<PAGE>

U. S. SECURITIES AND EXCHANGE COMMISSION FORM 10-K/A
Washington, D. C. 20549

[X]  ANNUAL REPORT  PURSUANT TO SECTION 13 or 15(d) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934 [Fee Required]
     For the Fiscal Year Ended December 31, 1996
     Commission File Number: 0-27384

--------------------------------------------------------------------------------
CAPITAL CORP OF THE WEST 
(Exact name of registrant as specified in its charter)

California                                                            77-0405791
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)

1160 West Olive Avenue, Suite A, Merced, California                   95348-1952
(Address of principal executive offices)                              (Zip Code)

(209) 725-2200
(Registrant's telephone number, including area code)

Securities registered under Section 12(b) of the Act:
None

Securities  registered  under Section 12(g) of the Act (Title of Class):  
Common Stock, no par value.
Preferred Stock, no par value.

The Registrant has filed all reports required to be filed by Section 13 or 15(d)
of the  Securities  Exchange Act of 1934 during the  preceding 12 months (or for
such shorter period that the Company was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
 X  Yes           No
---          ---

Disclosure of delinquent  filers  pursuant to Item 405 of Regulation  S-K is not
contained  herein,  and  will  not be  contained,  to the  best of  Registrant's
knowledge,  in  definitive  proxy  or  information  statements  incorporated  by
reference in Part III of this Form 10-K or any amendment to this Form 10-K. [x]

Aggregate  market  value  of the  voting  stock  held  by  nonaffiliates  of the
Registrant was approximately $32,165,469 (based on the $18.50 average of bid and
ask  prices  per  common  share on  February  28,  1997).  The  number of shares
outstanding of the  Registrant's  common stock, no par value, as of February 28,
1997 was 1,738,674. No shares of preferred stock, no par value, were outstanding
at February 28, 1997.

Documents incorporated by reference:
Portions  of the  definitive  proxy  statement  for the 1997  Annual  Meeting of
Shareholders to be filed with the Securities and Exchange Commission pursuant to
Regulation 14A are  incorporated by reference in Part I, Item 4; Part II, Item 9
and Part  III,  Items  10  through  13 and  portions  of the  Annual  Report  to
Shareholders  for 1996 are  incorporated by reference in Part II, Item 5 through
8.

                                        1

<PAGE>




                                         Capital Corp of the West
                                             Table of Contents


