounts Statement of Position 93-6, "Employers'
Accounting for Employee Stock Ownership Plans" ("SOP 93-6"). Under SOP 93-6, the Bank recognizes compensation cost equal to
the fair value of the ESOP shares during the periods in which they become committed to be released. To the extent that the
fair value of the Bank's ESOP shares committed to be released differ from the cost of those shares, the differential is
charged or credited to equity. The ESOP is externally leveraged and, as such, the ESOP debt is recorded as a liability and
interest expense is recorded on that debt. The ESOP shares not yet committed to be released are accounted for as a
reduction of shareholders' equity.</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><u>n. New Accounting Standards</u></b> - During the year 2002 the Financial Accounting Standard Board ("FASB") issued SFAS No. 148,
"Accounting for Stock-Based Compensation - Transition and Disclosure an amendment of FASB Statement No. 123". This
Statement amends FASB No. 123, to provide alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation. In addition, it amends the disclosure requirements of
Statement 123 to require prominent disclosures in both annual and interim financial statements about the method of
accounting for stock-based employee compensation and the effect of the method used on reported results. As of December 31,
2002, the Company has adopted the disclosure requirements of the Statement and continues to follow the intrinsic value
method to account for stock-based employee compensation.</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><u>o. Reclassifications</u></b> - Certain reclassifications have been made to the 2001 and 2000 financial statements to conform to the
classifications used in 2002.</FONT></P>

<p align=center><font size=2>45</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><i>2. Investment Securities</i></b></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<i>Following is a comparison of the amortized cost and approximate fair value of investment securities for the years ended December
31, 2002 and December 31, 2001:</i></FONT></P>
<PRE>
                                       -----------------------------------------------------------
  (In thousands)                                            Gross       Gross        Fair Value
December 31, 2002:                         Amortized     Unrealized   Unrealized     (Carrying
Securities available for sale:               Cost          Gains        Losses        Amount)
                                       -----------------------------------------------------------
U.S. Government agencies                    $63,794        $1,570          $0         $65,364
U.S. Government agency
 collateralized mortgage obligations             84             4           0              88
Obligations of state and
 political subdivisions                       2,795           178           0           2,973
Other investment securities                  36,158             5         (21)         36,142
                                         ---------------------------------------------------------
 Total securities available for sale       $102,831        $1,757        ($21)       $104,567
                                         =========================================================
December 31, 2001:
Securities available for sale:
U.S. Government agencies                    $42,341          $360        $(74)        $42,627
U.S. Government agency
 collateralized mortgage obligations            211             1          (2)            210
Obligations of state and
 political subdivisions                       3,464            72          (4)          3,532
Other investment securities                  17,164             0        (168)         16,996
                                         ---------------------------------------------------------
 Total securities available for sale        $63,180          $433       ($248)        $63,365
                                         =========================================================
</PRE>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Included in other debt
securities at December 31, 2002 is a short-term government securities mutual
fund totaling $10.0 million, a money market mutual fund totaling $23.0 million,
and a Trust Preferred securities pool totaling $3.1 million. Included in other
debt securities at December 31, 2001 are a short-term government securities
mutual fund totaling $10.0 million, a CRA qualified investment fund totaling
$4.0 million, and a Trust Preferred securities pool totaling $3.1 million. The
short-term government securities mutual fund invests in debt securities issued
or guaranteed by the U.S. Government, its agencies or instrumentalities, with a
maximum duration equal to that of a 3-year U.S. Treasury Note. The principal
strategy of the CRA qualified investment fund is to invest in debt securities
that will cause the shares of the fund to qualify under the Community
Reinvestment Act of 1977 (&#147;CRA&#148;) as CRA qualified investments. Such
investments may include U.S. Government agencies, taxable municipal bonds, and
certificates of deposit. The CRA investment fund was sold during 2002. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>There were gross realized
gains on sales of available-for-sale securities totaling $509,000, $770,000, and
$6,000 during the years ended December 31, 2002, 2001, and 2000, respectively.
There were gross realized losses on available-for-sale securities totaling
$24,000 during the year ended December 31, 2002, and none during 2001 or 2000. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The amortized cost and fair
value of securities available for sale at December 31, 2002, by contractual
maturity, are shown below. Actual maturities may differ from contractual
maturities because issuers have the right to call or prepay obligations with or
without call or prepayment penalties. Contractual maturities on collateralized
mortgage obligations cannot be anticipated due to allowed paydowns. </FONT></P>

<PRE>
                                                   December 31, 2002
                                          ---------------------------------------
                                             Amortized          Fair Value
  (In thousands)                               Cost         (Carrying Amount)
---------------------------------------------------------------------------------
Due in one year or less                       $33,180            $33,184
Due after one year through five years          43,003             43,764
Due after five years through ten years          1,120              1,166
Due after ten years                            25,444             26,366
Collateralized mortgage obligations                84                 87
                                        ------------------------------------------
                                             $102,831           $104,567
                                        ==========================================
</PRE>
<p align=center><font size=2>46</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>At December 31, 2002 and
2001, available-for-sale securities with an amortized cost of approximately
$65.0 million and $43.9 million (fair value of $66.7 million and $44.2 million)
were pledged as collateral for public funds, treasury tax and loan balances, and
repurchase agreements.<BR><BR>

The Company had no held-to-maturity securities at December 31, 2002 or 2001.</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><i>3. Loans</i></b></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<i>Loans are comprised of the following:</i></FONT></P>


<pre>
                                            December 31,
   (In thousands)                    2002                2001
--------------------------------------------------------------------
Commercial and industrial          $117,293            $102,280
Real estate - mortgage              100,417             111,425
Real estate - construction           95,024              92,764
Agricultural                         16,877              12,987
Installment                           7,811               6,647
Lease financing                      11,632              10,184
                              --------------------------------------
 Total Loans                       $349,054            $336,287
                              ======================================
</PRE>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The Company's loans are predominantly in the San Joaquin Valley, and the greater Oakhurst/East Madera County area, although the
Company does participate in loans with other financial institutions, primarily in the state of California.</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Commercial and industrial loans represent 33.6% of total loans at December 31, 2002 and have a high degree of industry
diversification. A substantial portion of the commercial and industrial loans are secured by accounts receivable, inventory,
leases or other collateral including real estate. The remainder are unsecured; however, extensions of credit are predicated upon
the financial capacity of the borrower. Repayment of commercial loans is generally from the cash flow of the borrower.</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Real estate mortgage loans, representing 28.9% of total loans at December 31, 2002, are secured by trust deeds on primarily
commercial property. Repayment of real estate mortgage loans is generally from the cash flow of the borrower.</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Real estate construction loans, representing 27.2% of total loans at December 31, 2002, consist of loans to residential
contractors, which are secured by single family residential properties. All real estate loans have established equity
requirements. Repayment on construction loans is generally from long-term mortgages with other lending institutions.
</FONT></P>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Agricultural loans represent 4.8% of total loans at December 31, 2002 and are generally secured by land, equipment, inventory
and receivables. Repayment is from the cash flow of the borrower.</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Lease financing loans, representing 3.3% of total loans at December 31, 2002, consist of loans to small businesses, which are
secured by commercial equipment. Repayment of the lease obligation is from the cash flow of the borrower.</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
There were no loans over 90 days past due and still accruing at December 31, 2002 or 2001. Nonaccrual loans totaled $15.4
million and $13.0 million at December 31, 2002 and 2001, respectively. There were no remaining undisbursed commitments to extend
credit on nonaccrual loans at December 31, 2002. The interest income that would have been earned on nonaccrual loans outstanding
at December 31, 2002 in accordance with their original terms is approximately $931,000. This compares to actual payments of
$3,000 received on such loans which were recorded as interest income during the year ended December 31, 2002.</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
The Company has, and expects to have, lending transactions in the ordinary course of its business with directors, officers,
principal shareholders and their affiliates. These loans are granted on substantially the same terms, including interest rates
and collateral, as those prevailing on comparable transactions with unrelated parties, and do not involve more than the normal
risk of collectibility or present unfavorable features.</FONT></P>

<p align=center><font size=2>47</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<i>Loans to directors, officers, principal shareholders and their affiliates are summarized below:</i></FONT></P>

<pre>
                                               December 31,
   (In thousands)                         2002              2001
---------------------------------------------------------------------
Aggregate amount outstanding,
  beginning of year                     $3,161              $860
New loans or advances during year          636               868
Repayments during year                    (648)             (526)
Other (1) (2)                           (2,800)            1,959
                                    ---------------------------------
Aggregate amount outstanding,
  end of year                             $349            $3,161
                                    =================================
Loan commitments                          $395             $560
                                    =================================
</PRE>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<i>(1) During 2002, one of the Company&#146;s directors resigned from the Board of
Directors. This figure represents the removal of their outstanding balances at
December 31, 2002.</i></FONT>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<i>(2) During 2001, two new directors joined the Company&#146;s Board of Directors, and
two resigned. This figure represents the addition of $2,154,000 in loan balances
outstanding at December 31, 2000 for the two new directors, and the removal of
$194,000 in loan balances for the two resigning directors.</i></FONT>
<BR>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<i>An analysis of changes in the allowance for credit losses is as follows:</i></FONT>

