Landmark National Bank prospectus

PROSPECTUS SUMMARY

THIS SUMMARY SUPPLIES PERTINENT HIGHLIGHTS OF THE MATERIAL CONTAINED IN THE BODY OF THIS PROSPECTUS. YOU ARE URGED TO READ THE ENTIRE PROSPECTUS CAREFULLY BEFORE MAKING A DECISION TO PURCHASE OUR STOCK. REFERENCES IN THIS PROSPECTUS TO "US" OR "WE" REFER TO LANDMARK NATIONAL BANK (IN ORGANIZATION).

THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. STATEMENTS THAT EVENTS OR OUTCOMES "WILL," ARE "EXPECTED," OR ARE "PLANNED" TO OCCUR, AND SIMILAR PREDICTIVE LANGUAGE, ARE SUCH FORWARD-LOOKING STATEMENTS. THESE STATEMENTS ARE BASED ON A NUMBER OF ASSUMPTIONS REGARDING OUR ABILITY TO RAISE ADEQUATE CAPITAL, OBTAIN APPROPRIATE REGULATORY APPROVALS, AND ESTABLISH OUR BUSINESS AS CONTEMPLATED, NONE OF WHICH MAY ACTUALLY OCCUR. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF THESE AND OTHER FACTORS, INCLUDING THOSE SET FORTH UNDER "RISK FACTORS" ON PAGE 3, AND ELSEWHERE IN THIS PROSPECTUS. WHETHER ANY FORWARD-LOOKING STATEMENTS WILL ULTIMATELY PROVE ACCURATE IS HIGHLY SPECULATIVE.

The Bank

Solana Beach is an affluent coastal city that is not currently the home of any community bank and has no community bank branches. Over the last several years, all of the community bank branches in Solana Beach and neighboring Del Mar and Cardiff-by-the-Sea, and most of those in adjacent areas, have been acquired by larger financial institutions. In fact, there are no community bank branches within a three-mile radius of our proposed office.

We believe that the lack of high-quality community banking services in Solana Beach, Del Mar, and Cardiff-by-the-Sea, and limited community banking services in other nearby areas, including Rancho Santa Fe, Encinitas, Carmel Valley and Torrey Hills, create a window of opportunity for our new bank. There are business and retail banking customers who want the personal service that a locally-headquartered bank can offer. We think we can attract and retain these customers and that a successful community bank can be built on providing the services they need.

Our initial efforts will focus on Solana Beach and adjacent communities. We have also identified La Jolla as an area in which we may be successful in raising deposits. After we open for business, we intend to seek a location in La Jolla for an office that would accept deposits, and might eventually become a full-service branch office. Assuming we find an appropriate location for the office, before we open a deposit-gathering office of this kind, we would need to request and obtain the approval or acquiescence of the Comptroller. We plan to make our request as soon as feasible after we are open for business, but we cannot assure you when or if we will be able to open a La Jolla office.

Our organizers are a diverse group of experienced business people with strong civic, professional and community ties who share a common vision and believe that their business and personal contacts will help us succeed. All of our executive officers are seasoned community banking veterans, most of whom have been involved in banking in coastal San Diego County for many years. Ronald J. Carlson, our Chairman, Chief Executive Officer and President, was formerly President and Chief Executive Officer of Scripps Bank, a successful community bank headquartered in La Jolla, California that was sold to a large financial institution in 2000. Ronald P. Bird, our Vice Chairman and Senior Executive Vice President, was formerly President and Chief Executive Officer of Bank of Southern California and has been a senior banker with community banks for more than 30 years.

We are being organized under federal law as a national banking association to engage in the general commercial and retail banking business. After we complete this offering (the "Offering") and receive regulatory approval, we will open for business in the Lomas Santa Fe shopping center, at 937 Lomas Santa Fe Drive, Suite A, Solana Beach, California 92075, telephone: (858) 509-2700. We will offer a wide range of deposit and loan services through our office, as well as through ATMs and by telephonic banking. Our deposits will be insured by the Federal Deposit Insurance Corporation (the "FDIC") up to the maximum legal limits thereof and the Bank will be a member of the Federal Reserve System.

We received preliminary approval for a national bank charter from the Office of the Comptroller of the Currency ("OCC" or "Comptroller") on February 26, 2002. The Bank received preliminary approval for deposit insurance from the FDIC on March 8, 2002. We believe the conditions of these approvals will be met during the ordinary course of business. Assuming that the Offering is successful and we obtain the required final regulatory approvals, we intend to open for business in July 2002.

The Offering

Class of Securities and Number of Shares Available in This Offering	Minimum of 1,000,000 and maximum of 1,200,000 shares of Common Stock, $5 par value (the "Common Stock").
Offering Price Per Share of Common Stock	$10 per share.
Minimum Subscription	500 Shares ($5,000).
Method of Subscription	You should deliver a completed and executed Application for Subscription for Common Stock (the "Application") with the full subscription price on or before July 5, 2002 (unless terminated earlier or extended), and we will determine whether we will accept the subscription (we reserve the right to reject a subscription, in whole or in part, in our sole discretion).
Anticipated Use of Proceeds	We will use the proceeds of the Offering to pay organizational expenses and for working capital.
Expiration Date	The Offering expires on July 5, 2002, unless we extend it or terminate earlier in our discretion.
Risk Factors	You should consider the material investment considerations described in the "Risk Factors" section beginning on page 3.

Corporate Information (See "Business of the Bank – Bank Organization" herein)

Company Name	Landmark National Bank (In Organization)
Proposed Business	Commercial Banking
Date of Organization	March 27, 2002
Anticipated Opening Date	July 15, 2002
Headquarters	937 Lomas Santa Fe Drive, Suite A Solana Beach, California 92075

RISK FACTORS

You should be aware of the risks and uncertainties associated with an investment in our Common Stock. We recommend that you review the entire Prospectus in detail and that, in your review, you pay particular attention to the following risks in connection with your investment:

RISKS RELATED TO THE CONDUCT OF OUR BUSINESS

We have no prior operating history and expect to suffer losses for some period of time.

We are newly organized and have no prior operating history. Our business is subject to the risks inherent in the establishment of any new business enterprise and the special risks of starting a new bank. We must persuade customers of other banks and financial institutions to move their banking relationships, control our costs and avoid significant loan losses. Even if we are successful in accomplishing all of these objectives, we expect to suffer losses for some period of time. Historically, new banks have lost money during the first year of operation and in some cases, for several years there after. No assurances can be given that we can succeed or as to the level of return, if any, which purchasers of our Common Stock will receive on their investment.

Loss of our senior executive officers could hurt our business severely.

We will be materially dependent on the performance of Ronald J. Carlson, who will be our Chairman, Chief Executive Officer and President, and Ronald P. Bird, who will be our Vice Chairman and Senior Executive Vice President. The loss of services of Mr. Carlson or Mr. Bird or their failure to adequately perform their management functions would make it difficult for us to grow our business, obtain and retain customers and set up and maintain appropriate internal controls of our operations. Our success will also be dependent upon our ability to attract and retain other qualified personnel. We do not know if we will be successful in recruiting the necessary personnel by our anticipated opening date or in retaining such personnel.

Competition with other financial institutions could adversely affect our business.

We face vigorous competition from banks and other financial institutions, including savings and loan associations, savings banks, finance companies and credit unions. A number of these banks and other financial institutions have substantially greater resources and lending limits, larger branch systems and a wider array of banking services than we will be able to offer. To a limited extent, we also compete with other providers of financial services, such as money market mutual funds, brokerage firms, consumer finance companies, insurance companies and governmental organizations which may offer more favorable financing than we can. Some of our nonbank competitors are not subject to the same extensive regulations that govern us. Increasingly, many of our competitors offer services to customers over the Internet and have sophisticated presences on the Internet, including strategic relationships with third parties that further increase the value they can provide to their customers. This competition may reduce or limit our margins on banking services, keep us from building or maintaining market share and adversely affect our results of operations and financial condition.

If our allowance for loan losses is not sufficient to cover actual loan losses we may not be able to generate any earnings.

Our loan customers may not repay their loans according to the terms of these loans, and the collateral securing the payment of these loans may be insufficient to assure repayment. We may experience significant loan losses which could have a material adverse effect on our operating results. Management will make various assumptions and judgments about the collectibility of our loan portfolio, including the creditworthiness of our borrowers and the value of the real estate and other assets serving as collateral for the repayment of many of our loans. We will maintain an allowance for loan losses in an attempt to cover any loan losses that may occur. In determining the size of the allowance, we will rely on an analysis of our loan portfolio based on historical loss experience, volume and types of loans, trends in classifications, volume and trends in delinquencies and non-accruals, national and local economic conditions and other pertinent information. If our assumptions are wrong, our current allowance may not be sufficient to cover future loan losses, and adjustments may be necessary to allow for different economic conditions or adverse developments in our loan portfolio. Material additions to our allowance would materially decrease our net income.

In addition, the OCC will periodically review our allowance for loan losses and may require us to increase our provision for loan losses or recognize further loan charge-offs, based on judgments different than those of our Management. Any increase in our allowance for loan losses or loan charge-offs as required by the OCC could have a negative effect on our operating results.

Local economic conditions may affect our ability to become profitable.

Substantially all of our deposits and assets are expected to be derived from operations in the local Solana Beach area and adjacent areas, such as Del Mar, Encinitas, Cardiff-by-the-Sea and Rancho Santa Fe. Consequently, our ability to become profitable may be negatively affected by factors that have a significant impact on general economic conditions in these areas. It is not clear whether current economic conditions in our markets are trending favorably or unfavorably at this time, but unemployment in San Diego County has recently been rising. Adverse changes in economic or other conditions in our geographic markets may impair our ability to collect loans and could otherwise negatively affect our financial condition and results of operations.

Our small business customers may have few resources to weather a downturn in the economy.

One of the primary focal points of our business development and marketing strategy is serving the banking and financial services needs of small and medium sized businesses and professionals. Small businesses generally have fewer financial resources in terms of capital or borrowing capacity than larger entities. If economic conditions are unfavorable in San Diego County, generally, the businesses of our lending clients and their ability to repay outstanding loans may be negatively affected. As a consequence, our results of operations and financial condition may be adversely affected.

Fluctuations in interest rates could prevent us from becoming profitable. We will realize income primarily from the difference between interest earned on loans and investments and the interest paid on deposits and borrowings.

Our ability to become profitable will be significantly dependent on our net interest income. We expect that we will periodically experience "gaps" in the interest rate sensitivities of our assets and liabilities, meaning that either our interest-bearing liabilities will be more sensitive to changes in market interest rates than our interest-earning assets, or vice versa. In either event, if market interest rates should move contrary to our position, this "gap" may work against us, and our earnings may be negatively affected. We are unable to predict fluctuations of market interest rates, which are affected by many factors, including the following:

- inflation;

- recession;

- a rise in unemployment;

- tightening money supply;

- policies of the Federal Reserve Board;

- deficit or surplus spending by the federal government; and

- domestic and international disorder and instability in domestic and foreign financial markets.

Although our asset/liability management strategy will be designed to control our risk from changes in market interest rates, we may not be able to prevent changes in interest rates from having a material adverse effect on our results of operations and financial condition.

Our business will be dependent on technology, and an inability to invest in technological improvements may adversely affect our results of operations and financial condition.

The financial services industry is undergoing rapid technological changes with frequent introductions of new technology-driven products and services. In addition to better serving customers, the effective use of technology increases efficiency and enables financial institutions to reduce costs. Our future success will depend in part upon our ability to create additional efficiencies in our operations, particularly in light of the increasing efficiency of our competitors. Many of our competitors have substantially greater resources to invest in technological improvements. Many of our competitors offer services over the Internet. We will start business without providing services over the Internet, but we plan to apply to the Comptroller for permission to do so as soon as feasible after we are open for business. There can be no assurance as to how quickly we will be able to offer services over the Internet or which services we will be able to offer because of the regulatory, technical and security issues that we will have to address. There can also be no assurance that our technological improvements will increase our operational efficiency or that we will be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to our customers.

Recent terrorist attacks in the United States have affected the stock market and the general economy.

On September 11, 2001, terrorists carried out attacks that destroyed the World Trade Center in New York and badly damaged the Pentagon outside Washington, D.C. In the wake of these attacks, stock prices broadly declined from the prices that existed prior to the attacks. In addition to affecting the stock markets, the terrorist attacks have affected, and may continue to affect, the national and international economies because of the uncertainties that exist as to how the United States and other countries will respond in the future and as to whether additional attacks will be carried out against the United States and its allies. These uncertainties contributed to a slowdown in economic activity in the United States in the fourth quarter of 2001. The weakened economy may have the effect of decreasing our loan demand and increasing our loan delinquencies.

We will be subject to substantial government regulation, which imposes significant costs on our operations.

We will be subject to extensive governmental supervision, regulation and control, and future government policy could adversely affect the banking industry and our operations. Recently, in response to the terrorist attacks of September 11, 2001, the President of the United States promulgated an executive order that requires banks, at their expense, to monitor their transactions with alleged terrorists and terrorist organizations. We cannot presently predict whether or in what form any future legislation and government policy will be adopted and there can be no assurance that it will not adversely affect the banking industry and our operations.

RISKS RELATED TO THE COMMON STOCK TO BE SOLD IN THIS OFFERING

We do not expect there to be an active market for our shares.

While there are no specific transfer restrictions on the Common Stock, we do not expect an active trading market to develop in the foreseeable future. Our Common Stock will not be listed on any exchange or on the National Association of Securities Dealers Automated Quotation System and we will not seek any such listing in the foreseeable future. We expect that we will have approximately 400 shareholders and that members of our Board of Directors and executive officers will own at least 23% of the outstanding Common Stock, including exercisable options. The concentration of stock ownership coupled with the lack of an active market will make it difficult to sell shares and, even if a sale may be effected, the price obtained may not reflect an appropriate valuation of our stock. Since the Common Stock may be an illiquid investment, you must be prepared to bear the economic risk of any investment in these securities for an indefinite period of time.

The Offering price has been set arbitrarily.

Since we have no operating history to help us set a fair market price, the interim Board of Directors arbitrarily set the Offering price of $10 per share based on the practices of other community banks in conducting their initial stock offerings. We have not received the advice of any independent investment-banking firm in setting this price.

We do not expect to pay any dividends to shareholders in our initial years of operation.

During the initial years of operation, we intend to follow a policy of retaining earnings, if any, for use in the development and expansion of our services and facilities. Consequently, we do not expect to pay dividends in our initial years of operation. Moreover, the approval of the Comptroller is required prior to the payment of dividends in certain circumstances.

The amount of our Common Stock owned by our directors and management, and other compensation arrangements with our officers, may impede potential takeovers.

At the conclusion of the Offering, we expect that the directors and executive officers will hold more than 25% of our outstanding Common Stock, if immediately exercisable stock options are included in the calculation. Each of our four senior executive officers is entitled to two years of continued salary in the event that employment is terminated in connection with a takeover, which would add significantly to the cost of acquiring us. In addition, all of the unvested stock options granted under our stock option plan will accelerate if we are acquired. As a result, our management has significant control over whether we are acquired or merged with another institution, and the acquisition of the Bank in the first few years of our operations is very unlikely due to the cost of paying our management and holders of stock options.

No professional underwriter is involved in the Offering.

Our shares will be sold directly by the organizers, interim directors and executive officers of the Bank, none of whom will receive any commissions or other remuneration for sales of shares. This Offering is not underwritten or being sold through the National Association of Securities Dealers, or any licensed broker-dealer. Thus, there has not been an independent review of matters covered in this Prospectus. You must rely solely on our organizers, interim directors and executive officers as to the accuracy of the information contained in this Prospectus.

It will be difficult for us to raise additional capital if we need to do so.

We do not plan to issue additional equity securities, but may need to do so in the future if additional capital is required. Our ability to raise capital through the sale of additional securities will depend primarily upon the financial condition of the Bank and the condition of financial markets generally and in our market area at the time of any such offering. Any such offering would have a dilutive effect on the interests of our shareholders in their per share earnings, if any, and their ownership of the Bank, and could have a dilutive effect on the book value of the shares outstanding before such offering. If additional capital is required, there can be no assurance that such capital would be available on terms satisfactory to us, if at all.

Our stock options will dilute the potential ownership and control by investors in this Offering.

We expect to grant stock options to purchase up to an additional 300,000 to 360,000 shares to our organizers, directors, executive officers and employees. The actual number will be equal to 30% of the shares issued in the Offering. Stock options issued to organizers for their service as organizers and to the initial executive officers will have exercise prices of $10 per share. The stock options available for issuance to others are expected to have exercise prices not less than the fair market value of the Common Stock at the date of issuance.