<TABLE>
<CAPTION>

                                                                                 Page              Reference
                                                                                 
                                     PART I
<S>               <C>                                                                     <C>
--------------------------------------------------------------------------------------------------------------
ITEM 1.           BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . .  3
--------------------------------------------------------------------------------------------------------------
ITEM 2.           PROPERTIES  . . . . . . . . . . . . . . . . . . . . . . . . . .32
--------------------------------------------------------------------------------------------------------------
ITEM 3.           LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . 34
--------------------------------------------------------------------------------------------------------------
ITEM 4.           SUBMISSION OF MATTERS TO A VOTE OF                                      Proxy Statement for
                  SECURITY HOLDERS . . . . . . . . . . . . . . . . . . . . . . . 34       1997 Annual Meeting
--------------------------------------------------------------------------------------------------------------
                                     PART II
--------------------------------------------------------------------------------------------------------------
ITEM 5.           MARKET FOR THE REGISTRANT'S COMMON
                  STOCK AND RELATED SECURITY HOLDER                                       Page 23 of 1996 Annual
                  MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . .34       Report
--------------------------------------------------------------------------------------------------------------
ITEM 6.           SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . .    34       Page 24 of 1996 Annual
                                                                                          Report
--------------------------------------------------------------------------------------------------------------
ITEM 7.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF                                      Pages 19-22 of 1996
                  OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 34       Annual Report
--------------------------------------------------------------------------------------------------------------
ITEM 8.           FINANCIAL STATEMENTS AND SUPPLEMENTARY                                  Pages 9-18 of 1996
                  DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34       Annual Report
--------------------------------------------------------------------------------------------------------------
ITEM 9.           CHANGES IN AND DISAGREEMENTS WITH
                  ACCOUNTANTS ON ACCOUNTING AND                                           Proxy Statement for 1997
                  FINANCIAL DISCLOSURE . . . . . . . . . . . . . . . . . . . . . 34       Annual Meeting
--------------------------------------------------------------------------------------------------------------
                                    PART III
--------------------------------------------------------------------------------------------------------------
ITEM 10.          DIRECTORS AND EXECUTIVE OFFICERS OF THE                                 Proxy Statement for 1997
                  REGISTRANT. . . . . . . . . . . . . . . . . . . . . . . . . . .34       Annual Meeting
--------------------------------------------------------------------------------------------------------------
ITEM 11.          EXECUTIVE COMPENSATION. . . . . . . . . . . . . . . . . . .    35       Proxy Statement for 1997
                                                                                          Annual Meeting
--------------------------------------------------------------------------------------------------------------
ITEM 12.          SECURITY OWNERSHIP OF CERTAIN BENEFICIAL                                Proxy Statement for 1997
                  OWNERS AND MANAGEMENT. . . . . . . . . . . . . . . . . .       35       Annual Meeting
--------------------------------------------------------------------------------------------------------------
ITEM 13.          CERTAIN RELATIONSHIPS AND RELATED                                       Proxy Statement for 1997
                  TRANSACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . .35       Annual Meeting
--------------------------------------------------------------------------------------------------------------
                                     PART IV
--------------------------------------------------------------------------------------------------------------
ITEM 14.          EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
                  AND REPORTS ON FORM 8-K . . . . . .                            35
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37-38
</TABLE>

                                                    2

<PAGE>



                                     PART I

ITEM 1.                  BUSINESS

General Development of the Company

General
Capital  Corp of the West (the  "Company"  or Capital  Corp") is a bank  holding
company  incorporated  under  the laws of the State of  California  on April 26,
1995.  On November 1, 1995,  the Company  became  registered  as a bank  holding
company,  and is the  holder of all of the  capital  stock of  County  Bank (the
"Bank") and all of the capital stock of Town and Country Finance and Thrift (the
"Thrift").  During 1996 the Company  formed Capital West Group, a new subsidiary
that engages in the financial  institution  advisory  business and purchased the
Thrift.  The  Company's  primary asset is the Bank and the Bank is the Company's
primary source of income. The Company's  securities consist of 20,000,000 shares
of Common Stock, no par value,  and 10,000,000  shares of Preferred Stock. As of
February 28, 1997 there were 1,738,674 common shares outstanding, held of record
by approximately 1,175 shareholders.  There were no preferred shares outstanding
at February 28, 1997.  The Bank has two wholly owned  subsidiaries,  Merced Area
Investment & Development,  Inc. ("MAID") and County Asset Advisors ("CAA").  CAA
is currently inactive.  All references herein to the "Company" include the Bank,
the Bank's subsidiaries,  Capital West Group and the Thrift,  unless the context
otherwise requires.


Information  about Commercial  Banking & General Business of the Company and its
Subsidiaries

The Bank was organized on August 1, 1977, as County Bank of Merced, a California
state banking  corporation.  The Bank commenced operations on December 22, 1977.
In November  1992,  the Bank changed its legal name to County  Bank.  The Bank's
securities  consist  of one  class of Common  Stock,  no par value and is wholly
owned by the Company.  The Bank's deposits are insured under the Federal Deposit
Insurance Act, by the Federal  Deposit  Insurance  Corporation  ("FDIC"),  up to
applicable limits stated therein. Like most state-chartered banks of its size in
California, it is not a member of the Federal Reserve System.

