Exhibit 13

Capital Corp of the WestSelected Financial Data

|(Amounts in thousands,
except per share data)    |  | 2003 |           | 2002 |   | 2001      |   | 2000 |         | 1999 |  
|------------------------------------------------ |  | ---- | --------- | ---- | - | --------- | - | ---- | ------- | ---- | -
|
|Summary income data:                             |  |      |           |      |   |           |   |      |         |      |  
|Interest income                                  |  | $    | 62,413    |      | $ | 58,811    |   | $    | 58,167  |      | $
|Interest expense                                 |  |      | 16,253    |      |   | 18,854    |   |      | 23,240  |      |  
|Net interest income                              |  |      | 46,160    |      |   | 39,957    |   |      | 34,927  |      |  
|Provision for loan losses                        |  |      | 2,455     |      |   | 4,151     |   |      | 4,115   |      |  
|Noninterest income                               |  |      | 10,177    |      |   | 8,263     |   |      | 6,290   |      |  
|Noninterest expense                              |  |      | 35,385    |      |   | 31,186    |   |      | 26,372  |      |  
|Income before provision for income taxes         |  |      | 18,497    |      |   | 12,883    |   |      | 10,730  |      |  
|Provision for income taxes                       |  |      | 4,857     |      |   | 2,455     |   |      | 2,819   |      |  
|Net income                                       |  | $    | 13,640    |      | $ | 10,428    |   | $    | 7,911   |      | $
|Share Data:                                      |  |      |           |      |   |           |   |      |         |      |  
|Average common shares outstanding                |  |      | 5,612     |      |   | 5,538     |   |      | 5,345   |      |  
|Basic earnings per share                         |  | $    | 2.43      |      | $ | 1.88      |   | $    | 1.48    |      | $
|Diluted earnings per share                       |  |      | 2.34      |      |   | 1.83      |   |      | 1.44    |      |  
|Book value per share                             |  |      | 15.82     |      |   | 14.49     |   |      | 12.39   |      |  
|Tangible book value per share                    |  | $    | 15.36     |      | $ | 13.87     |   | $    | 11.72   |      | $
|Balance Sheet Data:                              |  |      |           |      |   |           |   |      |         |      |  
|Total assets                                     |  | $    | 1,234,542 |      | $ | 1,034,396 |   | $    | 894,327 |      | $
|Total securities                                 |  |      | 372,015   |      |   | 287,020   |   |      | 271,411 |      |  
|Total loans                                      |  |      | 764,252   |      |   | 633,773   |   |      | 532,420 |      |  
|Total deposits                                   |  |      | 1,028,808 |      |   | 834,379   |   |      | 732,641 |      |  
|Shareholders' equity                             |  | $    | 89,485    |      | $ | 77,169    |   | $    | 64,120  |      | $
|Operating Ratios:                                |  |      |           |      |   |           |   |      |         |      |  
|Return on average equity                         |  |      | 16.43     | %    |   | 14.94     | % |      | 13.40   | %    |  
|Return on average assets                         |  |      | 1.23      |      |   | 1.09      |   |      | 1.03    |      |  
|Average equity to average assets ratio           |  |      | 7.46      |      |   | 7.29      |   |      | 7.69    |      |  
|Net interest margin                              |  |      | 4.53      |      |   | 4.58      |   |      | 5.04    |      |  
|Credit Quality Ratios:                           |  |      |           |      |   |           |   |      |         |      |  
|Nonperforming loans to total loans(1)            |  |      | 0.52      | %    |   | 0.38      | % |      | 0.91    | %    |  
|Allowance for loan losses to total loans         |  |      | 1.74      |      |   | 1.91      |   |      | 1.83    |      |  
|Allowance for loan losses to nonperforming loans |  |      | 332.70    |      |   | 509.15    |   |      | 200.65  |      |  
|Capital Ratios:                                  |  |      |           |      |   |           |   |      |         |      |  
|Risk-based tier 1 capital                        |  |      | 10.31     | %    |   | 9.49      | % |      | 9.49    | %    |  
|Total risk-based capital                         |  |      | 11.57     |      |   | 10.74     |   |      | 10.74   |      |  
|Leverage ratio                                   |  |      | 8.55      |      |   | 7.68      |   |      | 7.72    |      |  

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Management's Discussion and Analysis of Financial Condition and Results of Operations

The
following discussion and analysis is designed to provide a better understanding of the significant changes and trends related to Capital Corp of the West (the "Company"). The following discussion
should be read in conjunction with the consolidated financial statements of the Company and the notes thereto. The consolidated financial statements of the Company include its subsidiaries, County
Bank (the "Bank"), Capital West Group ("CWG") and Regency Investment Advisors ("RIA"). It also includes the Bank's subsidiaries, Merced Area Investment Development, Inc. ("MAID"), County Asset
Advisor, Inc. ("CAA") and County Investment Trust ("REIT").

In
addition to historical information, this discussion and analysis includes certain forward-looking statements that are subject to risks and uncertainties and include information about possible or
assumed future results of operations. Many possible events or factors could affect the future financial results and performance of the Company. This could cause results or performance to differ
materially from those expressed in our forward-looking statements. Words such as "expects," "anticipates," "believes," "estimates," "intends," "plans," "assumes," "projects," "predicts," "forecasts,"
variations of such words and other similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks,
uncertainties and assumptions which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in, or implied by, such forward-looking
statements.

Readers
of the Company's Annual Report and Form 10-K should not rely solely on forward looking statements and should consider all uncertainties and risks discussed throughout this
report. These statements are representative only on the date hereof, and the Company undertakes no obligation to update any forward-looking statements made. Some possible events or factors that could
occur that may cause differences from expected results include the following: the Company's loan growth is dependent on economic conditions, as well as various discretionary factors, such as decisions
to sell, or purchase certain loans or loan portfolios; or sell or buy participations of loans; the quality and adequacy of management of the borrower; developments in the industry the borrower is
involved in, product and geographic concentrations and the mix of the loan portfolio. The rate of charge-offs and provision expense can be affected by local, regional and international
economic and market conditions, concentrations of borrowers, industries, products and geographical conditions, the mix of the loan portfolio and management's judgements regarding the collectibility of
loans. Liquidity requirements may change as a result of fluctuations in assets and liabilities and off-balance sheet exposures, which will impact the capital and debt financing needs of
the Company and the mix of funding sources. Decisions to purchase, hold, or sell securities are also dependent on liquidity requirements and market volatility, as well
as on and off-balance sheet positions. Factors that may impact interest rate risk include local, regional and international economic conditions, levels, mix, maturities, yields or rates of
assets and liabilities and the wholesale and retail funding sources of the Company. The Company is also exposed to the potential of losses arising from adverse changes in market rates and prices which
can adversely impact the value of financial products, including securities, loans, and deposits. In addition, the banking industry in general is subject to various monetary and fiscal policies and
regulations, which include those determined by the Federal Reserve Board, the Federal Deposit Insurance Corporation and state regulators, whose policies and regulations could affect the Company's
results.

Other
factors that may cause actual results to differ from the forward-looking statements include the following: competition with other local and regional banks, savings and loan associations, credit
unions and other non-bank financial institutions, such as investment banking firms, investment advisory firms, brokerage firms, mutual funds and insurance companies, as well as other
entities which offer financial services; interest rate, market and monetary fluctuations; inflation; market volatility; general economic conditions; introduction and acceptance of new banking-related
products, services and enhancements; fee pricing strategies, mergers and acquisitions and their integration into the Company; civil disturbances or terrorist threats or acts, or apprehension about the
possible future occurrences or acts of this type, outbreak or excalation of hostilities in which the United States

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is
involved, any declaration of war by the U. S. Congress or any other national or international calamity, crisis or emergency; changes in laws and regulations; and management's ability to manage
these and other risks.

Critical Accounting Policies and EstimatesThe company's discussion and analysis of its financial condition and results of operations are
based upon the Company's consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these
financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities. On an on-going basis, the Company evaluates its estimates, including those related to the adequacy of the allowance for loan losses, investments, and intangible assets.
The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or
conditions. The one accounting estimate that materially affects the financial statements is the allowance for loan losses. The policies related to the adequacy of the allowance for loan losses and the
determination of impairment of investments and intangible assets that govern the Company's accounting in these areas can be found in Note 1, the sections titled "Allowance for Loan Losses",
"Investment Securities", "Intangible Assets" and "Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of" as well as in Note 3, titled "Loans", in this
report.

OverviewDuring 2003, earnings increased $3,212,000 or 31% to $13,640,000 which compares favorably to earnings of $10,428,000 and
$7,911,000 achieved in 2002 and 2001. Basic earnings per share were $2.43 in 2003 compared to $1.88 and $1.48 in 2002 and 2001. Diluted earnings per share were $2.34 in 2003 compared to $1.83 and
$1.44 in 2002 and 2001. The Company's return on average total assets was 1.23% in 2003 compared with 1.09% and 1.03% in 2002 and 2001. The $3,212,000 earnings improvement in 2003 was primarily the
result of increased loan and investment earning assets which resulted in net interest
income growth of 6,203,000 or 16%, an increase in noninterest income of 1,914,000 or 23% partially offset by a higher effective tax rate when compared to the prior year. The earnings improvement in
2002 when compared to 2001 was primarily the result of an increase in net interest income resulting from an increase in volume of interest earning assets. The Company achieved strong asset growth in
2003, reaching total assets at December 31, 2003 of $1,234,542,000 up $200,146,000 or 19% from $1,034,396,000 at December 31, 2002. Net loans grew to $750,989,000 at December 31,
2003, an increase of $129,350,000 or 21% from the $621,639,000 outstanding at December 31, 2002. Deposits grew to $1,028,808,000 at December 31, 2003, an increase of $194,429,000 or 23%
over the $834,379,000 outstanding as of December 31, 2002. Total shareholder's equity grew to $89,485,000 at December 31, 2003, an increase of $12,316,000 or 16% over the
year-end 2002 total of $77,169,000. The Company continues to be well capitalized by regulatory definitions. The Company's return on average equity was 16.43%, 14.94%, and 13.40% in 2003,
2002, and 2001.

Results of OperationsCapital Corp of the West's earnings were a record $13,640,000 during 2003, driven primarily by an improvement in net
interest income, an increase in noninterest income of $1,914,000 or 23% partially offset by a higher effective tax rate when compared to the year ended December 31, 2002. Net interest income
increased by $6,203,000, or 16%, to $46,160,000 during 2003 as compared to an increase in net interest income of $5,030,000 in 2002 over 2001 levels. The improvement in earnings during 2003 compared
to 2002 was driven primarily by an increase in average earning asset balances.

The
Company's primary source of revenue is net interest income, which is the difference between interest income and fees derived from earning assets and interest paid on liabilities obtained to fund
those assets. Total interest and fee income on earning assets increased from $58,811,000 in 2002 to $62,413,000, a $3,602,000 or 6% increase in 2003. During 2002, there was an increase of $644,000 or
1% to $58,811,000 compared to $58,167,000 in 2001. The level of interest income is affected by changes in the volume and the rates earned on interest-earning assets. During 2003, the increase in
interest income is due to increases in average earning assets partially offset by lower yields on those assets. Average interest-earning

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assets
in 2003 were $1,032,700,000 as compared with $884,885,000 in 2002, an increase of $147,815,000 or 17%. The average rate earned on interest-earning assets was 6.10% in 2003, a decrease of 61
basis points from the 6.71% earned in 2002. The primary cause for the decrease in rate on interest-earning assets was lower prevailing reinvestment market interest rates that were available in 2003 in
comparison to 2002.

Interest
expense is a function of the volume and rates paid for interest-bearing liabilities. Interest-bearing liabilities consist primarily of certain deposits and borrowed funds. Average
interest-bearing liabilities in 2003 were $858,665,000 as compared with $749,508,000 in 2002, an increase of $109,157,000 or 15%. The increase in volume came primarily from increased market
penetration from our existing branch network. Total interest expense decreased $2,601,000 or 14% to $16,253,000 in 2003 as compared to $18,854,000 for 2002. Total interest expense in 2001 totaled
$23,240,000. Total cost of interest-bearing funds were 1.89%, 2.52%, and 3.89% in 2003, 2002, and 2001. If the current rate environment holds during 2004, it is anticipated that the average interest
paid on certificates of deposit should continue to decline as maturing accounts reprice at their maturities to an anticipated current lower interest rate level.

The
Company's net interest margin, the ratio of net interest income to average interest-earning assets for 2003 was 4.53%. This is a decrease of five basis points compared to the 2002 margin of 4.58%.
The
decrease in net interest margin during 2003 was primarily the result of falling short term interest rates during 2003. If the current interest rate environment continues throughout 2004, it is
anticipated the Company's overall net interest margin should be in the 4.35% to 4.40% range. A modest increase in rates should cause the Company's net interest margin to slightly increase. The net
interest margin decrease of 46 basis points during 2002 from the 5.04% achieved in 2001 was primarily the result of an overall decline in prevailing interest rates during the period. In 2003, loans
comprised 67% of average interest-earning assets as compared with 65% and 64% in 2002 and 2001. Securities comprised 31% of average interest-earning in 2003 compared with 32% and 33% in 2002 and 2001.

The
Company's net interest income is affected by changes in the amount and mix of interest-earning assets and interest-bearing liabilities. It is also affected by changes in yields earned on
interest-earning assets and rates paid on interest-bearing deposits and other borrowed funds. The changes due to both rate and volume have been allocated to rate and volume in proportion to the
relationship of the absolute dollar amount of the change in each.

The
increase in taxable equivalent interest income of $3,624,000 in 2003 is comprised of a $9,661,000 volume increase attributable to an increase in interest-earning assets of $147,815,000 between
2003 and 2002 that was partially offset by a $6,037,000 rate decrease during this same period. The decrease in total interest expense of $2,601,000 in 2003 related to a $1,709,000 volume increase
attributable to an increase in average interest-bearing liabilities of $109,157,000 during 2003 when compared to 2002 that was partially offset by a $4,310,000 rate decrease during this same period.
Interest rate declines were greater for interest earning assets than interest bearing liabilities during this time period.

The
increase in taxable equivalent interest income of $675,000 in 2002 is comprised of a $13,666,000 volume increase primarily attributable to an increase in interest-earning assets of $181,497,000
between 2002 and 2001 that was partially offset by a $12,991,000 rate decrease during this same period. The decrease in total interest expense of $4,386,000 in 2002 in comparison to 2001 related to a
$10,124,000 rate decrease that was partially offset by an increase of $151,671,000 in average interest-bearing liabilities between 2002 and 2001 that caused a $5,738,000 volume increase in interest
expense during this same period. Interest rate declines were greater for interest earning assets than interest bearing liabilities during this time period.

Provision for Loan LossesThe Company maintains an allowance for loan losses at a level considered by management to be adequate to cover
the inherent risks of loss associated with its loan portfolio under prevailing and anticipated economic conditions. The provision for loan losses is charged against income and increases the allowance
for loan losses. The provision for loan losses for the year ended December 31, 2003 was $2,455,000 compared to $4,151,000 in 2002 and $4,115,000 in 2001. The decreased level of provision for
loan losses in 2003 when compared to 2002 was primarily the result of low charge-off levels helped by a strong commercial real estate market. The increased level of provision for loan

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losses
in 2002 when compared to 2001 was primarily the result of an overall increase in the size of the portfolio. The methodology used to determine the level of provision for loan losses includes an
analysis of relevant risk factors within the entire loan portfolio, including nonperforming loans. The methodology is based, in part, on management's use of a loan grading and classification system.
The Bank's management grades its loans through internal reviews and periodically subjects loans to external reviews. These external reviews are presented to and assessed by the Bank's audit committee.
Credit reviews are performed quarterly and the quality grading process occurs on a monthly basis. The level of provision for loan losses in 2003, 2002, and 2001 also supports the general loan growth
of the Company, as gross loans increased 21% in 2003 and 19% in 2002.