TERMS OF THE OFFERING

General

Landmark National Bank (In Organization) (the "Bank") is offering 1,000,000 to 1,200,000 shares of its Common Stock at a cash price of $10 per share for an aggregate subscription of $10,000,000 to $12,000,000. The Offering expires on July 5, 2002, subject to early termination or extension in the discretion of the Bank (the actual date on which the Offering ends is referred to as the "Expiration Date").

The Bank is offering these shares of Common Stock through its organizers (the "Organizers"), interim directors (the "Interim Directors") and executive officers. None of them will be compensated for sales in the Offering, but they may be reimbursed for any reasonable out-of-pocket expenses incurred in connection with the Offering, if any. We do not expect that any such expenses will be significant. The Bank will not compensate nor seek the assistance of any securities dealers, brokers or salespersons in connection with the Offering.

The Bank is not required to secure or accept subscriptions for the maximum number of shares being offered, and if subscriptions for 1,000,000 or more shares are received at any time, the Bank may, in its sole discretion, close this Offering by accepting all or a portion of such subscriptions, as long as it accepts subscriptions for at least 1,000,000 shares. IN DETERMINING WHICH SUBSCRIPTIONS TO ACCEPT, IN WHOLE OR IN PART, THE BANK MAY TAKE INTO ACCOUNT A SUBSCRIBER'S POTENTIAL TO DO BUSINESS WITH OR TO DIRECT CUSTOMERS TO THE BANK.

Subscription Procedure

To facilitate the subscription for shares of the Common Stock, an impound account (the "Impound Account") has been established at Pacific Coast Bankers' Bank, San Francisco, California (the "Impound Agent"). Subscription offers to purchase Common Stock can be made by completing and signing the enclosed Application form in triplicate and delivering all three copies thereof directly to the Impound Agent at the following address:

Landmark National Bank (In Organization)

c/o Pacific Coast Bankers' Bank

340 Pine Street, Suite 401

San Francisco, California 94104

Attention: Impound Account

IMPORTANT: THE FULL SUBSCRIPTION PRICE FOR THE SHARES SOUGHT TO BE PURCHASED MUST BE REMITTED WITH THE SUBSCRIPTION IN ORDER TO CONSTITUTE A VALID SUBSCRIPTION OFFER. THE SUBSCRIPTION PRICE CONSISTS OF THE NUMBER OF SHARES WHICH THE SUBSCRIBER SEEKS TO PURCHASE MULTIPLIED BY $10. THE SUBSCRIPTION PRICE MUST BE PAID IN UNITED STATES CURRENCY BY CHECK, BANK DRAFT, CASHIER'S CHECK OR MONEY ORDER PAYABLE TO "PACIFIC COAST BANKERS' BANK FOR LANDMARK NATIONAL BANK (IN ORGANIZATION), IMPOUND ACCOUNT" OR BY WIRE TRANSFER OF FUNDS TO THE IMPOUND ACCOUNT MAINTAINED BY AND AT THE OFFICES OF THE IMPOUND AGENT FOR THE PURPOSE OF ACCEPTING SUBSCRIPTIONS, ABA NO. 121042484, ATTENTION: IMPOUND ACCOUNT FBO ACCOUNT NUMBER 1001293 – LANDMARK NATIONAL BANK (IN ORGANIZATION). FAILURE TO INCLUDE THE SUBSCRIPTION AND THE FULL PURCHASE PRICE SHALL GIVE THE BANK THE RIGHT TO DISREGARD THE SUBSCRIPTION.

The subscription price will be deemed to have been received by the Impound Agent only upon (i) clearance of any uncertified check; (ii) receipt by the Impound Agent of any certified check, cashier's check or money order; or (iii) receipt of collected funds in the Impound Account designated above. If paying by uncertified personal check, please allow that funds paid thereby may take at least five (5) business days to clear. Accordingly, subscribers who wish to pay the subscription price by means of uncertified personal check are urged to make payment sufficiently in advance of the Expiration Date to ensure that their payment is received and clears by the Expiration Date and are urged to consider an alternative payment by means of certified or cashier's check, money order or wire transfer of funds.

The Bank may cancel the Offering in its entirety at any time. If the Bank cancels the Offering, does not open for business or returns funds to subscriber for any reason, all cash paid for shares will be returned to the subscriber, plus any profit incurred through the investment in United States Government securities. Any other costs and expenses, including any losses incurred through the investment in United States Government securities, will be borne by the Organizers. All appropriate refunds will be mailed no later than three weeks after expiration, close or cancellation of the Offering.

Expiration Date

The Bank will accept subscriptions until 5:00 p.m. on July 5, 2002, unless the Offering is fully subscribed prior to that date or the Bank closes the Offering before that date, and, in either event, the Offering may be closed without further notice. The expiration of the Offering may be extended without notice for two consecutive 60-day periods with the acquiescence of the OCC. Any such extension shall not affect the rights of those who have already subscribed. It is anticipated that the Bank will commence operation on or about July 15, 2002 or as soon as is practicable after the close of the Offering.

HANDLING OF STOCK SUBSCRIPTION FUNDS

Impound Account

Subscription funds will be directed by the Bank to an Impound Account with Pacific Coast Bankers' Bank, the Bank's subscription agent, located at 340 Pine Street, Suite 401, San Francisco, California 94104, until the cancellation or close of the Offering or until the Expiration Date (including extensions), whichever shall first occur. The funds in the Impound Account will be invested in securities of the United States Government. The subscription agent will hold all impound funds until the Comptroller provides a written statement that the funds may be released to the Bank.

Issuance of Stock

Certificates representing shares of Common Stock duly subscribed and paid for, including having been accepted by the Bank, will be issued as soon as practicable after the Bank receives its charter.

THE ISSUANCE OF COMMON STOCK BY THE BANK IS SUBJECT TO APPROVAL OF THE COMPTROLLER, AND THE BANK RESERVES THE RIGHT TO CANCEL SUBSCRIPTIONS AT THE DIRECTION OF THE COMPTROLLER UNTIL THE BANK RECEIVES ITS CHARTER.

USE OF PROCEEDS

Assuming the Bank opens for business on or about July 15, 2002, the Bank intends to use the $10,000,000 to $12,000,000 of gross proceeds for the general corporate purposes, including the payment of pre-opening capital expenditures and organizational costs, set forth below.

Organization, Issuance and Distribution Expenses

A total of approximately $811,200 will be applied to net organizational pre-opening expenses and Offering costs. Offering costs are projected to total $39,200 and include: legal fees of $15,000; printing costs of $7,500; postage costs of $2,000; advertising costs of $800; transfer agent fees of $3,300; accounting fees of $3,000; and impound agent fees of $7,600. All of the $811,200 in net estimated pre-opening and Offering costs will be initially paid from funds advanced by the Organizers.

The balance of Organizer funds will be expended on leasehold improvements, facility deposits, furniture and equipment. See "Management – Transactions with Directors and Officers." Total amounts include $417,400 of pre-opening expenses incurred from May 2000 to January 31, 2002, the date of the audited financial information included herewith; and $436,000 of estimated pre-opening expenses to be expended from February 1, 2002 to July 15, 2002, the anticipated day the Bank will open for business. See Financial Statements and notes thereto beginning at page F-1. After the Bank commences operations, subject to the approval of the Comptroller and the Bank's shareholders, the expenditures advanced by the Organizers will be repaid from the proceeds of the Offering. The Bank's Undivided Profits Account will simultaneously be augmented by any pre-opening income received from the investment of subscription funds in United States Government securities, estimated to be $37,100 if 1,000,000 shares of Common Stock are sold and $39,100 if 1,200,000 shares of Common Stock are sold.

The following table sets forth the Bank's Statement of Pre-Opening Expenses. The table and the information above contain estimates only. No assurance can be given that actual expenses, in total or by category, will not exceed the stated amounts.

Statement of Pre-Opening Expenses

	Actual through January 31, 2002	Estimated from February 1, 2002 to July 15, 2002	Total


Consulting Fees	$ 181,900	$ 0	$ 181,900
Occupancy Expense	122,200	116,900	239,100
OCC Application Fee	15,000	0	15,000
Legal and Professional Fees	75,800	16,100	91,900
Telephone and Utilities	5,000	3,500	8,500
Salaries and Wages	0	242,700	242,700
Accounting Fees	0	2,000	2,000
Initial Stock Offering Expenses	0	39,200	39,200
Other Operating Expenses	17,500	15,600	33,100
	417,400	436,000	853,400
Interest Income	(5,100)	(37,100)	(42,200)
	$412,300	$398,900	$811,200

Investments Upon the Commencement of Business

The balance of the proceeds of the Offering, estimated to be $9,188,800 if 1,000,000 shares of Common Stock are sold and $11,190,800 if 1,200,000 shares of Common Stock are sold, will be used by the Bank for the purposes of making loans and investments, paying operating expenses and furthering the general corporate purposes of the Bank. It is estimated that at the end of the first year of operation the Bank will have $25,245,000 in loans and $1,847,000 in cash and due from banks. During the first 12 months of operation, it is estimated that the Bank's total operating expenses will be $2,656,000. It is further estimated that $943,000 will be used for salaries and benefits, $449,000 remitted on interest expense on deposits, $406,000 for occupancy and equipment expenses, $257,000 as a provision for loan and lease losses, and $601,000 for other expenses of operation. See "Business of the Bank – Premises." These estimates are based on projections prepared by management of the Bank and there can be no assurance that they will prove accurate due to the factors set forth above in "Risk Factors" and other uncertainties inherent in the nature of the Bank's business and described elsewhere in this Prospectus.

BUSINESS OF THE BANK

Bank Organization

On September 21, 2001, the Bank filed an Application for Authority to Organize with the Comptroller and an Application for Insurance of Accounts with the FDIC. The Bank received preliminary approval to organize from the Comptroller on February 26, 2002 and preliminary approval for insurance of accounts from the FDIC on March 8, 2002. The Bank's Articles of Association and Organization Certificate were signed by the Organizers and filed with the Comptroller on March 27, 2002, thereby establishing the Bank's corporate existence. The Organizers have elected the Bank's Interim Directors and the interim directors have proceeded to adopt Bylaws, a form of stock certificate and a corporate seal. The Bank's Interim Directors and officers are engaged in completing the other tasks necessary to open the Bank, including raising the initial capital of the Bank through this Offering.

The Bank intends to commence operation on or about July 15, 2002 or as soon as reasonably practicable thereafter. Licensing of the Bank to commence operations is dependent upon a number of factors which may be beyond the control of the Bank, including the timely completion of this Offering and the hiring of employees. Any delay in the commencement of operation is likely to increase the estimated organization and pre-opening expenses. See "Use of Proceeds" and the Financial Statements herein.

Market Opportunity and Strategy

Our initial efforts will focus on Solana Beach and adjacent communities. We have also identified La Jolla as an area in which we may be successful in raising deposits. After we open for business, we intend to seek a location in La Jolla for an office that would accept deposits, and might eventually become a full-service branch office. Assuming we find an appropriate location for the office, before we open a deposit-gathering office of this kind, after we are open for business we would need to request and obtain the approval or acquiescence of the Comptroller. We plan to make our request as soon as feasible after we are open for business, but we cannot assure you when or if we will be able to open a La Jolla office.

Our Organizers are a diverse group of experienced business people with strong civic, professional and community ties who share a common vision and believe that their business and personal contacts will help us succeed. All of our executive officers are seasoned community banking veterans, most of whom have been involved in banking in coastal San Diego County for many years. Ronald J. Carlson, our Chairman, Chief Executive Officer and President, was formerly President and Chief Executive Office of Scripps Bank, a successful community bank headquartered in La Jolla, California that was sold to a large financial institution in 2000. Ronald P. Bird, our Vice Chairman and Senior Executive Vice President, was formerly President and Chief Executive Officer of Bank of Southern California and has been a senior banker with community banks for more than 30 years.

Objectives and Implementation

Our long-term objective is to become the outstanding and most profitable full service commercial bank serving the San Diego County coastal communities. We will seek to attain an asset size of more than $100 million by the end of the third year of our operations. We hope to be profitable on a consistent month to month basis by the end of the second year of our operations. The Bank will generate assets and deposits through broad-based marketing to businesses and residents in the targeted geographic area of Solana Beach and surrounding San Diego County communities.

The Bank will provide a broad line of financial products and services to its constituent market area. We will strive to deliver the highest quality community banking services to individuals, business and healthcare professionals, and to small and medium sized businesses. Each of the market segments served by the Bank will be provided with financial products and services tailored to their specific financial requirements.

Our senior management, as well as support staff and other managers, are experienced bankers from San Diego County. These bankers have observed the deterioration in local banking service that has occurred during the wave of bank mergers and consolidations in San Diego County. Each of them wants the opportunity to provide a level of community banking services, especially to companies and retail customers who were once customers of community banks and are now customers of the newly-merged, larger institutions, most of which are headquartered outside San Diego County and some of which are headquartered outside California.

Our managers and directors have contacts at many levels – business, civic, charitable and personal –with potential customers currently banking with our competitors. Many of these individuals and businesses were historically served by local community banks that have since become acquired by the large regional or national banks. We also believe that they are dissatisfied with the level and type of service that they are receiving from those larger institutions and that we can use our contacts with them to develop business for the Bank.

The key to the success of the Bank is the generation of quality lending relationships. Earnings potential, loan quality, and loss avoidance will be critical aspects of this asset generation. The Bank is expected to earn revenues generated from the difference between the yield on its loan portfolio and the cost of its deposits. The Bank may also sell some of the guaranteed portion of the SBA loans it generates in exchange for fee income.

The Bank will focus on a controlled product mix, consisting primarily of commercial and professional business lending, commercial real estate lending, and to a lesser extent consumer lending. The Bank will offer traditional lending products, including commercial and industrial loans, loans guaranteed by the Small Business Administration, semi-permanent loans on commercial real estate, loans to finance the construction of real estate projects, and mortgage and consumer loans, including installment loans, home equity loans and home equity lines of credit. In addition, the Bank will offer fee-based services to its customer base, including merchant banking support and cash management systems. We will also provide courier services to selected business customers, both through the use of an outside, bonded courier service and through in-house courier service for limited cash and non-cash documents and transactions.

We do not intend to engage in off-balance sheet financing transactions or to make loans to subsidiaries or partly-owned entities. Although the Bank may make loans to its directors and other affiliates, it will do so only on the approval of the disinterested members of the Bank's board of directors, on terms that would be offered to a non-affiliated third party and in compliance with applicable banking regulations.

Bank management will also concentrate efforts on the expansion of the Bank's deposit base. Deposit business development efforts will be two pronged. Local businesses will be targeted for both deposit and lending relationships, with loan compensating balances and complete cash management services generating business checking and term deposit accounts. The residential community, including the large proportion of retired residents in coastal San Diego County, is likely to be a source of term deposits, as well as transaction account balances.

Operational Expenses

The most significant expense in implementing our asset and liability marketing plan is the cost of the staff to develop and support the planned growth in lending and depository relationships. Bank management is expected to make recommendations for individuals to fill positions in operations, lending and staff support. To provide a high level of customer service, the Bank must commence operations with a level of staffing that anticipates growth over the first three years of operations.

The Bank will also have to make annual lease payments of approximately $180,000 for its space in the Lomas Santa Fe shopping center on Lomas Santa Fe Drive. See "– Premises" below.

Containment of non-interest costs will be a critical operating objective for the Bank's management. The Bank expects to incur significant costs for advertising, business development and data processing in its initial years, relative to its size.

Market Area and Competition

San Diego County Overview

As of 2000, the economy of San Diego County had a Gross Regional Product in excess of $100 billion and had entered its seventh consecutive year of expansion, following the recession that ended in the County in 1993. Compared with the national economies throughout the world, San Diego County would rank as the 37th largest, comparable in size to Israel, Indonesia or Venezuela. Within the United States, San Diego ranks as the 16th largest metropolitan area economy. San Diego County ranks second in total population among the 58 counties in California and is the fifth largest county nationwide.

Economic growth during the latter half of the 1990's has transformed the County's economy from one dependent upon military spending and defense industries to an economy well represented by the technologies of the "New Economy," specifically in the areas of communications, computer technology, and biotechnology. Historically, growth in San Diego County has been tied to its strong Navy/Marine presence and on Department of Defense contract funding flowing to private San Diego companies. The economic peak in San Diego's defense industry occurred during the 1980's, with more than 300,000 jobs created during the Reagan-Bush years of 1983 through 1990. The combined effects of the 1991 national recession, the Gulf War, the breakup of the Soviet Union and the subsequent end of the Cold War, and the downsizing of the U.S. military adversely impacted the San Diego economy.