<pre>
                                             Years Ended December 31,
  (In thousands)                       2002           2001             2000
--------------------------------------------------------------------------------
Balance, beginning of year           $4,457          $3,773           $2,642
Provision charged to operations       1,963           1,733            1,580
Losses charged to allowance            (933)         (1,076)            (474)
Recoveries on loans previously
  charged off                            69              27               25
                                  ----------------------------------------------
Balance at end-of-period             $5,556          $4,457           $3,773
                                  ==============================================
</PRE>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The allowance for credit
losses represents management's estimate of the risk inherent in the loan
portfolio based on the current economic conditions, collateral values and
economic prospects of the borrowers. Significant changes in these estimates
might be required in the event of a downturn in the economy and/or the real
estate market in the San Joaquin Valley, and the greater Oakhurst and East
Madera County area. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>At December 31, 2002 and
2001, the Company's recorded investment in loans for which impairment has been
recognized totaled $15.3 million and $13.1 million, respectively. Included in
total impaired loans at December 31, 2002 is $8.4 million of impaired loans for
which the related specific allowance is $1.3 million, as well as $6.9 million of
impaired loans that as a result of write-downs or the fair value of the
collateral, did not have a specific allowance. At December 31, 2001, total
impaired loans included $1.3 million for which the related specific allowance is
$115,000, as well as $11.8 million of impaired loans that as a result of
write-downs or the fair value of the collateral did not have a specific
allowance. The average recorded investment in impaired loans was $11.3 million
and $5.7 million for the years ended December 31, 2002 and 2001, respectively.
In most cases, the Company uses the cash basis method of income recognition for
impaired loans. In the case of certain troubled debt restructuring for which the
loan is performing under the current contractual terms, income is recognized
under the accrual method. For the years ended December 31, 2002, 2001, and 2000,
the Company recognized $3,000, $23,000 and $270,000 on such loans, respectively. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In the normal course of
business, the Company is party to financial instruments with off-balance sheet
risk to meet the financing needs of its customers. At December 31, 2002 and 2001
these financial instruments include commitments to extend credit of $114.2
million and $108.1 million, respectively, and standby letters of credit of
$814,000 and $6.3 million, respectively. These instruments involve elements of
credit risk in excess of the amount recognized on the balance sheet. The
contract amounts of these instruments reflect the extent of the involvement the
bank has in off-balance sheet financial instruments. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company&#146;s exposure
to credit loss in the event of nonperformance by the counterparty to the
financial instrument for commitments to extend credit and standby letters of
credit is represented by the contractual amounts of those instruments. The
Company uses the same credit policies as it does for on-balance sheet
instruments. </FONT></P>

<p align=center><font size=2>48</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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. Substantially all of these
commitments are at floating interest rates based on the Prime rate. Commitments
generally have fixed expiration dates. The Company evaluates each customer's
creditworthiness on a case by case basis. The amount of collateral obtained, if
deemed necessary, is based on management's credit evaluation. Collateral held
varies but includes accounts receivable, inventory, leases, property, plant and
equipment, residential real estate and income-producing properties. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Standby letters of credit are generally unsecured and are issued by the Company to guarantee the performance of a customer to a
third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans
to customers.</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><I>4. Premises and Equipment</i></b></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<i>The components of premises and equipment are as follows:</i></FONT></P>

<pre>
                                            December 31,
   (In thousands)                      2002              2001
------------------------------------------------------------------
Land                                   $254              $254
Buildings and improvements            2,312             2,290
Furniture and equipment               5,465             5,097
                                 ---------------------------------
                                      8,031             7,641

Less accumulated depreciation
  and amortization                   (5,384)           (4,584)
                                 ---------------------------------
Total premises and equipment         $2,647            $3,057
                                 =================================
</PRE>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total depreciation expense
on Company premises and equipment totaled $836,000, $844,000, and $803,000 for
the years ended December 31, 2002, 2001 and 2000, respectively, and is included
in occupancy expense in the accompanying consolidated statements of income. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><i>5. Investment in Limited Partnership</i></b></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During the fourth quarter
of 1997, the Bank purchased a limited interest in a private limited partnership
that acquires affordable housing properties in California that generate Low
Income Housing Tax Credits under Section 42 of the Internal Revenue Code of
1986, as amended. During 2001, the Bank purchased additional limited partnership
interests totaling $939,000. Certain properties may also be eligible for state
tax credits under various sections of the California Revenue and Taxation Code.
The Bank's limited partnership investment is accounted for under the equity
method. Accordingly, the Bank's share of net income or loss from this investment
is recorded in other noninterest expense. The Bank's share of the net loss for
the year ended December 31, 2002, 2001 and 2000 was $210,000, $247,000 and
$173,000, respectively. The limited partnership investment is expected to
generate tax credits over a period of approximately 15 years. Tax credits for
the years ended December 31, 2002 and 2001 totaled $392,000 and $401,000,
respectively. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><i>6. Deposits</i></b></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<i>Deposits include the following:</i></FONT></P>


<pre>
                                                   December 31,
  (In thousands)                            2002                2001
-----------------------------------------------------------------------------
Noninterest-bearing deposits               $89,000             $72,413
Interest-bearing deposits:
  NOW and money market accounts            100,199              83,316
  Savings accounts                          21,138              19,883
  Time deposits:
    Under $100,000                          85,564              68,414
    $100,000 and over                      128,086             124,625
                                      ---------------------------------------
Total interest-bearing deposits            334,987             296,238
                                      ---------------------------------------
Total deposits                            $423,987            $368,651
                                      =======================================
</PRE>

<p align=center><font size=2>49</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<i>At December 31, 2002, the scheduled maturities of all certificates of deposit and other time deposits are as follows:</i>
</FONT></P>

<pre>
     (In thousands
------------------------------------------------------------------
One year or less                                 $185,095
More than one year, but
  less than or equal to two years                  22,032
More than two years, but
  less than or equal to three years                 4,842
More than three years, but
  less than or equal to four years                  1,148
More than four years, but
  less than or equal to five years                    423
More than five years                                  110
                                              -------------------
                                                 $213,650
                                              ===================
</PRE>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company may
occasionally obtain brokered deposits as an additional source of funding. At
December 31, 2002, the Company held brokered time deposits totaling $26.3
million with an average rate of 2.77%. Of this balance, $24.8 million is
included in time deposits of $100,000 or more, and the remaining $1.5 million is
included in time deposits of less than $100,000. Included in brokered time
deposits are balances totaling $10.1 million maturing in three to six months,
$15.6 million maturing in six to twelve months, and $595,000 maturing in more
than one year. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Deposits of directors, officers and other related parties to the Bank totaled $8.1 million and $6.4 million at December 31, 2002
and 2001, respectively. The rates paid on these deposits were those customarily paid to the Bank's customers in the normal
course of business.</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><i>7. Short-term Borrowings/Other Borrowings</i></b></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company had
collateralized and uncollateralized lines of credit with the Federal Reserve
Bank of San Francisco and other correspondent banks aggregating $157.5 million,
as well as Federal Home Loan Bank (&#147;FHLB&#148;) lines of credit totaling $
36.7 million at December 31, 2002. At December 31, 2002, advances on the FHLB
lines of credit totaled $35.4 million. These lines of credit generally have
interest rates tied to the Federal Funds rate or are indexed to short-term U.S.
Treasury rates or LIBOR. FHLB advances are collateralized by all of the
Company&#146;s stock in the FHLB and certain qualifying mortgage loans. As of
December 31, 2002, $38.4 million in real estate-secured loans were pledged as
collateral for FHLB advances. Additionally, $192.7 million in real
estate-secured loans were pledged at December 31, 2002 as collateral for unused
borrowing lines with the Federal Reserve Bank totaling $144.5 million. All lines
of credit are on an &#147;as available&#148; basis and can be revoked by the
grantor at any time. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company had
collateralized and uncollateralized lines of credit aggregating $119.6 million,
as well as a repurchase agreement line of credit of $5.3 million and FHLB lines
of credit totaling $35.6 million at December 31, 2001. The Company had
outstanding repurchase agreements of $5.3 million, FHLB advances of $22.2
million. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<i>The table below provides further detail of the Company's repurchase agreements and FHLB advances for the years ended December
31, 2002 and 2001:</i></FONT></P>

<PRE>
                                                              December 31,
-----------------------------------------------------------------------------------
  (Dollars in thousands)                                 2002              2001
-----------------------------------------------------------------------------------
Outstanding:
  Average for the period - Repos                         $218            $12,048
  Average for the period - FHLB advances              $32,398            $19,255
  Maximum during the period - total borrowings        $35,400            $38,250
Interest rates:
  Average for the period - Repos                       1.96%               4.90%
  Average for the period - FHLB advances               4.24%               4.79%
  Average at period end - Repos                        0.00%               1.93%
  Average at period end - FHLB advances                4.17%               4.66%
</PRE>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On June 20, 2000, the
Company&#146;s ESOP entered into an agreement with a correspondent bank to
establish a $1.0 million unsecured line of credit with a variable rate of prime
plus 100 basis points and maturity of June 20, 2005. The loan is guaranteed by
the Company. Advances on the line totaled $650,000 at December 31, 2002. </FONT></P>