The Company  acquired the Thrift on June 28, 1996 for a combination  of cash and
stock with an aggregate value of  approximately  $5.8 million.  The Thrift is an
industrial loan company with four offices. It specializes in direct loans to the
public and the  purchase of  financing  contracts  principally  from  automobile
dealerships and furniture  stores.  It was originally  incorporated in 1957. Its
deposits (technically known as investment certificate or certificates of deposit
rather than deposits) are insured by the FDIC up to applicable limits.

Industry & Market Area
The Bank engages in general  commercial  banking  business  primarily in Merced,
Tuolomne  and  Stanislaus  Counties.  The Bank has nine branch  offices;  two in
Merced with the branch located in north Merced currently  designated as the head
office,  and offices in Atwater,  Turlock,  Hilmar,  Sonora,  Los Banos, and two
offices  in  Modesto   opened  in  late  1996.   The  Company's   administrative
headquarters  are located in Merced in three separate  suites in the same office
complex.  The  administrative  facilities also provides  accommodations  for the
activities of Merced Area Investment and Development ("MAID"), the Bank's wholly
owned real  estate  development  subsidiary  and Capital  West  Group.  Although
approved  to  be a  full  service  branch  banking  office,  the  administrative
headquarters  facility  is  presently  used  solely as the  Company's  corporate
headquarters.  The Thrift engages in general consumer lending business primarily
in Stanislaus,  Fresno and Tulare Counties from its main office in Turlock;  and
branch  offices  located  in  Modesto,   Visalia,  and  Fresno.  (See  "ITEM  2.
PROPERTIES")

Competition

The Company's  primary  market area consists of Merced,  Tuolomne and Stanislaus
Counties and nearby  communities of adjacent  counties.  The banking business in
California generally,  and specifically in the Company's primary market area, is
highly competitive with respect to both loans and deposits. The banking business
is dominated by a relatively small number of major banks which have many offices
operating over wide geographic  areas.  Many of the major commercial banks offer
certain services (such as international, trust and

                                        3

<PAGE>

securities  brokerage services) which are not offered directly by the Company or
through   its   correspondent   banks.   By  virtue  of  their   greater   total
capitalization,  such banks have  substantially  higher  lending limits than the
Company and substantial advertising and promotional budgets.

However,  smaller  independent  financial  institutions,  savings  and loans and
credit unions also  represent a  competitive  force.  To  illustrate  the Bank's
relative  market  share,  based  upon  total  deposits  in the County of Merced,
California  at June 30,  1996 (more  recent data is not  available),  the Bank's
deposits  represented  approximately  15.7%  of  total  deposits  in  all  other
financial  institutions  in the county.  Deposits  in  Stanislaus  and  Tuolomne
counties were not material as of that date.

In the past, an independent bank's principal  competitors for deposits and loans
have been other banks (particularly major banks),  savings and loan associations
and credit unions.  To a lesser extent,  competition was also provided by thrift
and  loans,   mortgage  brokerage  companies  and  insurance  companies.   Other
institutions,  such as brokerage houses, credit card companies,  and even retail
establishments have offered new investment vehicles, such as money-market funds,
which also compete with banks.  The direction of federal  legislation  in recent
years  seems  to  favor   competition   between  different  types  of  financial
institutions and to foster new entrants into the financial  services market, and
it is anticipated  that this trend will continue.  It should be noted,  however,
that savings and loan  institutions have now been restricted in their ability to
make commercial loans under the Financial  Institutions  Reform,  Recovery,  and
Enforcement Act of 1989 ("FIRREA") legislation.

To compete  with major  financial  institutions  in its service  area,  the Bank
relies upon specialized  services,  responsive handling of customer needs, local
promotional  activity,  and personal  contacts by its  officers,  directors  and
staff, as opposed to large  multi-branch  banks which compete  primarily by rate
and location of branches.  For  customers  whose loan demands  exceed the Bank's
lending  limits,  the  Bank  seeks  to  arrange  funding  for  such  loans  on a
participation basis with its correspondent banks or other independent commercial
banks.  The Bank also assists  customers  requiring  services not offered by the
Bank to obtain such services from its correspondent banks.