By the mid-1990's, commercial endeavors in high technology ventures triggered the transformation of the San Diego economy. Fueled by technologies used in the defense-related industries and by the abundant and highly educated resident labor force, business formation and employment demand emerged in telecommunications, electronics, computers, software, and biotechnology firms. The American Electronics Association observes that technology firms employ 62 of every 1,000 private sector workers in San Diego. San Diego County comprises the third largest concentration of bioscience companies in the United States. The University of California, San Diego (UCSD) is a leading incubator of biotechnology companies, while the San Diego Supercomputer Center at UCSD spawned a number of software companies.

International trade has been an impetus for San Diego's economic recovery during the 1990's. Cross border trade with Mexico and NAFTA-related export production have helped to boost the local economy. Manufacturing on both sides of the U.S.–Mexico border has generated the establishment and growth of supply, distribution, service and design facilities in San Diego.

Despite cutbacks in defense spending, military operations in San Diego have remained a dynamic sector. San Diego is the Navy's principal location for West Coast operations. The County is the homeport for three nuclear-powered aircraft carriers. The reassignment of the Miramar Naval Air Station to the Marines has preserved the base as a major economic entity. Since 1997, the U. S. Space & Naval Warfare Systems Command has been relocated to San Diego, contributing to thousands of high-paying jobs and billions of dollars in contract work to local companies. San Diego has one of the few remaining shipyards on the West Coast capable of building and repairing large ships.

Tourism ranks behind the manufacturing and military sectors in San Diego County. Convention and visitor spending has remained high and stable, although this sector has recently slowed as a result of changing travel patterns after the terrorist attacks of September 11, 2001. The development of a new baseball park is stimulating building and businesses in downtown San Diego. The opening of Legoland in Carlsbad has fostered tourism in the northern reaches of the County.

Growth in the northern portion of the County has outstripped the gains in the south over recent years. The combined nine cities in the northern portion of the County grew by 21.6 percent compared with 14.6 percent in the southern section during the period from 1990 to 2000. The fastest growth over this ten-year period was recorded in the city of San Marcos, where population increased by 38.4 percent. Other sizable gains were recorded in Carlsbad, reflecting the city's expansion in new businesses and in recreation/tourist activities, and in Chula Vista, where employment opportunities related to the maquiladoras encouraged population growth.

The County's business establishments are overwhelmingly small-sized operations. Nearly 55 percent of the businesses surveyed in 1999 by the California Department of Finance report having fewer than five employees. There are only 46 businesses with more than 1,000 employees, representing only 0.07 percent of the 63,304 business establishments in the county. There are 58,141 firms or nearly 95 percent of the total number of businesses in San Diego County with fewer than 50 employees. In terms of industrial composition based upon the number of local firms, nearly 41 percent of the firms are involved in the service industry. Retail trade accounts for almost 30 percent of the firms in the County.

Competition in Local Market

The city of Solana Beach was chosen as the headquarters for the Bank due to the recent impressive growth in population and new business formation in the general area of Solana Beach and the absence of a community commercial bank in the city. There are no community banks with a branch in Solana Beach, Cardiff-by-the-Sea or in Del Mar. The only community banks serving the city of Encinitas are Southwest Community Bank and Capital Bank of North County. Rancho Santa Fe National Bank is headquartered in the community of Rancho Santa Fe. There are no other community banks with a branch in Rancho Santa Fe. Solana Beach was the headquarters of the successful Torrey Pines Bank, a $463 million commercial bank that was sold to Wells Fargo Bank in 1990.

The proposed branch for the Bank is within a five mile radius of the following coastal San Diego County cities: Cardiff-by-the-Sea, Encinitas, Rancho Santa Fe, and Del Mar. The more than 175,000 residents in the communities of Solana Beach, Del Mar, Encinitas, Rancho Santa Fe and the unincorporated communities in the zip code areas of 92121, 92127, 92129, and 92130 are served by 18 financial institutions, consisting of 10 commercial banks, 1 thrift and loan association, and 7 savings associations. Within this market area, there are 27 branches of commercial banks, 1 branch of a thrift and loan association, and 13 branches of savings associations.

In this combined marketplace, Bank of America has the largest deposit market share at 19.2 percent. Washington Mutual has the second largest share at 16.3 percent. Based upon June 30, 1999 data, commercial banks hold 66.6 percent of the area's deposits. Savings associations have 30.8 percent of the total deposits, and thrift and loans hold 2.7 percent of total deposits.

The Bank will compete, with respect to both loans and deposits, with all of these other financial institutions as well as with non-regulated finance companies. Many of these institutions have certain advantages over the Bank. These advantages include the ability to finance extensive advertising campaigns; to allocate investment assets to regions of highest yield and demand; to offer certain services the Bank will not directly offer, such as international banking and trust services; and, by virtue of greater total capitalization, to make larger loans without participating a portion thereof. In addition, other entities, both public and private, seeking to raise capital through the issuance and sale of debt or equity securities will also compete with the Bank for the acquisition of deposits.

A new and developing area of competition is the delivery of financial services over the Internet. We will start business without providing services over the Internet, but we plan to apply to the Comptroller for permission to do so as soon as feasible after we are open for business. There can be no assurance as to how quickly we will be able to offer services over the Internet or which services we will be able to offer because of the regulatory, technical and security issues that we will have to address.

Many financial institutions are offering their services nationally and internationally over the Internet. The most basic services include access by customers to account information and providing instructions to the financial service provider over the Internet. The next level of Internet service involves completion of loan and account application information on the Internet, which is then provided directly to the institution. In addition, Internet service providers have begun to offer competitive bidding for financial services, including loans and certificates of deposit over the Internet. Thus, we will be competing directly with Internet service providers that can offer broader services than the Bank; in some instances at more competitive rates and with certain potential convenience advantages the Bank cannot offer initially.

In order to compete with other financial institutions, the Bank intends to use, to the fullest extent possible, the flexibilities that a locally owned and operating community bank status will permit. This will include an emphasis on meeting the specialized banking needs of community businesses and individuals through personal contact by Bank officers, directors and employees, and by providing experienced management and staff. Relationships with primary and secondary correspondent banks and other service providers will be established in order to avail Bank customers of services the Bank does not provide directly.

Premises

The Bank's initial office facilities will be located at 937 Lomas Santa Fe Drive, Solana Beach, California 92075 ("Main Office"). The Bank has entered into a premises lease with Pacific Solana Beach Holdings, LP, as landlord, which commenced on September 1, 2001 and ends on August 31, 2011, renewable for two additional five-year periods thereafter at the Bank's option.

The leased premises are located within the Lomas Santa Fe Plaza, a commercial development which includes as its anchor tenants Vons, Ross Dress for Less, We-R Fabrics and Blockbuster Video. This location is a highly visible office conveniently situated for potential customers along the central coast of San Diego County. It is within 100 yards of the Lomas Santa Fe Drive exit from Interstate 5. This location is also on one of the main corridors between the coast and Rancho Santa Fe, which is both deposit-rich, and home to many successful business owners and professionals. The location is near the former headquarters of Torrey Pines Bank, a highly successful community bank that was sold to Wells Fargo Bank in 1990.

Rental amounts are as follows:

September 1, 2001 to August 31, 2003	$14,688.95 per month
September 1, 2003 to August 31, 2005	$15,423.40 per month
September 1, 2005 to August 31, 2007	$16,194.57 per month
September 1, 2007 to August 31, 2009	$17,004.30 per month
September 1, 2009 to August 31, 2011	$17,854.51 per month

The rental amounts above do not include triple net costs (maintenance, taxes, common area, etc.), which the Bank will be responsible for, or any utilities except water. At the Bank's option, the lease may be renewed for two additional five-year periods. Rent during the extension period will increase on the first day of each extension period to the "fair value" of the premises (calculated as specified in the lease).

The Main Office is located on 937 Lomas Santa Fe Drive, Solana Beach, California 92075, near the Lomas Santa Fe Drive exit from the I-5 freeway. The Bank's lease covers 5,543 net useable square feet. Virtually all interior leasehold improvements have to be completed, including installation of a safe, an ATM, a "Night Depository," interior walls, carpeting, window treatments and a teller line. Other than the cost of the lease itself, the Bank anticipates it will incur the following bank premises and equipment related expenses: first year of operation – $226,000; second year of operation – $247,000; and third year of operation – $264,000. These figures are estimates only. No assurances can be given that actual expenses will not exceed the stated amounts. In the opinion of Bank management, the leased premises are adequately covered by insurance.

Profitability

Typically, new banks are not profitable in the first year of operation, and in some cases are not profitable for several years, if at all. Although there can be no assurance that the Bank will become profitable, the Organizers believe the Bank's business plan should make the Bank consistently profitable on a monthly basis before the end of its second year of operation.

Asset Management

Management of the Bank will seek to invest the largest portion of the Bank's assets in loans of the type described above under "– Objectives and Implementation." It is our current intention that loans will generally be limited to an aggregate amount of less than 80% of deposits. The balance of the Bank's funds will be invested primarily in securities of the United States Government and its agencies or the State of California and its agencies and municipalities, and in other short-term money market instruments, including the sale of Federal funds to other banks. While the mix of such investments is not presently known, the Bank's investment policy will provide for a portfolio divided among securities purchased to meet one or more of the following goals: (1) maintenance of a strong liquidity base; (2) achievement of maximum yields commensurate with low risk and appropriate maturity; and (3) achievement of maximum tax benefits. In order to maximize yields, the Bank's investment policy will provide for investment in taxable securities only until such time as the Bank's profitability indicates a higher tax-effective yield in nontaxable securities.

Employees

The Bank will employ Ronald J. Carlson as Chairman, Chief Executive Officer and President, Ronald P. Bird as Vice Chairman and Senior Executive Vice President, M. Catherine Wright as Chief Financial Officer and Senior Vice President, and an executive currently with another bank as Chief Credit Officer and Executive Vice President. Messrs. Carlson and Bird will also serve as directors of the Bank. We expect that the Bank will employ approximately 12 persons at the time it commences operation and throughout the first year of operation.

SUPERVISION AND REGULATION

General

The following discussion of statutes and regulations affecting banks is only a summary and does not purport to be complete. This is qualified in its entirety by reference to such statutes and regulations. No assurance can be given that such statutes and regulations will not change in the future.

As a national banking association, the Bank will be a member of the Federal Reserve System and will be subject to regulation, supervision and examination by the Comptroller, and subject to applicable laws and regulations under federal banking laws. Deposits of the Bank will be insured up to the maximum limits (presently $100,000 per account) allowed by the FDIC. As a result of this deposit insurance function, the FDIC also has certain supervisory authority and powers over FDIC insured institutions. The Bank will also be subject to applicable provisions of California law if not in conflict with or preempted by federal legislation.

Various requirements and restrictions under federal and state laws will affect the operation of the Bank. Federal regulations address several areas including loans, investments, mergers and acquisitions, borrowings, dividends, and the number and locations of branch offices.

Impact of Monetary Policies

Banking is a business which depends on rate differentials. In general, the difference between the interest rate paid by the Bank on its deposits and its other borrowings and the interest rate earned by the Bank on loans, securities and other interest-earning assets comprises the major source of the Bank's earnings. These rates are highly sensitive to many factors which are beyond the control of the Bank and, accordingly, the earnings and growth of the Bank are subject to the influence of economic conditions generally, both domestic and foreign, including inflation, recession, and unemployment; and also to the influence of monetary and fiscal policies of the United States and its agencies, particularly the Federal Reserve Board. The Federal Reserve Board implements national monetary policy, such as seeking to curb inflation and combat recession, by its open-market dealings in United States government securities, by adjusting the required level of reserves for financial institutions subject to reserve requirements, by placing limitations upon savings and time deposit interest rates, and through adjustments to the discount rate applicable to borrowings by banks which are members of the Federal Reserve System. The actions of the Federal Reserve Board in these areas influence the growth of bank loans, investments, and deposits and also affect interest rates. The nature and timing of any future changes in such policies and their impact on the Bank cannot be predicted; however, the impact on the Bank's net interest margin, whether positive or negative, depends on the degree to which the Bank's interest-earning assets and interest-bearing liabilities are rate sensitive. 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 Bank's net income.

Recent Legislation

From time to time legislation is proposed or enacted which has the effect of increasing the cost of doing business and changing the competitive balance between banks and other financial and non-financial institutions. These laws have generally had the effect of altering competitive relationships existing among financial institutions, reducing the historical distinctions between the services offered by banks, savings and loan associations and other financial institutions, and increasing the cost of funds to banks and other depository institutions.

Certain of the potentially significant changes, which have been enacted in the past several years, are discussed below.

Financial Services Act of 1999. The Financial Services Act of 1999 ("FSA") was signed into law on November 12, 1999 and became effective on March 11, 2000. The FSA repeals provisions of the Glass-Steagall Act, which had prohibited commercial banks and securities firms from affiliating with each other and engaging in each other's businesses. Thus, many of the barriers prohibiting affiliations between commercial banks and securities firms have been eliminated.

The Bank Holding Company Act ("BHCA") is also amended by the FSA to allow new "financial holding companies" ("FHC") to offer banking, insurance, securities and other financial products to consumers. Specifically, the FSA amends section 4 of the BHCA in order to provide for a framework for the engagement in new financial activities. A bank holding company ("BHC") may elect to become a financial holding company if all its subsidiary depository institutions are well capitalized and well managed. If these requirements are met, a BHC may file a certification to that effect with the FRB and declare that it elects to become a FHC. After the certification and declaration is filed, the FHC may engage either de novo or through an acquisition in any activity that has been determined by the FRB to be financial in nature or incidental to such financial activity. BHCs may engage in financial activities without prior notice to the FRB if those activities qualify under a new list in section 4(k) of the BHCA. However, notice must be given to the FRB within 30 days after a FHC has commenced one or more of the financial activities.

Under the FSA, national banks (as well as FDIC-insured state banks, subject to various requirements) are permitted to engage through "financial subsidiaries" in certain financial activities permissible for affiliates of FHCs. However, to be able to engage in such activities the national bank must also be well capitalized and well managed and receive at least a "satisfactory" rating in its most recent Community Reinvestment Act examination. In addition, if the national bank ranks as one of the top 50 largest insured banks in the United States, it must have an issue of outstanding long-term debt rated in one of the 50 highest rating categories by an independent rating agency. If the national bank falls within the next group of 50, it must either meet the debt-rating test described above or satisfy a comparable test jointly agreed to by the FRB and the Treasury Department. No debt rating is required for any national bank, such as the Bank, not within the top 100 largest insured banks in the United States.

The Bank cannot be certain of the effect of the foregoing legislation on its business, although there is likely to be consolidation among financial services institutions and increased competition for the Bank.

Federal Deposit Insurance Corporation Improvement Act of 1991. The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") was signed into law on December 19, 1991. FDICIA recapitalized the FDIC's Bank Insurance Fund, granted broad authorization to the FDIC to increase deposit insurance premium assessments and to borrow from other sources, and continued the expansion of regulatory enforcement powers, along with many other significant changes.

FDICIA establishes five categories of capitalization: "well capitalized," "adequately capitalized," "undercapitalized," "significantly undercapitalized," and "critically undercapitalized." If a bank falls in the "undercapitalized," "significantly undercapitalized" or "critically undercapitalized" categories, it will be subject to significant enforcement actions by the Comptroller. See "–Enforcement Powers – Corrective Measures for Capital Deficiencies" below.

FDICIA also grants the regulatory agencies authority to prescribe standards relating to internal controls, credit underwriting, asset growth and compensation, among others, and requires the regulatory agencies to promulgate regulations prohibiting excessive compensation or fees. Many regulations have been adopted by the regulatory agencies to begin to implement these provisions and subsequent legislation (the Riegle Community Development Act, discussed below) gives the regulatory agencies the option of prescribing the safety and soundness standards as guidelines rather than regulations.

As previously noted, FDICIA places restrictions on activities authorized under state law. FDICIA generally restricts activities through subsidiaries to those permissible for national banks, thereby effectively eliminating real estate investment. Insurance activities are also limited, except to the extent permissible for national banks.

The Riegle-Neal Act. The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the "Riegle-Neal Act"), enacted on September 29, 1994, repealed the McFadden Act of 1927, which required states to decide whether national or state banks could enter their state, and allowed banks to open branches across state lines beginning on June 1, 1997. The Riegle-Neal Act also repealed the 1956 Douglas Amendment to the Bank Holding Company Act, which placed the same requirements on bank holding companies. The repeal of the Douglas Amendment now makes it possible for banks to buy out of-state banks in any state and convert them into interstate branches.