<p align=center><font size=2>50</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><i>8. Trust Preferred Securities</i></b></FONT></P>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On July 16, 2001, the
Company&#146;s wholly owned special-purpose trust subsidiary, United Security
Bancshares Capital Trust I (the &#147;Trust&#148;) issued $15 million in
cumulative Trust Preferred Securities. The securities bear a floating rate of
interest of 3.75% over the six month LIBOR rate, payable semi-annually.
Concurrent with the issuance of the Trust Preferred Securities, the Trust used
the proceeds from the Trust Preferred Securities offering to purchase a like
amount of Junior Subordinated Debentures of the Company. The Subordinated
Debentures are the sole assets of the Trust and are eliminated, along with the
related income statement effects, in the consolidated financial statements. The
Company will pay interest on the Junior Subordinated Debentures to the Trust,
which represents the sole revenues and sole source of dividend distributions to
the holders of the Trust Preferred Securities. The Company has the right,
assuming no default has occurred, to defer payments of interest on the Junior
Subordinated Debentures at any time for a period not to exceed 20 consecutive
quarters. The Trust Preferred Securities will mature on July 25, 2031, but can
be redeemed after July 25, 2006 at a premium, and can be redeemed after July 25,
2011 at par. The obligations of the Trust are fully and unconditionally
guaranteed, on a subordinated basis, by the Company. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company received $14.5
million from the Trust upon issuance of the Junior Subordinated Debentures, of
which $13.7 million was contributed by the Company to the Bank to increase its
capital. The remainder was utilized by the Company for general corporate
purposes. Under applicable regulatory guidelines, the Company expects that a
portion of the Trust Preferred Securities will qualify as Tier I Capital, and
the remainder as Tier II Capital. Issuance costs of $495,000 related to the
Trust Preferred Securities have been deferred and will be amortized over the
30-year life of the securities. Interest expense on the Trust Preferred
Securities totaled $883,000 and $533,000, and amortization expense totaled $
17,000 and $8,000 for the years ended December 31, 2002 and 2001, respectively. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><i>9. Taxes on Income</i></b></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<i>The tax effects of significant items comprising the Company's net deferred tax assets (liabilities) are as follows:</i>
</FONT></P>

<pre>
                                                        December 31,
   (In thousands)                                   2002            2001
-----------------------------------------------------------------------------
Deferred tax assets:
 Credit losses not currently deductible            $1,912          $1,320
 State franchise tax                                   36             277
 Deferred compensation                                395             313
 Amortization of core deposit intangible              161             131
 Depreciation                                          60             ---
 Other                                                 86              82
                                                -----------------------------
Total deferred tax assets                           2,650           2,123
Deferred tax liabilities:
 Depreciation                                         ---             (74)
 FHLB dividend                                       (125)            (88)
 Unrealized holding gain on AFS securities           (693)            (74)
 Prepaid expenses                                    (194)           (157)
                                                ------------------------------
Total deferred tax liabilities                     (1,012)           (393)
                                                ------------------------------
Net deferred tax assets                            $1,638          $1,730
                                                ==============================
</PRE>
<BR><BR><BR><BR>
<p align=center><font size=2>51</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">



<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<i>Taxes on income for the years ended December 31 consist of the following:</i></FONT></P>

<PRE>
   (In thousands)
-----------------------------------------------------------------------
2002:                       Federal         State         Total
                         ----------------------------------------------
Current                     $3,569          $107         $3,676
Deferred                      (212)         (315)          (527)
                         ----------------------------------------------
                            $3,357         $(208)        $3,149
                         ==============================================
2001:
Current                     $2,728          $796         $3,524
Deferred                      (266)          (73)          (339)
                         ----------------------------------------------
                            $2,462          $723         $3,185
                         ==============================================
2000:
Current                     $3,112        $1,036         $4,148
Deferred                      (568)         (130)          (698)
                         ----------------------------------------------
                            $2,544          $906         $3,450
                         ==============================================
</PRE>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<i>A reconciliation of the statutory federal income tax rate to the effective income tax rate is as follows:</i>
</FONT></P>
<pre>
                                                 Years Ended December 31,
                                             2002          2001          2000
-----------------------------------------------------------------------------------
Statutory federal income tax rate            34.0%         34.0%         34.0%
State franchise tax, net of
  federal income tax benefit                  1.0           7.2           7.2
Tax exempt interest income                   (1.2)         (1.4)         (1.4)
Low Income Housing - federal credits         (3.7)         (4.3)         (3.0)
Other                                        (0.2)         (1.6)         (1.3)
                                         ------------------------------------------
                                             29.9%         33.9%         35.5%
                                         ==========================================
</PRE>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><i>10. Stock Options</i></b></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Options have been granted
to officers and key employees at an exercise price equal to estimated fair
values at the date of grant as determined by the Board of Directors. During
1995, the Board of Directors and shareholders of the Company approved the
adoption of the 1995 Stock Option Plan. The 1987 Plan was terminated as to the
granting of additional options under that plan. The options granted under both
the 1987 and 1995 Stock Option Plan are exercisable 20% each year commencing one
year after the date of grant and expire ten years after the date of grant. The
maximum number of shares which can be granted under the 1995 Plan is 690,000. A
total of 130,000 shares remain reserved under the 1995 Stock Option Plan. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<i>Options outstanding, exercisable, exercised and forfeited are as follows:</i></FONT></P>

<PRE>
                                                           Weighted                     Weighted
                                               1987         Average         1995        Average
                                               Plan      Exercise Price     Plan      Exercise Price
---------------------------------------------------------------------------------------------------------------
Options outstanding January 1, 2000           145,970       $4.09          425,117        $8.33
 Granted during the year                            0                        5,000       $17.00
 Exercised during the year                   (145,970)      $4.09          (81,687)       $5.54
                                           ------------                  -------------
Options outstanding December 31, 2000               0                      348,430        $9.11
                                           ============
 Granted during the year                                                    30,000       $17.50
 Exercised during the year                                                (104,830)       $7.69
                                                                         -------------
Options outstanding December 31, 2001                                      273,600       $10.57
 Exercised during the year                                                 (58,800)       $7.08
 Canceled or expired during the year                                        (3,000)       $5.21
                                                                         -------------
Options outstanding December 31, 2002                                      211,800       $11.62
                                                                         =============
</PRE>

<p align=center><font size=2>52</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Included in total
outstanding options at December 31, 2002, are 184,800 exercisable shares under
the 1995 plan, at a weighted average price of $10.77. Included in total
outstanding options at December 31, 2001, are 197,600 exercisable shares under
the 1995 plan, at a weighted average price of $9.23. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<i>Additional information regarding options as of December 31, 2002 is as follows:</i></FONT></P>


<pre>
                Options Outstanding                                 Options Exercisable
-------------------------------------------------------------------------------------------------------------
                                     Weighted Avg
   Range of             Number        Remaining       Weighted Avg        Number       Weighted Avg
Exercise Prices      Outstanding  Contract Life(yrs) Exercise Price     Exercisable   Exercise Price
-------------------------------------------------------------------------------------------------------------
$5.21 to $5.25        5,600              2.7             $5.21             5,600            $5.21
    $6.08             22,500             3.5             $6.08            22,500            $6.08
   $11.33            148,700             4.6            $11.33           148,700           $11.33
$17.00 to $17.50      35,000             8.1            $17.43             8,000           $17.38
                   ------------                                       --------------
         Total       211,800                                             184,800
                   ============                                       ==============
</PRE>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As discussed in Note 1, the
Company continues to account for its stock-based awards using the intrinsic
value method in accordance with Accounting Principles Board Opinion No. 25,
&quot;Accounting for Stock Issued to Employees&quot; and its related
interpretations. Accordingly, no compensation expense has been recognized in the
financial statements for employee stock arrangements. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Statement of Financial
Accounting Standards (&quot;SFAS&quot;) No. 148, &#147;Accounting for
Stock-Based Compensation &#150; Transition and Disclosure an amendment of FASB
Statement No. 123&#148;, requires the disclosure of pro forma net income and
earnings per share. Under SFAS 148, the fair value of stock-based awards to
employees is calculated through the use of option pricing models, even though
such models were developed to estimate fair value of freely tradable, fully
transferable options without vesting restrictions, which significantly differ
from the Company's stock option awards. These models also require subjective
assumptions, including future stock price volatility and expected time to
exercise, which greatly affect the calculated values. The Company's calculations
were made using the Black-Scholes option pricing model with the following
weighted average assumptions for expected life: 60 months following vesting for
2001, 24 months following vesting for 2000, 77 months following vesting for
1997, and 64 months following vesting for 1996 and 1995. Assumptions for stock
volatility were 12.41% in 2001 and 2000, 15.88% in 1997, 7.08% in 1996 and 6.59%
in 1995. Risk free interest rates used were 5.1% in 2001, 6.0% in 2000, 6.2% in
1997, 6.9% in 1996 and 6.4% in 1995. Expected dividends range from 1.7% to 3.8%
during the expected term of the options. See Note 1 for pro forma net income
calculations pursuant to SFAS No. 148. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><i>11. Employee Benefit Plans</i></b></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<u>Employee Stock Ownership Plan</u></FONT></P>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company has an Employee
Stock Ownership Plan and Trust, (the &#147;ESOP&#148;), designed to enable
eligible employees to acquire shares of common stock. ESOP eligibility is based
upon length of service requirements. The Bank contributes cash to the ESOP in an
amount determined at the discretion of the Board of Directors. The trustee of
the ESOP uses such contribution to purchase shares of common stock currently
outstanding, or to repay debt on the leveraged portion of the ESOP. The shares
of stock purchased by the trustee are allocated to the accounts of the employees
participating in the ESOP on the basis of total relative compensation. Employer
contributions vest over a period of six years. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During June of 2000, the
Company&#146;s Employee Stock Ownership Plan (&#147;ESOP&#148;) established an
unsecured five-year variable-rate line of credit (&#147;the loan&#148;) in the
amount of $1.0 million for the purpose of purchasing common stock of the
Company. The loan is with a correspondent bank and is guaranteed by the
plan&#146;s sponsor, United Security Bancshares. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The ESOP used the proceeds
of the loan to acquire shares of the Company&#146;s common stock which will be
held in a suspense account by the ESOP. At the end of each year, shares will be
released for allocation to the accounts of the individual ESOP participants in
proportion to the principal and interest paid on the loan during the year. The
ESOP loan is recorded as a liability of the Company and the unreleased shares
purchased with the loan are reported as unearned ESOP shares in
shareholders&#146; equity. Unreleased shares are not recognized as outstanding
for earnings per share and capital computations. Dividends on unallocated ESOP
shares will be used to pay debt service on the ESOP loan and, as such, are
recorded as a reduction of debt and accrued interest. </FONT></P>