Noninterest IncomeThe following table summarizes other income for the years ended December 31.

|(Dollars in thousands)                |                          | 2003 |       | 2002   |   | 2001 
|------------------------------------- | ------------------------ | ---- | ----- | ------ | - | -----
|
|Noninterest Income:                   |                          |      |       |        |   |      
|Deposit service charges               |                          | $    | 5,480 |        | $ | 5,076
|Income from sale of real estate       |                          |      | 608   |        |   | 33   
|Earnings on bank owned life insurance |                          |      | 1,003 |        |   | 994  
|Loan packaging fees                   |                          |      | 538   |        |   | 206  
|Gain on sale of loans                 |                          |      | 296   |        |   | 141  
|Retail investment income              |                          |      | 914   |        |   | 538  
|Other                                 |                          |      | 1,338 |        |   | 1,275
|                                      |                          |      |       |        |   |      
|                                      | Total noninterest income |      | $     | 10,177 |   | $    
|                                      |                          |      |       |        |   |      

Total other income increased by $1,914,000 or 23% to $10,177,000 in 2003 which compares with $8,263,000 and $6,290,000 earned in 2002 and 2001. Deposit service
charges increased by $404,000 or 8% during 2003. The 2003, 2002, and 2001 increase in deposit service charges was primarily the result of an increase in demand deposit and NOW accounts in each of
these years as well as service charge increases on certain products and services during 2002. Income from sale of real estate grew by $575,000 due to the sale of properties previously charged off.
Loan packaging fees grew by $332,000 or 161% due to low interest rates and expanded mortgage operations. Retail investment income grew by $376,000 or 70% which is primarily due to the
June 2002, acquisition of RIA and expanded retail investment operations. Other income increased by $63,000 or 5% to $1,338,000 in 2003, compared to $1,275,000 and $1,023,000 in 2002 and 2001.

Noninterest ExpenseTotal noninterest expense increased $4,199,000 or 13% to $35,385,000 in 2003 as compared with an increase of $4,814,000
or 18% to $31,186,000 in 2002. Noninterest expense totaled $26,372,000 in 2001.

Salaries
and related benefits increased by $2,397,000 or 14% to $19,071,000 in 2003, compared with an increase of $3,059,000 or 22% to $16,674,000 in 2002. Salaries and related benefits totaled
$13,615,000 in 2001. The salary increases were primarily due to staff additions to support growth, the acquisition of RIA in 2002 and normal salary progression.

Premises
and occupancy expenses increased $420,000 or 17% to $2,946,000 in 2003 compared with an increase of $393,000 or 18% to $2,526,000 in 2002. Premises and occupancy expense totaled $2,133,000 in
2001. The increases in 2003 and 2002 were caused primarily by the addition of new branch facilities and expansion for general company growth.

Equipment
expenses increased $381,000 or 13% to $3,335,000 in 2003 compared with an increase of $215,000 or 8% to $2,954,000 in 2002. Equipment expenses were $2,739,000 in 2001. The increase in 2003
and 2002 was primarily due to equipment purchases relating to branch remodeling and general growth of the Company.

The
Company's professional fees include legal, consulting, audit and accounting fees. These expenses increased by $485,000 or 41% to $1,662,000 in 2003 as compared with a increase of $710,000 or 152%
to $1,177,000 in 2002. Total professional fees were $467,000 in 2001. The increase in 2003 was attributable to
increased consulting fees for a bank record retention / document retrieval project as well as other smaller bank projects and increased fees primarily related to general growth of the Company. In
addition, the costs related to regulatory compliance, including, but not limited to, compliance with the Sarbanes-Oxley Act of 2002, also increased. The increase in 2002 was attributable to increased
use of consulting services used to identify new business opportunities, tax saving strategies and fees related to the RIA acquisition.

Supplies
increased by $14,000 or 2% to $794,000 in 2003 as compared with an decrease of $105,000 or 12% to $780,000 in 2002. Supplies expense totaled $885,000 in 2001. The supplies expense has
increased and decreased for the last three years in relation to branch office growth,

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changes
in regulations and product disclosures, and with paper transaction volumes. Generally, as more banking transactions are delivered electronically, paper costs are reduced.

Marketing
expenses increased by $63,000 or 7% to $963,000 in 2003 as compared with a decrease of $49,000 or 5% to $900,000 in 2002. Marketing expenses totaled $949,000 in 2001. Marketing expenses have
been fairly stable over the past few years as the Company has actively promoted various deposit and loan products using television, newspaper, and other media sources to assist in attracting new and
retaining existing customers.

Other
expenses increased $443,000 or 8% to $5,938,000 in 2003. During 2002, other expenses increased $703,000 or 15% to $5,495,000. Other expenses were $4,792,000 in 2001. These expense increases are
generally the result of Company growth.

Provision for Income TaxesThe Company's provision for income taxes was $4,857,000 in 2003 compared to a provision for income taxes of
$2,455,000 and $2,819,000 in 2002 and 2001. The effective income tax rates (computed as income taxes as a percentage of income before income taxes) were 26%, 19%, and 26% for 2003, 2002, and 2001.
During 2002, the effective tax rate was lowered by the implementation of a certain capital raising strategy that had the effect of reducing state income taxes. This strategy lowered taxable state
income by approximately $16,000,000 and $3,100,000 in 2002 and 2001, respectively. During 2003, 2002 and 2001 the tax rate was lower than the statutory rate due also in part, to tax credits earned
from the investment of low-income housing partnerships that qualify for housing tax credits. Total housing tax credits for 2003, 2002, and 2001 were approximately $975,000, $750,000, and
$600,000. In addition, during 2003, 2002, and 2001, the Company realized tax benefits of $442,000,$407,000, and $386,000 from nontaxable interest
income received from bank qualified municipal securities.

During
2003, California enacted tax legislation that added new penalties for institutions that engaged in strategies and transactions that the Franchise Tax Board defined as abusive tax shelters. The
new tax shelter regulations give taxpayers until April 30, 2004 to take advantage of an amnesty period that would allow taxpayers to amend prior year tax filings without being subject to the
new tax shelter penalties. The Company does utilize a Real Estate Investment Trust ("REIT") which has generated tax savings and has now been listed by the Franchise Tax Board as an abusive tax
shelter. Company management believes the strategy used is lawful and defensible, and intends to defend the tax positions taken. If the Company
ultimately is unsuccessful in its defense, the FTB could impose additional tax shelter penalties of up to 70%. While this outcome is not expected, an adverse ruling against the Company is possible. If
such an event were to occur, it would adversely affect the Company's financial condition and results of operation. The Company has generated a cumulative total of $1,084,000 in recorded state tax
benefits from the REIT from January 1, 2001 through December 31, 2002.

Financial ConditionTotal assets increased $200,146,000 or 19% to $1,234,542,000 at December 31, 2003, compared to $1,034,396,000 at
December 31, 2002. Net loans increased to $750,989,000 at December 31, 2003, a 21% increase from the balance of $621,639,000 at December 31, 2002. Deposits grew by $194,429,000 or
23% in 2003 to $1,028,808,000 which compares to $834,379,000 at December 31, 2002. Growth in assets has been achieved primarily through the growth in deposits obtained through our retail branch
offices which has funded increased investment in loans and investment securities. The Company uses its retail branch system and outside calling officers to attract new deposit and loan customers.

SecuritiesThe following table sets forth the carrying amount (fair value) of available for sale securities at December 31,

|(Dollars in thousands)                   |                       | 2003 |         | 2002    |   | 2001   
|---------------------------------------- | --------------------- | ---- | ------- | ------- | - | -------
|
|U.S. Treasury & U.S. Government agencies |                       | $    | 55,269  |         | $ | 66,130 
|State and political subdivisions         |                       |      | 1,073   |         |   | 25,619 
|Mortgage-backed securities               |                       |      | 130,182 |         |   | 64,655 
|Collateralized mortgage obligations      |                       |      | 45,267  |         |   | 40,952 
|Corporate securities                     |                       |      | 3,078   |         |   | 3,559  
|                                         |                       |      |         |         |   |        
|                                         | Total debt securities |      |         | 234,869 |   |        
|Agency preferred stock                   |                       |      | 13,008  |         |   | 14,613 
|Trust preferred stock                    |                       |      | 5,023   |         |   | 4,927  
|Equity securities                        |                       |      | 22,503  |         |   | 10,937 
|                                         |                       |      |         |         |   |        
|Total carrying value and fair value      |                       | $    | 275,403 |         | $ | 231,392
|                                         |                       |      |         |         |   |        

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The following table sets forth the carrying amount (amortized cost) and fair value of held to maturity securities at December 31,

|(Dollars in thousands)                     |  | 2003 |        | 2002 |   | 2001  
|------------------------------------------ |  | ---- | ------ | ---- | - | ------
|
|U.S. Treasury and U.S. Government agencies |  | $    |       |      | $ | 4,629 
|State and political subdivisions           |  |      | 42,482 |      |   | 4,347 
|Mortgage-backed securities                 |  |      | 40,185 |      |   | 46,652
|Collateralized mortgage obligations        |  |      | 13,945 |      |   |      
|                                           |  |      |        |      |   |       
|Carrying amount (amortized cost)           |  | $    | 96,612 |      | $ | 55,628
|                                           |  |      |        |      |   |       
|Fair value                                 |  | $    | 97,295 |      | $ | 57,905
|                                           |  |      |        |      |   |       

Available for sale securities increased $44,011,000 or 19% to $257,403,000 at December 31, 2003 over the comparable balance of $231,392,000 at
December 31, 2002. Held to maturity securities increased $40,984,000 or 74% to $96,612,000 at December 31, 2003 compared to $55,628,000 outstanding at December 31, 2002. The
increases achieved within both segments of the securities portfolio were made possible by increased deposit liabilities and increased borrowings that were used to fund increased purchases of
investment securities. The single largest component of the Company's investment portfolio during the last three years has been mortgage-backed securities, which generally provide a higher yielding
investment return, but contain a longer maturity than the other types of securities contained with the investment portfolios. At December 31, 2003 and 2002 the Company did not hold any
structured notes. See Note 1 and 3 to the Company's Consolidated Financial Statements for further information concerning the securities portfolio.

LoansTotal loans increased $130,479,000 or 21% to $764,252,000 at December 31, 2003, compared to the $633,773,000 outstanding at
December 31, 2002. The increase in loan volumes in 2003 were due to increased penetration into existing geographic markets.

The
Company concentrates its lending activities in five principal areas: commercial, agricultural, real estate construction, real estate mortgage, and consumer loans. Interest rates charged for loans
made by the Company vary with the degree of risk, the size and term of the loan, and borrowers' depository relationships with the Company and prevailing market rates.

As
a result of the Company's loan portfolio mix, the future quality of these assets could be affected by adverse trends in its region or in the broader community. These trends are beyond the control
of the Company.

Credit Risk Management and Asset QualityThe Company closely monitors the markets in which it conducts its lending operations and adjusts
its strategy to control exposure to loans with higher credit risk. Asset reviews are performed using grading standards and criteria similar to those employed by bank regulatory agencies. Assets
receiving lesser grades become "classified assets" which include all nonperforming assets and potential problem loans and receive an elevated level of attention to improve the likelihood of
collection. The policy of the Company is to review each loan in the portfolio to identify problem credits. There are three classifications for problem loans: "substandard," "doubtful" and "loss."
Substandard loans have one or more defined weaknesses and are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Doubtful loans
have the weaknesses of substandard loans with the additional characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions and values
questionable, and there is a high possibility of loss. A loan classified as loss is considered uncollectible and its continuance as an asset is not warranted. The level of nonperforming loans and real
estate acquired through foreclosure are two indicators of asset quality. Nonperforming loans are those in which the borrower fails to perform under the original terms of the obligation and are
categorized as loans past due 90 days or more but still accruing, loans on nonaccrual status and restructured loans. Loans are generally placed on nonaccrual status and accrued but unpaid
interest is reversed against current year income when interest or principal payments become 90 days past due unless the outstanding principal and interest is adequately secured and, in the
opinion of management, are deemed to be in the process of collection. Loans that are not 90 days past due
may also be placed on nonaccrual status if management reasonably believes the borrower will not be able to comply to the contractual loan repayment terms and the collection of principal or interest is
in question.

Management
defines impaired loans as those loans, regardless of past due status, in which

23

---

principal
and interest are not expected to be collected under the original contractual loan repayment terms. An impaired loan is charged off at the time management believes the collection of principal
and interest process has been exhausted. Partial charge-offs are recorded when portions of impaired loans are deemed uncollectable. At December 31, 2003 and 2002, impaired loans
were measured based upon the present value of future cash flows discounted at the loan's effective rate, the loan's observable market price, or the fair value of collateral if the loan is collateral
dependent.

The
Company had impaired loans at December 31, 2003 of $3,987,000 as compared with $2,383,000 at December 31, 2002. Impaired loans as of December 31, 2003 were $3,987,000 which
had specific allowances for loan loss of $598,000 as compared with impaired loans of $2,383,000 as of December 31, 2002, which had specific allowance for loan losses of $406,000. Other forms of
collateral, such as inventory, chattel, and equipment secure the remaining nonperforming loans as of each date.

At
December 31, 2003 and 2002 the Bank had $60,000 of real estate acquired through foreclosure, which consisted of one residential foreclosure property.

Allowance for Loan LossesIn determining the adequacy of the allowance for loan losses, management takes into consideration the growth
trend in the portfolio, examinations by financial institution supervisory authorities, internal and external credit reviews, prior loan loss experience of the Company, concentrations of credit risk,
delinquency trends, general economic conditions and the interest rate environment. The allowance for loan losses is based on estimates and ultimate future losses may vary from current estimates. It is
always possible that future economic or other factors may adversely affect the Company's borrowers, and thereby cause loan losses to exceed the current allowance for loan losses.

The
balance in the allowance for loan losses was affected by the amounts provided from operations, amounts charged-off, and recoveries of loans previously charged off. The Company had
provisions to the allowance in 2003 of $2,455,000 as compared to $4,151,000 and $4,115,000 in 2002 and 2001. See "Results of Operations  Provision for Loan Losses."
The following table summarizes the loan loss experience of the Company for the years ended December 31,

|(Dollars in thousands)           |                         | 2003 |         | 2002   |   | 2001    |        | 2000 |         | 1999   |  
|-------------------------------- | ----------------------- | ---- | ------- | ------ | - | ------- | ------ | ---- | ------- | ------ | -
|
|Allowance for loan losses:       |                         |      |         |        |   |         |        |      |         |        |  
|Balance at beginning of year     |                         | $    | 12,134  |        | $ | 9,743   |        | $    | 8,207   |        | $
|Provision for loan losses        |                         |      | 2,455   |        |   | 4,151   |        |      | 4,115   |        |  
|Charge-offs:                     |                         |      |         |        |   |         |        |      |         |        |  
|Commercial and agricultural      |                         |      | 1,010   |        |   | 1,504   |        |      | 864     |        |  
|Real-estate  mortgage           |                         |      | 29      |        |   |        |        |      |        |        |  
|Consumer                         |                         |      | 956     |        |   | 1,085   |        |      | 2,288   |        |  
|                                 |                         |      |         |        |   |         |        |      |         |        |  
|                                 | Total charge-offs       |      |         | 1,995  |   |         | 2,589  |      |         | 3,152  |  
|                                 |                         |      |         |        |   |         |        |      |         |        |  
|Recoveries:                      |                         |      |         |        |   |         |        |      |         |        |  
|Commercial and agricultural      |                         |      | 302     |        |   | 233     |        |      | 159     |        |  
|Real-estate  mortgage           |                         |      |        |        |   |        |        |      |        |        |  
|Consumer                         |                         |      | 367     |        |   | 596     |        |      | 414     |        |  
|                                 |                         |      |         |        |   |         |        |      |         |        |  
|                                 | Total recoveries        |      |         | 669    |   |         | 829    |      |         | 573    |  
|                                 |                         |      |         |        |   |         |        |      |         |        |  
|Net charge-offs                  |                         |      | 1,326   |        |   | 1,760   |        |      | 2,579   |        |  
|                                 |                         |      |         |        |   |         |        |      |         |        |  
|Balance at end of year           |                         | $    | 13,263  |        | $ | 12,134  |        | $    | 9,743   |        | $
|                                 |                         |      |         |        |   |         |        |      |         |        |  
|Loans outstanding at year-end    |                         | $    | 764,252 |        | $ | 633,773 |        | $    | 532,420 |        | $
|Average loans outstanding        |                         | $    | 687,419 |        | $ | 576,156 |        | $    | 453,503 |        | $
|Net charge-offs to average loans |                         |      | .19     | %      |   | .31     | %      |      | .57     | %      |  
|Allowance for loan losses        |                         |      |         |        |   |         |        |      |         |        |  
|                                 | To total loans          |      |         | 1.74   | % |         | 1.91   | %    |         | 1.83   | %
|                                 | To nonperforming loans  |      |         | 332.70 | % |         | 509.15 | %    |         | 200.65 | %
|                                 | To nonperforming assets |      |         | 327.74 | % |         | 496.56 | %    |         | 182.85 | %

24

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The Company's charge-offs, net of recoveries, were $1,326,000 in 2003 as compared with $1,760,000 and $2,579,000 in 2002 and 2001. This represents loan loss experience ratios of 0.19%,
0.31% and 0.57% in those respective years stated as a percentage of average loans outstanding for each year. The decrease in net charge-offs in 2003 when compared to 2002 is due to
decreased net charge offs within the consumer portfolio as well as the commercial and agricultural portfolios. As of December 31, 2003 the allowance for loan losses was $13,263,000 or 1.74% of
total loans outstanding. This compares with an allowance for loan losses of $12,134,000 or 1.91% in 2002 and $9,743,000 or 1.83% in 2001. The decrease in net charge-offs in 2002 compared
to 2001 was due to decreased net charge-offs within the consumer portfolio.