The Riegle-Neal Act provides that interstate branching and merging of existing banks is permitted beginning June 1, 1997, provided that the banks are at least "adequately capitalized" and demonstrate good management. Interstate mergers and branch acquisitions are permitted at an earlier time if a state chooses to enact a law allowing such activity. The states are also authorized to enact a law to permit interstate banks to branch de novo.

On September 28, 1995, the California Interstate Banking and Branching Act of 1995 ("CIBBA") was enacted and signed into law allowing early interstate branching in California. CIBBA authorizes out-of-state banks to enter California by the acquisition of or merger with a California bank that has been in existence for at least five years, unless the California bank is in danger of failing or in certain other emergency situations.

Administrative Actions

Following the September 11, 2001 terrorist attacks on the United States, President Bush signed an executive order on September 24, 2001 that has a number of consequences for the operations of commercial banks. First, it ordered the freezing of assets of persons on a list included in the order and each financial institution is required to monitor its deposits to determine whether they should be frozen. Second, it makes it illegal to do business with any of the persons or entities named on the list. This means that the Bank will be obligated to carefully screen its customers on an ongoing basis to assure that the Bank is permitted to do business with them. These types of administrative orders and similar regulations of bank regulators may increase the cost of operating the Bank and it is possible that further such orders will be made although we are not aware of any at this time.

Restrictions on Transactions With Insiders

Sections 23A and 23B of the Federal Reserve Act regulate transactions between insured institutions and their "affiliates" and transactions by the Bank that benefit affiliates. For these purposes, an "affiliate" is a company under common control with the institution. In general, Section 23A imposes limits on the amount of such transactions, and also requires certain levels of collateral for loans to affiliates. Section 23B of the Federal Reserve Act generally requires that certain transactions between a bank and its respective affiliates be on terms substantially the same, or at least as favorable to such bank, as those prevailing at the time for comparable transactions with or involving other nonaffiliated persons. At this time the Bank does not believe that it will have any "affiliates" when it opens for business.

The restrictions on loans to directors, executive officers, principal stockholders and their related interests (collectively referred to herein as "insiders") contained in the Federal Reserve Act and Regulation O promulgated thereunder apply to all federally insured institutions and their subsidiaries and holding companies. These restrictions include limits on loans to one borrower and conditions that must be met before such a loan can be made. There is also an aggregate limitation on all loans to insiders and their related interests. These loans cannot exceed the institution's total unimpaired capital and surplus, and the FDIC may determine that a lesser amount is appropriate. Insiders are subject to enforcement actions for knowingly accepting loans in violation of applicable restrictions.

Deposit Insurance Assessments

The FDIC is required to implement a risk-based assessment system in which the insurance premium relates to the probability that the deposit insurance fund will incur a loss and the FDIC sets semi-annual assessments in an amount necessary to increase the reserve ratio of the Bank Insurance Fund (the "BIF") to at least 1.25% of insured deposits or a higher percentage as determined to be justified by the FDIC.

Under the risk-based assessment system adopted by the FDIC, a BIF member institution such as the Bank is categorized into one of three capital categories ("well capitalized," "adequately capitalized," and "undercapitalized) and one of three categories based on supervisory evaluations by its primary federal regulator (in the Bank's case, the OCC). The three supervisory categories are: financially sound with only a few minor weaknesses (Group A), demonstrates weaknesses that could result in significant deterioration (Group B), and poses a substantial probability of loss (Group C). The capital ratios used by the FDIC to define well-capitalized, adequately capitalized and undercapitalized are the same as in the FDIC's prompt corrective action regulations, discussed below under "Enforcement Powers."

Risk-Based Capital Guidelines

The federal banking agencies have issued risk-based capital guidelines. The risk-based capital guidelines include a definition of capital and a framework for calculating risk weighted assets by assigning assets and off-balance sheet items to broad credit risk categories. A bank's risk-based capital ratio is calculated by dividing its qualifying total capital (the numerator of the ratio) by its risk weighted assets (the denominator of the ratio).

A bank's qualifying total capital will consist of two types of capital components: "core capital elements" (comprising Tier 1 capital) and "supplementary capital elements" (comprising Tier 2 capital). The Tier 1 component of a bank's qualifying capital must represent at least 50% of qualifying total capital and may consist of the following items that are defined as core capital elements: (i) common stockholders' equity; (ii) qualifying noncumulative perpetual preferred stock (including related surplus); and (iii) minority interest in the equity accounts of consolidated subsidiaries. The Tier 2 component of a bank's qualifying total capital may consist of the following items: (i) allowance for loan and lease losses (subject to limitations); (ii) perpetual preferred stock and related surplus (subject to conditions); (iii) hybrid capital instruments (as defined) and mandatory convertible debt securities; and (iv) term subordinated debt and intermediate-term preferred stock, including related surplus (subject to limitations).

Assets and credit equivalent amounts of off-balance sheet items are assigned to one of several broad risk categories, according to the obligor, or, if relevant, the guarantor or the nature of collateral. The aggregate dollar value of the amount in each category is then multiplied by the risk weight associated with that category. The resulting weighted values from each of the risk categories are added together, and this sum is the bank's total risk weighted assets that comprise the denominator of the risk-based capital ratio.

A two-step process determines risk weights for all off-balance sheet items. First, the "credit equivalent amount" of off-balance sheet items is determined, in most cases by multiplying the off-balance sheet item by a credit conversion factor. Second, the credit equivalent amount is treated like any balance sheet asset and generally is assigned to the appropriate risk category according to the obligor, or, if relevant, the guarantor or the nature of the collateral.

All banks are required to meet a minimum ratio of qualifying total capital to risk weighted assets of 8%, of which at least 4% should be in the form of Tier 1 capital.

The regulatory agencies have adopted leverage requirements that apply in addition to the risk-based capital requirements. Under these requirements, banks are required to maintain core capital of at least 3% of their assets (the "Leverage Ratio"). However, an institution may be required to maintain core capital of at least 4% or 5% or possibly higher, depending upon its activities, risks, rate of growth, and other factors deemed material by regulatory authorities.

Enforcement Powers

Federal regulatory agencies have broad and strong enforcement authority reaching a wider range of persons and entities. Some of these provisions include those which: (i) establish a broad category of persons subject to enforcement under the Federal Deposit Insurance Act; (ii) establish broad authority for the issuance of cease and desist orders and provide for the issuance of temporary cease and desist orders; (iii) provide for the suspension and removal of wrongdoers on an industry-wide basis; (iv) prohibit the participation of persons suspended or removed or convicted of a crime involving dishonesty or breach of trust from serving in another insured institution; (v) require regulatory approval of new directors and senior executive officers in certain cases; (vi) provide protection from retaliation against "whistleblowers" and establishes rewards for "whistleblowers" in certain enforcement actions resulting in the recovery of money; (vii) require the regulators to publicize all final enforcement orders; (viii) require each insured financial institution to provide its independent auditor with its most recent Report of Condition ("Call Report"); (ix) permit the imposition of significant penalties for failure to file accurate and timely Call Reports; and (x) provide for the assessment of significant civil money penalties and the imposition of civil and criminal forfeiture and other civil and criminal fines and penalties.

Crime Control Act of 1990. The Crime Control Act of 1990 further strengthened the authority of federal regulators to enforce capital requirements, increased civil and criminal penalties for financial fraud, and enacted provisions allowing the FDIC to regulate or prohibit certain forms of golden parachute benefits and indemnification payments to officers and directors of financial institutions.

Corrective Measures for Capital Deficiencies. The prompt corrective action regulations, which were promulgated to implement certain provisions of FDICIA, also effectively impose capital requirements on national banks, by subjecting banks with less capital to increasingly stringent supervisory actions. For purposes of the prompt corrective action regulations, a bank is "undercapitalized" if it has a total risk-based capital ratio of less than 8%; a Tier 1 risk-based capital ratio of less than 4%; or a leverage ratio of less than 4% (or less than 3% if the bank has received a composite rating of 1 in its most recent examination report and is not experiencing significant growth). A bank is "adequately capitalized" if it has a total risk-based capital ration of 8% or higher; a Tier 1 risk-based capital ratio of 4% or higher; a leverage ratio of 4% or higher (3% or higher if the bank was rated a composite 1 in its most recent examination report and is not experiencing significant growth); and does not meet the criteria for a "well capitalized" bank. A bank is "well capitalized" if it has a total risk-based capital ratio of 10% or higher; a Tier 1 risk-based capital ratio of 6% or higher; a leverage ratio of 5% or higher; and is not subject to any written requirement to meet and maintain any higher capital level(s). There is no assurance as to what capital ratios the Bank will be able to maintain.

Under the provisions of FDICIA and the prompt corrective action regulations, for example, an "undercapitalized" bank is subject to a limit on the interest it may pay on deposits. Also, an undercapitalized bank cannot make any capital distribution, including paying a dividend (with some exceptions), or pay any management fee (other than compensation to an individual in his or her capacity as an officer or employee of the bank). Such a bank also must submit a capital restoration plan to the Comptroller for approval, restrict total asset growth and obtain regulatory approval prior to making any acquisition, opening any new branch office or engaging in any new line of business. Additional broad regulatory authority is granted with respect to "significantly undercapitalized" banks, including forced mergers, ordering new elections for directors, forcing divestiture by its holding company, if any, requiring management changes, and prohibiting the payment of bonuses to senior management. Additional mandatory and discretionary regulatory actions apply to "significantly undercapitalized" and "critically undercapitalized" banks, the latter being a bank with capital at or less than 2%. The Comptroller may appoint a receiver or conservator for a "critically undercapitalized" bank after 90 days, even if the bank is still solvent. Failure of a bank to maintain the required capital could result in such a bank being declared insolvent and closed.

Community Reinvestment Act and Fair Lending Developments

The Bank is subject to certain fair lending requirements and reporting obligations involving home mortgage lending operations and Community Reinvestment Act ("CRA") activities. The CRA generally requires the federal banking agencies to evaluate the record of financial institutions in meeting the credit needs of their local communities, including low and moderate income neighborhoods. In addition to substantial penalties and corrective measures that may be required for a violation of certain fair lending laws, the federal banking agencies may take compliance with such laws and CRA into account when regulating and supervising other activities.

The federal banking agencies have adopted regulations which measure a bank's compliance with its CRA obligations on a performance-based evaluation system. This system bases CRA ratings on an institution's actual lending service and investment performance rather than the extent to which the institution conducts needs assessments, documents community outreach or complies with other procedural requirements. In March 1994, the Federal Interagency Task Force on Fair Lending issued a policy statement on discrimination in lending. The policy statement describes the three methods that federal agencies will use to prove discrimination: overt evidence of discrimination, evidence of disparate treatment and evidence of disparate impact.

Allowance For Loan and Lease Losses

On December 21, 1993, the OCC and the other federal financial institution regulatory agencies issued an interagency policy statement on the allowance for loan and lease losses (the "Policy Statement"). The Policy Statement requires that federally insured depository institutions maintain an allowance for loan and lease losses ("ALLL") adequate to absorb credit losses associated with the loan and lease portfolio, including all binding commitments to lend. In addition to the Policy Statement, the federal banking agencies, Securities and Exchange Commission, Internal Revenue Service, and accounting profession groups periodically provide guidance to the banking industry on ALLL methodology.

The Policy Statement defines an adequate ALLL for regulatory purposes as a level that in general is no less than the sum of the following items, given the appropriate facts and circumstances as of the evaluation date: (1) For loans and leases classified as substandard or doubtful, all credit losses over the remaining effective lives of those loans and leases; (2) For those loans and leases that are not classified, all estimated credit losses forecasted for the upcoming twelve months; and (3) Amounts for estimated losses from the transfer risk on international loans. Additionally, an adequate level of ALLL should reflect an additional margin in recognition of the imprecision inherent in most estimates of expected credit losses. The Policy Statement also provides guidance to examiners in evaluating the adequacy of the ALLL. Among other things, the Policy Statement directs examiners to check the reasonableness of ALLL methodology by comparing the reported ALLL against the sum of: 50% of the portfolio classified doubtful, 15% of the portfolio classified substandard, and for portions of the portfolio that have not been classified (including special mention loans), estimated credit losses for the upcoming twelve months given the facts and circumstances as of the evaluation date.

Other Aspects of Federal and State Law

The Bank is also subject to federal and state statutory and regulatory provisions covering, among other things, security procedures, currency and foreign transactions reporting, insider and affiliated party transactions, management interlocks, truth-in-lending, electronic funds transfers, funds availability, truth-in-savings, home mortgage disclosure, and equal credit opportunity. There are also a variety of federal statutes which restrict the acquisition of control of the Bank.

Important Accounting Policies

The following is a summary of the important accounting polices that will be adopted by the Bank:

Use of Estimates in the Preparation of Financial Statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America will require management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Due From Banks. Banking regulations require that banks maintain a percentage of their deposits as reserves in cash or on deposit with the Federal Reserve Bank. New banks, such as the Bank, are exempt from this requirement for the first year of operation.

Investment Securities. Bonds, notes and debentures for which the Bank has the positive intent and ability to hold to maturity will be reported at cost, adjusted for premiums and discounts that are recognized in interest income using the interest method over the period to maturity.

Investments not classified as trading securities nor as held to maturity securities will be classified as available-for-sale securities and recorded at fair value. Unrealized gains or losses on available-for-sale securities will be excluded from net income and reported as an amount net of taxes as a separate component of other comprehensive income included in shareholders’ equity. Premiums or discounts on held-to-maturity and available-for-sale securities will be amortized or accreted into income using the interest method. Realized gains or losses on sales of held-to-maturity or available-for-sale securities will be recorded using the specific identification method.

Loans. Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or payoff will be reported at their outstanding unpaid principal balances reduced by any charge-offs or specific valuation accounts and net of any deferred fees or costs on originated loans, or unamortized premiums or discounts on purchased loans. Loan origination fees and certain direct origination costs will be capitalized and recognized as an adjustment of the yield of the related loan.

Loans on which the accrual of interest has been discontinued will be designated as nonaccrual loans. The accrual of interest on loans will be discontinued when principal or interest is past due 90 days or when, in the opinion of management, there is reasonable doubt as to collectibility. When loans are placed on nonaccrual status, all interest previously accrued but not collected will be reversed against current period interest income. Income on nonaccrual loans will be subsequently recognized only to the extent that cash is received and the loan's principal balance is deemed collectible. Interest accruals will be resumed on such loans only when they are brought current with respect to interest and principal and when, in the judgment of management, the loans are estimated to be fully collectible as to all principal and interest.

The Bank will consider a loan to be impaired when it is probable that the Bank will be unable to collect all amounts due (principal and interest) according to the contractual terms of the loan agreement. Measurement of impairment will be based on the expected future cash flows of an impaired loan which will be discounted at the loan's effective interest rate, or measured by reference to an observable market value, if one exists, or the fair value of the collateral for a collateral-dependent loan. The Bank will select the measurement method on a loan-by-loan basis except that collateral-dependent loans for which foreclosure is probable will be measured at the fair value of the collateral. The Bank will recognize interest income on impaired loans based on its existing methods of recognizing interest income on nonaccrual loans.

Allowance for Loan Losses. The allowance for loan losses will be adjusted by charges to income and decreased by charge-offs (net of recoveries). Management's periodic evaluation of the adequacy of the allowance will be based on the Bank's known and inherent risks in the portfolio, adverse situations that may affect the borrower's ability to repay, the estimated value of any underlying collateral, and current economic conditions.

Premises and Equipment. Premises and equipment will be carried at cost less accumulated depreciation and amortization. Depreciation will be computed using the straight-line method over the estimated useful lives, which ranges from three to ten years for furniture and equipment and thirty years for premises. Expenditures for betterments or major repairs will be capitalized and those for ordinary repairs and maintenance will be charged to operations as incurred.

Income Taxes. Deferred tax assets and liabilities will be reflected at currently enacted income tax rates applicable to the period in which the deferred tax assets or liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities will be adjusted through the provision for income taxes.

Stock-Based Compensation. SFAS No. 123, "Accounting for Stock-Based Compensation," issued by the Financial Accounting Standards Board in October 1995, encourages, but does not require, companies to record compensation cost for stock-based employee compensation plans at fair value. The Bank plans to account for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations. Accordingly, compensation cost for stock options will be measured as the excess, if any, of the quoted market price of the Bank's stock at the date of the grant over the amount an employee must pay to acquire the stock.

MANAGEMENT

Organizers, Interim Directors and Officers

The following table sets forth information about the Organizers, Interim Directors and proposed officers of the Bank.