<p align=center><font size=2>53</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>No ESOP shares were
purchased during 2002. During the year ended December 31, 2001, the ESOP
purchased 23,185 shares of common stock on the open market under the revolving
line of credit for a total cost of $399,000 (average cost of $17.20 per share).
During the year ended December 31, 2000, the leveraged ESOP purchased 46,861
shares of common stock on the open market for a total cost of $817,000 (average
cost of $17.43 per share), and purchased an additional 8,126 shares prior to
June 2000 when the Company leveraged its ESOP Plan. Compensation expense totaled
$273,000, $246,000 and $254,000 for the years ended December 31, 2002, 2001 and
2000, respectively. Interest expense incurred on the ESOP loan totaled $45,000,
$88,000 and $21,000 for the years ended December 31, 2002, 2001 and 2000,
respectively. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<i>Allocated, committed-to-be-released, and unallocated ESOP shares as of December 31, 2002, 2001 and 2000 were as follows:</i>
</FONT></P>

<pre>
                                       2002           2001         2000
---------------------------------------------------------------------------------
Allocated                            111,857         103,035      95,973
Committed-to-be-released              15,585          11,952       7,742
Unallocated                           34,767          50,352      39,119
                                   ----------------------------------------------
Total ESOP shares                    162,209         165,339     142,834
                                   ==============================================
Fair value of unreleased shares     $620,591        $855,984    $679,888
                                   ==============================================
</PRE>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<u>401K Plan</u></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company has a Cash or
Deferred 401(k) Stock Ownership Plan (the &#147;401(k) Plan&#148;) organized
under Section 401(k) of the Code. All employees of the Company are initially
eligible to participate in the 401(k) Plan upon the first day of the month after
date of hire. Under the terms of the plan, the participants may elect to make
contributions to the 401(k) Plan as determined by the Board of Directors.
Participants are automatically vested 100% in all employee contributions.
Participants may direct the investment of their contributions to the 401(k) Plan
in any of several authorized investment vehicles. The Company contributes funds
to the Plan up to 5% of the employees&#146; eligible annual compensation.
Company contributions are subject to certain vesting requirements over a period
of six years. Contributions made by the Company are invested in Company stock.
During 2002, 2001 and 2000, the Company contributed a total of $161,000,
$139,000, and $120,000, respectively, to the Deferral Plan. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<u>Salary Continuation Plan</u></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company has established
a non-qualified Salary Continuation Plan for five of the Company's key
employees, which provides additional compensation benefits upon retirement for a
period of 15 years. Future compensation under the Plan is earned by the
employees for services rendered through retirement and vests over a period of 12
years. The Company accrues for the salary continuation liability based on
anticipated years of service and vesting schedules provided under the Plan. At
December 31, 2002 and 2001, $881,000 and $711,000, respectively, had been
accrued to date and is included in other liabilities. In connection with the
implementation of the Salary Continuation Plans, the Company purchased single
premium universal life insurance policies on the life of each of the key
employees covered under the Plan. The Company is the owner and beneficiary of
these insurance policies. The cash surrender value of the policies was $2.5
million and $2.4 million at December 31, 2002 and 2001, respectively. The assets
of the Plan, under Internal Revenue Service regulations, are the property of the
Company and are available to satisfy the Company's general creditors. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><i>12. Commitments and Contingent Liabilities</i></b></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company leases land and
premises for its branch banking offices and administration facilities. The
initial terms of these leases expire at various dates through 2015. Under the
provisions of most of these leases, the Company has the option to extend the
leases beyond their original terms at rental rates adjusted for changes reported
in certain economic indices or as reflected by market conditions. The total
expense on land and premises leased under operating leases was $267,000,
$247,000, and $234,000 during 2002, 2001, and 2000, respectively. </FONT></P>

<p align=center><font size=2>54</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<i>Future minimum rental commitments under existing leases as of December 31, 2002 are as follows:</i>
</FONT></P>

<pre>
   (In thousands):
-----------------------------------------
   2003                       $234
   2004                        200
   2005                        204
   2006                        119
   2007                        110
Thereafter                     803
                         ----------------
                            $1,670
                         ================
</PRE>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><i>13. Financial Instruments Fair Value Disclosure</i></b></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The following summary
disclosures are made in accordance with the provisions of Statement of Financial
Accounting Standards No. 107, &#147;Disclosures About Fair Value of Financial
Instruments,&#148; which requires the disclosure of fair value information about
both on- and off- balance sheet financial instruments where it is practicable to
estimate that value. Fair value is defined in SFAS No. 107 as the amount at
which an instrument could be exchanged in a current transaction between willing
parties, other than in a forced or liquidation sale. It is not the
Company&#146;s intent to enter into such exchanges. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In cases where quoted
market prices were not available, fair values were estimated using present value
or other valuation methods, as described below. The use of different assumptions
(e.g., discount rates and cash flow estimates) and estimation methods could have
a significant effect on fair value amounts. Accordingly, the estimates presented
herein are not necessarily indicative of the amounts the Company could realize
in a current market exchange. Because SFAS No. 107 excludes certain financial
instruments and all non-financial instruments from its disclosure requirements,
any aggregation of the fair value amounts presented would not represent the
underlying value of the Company. </FONT></P>

<PRE>
                                      December 31, 2002                December 31, 2001
                              -------------------------------------------------------------------
                                                  Estimated                        Estimated
                                  Carrying           Fair          Carrying           Fair
   (In thousands)                  Amount           Value           Amount           Value
-------------------------------------------------------------------------------------------------
Financial Assets:
   Cash and cash equivalents       $31,485          $31,485          $29,255         $29,255
   Interest-bearing deposits        10,224           10,299             --              --
   Investment securities           104,567          104,567           63,365          63,365
   Loans, net                      348,598          349,143          335,620         334,683
Financial Liabilities:
   Deposits                        423,987          422,398          368,651         367,114
   Borrowings                       36,050           35,396           28,416          28,037
   Trust Preferred Securities       15,000           14,995           15,000          14,988
Commitments to extend credit          --               --               --              --
</PRE>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The following methods and
assumptions were used in estimating the fair values of financial instruments: </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b>Cash and Cash Equivalents</b> - The carrying amounts reported in the balance sheets for cash and cash equivalents approximate
their estimated fair values.</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b>Interest-bearing Deposits</b> - Interest bearing deposits in other banks consist of fixed-rate certificates of deposits.
Accordingly, fair value has been estimated based upon interest rates currently being offered on deposits with similar
characteristics and maturities.</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b>Investments</b> - Fair values for investment securities, including collateralized mortgage obligations, are based on quoted
market prices.</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>Loans</b> - Fair values of
variable rate loans which reprice frequently and with no significant change in
credit risk are based on carrying values. Fair values for all other loans are
estimated using discounted cash flows over their remaining maturities, using
interest rates at which similar loans would currently be offered to borrowers
with similar credit ratings and for the same remaining maturities. </FONT></P>

<p align=center><font size=2>55</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>Deposits</b> &#150; In
accordance with SFAS No. 107, fair values for transaction and savings accounts
are equal to the respective amounts payable on demand at December 31, 2002 and
2001 (i.e., carrying amounts). The Company believes that the fair value of these
deposits is clearly greater than that prescribed by SFAS No. 107. Fair values of
fixed-maturity certificates of deposit were estimated using the rates currently
offered for deposits with similar remaining maturities. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b>Borrowings</b> - Borrowings consist of federal funds sold, securities sold under agreements to repurchase, and other short-term
borrowings. Fair values of borrowings were estimated using the rates currently offered for borrowings with similar remaining
maturities.</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>Trust Preferred Securities</b>
&#150; Trust preferred securities reprice semiannually. Consequently, fair
values were estimated using the rates currently offered for borrowings with
similar remaining repricing characteristics. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>Commitments to Extend
Credit</b> - Fair values of commitments to extend credit are estimated using the
interest rate currently charged to enter into similar agreements, taking into
account the remaining terms of the agreements and the present
counterparties&#146; credit standing. Fair values of standby letters of credit
are based on fees currently charged for similar agreements. There was no
material difference between the contractual amount and the estimated value of
commitments to extend credit at December 31, 2002 and 2001. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><i>14. Regulatory Matters</i></b></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><u>Capital Guidelines</u> - The
Company (on a consolidated basis) and the Bank are subject to various regulatory
capital requirements adopted by the Board of Governors of the Federal Reserve
System (&#147;Board of Governors&#148;). Failure to meet minimum capital
requirements can initiate certain mandates and possible additional discretionary
actions by regulators that, if undertaken, could have a direct material effect
on the Company&#146;s consolidated financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, the
Company and the Bank must meet specific capital guidelines that involve
quantitative measures of their assets, liabilities, and certain off-balance
sheet items as calculated under regulatory accounting practices. The capital
amounts and classification are also subject to qualitative judgments by the
regulators about components, risk weightings, and other factors. Prompt
corrective action provisions are not applicable to bank holding companies. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Quantitative measures
established by regulation to ensure capital adequacy require insured
institutions to maintain a minimum leverage ratio of Tier 1 capital (the sum of
common stockholders' equity, noncumulative perpetual preferred stock and
minority interests in consolidated subsidiaries, minus intangible assets,
identified losses and investments in certain subsidiaries, plus unrealized
losses or minus unrealized gains on available for sale securities) to total
assets. Institutions which have received the highest composite regulatory rating
and which are not experiencing or anticipating significant growth are required
to maintain a minimum leverage capital ratio of 3% of Tier 1 capital to total
assets. All other institutions are required to maintain a minimum leverage
capital ratio of at least 100 to 200 basis points above the 3% minimum
requirement. </FONT></P>
<BR><BR><BR><BR><BR>
<p align=center><font size=2>56</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">