LiquidityTo maintain adequate liquidity requires that sufficient resources be available at all times to meet cash flow requirements of the
Company. The need for liquidity in a banking institution arises principally to provide for deposit withdrawals, the credit needs of its customers and to take advantage of investment opportunities as
they arise. The company may achieve desired liquidity from both assets and liabilities. The Company considers cash and deposits held in other banks, federal funds sold, other short term investments,
maturing loans and investments, receipts of principal and interest on loans, available for sale investments and potential loan sales as sources of asset liquidity. Deposit growth and access to credit
lines established with correspondent banks and market sources of funds are considered by the Company as sources of liquidity. The Company is the sole shareholder of the Bank, and derives it's primary
source of liquidity from it's ability to receive dividends from the Bank. Dividends from the Bank are subject to certain regulatory limitations.

Recent
accounting rule changes have resulted in the variable interest entities used for trust preferred offerings no longer being treated as consolidated subsidiaries of trust preferred issuers. The
FRB has indicated that trust preferred securities will continue to constitute Tier 1 capital until further notice. However, there could be a change to the regulatory capital treatment of
preferred securities issued by bank holding companies, such as a conclusion being reached by the FRB that preferred securities should no longer be treated as Tier 1 regulatory capital. In
addition, the SEC staff has concluded that all banks and bank holding companies must deconsolidate the trusts used for trust preferred offerings as of December 31, 2003.

The
Company reviews its liquidity position on a regular basis based upon its current position and expected trends of loans and deposits. Management believes that the Company maintains adequate amounts
of liquid assets to meet its liquidity needs. These assets include cash and deposits in other banks, available for sale securities and federal funds sold. The Company's liquid assets totaled
$321,235,000 and $305,075,000 at December 31, 2003 and 2002 and were 26% and 29% of total assets on December 31, 2003 and 2002. Cash and noninterest-bearing deposits in other banks
decreased $2,336,000 or 5% to $44,292,000 at December 31, 2003, compared to $46,628,000 at December 31, 2002. The decrease in the 2003 cash position when compared to 2002 was the result
of decreased in-transit cash items at December 31, 2003 when compared to December 31, 2002. Liquidity is also affected by collateral requirements of its public agency
deposits and certain borrowings. Total pledged securities were $295,024,000 and $193,962,000 at December 31, 2003 and 2002.

Although
the Company's primary sources of liquidity include liquid assets and a stable deposit base, the Company maintains lines of credit with certain correspondent banks, the Federal Reserve Bank,
and the Federal Home Loan Bank aggregating $174,313,000 of which $83,346,000 was outstanding as of December 31, 2003. This compares with lines of credit of $160,546,000 of which $100,841,000
was outstanding as of December 31, 2002.

The
following table sets forth known contractual obligations of the Company at December 31, 2003:

Contractual
Obligations

|At December 31, 2003
(Dollars in thousands) |  | Within
One
Year |        | One to
Three Years |   | Three
To Five
Years |  | After
Five
Years |        | Total
|------------------------------------------- |  | --------------- | ------ | ------------------ | - | ------------------- |  | ---------------- | ------ | -----
|
|Borrowings                                  |  | $               | 25,731 |                    | $ | 27,792              |  | $                | 26,672 |      
|Operating leases                            |  |                 | 1,102  |                    |   | 1,960               |  |                  | 1,308  |      
|Purchase obligations                        |  |                 | 1,400  |                    |   |                    |  |                  |       |      
|                                            |  |                 |        |                    |   |                     |  |                  |        |      
|                                            |  | $               | 28,233 |                    | $ | 29,752              |  | $                | 27,980 |      
|                                            |  |                 |        |                    |   |                     |  |                  |        |      

25

---

Borrowings and operating lease obligations are discussed in the consolidated financial statements at Notes 5 and 10, respectively. The purchase obligation
consists of one contract to build a retail branch office in Fresno, California.

Market and Interest Rate Risk ManagementIn the normal course of business, the Company is exposed to market risk which includes both price
and liquidity risk. Price risk is created from fluctuations in interest rates and the mismatch in repricing characteristics of assets, liabilities, and off-balance sheet instruments at a
specified point in time. Mismatches in interest rate repricing among assets and liabilities arise primarily through the interaction of the various types of loans versus the types of deposits that are
maintained as well as from management's discretionary investment and funds gathering activities. Liquidity risk arises from the possibility that the Company may not be able to satisfy current and
future financial commitments or that the Company may not be able to liquidate financial instruments at market prices. Risk management policies and procedures have been established and are utilized to
manage the Company's exposure to market risk. Quarterly testing of the Company's assets and liabilities under both increasing and decreasing interest rate environments are performed to insure the
Company does not assume a magnitude of risk that is outside approved policy limits.

The
Company's success is largely dependent upon its ability to manage interest rate risk. Interest rate risk can be defined as the exposure of the Company's net interest income to adverse movements in
interest rates. Although the Company manages other risks, such as credit and liquidity risk in the normal course of its business, management considers interest rate risk to be its most significant
market risk and could potentially have the largest material effect on the Company's financial condition and results of operations. Correspondingly, the overall strategy of the Company is to manage
interest rate risk, primarily through balance sheet structure, to be interest rate neutral. The Company does engage in the use derivative instruments to control interest rate risk. During the third
quarter of 2001, the Company entered into a $20,000,000 hedge transaction exchanging a fixed interest rate for a variable rate tied to the prime rate. This hedge transaction was designed to give some
interest income protection in a falling rate environment. This type of hedging activity is permitted subject to the approval of the Board of Directors.

The
Company's interest rate risk management is the responsibility of the Asset/Liability Management Committee (ALCO), which reports to the Board of Directors. ALCO establishes policies that monitor
and coordinate the Company's sources, uses and pricing of funds. ALCO is also involved in formulating the economic projections for the Company's budget and strategic plan. ALCO sets specific rate
sensitivity limits for the Company. ALCO monitors and adjusts the Company's exposure to changes in interest rates to achieve predetermined risk targets that it believes are consistent with current and
expected market conditions. Balance sheet management personnel monitor the asset and liability changes on an ongoing basis and provide report information and recommendations to the ALCO committee in
regards to those changes.

Earnings SensitivityThe Company's net income is dependent on its net interest income. Net interest income is susceptible to interest rate
risk to the degree that interest-bearing liabilities mature or reprice on a different basis than interest-earning assets. When interest-bearing liabilities mature or reprice more quickly than
interest-earning assets in a given period, a significant increase in market rates of interest could adversely affect net interest income. Similarly, when interest-earning assets mature or reprice more
quickly than interest-bearing liabilities, falling interest rates could result in a decrease in net interest income.

The
primary analytical tool used by the Company to gauge interest rate sensitivity is a net interest income simulation model used by many other financial institutions. The model, which is updated
quarterly, incorporates all of the Company's assets and liabilities and off-balance sheet funding commitments, together with assumptions that reflect the current interest rate environment.
The Company does utilize off-balance sheet derivative financial instruments such as interest rate swaps, futures contracts, or other financial hedging instruments in managing interest rate
risk. The model projects changes in cash flow of the various interest-earning assets and interest-bearing liabilities in both rising and falling interest rate environments. Based on the current
portfolio mix, this model is used to estimate the effects of changes in market rates on the Company's net interest income under interest rate conditions that

26

---

simulate
an immediate and sustained shift in the yield curve of up 2 percent and down 1 percent, as well as the effect of immediate and sustained flattening or steepening of the yield
curve. This model's estimate of interest rate sensitivity takes into account the differing time intervals and differing rate change increments of each type of interest sensitive asset and liability.

The
estimated impact of immediate changes in interest rates at the specified levels at December 31, 2003 and 2002 is presented in the following tables:

December 31, 2003

|Change in interest rates
(In basis points) |  | Change in net interest
Income(1) |            | Percentage change in net interest
income |     
|------------------------------------------ |  | -------------------------------- | ---------- | ---------------------------------------- | ----
|
|+200                                       |  | $                                | 173,000    |                                          | 0.3 
|-100                                       |  | $                                | (1,257,000 | )                                        | (2.5

December 31, 2002

|Change in interest rates
(In basis points) |  | Change in net interest
Income(1) |          | Percentage change in net interest
income |     
|------------------------------------------ |  | -------------------------------- | -------- | ---------------------------------------- | ----
|
|+200                                       |  | $                                | 552,000  |                                          | +1.4
|-100                                       |  | $                                | (766,000 | )                                        | -1.8

It should be emphasized that the results are dependent on material assumptions such as those discussed above. For instance, asymmetrical interest rate behavior
can have a material impact on the simulation results.

The
Company's primary objective in managing interest rate risk is to minimize the adverse impact of changes in interest rates on the Company's net interest income and capital, while structuring the
Company's asset-liability structure to obtain the maximum yield-cost spread on that structure. The Company relies primarily on its asset-liability structure to control interest rate risk.

Based
upon the December 31, 2003 mix of interest sensitive assets and liabilities, given sustained increase in the federal funds rate of 2%, this model estimated the Company's cumulative net
interest income over the next year would increase by
$173,000. This compares with a cumulative one year expected increase in net interest income of $552,000 as of December 31, 2002. If prevailing market interest rates sustained a decrease of 1.0%
at December 31, 2003, this model estimated the Company's cumulative one year expected decrease in net interest income would be $1,257,000. This compares with an expected cumulative one year
decrease in net interest income of $766,000 as of December 31, 2002. The model shows that at December 31, 2003 if interest rates increase or decrease, the Company has similar interest
rate risk exposure as compared to December 31, 2002, with slightly more negative results in a decreasing rate environment. As the total measure of interest rate risk indicates, the Company is
modestly asset sensitive.

Off-Balance Sheet ArrangementsDuring 2001, the Company entered into an interest rate exchange agreement with the Federal Home
Loan Bank ("FHLB") of San Francisco that was recorded as a cash flow hedge transaction. The notional amount of the swap is $20 million with a term of 3 years expiring on
August 23, 2004. This swap is subject to collateral requirements that are established by the FHLB. For more information regarding this swap transaction, see Note 1, the section titled
"Derivative Instruments and Hedging Activities" in this report.

During
2003, the Company entered into $20,000,000 of delayed settlement FHLB borrowings. Under the terms of these borrowings, the Company agreed to borrow $20,000,000 from the FHLB at fixed dates
during 2004 at interest rates that are currently known.

The
Bank has also extended firm lending commitments in the form of unused credit lines to loan customers. These commitments may or may not ever be drawn upon, depending on the credit needs of the
Bank's loan customers. For more information regarding these loan commitments, See Note 10, titled "Commitments and Financial Instruments With Off-Balance Sheet Credit Risk" in the
Company's 2003 annual report.

Capital ResourcesThe Company is subject to various regulatory capital requirements administered by the federal banking agencies. Failure
to meet minimum capital requirements can initiate mandatory and possibly additional discretionary actions by the regulators that, if

27

---

undertaken,
could have a material effect on the Company's financial statements. Management believes, as of December 31, 2003, that the Company and the Bank meet all capital requirements to
which they are subject. The Company's leverage capital ratio at December 31, 2003 was 8.55% as compared with 7.68% as of December 31, 2002. The Company's total risk-based
capital ratio at December 31, 2003 was 11.57% as compared to 10.74% as of December 31, 2002.

Capital
ratios are reviewed on a regular basis to ensure that capital exceeds the prescribed regulatory minimums and is adequate to meet the Company's future needs. All ratios are in excess of the
regulatory definitions of "well capitalized". Management believes that, under the current regulations, the Company will continue to meet its minimum capital requirements in the foreseeable future.

The
Company has no formal dividend policy, and dividends are issued solely at the discretion of the Company's Board of Directors, subject to compliance with regulatory requirements. In order to pay
any cash dividend, the Company must receive payments of dividends or management fees from the Bank. There are certain regulatory limitations on the payment of cash dividends by banks. Notwithstanding
regulatory restrictions, in order for the Bank to maintain a 10% risk weighted capital ratio, the Company had the ability to pay cash dividends at December 31, 2003 of $15,373,000. The Bank had
the ability to pay cash dividends to the Company at December 31, 2002 of $4,935,000.

Impact of InflationThe primary impact of inflation on the Company is its effect on interest rates. The
Company's primary source of income is net interest income which is affected by changes in interest rates. The Company attempts to limit inflation's impact on its net interest margin through management
of rate-sensitive assets and liabilities and the analysis of interest rate sensitivity. The effect of inflation on premises and equipment, as well as noninterest expenses, has not been
significant for the periods covered in this report.

Market for Company's Common Stock and Related Stock MattersThe Company's stock is included for quotation on the NASDAQ National Market
System with a stock quotation symbol of CCOW.

The
following table indicates the range of high and low sales prices for the period shown, based upon information provided by the NASDAQ National Market System.

|2003        |  | High |       | Low
|----------- |  | ---- | ----- | ---
|
|4th quarter |  | $    | 41.25 |    
|3rd quarter |  |      | 35.30 |    
|2nd quarter |  |      | 26.58 |    
|1st quarter |  | $    | 26.31 |    

|2002        |  | High |       | Low
|----------- |  | ---- | ----- | ---
|
|4th quarter |  | $    | 23.95 |    
|3rd quarter |  |      | 20.05 |    
|2nd quarter |  |      | 22.00 |    
|1st quarter |  | $    | 20.11 |    

Generally, the Company has retained earnings to support the growth of the Company and has not paid regular cash dividends.

28

---

Independent Auditors' Report

To the Board of Directors and Shareholders of Capital Corp of the West:

We
have audited the accompanying consolidated balance sheets of Capital Corp of the West and subsidiaries (the Company) as of December 31, 2003 and 2002, and the related
consolidated statements of income and comprehensive income, cash flows, and shareholders' equity for each of the years in the three year period ended December 31, 2003. These consolidated
financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

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

In
our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Capital Corp of the West and subsidiaries as
of December 31, 2003 and 2002 and the results of their operations and their cash flows for each of the years in the three year period ended December 31, 2003, in conformity with
accounting principles generally accepted in the United States of America.