Name and Position with the Bank	Age	Business	Business Address	Shares to be owned (1)	% if minimum sold (2)	% if maximum sold (2)
David A. Altomare Organizer	51	Professional Sports Management	San Diego Sockers 9606 Aero Drive, Suite 1400 San Diego, CA 92123-1869	55,000 (3)	5.47%	4.56%
Kenneth S. Baumgartner Organizer, Director	57	Real Estate Development	McMillin Companies 2727 Hoover Avenue National City, CA 91950	19,000 (4)	1.88%	1.57%
Bruce B. Beaton Organizer	54	Real Estate Syndication	Real Estate Investments 7005 Surfboard Circle Carlsbad, CA 92009	11,500 (5)	1.14%	0.95%
Ronald P. Bird Director, Vice Chairman, Senior Executive Vice President	61	Banker	140 Marine View Avenue, Suite 202 Solana Beach, CA 92075	13,333 (6)	1.32%	1.10%
Ronald J. Carlson Director, Chairman, Chief Executive Officer, President	67	Banker	140 Marine View Avenue, Suite 202 Solana Beach, CA 92075	10,000 (7)	1.00%	0.83%
Chief Credit Officer (Name Confidential) Executive Vice President	50+	Banker	140 Marine View Avenue, Suite 202 Solana Beach, CA 92075	1,500 (7)	0.15%	0.13%
Gunter Enz Organizer	53	Internet Professional Information	LawInfo.com 1782 La Costa Meadows Drive, Suite 100 San Marcos, CA 92069	24,000 (8)	2.38%	1.99%
Barbara Freeman Organizer	52	Investor	3226 Curlew Street San Diego, CA 92103	22,500 (9)	2.23%	1.86%
Orrin L. Gabsch Organizer, Director	59	Pharmaceutical Consultant	6105 La Jolla Scenic Dr. S. La Jolla, CA 92037	40,000 (10)	3.98%	3.32%
David B. Goodell Organizer, Director	62	Real Estate Investments	Del Mar Investment Group, Inc. P.O. Box 609 Del Mar, CA 92014	29,000 (11)	2.87%	2.40%
Michael McCafferty Organizer	59	Enterpreneur/ Software Developer	P.O. Box 2270 Del Mar, CA 92014	22,500 (12)	2.23%	1.86%
Edward J. Osuna Organizer	62	Collection Services	Creditor Remedies, Inc. P.O. Box 4477 San Diego, CA 92164	19,000 (13)	1.88%	1.57%
Edward H. Richard Organizer	65	Investor	876 Armada Terrace San Diego, CA 92106	16,500 (14)	1.65%	1.37%
Marshal A. Scarr Organizer, Director	46	Business and Real Estate Lawyer	Peterson & Price, A.P.C. 530 "B" Street, Suite 1300 San Diego, CA 92101	18,500 (15)	1.84%	1.54%
James J. Schmid Organizer	54	Real Estate Investments	215 South Highway 101, Suite 200 Solana Beach, CA 92075	19,000 (13)	1.88%	1.57%
Larry G. Showley Organizer, Director	63	Insurance	Showley, Archambault & Alexander 3838 Camino Del Rio North, Suite 301 San Diego, CA 92108	29,000 (11)	2.87%	2.40%
Anne C. Taubman Organizer, Director	47	Retail Shopping Center Management	Seaport Village 849 West Harbor Drive, Suite D San Diego, CA 92101	29,000 (16)	2.87%	2.40%
Christopher Weil Organizer, Director	64	Investment Management	Christopher Weil & Company, Inc. 6150 Lusk Boulevard, Suite B-205 San Diego, CA 92121	29,000 (11)	2.87%	2.40%
Thomas W. Wermers Organizer, Director	38	Construction	Wermers 5080 Shoreham Place, Suite 105 San Diego, CA 92122	22,500 (17)	2.23%	1.86%
M. Catherine Wright Chief Financial Officer, Senior Vice President	51	Banker	140 Marine View Avenue, Suite 202 Solana Beach, CA 92075	7,667 (18)	0.76%	0.64%

All Directors & Executive Officers (12 in number)				248,500	23.03%	19.43%
All non-Director Organizers (8 in number)				190,000	17.89%	15.06%
All Directors, Executive Officers & Organizers (20 in number)				438,500	38.43%	32.70%

________________________

(1) The table includes all shares beneficially owned or expected to be beneficially owned upon completion of the formation of the Bank, whether directly or indirectly, individually or together with associates. Includes any shares owned or expected to be owned, whether jointly or as community property with a spouse, or any stock of which beneficial ownership may be acquired within 60 days of the date the Bank opens for business by the exercise of options. Unless otherwise specified in the footnotes that follow, the indicated person has or is expected to have sole voting power and sole investment power. The source of all information regarding proposed ownership of shares is written advice from the specified organizer, officer or director. The options are described in more detail in "Stock Plan – Special Provisions of Organizer Options" and "Stock Plan – Special Provisions of Initial Officer Options," below.

(2) Any securities not outstanding which are actually or expected to be subject to options, warrants, rights or conversion privileges which may be exercised within 60 days shall be deemed to be outstanding for the purpose of computing the percentage of outstanding securities of the class owned by such person but shall not be deemed to be outstanding for the purpose of computing the percentage of the class by any other person.

(3) Includes 50,000 shares to be purchased in the Offering and Organizer Options immediately exercisable for the purchase of 5,000 shares at a price of $10.00 per share.

(4) Includes 10,000 shares to be purchased in the Offering, for which voting and investment powers are shared, and Organizer Options immediately exercisable for the purchase of 9,000 shares at a price of $10.00 per share.

(5) Includes 2,500 shares to be purchased in the Offering and Organizer Options immediately exercisable for the purchase of 9,000 shares at a price of $10.00 per share.

(6) Includes 5,000 shares to be purchased in the Offering and Initial Officer Options immediately exercisable for the purchase of 8,333 shares at a price of $10.00 per share.

(7) Voting and investment powers are shared.

(8) Includes 15,000 shares to be purchased in the Offering, for which voting and investment powers are shared, and Organizer Options immediately exercisable for the purchase of 9,000 shares at a price of $10.00 per share.

(9) Includes 13,500 shares to be purchased in the Offering and Organizer Options immediately exercisable for the purchase of 9,000 shares at a price of $10.00 per share.

(10) Includes 35,000 shares to be purchased in the Offering and Organizer Options immediately exercisable for the purchase of 5,000 shares at a price of $10.00 per share. Voting and investment powers are shared. Ownership of 10,000 shares held in trust for children by spouse is disclaimed.

(11) Includes 20,000 shares to be purchased in the Offering, for which voting and investment powers are shared, and Organizer Options immediately exercisable for the purchase of 9,000 shares at a price of $10.00 per share.

(12) Includes 13,500 shares to be purchased in the Offering and Organizer Options immediately exercisable for the purchase of 9,000 shares at a price of $10.00 per share.

(13) Includes 10,000 shares to be purchased in the Offering and Organizer Options immediately exercisable for the purchase of 9,000 shares at a price of $10.00 per share.

(14) Includes 13,500 shares to be purchased in the Offering and Organizer Options immediately exercisable for the purchase of 3,000 shares at a price of $10.00 per share.

(15) Includes 13,500 shares to be purchased in the Offering, for which voting and investment powers are shared, and Organizer Options immediately exercisable for the purchase of 5,000 shares at a price of $10.00 per share.

(16) Includes 20,000 shares to be purchased in the Offering and Organizer Options immediately exercisable for the purchase of 9,000 shares at a price of $10.00 per share.

(17) Includes 13,500 shares to be purchased in the Offering, for which voting and investment powers are shared, and Organizer Options immediately exercisable for the purchase of 9,000 shares at a price of $10.00 per share.

(18) Includes 1,000 shares to be purchased in the Offering, for which voting and investment powers are shared, and Initial Officer Options immediately exercisable for the purchase of 6,667 shares at a price of $10.00 per share.

The Comptroller has the authority to disallow any of the above persons from assuming the designated positions and has not interposed any objections to those named. Directors of the Bank for its first year will be elected by the subscribers whose Subscriptions have been accepted, prior to the date the Bank opens for business. It is anticipated that those persons designated as "directors" above will be nominated by the interim Board of Directors to serve in such capacity.

Business Experience and Background of Organizers, Interim Directors and Officers

Directors

The eight outside directors of the Bank have been selected based upon their business backgrounds and influence within San Diego County. These individuals bring skills, expertise and varied backgrounds that will prove to be valuable resources for the Bank, especially during its early years of operations. The proposed directors are active with community and civic organizations and will provide Bank management with strategies for the Bank to reach the community. There are no family relationships between any of the directors or executive officers of the Bank.

The following section presents brief biographies of the ten Interim Directors of the Bank. All of the directors are also Organizers of the Bank, most of which have been active in its formation activities since May 2000, and in some cases since July 2001.

KENNETH S. BAUMGARTNER is President of McMillin Companies, a homebuilder located in National City, California. Mr. Baumgartner has been employed with McMillin Companies since 1979, beginning as a Project Manager and advancing through various management positions to his current rank. Mr. Baumgartner is involved in all aspects of McMillin Companies, including real estate development, acquisition, finance, construction and sale. Mr. Baumgartner has successfully guided project teams in the planning and development of numerous master planned communities, most notably the Rancho del Rey, Bonita Long Canyon and McMillin Lomas Verdes projects in Chula Vista, California. In total, he has been involved in the development of over 7,000 housing units.

Mr. Baumgartner has been an active Board Member of the South Bay Family YMCA since 1988. He was President of the Board of Directors and was instrumental in the planning and building of a $4.2 million YMCA facility. In 1999, he was awarded the YMCA of San Diego County's Golden Triangle Award for outstanding service. He is a member of the San Diego Chapter of Lambda Alpha, an honorary land economic organization. He has also served as a Board Member of the Lakeside National Little League and as a youth soccer coach.

Mr. Baumgartner has held a real estate brokers license from the State of California since 1976. He earned his Bachelor of Arts degree in Economics from Rutgers University and his Masters of City Planning from San Diego State University.

RONALD P. BIRD is a Director, Vice Chairman and Senior Executive Vice President of the Bank. Mr. Bird is the former Senior Vice President, Member of the Senior Management Committee, and Director of the Business Services Department for San Diego National Bank. Mr. Bird was a member of the Senior Managing, Asset Liability, and Marketing Committees at San Diego National Bank. Mr. Bird joined San Diego National Bank in 1993 and resigned from that bank in 2001 to organize the Bank. Mr. Bird has worked in commercial banking for over 40 years and has been a commercial banker in the San Diego area since 1967.

Prior to joining San Diego National Bank, Mr. Bird was the President, Chief Executive Officer, and Director of Bank of Southern California, a position that he held from 1985 until 1993. Prior to his position at Bank of Southern California, Mr. Bird was Executive Vice President and Director at La Jolla Bank and Trust Company, where he served the banking needs of the San Diego community from 1976 to 1985.

Mr. Bird began his banking career in 1958 with Valley National Bank in Tucson, Arizona. He moved to the San Diego area in 1967 and accepted the position of Vice President and Manager of the La Jolla office of San Diego Trust & Savings Bank, where he worked until joining La Jolla Bank and Trust Company in 1976.

Mr. Bird is active in local charity and community associations. He is Past Chairman of the Mainly Mozart Festival. He is Chairman of the Board for the Lincoln Club of San Diego. He is a past member of the Philanthropy Committee for San Diego Foundation. He is a member of the Board of Directors for Share-A-Vision. He is the 1999 and 2000 BRAVO Gala Co-Chairman and board member for San Diego Performing Arts. He is a past member of the Board for Bishop's School, California Banker's Association, Burnham Institute, and San Diego Opera. He is a Past President of the Board for the San Diego Museum of Photographic Arts and Episcopal Community Services. He is a past member of the Community Economic Development Executive Committee at San Diego State University. The Juvenile Diabetes Foundation named him 1998 Father of the Year.

Mr. Bird earned his Bachelor of Science degree in Accounting from the University of Arizona in Tucson.

RONALD J. CARLSON is a Director, Chairman, Chief Executive Officer and President of the Bank. Mr. Carlson is the former President and Chief Executive Officer of Scripps Bank of La Jolla. Upon the acquisition of Scripps Bank by U.S. Bank in October 2000, Mr. Carlson served as Vice Chairman of the San Diego Market until July 2001.

During a distinguished 41-year career, Mr. Carlson has been involved in banking in the San Diego area. He began his banking career in 1960 as a management trainee and installment loan officer at Bank of America. He was associated with California First Bank from 1961 to 1971, beginning as a Real Estate Loan Officer, progressing through management to Regional Vice President and Vice President/Manager of the Central Loan Department. From 1971 to 1973, Mr. Carlson was the Vice President and Manager of the San Diego Main Office of Bank of California. Mr. Carlson joined La Jolla Bank and Trust in 1973 as an Executive Vice President and Senior Loan Officer and in 1979 was promoted to the position of President and Chief Operating Officer. In 1981, Mr. Carlson joined Bank of Rancho Bernardo as its President and Chief Executive Officer. In 1983, he joined Scripps Bank, where he was the President and Chief Executive Officer for 18 years.

Mr. Carlson is currently a member of the Board of Regents for California Lutheran University and is Chairman of the Finance and Administration Committee of the university. He is a Director of the American Heart Association in San Diego, the San Diego Blood Bank, and the San Diego Maritime Museum and an Advisory Director of the Salvation Army. He is the past President of the San Diego Council of the Boy Scouts of America and the Kiwanis Club of La Jolla. He is a former director of Lutheran Social Services of Southern California, San Diego Hospice, Southwestern Yacht Club and San Diego Railroad Museum. He is the former Chairman of Volunteers of America, and the former Chairman of the Executive Committee for the Corporate Associates of the University of San Diego. He is the former Treasurer of the Northwest YMCA.

Mr. Carlson earned his Bachelor of Science degree in Finance from the University of Colorado. He served as a Lieutenant JG in the United States Navy from 1957 to 1960.

ORRIN L. GABSCH has been a pharmacist in California since 1968. He is the former owner of Burns Drugs in La Jolla, California, for which he currently provides consultation services. He is also Vice-President of the Board for Pacific Pharmacy Computers in Fresno, California.

Mr. Gabsch is active in the La Jolla community. He is currently the President of the La Jolla Town Council, is a member of the Land Use Committee and the Planned District Ordinance Committee and is past Chairman of the La Jolla Traffic and Transportation Board. He is a past member of Torrey Pines Christian Church, where he has served as Chairman of the deacons, Chairman of the elders, and both Chairman and Vice-Chairman of the congregation. He is currently a member of La Jolla Presbyterian Church.

Mr. Gabsch is a member and former Director of La Jolla Rotary Club. He is an advisory board member for the Stevens Cancer Center at Scripps Memorial Hospital, and a member of the Board of Directors for Pemarro, a residential facility for relapse-prone alcoholics and addicts. Mr. Gabsch is also a graduate of LEAD San Diego, Inc., a non-profit organization committed to the development of community leaders for the San Diego region.

DAVID B. GOODELL is President and sole owner of Del Mar Investment Group, Inc., a real estate investment company headquartered in Del Mar, California. Del Mar Investment Group was formed in 1988. Mr. Goodell established Del Mar Land Management in 1993 and is the President and sole shareholder of this real estate investment company.

Mr. Goodell is active in a number of professional, charitable and civic organizations. He is a board member and the immediate past chairman of the La Jolla Community Fund. He has been a member of the La Jolla Rotary Club since 1972 and is the immediate past President of the La Jolla Rotary. He is a former board member of the San Diego Oceans Foundation. He has been a volunteer with the Meals-on-Wheels program since 1990.

In October 1990, the mayor of San Diego appointed Mr. Goodell to the San Diego North City Future Urbanizing Area Advisory Committee, which was formed to identify key concerns regarding the future development of the North City area. Mr. Goodell was appointed by the San Diego City Council in 1991 to serve on the San Diego North City Future Urbanizing Area Framework Plan Committee, which has been charged to plan an area combining the best of "rustic, rural, picturesque development with the best of tightly arranged, fine grained modern villages, all tied together with an extensive open space, pedestrian and transportation system." As part of this process, Mr. Goodell served as Chairman of the Alliance of Property Owners, an association of owners of the 12,000-acre San Diego North City Future Urbanizing Area. He was also member of the San Dieguito River Valley Regional Open Space Park Citizen's Advisory Committee and of the committee advising the joint study by the City of San Diego and CalTrans on the alignment and financing of State Route 56 between Interstate 5 and Interstate 15.

Mr. Goodell attended San Diego State University from approximately 1960 to 1966.

MARSHAL A. SCARR is an attorney with the downtown San Diego law firm of Peterson and Price, A.P.C. Mr. Scarr has practiced law in the San Diego area since he was admitted to the California State Bar Association in 1983. Mr. Scarr has been with Peterson & Price since 1985. His legal practice concentrates on business and real property transactional matters.