<PRE>
                                                                                    To Be Well
                                                                                 Capitalized Under
                                                                For Capital      Prompt Corrective
                                              Actual        Adequacy Purposes    Action Provisions
                                       --------------------------------------------------------------
(In thousands)                           Amount    Ratio     Amount    Ratio      Amount    Ratio
-----------------------------------------------------------------------------------------------------
As of December 31, 2002 (Company):
  Total Capital (to Risk Weighted
    Assets)                             $58,275    13.20%    $35,314    8.00%    $44,143    10.00%
  Tier 1 Capital (to Risk Weighted
    Assets)                              50,343    11.40%     17,657    4.00%     26,486     6.00%
  Tier 1 Capital ( to Average Assets)    50,343     9.54%     15,832    3.00%     26,386     5.00%

As of December 31, 2002 (Bank):
  Total Capital (to Risk Weighted
    Assets)                             $56,059    12.74%    $35,190    8.00%    $43,987    10.00%
  Tier 1 Capital (to Risk Weighted
    Assets)                              50,560    11.49%     17,595    4.00%     26,392     6.00%
  Tier 1 Capital ( to Average Assets)    50,560     9.61%     15,785    3.00%     26,308     5.00%

As of December 31, 2001 (Company):
  Total Capital (to Risk Weighted
    Assets)                             $52,662    12.89%    $32,694    8.00%    $40,868    10.00%
  Tier 1 Capital (to Risk Weighted
    Assets)                              44,205    10.82%     16,347    4.00%     24,521     6.00%
  Tier 1 Capital ( to Average Assets)    44,205    10.20%     13,030    3.00%     21,716     5.00%

As of December 31, 2001 (Bank):
  Total Capital (to Risk Weighted
    Assets)                             $50,729    12.48%    $32,523    8.00%    $40,654    10.00%
  Tier 1 Capital (to Risk Weighted
    Assets)                              46,272    11.38%     16,262    4.00%     24,392     6.00%
  Tier 1 Capital ( to Average Assets)    46,272    10.67%     13,005    3.00%     21,674     5.00%
</PRE>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Board of Governors has
also adopted a statement of policy, supplementing its leverage capital ratio
requirements, which provides definitions of qualifying total capital (consisting
of Tier 1 capital and supplementary capital, including the allowance for loan
losses up to a maximum of 1.25% of risk-weighted assets) and sets forth minimum
risk-based capital ratios of capital to risk-weighted assets. Insured
institutions are required to maintain a ratio of qualifying total capital to
risk weighted assets of 8%, at least one-half of which must be in the form of
Tier 1 capital. Management believes, as of December 31, 2002, that the Company
and the Bank meet all capital adequacy requirements to which they are subject. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As of December 31, 2002 and
2001, the most recent notifications from the Bank&#146;s regulators 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 capital and Tier 1 capital (as defined) to risk-based assets (as
defined), and a minimum leverage ratio of Tier 1 capital to average assets (as
defined) as set forth in the proceeding discussion. There are no conditions or
events since the notification that management believes have changed the
institution&#146;s category. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Under regulatory
guidelines, the $15 million in Trust Preferred Securities issued in July of 2001
qualifies as Tier 1 capital up to 25% of Tier 1 capital. Any additional portion
of Trust Preferred Securities qualifies as Tier 2 capital. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><u>Dividends</u> - Subsequent to
the Reorganization on June 12, 2001, dividends paid to shareholders will be paid
by the bank holding company, subject to restrictions set forth in the California
General Corporation Law. The primary source of funds with which dividends will
be paid to shareholders will come from cash dividends received by the Company
from the Bank. Year-to-date as of December 31, 2002, the Company received $4.4
million in cash dividends from the Bank, from which the Company has declared or
paid $2.8 million in dividends to shareholders. </FONT></P>

<p align=center><font size=2>57</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Under California state
banking law, the Bank may not pay cash dividends in an amount which exceeds the
lesser of the retained earnings of the Bank or the Bank&#146;s net income for
the last three fiscal years (less the amount of distributions to shareholders
during that period of time). If the above test is not met, cash dividends may
only be paid with the prior approval of the California State Department of
Financial Institutions, in an amount not exceeding the greater of: (i) the
Bank&#146;s retained earnings; (ii) its net income for the last fiscal year; or
(iii) its net income for the current fiscal year. As of December 31, 2002,
approximately $8.6 million was available to the Bank for cash dividend
distributions without prior approval. Year-to-date, the Bank has paid dividends
of $4.4 million to the Company. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>Cash Restrictions</U> - The
Bank is required to maintain average reserve balances with the Federal Reserve
Bank. At December 31, 2002, the Bank&#146;s qualifying balance with the Federal
Reserve Bank was $6.6 million consisting of vault cash and balances. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><i>15. Supplemental Cash Flow Disclosures</i></b></FONT></P>

<pre>
                                             Years Ended December 31,
    (In thousands)                      2002           2001            2000
----------------------------------------------------------------------------------
Cash paid during the period for:
  Interest                             $10,764        $13,385          $11,379
  Income Taxes                           3,237          3,943            3,927
Noncash investing activities:
  Loans transferred to
    foreclosed property                  5,113          2,980            2,781
  Dividends declared not paid              710            625              546
</PRE>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><i>16. Net Income Per Share</i></b></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<i>The following table provides a reconciliation of the numerator and the denominator of the basic EPS computation with the
numerator and the denominator of the diluted EPS computation:</i></FONT></P>
<PRE>
                                                                 Years Ended December 31,
   (In thousands, except earnings per share data)      2002                2001               2000
---------------------------------------------------------------------------------------------------------
Net income available to common shareholders           $7,371              $6,193              $6,257
                                                 ========================================================
Weighted average shares issued                         5,444               5,499               5,389
  Less: unearned ESOP shares                             (43)                (55)                (14)
                                                 --------------------------------------------------------
Weighted average shares outstanding                    5,401               5,444               5,375
   Add: dilutive effect of stock options                  86                 120                 213
                                                 --------------------------------------------------------
Weighted average shares outstanding
     adjusted for potential dilution                   5,487               5,564               5,588
                                                 ========================================================
Basic earnings per share                               $1.36               $1.14              $1.16
                                                 ========================================================
Diluted earnings per share                             $1.34               $1.11              $1.12
                                                 ========================================================
</PRE>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><i>17. Other Comprehensive Income</i></b></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<i>The following table provides a reconciliation of the amounts included in comprehensive income:</i></FONT></P>
<pre>
                                                             Years Ended December 31,
  (In thousands)                                     2002           2001            2000
---------------------------------------------------------------------------------------------
Other comprehensive income, net of tax:
 Unrealized gain on sale  securities - net
  income tax of $815, $157, and $491                $1,222          $235            $737
Less: Reclassification adjustment for gain
  on sale of Available-for-sale securities
  included in net income - net income
  tax of $194, $307 and $2                            (291)         (461)             (3)
                                               ----------------------------------------------
Net unrealized gain (loss) on
  available-for-sale securities                       $931         $(226)           $734
                                               ==============================================
</PRE>

<p align=center><font size=2>58</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><i>18. Common Stock Repurchase Plan</i></b></FONT></P>


<p><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
During August 2001, the Company&#146;s Board of Directors approved a plan to
repurchase, as conditions warrant, up to 280,000 shares of the Company&#146;s
common stock on the open market or in privately negotiated transactions. The
duration of the program is open-ended and the timing of the purchases will
depend on market conditions. During the years ended December 31, 2002 and 2001,
the Company repurchased 64,676 and 115,786 shares for a total of $1.1 million
and $1.9 million, respectively. The repurchased shares were subsequently
retired.</FONT><p>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
19. Parent Company Only Financial Statements</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<i>The following are the condensed financial statements of United Security Bancshares and should be read in conjunction with the
consolidated financial statements:</i></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b>United Security Bancshares<BR>
Balance Sheets (parent only)</b></FONT></P>

<PRE>
                                                                December 31,
       (In thousands)                                     2002                 2001
----------------------------------------------------------------------------------------------
    Assets:
      Cash and equivalents                               $1,283                $759
      Investment in bank subsidiary                      53,902              49,126
      Investment in nonbank entity                        1,500               1,500
         Other assets                                       471                 487
                                                    ------------------------------------------
        Total assets                                    $57,156             $51,872
                                                    ==========================================

    Liabilities &amp; Shareholders' Equity
      Liabilities:
        Junior subordinated debt securities             $15,000             $15,000
        Accrued interest payable                            374                 533
        Other liabilities                                   683                 280
                                                    ------------------------------------------
        Total liabilities                                16,057              15,813