Bank's Services and Markets

Bank
The Bank conducts a general commercial banking business including the acceptance
of demand (includes interest bearing),  savings and time deposits. The Bank also
offers  commercial,  real estate,  personal,  home  improvement,  home mortgage,
automobile,  credit card and other  installment and term loans.  The Bank offers
travelers' checks,  safe deposit boxes,  banking-by-mail,  drive-up  facilities,
24-hour  automated teller machines,  and other customary banking services to its
customers.  Although  Management  believes there is demand for trust services in
its service area, the Bank does not operate a trust department nor does it offer
these services through a correspondent banking relationship to its customers.

The four  general  areas in which  the Bank has  directed  virtually  all of its
lendable assets are (i) commercial  loans,  including  agricultural  loans, (ii)
consumer  installment  loans,  (iii) real estate mortgage  loans,  and (iv) real
estate  construction  loans.  As of December  31,  1996,  these four  categories
accounted for approximately  39%, 22%, 31% and 8%,  respectively,  of the Bank's
loan portfolio.

In  1990,  the  Bank  entered  into  a  cooperative  agreement  with  Prudential
Agricultural Group to offer agricultural real estate loans to farmers in Merced,
Stanislaus,  San Joaquin,  Madera, Monterey, Santa Cruz and San Benito Counties.
The program is designed to have a select group of independent  banks  throughout
the United  States  generate  farm real estate loans and process them within the
underwriting  standards of the proposed Farmer Mac program. The qualifying loans
are for the purchase or refinance of production oriented agricultural properties
and are secured by a first deed of trust on the property.  Loan terms range from
5 to 20 years in length and loan amounts  range from  $500,000 to $3.0  million.
The  Bank  originates,  packages  and  subsequently  sells  these  loans  to the
Prudential  Agricultural  Group and retains servicing rights on these loans. The
Bank is the only  representative in Merced and Stanislaus Counties to offer this
program.

                                        4

<PAGE>

In addition in 1992,  the Bank became a certified  Farmers  Home  Administration
lender,  now known as the Farm Service Agency.  The Bank originates  loans under
the  guidelines of such program both to retain for the Bank's loan portfolio and
to sell in the secondary  market.  The Bank may also sell loans, in the $100,000
range, direct to Farmer Mac.

In  1994,  the Bank  organized  a  department  to  originate  loans  within  the
underwriting  standards of Small Business  Administration.  The Bank  originates
packages and subsequently  sells these loans in the secondary market and retains
servicing rights on these loans.

The Bank's  deposits are attracted  primarily  from  individuals  and small- and
medium-sized business-related sources. The Bank also attracts some deposits from
municipalities and other governmental  agencies and entities. In connection with
the  deposits of  municipalities  or other  governmental  agencies,  the Bank is
generally required to pledge securities to secure such deposits, except when the
depositor  signs a waiver with respect to the first  $100,000 of such  deposits,
which amount is insured by the FDIC.

The principal sources of the Bank's revenues are (i) interest and fees on loans,
(ii) interest on investment  securities  (principally U.S. Government securities
and municipal  bonds),  and (iii) service charges on deposit  accounts.  For the
year ended December 31, 1996, these sources comprised  approximately  106%, 20%,
and 8% respectively, of the Bank's total operating income.

Bank's Business Not Dependent upon a Small Number of Individuals
Most  of  the  Bank's  business  originates  from  individuals,  businesses  and
professional  firms  located  in and  around  Merced,  Tuolomne  and  Stanislaus
Counties.  The Bank is not dependent upon a single  customer or group of related
customers for a material  portion of its deposits,  nor is a material portion of
the  Bank's  loans  concentrated  within a single  industry  or group of related
industries. As of December 31, 1996, the largest industry within the Bank's loan
portfolio  is it's  real  estate  mortgage  loans at 31% of the loan  portfolio.
Agriculture  loans are 24% including  dairy loans of 15%.  Thus,  the quality of
these Bank assets and Bank earnings could be adversely affected by a downturn in
the local economy, including the dairy industry sector.