KPMG LLP

Sacramento,
California
January 27, 2004

29

---

Capital Corp of the West
Consolidated Balance Sheets

|                     |                                                                                                                                        | As of December 31,
|-------------------- | -------------------------------------------------------------------------------------------------------------------------------------- | ------------------
|
|
|Assets               |                                                                                                                                        |                   
|                     | Cash and noninterest-bearing deposits in other banks                                                                                   |                   
|                     | Federal funds sold                                                                                                                     |                   
|                     | Time deposits at other financial institutions                                                                                          |                   
|                     | Investment securities available for sale, at fair value                                                                                |                   
|                     | Investment securities held to maturity, at cost; market values of $97,295 and $57,905 in 2003 and 2002                                 |                   
|                     | Loans, net of allowance for loan losses of $13,263 and $12,134 at December 31,2003 and December 31, 2002                               |                   
|                     | Interest receivable                                                                                                                    |                   
|                     | Premises and equipment, net                                                                                                            |                   
|                     | Goodwill and other intangible assets                                                                                                   |                   
|                     | Cash value of life insurance                                                                                                           |                   
|                     | Investment in housing tax credit limited partnerships                                                                                  |                   
|                     | Other assets                                                                                                                           |                   
|                     |                                                                                                                                        |                   
|                     | Total assets                                                                                                                           |                   
|                     |                                                                                                                                        |                   
|Liabilities          |                                                                                                                                        |                   
|                     | Deposits:                                                                                                                              |                   
|                     |                                                                                                                                        |                   
|                     |                                                                                                                                        |                   
|                     |                                                                                                                                        |                   
|                     |                                                                                                                                        |                   
|                     |                                                                                                                                        |                   
|                     |                                                                                                                                        |                   
|                     |                                                                                                                                        |                   
|                     | Other borrowings                                                                                                                       |                   
|                     | Junior subordinated debentures                                                                                                         |                   
|                     | Accrued interest, taxes and other liabilities                                                                                          |                   
|                     |                                                                                                                                        |                   
|                     | Total liabilities                                                                                                                      |                   
|Shareholders' Equity |                                                                                                                                        |                   
|                     | Preferred stock, no par value; 10,000,000 shares authorized; none outstanding                                                          |                   
|                     | Common stock, no par value; 20,000,000 shares authorized; 5,660,739 and 5,591,336 issued and outstanding at December 31, 2003 and 2002 |                   
|                     | Retained earnings                                                                                                                      |                   
|                     | Accumulated other comprehensive income, net                                                                                            |                   
|                     |                                                                                                                                        |                   
|                     |                                                                                                                                        |                   
|                     |                                                                                                                                        |                   
|                     |                                                                                                                                        |                   
|                     |                                                                                                                                        |                   

See accompanying notes to consolidated financial statements

30

---

Capital Corp of the West
Consolidated Statements of Income and Comprehensive Income

|                                                                    |                                                             | Years Ended December 31,
|------------------------------------------------------------------- | ----------------------------------------------------------- | ------------------------
|
|
|Interest income:                                                    |                                                             |                         
|                                                                    | Interest and fees on loans                                  |                         
|                                                                    | Interest on deposits with other financial institutions      |                         
|                                                                    | Interest on investment securities held to maturity:         |                         
|                                                                    |                                                             |                         
|                                                                    |                                                             |                         
|                                                                    | Interest on investment securities available for sale:       |                         
|                                                                    |                                                             |                         
|                                                                    |                                                             |                         
|                                                                    | Interest on federal funds sold                              |                         
|                                                                    |                                                             |                         
|                                                                    |                                                             |                         
|Interest expense:                                                   |                                                             |                         
|Deposits:                                                           |                                                             |                         
|                                                                    | Negotiable orders of withdrawal                             |                         
|                                                                    | Savings                                                     |                         
|                                                                    | Time, under $100,000                                        |                         
|                                                                    | Time, $100,000 and over                                     |                         
|                                                                    |                                                             |                         
|                                                                    |                                                             |                         
|                                                                    | Interest on Subordinated Debentures                         |                         
|                                                                    | Other borrowings                                            |                         
|                                                                    |                                                             |                         
|                                                                    |                                                             |                         
|Net interest income                                                 |                                                             |                         
|Provision for loan losses                                           |                                                             |                         
|                                                                    |                                                             |                         
|Net interest income after provision for loan losses                 |                                                             |                         
|Noninterest income:                                                 |                                                             |                         
|                                                                    | Service charges on deposit accounts                         |                         
|                                                                    | Gain from sale of real estate                               |                         
|                                                                    | Increase in cash surrender value of life insurance policies |                         
|                                                                    | Other                                                       |                         
|                                                                    |                                                             |                         
|                                                                    |                                                             |                         
|Noninterest expenses:                                               |                                                             |                         
|                                                                    | Salaries and related benefits                               |                         
|                                                                    | Premises and occupancy                                      |                         
|                                                                    | Equipment                                                   |                         
|                                                                    | Professional fees                                           |                         
|                                                                    | Supplies                                                    |                         
|                                                                    | Marketing                                                   |                         
|                                                                    | Intangible amortization                                     |                         
|                                                                    | Other                                                       |                         
|                                                                    |                                                             |                         
|                                                                    |                                                             |                         
|Income before provision for income taxes                            |                                                             |                         
|Provision for income taxes                                          |                                                             |                         
|                                                                    |                                                             |                         
|Net income                                                          |                                                             | $                       
|                                                                   
|Comprehensive income:                                               |                                                             |                         
|Unrealized (loss) gain on securities arising during the period, net |                                                             |                         
|                                                                    |                                                             |                         
|Comprehensive income                                                |                                                             | $                       
|                                                                    |                                                             |                         
|                                                                   
|Basic earnings per share                                            |                                                             | $                       
|Diluted earnings per share                                          |                                                             | $                       

See accompanying notes to consolidated financial statements

31

---

Capital Corp of the West
Consolidated Statements of Shareholders' Equity

|                                                                                      |  | Common Stock |  |   |        |  |   |        |  
|------------------------------------------------------------------------------------- |  | ------------ |  | - | ------ |  | - | ------ | -
|
|
|                                                                                      | 
|Balance, December 31, 2000                                                            |  | 4,552        |  | $ | 35,918 |  | $ | 17,449 |  
|                                                                                      | 
|5% stock dividend, including cash payment for fractional shares                       |  | 228          |  |   | 2,981  |  |   | (2,988 | )
|Exercise of stock options                                                             |  | 98           |  |   | 595    |  |   |       |  
|Issuance of shares pursuant to 401K and ESOP plans                                    |  | 49           |  |   | 595    |  |   |       |  
|Net change in fair market value of investment securities, net of tax effect of $1,060 |  |             |  |   |       |  |   |       |  
|Net income                                                                            |  |             |  |   |       |  |   | 7,911  |  
|                                                                                      | 
|Balance, December 31, 2001                                                            |  | 4,927        |  | $ | 40,089 |  | $ | 22,372 |  
|                                                                                      | 
|Exercise of stock options, including tax benefit                                      |  | 116          |  |   | 846    |  |   |       |  
|Issuance of shares pursuant to 401K and ESOP plans                                    |  | 35           |  |   | 537    |  |   |       |  
|Net change in fair market value of investment securities, net of tax effect of $840   |  |             |  |   |       |  |   |       |  
|5% stock dividend, including cash payment for fractional shares                       |  | 247          |  |   | 4,964  |  |   | (4,976 | )
|Net income                                                                            |  |             |  |   |       |  |   | 10,428 |  
|                                                                                      | 
|Balance, December 31, 2002                                                            |  | 5,325        |  | $ | 46,436 |  | $ | 27,824 |  
|                                                                                      | 
|Exercise of stock options, including tax benefit                                      |  | 63           |  |   | 934    |  |   |       |  
|Issuance of shares pursuant to 401K and ESOP plans                                    |  | 7            |  |   | 226    |  |   |       |  
|Net change in fair market value of investment securities, net of tax effect of $1,613 |  |             |  |   |       |  |   |       |  
|5% stock dividend, including cash payment for fractional shares                       |  | 266          |  |   | 6,632  |  |   | (6,648 | )
|Net income                                                                            |  |             |  |   |       |  |   | 13,640 |  
|                                                                                      | 
|Balance, December 31, 2003                                                            |  | 5,661        |  | $ | 54,228 |  | $ | 34,816 |  
|                                                                                      | 

See accompanying notes to consolidated financial statements

32

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Capital Corp of the West
Consolidated Statements of Cash Flows

|                                                                                                                      |  | Years Ended December 31, |         
|--------------------------------------------------------------------------------------------------------------------- |  | ------------------------ | --------
|
|                                                                                                                      | 
|Operating activities:                                                                                                 |  |                          |         
|Net income                                                                                                            |  | $                        | 13,640  
|Adjustments to reconcile net income to net cash provided by operating activities:                                     |  |                          |         
|Provision for loan losses                                                                                             |  |                          | 2,455   
|Depreciation, amortization and accretion, net                                                                         |  |                          | 5,457   
|Benefit from deferred income taxes                                                                                    |  |                          | (1,582  
|Loss on sale of available for sale investment securities                                                              |  |                          |        
|Gain on sale of real estate                                                                                           |  |                          | (608    
|Net increase in interest receivable & other assets                                                                    |  |                          | (8,203  
|Net decrease (increase) in accrued interest payable & other liabilities                                               |  |                          | 478     
|                                                                                                                      | 
|Net cash provided by operating activities                                                                             |  | $                        | 11,637  
|                                                                                                                      | 
|Investing activities:                                                                                                 |  |                          |         
|Investment security purchases  available for sale securities                                                         |  |                          | (47,757 
|Investment security purchases  held to maturity securities                                                           |  |                          | (14,400 
|Investment security purchases  mortgage-backed securities and collaterized mortgage obligations  available for sale |  |                          | (129,084
|Investment security purchases  mortgage-backed securities and collateralized mortgage obligations  held to maturity |  |                          | (35,305 
|Proceeds from maturities of available for sale investment securities                                                  |  |                          | 45,417  
|Proceeds from maturities of held to maturity investment securities                                                    |  |                          | 5,515   
|Proceeds from maturities of mortgage-backed securities and collateralized mortgage obligations  available for sale   |  |                          | 56,942  
|Proceeds from maturities of mortgage-backed securities and collateralized mortgage obligations  held to maturity     |  |                          | 27,827  
|Proceeds from sales of available for sale investment securities                                                       |  |                          |        
|Proceeds from sales of mortgage-backed securities and collateralized mortgage obligations  available for sale        |  |                          |        
|Net decrease (increase) in time deposits in other financial institutions                                              |  |                          | 150     
|Proceeds from sales of commercial and real estate loans                                                               |  |                          | 4,026   
|Origination of loans                                                                                                  |  |                          | (567,501
|Proceeds from repayment of loans                                                                                      |  |                          | 429,655 
|Purchases of premises and equipment                                                                                   |  |                          | (3,960  
|Proceeds from sales of real estate                                                                                    |  |                          | 832     
|Purchase of subsidiary                                                                                                |  |                          |        
|                                                                                                                      | 
|Net cash used in investing activities                                                                                 |  | $                        | (227,643
|                                                                                                                      | 
|Financing activities:                                                                                                 |  |                          |         
|Net increase in demand, NOW and savings deposits                                                                      |  |                          | 165,002 
|Net increase in certificates of deposit                                                                               |  |                          | 29,427  
|Proceeds from borrowings                                                                                              |  |                          | 5,000   
|Repayment of borrowings                                                                                               |  |                          | (22,387 
|Issued shares for benefit plan purchases                                                                              |  |                          | 226     
|Payment for fractional shares                                                                                         |  |                          | (16     
|Issuance of Junior Subordinated Debentures                                                                            |  |                          | 10,310  
|Exercise of stock options, net                                                                                        |  |                          | 743     
|                                                                                                                      | 
|Net cash provided by financing activities                                                                             |  | $                        | 188,305 
|                                                                                                                      | 
|Net (decrease) increase in cash and cash equivalents                                                                  |  |                          | (27,701 
|Cash and cash equivalents at beginning of year                                                                        |  |                          | 73,183  
|                                                                                                                      | 
|Cash and cash equivalents at end of year                                                                              |  | $                        | 45,482  
|                                                                                                                      | 
|Supplemental disclosure of non-cash investing and financing activities:                                               |  |                          |         
|Investment securities unrealized (losses) gains, net of taxes                                                         |  | $                        | (2,468  
|Interest paid                                                                                                         |  |                          | 16,054  
|Income tax payments                                                                                                   |  |                          | 4,355   
|Transfer of securities from available for sale to held to maturity                                                    |  |                          | 24,557  
|Loans transferred to other real estate owned                                                                          |  | $                        | 224     

See accompanying notes to consolidated financial statements

33

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NOTE 1. Summary of Significant Accounting Policies

Capital
Corp of the West (the "Company") is a registered bank holding company, which provides a full range of banking services to individual and business customers primarily in the Central San Joaquin
Valley, through its subsidiaries. The following is a description of the more significant policies.

Principles of Consolidation:The consolidated financial statements of Capital Corp of the West include its subsidiaries: County Bank (the
"Bank"), Capital West Group ("CWG"), Regency Investment Advisors ("RIA"), and the subsidiaries of County Bank which include County Asset Advisor, Inc. ("CAA"), Merced Area Investment
Development, Inc. ("MAID"), and County Investment Trust ("REIT"). CWG, a subsidiary formed in 1996, became inactive in 1997. Regency Investment Advisors was acquired in June 2002. All
significant intercompany balances and transactions are eliminated.

The
consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. In preparing the consolidated financial statements,
management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reported period. Actual results could differ from those estimates applied in the preparation of the consolidated financial
statements. A material estimate that is particularly susceptible to change in the near term relates to the determination of the allowance for loan losses.

Cash and Cash Equivalents:The Company maintains deposit balances with various banks which are necessary for check collection and account
activity charges. Cash in excess of immediate requirements is invested in federal funds sold or other short-term investments. Generally, federal funds are sold for periods from one to
thirty days. Cash, noninterest-bearing deposits in other banks and federal funds sold are considered to be cash and cash equivalents for the purposes of the consolidated statements of cash flows.
Banks are required to maintain minimum average reserve balances with the Federal Reserve Bank. The amount of those reserve balances was approximately $25,000 at December 31, 2003 and 2002.

Investment Securities:Investment securities consist of U.S. treasury, federal agencies, state and county municipal securities, corporate
bonds, mortgage-backed securities, collateralized mortgage obligations,
agency preferred stock, trust preferred stock and equity securities. Investment securities are classified into one of three categories. These categories include trading, available for sale, and held
to maturity. The category of each security is determined based on the Company's investment objectives, operational needs and intent. The Company has not purchased securities with the intent of
actively trading them.

Securities
available for sale may be sold prior to maturity and are available for future liquidity requirements. These securities are carried at fair value. Unrealized gains and losses on securities
available for sale are excluded from earnings and reported net of tax as a separate component of shareholders' equity until realized.

Securities
held to maturity are classified as such where the Company has the ability and positive intent to hold them to maturity. These securities are carried at cost, adjusted for amortization of
premiums and accretion of discounts.

Premiums
and discounts are amortized or accreted over the life of the related investment security as an adjustment to yield using the effective interest method. Dividend and interest income are
recognized when earned. Realized gains and losses for securities classified as available for sale or held to maturity are included in earnings and are derived using the specific identification method
for determining the cost of securities sold. Unrealized losses due to fluctuations in fair value of securities held to maturity or available for sale are recognized through earnings when it is
determined that there is other than temporary impairment.

Loans:Loans are carried at the principal amount outstanding, net of unearned income, including deferred loan origination fees and costs.
Nonrefundable loan origination and commitment fees and the direct costs associated with originating or acquiring the loans are deferred and amortized as an adjustment to interest income over

34

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the
life of the related loan using a method that approximates the level yield method.

Interest
income on loans is accrued based on contract interest rates and principal amounts outstanding. Loans which are more than 90 days delinquent, with respect to interest or principal, are
placed on non-accrual status, unless the outstanding principal and interest is adequately secured and, in the opinion of management, remains collectable. Uncollected accrued interest is
reversed against interest income, and interest is subsequently recognized only as received until the loan is returned to accrual status. Interest accruals are resumed when such loans are brought fully
current with respect to interest and principal and when, in the judgment of management, the loans are estimated to be fully collectable as to both principal and interest.