     Shareholders' Equity:
        Common  stock, no par value
          10,000,000 shares authorized, 5,406,666
           and 5,397,298 issued and outstanding,
           in 2002 and 2001                              17,553              18,239
        Retained earnings                                23,114              18,582
        Unearned ESOP shares                               (609)               (873)
        Accumulated other comprehensive income            1,041                 111
                                                    ------------------------------------------
        Total shareholders' equity                       41,099              36,059
                                                    ------------------------------------------
        Total liabilities and shareholders' equity      $57,156             $51,872
                                                    ==========================================
</PRE>
<BR><BR><BR><BR><BR>



<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b>United Security Bancshares<BR>
Income Statement (parent only)</b></FONT></P>

<PRE>
                                                        Years Ended December 31,
      (In thousands)                                   2002                 2001
-------------------------------------------------------------------------------------
    Income:
       Dividends from subsidiaries                    $4,385               $4,300
       Other income                                      150                    0
                                               --------------------------------------
         Total income                                  4,535                4,300
    Expense:
       Interest expense                                  899                  541
       Other expense                                     233                  122
                                               ---------------------------------------
         Total  expense                                1,132                  663
                                               ---------------------------------------
    Income before taxes and equity in
      undistributed income of subsidiary               3,403                3,637
       Income tax benefit                               (385)                (273)
       Equity in undistributed income
        of subsidiary                                  3,583                2,283
                                               ---------------------------------------
    Net Income                                        $7,371               $6,193
                                               =======================================
</PRE>


<p align=center><font size=2>59</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b>United Security Bancshares<BR>
Statement of Cash Flows (parent only)</b></FONT></P>


<PRE>
                                                            Years Ended December 31,
           (In thousands)                                  2002                 2001
--------------------------------------------------------------------------------------------
    Cash Flows From Operating Activities:
      Net income                                           $7,371               $6,193
      Adjustments to reconcile net earnings to
        cash provided by operating activities:
      Equity in undistributed income of subsidiaries       (3,583)              (2,283)
      Amortization of issuance costs                           17                    8
      Net change in other liabilities                         165                  259
                                                       -------------------------------------
       Net cash provided by operating activities            3,970                4,177

    Cash Flows From Investing Activities:
       Capital contribution to subsidiary                       0              (13,700)
       Investment in nonbank entity                             0               (1,500)
                                                       -------------------------------------
       Net cash used in investing activities                    0              (15,200)

    Cash Flows From Financing Activities:
       Net proceeds from issuance of
         junior subordinated debt                               0               14,505
       Proceeds from stock options exercised                  416                  429
       Repurchase and retirement of common stock           (1,107)              (1,884)
       Payment of dividends on common stock                (2,755)              (1,268)
                                                       -------------------------------------
           Net cash provided by financing activities       (3,446)              11,782

        Net increase  in cash and cash equivalents            524                  759
        Cash and cash equivalents at beginning of period      759                    0
                                                       -------------------------------------
        Cash and cash equivalents at end of period         $1,283                 $759
                                                       =====================================

        Supplemental cash flow disclosures:
        Noncash financing activities:
           Dividends declared not paid                       $710                 $625
                                                       =====================================
</PRE>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b><i>20. Quarterly Financial Data (unaudited)</i></b></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<i>Selected quarterly financial data for the years ended December 31, 2002 and 2001 are presented below:</i></FONT></P>

<pre>
                                                         2002                                  2001
                                        -----------------------------------------------------------------------------
(In thousands except per share data)       4th      3rd       2nd       1st      4th       3rd       2nd      1st
---------------------------------------------------------------------------------------------------------------------
Interest income                            $7,219   $7,413    $7,196    $6,844   $6,696    $7,848    $7,726   $7,793
Interest expense                            2,491    2,796     2,697     2,713    3,014     3,603     3,378    3,416
                                        -----------------------------------------------------------------------------
   Net interest income                      4,728    4,617     4,499     4,131    3,682     4,245     4,348    4,377
Provision for credit losses                   774      325       244       620      465       492       401      375
Gain on sale of securities                    509      (2)      (22)         0       11       482       276        1
Other noninterest income                    1,150    1,315     1,099     1,319    1,055       967       850      635
Noninterest expense                         2,654    2,928     2,583     2,695    2,589     2,580     2,409    2,240
                                        -----------------------------------------------------------------------------
   Income before income tax expense         2,959    2,677     2,749     2,135    1,694     2,622     2,664    2,398
Income tax expense                            901      801       828       619      366       944       990      885
                                        -----------------------------------------------------------------------------
   Net income                              $2,058   $1,876    $1,921    $1,516   $1,328    $1,678    $1,674   $1,513
                                        =============================================================================
Net income per share:
   Basic                                   $0.38     $0.35    $0.36     $0.28     $0.24    $0.31     $0.31     $0.28
                                        =============================================================================
   Diluted                                 $0.38     $0.34    $0.35     $0.28     $0.24    $0.30     $0.30     $0.27
                                        =============================================================================
Dividends declared per share               $0.13     $0.13    $0.13     $0.13    $0.115   $0.115    $0.115    $0.115
                                        =============================================================================
Average shares outstanding for
  net income per share:
   Basic                                  5,401    5,397     5,382     5,387    5,444     5,451     5,442    5,430
                                        =============================================================================
   Diluted                                5,487    5,488     5,483     5,487    5,564     5,577     5,576    5,577
                                        =============================================================================
</PRE>
<BR><BR><BR><BR><BR><BR>

<p align=center><font size=2>60</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">



<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<a name="a009"></a>
<b>Item 9 - Changes in and Disagreements with Accountants on Accounting and Financial Disclosure</b>
<BR><BR>
None.</FONT></P>

<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b>PART III</b></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<a name="a010"></a>
<b>Item 10 - Directors and Executive Officers of the Registrant</b></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pursuant to Instruction G,
the information required by this item is hereby incorporated herein by reference
from the caption entitled &quot;Information on Directors and Executive
Officers&quot; set forth in the Company's definitive Proxy Statement for its
2003 Annual Meeting of Shareholders (&quot;Proxy Statement&quot;). </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<a name="a011"></a>
<b>Item 11 - Executive Compensation</b></FONT></P>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pursuant to Instruction G,
the information required by this item is hereby incorporated herein by reference
from the caption entitled &quot;Compensation of Directors and Executive
Officers&quot; set forth in the Company's definitive Proxy Statement for its
2003 Annual Meeting of Shareholders (&quot;Proxy Statement&quot;). </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<a name="a012"></a>
<b>Item 12 - Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters</b></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pursuant to Instruction G,
the information required by this item is hereby incorporated herein by reference
from the caption entitled &quot;Shareholdings of Certain Beneficial Owners and
Management&quot; set forth in the Company's definitive Proxy Statement for its
2003 Annual Meeting of Shareholders (&quot;Proxy Statement&quot;). </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<a name="a013"></a>
<b>Item 13 - Certain Relationships and Related Transactions</b></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pursuant to Instruction G,
the information required by this item is hereby incorporated herein by reference
from the caption entitled &quot;Certain Related Parties and Related Party
Transactions&quot; set forth in the Company's definitive Proxy Statement for its
2003 Annual Meeting of Shareholders (&quot;Proxy Statement&quot;). </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<a name="a014"></a>
<b>Item 14. Controls and Procedures</b></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(a) Evaluation of
Disclosure Controls and Procedures: An evaluation of the Company's disclosure
controls and procedures (as defined in Section 13(a)-14(c) of the Securities
Exchange Act of 1934 (the &quot;Act&quot;)) was carried out under the
supervision and with the participation of the Company's Chief Executive Officer,
Chief Financial Officer and several other members of the Company's management
within the 90-day period preceding the filing date of this annual report. The
Company's Chief Executive Officer and Chief Financial Officer concluded that the
Company's disclosure controls and procedures as currently in effect are
effective in ensuring that the information required to be disclosed by the
Company in the reports it files or submits under the Act is (i) accumulated and
communicated to the Company's management (including the Chief Executive Officer
and Chief Financial Officer) in a timely manner, and (ii) recorded, processed,
summarized and reported within the time periods specified in the SEC's rules and
forms. </FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(b) Changes in Internal
Controls: In the quarter ended December 31, 2002, the Company did not make any
significant changes in, nor take any corrective actions regarding, its internal
controls or other factors that could significantly affect these controls. </FONT></P>

<p align=center><font size=2>61</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">

<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b>PART IV</b></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<a name="a015"></a>
<b>Item 15 - Exhibits, Financial Statement Schedules and Reports on Form 8-K</b></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b>(a)(1)   Financial Statements</b></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
See Financial Statements beginning on page 36 of this report.</FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<b>(a)(2)   Financial Statement Schedules</b></FONT></P>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>All financial statement
schedules are omitted because they are not applicable or not required or because
the information is included in the financial statements or notes thereto or is
not material. </FONT></P>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR>
<td valign=top width=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>(a)(3)</b></font></td>
<td width=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b><u>Exhibits</u></b></font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td valign=top><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.1</font></td>
<td><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Articles of Incorporation of Registrant (1)</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td valign=top><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.2</font></td>
<td><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Bylaws of Registrant (1)</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>

<tr>
<td valign=top><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.1</font></td>
<td><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Specimen common stock certificate of United Security Bancshares (1)</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>