Bank's Real Estate Subsidiary (MAID)

General
As authorized  by Section 751.3 of the  California  Financial  Code,  California
state-chartered   banks  are  allowed  to  engage  in  real  estate  development
activities either directly or through  investment in a wholly-owned  subsidiary.
Pursuant to this  authorization,  the Bank  established  MAID, its  wholly-owned
subsidiary, as a California corporation on February 18, 1987.

In late 1995, the Company wrote down the entire remaining  investment in MAID in
the amount of $2,881,000.  The uncertainty about the effect of the investment in
MAID on the results of future  operations  caused  management  to recognize  the
complete write-down in 1995.

At December 31, 1996, MAID held two real estate projects  including improved and
unimproved land in various stages of development. MAID continues to market these
projects,  and any  amounts  realized  upon sale or other  disposition  of these
assets above their current  carrying  value of zero will result in  non-interest
income  at the time of such  sale or  disposition.  The  following  is a general
discussion of these properties:

(1) This  project  consists  of 9  remaining  improved  lots and 117  additional
unimproved  lots. MAID does not currently intend to develop the subsequent three
phases (117 lots) of this property.

(2) This project is comprised of 230 unimproved lots of which 143 are remaining.
MAID does not currently intend to develop the remaining property.

Bank's subsidiary, County Asset Advisors

General
                                        5

<PAGE>

Pursuant to section 772 of the California  Financial code, the Bank  established
County Asset Advisors, a wholly-owned subsidiary, as a California corporation in
1994. County Asset Advisors is not currently engaged in any activities.

The Thrift

General
The Thrift is a licensed  California  Industrial  Loan Company  specializing  in
direct loans to the public and the purchase of  financing  contract  principally
from car  dealerships  and furniture  stores.  The Thrift offers certain deposit
products  including savings and time deposits which are technically  referred to
as installment investment  certificates and fully paid investment  certificates.
An industrial  loan company is prohibited by the Industrial  Loan Company Law to
offer transaction accounts to its customers.

Capital West Group

General
Capital  West  Group was formed in April 1996 as a wholly  owned  subsidiary  of
Capital Corp.  The subsidiary  specializes  in a variety of consulting  work for
independent  financial  institutions  located  primarily in the western  states.
Consulting services would include strategic planning, capital planning, new bank
formation,  providing  fairness  opinions  and other  special  projects for both
boards and management of client institutions.

Research Activities

The Company has not engaged in any material research  activities relating to the
development  of new services or the  improvement  of existing  banking  services
during the past two fiscal years. During that time, however,  Company directors,
officers  and  employees  have  continually  engaged  in  marketing  activities,
including the evaluation and  development of new services,  in order to maintain
and improve the Company's  competitive position in its primary service area. The
costs of these activities have not been significant during this period.

The Company has no present  plans to introduce a new product or line of business
which would require the invest ment of a material  amount of the Company's total
assets.

Number of Employees

As of  December  31,  1996,  the  Company  employed  a  total  of 141  full-time
equivalent   employees.   The  Company  beleives  that  employee  relations  are
excellent.

Seasonal Trends in the Company's Business

Although the Company does experience some immaterial  seasonal trends in deposit
growth and funding of its dairy and construction loan portfolios, in general the
Company's business is not seasonal.

Operations in Foreign Countries

The Company conducts no operations in any foreign country.