Mr. Scarr is active in a number of community and professional organizations. Mr. Scarr is a board member of San Diego Hebrew Homes which has its principal residential facility, Seacrest, in Encinitas, California. From 1996 through 2001, he served on the board of directors for the Senior Community Centers of San Diego, a non-profit organization that provides low cost meals as well as social services to low-income seniors in the San Diego area. Mr. Scarr served on the Board and was Secretary to the San Diego chapter of CCIM, a commercial real estate organization, from 1999-2001.

Mr. Scarr is a past member of the National Panel of Arbitrators for the American Arbitration Association. He was pro-bono legal counsel from 1993 to 1995 for the Center for Medical Ethics and Mediation, a non-profit corporation that promotes mediation in medical ethics cases. He is a past co-Chairperson of the Environmental Law/Land Use Section and a past co-chair of the Real Property Law Section of the San Diego County Bar Association. He is a member of the Real Property and Business Law Sections of the California State Bar and a member of the Real Property, Land Use, Business, and Probate Law Sections of the San Diego County Bar Association. He is a past member of the Association of Business Trial Lawyers of America. He is a graduate of LEAD San Diego, Class of 1994. Mr. Scarr is a recent lecturer on the fundamentals of real estate closings in California and eviction and landlord/tenant law in California. He is currently active with his son's little league team and recently concluded managing his daughter's competitive soccer team.

Mr. Scarr earned his Bachelor of Arts in Political Science from San Diego State University. He received his Juris Doctorate from the University of Santa Clara, School of Law.

LARRY G. SHOWLEY is a Principal and Partner of Showley, Archambault & Alexander, a member firm of Partners Financial. The firm specializes in the sale of life and disability insurance and offers other financial and advisory services for the individual and corporate market. Mr. Showley entered the life insurance industry in 1964. During his 37-year career in the insurance industry, he has been active in a number of San Diego-based insurance organizations. Mr. Showley is Past President of San Diego Chapter of CLU & ChFC and the San Diego Estate Planning Council. He is the Past Vice President of the San Diego Association of Life Underwriters. Mr. Showley has been a member of the Million Dollar Round Table for 34 years. He is a current member of the Association for Advanced Life Underwriters, the National Association of Insurance and Financial Advisors and the Society of Financial Service Professionals. Mr. Showley is an Instructor of Continuing Education Courses for Certified Public Accountants and is an National Association of Securities Dealers Registered Representative.

Mr. Showley is past President of Kearny Mesa Rotary Club, Mercy 1000 Foundation of Mercy Hospital, and the San Diego Breakfast Club. He is a past board member of the Downtown YMCA. He was on the Planned Giving Committee for Foothill Methodist Church. He is currently on the Gift Planning Advisory Board for Scripps Hospital Foundation. As a current member of the San Diego Downtown Rotary Club, Mr. Showley is on the Music Committee, Golf Committee, and Club 33 Singers. He is a member of the California Seniors Golf Association and International Golfing Fellowship of Rotarians. He is currently on the Board of Directors of San Diego Country Club. He is also a member of De Anza Country Club.

Mr. Showley served in the U. S. Navy as a Supply Corp Officer from 1960-1963. He earned his Bachelor of Science degree in Finance from the University of Illinois. He became a Chartered Life Underwriter in 1967 and a Chartered Financial Consultant in 1984.

ANNE C. TAUBMAN is the President and Chairman of the Board for San Diego Seaport Village ("Seaport Village"), a retail center in downtown San Diego.

Seaport Village is a 14-acre waterfront shopping, dining and entertainment complex, located on the bay in downtown San Diego. The complex has over 90,000 square feet and 28 buildings. Tenants include four major restaurants, 57 specialty shops, and 13 quick-food eateries. Seaport Village is a Plank Owner of the Midway, a group that is instrumental in bringing the USS Midway to the Navy Pier in San Diego Bay. The Midway will be converted into a multi-dimensional, interactive, educational and entertainment complex. Seaport Village contributes in excess of $400,000 annually to support charitable causes, to provide free entertainment, and to promote goodwill within and for San Diego.

Prior to joining Seaport Village in 1990, Ms. Taubman was a Securities Principal and Investment Advisor with the NASD registered firm of Christopher Weil & Company, Inc. Ms. Taubman remains a member of the Investment Committee of Christopher Weil & Company, Inc.

Ms. Taubman is extremely active in the San Diego community. Ms. Taubman and her Seaport Village staff serve in various community organizations, including Convis, the Greater San Diego Chamber of Commerce, Port Tenant's Association, Traveler's Aid Society, Downtown Communications Council, Downtown San Diego Partnership, Hotel Motel Association, Concierge Association, St. Jude's Hospital, the Board of Directors of the San Diego Mainly Mozart Music Festival and the Board of Directors of Globe Theatres.

Ms. Taubman earned her Bachelor of Arts degree in Psychology from the University of Denver and her Masters of Arts degree in Clinical Psychology from the California School of Professional Psychology. Ms. Taubman has a Series 7 and 24 securities license and has earned the designation of Financial Planner.

CHRISTOPHER WEIL is the President and CEO of Christopher Weil & Company, Inc. (CWC), an NASD/SEC securities broker-dealer and registered investment advisor. CWC is primarily involved in providing investment management services to individual and institutional investors. Mr. Weil is also the President and CEO of Storage Managers, Inc. (SMI) and CWC Asset Advisors, Inc. (CWCAA), businesses which together currently manage twenty-three private equity investment funds.

Mr. Weil entered the investment business in 1963. In 1970 he formed his first securities firm and in 1972 he formed his first private equity management firm. In 1985 he sold both of these companies to affiliates of Storage Equities, Inc. (now Public Storage, Inc.), a New York Stock Exchange listed REIT. In 1989 Mr. Weil formed The Weil Company (CWC after a name change in 1996) and SMI to continue his portfolio management and private equity businesses. CWC AA was formed in 2000.

Through CWC, Mr. Weil is a member of the Securities Industry Association and the National Association of Real Estate Investment Trusts. He is the President of the Board of the San Diego Mainly Mozart Festival and a member of the University of California, San Diego Chancellor's Associates.

Mr. Weil earned a Bachelor of Arts degree from the University of California, Los Angeles.

THOMAS W. WERMERS is President and CEO of the Wermers Group of companies. Wermers has grown from a small homebuilder to one of the premier multi-family builders in the industry. Licensed in the nine western states and headquartered in San Diego, Wermers does reconstruction as well as apartments, senior assisted living facilities and extended stay hotels. Mr. Wermers has been involved with the Wermers’ Companies for nearly 20 years. He has worked on the construction and development of projects throughout California and the Southwest. He is experienced in all phases of construction, from the initial planning to the marketing of the completed project. Mr. Wermers has had the direct oversight of over 50 major construction projects consisting of over 10,000 units. Currently, Wermers’ Companies’ employ approximately 200 local employees.

Mr. Wermers is a member of the Young President’s Organization (YPO) Coastal San Diego Chapter. He was the organization’s Treasurer for two years. The Wermers’ Companies are members of the Building Industry Association (BIA), the California Association of Community Managers (CACM), the North County Apartment Manager’s Association (NCAMA), the South Coast Apartment Association (SCAA) and the Community Associations Institute (CAI). Mr. Wermers and his companies are very active in community support. From sponsoring local little league and soccer teams and building homes for the underprivileged to serving at Senior Community Centers and making donations to charities, Wermers and its employees are champions of many worthwhile causes in San Diego County.

Mr. Wermers attended San Diego State University.

Officers

Chief Financial Officer. M. CATHERINE WRIGHT is the Chief Financial Officer and a Senior Vice President of the Bank. Ms. Wright has more than 30 years of banking experience, including more than 20 years experience as a financial, accounting and treasury executive for community banks. Throughout her career, Ms. Wright has worked for numerous financial institutions in San Diego County. Most recently, Ms. Wright was Senior Vice President, Chief Financial Officer, and Corporate Secretary for Scripps Bank, until that bank's merger with US Bank in November 2000. At Scripps Bank, Ms. Wright was responsible for internal and external financial reporting for the bank and its holding company, the budget process, the asset and liability management function and general ledger management. She was a member of the Executive Officer, Information Technology Steering, and Board ALCO Committees. She chaired the Management ALCO, 401K and ESOP, and Profitability Committees.

Prior to joining Scripps Bank, Ms. Wright was the Senior Vice President and Cashier at First National Bank in San Diego. That bank grew from $150 million when she joined in 1987 to $600 million by 1996. In 1993, she was named a Senior Vice President and managed the treasury function, interest rate risk, investments, information systems, electronic banking and Fedline operations. She was instrumental in the bank's data processing conversion and participated in the out-sourcing task force.

From 1978 to 1987, Ms. Wright was with Bank of Commerce, also in San Diego. She began with Bank of Commerce as a lending officer and transferred into the administrative departments to manage the accounting and personnel departments. She was responsible for non-lending regulatory compliance, liquidity and GAP/interest rate risk, operations administration, and system security. Ms. Wright began her banking career in 1969 with Bank of America in San Diego, where she held positions in operations and lending.

Ms. Wright earned a Bachelor of Science degree in Accountancy from National University. She completed the American Bankers Association National School of Bank Investment and Financial Management. She graduated from the Pacific Coast Banking School and took the American Institute of Banking "Bank Sim" course. She is Vice President for the San Diego County Group of Financial Women International.

Chief Credit Officer. The name of the proposed Chief Credit Officer (CCO) must remain confidential at this time. The proposed CCO has had extensive experience and responsibility for commercial loan and real estate loan portfolios, including positions with two community banks in San Diego County. In these positions, the proposed CCO has been responsible for revenue generation, expense control and asset quality, including the monitoring of loan portfolios for upgrades and downgrades. Other banking industry experience includes proper structure, pricing and yield of the loan portfolio as well as memberships in Executive and Loan Committees.

Organizers

Although their contributions to the success of the Bank after formation will be informal, the Organizers who are not continuing as directors of the Bank have made substantial financial and organizational contributions to the Bank. Many of them have been involved in the formation of the Bank since May 2000. Because of their significant shareholdings in the Bank, we hope that they will be significant sources of business for the Bank in the future.

DAVID A. ALTOMARE

Mr. Altomare has been in the publishing business since 1980 when he founded the San Diego Auto Trader, a venture which has since branched into 13 publications with over 1,400 pages of print each week. Mr. Altomare's company, Trader Publications, currently employs 275 workers. In 1996, Mr. Altomare expanded internationally and began an Auto Trader magazine in Hungary. In 2000, Trader Publications was sold to Trader Publishing Company, a Virginia company, which is the owner of nearly all of the Auto Trader magazines across the country. In 2001, Mr. Altomare brought the internationally successful Auto Trader publication to Mexico. The first publication, Baja Auto Trader, is based in Tijuana, Baja California, with the intent to expand throughout the country.

In 2000, set free of his responsibilities to the San Diego Auto Trader and with time on his hands, Mr. Altomare was able to follow his long time dream of owning the San Diego Sockers. He is currently the Chairman of the Sockers as well. The Sockers returned to the field in July 2001 as part of the World Indoor Soccer League (WISL). After the end of a very successful season, the Sockers joined the Major Indoor Soccer League (MISL).

The Auto Trader has sponsored many adult and youth soccer teams, clubs, camps, and individual players. The Auto Trader was the primary sponsor of Mesa Soccer's annual Recreational All Star tournament for years, a sponsor of the International Friendship Soccer League, and a sponsor of the J.J. and Laura Herron Foundation. Mr. Altomare has been the long time sponsor of an adult women's team, the Auto Trader Women's Select team, now known as the WFC, which plays in the Women's Premier Soccer League (WPSL). The WFC team has won many regional and national championships. Mr. Altomare’s interest in soccer goes back to the 1980’s when he coached his then seven-year old son's team.

Mr. Altomare continues to support various youth and adult soccer programs along with other organizations, including MADD, United Way, and Voices for Children.

BRUCE B. BEATON

Mr. Beaton has been in real estate investment business for 29 years. He specializes in forming real estate partnerships that acquire income producing industrial and retail properties. Mr. Beaton has been involved in over 55 of these types of partnerships and generally acts as the general or managing partner. He has been active in the mapping and planning of numerous projects in San Diego County's Carmel Valley and continues to be active in the real estate investment community. From 1987 to 1995, Mr. Beaton served on the Carmel Valley Community Planning Board as one of two investor representatives.

Mr. Beaton coached LaCrosse at Earl Warren Junior High School from 2000 through 2001. He spent 6 years in the army reserve, ending in 1976. Mr. Beaton earned a Bachelor of Arts degree in Business Administration from Colorado College in 1969.

GUNTER ENZ

Mr. Enz, a resident of Encinitas, California, is the Founder and President of Lawinfo.com of San Marcos, California. Lawinfo.com is an Internet marketing company targeted to the legal industry and recognized as an Experienced Attorney's Referral Service, Inc. by the California State Bar Association certified referral service. Lawinfo.com was formed in 1989 and provides worldwide web access to legal information services for attorneys, legal support professionals, and the general public. The web service provides website, domain hosting and directory listings for legal professionals, including attorneys, trial consultants, expert witnesses, court reporters, process services, investigators, and other legal service providers. Lawinfo.com consistently has been named a top 500 website by ZD Net Inter@active Weekly.

Mr. Enz began his professional career in 1974 as the Founder and President of Enz Advertising of Vienna, Austria. This advertising and marketing agency focused on the Austrian hospitality industry. Mr. Enz sold this company in 1978 and moved to the United States. From 1978 to 1995, Mr. Enz was a Partner in Dalen, Enz and Associates of San Diego. Dalen, Enz was a residential and commercial development company. Over 17 years of operations the company funded, developed and sold well over $100 million worth of residential and commercial properties. From 1985 to 1991, Mr. Enz was also the Chief Executive Officer of Stratford Communities, Inc., a residential real estate development company based in San Diego. Lawinfo.com, which was formed in 1989, has been the full-time occupation for Mr. Enz since 1994.

Mr. Enz earned a degree in pre-medical studies from the University of Vienna.

BARBARA FREEMAN

Ms. Freeman has been an active investor in a number of commercial ventures, including start-up companies, in California since 1989. She is also active in a number of civic and charitable organizations in San Diego. She has served on the Board of the Children's Museum of San Diego and the San Diego Museum of Photographic Arts. Ms. Freeman has been involved with and supported many local organizations, including the San Diego Jewish Film Festival, the Lambs Playhouse Educational Outreach, S.T.R.I.V.E. and the Doors of Faith Orphanage. Ms. Freeman is a Founding Member of the San Diego Community Foundation, Women's Division.

Ms. Freeman earned a Bachelor of Arts degree from the University of California, Irvine and a Masters of Arts in Marriage, Family and Child Therapy from the Phillips Graduate Institution of Los Angeles, California.

MICHAEL McCAFFERTY

Mr. McCafferty has been a businessperson in the San Diego area since 1978. He founded and has owned three San Diego companies that specialized in software development and communications. He was the inventor, owner and President of Remote Control International, which developed the software database program TeleMagic. Remote Control International was named to the Inc. 500 list of the fastest growing privately held U.S. companies in 1990 and 1991. The TeleMagic product was sold to Sage Group of Dallas, Texas in 1992. Mr. McCafferty retired after selling his company in 1992.

Mr. McCafferty was the founder and CEO of Consumers' Computer Corporation of America, which was headquartered in San Diego. This startup company offered electronic yellow page services by using automated voice response to touch-tone telephone requests, a 24/7 service which predated the World Wide Web by ten years.

Prior to coming to the San Diego area in 1978, Mr. McCafferty was a sales representative and systems engineer for IBM Corporation in Hagerstown, Maryland. He was also President and CEO of Eastern Data Processing, a payroll processing service in Philadelphia, Pennsylvania and Executive Vice President in charge of Operations for Robert F. White and Company, a large payroll service company in Chicago, Illinois.

Since retiring in 1992, Mr. McCafferty has been involved in a number of charity and civic activities, as well as flying a vintage bi-plane. He is a board member of the Santa Margarita YMCA in Oceanside, California. He is a consultant and board member to a non-profit organization that provides free consulting services to small businesses in the San Diego area. He is the founder of the McCafferty Family Scholarship Funds at LaSalle College High School of Philadelphia and at Mount Saint Mary's College in Emmetsburg, Maryland. He is also a contributor to the Rutgers University Spinal Cord Injury Research project.

Mr. McCafferty earned a Bachelor of Science degree in Accounting from Mount Saint Mary's College of Emmetsburg, Maryland. He served in the West Virginia Air National Guard from 1965 to 1971 and in the Pennsylvania Air National Guard from 1970 to 1971.