<tr>
<td valign=top><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.1</font></td>
<td><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Executive Salary Continuation Agreement for Dennis Woods (1)</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr><tr>
<td valign=top><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.2</font></td>
<td><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Change in Control Agreement for Dennis Woods (1)</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td valign=top><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.3</font></td>
<td><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Executive Salary Continuation Agreement for Kenneth Donahue (1)</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr><tr>
<td valign=top><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.4</font></td>
<td><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Change in Control Agreement for Kenneth Donahue (1)</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr><tr>
<td valign=top><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.5</font></td>
<td><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Executive Salary Continuation Agreement for David Eytcheson (1)</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr><tr>
<td valign=top><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.6</font></td>
<td><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Change in Control Agreement for David Eytcheson (1)</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr><tr>
<td valign=top><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.7</font></td>
<td><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Executive Salary Continuation Agreement for Rhodlee Braa (1)</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td valign=top><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.8</font></td>
<td><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Change in Control Agreement for Rhodlee Braa (1)</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td valign=top><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.9</font></td>
<td><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Stock Option Agreement for Dennis Woods dated June 16, 1996 (1)</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td valign=top><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.10</font></td>
<td><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Stock Option Agreement for Dennis Woods dated July 21, 1997 (1)</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td valign=top><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.11</font></td>
<td><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Stock Option Agreement for Kenneth Donahue dated July 21, 1997 (1)</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td valign=top><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.12</font></td>
<td><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Stock Option Agreement for David Eytcheson dated July 21, 1997 (1)</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td valign=top><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.13</font></td>
<td><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Stock Option Agreement for Rhodlee Braa dated October 10, 1995 (1)</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td valign=top><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.14</font></td>
<td><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Stock Option Agreement for Rhodlee Braa dated July 21, 1997 (1)</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td valign=top><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.15</font></td>
<td><FONT FACE="Times New Roman, Times, Serif" SIZE=2>USB 1995 Stock Option Plan. Filed as Exhibit 10.15 to the Company's Registration
Statement on Form S-4 (file number 333-58256) filed April 4, 2001 and
incorporated herein by reference.</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr><tr>
<td valign=top><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.16</font></td>
<td><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Amendment to USB 1995 Stock Option Plan. Filed as Exhibit 99.2 to the Company's
Registration Statement on Form S-8 (file number 333-89362) filed May 28, 2002
and incorporated herein by reference.</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr><tr>
<td valign=top><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.17</font></td>
<td><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Amended and Restated Declaration of Trust for USB Capital Trust I&#151;dated
July 16, 2001. Filed as Exhibit 10.1 to the Company&#146;s Form 10-Q filed
August 14, 2001.</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr><tr>
<td valign=top><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.18</font></td>
<td><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Indenture Agreement between United Security Bancshares and Bank of New York for
Junior Subordinated Securities&#151;dated July 16, 2001. Filed as Exhibit 10.2
to the Company&#146;s Form 10-Q filed August 14, 2001.</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
</table>


<p align=center><font size=2>62</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">

<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR>
<td valign=top width=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11.1</font></td>
<td width=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Computation of earnings per share.</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>

<TR>
<td valign=top width=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</font></td>
<td width=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>See Note 16 to Financial Statements on page 58 of this report</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr><TR>
<td valign=top width=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>23.1</font></td>
<td width=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Consent of Moss Adams LLP</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<TR>
<td valign=top width=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>99.1</font></td>
<td width=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Certification of the Chief Executive Officer of United Security Bancshares
pursuant to Section 902 of the Sarbannes-Oxley Act of 2002.</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<TR>
<td valign=top width=6%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>99.2</font></td>
<td width=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Certification of the Chief Financial Officer of United Security Bancshares
pursuant to Section 902 of the Sarbannes-Oxley Act of 2002.</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
</TABLE>

<BR>

<FONT FACE="Times New Roman, Times, Serif" SIZE=2>
(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b>Reports on Form 8-K</b><BR><BR>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
None were filed during the fourth quarter of 2002.<BR><BR></font>

<BR><BR><BR><BR><BR><BR><BR>

<p align=center><font size=2>63</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">





<a name="a016"></a>
<p align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>Signatures</b></font></p><BR>


<p><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized, in Fresno, California, on the 25th day of March,
2003.</font></p><BR><BR>

<TABLE width=620 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR>
<td width=60%>&nbsp;</td>
<td align=center width=40%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>United Security Bancshares</b></font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<TR>
<td>&nbsp;</td>
<td align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2><u>/S/  Dennis R.Woods</u></font></td>
</tr>
<TR>
<td>&nbsp;</td>
<td align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dennis R.Woods</font></td>
</tr>
<TR>
<td>&nbsp;</td>
<td align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Chairman of the Board and</font></td>
</tr>
<TR>
<td>&nbsp;</td>
<td align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>President</font></td>
</tr>

<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<TR>
<td>&nbsp;</td>
<td align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2><u>/S/  Kenneth L. Donahue</u></font></td>
</tr>
<TR>
<td>&nbsp;</td>
<td align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Kenneth L. Donahue</font></td>
</tr>
<TR>
<td>&nbsp;</td>
<td align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Senior Vice President and</font></td>
</tr>
<TR>
<td>&nbsp;</td>
<td align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Chief Financial Officer</font></td>
</tr>
</TABLE><BR><BR><BR><BR><BR><BR><BR>

<p align=center><font size=2>64</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">


<p align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>Signatures</b></font></p><BR>


<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pursuant to the
requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the registrant and in the capacities
on the date indicated: </FONT></P><BR>

<TABLE width=620 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR>
<td align=right valign=top width=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Date:</font></td>
<td align=center valign=top width=30%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><u>&nbsp;&nbsp;&nbsp;3/25/2003&nbsp;&nbsp;&nbsp;</u></font></td>
<td align=center width=55%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><u>&nbsp;&nbsp;/s/ Robert G. Bitter&nbsp;&nbsp;</u><BR>Robert G. Bitter<BR>Director</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<TR>
<td align=right valign=top width=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Date:</font></td>
<td align=center valign=top width=30%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><u>&nbsp;&nbsp;&nbsp;3/25/2003&nbsp;&nbsp;&nbsp;</u></font></td>
<td align=center width=55%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><u>&nbsp;&nbsp;/s/ Stanley J. Cavalla&nbsp;&nbsp;</u><BR>Stanley J. Cavalla<BR>Director</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<TR>
<td align=right valign=top width=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Date:</font></td>
<td align=center valign=top width=30%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><u>&nbsp;&nbsp;&nbsp;3/25/2003&nbsp;&nbsp;&nbsp;</u></font></td>
<td align=center width=55%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><u>&nbsp;&nbsp;/s/ Tom Ellithorpe&nbsp;&nbsp;</u><BR>Tom Ellithorpe<BR>Director</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<TR>
<td align=right valign=top width=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Date:</font></td>
<td align=center valign=top width=30%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><u>&nbsp;&nbsp;&nbsp;3/25/2003&nbsp;&nbsp;&nbsp;</u></font></td>
<td align=center width=55%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><u>&nbsp;&nbsp;/s/ Ronnie D. Miller&nbsp;&nbsp;</u><BR>Ronnie D. Miller<BR>Director</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<TR>
<td align=right valign=top width=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Date:</font></td>
<td align=center valign=top width=30%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><u>&nbsp;&nbsp;&nbsp;3/25/2003&nbsp;&nbsp;&nbsp;</u></font></td>
<td align=center width=55%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><u>&nbsp;&nbsp;/s/ Walter Reinhard&nbsp;&nbsp;</u><BR>Walter Reinhard<BR>Director</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<TR>
<td align=right valign=top width=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Date:</font></td>
<td align=center valign=top width=30%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><u>&nbsp;&nbsp;&nbsp;3/25/2003&nbsp;&nbsp;&nbsp;</u></font></td>
<td align=center width=55%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><u>&nbsp;&nbsp;/s/ John Terzian&nbsp;&nbsp;</u><BR>John Terzian<BR>Director</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<TR>
<td align=right valign=top width=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Date:</font></td>
<td align=center valign=top width=30%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><u>&nbsp;&nbsp;&nbsp;3/25/2003&nbsp;&nbsp;&nbsp;</u></font></td>
<td align=center width=55%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><u>&nbsp;&nbsp;/s/ Bobbi Thomason&nbsp;&nbsp;</u><BR>Bobbi Thomason<BR>Director</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>

</table>

<p align=center><font size=2>65</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">

<a name="a017"></a>

<TABLE width=620 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<tr>
<td width=4%>&nbsp;</td>
<td width=4%>&nbsp;</td>
<td width=92%>&nbsp;</td>
</tr>
<tr>
<td colspan=3 align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>CERTIFICATION</b></font></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr><tr>
<td colspan=3 align=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>I, Dennis R. Woods, certify that:</font></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td valign=top><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.</font></td>
<td colspan=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>I have reviewed this annual report on Form 10-K of United Security Bancshares;</font></td>
<td>&nbsp;</td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td valign=top><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.</font></td>
<td colspan=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;</font></td>
<td>&nbsp;</td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td valign=top><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.</font></td>
<td colspan=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Based on my knowledge, the financial statements, and other financial information
included in this annual report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this annual report;</font></td>
<td>&nbsp;</td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td valign=top><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.</font></td>
<td colspan=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:</font></td>
<td>&nbsp;</td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td>&nbsp;</td>
<td valign=top><FONT FACE="Times New Roman, Times, Serif" SIZE=2>a)</font></td>
<td><FONT FACE="Times New Roman, Times, Serif" SIZE=2>designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td>&nbsp;</td>
<td valign=top><FONT FACE="Times New Roman, Times, Serif" SIZE=2>b)</font></td>
<td><FONT FACE="Times New Roman, Times, Serif" SIZE=2>evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
annual report (the &quot;Evaluation Date&quot;); and</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td>&nbsp;</td>
<td valign=top><FONT FACE="Times New Roman, Times, Serif" SIZE=2>c)</font></td>
<td><FONT FACE="Times New Roman, Times, Serif" SIZE=2>presented in this quarterly  report our  conclusions  about the  effectiveness
of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td valign=top><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.</font></td>
<td colspan=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):</font></td>
<td>&nbsp;</td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td>&nbsp;</td>
<td valign=top><FONT FACE="Times New Roman, Times, Serif" SIZE=2>a)</font></td>
<td><FONT FACE="Times New Roman, Times, Serif" SIZE=2>all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td>&nbsp;</td>
<td valign=top><FONT FACE="Times New Roman, Times, Serif" SIZE=2>b)</font></td>
<td><FONT FACE="Times New Roman, Times, Serif" SIZE=2>any fraud,  whether or not material,  that  involves management or other employees
 who have a  significant  role in the registrant's internal controls; and</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td valign=top><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.</font></td>
<td colspan=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.</font></td>
<td>&nbsp;</td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td>&nbsp;</td>
<td colspan=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Date:&nbsp;&nbsp;&nbsp;&nbsp;March 25, 2003</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>