Supervision and Regulation

Overview
The Company is subject to extensive regulation by federal and state authorities.
As a California  chartered bank holding  company,  the Company is subject to and
examined by the Board of Governors of the Federal  Reserve System  ("FRB").  The
Bank, as a California  state licensed bank with accounts  insured by the FDIC to
the maximum amount  permitted by law, is subject to regulation,  supervision and
regular examination by the California Superintendent of Banks ("Superintendent")
and the FDIC.  The Bank is also subject to certain  regulations  of the FRB. The
Thrift,  as an industrial loan company with accounts  insured by the FDIC to the
maximum amount

                                        6

<PAGE>

permitted by law is subject to regulation,  supervision and regular  examination
by the  California  Department  of  Corporations  and the FDIC.  The  Company is
subject to the periodic requirements of Section 15(d) of the Securities Exchange
Act of 1934, as amended,  which include, but are not limited to filing,  annual,
quarterly,   and  other  current   reports  with  the  Securities  and  Exchange
Commission.  The primary current function of the Company is to hold the stock of
the Bank and its other subsidiaries.

Most aspects of the Bank's business and operations,  including periodic reports,
investments,  loans,  certain  checkclearing  activities,   branching,  reserves
against deposits,  the permissible scope of the Bank's activities,  and numerous
other  areas,  are  governed  by federal  and state  statutes  and  regulations,
including the  regulations of the FDIC and the FRB. The banking  industry in the
United  States is affected by the extensive  regulation  of  commercial  banking
activities  and,  on an ongoing  basis,  by the  enactment  of federal and state
legislation.  Such  legislation  may have the effect of increasing or decreasing
the cost of doing business, may modify permissible activities, and could enhance
the  competitive  position of  non-bank  financial  institutions.  Any change in
applicable  laws or  regulations  may  have a  material  adverse  effect  on the
business and prospects of the Bank.

In addition to the  challenges  presented by the great breadth of the regulatory
subject  matter which will affect the Company,  it should also be noted that the
regulatory  agencies  which  have  jurisdiction  over  the  Company  have  broad
discretion in exercising their supervisory  powers.  For example,  under federal
law the FDIC has  authority  to  prohibit a state bank from  engaging in banking
practices which it considers unsafe and unsound.

The laws of the  State  of  California  also  affect  the  Bank's  business  and
operations.  Pursuant to the  California  Financial  Code,  if it appears to the
Superintendent  that a bank is violating its articles of  incorporation or state
law,  or  is  engaging  in  unsafe  or   injurious   business   practices,   the
Superintendent  can order the bank to comply with the law or to cease the unsafe
or injurious  practices.  The  Superintendent has the power to suspend or remove
bank  officers,  directors  and  employees who (i) violate any law or regulation
relating to the business of the bank or breach any  fiduciary  duty to the bank,
(ii) engage in any unsafe or unsound  practices  related to the  business of the
bank, or (iii) are charged with or convicted of a felony involving dishonesty or
breach  of  trust.  The  Superintendent  is also  required  to order the Bank to
correct any  impairment of its  contributed  capital and to assess the shares of
the Bank's stock to correct such impairment if necessary.

In addition to the regulation and supervision  outlined  above,  banks must also
deal with  judicial  scrutiny of their  lending and  collection  practices.  For
example,  some banks have been found liable for exercising  remedies which their
loan  documents  authorized  upon the borrower's  default.  This has occurred in
cases  where  the  exercise  of  those  remedies  has  been   determined  to  be
inconsistent  with the  previous  course  of  dealing  between  the bank and the
borrower.  As a result,  banks have had to  exercise  increased  caution,  incur
greater  expense and face  increased  exposure to  liability  when  dealing with
nonperforming loans.

Bank Holding Company Act
Capital  Corp is a bank holding  company  within the meaning of the Bank Holding
Company Act ("BHC") Act and is  registered  as such with the FRB. A bank holding
company is  required to file with the FRB annual  reports and other  information
regarding  its business  operations  and those of its  subsidiaries.  It is also
subject to examination by the FRB and is required to obtain FRB approval  before
acquiring, directly or indirectly,  ownership or control of any voting shares of
any bank, if after such  acquisition,  it would  directly or  indirectly  own or
control more than 5% of the voting stock of that bank,  unless it already owns a
majority of the voting stock of that bank. The BHC Act further provides that the
FRB shall not approve any such  acquisition  that would result in or further the
creation of a monopoly,  or the effect of which may be  substantially  to lessen
competition, unless the anti-competitive effects of the proposed transaction are
clearly  outweighed by the probable  effect in meeting the convenience and needs
of the community to be served.