EDWARD J. OSUNA

Mr. Osuna is the sole owner of three San Diego-based collection agencies. He is President and Chief Executive Officer of Brush Collections, Inc., of which he has been the sole owner since 1972, and of Creditor Remedies, Inc., which he purchased in 1998. He is Vice President of World Trotter Collection Agency, which he purchased in 1996. The companies owned by Mr. Osuna have most of San Diego's major commercial banks as their clients and specialize in the high volume collection of delinquent consumer credit.

Mr. Osuna began his career in 1959 by working in the collection industry with Arganbright & Wage Collection Agency. In 1965 he joined Brush Collections with the offer of a partnership and a ten-year buyout agreement. Mr. Osuna became a founding director of Point Loma Savings and Loan Association in 1979. Point Loma was later converted to a commercial bank, Bank of Southern California, which then merged with First National Bank in 1996. Mr. Osuna served on the bank's board of directors from 1979 to 1996. He served on the bank's Loan Committee for ten years, including five years as Chairman of the Loan Committee. He also served as Chairman of the bank's Audit Committee for one year.

Mr. Osuna has been a member of the Consumer Credit Counselors ("CCC") since 1986. CCC is a non-profit national Organization dedicated to assisting consumers in the working out of their financial problems. The program works with the consumer and the creditor to formulate a viable repayment program. CCC provides educational programs in proper money and credit management as well as financial literacy programs. Mr. Osuna has been on the Board of Trustees for CCC since 1996 and has held the offices of Secretary, Treasurer, Vice Chairman and Chairman. He is currently the Chairman of the By-Laws Committee for CCC.

Mr. Osuna was active in the Fletcher League Little League from 1973 to 1983, holding a number of director positions with the Little League. Mr. Osuna joined the United States Marine Corp in 1958, serving six months of active duty and six years of active reserve. He earned an Honorable Discharge in 1964.

EDWARD H. RICHARD

Mr. Richard has been active in industry for over 40 years, owing and operating several successful manufacturing companies. He was the founder of Magnetics International, Inc., which he built from several purchased divisions operating at a loss, took public and turned into a highly profitable company, selling his equity interest in 1986. From 1967 through 1996 he was the principal owner and CEO of David Round & Son, Inc., a well-known manufacturer of materials handling equipment. Mr. Richard currently owns and operates Round Realty, Inc., a real estate investment company. He also performs management consulting focused on helping troubled companies turn themselves around.

Mr. Richard is currently President and Trustee of the Edward H. Richard Foundation and Vice President and Trustee of the Henry & Ida Richard Foundation, two charitable foundations which support a large number of charitable endeavors. He is a member of the Board of Trustees, Treasurer, Chairperson of the Finance and Audit Committees, and a member of the Nominating, Executive and Long Range Planning Committees for the La Jolla Playhouse. He served as a member of the Artistic Director Search Committee and Contract Negotiation Committee for both the Artistic and the Managing Directors of the La Jolla Playhouse. Mr. Richard is Chairperson of the Board, immediate past President, Finance Committee Chair and Nominating Committee Chair of the San Diego Mainly Mozart Music Festival. He is a member of the Finance Committee of the San Diego Museum of Art and chairs a working group and is a committee member for the San Diego Foundation.

Mr. Richard's past affiliations include acting as a founder and Chairman of the Council of Smaller Enterprise (COSE), Cleveland, Ohio, now the largest regional small business group in the United States, as Chairman of the Federal Citizens Committee on Paper Work Reduction, as a Member of the United States Treasury Secretary's Small Business Advisory Committee, as a Member of the Board of Trustees, Treasurer and Chairperson Finance Committee of Antioch University, as an elected member and Chair of the Finance Committee of the Public School Board in Bratenahl, as a Member of the Board of Trustees of the Northeast Ohio Sewer District, as a Member of the Board of Trustees of the Hiram House Camp and as a Member of the Board of Trustees Classics Unlimited.

JAMES J. SCHMID

Mr. Schmid is President of Chelsea Investment Corporation, a Solana Beach-based real estate investment company which he founded in 1985. Chelsea Investment Corporation is involved in investment, development, syndication and asset management. Clients of the company include banks, thrifts, housing agencies and authorities, insurance companies, accounting and law firms, and individual investors. Projects developed by Chelsea Investment Corporation include numerous low income housing tax credit projects in California and Arizona that were sponsored by government agencies and not-for-profit low income housing agencies, and include a 225 unit apartment complex in El Cajon, California, a 62 acre mixed-use business park in Ontario, California, a 115,000 square foot office building in Ontario, California, and a 340 unit motel in Las Vegas, Nevada.

Mr. Schmid has conducted business in San Diego for over 25 years. Prior to founding Chelsea Investment Corporation, Mr. Schmid was Chief Operating Officer for Torrey Enterprises, Inc., a La Jolla-based major development firm. From 1978 to 1992, Mr. Schmid was Vice President and General Counsel for McKellar Development Corporation in La Jolla. From 1989 to 1990, he was President of the Holding Company of State Bank and Trust Company of New Ulm, Minnesota. Mr. Schmid began his career as an attorney for a law firm in Phoenix, Arizona and later joined a law firm in La Jolla.

Mr. Schmid has been admitted to the Arizona and California Bar Associations. He holds a California real estate broker's license. He is Past President of the Encinitas Soccer League.

Mr. Schmid earned a Bachelor of Arts degree in Political Science and History from the University of Minnesota, a Juris Doctor from the University of Minnesota Law School, and an LL.M. in taxation from the Graduate Tax Program at Boston University School of Law.

Remuneration of Organizers, Interim Directors and Officers

Since March 2001, Mr. Bird has worked full time exclusively on the organizational process and Ms. Wright has worked part time on the organizational process. They have been paid under a written consulting arrangement with remuneration for their efforts paid out of Organizer funds. For the eleven months ending January 31, 2002, Mr. Bird has been paid $77,700 salary plus $9,800 for health, life and disability insurance and Ms. Wright has been paid $24,468. Effective March 2002, the monthly salary for Mr. Bird will be $10,208, for Ms. Wright will be $9,167 and they both will receive health, life and disability benefits. The Organizers expect to continue this arrangement until the bank opens for business. These consulting expenses incurred by the Organizers during the organization period are included in the Bank's pre-opening expenses. See "Use of Proceeds."

The Bank intends to employ Ronald J. Carlson as its Chairman, Chief Executive Officer and President; Ronald P. Bird as its Vice Chairman and Senior Executive Vice President; a Chief Credit Officer and Executive Vice President (whose name cannot be disclosed at this time); and M. Catherine Wright as its Chief Financial Officer and Senior Vice President. The Bank will enter into three-year employment agreements with each of these individuals effective upon the opening of the Bank, although their employment may be terminated at any time by the Bank at will.

The annual salaries of Mr. Carlson, Mr. Bird, the Chief Credit Officer and Ms. Wright, will be $127,500, $122,500, $120,000 and $110,000, respectively. The Bank will also provide all four with health, life and disability insurance, 20 days of vacation per year, and an automobile allowance to be fixed by the Board of Directors of the Bank. Each of them is to be reimbursed for expenses incurred in the performance of his or her duties to the Bank. It is anticipated that the Bank will establish an employee stock option plan, incentive plan and a 401(k) Plan and that all four will be eligible for participation. The stock options granted to Mr. Bird and Ms. Wright will be vested, as to one-third of the options granted, in recognition of their service to the Bank during its organizational phase. Otherwise, the options granted to each of the executive officers will vest over three years from the date the Bank opens for business. See "Stock Plan – Special Provisions of Initial Officer Options" regarding the stock options to be granted to the executive officers.

The executives will receive various types of compensation in the event of termination of employment, depending on the nature of the termination, under their employment agreements and the Bank's 2002 Stock Option Plan, as follows:

Termination by the Bank for "Cause" (commission of a criminal act, furnishing proprietary information to a competitor, habitual neglect of duties, habitual intoxication, removal by regulatory authorities):	No compensation
Voluntary resignation by the executive:	No compensation
Termination due to death or disability:	Stock options become fully exercisable and remain exercisable for their full stated 10 year term
Termination by the Bank without Cause:	Payment of base salary through date of termination; Payment of lump sum equal to 12 months' base salary upon executive's delivery of a written release of any claims against the Bank; Payment of accrued vacation; Immediate vesting of stock options with exercise period extended for 90 days from the date of termination
Termination by the executive due to relocation of office 50 miles from Main Office, reduction of base salary below level required by employment agreement or failure to provide benefits substantially similar to those required by employment agreement ("Good Cause"):	Same benefits as if terminated by the Bank without "Cause"
Termination within 6 months of a "change of control" of the Bank (acquisition of more than 50% of voting stock in the Bank):	If termination was by the Bank without "Cause" or by the executive for "Good Cause," and the executive has signed the written release referred to above, payment of lump sum equal to an additional 12 months' base salary; In the event that payment to the executive related to a change of control would be deemed to be taxable parachute payments under the Internal Revenue Code's "golden parachute" provisions the payments will be reduced

The other Organizers and Interim Directors are not presently receiving any fees for their attendance at Board and Committee meetings or their performance of other services in connection with the organization and operation of the Bank. They will not receive such fees prior to the Bank's opening for business and it is not anticipated that the directors will receive any directors' fees during the first 24 months of the Bank's operations.

Organizers are being issued stock options ("Organizer Options") for their efforts in organizing the Bank, as set forth in "Stock Plan – Special Provisions of Organizer Options," below. In addition, executive officers are being granted stock options described in "Stock Plan – Special Provisions of Initial Officer Options," below. We anticipate that the shareholders will approve the Bank's 2002 Stock Plan, described in "Stock Plan," below.

Transactions with Directors and Officers

We anticipate that the directors of the Bank, and companies with which they are associated, will have banking transactions with the Bank in the ordinary course of business. It is the firm intention of the Board of Directors that any loans and commitments to lend included in such transactions will be made in accordance with all applicable laws and on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons of similar creditworthiness.

There are no existing or proposed material interests or transactions between the Bank and/or any of its officers or directors outside the ordinary course of the Bank's business, except as indicated herein. The Organizers of the Bank have advanced or will advance an estimated $2,000,000 of their funds for the purpose of covering the Bank's initial organizational expenses, costs and capital investments, for which they are to be reimbursed (without interest) by the Bank, subject to the approval of the Comptroller after the Bank commences business. An estimated $849,000 is expected to have been advanced for organizational expenses and costs, and an estimated $896,000 is expected to have been advanced for leasehold, furniture, equipment and other capitalized costs. See "Use of Proceeds."

CAPITAL STOCK

General

The authorized capital stock of the Bank consists of 10,000,000 shares of $5 par value Common Stock. Initially, it is proposed that the Bank issue between 1,000,000 to 1,200,000 shares of Common Stock at a sale price of $10 per share. The designations and powers, preferences and rights, and the qualifications, limitations or restrictions thereof of the Common Stock are described below.

The following table sets forth the capitalization of the Bank assuming the initial shares of the Bank are sold as well as the capitalization of the Bank assuming the initial shares of the Bank are sold and all outstanding proposed stock options are exercised.

Capitalization

	Initial Shares Only		Shares and Options (1)
	Minimum	Maximum	Minimum	Maximum
Shareholders' Equity
Common Stock - $5 Par Value
1,000,000 Shares Issued and Outstanding	$5,000,000
1,200,000 Shares Issued and Outstanding		$6,000,000
1,266,000 Shares Issued and Outstanding			$6,130,000
1,426,000 Shares Issued and Outstanding				$7,130,000
Surplus	5,000,000	6,000,000	6,130,000	$7,130,000
Accumulated Deficit - Note 2	(811,200)	(809,200)	(811,200)	(809,200)

Total Shareholders' Equity	$9,188,800	$11,190,800	$11,448,800	$13,450,800

Note 1 - Includes the proceeds from the exercise of 126,000 Organizer Options which are immediately exercisable and 100,000 proposed options, 15,000 of which are immediately exercisable and 85,000 of which are exercisable over three to ten years.

Note 2 - Includes $848,300 in estimated net pre-opening expenses reduced by estimated interest earned from the investment of subscription funds of $37,100 in the minimum and $39,100 in the maximum.

Common Stock

Each share of Common Stock has the same rights, privileges and preferences as every other share and will be entitled to participate in any liquidation, dissolution or winding up on the basis of pro rata shareholdings. The Common Stock has no conversion or redemption rights or sinking fund provisions. Each share will participate equally in dividends, which are payable when and as declared by the Board of Directors out of funds legally available for that purpose. See "– Dividends," below.

Dividends

The Board of Directors presently intends that no cash dividends will be declared during the early stages of the Bank's development. No assurance can be given that the Bank's earnings will permit the payment of dividends of any kind. Moreover, even if legally available, no assurance can be given that the Bank will pay dividends.

The future dividend policy of the Bank is subject to the discretion of the Board of Directors and will depend upon a number of factors, including future earnings, financial conditions, cash needs, and general business conditions. Additionally, under certain circumstances, approval of the Comptroller may be required with respect to the payment of dividends. Each share of Common Stock will be entitled to participate equally in dividends.

Pursuant to 12 U.S.C. Section 56, no national bank may pay dividends from its capital. All dividends must be paid out of net profits, after deducting losses and bad debts. The payment of dividends out of net profits of a national bank is further limited by 12 U.S.C. Section 60(a) which prohibits a bank from declaring a dividend on its shares of common stock until the surplus fund equals the amount of capital stock or, if the surplus fund does not equal the amount of capital stock, until one-tenth of a bank's net profits of the preceding half year in the case of quarterly or semiannual dividends or the preceding two years in the case of an annual dividend are transferred to the surplus fund.

Pursuant to 12 U.S.C. Section 60(b), the approval of the Comptroller is required if the total of all dividends declared by a bank in any calendar year exceeds the total of its retained net profits of that year combined with its net profits of the two preceding years, less any required transfers to surplus or a fund for the retirement of any preferred stock.

Additionally, pursuant to 12 U.S.C. Section 1818(b), the Comptroller may prohibit the payment of dividends which would constitute an unsafe and unsound banking practice and pursuant to 12 U.S.C. Section 1818, et seq., the payment of dividends would be prohibited if the Bank's capital fell below certain levels.

Dissolution and Liquidation

In the event of a voluntary or involuntary liquidation, dissolution or winding up of the Bank, after distribution in full of the preferential amounts to be distributed to the holders of all classes and series of stock entitled thereto and to the holders of capital notes, if any, the holders of the Common Stock shall be entitled to receive all the remaining assets of the Bank. However, in a voluntary dissolution, a national bank may only go into liquidation and be closed by a vote of shareholders owning two-thirds of its stock. Liquidation may also be effected in whole or in part through the sale of all or a portion of its deposit liabilities to another bank. In the event of a liquidation or sale of the Bank, each share would receive an equal portion of the proceeds of such liquidation or sale. Shareholders owning two-thirds of the stock of the Bank's stock must approve a purchase and sale agreement, unless an emergency exists. In the event of an emergency, the Comptroller may specifically waive such requirement for shareholder approval.

Voting Rights

Each share of Common Stock is entitled to one vote at any meeting of shareholders, except in the election of directors. Pursuant to 12 U.S.C. Section 61, each shareholder has the right to vote the number of shares owned for as many persons as there are directors to be elected, or to cumulate such shares and give one candidate as many votes as the number of directors multiplied by the number of shares equals, or to distribute votes on the same principle among as many candidates as the shareholder deems appropriate.

Preemptive Rights

The Common Stock will not have preemptive rights; therefore, future shares of Common Stock may be offered to other investors or to existing shareholders, at the discretion of the Board of Directors.

Assessment of Shares

The Common Stock is subject to assessment by the Comptroller pursuant to 12 U.S.C. Section 55, as amended. This section, which has not been invoked in recent times, generally provides that if the capital stock of a national bank is impaired by losses or otherwise (a national bank's capital is impaired when its accumulated losses exceeds its surplus), the Comptroller may require payment of the deficiency by assessing the Bank's shareholders on a pro rata basis. If any shareholder fails to pay an assessment after three months notice, the stock of the shareholder, to the extent necessary, will be sold to remedy the deficiency. Any such assessment would be limited to the proceeds of the sale of such stock at public auction.

Shareholder Reports

For at least the first year after the Bank opens for business, and as long as it has at least 300 shareholders, the Bank will be required to file reports with the OCC under Section 15(d) of the Securities Exchange Act of 1934. Therefore, it is anticipated that the Bank will be a "reporting company" pursuant to the Securities Exchange Act of 1934 for the foreseeable future. These obligations include the obligation to provide shareholders with an audited annual report.