<tr>
<td>&nbsp;</td>
<td colspan=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2><u>&nbsp;&nbsp;&nbsp;&nbsp;/S/ Dennis R. Woods&nbsp;&nbsp;&nbsp;&nbsp;</u></font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td colspan=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dennis R. Woods&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td colspan=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Chairman of the Board and&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td colspan=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;President</font></td>
</tr>
</table>

<BR><BR>

<p align=center><font size=2>66</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">




<TABLE width=620 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<tr>
<td width=4%>&nbsp;</td>
<td width=4%>&nbsp;</td>
<td width=92%>&nbsp;</td>
</tr>
<tr>
<td colspan=3 align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2><b>CERTIFICATION</b></font></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr><tr>
<td colspan=3 align=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>I, Kenneth L. Donahue, certify that:</font></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td valign=top><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.</font></td>
<td colspan=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>I have reviewed this annual report on Form 10-K of United Security Bancshares;</font></td>
<td>&nbsp;</td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td valign=top><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.</font></td>
<td colspan=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;</font></td>
<td>&nbsp;</td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td valign=top><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.</font></td>
<td colspan=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Based on my knowledge, the financial statements, and other financial information
included in this annual report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this annual report;</font></td>
<td>&nbsp;</td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td valign=top><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.</font></td>
<td colspan=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:</font></td>
<td>&nbsp;</td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td>&nbsp;</td>
<td valign=top><FONT FACE="Times New Roman, Times, Serif" SIZE=2>a)</font></td>
<td><FONT FACE="Times New Roman, Times, Serif" SIZE=2>designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td>&nbsp;</td>
<td valign=top><FONT FACE="Times New Roman, Times, Serif" SIZE=2>b)</font></td>
<td><FONT FACE="Times New Roman, Times, Serif" SIZE=2>evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
annual report (the &quot;Evaluation Date&quot;); and</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td>&nbsp;</td>
<td valign=top><FONT FACE="Times New Roman, Times, Serif" SIZE=2>c)</font></td>
<td><FONT FACE="Times New Roman, Times, Serif" SIZE=2>presented in this quarterly  report our  conclusions  about the  effectiveness
of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td valign=top><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.</font></td>
<td colspan=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):</font></td>
<td>&nbsp;</td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td>&nbsp;</td>
<td valign=top><FONT FACE="Times New Roman, Times, Serif" SIZE=2>a)</font></td>
<td><FONT FACE="Times New Roman, Times, Serif" SIZE=2>all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td>&nbsp;</td>
<td valign=top><FONT FACE="Times New Roman, Times, Serif" SIZE=2>b)</font></td>
<td><FONT FACE="Times New Roman, Times, Serif" SIZE=2>any fraud,  whether or not material,  that  involves management or other employees
 who have a  significant  role in the registrant's internal controls; and</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td valign=top><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.</font></td>
<td colspan=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.</font></td>
<td>&nbsp;</td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td>&nbsp;</td>
<td colspan=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Date:&nbsp;&nbsp;&nbsp;&nbsp;March 25, 2003</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>

<tr>
<td>&nbsp;</td>
<td colspan=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2><u>&nbsp;&nbsp;&nbsp;&nbsp;/S/ Kenneth L. Donahue&nbsp;&nbsp;&nbsp;&nbsp;</u></font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td colspan=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Kenneth L. Donahue&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td colspan=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Senior Vice President and&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
</tr>
<tr>
<td>&nbsp;</td>
<td colspan=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Chief Financial Officer</font></td>
</tr>
</table>

<BR><BR>

<p align=center><font size=2>67</font></p>
<HR  SIZE="3" COLOR="#CCEEFF" WIDTH="100%" ALIGN="CENTER">




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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>3
<FILENAME>exhibit23.htm
<DESCRIPTION>CONSENT - MOSS ADAMS
<TEXT>
<HTML>
<head>
<title>United Security Bancshares 10K December 31, 2002
</title>
</head>
<BODY>


<P align=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Exhibit 23.1</FONT></P>


<H2 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=3>Moss Adams LLP<BR>
Certified Public Accountants</FONT></H2>
<BR><BR>
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>INDEPENDENT
AUDITOR&#146;S CONSENT</FONT></H1>
<BR>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We consent to the
incorporation of our report dated January 8, 2003 incorporated by reference in
this Form 10-K into the previously filed registration statements on Form S-8 for
1995 Stock Option Plan (Registration Statement File No. 333-89362) and for the
401(k) Plan (Registration Statement File No. 333-10078). </FONT></P>
<BR><BR>

<H2 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>/s/ Moss Adams
LLP</FONT></H2>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Stockton, California<BR>
March 26, 2003</FONT></P>


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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.77Q1
<SEQUENCE>4
<FILENAME>a10k2002cert991.htm
<DESCRIPTION>99.1 - SEC 906 CERT CEO
<TEXT>
<HTML>
<head>
<title>906 certification for United Security Bancshares 10K December 31, 2002
</title>
</head>
<BODY>



<p align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=3><b>Section 906 Certification</b></font></p><BR>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
The certification set forth below is being submitted to the Securities and Exchange Commission
solely for the purpose of complying with Section 1350 of Chapter 63 of Title 18 of the United
States Code.</FONT></P>
<BR>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
March 31, 2003</FONT></P>
<BR>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
In connection with the Annual Report of United Security Bancshares on Form 10-K for the
period ending December 31, 2002 as filed with the Securities and Exchange Commission on the date hereof,
I, Dennis R. Woods, the Chief Executive Officer of United Security Bancshares certify:</FONT></P>
<BR>

<TABLE width=620 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<tr>
<td valign=top width=5%>1.</td>
<td width=95%>that this Annual Report fully complies
with the requirements of section 13(a) or 15(d) of the Securities Exchange Act
of 1934; and</td>
</tr>

<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>

<tr>
<td valign=top>2.</td>
<td>that information contained in this
Annual Report fairly presents, in all material respects, the financial
condition and results of operations of United Security Bancshares.</td>
</tr>
</table>
<BR><BR><BR>

<TABLE width=620 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<tr>
<td width=60%>&nbsp;</td>
<td align=center width=40%><b>&nbsp;</b></td>
</tr>
<TR>
<td>&nbsp;</td>
<td align=center><u>/S/  Dennis R. Woods</u></td>
</tr>
<TR>
<td>&nbsp;</td>
<td align=center>Dennis R. Woods</td>
</tr>
<TR>
<td>&nbsp;</td>
<td align=center>Chairman of the Board and</td>
</tr>
<TR>
<td>&nbsp;</td>
<td align=center>President</td>
</tr>
</TABLE><BR><BR>


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</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.77Q1
<SEQUENCE>5
<FILENAME>a10k2002cert992.htm
<DESCRIPTION>99.2 - 906 CERT CFO
<TEXT>
<HTML>
<head>
<title>906 certification for United Security Bancshares 10K December 31, 2002
</title>
</head>
<BODY>



<p align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=3><b>Section 906 Certification</b></font></p><BR>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
The certification set forth below is being submitted to the Securities and Exchange Commission
solely for the purpose of complying with Section 1350 of Chapter 63 of Title 18 of the United
States Code.</FONT></P>
<BR>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
March 31, 2003</FONT></P>
<BR>

<P><FONT FACE="Times New Roman, Times, Serif" SIZE=3>
In connection with the Annual Report of United Security Bancshares on Form 10-K for the
period ending December 31, 2002 as filed with the Securities and Exchange Commission on the date hereof,
I, Kenneth L. Donahue, the Chief Financial Officer of United Security Bancshares certifies:</FONT></P>
<BR>

<TABLE width=620 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<tr>
<td valign=top width=5%>1.</td>
<td width=95%>that this Annual Report fully complies
with the requirements of section 13(a) or 15(d) of the Securities Exchange Act
of 1934; and</td>
</tr>

<tr>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>

<tr>
<td valign=top>2.</td>
<td>that information contained in this
Annual Report fairly presents, in all material respects, the financial
condition and results of operations of United Security Bancshares.</td>
</tr>
</table>
<BR><BR><BR>

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<td width=60%>&nbsp;</td>
<td align=center width=40%><b>&nbsp;</b></td>
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<td>&nbsp;</td>
<td align=center><u>/S/  Kenneth L. Donahue</u></td>
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<td>&nbsp;</td>
<td align=center>Kenneth L. Donahue</td>
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<td>&nbsp;</td>
<td align=center>Senior Vice President and</td>
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<td>&nbsp;</td>
<td align=center>Chief Financial Officer</td>
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