A
loan is considered impaired, if it is probable that the Company will be unable to collect the scheduled payments of principal and interest when due according to the contractual terms of the loan
agreement. Any allowance for loan losses on impaired loans is measured based upon the present value of future cash flows
discounted at the loan's effective rate, the loan's observable market price, or the fair value of collateral if the loan is collateral dependent. Interest on impaired loans is recognized on a cash
basis. In general, these statements are not applicable to large groups of small balance homogenous loans that are collectively evaluated for impairment, such as residential mortgage and consumer
installment loans. Income recognition on impaired loans conforms to the method the Company uses for income recognition on nonaccrual loans. Interest income on nonaccrual loans is recorded on a cash
basis. Payments may be treated as interest income or return of principal depending upon management's opinion of the ultimate risk of loss on the individual loan. Cash payments are treated as interest
income when management believes the remaining principal balance is fully collectable.

Allowance for Loan Losses:The allowance for loan losses is maintained at the level considered to be adequate for inherent loan losses
based on management's assessment of various factors affecting the loan portfolio, which include: growth trends in the portfolio, historical experience, concentrations of credit risk, delinquency
trends, general economic conditions, and internal and external credit reviews. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the
Company's allowance for loan losses. Such agencies may require the Company to recognize additions to the allowance for loan losses based on their judgment of information available to them at the time
of their examination. Additions to the allowance for loan losses, in the form of provision for loan losses, are reflected in current operating results, while charge-offs to the allowance
for loan losses are made when a loss is determined to have occurred. Management uses the best information available on which to base estimates, however, ultimate losses may vary from current
estimates.

Gain or Loss on Sale of Loans:Transfers of real estate mortgage loans held for sale in which the Company surrenders control over those
loans are accounted for as a sale to the extent that consideration other than beneficial interests in the transferred loans is received in exchange. There were no loans held for sale as of
December 31, 2003 and 2002. Gains or losses are recognized at the time of sale and are calculated based on the amounts received and the book value of the loans sold.

Premises and Equipment:Premises and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation and
amortization are computed on the straight line basis over the estimated useful life of each type of asset. Estimated useful lives range up to 39 years for buildings, up to the lease term for
leasehold improvements, and 3 to 15 years for furniture and equipment.

Other Real Estate:Other real estate is comprised of property acquired through foreclosure proceedings or acceptance of
deeds-in-lieu of foreclosure. Losses recognized at the time of acquiring property in full or partial satisfaction of debt are charged against the allowance for loan losses.
Other real estate is recorded at the lower of the related loan balance or fair value, less estimated disposition costs. Fair value of other real estate is generally based on an independent appraisal
of the property. Any subsequent costs or losses are recognized as noninterest expense when incurred.

Goodwill and Other Intangible Assets:Goodwill represents the excess of costs over the fair value of net assets of businesses acquired.
Goodwill was generated with the purchase of the Town and

35

---

Country
Finance and Thrift (the "Thrift") in June 1996. The Thrift's assets, including intangible assets, were subsequently merged into County Bank in November 1999, and the Thrift's
charter eliminated. Goodwill associated with the purchase of the Thrift is no longer being amortized beginning on January 1, 2002 and had a balance of $1,405,000 as of December 31, 2003
and 2002. The goodwill associated with the purchase of Regency Investment Advisors Inc. in June 2002 was $520,000. Core deposit intangibles, representing the excess of purchase price
paid over the fair value of net savings deposits acquired, were generated by the purchase of the Thrift in June 1996 and the purchase of three branches from the Bank of America in December,
1997. Core deposit intangibles resulting from these acquisitions are being amortized over 10 and 7 years, respectively. Core deposit intangibles had a balance of $724,000 and $1,399,000 as of
December 31, 2003 and 2002. Amortization of core deposit premiums was $676,000, $680,000, and $680,000 for the years ended December 31, 2003, 2002 and 2001. Core deposit premiums are
scheduled to amortize at a rate of approximately $170,000 per quarter through the quarter ended September 30, 2004 and at a rate of $47,000 during the fourth quarter of 2004. Goodwill and
intangible assets are reviewed on a periodic basis for impairment. If such impairment is indicated, recoverability of the asset is assessed based upon expected undiscounted net cash flows.

In
July 2001, the FASB issued Statement No. 142, Goodwill and Other Intangible Assets. Statement 142 requires that goodwill and intangible assets acquired in a business combination and
determined to have an indefinite useful life are not amortized, but instead are tested for impairment at least annually in accordance with the provisions of Statement 142. Intangible assets with
definite useful lives are required to be amortized over their respective estimated useful lives to their estimated residual values, and also reviewed for impairment in accordance with FASB Statement
No. 144,Accounting for Impairment or Disposal of Long-Lived Assets.The Company was required to adopt the provisions of Statement
141 immediately and Statement 142 effective January 1, 2002. Accordingly, the goodwill from the Thrift purchase has not been amortized beginning January 1, 2002, but has been evaluated
for impairment in accordance with the appropriate accounting literature. The Company had no transitional impairment losses recognized as a cumulative effect of a change in accounting principle related
to the adoption of this statement. As a result of adoption of Statement 142, the Company has ceased amortizing $1,405,000 of goodwill, which eliminated $122,000 of annual goodwill expense
amortization.

Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of:The Company adopted Statement 144 on
January 1, 2002. The adoption of Statement 144 did not affect the Company's financial statements.

Long-lived
assets, such as property, plant, and equipment and certain purchased intangibles subject to amortization are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated
undiscounted future net cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, such an asset is considered to be impaired, and an
impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the balance
sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a
disposed group classified as held for sale would be presented separately in the appropriate asset and liability sections of the balance sheet.

Goodwill
is tested annually for impairment, and is tested for impairment more frequently if events and circumstances indicate that the asset might be impaired. An impairment loss is recognized to the
extent that the carrying amount exceeds the asset's fair value. This determination is made at the reporting unit level and consists of two steps. First, the Company determines the fair value of a
reporting unit and compares it to its carrying amount. Second, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized for any excess of the carrying amount
of the reporting unit's goodwill over the implied fair value of that goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar
to a purchase price allocation, in accordance with FASB Statement No. 141,Business Combinations.

36

---

The
residual fair value after this allocation is the implied fair value of the reporting unit goodwill. There has been no recorded amortization of the RIA acquisition and there has been no impairment
losses recognized on the Town and Country Finance and Thrift and RIA recorded goodwill as of December 31, 2003.

Deferred Compensation:The Company has purchased single premium universal life insurance policies in conjunction with implementation of
salary continuation plans for certain members of management, a deferred compensation plan for certain members of the Board of Directors, and for general investment purposes. The Company is the owner
and beneficiary of these policies. The Bank has also formed a Rabbi trust and has irrevocably assigned some of these universal life insurance policies to the Rabbi trust in support of these salary
continuation and deferred compensation benefits. The cash surrender value of the insurance policies is recorded in other assets and these values totaled $24,138,000 and $17,240,000 as of
December 31, 2003 and 2002. Income from these policies is recorded in other income and the load, mortality and surrender charges have been recorded in other expenses. An accrued liability of
$3,125,000 and $2,487,000 as of December 31, 2003 and 2002 was recorded to reflect the present value of the expected retirement benefits for the salary continuation plans and the deferred
compensation benefits and was included in other liabilities. Salary continuation expense of $669,000 and $656,000 and deferred compensation expense of $64,000 and $59,000 was recorded for the years
ending December 31, 2003 and 2002.

Income Taxes:The Company files a consolidated federal income tax return and a combined state franchise tax return. The provision for
income taxes includes federal income and state franchise taxes. Income tax expense is allocated to each entity of the Company based upon the analysis of the tax consequences of each company on a stand
alone basis.

The
Company accounts for income taxes under the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the enactment date.

Income Tax Credits:The Company has investments in limited partnerships which own low income affordable housing projects that generate tax
benefits in the form of federal and state housing tax credits. As an investor in these partnerships, the Company receives tax benefits in the form of tax deductions from partnership operating losses
and income tax credits. These income tax credits are earned over a 10-year period as a result of the investment meeting certain criteria and are subject to recapture over a
15-year period. The expected benefit resulting from the affordable housing income tax credits is recognized in the period in which the tax benefit is recognized in the Company's
consolidated tax returns. These investments are accounted for using the effective yield method and are evaluated at each reporting period for impairment. The Bank had gross investments in these
partnerships of $10,407,000 and $8,368,000 as of December 31, 2003 and 2002 which were included in other assets.

Exit or Disposal Activities:In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or
Disposal Activities." SFAS No. 146 addresses financial accounting and reporting for costs associated with exit or disposal activities. The statement supersedes Emerging Issues Task Force (EITF)
Issue No. 94-3 "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (Including Certain Costs Incurred in a Restructuring)." SFAS
No. 146 is effective for exit or disposal activities that are initiated after December 31, 2002, with early application encouraged. The Company adopted SFAS No, 146 in June, 2002.

Derivative Instruments and Hedging Activities:All derivative instruments are recognized in the consolidated balance sheet at fair value.
The accounting treatment for gains or losses from changes in the derivative instrument's fair value is contingent on whether the derivative instrument qualifies as a hedge under the accounting
standard. On the date the Company enters into a derivative contract, the Company

37

---

designates
the derivative instruments as (1) a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment (fair value hedge), (2) a hedge of a
forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (cash flow hedge) or (3) hedge for trading, customer accommodation
or not qualifying for hedge accounting (free-standing derivative instruments). For a fair value hedge, changes in the far value of the derivative instrument and changes in the fair value
of the hedged asset or liability or of an unrecognized firm commitment attributable to the hedged risk are recorded in current period net income. For a cash flow hedge, changes in the fair value of
the derivative instrument to the extent that it is effective are recorded in other comprehensive income, net of tax, within shareholders' equity and subsequently reclassified to net income in the same
period(s) that the hedged transaction impacts net income. For free-standing derivative instruments, changes in the fair values are reported in current period net income. The Company
formally documents the relationship between hedging instruments and hedged items, as well as the risk management objective and strategy for undertaking any hedge transaction. This process includes
linking all derivative instruments that are designated as fair value or cash flow hedges to specific assets and liabilities on the balance sheet or to specific forecasted transactions. The Company
also formally assesses both at the inception of the hedge and on an ongoing basis, whether the derivative instruments used are highly effective in offsetting changes in fair values or cash flows of
hedged items. If it is determined that the derivative instrument is not highly effective as a hedge, hedge accounting is discontinued.

During
the third quarter of 2001, the Company entered into an interest rate exchange agreement with the Federal Home Loan Bank of San Francisco that was recorded as a cash flow hedge
transaction. The
notional amount of the swap is $20 million with a term of 3 years expiring on August 23, 2004. The Company entered into the interest rate swap to convert floating-rate
loans to a fixed rate (7.46%). The Company will pay prime rate, which at the time of the transaction was 6.50%. The Company intends to use the swap as a hedge of the related loans for 3 years.
At December 31, 2003 and 2002, the fair market value of this interest rate swap of $418,000 and $750,000, respectively, was reported as an other asset in the consolidated balance sheet and
included as other comprehensive income in the consolidated statements of income and comprehensive income. Management has determined that the amount of the hedge ineffectiveness from inception of the
hedge to December 31, 2003 was not significant.

Borrowing Commitments:The Company has entered into forward commitments for long-term borrowings with the Federal Home Loan
Bank. These transactions are reflected as commitments for the Company but not recorded on its books until the transactions actually funds. They are disclosed as a commitment and the fair value of the
commitment is reflected as an off-balance sheet item.

Earnings Per Share:Basic earnings per share (EPS) includes no dilution and is computed by dividing income available to common stockholders
by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution of securities that could share in the earnings of an entity.

On
February 25, 2003, the Board of Directors authorized a 5% stock dividend payable on April 25, 2003. All income per share amounts have been adjusted to give retroactive effect to the
stock dividend.

The
following table provides a reconciliation of the numerator and denominator of the basic and diluted earnings per share computation for the years ended December 31, 2003, 2002 and 2001:

|                          |                                                            | For The Twelve Months Ended December 31,
|------------------------- | ---------------------------------------------------------- | ----------------------------------------
|
|
|
|Basic EPS computation:    |                                                            |                                         
|                          | Net income                                                 |                                         
|                          |                                                            |                                         
|                          | Average common shares outstanding                          |                                         
|                          |                                                            |                                         
|Basic EPS                 |                                                            | $                                       
|                          |                                                            |                                         
|Diluted EPS computations: |                                                            |                                         
|                          | Net income                                                 |                                         
|                          |                                                            |                                         
|                          | Average common shares outstanding                          |                                         
|                          | Effect of stock options                                    |                                         
|                          |                                                            |                                         
|                          | Total weighted average shares and common stock equivalents |                                         
|                          |                                                            |                                         
|Diluted EPS               |                                                            | $                                       
|                          |                                                            |                                         

38

---

In 2003, 2002, and 2001 there were options covering 7,675, 0, and 24,675 shares that were not considered in the earnings per share computations because the
option exercise price was in excess of the stock closing price on December 31, 2003, 2002 and 2001 making these shares antidilutive.

Stock Option Plan:Statement of Financial Accounting Standards No 148, "Accounting for Stock Based Compensation  Transition
and Disclosure" an amendment of FASB Statement No. 123 and Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," establishes financial
accounting and reporting standards for stock-based compensation plans, including employee stock purchase plans, stock options and restricted stock. Statement No. 148 and 123 encourages all
entities to adopt a fair value method of accounting for stock-based compensation plans, whereby compensation cost is measured at the grant date upon the fair value of the award and is realized as an
expense over the service or vesting period. However, Statement No. 148 and 123 also allow an entity to continue to measure compensation cost for these plans using the intrinsic value method of
accounting prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" as long as proforma fair market method disclosures of net income and basic and
diluted earnings per share and stock-based compensation costs, net of related tax effects, are prominently disclosed. The Company accounts for stock-based awards to employees and directors using the
intrinsic value method of accounting in accordance with Accounting Principles Board Opinion No. 25. Under the intrinsic value method, compensation cost is generally the excess, if any, of the
quoted market price of the stock at the grant or other measurement date over the exercise price. See Note 13 for additional
disclosure information relative to options granted and outstanding.

The
Company applies APB Opinion No. 25 in accounting for its stock options and, accordingly, no compensation cost has been recognized for its stock options in the accompanying consolidated
financial statements. Had the Company determined compensation cost based on the fair value at the grant date for its stock options under SFAS No. 123,Accounting for
Stock-Based Compensation,the Company's net income would have been reduced to the proforma amounts indicated as follows:

|                           |             | Years Ended December 31,
|-------------------------- | ----------- | ------------------------
|
|
|Net income                 |             |                         
|                           | As reported |                         
|                           | Proforma    |                         
|Basic earnings per share   |             |                         
|                           | As reported |                         
|                           | Proforma    |                         
|Diluted earnings per share |             |                         
|                           | As reported |                         
|                           | Proforma    |                         

Total compensation expense related to the issuance of options that would have been reported was $601,000, $449,000, and $402,000 during 2003, 2002 and 2001,
respectively.

The
per share weighted average fair value of stock options granted during 2003, 2002, and 2001 was $11.02, $7.57, and $5.47 on the date of grant using the Black Scholes option pricing model with the
following weighted average assumptions: 2003, 2002, and 2001 expected dividend yield 0%; 2003, 2002, and 2001 expected volatility of 29%, and a risk free interest rate of 4.75% for 2003, 2002, and
2001, and an expected life of 7 years in 2003, 2002, and 2001, respectively.

Comprehensive Income:Comprehensive income consists of net income and unrealized gains (losses) on securities and certain derivative
instruments and is presented in the consolidated statements of income and comprehensive income.

Reclassifications:Certain amounts in the 2002 consolidated financial statements have been reclassified to conform with the 2003
presentation. These changes were the result of changes to Generally Accepted Accounting Principles ("GAAP") or newly issued interpretations of GAAP.