STOCK PLAN

General

The Board of Directors has adopted a stock incentive plan, the Landmark National Bank 2002 Stock Plan (the "Plan"), and intends to issue options under the Plan, subject to shareholder approval, following completion of the Offering. The Plan provides for the grant of incentive stock options to employees and nonstatutory stock options to Organizers, directors and employees (together, "Stock Awards"). Incentive stock options granted under the Plan are intended to qualify as "incentive stock options" within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). Nonstatutory stock options granted under the Plan are not intended to qualify as incentive stock options under the Code. See "– Federal Income Tax Information" below for a discussion of the tax treatment of these two types of stock options.

Purpose

The Plan provides a means by which Organizers, directors and selected employees of the Bank may be given an opportunity to purchase Common Stock. The Bank, by means of the Plan, seeks to reward its Organizers for their financial and other support in the organizational phase, to retain the services of persons who are now employees and directors of the Bank, to secure and retain the services of new employees and directors, and to provide incentives for such persons to exert maximum efforts for the success of the Bank.

Administration

The Plan will be administered by the Board of Directors unless and until the Board of Directors delegates administration to a committee composed of not fewer than two members of the Board of Directors. All of the members of any such committee must be non-employee directors (unless the Board of Directors expressly declares that such requirement shall not apply). If administration is delegated to a committee, such committee will have, in connection with the administration of the Plan, the powers possessed by the Board of Directors, subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board of Directors (the Board of Directors or any such committee being referred to as the "Administrator").

Shares Subject to the Plan

The Common Stock that may be sold pursuant to Stock Awards under the Plan shall not exceed thirty percent (30%) of the number of shares of Common Stock outstanding at the date of adoption of the Plan by the shareholders of the Bank. If the minimum number of shares is sold in the Offering, the number of shares subject to the Plan will be 300,000. If the maximum number of shares is sold in the Offering, the number of shares subject to the Plan will be 360,000. If any Stock Award expires or terminates, in whole or in part, without having been exercised in full, or if any unvested Stock Award is forfeited, the stock not purchased under such Stock Award will revert to and again become available for issuance under the Plan. The Common Stock subject to the Plan shall be unissued shares.

Eligibility

Incentive stock options may be granted only to employees. Nonstatutory stock options may be granted to Organizers, employees or directors. As of the opening for business of the Bank, it expects to have 16 Organizers who will receive stock options, described under "Special Provisions of Organizer Options," and up to 5 employees and 8 directors will be eligible for Stock Awards under the Plan.

No person is eligible for the grant of an incentive stock option if, at the time of grant, such person owns stock constituting more than ten percent (10%) of the total combined voting power of all classes of stock of the Bank unless the exercise price of such option is at least one hundred ten percent (110%) of the fair market value of the Common Stock subject to the option at the date of grant and the option is not exercisable after the expiration of five (5) years from the date of the grant.

Term and Termination

No option is exercisable after the expiration of ten (10) years from the date it was granted. Generally, in the event an optionee's continuous status as an employee or director is terminated, the optionee may exercise his or her option (to the extent that the optionee was entitled to exercise it at the time of termination) but only within the earlier of (i) the date three (3) months after the termination of the optionee's continuous status as an employee or director, or (ii) the expiration of the term of the option as set forth in the option agreement. However, in the event that the optionee's continuous status as an employee or director is terminated for "cause," as defined in the Plan, the option terminates as of the date the employee's or director's status terminates. In addition, in the event a non-employee director's continuous status as a director terminates as a result of the director's death or disability, the director's option will accelerate and remain exercisable through the entire initial stated term of the option.

An optionee's option agreement may also provide that if the exercise of the option following the termination of the optionee's continuous status as an employee or director would result in liability under Section 16(b) of the Exchange Act, then the option shall terminate on the earlier of (i) the expiration of the term of the option, or (ii) the expiration of a period three (3) months after the termination of the optionee's continuous status as an employee or director during which the exercise of the option would not be in violation of such registration requirements.

Exercise

The exercise price of each stock option will not be less than one hundred percent (100%) of the fair market value of Common Stock on the date of grant. The purchase price of stock acquired pursuant to a stock option must be paid in cash at the time of exercise.

Transferability

A stock option shall not be transferable except by will or by the laws of descent and distribution, and shall be exercisable during the lifetime of the person to whom the stock option is granted only by such person. An optionee may designate a beneficiary who may exercise his or her option after death.

Vesting

The total number of shares of stock subject to an option shall be allotted in periodic installments. The option agreement shall provide that from time to time during each of such installment periods, the option may become exercisable ("vest") with respect to some or all of the shares allotted to that period. The option agreement must provide that the option will vest no more quickly than as to one-third of the shares of stock subject to the option in each of the first three years.

Adjustments upon Change in Stock

If any change is made in the Common Stock, without receipt of consideration by the Bank (through merger, consolidation, reorganization, recapitalization, stock dividend, dividend in property other than cash, stock split, liquidation dividend, combination of shares, exchange of shares, change in corporate structure, or otherwise), the class(es) and maximum number of shares subject to the Plan and the class(es) and number of shares and price per share of stock subject to outstanding Stock Awards will be appropriately adjusted.

In the event of a "Change in Control" (defined below), holders of outstanding Stock Awards shall have the right to exercise, and shall be vested as to, all outstanding Stock Awards, including shares as to which the Stock Award would not otherwise be exercisable or vested. If outstanding Stock Awards become fully vested in the event of a Change in Control, the Administrator shall notify all participants that their outstanding Stock Awards shall be fully exercisable for a period of three (3) months (or such other period of time not exceeding six (6) months as is determined by the Administrator at the time of the grant) from the date of such notice, and any unexercised options shall terminate upon the expiration of such period.

For purposes of the Plan, "Change in Control" means:

(1) the acquisition of 50% or more of the outstanding voting stock of the Bank by any person or entity, with certain exceptions for employee benefit plans of the Bank;

(2) the acquisition of 25% or more of the outstanding voting stock of the Bank by any person or entity and a change in the composition of the Board of Directors during the following 12 months such that those persons serving as directors immediately prior to the share acquisition cease to make up at least 60% of the directors of the Bank;

(3) a merger or consolidation of the Bank with any other corporation, other than a merger or consolidation in which the shareholders of the Bank immediately prior thereto continue to own more than 50% of the outstanding voting stock of the Bank; or

(4) the complete liquidation of the Bank, or disposition of all or substantially all of the Bank's assets.

Special Provisions of Organizer Options

The Bank expects to grant options to purchase up to 126,000 shares of Common Stock to the Organizers ("Organizer Options"). These grants are to reward the Organizers for their financial and other support during the organizational phase of the Bank and to incentivize them to contribute to the success of the Bank. Twelve Organizers will receive options to purchase 9,000 shares, three Organizers will receive options to purchase 5,000 shares, and one Organizer will receive options to purchase 3,000 shares. At this time the Bank does not expect to issue additional stock options to Organizers who are also directors in the first year of the Bank's operations.

The Organizer Options have provisions that are different from the other options granted under the Plan. Although the term of each of the Organizer Options is to be 10 years from the date of grant, which is expected to be at the time the Bank opens for business, the Organizer Options will be fully vested upon issuance. The exercise price will be $10 per share, reflecting the price to be paid by subscribers in the Offering. There is no requirement that the Organizer provide any services to the Bank after issuance of the Organizer Options and the Organizer Options are not subject to forfeiture due to loss of employment or termination of service as a director.

Special Provisions of Initial Officer Options

Incentive stock options ("Initial Officer Options") are being granted to Mr. Carlson (35,000), Mr. Bird (25,000), the Chief Credit Officer (20,000) and Ms. Wright (20,000) with ten year terms and exercise prices of $10 per share. In the employment arrangements with the initial executive officers of the Bank, the Bank agreed to certain special terms that are different from those that will typically be included in the options granted to other employees under the Plan.

In the event employment is terminated without cause (excluding death or disability), as defined in the employment agreement, rather than the Plan, or the executive resigns as a result of a 50-mile relocation of office or reduction in base salary, the options fully vest and are exercisable for 90 days from the date of termination. In addition, if the executive's employment is terminated as a result of death or disability, the option accelerates and remains exercisable through the end of the stated term of the option (10 years from date of grant). Finally, one-third of the options granted to Mr. Bird and Ms. Wright are vested at issuance in recognition of their service during the Bank's organizational phase, with the remaining two-thirds vesting over two years.

Rights to Compel Exercise or Forfeit

All stock options issued under the Plan will be subject to the following provisions:

If the capital of Landmark National Bank ("Bank") falls below the minimum requirements contained in 12 CFR Part 3, or falls below a higher requirement as determined by the Comptroller of the Currency, ("Comptroller"), or the existence of outstanding Options impairs the Bank's ability to raise capital, the Comptroller may direct the Bank to require Option holders to exercise or forfeit their Options. The Bank will notify Option holders within 45 days from the date the Comptroller notifies the Bank in writing that Option holders must exercise or forfeit their Options. The Bank will cancel Options not exercised within 21 days of the Bank's notification. The Bank has agreed to comply with any Comptroller request that the Bank invoke its right to require Option holders to exercise or forfeit their Options under the circumstances stated above.

Amendment of the Landmark National Bank 2002 Stock Plan

The Administrator at any time, and from time to time, may amend the Plan. However, no amendment shall be effective unless approved by the shareholders of Landmark if shareholder approval is required in order for the Plan to satisfy the requirements of Section 422 of the Code, or to comply with the requirements of Rule 16b-3 under the Exchange Act or the Nasdaq or other stock exchange listing requirements. However, no amendment may be made that would cause the Plan not to comply with applicable bank regulatory guidelines without the prior consent or acquiescence of the appropriate bank regulatory authority. The Administrator may in its sole discretion submit any amendment to the Plan for shareholder approval.

Termination or Suspension of the Landmark National Bank 2002 Stock Plan

The Administrator may suspend or terminate the Plan at any time. Unless sooner terminated, the Plan shall terminate on the date 10 years after its adoption by the Board of Directors of the Bank. No Stock Awards may be granted under the Plan while the Plan is suspended or after it is terminated.

Federal Income Tax Information

Incentive Stock Options. Incentive stock options under the Plan are intended to be eligible for the favorable federal income tax treatment accorded "incentive stock options" under the Code.

There generally are no federal income tax consequences to the optionee or the Bank by reason of the grant or exercise of an incentive stock option. However, the exercise of an incentive stock option may increase the optionee's alternative minimum tax liability, if any.

If an optionee holds stock acquired through exercise of an incentive stock option for at least two years from the date on which the option is granted and at least one year from the date on which the shares are transferred to the optionee upon exercise of the option, any gain or loss on a disposition of such stock will be long-term capital gain or loss. Generally, if the optionee disposes of the stock before the expiration of either of these holding periods (a "disqualifying disposition"), at the time of disposition, the optionee will realize taxable ordinary income equal to the lesser of (a) the excess of the stock's fair market value on the date of exercise over the exercise price, or (b) the optionee's actual gain, if any, on the purchase and sale. The optionee's additional gain, or any loss, upon the disqualifying disposition will be a capital gain or loss. Capital gains currently are generally subject to lower tax rates than ordinary income. The maximum capital gains rate for federal income tax purposes is currently 20% for property held more than 12 months, while the maximum ordinary income rate is effectively 39.6% at the present time. Slightly different rules may apply to optionees who acquire stock subject to certain repurchase options.

To the extent the optionee recognizes ordinary income by reason of a disqualifying disposition, the Bank will generally be entitled (subject to the requirement of reasonableness and the satisfaction of a tax reporting obligation) to a corresponding business expense deduction in the tax year in which the disqualifying disposition occurs.

Nonstatutory Stock Options. Nonstatutory stock options granted under the Plan generally have the following federal income tax consequences:

There are no tax consequences to the optionee or the Bank by reason of the grant of a nonstatutory stock option. Upon exercise of a nonstatutory stock option, the optionee normally will recognize taxable ordinary income equal to the excess of the stock's fair market value on the date of exercise over the option exercise price. Generally, with respect to employees, the Bank is required to withhold taxes from regular wages or supplemental wage payments in an amount based on the ordinary income recognized. Subject to the requirement of reasonableness and the satisfaction of a reporting obligation, the Bank will generally be entitled to a business expense deduction equal to the taxable ordinary income realized by the optionee. Upon disposition of the stock, the optionee will recognize a capital gain or loss equal to the difference between the selling price and the purchase price (to the extent not recognized as taxable income as described above). Slightly different rules may apply to optionees who acquire stock subject to certain repurchase options or who are subject to Section 16(b) of the Exchange Act.

INDEMNIFICATION

The Articles of Association of the Bank provide that the Bank may make or agree to make indemnification payments to an institution-affiliated party, as defined at 12 USC 1813(u), for an administrative proceeding or civil action initiated by any federal banking agency, that are reasonable and consistent with the requirements of 12 USC 1828(k) and the implementing regulations thereunder. The Bank may also indemnify such a party for damages and expenses, including the advancement of expenses and legal fees, in cases involving an administrative proceeding or civil action not initiated by a federal banking agency, in accordance with and to the fullest extent permissible under California law, provided such payments are consistent with safe and sound banking practices.

Notwithstanding any other provisions contained therein, the Articles of Association are subject to the requirements and limitations set forth in state and federal laws, rules, and regulations, and orders regarding indemnification and prepayment of legal expenses and liabilities, including section 18(k) of the Federal Deposit Insurance Act and Part 359 of the FDIC's Rules and Regulations or any successor regulations thereto. To the extent that there is any conflict between state and federal law, federal laws shall supersede and control.

These provisions may have the effect of deterring shareholder derivative actions, since the Bank may ultimately be responsible for expenses for both parties to the action. A similar effect would not be expected for third-party claims.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Bank pursuant to the foregoing provisions, or otherwise, the Bank has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

	MINIMUM	MAXIMUM
Number of shares	$ 1,000,000	$ 1,200,000
Proceeds, before expenses, to the Bank	$10,000,000	$12,000,000
Expenses of the offering(1)	$ 39,200	$ 39,200
Net proceeds to the Bank(2)	$ 9,188,800	$11,190,800
Net proceeds per share, to the Bank(2)	$ 9.19	$ 9.32

ASSETS

Cash	$ 41,522

Leasehold Improvements	33,719
Furniture, Fixtures and Equipment	14,660
Less Accumulated Depreciation	( 4,224)
	44,155
Deposits and Other Assets	15,311
	$ 100,988

LIABILITIES AND SHAREHOLDERS' EQUITY

Accounts Payable and Accrued Expenses	$ 9,757
Due to Organizers	503,502

TOTAL LIABILITIES	513,259

SHAREHOLDERS' EQUITY

Common Stock, par value $5.00 per share; 10,000,000 shares Authorized; none Issued and Outstanding	–
Surplus	–
Deficit Accumulated During the Organizational Period	(412,271)

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$ 100,988

REVENUE

Interest and Dividend Income		$ 5,085

EXPENSES

Legal and Professional Fees		75,828
OCC Application Fee		15,000
Rent and Other Occupancy Expense		127,234
Consulting Fees and Expenses		181,816
Other Expenses		17,478
Total Expense		417,356

NET LOSS		$ (412,271)

			Deficit
			Accumulated
			During the
	Common		Organizational
	Stock	Surplus	Period	Total

Balance at May 22, 2000	$ –	$ –	$ –	$ –

Net Loss			(412,271)	(412,271)

Balance at January 31, 2002	$ –	$ –	$ (412,271)	$ (412,271)

OPERATING ACTIVITIES

Net Loss		$ (412,271)
Depreciation		4,224
Increase in Accounts Payable		9,757

CASH USED BY OPERATIONS		(398,290)


INVESTING ACTIVITIES

Purchase of Leasehold Improvements and Other Assets		(63,690)

CASH USED BY INVESTING ACTIVITIES		(63,690)


FINANCING ACTIVITIES

Advances from Organizers		503,502

CASH PROVIDED BY FINANCING ACTIVITIES		503,502

NET INCREASE IN CASH		41,522

CASH AT MAY 22, 2000		–

CASH AT JANUARY 31, 2002		$ 41,522

	How Shares are to be Registered (Please Print or Type)
___________________________________________________________________________________________ Name(s) and Nature of Ownership (e.g. Joint Tenancy, Community Property, etc.)
__________________________________________ Telephone Number Fax Number		__________________________________________ Mailing Address - Street
__________________________________________ Social Security Number or Taxpayer I.D. Number		__________________________________________ City and State Zip

________________________________ (Signature)	________________________________ (Signature)
________________________________ Name (please print or type)	________________________________ Name (please print or type)