39

---

NOTE 2. Investment Securities

The
amortized cost and estimated market value of investment securities at December 31, are summarized below:

|(Dollars in thousands)                     |                                     | Amortized
Cost |         | Gross
Unrealized
Gains |   | Gross
Unrealized
Losses |       | Estimated Fair
Value
|------------------------------------------ | ----------------------------------- | -------------- | ------- | ---------------------- | - | ----------------------- | ----- | --------------------
|
|2003                                      
|Available for sale securities:             |                                     |                |         |                        |   |                         |       |                     
|U.S. Treasury and U.S. Government agencies |                                     | $              | 55,029  |                        | $ | 478                     |       | $                   
|State & political subdivisions             |                                     |                | 1,068   |                        |   | 6                       |       |                     
|Mortgage-backed securities                 |                                     |                | 129,196 |                        |   | 1,329                   |       |                     
|Collateralized mortgage obligations        |                                     |                | 45,356  |                        |   | 242                     |       |                     
|Corporate debt securities                  |                                     |                | 3,018   |                        |   | 60                      |       |                     
|                                           |                                     |                |         |                        |   |                         |       |                     
|                                           | Total debt securities               |                |         | 233,667                |   |                         | 2,115 |                     
|                                           |                                     |                |         |                        |   |                         |       |                     
|Agency preferred stock                     |                                     |                | 14,832  |                        |   |                        |       |                     
|Trust preferred stock                      |                                     |                | 5,533   |                        |   |                        |       |                     
|Equity securities                          |                                     |                | 22,600  |                        |   |                        |       |                     
|                                           |                                     |                |         |                        |   |                         |       |                     
|                                           | Total available for sale securities |                |         | 276,632                |   |                         | 2,115 |                     
|                                           |                                     |                |         |                        |   |                         |       |                     
|Held to maturity securities:               |                                     |                |         |                        |   |                         |       |                     
|U.S. Treasury & U.S. government agencies   |                                     |                |        |                        |   |                        |       |                     
|State and political subdivisions           |                                     |                | 42,482  |                        |   | 420                     |       |                     
|Mortgage-backed securities                 |                                     |                | 40,185  |                        |   | 1,028                   |       |                     
|Collateralized mortgage obligations        |                                     |                | 13,945  |                        |   | 16                      |       |                     
|                                           |                                     |                |         |                        |   |                         |       |                     
|                                           | Total held to maturity securities   |                | $       | 96,612                 |   | $                       | 1,464 |                     
|                                           |                                     |                |         |                        |   |                         |       |                     
|2002                                      
|Available for sale securities:             |                                     |                |         |                        |   |                         |       |                     
|U.S. Treasury and U.S. Government agencies |                                     | $              | 64,812  |                        | $ | 1,318                   |       | $                   
|State & political subdivisions             |                                     |                | 24,565  |                        |   | 1,054                   |       |                     
|Mortgage-backed securities                 |                                     |                | 62,451  |                        |   | 2,204                   |       |                     
|Collateralized mortgage obligations        |                                     |                | 40,661  |                        |   | 291                     |       |                     
|Corporate debt securities                  |                                     |                | 3,553   |                        |   | 6                       |       |                     
|                                           |                                     |                |         |                        |   |                         |       |                     
|                                           | Total debt securities               |                |         | 196,042                |   |                         | 4,873 |                     
|                                           |                                     |                |         |                        |   |                         |       |                     
|Agency preferred stock                     |                                     |                | 14,912  |                        |   | 110                     |       |                     
|Trust preferred stock                      |                                     |                | 5,518   |                        |   |                        |       |                     
|Equity securities                          |                                     |                | 10,882  |                        |   | 55                      |       |                     
|                                           |                                     |                |         |                        |   |                         |       |                     
|                                           | Total available for sale securities |                |         | 227,354                |   |                         | 5,038 |                     
|                                           |                                     |                |         |                        |   |                         |       |                     
|Held to maturity securities:               |                                     |                |         |                        |   |                         |       |                     
|U.S. Treasury & U.S. government agencies   |                                     |                | 4,629   |                        |   | 251                     |       |                     
|State and political subdivisions           |                                     |                | 4,347   |                        |   | 310                     |       |                     
|Mortgage-backed securities                 |                                     |                | 46,652  |                        |   | 1,831                   |       |                     
|                                           |                                     |                |         |                        |   |                         |       |                     
|                                           | Total held to maturity securities   |                | $       | 55,628                 |   | $                       | 2,392 |                     
|                                           |                                     |                |         |                        |   |                         |       |                     

At December 31, 2003 and 2002, investment securities with carrying values of approximately $295,024,000 and $193,962,000, respectively, were pledged as
collateral for deposits of public funds, government deposits, the Bank's use of the Federal Reserve Bank's discount window, and Federal Home Loan Bank line of credit. The Bank is a member of the
Federal Reserve Bank and the Federal Home Loan Bank. The Bank carried balances, stated at cost, of $4,914,000 and $6,258,000 of Federal Home Loan Bank stock and $1,127,000 and $1,066,000 of Federal
Reserve Bank stock as of December 31, 2003 and 2002. Gross losses on sale of available for sale securities of $0, $99,000, and $0, were recognized in 2003, 2002, and

40

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2001.
Gross gain on sale of available for sale securities of $0, $279,000, and $0 were recognized in 2003, 2002, and 2001.

In
June, 2003, state and municipal debt securities with a carrying value of $24,558,000 and a market value of $26,204,000 were transferred from the available for sale portfolio to the held to maturity
portfolio at market value. The Company made the decision based on management's intent to hold these securities to maturity. The unrealized holding gain at the date of transfer is reported as a
separate component of shareholders' equity, amortized over the remaining life of the securities as an adjustment of yield in a manner consistent with the amortization of a premium or accretion of a
discount.

The
carrying and estimated fair values of debt securities at December 31, 2003 by contractual maturity, are shown on the following table. Actual maturities may differ from contractual
maturities because issuers generally have the right to call or prepay obligations with or without call or prepayment penalties.

|(Dollars in thousands)              |                                     | Amortized
Cost |                                          | Estimated
Fair Value
|----------------------------------- | ----------------------------------- | -------------- | ---------------------------------------- | --------------------
|
|Available for sale debt securities: |                                     |                |                                          |                     
|                                    | One year or less                    |                | $                                        | 23,040              
|                                    | One to five years                   |                |                                          | 34,964              
|                                    | Five to ten years                   |                |                                          | 43                  
|                                    | Over ten years                      |                |                                          | 1,068               
|                                    | Mortgage-backed securities and CMOs |                |                                          | 174,552             
|                                    |                                     |                |                                          |                     
|                                    |                                     |                | Total available for sale debt securities |                     
|                                    |                                     |                |                                          |                     
|Held to maturity debt securities:   |                                     |                |                                          |                     
|                                    | One year or less                    |                | $                                        |                    
|                                    | One to five years                   |                |                                          | 4,110               
|                                    | Five to ten years                   |                |                                          | 20,320              
|                                    | Over ten years                      |                |                                          | 18,052              
|                                    | Mortgage-backed securities and CMOs |                |                                          | 54,130              
|                                    |                                     |                |                                          |                     
|                                    |                                     |                | Total held to maturity debt securities   |                     
|                                    |                                     |                |                                          |                     

Gross
unrealized losses on investment securities and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous
unrealized loss position, at December 31,2003, were as follows:

|                                    |  | Less than 12 months |       | 12 months or more |   | Total  
|----------------------------------- |  | ------------------- | ----- | ----------------- | - | -------
|
|
|Available for sale:                 |  |                     |       |                   |   |        
|U.S. government agencies            |  | $                   | 238   |                   | $ | 19,929 
|State and political subdivisions    |  |                     | 1     |                   |   | 247    
|Mortgage-backed securities          |  |                     | 343   |                   |   | 40,830 
|Collateralized mortgage obligations |  |                     | 331   |                   |   | 20,001 
|Agency preferred stock              |  |                     | 379   |                   |   | 6,453  
|Trust preferred stock               |  |                     |      |                   |   |       
|Equity securities                   |  |                     | 97    |                   |   | 22,503 
|                                    |  |                     |       |                   |   |        
|                                    |  | $                   | 1,389 |                   | $ | 109,963
|                                    |  |                     |       |                   |   |        
|Held to maturity securities:        |  |                     |       |                   |   |        
|State and Political Subdivisions    |  | $                   | 247   |                   | $ | 21,185 
|Mortgage-backed securities          |  |                     | 419   |                   |   | 14,184 
|Collateralized mortgage obligations |  |                     | 115   |                   |   | 9,957  
|                                    |  |                     |       |                   |   |        
|                                    |  | $                   | 781   |                   | $ | 45,326 
|                                    |  |                     |       |                   |   |        

41

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U.S. government agencies: The unrealized losses on investments in U.S. government agency securities were caused by market interest rate increases that occurred after these securities were purchased.
Because the Company has the ability and intent to hold these investments until a market price recovery or maturity, these investments are not considered other-than-temporarily
impaired.

State
and political subdivisions: The unrealized losses on state and political subdivision investments were caused by market interest rate increases that occurred after these securities were
purchased. Because the Company has the ability and intent to hold these investments until a market price recovery or maturity, these investments are not considered
other-than-temporarily impaired.

Mortgage-backed
securities: The unrealized losses on investments in mortgage-backed securities were caused by market interest rate increases that occurred after these securities were purchased and
higher actual prepayment rates than were originally estimated on mortgage-backed securities that were purchased at a premium. When the marketplace believes that prepayment rates will remain high,
higher coupon mortgage-backed securities are priced to reflect lower premiums and higher expected principal prepayments. Because the Company has the ability and intent to hold these investments until
a market price recovery or maturity, these investments are not considered other-than-temporarily impaired.

Collateralized
mortgage obligations: The unrealized losses on collateralized mortgage obligation securities were caused by market rate increases that occurred after these securities were purchased.
Because the Company has the ability and intent to hold these investments until a market price recovery or maturity, these investments are not considered other-than-temporarily
impaired.

Agency
preferred stock: The unrealized losses on trust preferred securities were caused by historically low prevailing market rates, coupled with competing securities issued subsequent to the purchase
of these securities that have preferential terms to the investor when compared to the agency preferred stock issued and owned by the Company. Because the Company has the ability and intent to hold
these investments until a market price recovery, and the Company believes that the market price of these securities will improve as interest rates move higher, these investments are not considered
other-than-temporarily impaired.

Trust
preferred stock: The unrealized losses on agency preferred stock were caused by generally low prevailing market rates. Because the Company has the ability and intent to hold these investments
until a market price recovery, and the Company believes that the market price of these securities will improve as interest rates move higher, these investments are not considered
other-than-temporarily impaired.

Equity
securities: The company invests in mutual funds that hold adjustable rate mortgage loan investments that fluctuate in value with prevailing
market interest rates. The unrealized losses on equity securities were caused by generally low prevailing market rates. The market price of adjustable rate loans declines during periods of falling or
flat interest rates. Because the Company has the ability and intent to hold these investments until a market price recovery, and the Company believes that the market price of these securities will
improve as interest rates move higher, these investments are not considered other-than-temporarily impaired.

NOTE 3. Loans

Loans
at December 31 consisted of the following:

|(Dollars in thousands)         |             | 2003 |         | 2002    |  
|------------------------------ | ----------- | ---- | ------- | ------- | -
|
|Commercial                     |             | $    | 195,588 |         | $
|Agricultural                   |             |      | 92,550  |         |  
|Real estate  mortgage         |             |      | 318,624 |         |  
|Real estate  construction     |             |      | 89,652  |         |  
|Consumer                       |             |      | 67,838  |         |  
|                               |             |      |         |         |  
|                               | Gross loans |      |         | 764,252 |  
|Less allowance for loan losses |             |      | (13,263 | )       |  
|                               |             |      |         |         |  
|                               | Net loans   |      | $       | 750,989 |  
|                               |             |      |         |         |  

Loans,
excluding consumer loans, are net of deferred loan fees of $2,683,0000 and $2,021,000 as of December 31, 2003 and 2002. Consumer loans are net of deferred loan costs of $417,000 and
$660,000 as of December 31, 2003 and 2002.

Nonaccrual
loans totaled $3,987,000 and $2,383,000 at December 31, 2003 and 2002. Foregone interest on nonaccrual loans was approximately $39,000, $131,000, and $170,000 for

42

---

the
years ended December 31, 2003, 2002 and 2001.

Impaired
loans are loans for which it is probable that the Company will not be able to collect all amounts due. At December 31, 2003 and 2002, the recorded investment in impaired loans was
$3,987,000, and $2,383,000 which had a related allowance for loan losses of $598,000, and $406,000 in 2003 and 2002. As of December 31, 2003 and 2002, there were no impaired loans without a
related allowance for loan loss assigned to them. The average outstanding balance of impaired loans for the years ended December 31, 2003, 2002 and 2001 was $2,328,000, $5,134,000, and
$3,629,000 on which $231,000, $210,000, and $105,000 was recognized as interest income on a cash basis.

At
December 31, 2003 and 2002, the collateral value method was used to measure impairment for all loans classified as impaired. The following table shows the recorded investment in impaired
loans by loan category at December 31:

|(Dollars in thousands) |  | 2003 |       | 2002
|---------------------- |  | ---- | ----- | ----
|
|Commercial             |  | $    | 3,477 |     
|Agricultural           |  |      | 448   |     
|Consumer and other     |  |      | 62    |     
|                       |  |      |       |     
|                       |  | $    | 3,987 |     
|                       |  |      |       |     

The
following is a summary of changes in the allowance for loan losses during the years ended December 31:

|(Dollars in thousands)                     |  | 2003 |        | 2002 |   | 2001   |  
|------------------------------------------ |  | ---- | ------ | ---- | - | ------ | -
|
|Balance at beginning of year               |  | $    | 12,134 |      | $ | 9,743  |  
|Loans charged-off                          |  |      | (1,995 | )    |   | (2,589 | )
|Recoveries of loans previously charged-off |  |      | 669    |      |   | 829    |  
|Provision for loan losses                  |  |      | 2,455  |      |   | 4,151  |  
|                                           |  |      |        |      |   |        |  
|Balance at end of year                     |  | $    | 13,263 |      | $ | 12,134 |  
|                                           |  |      |        |      |   |        |  

In
the ordinary course of business, the Company, through its subsidiaries, has made loans to certain directors and officers and their related businesses. In management's opinion, these loans are
granted on substantially the same terms, including interest rates and collateral, as those prevailing on comparable transactions with unrelated parties, and do not involve more than the normal risk of
collectibility.

Activity
in loans to, or guaranteed by, directors and executive officers and their related businesses at December 31, are summarized as follows:

|(Dollars in thousands)       |  | 2003 |       | 2002 |  
|---------------------------- |  | ---- | ----- | ---- | -
|
|Balance at beginning of year |  | $    | 2,173 |      | $
|Loan advances and renewals   |  |      | 835   |      |  
|Loans matured or collected   |  |      | (556  | )    |  
|                             |  |      |       |      |  
|Balance at end of year       |  | $    | 2,452 |      | $
|                             |  |      |       |      |  

The
Bank's business activity is with customers located primarily in the counties of Fresno, Madera, Mariposa, Merced, San Francisco, San Joaquin, Stanislaus, and Tuolumne in the state of California.
Consumer lending and small working capital loans represents approximately 20% of the total loan portfolio and consists of consumer lending, loans to small businesses, credit cards, and the purchase of
financing contracts principally from automobile dealers. Individual loans and lines are made in a variety of ways. In many cases collateral such as real estate, automobiles, and equipment are used to
support the extension of credit. Repayment, however, is largely dependent upon the borrower's personal cash flow.

Real
estate, construction, agricultural, and large business loans make up approximately 80% of the Bank's loan portfolio. Lending activities are spread across a wide spectrum including commercial
loans to businesses, construction and permanent real estate financing, short and long term agricultural loans for production, and real estate purposes and SBA financing. Where appropriate, collateral
is taken to secure and reduce the Bank's credit risk. Each loan is submitted to an individual risk grading process but the borrowers' ability to repay is dependent, in part, upon factors affecting the
local and national economies.

43

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NOTE 4. Premises and Equipment

Premises
and equipment consisted of the following at December 31:

|(Dollars in thousands)                         |                             | 2003 |        | 2002  
|---------------------------------------------- | --------------------------- | ---- | ------ | ------
|
|Land                                           |                             | $    | 2,553  |       
|Buildings                                      |                             |      | 12,686 |       
|Leasehold improvements                         |                             |      | 2,045  |       
|Furniture and equipment                        |                             |      | 14,203 |       
|                                               |                             |      |        |       
|                                               | Subtotal                    |      |        | 31,487
|Less accumulated depreciation and amortization |                             |      | 14,930 |       
|                                               |                             |      |        |       
|                                               | Premises and equipment, net |      | $      | 16,557
|                                               |                             |      |        |       

Included
in the premises and equipment totals are construction in progress of $541,000 and $378,000 at December 31, 2003 and 2002 respectively. Depreciation expense totaled $1,661,000,
$1,903,000 and $1,906,000 in 2003, 2002 and 2001. NOTE 5. Other Borrowings

The
following is a summary of selected information for short term borrowings. These borrowings generally mature in less than one year.

|As of December 31,          |  |   |        |  |           |  |   |        |  |            |  |  
|--------------------------- |  | - | ------ |  | --------- |  | - | ------ |  | ---------- |  | -
|
|
|
|
|Treasury Tax Loan(1)        |  | $ | 6,467  |  | .98%      |  | $ | 6,303  |  | .98%       |  | $
|FHLB advances               |  |   | 18,175 |  | 1.0-5.09% |  |   | 23,700 |  | 1.37-4.47% |  |  
|                            |  |   |        |  |           |  |   |        |  |            |  |  
|Total short term borrowings |  | $ | 24,642 |  |           |  | $ | 30,003 |  |            |  | $
|                            |  |   |        |  |           |  |   |        |  |            |  |  

The Company maintains a secured line of credit with the Federal Home Loan Bank of San Francisco (FHLB). Based on the FHLB stock requirements at December 31, 2003, this
line provided for maximum borrowings of $119,372,000 of which $83,346,000 was outstanding. At December 31, 2003 this borrowing line is collateralized by securities with a market value of
$125,655,000. At December 31, 2002, the line of credit collateralized by securities totaled $100,841,000 of which $100,841,000 was outstanding leaving $0 available. The Company had additional
secured, unused lines of credit of $14,941,000 and unsecured unused lines of credit of $40,000,000 at December 31, 2003. This compares with secured, unused lines of credit of $19,705,000 and
unsecured unused lines of credit of $40,000,000 as of December 31, 2002.

The
following is a summary of selected information for long-term borrowings. These borrowings generally mature in greater than one year.

|(Dollars in millions)      |  |              |  |             |  | 2003 |        | 2002 |   | 2001  
|-------------------------- |  | ------------ |  | ----------- |  | ---- | ------ | ---- | - | ------
|
|
|Mortgage note              |  | 7.80%        |  | 2007        |  | $    | 3,004  |      | $ | 3,060 
|FHLB advances              |  | 4.13  6.83% |  | 2005  2011 |  |      | 65,171 |      |   | 77,141
|                           |  |              |  |             |  |      |        |      |   |       
|Total long term borrowings |  |              |  |             |  | $    | 68,175 |      | $ | 80,201
|                           |  |              |  |             |  |      |        |      |   |       

Interest
expense related to FHLB borrowings totaled $4,069,000, $4,265,000, and $1,884,000 in 2003, 2002, and 2001. Interest expense related to the mortgage note totaled $240,000, $245,000, and
$262,000 in 2003,

44

---

2002,
and 2001. This long term note is secured by Company land and buildings. Interest expense on federal funds purchased was $11,000, $22,000 and $5,000 in 2003, 2002, and 2001. Compensating balance
arrangements are not significant to the operations of the Company.

Principal
payments required to service the Company's borrowings during the next five years are:

|Years ended December 31,
(Dollars in thousands) |  |  
|----------------------------------------------- |  | -
|
|2004                                            |  | $
|2005                                            |  |  
|2006                                            |  |  
|2007                                            |  |  
|2008                                            |  |  
|Thereafter                                      |  |  
|                                                |  |  
|Total borrowed funds                            |  | $
|                                                |  |  

NOTE 6. Junior Subordinated Debentures

At
December 31, 2003 the Company had 2 wholly-owned trusts ("Trusts") that were formed to issue trust preferred securities and related common securities of the Trusts. As a result of adoption
of FIN 46R, the Company deconsolidated the Trusts as of and for the years ended December 31, 2003 and 2002. There was $16,496,000 and $6,186,000 of junior subordinated debentures issued and
outstanding as of December 31, 2003 and 2002, respectively. The junior subordinated debentures were reflected as long-term debt in the consolidated balance sheets at
December 31, 2003 and 2002.

Prior
to December 31, 2003, the Trusts were consolidated subsidiaries and were included in liabilities in the consolidated balance sheet, as "Capital Securities". The common securities and
debentures, along with the related income effects were eliminated in the consolidated financial statements.

County
Statutory Trust I and County Statutory Trust II are Connecticut statutory trusts, which were formed for the purpose of issuing County Statutory Trust I Capital Securities and County Statutory
Trust II Capital Securities ("Trust Preferred Securities"). The Trust Preferred Securities are described below. Interest on the Trust Preferred Securities is payable semi-annually on the
10.20% issue and quarterly on the 4.07% issue and is deferrable, at the option of the Company for up to five years for both issues. Following the issuance of the Trust Preferred Securities, the Trust
used the proceeds from the Trust Preferred Securities offering to purchase a like amount of Junior Subordinated Debt Securities (the Debt Securities) of the Company. The debt securities bear the same
terms and interest rates as the related Trust Preferred Securities. The Debt Securities are the sole assets of the Trust. The Company has fully and unconditionally guaranteed all of the obligations of
the Trust.

County
Statutory Trust I issued $6,000,000 in Trust Preferred Securities on February 22, 2001. These securities pay interest at the rate of 10.20% and have a stated maturity date of
February 22, 2031. They also have an optional redemption date of February 22, 2021. County Statutory Trust II issued $10,000,000 in Trust Preferred Securities on December 17,
2003. These securities pay interest a variable rate of interest that was 4.07% at December 31, 2003, and have a stated maturity date of December 17, 2033. They also have an optional
redemption date of December 17, 2008. The interest rate on this issue is fixed for five years, then after the optional redemption date of December 17, 2008, the rate will be indexed to
the then-current 3 month LIBOR rate plus 2.85%.

The
debentures issued, less the common securities of the Trusts, qualify as Tier 1 capital under the interim guidance issued by the Board of Governors of the Federal Reserve System (Federal Reserve
Board).

The
Trust Preferred Securities are mandatorily redeemable, in whole or in part, upon repayment of their underlying Debt Securities at their respective stated maturities or their earlier redemption.
The Debt Securities are redeemable prior to maturity at the option of the Company on or after their respective optional redemption dates.

45

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NOTE 7. Real Estate Operations

As
of December 31, 2003, MAID owned the County Bank Administrative Headquarters building. During 2002, with the consent of the state regulators, MAID agreed to limit real estate holdings to
branch premises property only.

NOTE 8. Income Taxes

The
provision for income taxes for the years ended December 31 is comprised of the following:

|(Dollars in thousands) |  | Federal |        | State |   | Total |  
|---------------------- |  | ------- | ------ | ----- | - | ----- | -
|
|2003                   |  |         |        |       |   |       |  
|Current                |  | $       | 4,906  |       | $ | 1,533 |  
|Deferred               |  |         | (767   | )     |   | (815  | )
|                       |  |         |        |       |   |       |  
|                       |  | $       | 4,139  |       | $ | 718   |  
|                       |  |         |        |       |   |       |  
|                       | 
|2002                   |  |         |        |       |   |       |  
|Current                |  | $       | 4,416  |       | $ | 136   |  
|Deferred               |  |         | (1,124 | )     |   | (973  | )
|                       |  |         |        |       |   |       |  
|                       |  | $       | 3,292  |       | $ | (837  | )
|                       |  |         |        |       |   |       |  
|                       | 
|2001                   |  |         |        |       |   |       |  
|Current                |  | $       | 3,304  |       | $ | 417   |  
|Deferred               |  |         | (804   | )     |   | (98   | )
|                       |  |         |        |       |   |       |  
|                       |  | $       | 2,500  |       | $ | 319   |  
|                       |  |         |        |       |   |       |  

The
tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2003 and 2002 consists of the following:

|(Dollars in thousands)    |                                       | 2003 |                                      | 2002  |  
|------------------------- | ------------------------------------- | ---- | ------------------------------------ | ----- | -
|
|Deferred tax assets:      |                                       |      |                                      |       |  
|                          | Allowance for loan losses             |      | $                                    | 5,576 |  
|                          | Deferred compensation                 |      |                                      | 1,314 |  
|                          | Intangible amortization               |      |                                      | 918   |  
|                          | Nonaccrual interest                   |      |                                      | 319   |  
|                          | Fixed assets                          |      |                                      | 146   |  
|                          | Other                                 |      |                                      | 612   |  
|                          |                                       |      |                                      |       |  
|                          |                                       |      | Total gross deferred tax assets      |       |  
|                          | Less valuation allowance              |      |                                      | (20   | )
|                          |                                       |      |                                      |       |  
|                          | Deferred tax assets                   |      | $                                    | 8,865 |  
|                          |                                       |      |                                      |       |  
|Deferred tax liabilities: |                                       |      |                                      |       |  
|                          | Investment securities unrealized gain |      | $                                    | 266   |  
|                          | Investment in partnerships            |      |                                      | 559   |  
|                          | Insurance accrual                     |      |                                      | 44    |  
|                          | FHLB stock dividends                  |      |                                      | 251   |  
|                          | Other                                 |      |                                      |      |  
|                          |                                       |      |                                      |       |  
|                          |                                       |      | Total gross deferred tax liabilities |       |  
|                          |                                       |      |                                      |       |  
|                          |                                       |      | Net deferred tax assets              |       | $
|                          |                                       |      |                                      |       |  

In
assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate
realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the level of historical taxable income and
projections for future taxable income over the periods which the deferred tax assets are deductible, management believes it is more likely than not the Company will realize the benefits of these
deductible differences, net of the existing valuation allowances at December 31, 2003 and 2002.

46

---

A
reconciliation of income tax at the federal statutory rate to the provision for income taxes follows:

|(Dollars in thousands)                                                                                           |  | 2003 |       | 2002 |   | 2001  |  
|---------------------------------------------------------------------------------------------------------------- |  | ---- | ----- | ---- | - | ----- | -
|
|Statutory federal income tax rate due, computed at an effective tax rate of 35% in 2003 and 34% in 2002 and 2001 |  | $    | 6,474 |      | $ | 4,380 |  
|State franchise tax, at statutory rate, net of federal income tax benefit                                        |  |      | 467   |      |   | (552  | )
|Tax exempt interest income, net                                                                                  |  |      | (442  | )    |   | (407  | )
|Housing tax credits                                                                                              |  |      | (975  | )    |   | (750  | )
|Dividends received deduction                                                                                     |  |      | (134  | )    |   | (168  | )
|Intangible amortization                                                                                          |  |      |      |      |   |      |  
|Cash surrender value life insurance                                                                              |  |      | (314  | )    |   | (309  | )
|Other                                                                                                            |  |      | (219  | )    |   | 261   |  
|                                                                                                                 |  |      |       |      |   |       |  
|Provision for income taxes                                                                                       |  | $    | 4,857 |      | $ | 2,455 |  
|                                                                                                                 |  |      |       |      |   |       |  

As
of December 31, 2003, the current liability for federal and state income taxes was $786,000.

NOTE 9. Regulatory Matters

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

First,
a bank must meet a minimum Tier I (as defined in the regulations) capital ratio ranging from 3% to 5% based upon the bank's CAMEL ("capital adequacy, asset quality, management, earnings, and
liquidity") rating.

Second,
a bank must meet minimum total risk based capital to risk weighted assets ratio of 8%. Risk based capital and asset guidelines vary from Tier I capital guidelines by redefining the components
of capital, categorizing assets into different risk classes, and including certain off-balance sheet items in the calculation of the capital ratio. The effect of the risk based capital
guidelines is that banks with high exposure will be required to raise additional capital while institutions with low risk exposure could, with the concurrence of regulatory authorities, be permitted
to operate with lower capital ratios. In addition, a bank must meet minimum Tier I capital to average assets ratio of 4%.

Management
believes, as of December 31, 2003 that the Company and the Bank met all capital adequacy requirements to which they are subject, including the ratio test for a well capitalized bank
under the regulatory framework for prompt corrective action. The most recent notification from the FRB categorized the Company and the Bank as well capitalized under the FDICIA regulatory framework
for prompt corrective action. Subsequent to this notification, there are no conditions or events that management believes have changed the risk based capital category of the Company and the Bank. To
be categorized as well capitalized, the Bank must meet minimum ratios.

The
Company has no formal dividend policy, and dividends are issued solely at the discretion of the Company's Board of Directors subject to compliance with regulatory requirements. In order to pay any
cash dividends, the Company must receive payments of dividends from the Bank. There are certain regulatory limitations on the payment of cash dividends by banks.

Quantitative
measures established by regulation to ensure capital adequacy require the Company to maintain minimum amounts and ratios (set forth in the following table).

47

---

The Company's and Bank's actual capital amounts and ratios as of December 31, 2003 are as follows:

|(Dollars in thousands)                   |  | Actual |         | For Capital
Adequacy Purposes |       | To Be Well Capitalized
Under Prompt Corrective
Action Provisions |  
|---------------------------------------- |  | ------ | ------- | ----------------------------- | ----- | ---------------------------------------------------------------- | -
|                                         | 
|
|
|Total capital (to risk weighted assets)  |  | $      | 113,543 |                               | 11.57 | %                                                                | $
|Tier I capital (to risk weighted assets) |  |        | 101,259 |                               | 10.31 |                                                                  |  
|Leverage ratio(1)                        |  | $      | 101,259 |                               | 8.55  | %                                                                | $
|                                         | 
|The Bank:                                |  |        |         |                               |       |                                                                  |  
|                                         | 
|Total capital (to risk weighted assets)  |  | $      | 102,842 |                               | 10.50 | %                                                                | $
|Tier I capital (to risk weighted assets) |  |        | 90,591  |                               | 9.25  |                                                                  |  
|Leverage ratio(1)                        |  | $      | 90,591  |                               | 7.66  | %                                                                | $

The Company's and Bank's actual capital amounts and ratios as of December 31, 2002 are as follows:

|(Dollars in thousands)                   |  | Actual |        | For Capital
Adequacy Purposes |       | To Be Well Capitalized
Under Prompt Corrective
Action Provisions |  
|---------------------------------------- |  | ------ | ------ | ----------------------------- | ----- | ---------------------------------------------------------------- | -
|                                         | 
|
|
|Total capital (to risk weighted assets)  |  | $      | 86,794 |                               | 10.74 | %                                                                | $
|Tier I capital (to risk weighted assets) |  |        | 76,668 |                               | 9.49  |                                                                  |  
|Leverage ratio(1)                        |  | $      | 76,668 |                               | 7.68  | %                                                                | $
|                                         | 
|The Bank:                                |  |        |        |                               |       |                                                                  |  
|                                         | 
|Total capital (to risk weighted assets)  |  | $      | 84,613 |                               | 10.50 | %                                                                | $
|Tier I capital (to risk weighted assets) |  |        | 74,517 |                               | 9.25  |                                                                  |  
|Leverage ratio(1)                        |  | $      | 74,517 |                               | 7.48  | %                                                                | $

48

---

NOTE 10. Commitments and Financial Instruments With Off-Balance Sheet Credit Risk

At
December 31, 2003, the Company has operating lease rental commitments for remaining terms of one to ten years. The Company has options to renew two of its leases for a period of 10 and
15 years. The minimum future commitments under non-cancelable lease agreements having terms in excess of one year at December 31, 2003 are as follows:

|Years ended December 31,
(Dollars in thousands) |  |  
|----------------------------------------------- |  | -
|
|2004                                            |  | $
|2005                                            |  |  
|2006                                            |  |  
|2007                                            |  |  
|2008                                            |  |  
|Thereafter                                      |  |  
|                                                |  |  
|Total minimum lease payments                    |  | $
|                                                |  |  

Rent
expense was approximately $986,000, $873,000,and $811,000, for the years ended December 31, 2003, 2002, and 2001.

In
the ordinary course of business, the Company enters into various types of transactions which involve financial instruments with off-balance sheet risk. These instruments include
commitments to extend credit and standby letters of credit and are not reflected in the accompanying balance sheets. These transactions may involve, to varying degrees, credit and interest risk in
excess of the amount, if any, recognized in the balance sheets.

The
Company's off-balance sheet credit risk exposure is the contractual amount of commitments to extend credit and standby letters of credit. The Company applies the same credit standards
to these contracts as it uses in its lending process. Additionally, commitments to extend credit and standby letters of credit bear similar credit risk characteristics as outstanding loans.

Financial
instruments whose contractual amount represents risk:

|                             |  | As of December 31,
|---------------------------- |  | ------------------
|                             |  |                   
|
|
|Commitments to extend credit |  | $                 
|Standby letters of credit    |  |                   

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

Standby
letters of credit are conditional commitments issued by the Company to guarantee the performance of the customer to a third party. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loan facilities to customers. Collateral held for standby letters of credit is based on an individual evaluation of each customer's credit
worthiness, but may include cash, equipment, inventory, and securities.

The
Company, because of the nature of its business, is subject to various threatened or filed legal cases. The Company, based on the advice of legal counsel, does not expect such cases will have a
material, adverse effect on its financial position or results of operations.

The
company has entered into forward commitments with the Federal Home Loan Bank for long term borrowings. The following is a summary of those commitments.

|(Dollars in thousands) |  | Interest rates |  | Maturity Dates |  | Amount
|---------------------- |  | -------------- |  | -------------- |  | ------
|
|FHLB advances          |  | 2.39-2.93%     |  | 2006           |  | $     

49

---

Note 11. Time Deposits

At
December 31, 2003 the aggregate maturities for time deposits are as follows:

|Years ended December 31,
(Dollars in thousands) |  |  
|----------------------------------------------- |  | -
|
|2004                                            |  | $
|2005                                            |  |  
|2006                                            |  |  
|2007                                            |  |  
|2008                                            |  |  
|Thereafter                                      |  |  
|                                                |  |  
|Total time deposits                             |  | $
|                                                |  |  

NOTE 12. Employee and Director Benefit Plans

The
Company has a noncontributory employee stock ownership plan ("ESOP") and an employee savings plan covering substantially all employees. During 2003, 2002, and 2001, the Company contributed
approximately $541,000, $468,000,and $326,000, to the ESOP and $193,000, $173,000,and $116,000 to the
employee savings plan.

Under
provisions of the ESOP, the Company can make discretionary contributions to be allocated based on eligible individual annual compensation, as approved by the Board of Directors. Contributions to
the ESOP are recognized as compensation expense. For the years December 31, 2003, 2002, and 2001, the ESOP owned 206,980, 206,100, and 180,079 shares of the Company's stock. ESOP shares are
included in the weighted average number of shares outstanding for earnings per share computations.

The
employee savings plan allowed participating employees to contribute up to $13,000 each in 2003. The Company matched 25% of the employees' elective contribution, as defined, not to exceed 10% of
eligible annual compensation.

The
Company maintains a non-qualified salary continuation plan for certain senior executive officers of the Company and the Bank. Under the plan, the Company has agreed to pay these
executives retirement benefits for a ten to fifteen year period after their retirement so long as they meet certain length of service vesting requirements. The plan is informally linked to several
single premium universal life insurance policies that provide life insurance on certain senior executive officers with the Company named as the owner and beneficiary of these policies. The Bank has a
Rabbi trust and specific life insurance contracts have been irrevocably assigned to the trust in support of the salary continuation plans. Salary continuation expense totaled $669,000,
$656,000,and $406,000, in 2003, 2002, and 2001.

The
Company also maintains a non-qualified deferred compensation plan for members of the board of directors of the Company and the Bank. Under the deferred compensation plan, members of
the board of directors have the ability to defer compensation they receive as directors until they reach retirement age, so long as they meet certain length of service vesting requirements. Upon
reaching retirement age, the Company has agreed to pay these directors retirement benefits over a ten year period. The plan is informally linked to several single premium universal life insurance
policies that provide life insurance on certain directors with the Company named as the owner and beneficiary of these policies. The Bank has a Rabbi trust and specific life insurance contracts have
been irrevocably assigned to the trust in support of the deferred compensation plans. Deferred compensation expense totaled $64,000, $59,000,and
$70,000 in 2003, 2002, and 2001.

NOTE 13. Stock Option Plan

In
1992, shareholders approved the adoption of an incentive stock option plan for bank management and a non-statutory stock option plan for directors. In 2002, shareholders approved the
adoption of a new incentive stock option plan for bank management and a new non-statutory stock option plan for directors. The maximum number of shares issuable under the plans was 126,000
and was amended by the shareholders in 1995 and 2001 to 450,000 and 675,000 options available for grant. Options are available for grant under the plans at prices that approximate fair market value of
the stock at the date of grant. Options granted under both plans become exercisable 25% at the time of grant and 25% each year thereafter and expire 10 years from the date of grant.

50

---

A
summary of the status of the Company's stock options as of and for the years ended December 31, 2003, 2002, and 2001 and changes during the years ended on those dates, follows:

|                                   |  | Number of
shares |   | Weighted
average
exercise price |       | Number of
shares |          | Weighted
average
exercise price |   | Number of
shares |  | Weighted
average
exercise price
|---------------------------------- |  | ---------------- | - | ------------------------------- | ----- | ---------------- | -------- | ------------------------------- | - | ---------------- |  | -------------------------------
|
|
|Outstanding at beginning of year   |  | 378,785          |   | $                               | 11.73 |                  | 434,915  |                                 | $ | 8.84             |  | 432,099                        
|Granted                            |  | 79,825           |   |                                 | 26.40 |                  | 89,531   |                                 |   | 16.93            |  | 117,301                        
|Exercised                          |  | (63,421          | ) |                                 | 11.73 |                  | (119,898 | )                               |   | 5.46             |  | (107,577                       
|Forfeited                          |  | (5,589           | ) |                                 | 17.00 |                  | (25,763  | )                               |   | 10.15            |  | (6,908                         
|                                   |  |                  |   |                                 |       |                  |          |                                 |   |                  |  |                                
|Outstanding at end of year         |  | 389,600          |   | $                               | 14.66 |                  | 378,785  |                                 | $ | 11.73            |  | 434,915                        
|                                   |  |                  |   |                                 |       |                  |          |                                 |   |                  |  |                                
|Options exercisable at end of year |  | 269,886          |   | $                               | 11.94 |                  | 251,206  |                                 | $ | 10.55            |  | 300,677                        

The
following table summarizes information about options outstanding at December 31, 2003:

| 
|-
|
|
|
|$
| 
| 
| 
| 
|$
| 

The
number of shares and exercise price per share has been adjusted for stock dividends and stock splits during the period. See Note 1 for additional information related to total compensation
and effects on net income.

51

---

NOTE 14. Fair Value of Financial Instruments

The
Company in estimating its fair value disclosures for financial instruments used the following methods and assumptions:

Financial Assets:

Cash and cash equivalents:For these assets, the carrying amount is a reasonable estimate for fair value.

Investments:Fair values for available for sale and held to maturity investment securities are based on quoted market prices where
available. If quoted market prices were not available, fair values were based upon quoted market prices of comparable instruments.

Net loans:The fair value of loans is estimated by utilizing discounted future cash flow calculations using the interest rates currently
being offered for similar loans to borrowers with similar credit risks and for the remaining or estimated maturities considering prepayments. The carrying value of loans is net of the allowance for
loan losses and unearned loan fees.

Financial Liabilities:

Deposits:The fair values disclosed for deposits generally paid upon demand (i.e. noninterest-bearing and interest-bearing demand) savings
and money market accounts are considered equal to their respective carrying amounts as reported on the consolidated balance sheets. The fair value of fixed rate certificates of deposit is estimated
using
the rates currently offered for deposits of similar remaining maturities.

Borrowings:For these instruments, the fair value is estimated using rates currently available for similar loans with similar credit risk
and for the remaining maturities.

Commitments to extend credit and standby letters of credit:The fair value of commitments to extend credit and standby letters of credit is
estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present credit worthiness of the counter parties. For
fixed rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rate. The fair value of letters of credit is based on fees currently
charged for similar arrangements or on the estimated cost to terminate them or otherwise settle the obligation with the counter parties at the recording date.

Fair
values for financial instruments are management's estimates of the values at which the instruments could be exchanged in a transaction between willing parties. These estimates are subjective and
may vary considerably from amounts that would be realized in actual transactions. In addition, other significant assets are not considered financial assets including, any deferred tax assets and
premises and equipment. Further, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on the fair value estimates and have not been
considered in any of these estimates.

|(Dollars in thousands)
|----------------------
|
|
|Financial assets:     
|                      
|                      
|                      
|                      
|                      
|                      
|                      
|                      

52

---

|Financial liabilities     |                                 |   |         |         |   |        
|------------------------- | ------------------------------- | - | ------- | ------- | - | -------
|                          | Noninterest-bearing demand      |   | $       | 206,709 |   | $      
|                          | Negotiable orders of withdrawal |   |         | 136,975 |   |        
|                          | Savings                         |   |         | 330,023 |   |        
|                          | Time deposits                   |   |         | 355,101 |   |        
|                          | Borrowings                      |   |         | 92,817  |   |        
|                          | Subordinated Debentures         |   | $       | 16,496  |   | $      
|
|
|Off-balance sheet:        |                                 |   |         |         |   |        
|Loan Commitments          |                                 | $ | 348,282 |         | $ | 348,282
|Standby letters of credit |                                 |   | 7,380   |         |   | 7,380  
|Borrowed funds commitment |                                 |   | 20,000  |         |   | 20,144 

|(Dollars in thousands)   
|-------------------------
|
|
|Financial assets:        
|                         
|                         
|                         
|                         
|                         
|                         
|Financial liabilities    
|                         
|                         
|                         
|                         
|                         
|                         
|
|
|Off-balance sheet:       
|Commitments              
|Standby letters of credit

NOTE 15. Parent Company Only Financial Information

This
information should be read in conjunction with the other notes to the consolidated financial statements. The following are the condensed balance sheets of the Company as of December 31,
2003 and 2002 and the condensed statements of income and cash flows for the years ended December 31, 2003, 2002, and 2001:

Condensed balance sheets

|                                          |                                            | December 31,
|----------------------------------------- | ------------------------------------------ | ------------
|
|
|Assets                                    |                                            |             
|Cash and short-term investments           |                                            | $           
|Investment in County Bank                 |                                            |             
|Investment in Regency Investment Advisors |                                            |             
|Net premises and equipment                |                                            |             
|Other assets                              |                                            |             
|                                          |                                            |             
|                                          | Total assets                               |             
|                                          |                                            |             
|Liabilities and shareholders' Equity      |                                            |             
|Liabilities                               |                                            |             
|Subordinated debentures                   |                                            | $           
|Capitalized lease                         |                                            |             
|Other liabilities                         |                                            |             
|                                          |                                            |             
|                                          | Total liabilities                          |             
|                                          |                                            |             
|                                          | Total shareholders' equity                 |             
|                                          |                                            |             
|                                          | Total liabilities and shareholders' equity |             
|                                          |                                            |             

53

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|Condensed statements of income                                                              |                                                                   | Years Ended December 31, |                     
|------------------------------------------------------------------------------------------- | ----------------------------------------------------------------- | ------------------------ | --------------------
|
|
|
|Income                                                                                      |                                                                   |                          |                     
|                                                                                            | Interest                                                          |                          | $                   
|                                                                                            | Lease income                                                      |                          |                     
|                                                                                            | Management fees from subsidiaries                                 |                          |                     
|                                                                                            | Other noninterest income                                          |                          |                     
|                                                                                            |                                                                   |                          |                     
|                                                                                            |                                                                   |                          | Total income        
|Expenses                                                                                    |                                                                   |                          |                     
|                                                                                            | Interest on borrowings                                            |                          |                     
|                                                                                            | Capitalized lease interest                                        |                          |                     
|                                                                                            | Salaries and related benefits                                     |                          |                     
|                                                                                            | Other noninterest expense                                         |                          |                     
|                                                                                            |                                                                   |                          |                     
|                                                                                            |                                                                   |                          | Total other expenses
|Loss before income taxes and equity in undistributed earnings of subsidiaries               |                                                                   |                          | (751                
|Income tax benefit                                                                          |                                                                   |                          | 290                 
|Equity in undistributed income of subsidiaries                                              |                                                                   |                          | 14,101              
|                                                                                            |                                                                   |                          |                     
|Net income                                                                                  |                                                                   | $                        | 13,640              
|                                                                                            |                                                                   |                          |                     
|
|
|
|
|Operating activities:                                                                       |                                                                   |                          |                     
|Net income                                                                                  |                                                                   | $                        | 13,640              
|Adjustments to reconcile net income to net cash (used in) provided by operating activities: |                                                                   |                          |                     
|                                                                                            | Depreciation of fixed assets                                      |                          |                     
|                                                                                            | Equity in undistributed earnings of subsidiaries                  |                          |                     
|                                                                                            | Decrease in other assets                                          |                          |                     
|                                                                                            | Decrease in other liabilities                                     |                          |                     
|                                                                                            |                                                                   |                          |                     
|                                                                                            | Net cash (used in) provided by operating activities               |                          |                     
|Investing activities:                                                                       |                                                                   |                          |                     
|                                                                                            | Capital contribution to subsidiary bank                           |                          |                     
|                                                                                            | Purchase of subsidiary and capital contributions                  |                          |                     
|                                                                                            | Purchase of premises and equipment                                |                          |                     
|                                                                                            |                                                                   |                          |                     
|                                                                                            | Net cash used in investing activities                             |                          |                     
|Financing activities:                                                                       |                                                                   |                          |                     
|                                                                                            | Issuance of Junior Subordinated Debentures                        |                          |                     
|                                                                                            | Net increase (decrease) in other borrowings and capitalized lease |                          |                     
|                                                                                            | Issuance of common stock related to exercise of                   |                          |                     
|                                                                                            | stock options and employee benefit plans                          |                          |                     
|                                                                                            | Cash dividends and fractional shares                              |                          |                     
|                                                                                            |                                                                   |                          |                     
|                                                                                            | Net cash provided by financing activities                         |                          |                     
|                                                                                            |                                                                   |                          |                     
|                                                                                            | Increase (decrease) in cash and cash equivalents                  |                          |                     
|                                                                                            | Cash and cash equivalents at beginning of year                    |                          |                     
|                                                                                            |                                                                   |                          |                     
|                                                                                            | Cash and cash equivalents at end of year                          |                          | $                   
|                                                                                            |                                                                   |                          |                     

54

---

NOTE 16. Quarterly Results of Operations (Unaudited)

|                              |  | 2003 Quarter Ended
|----------------------------- |  | ------------------
|
|
|
|Interest income               |  | $                 
|Interest expense              |  |                   
|Net interest income           |  |                   
|Provision for loan losses     |  |                   
|Other income                  |  |                   
|Other expenses                |  |                   
|Income before income taxes    |  |                   
|Income taxes                  |  |                   
|Net income                    |  | $                 
|                             
|Basic earnings per share(1)   |  | $                 
|                             
|Diluted earnings per share(1) |  | $                 

|                              |  | 2002 Quarter Ended
|----------------------------- |  | ------------------
|
|
|
|Interest income               |  | $                 
|Interest expense              |  |                   
|Net interest income           |  |                   
|Provision for loan losses     |  |                   
|Other income                  |  |                   
|Other expenses                |  |                   
|Income before income taxes    |  |                   
|Income taxes                  |  |                   
|Net income                    |  | $                 
|                             
|Basic earnings per share(1)   |  | $                 
|                             
|Diluted earnings per share(1) |  | $                 

55

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