Under  the  BHC  Act,  a bank  holding  company  is,  with  limited  exceptions,
prohibited  from (i) acquiring  direct or indirect  ownership or control of more
than 5% of the voting shares of any company which is not a bank or (ii) engaging
in any  activity  other  than  managing  or  controlling  banks.  With the prior
approval of the FRB, however, a bank holding company may own shares of a company
engaged in activities  which the FRB has determined to be so closely  related to
banking or managing or controlling banks as to be a proper incident thereto.

                                        7

<PAGE>

The FRB has by  regulation  determined  that certain  activities  are so closely
related to banking as to be a proper incident  thereto within the meaning of the
BHC  Act.  These  activities  include,  but are not  limited  to:  operating  an
industrial loan company, industrial bank, Morris Plan bank, savings association,
mortgage  company,  finance company,  credit card company or factoring  company;
performing  certain  data  processing   operations;   providing  investment  and
financial  advice;  operating  a trust  company  in certain  instances,  selling
traveler's  checks,  United  States  savings  bond  and  certain  money  orders;
providing certain courier services;  providing  management  consulting advice to
nonaffiliated  depository  institutions in some  instances;  acting as insurance
agent for certain types of credit-related insurance;  leasing property or acting
as agent,  broker or advisor for leasing  property  on a "full  pay-out  basis";
acting as a consumer  financial  counselor,  including  tax  planning and return
preparation;  performing futures and options advisory services,  check guarantee
services  and discount  brokage  activities;  operating a  collection  or credit
bureau; or performing personal property appraisals.  Capital Corp has no present
intention to engage in any of such  permitted  activities,  except  operating an
industrial  loan  company  and  providing   management   consulting   advice  to
nonaffiliated depository institutions.

The FRB has also determined  that certain  activities are not so closely related
to banking to be a proper  incident  thereto  within the meaning of the BHC Act.
Such activities include real estate brokerage and syndication; land development;
property  management;  underwriting  of life  insurance  not  related  to credit
transactions; and, with certain exceptions,  securities underwriting, and equity
financing.

Under the BHC Act, a bank holding  company and its  subsidiaries  are prohibited
from acquiring and voting shares of interest in all or substantially  all of the
assets of any bank located outside the state in which the operations of the bank
holding company's  banking  subsidiaries are principally  conducted,  unless the
acquisition is specifically authorized by the law of the state in which the bank
to be acquired is located or unless the transaction  qualifies under federal law
as "emergency  interstate  acquisition" of a closed or failing bank.  California
law expressly permits interstate banking.

Regulations and policies of the FRB require a bank holding company to serve as a
source of financial and managerial  strength to its subsidiary  banks. It is the
FRB's policy that a bank  holding  company  should stand ready to use  available
resources to provide  adequate capital funds to a subsidiary bank during periods
of financial  stress or adversity and should maintain the financial  flexibility
and  capital-raising  capacity to obtain  additional  resources  for assisting a
subsidiary  bank.  Under certain  conditions,  the FRB may conclude that certain
actions of a bank  holding  company,  such as payment of cash  dividends,  would
constitute an unsafe and unsound practice because they violate the FRB's "source
of strength" doctrine.

A bank holding company and its  subsidiaries  are prohibited from certain tie-in
arrangements  in  connections  with any  extension  of credit,  sale or lease of
property or furnishing of services. For example, with certain exceptions, a bank
may not  condition an extension of credit on a promise by its customer to obtain
other services provided by it, its holding company or other subsidiaries,  or on
a promise by its customer not to obtain other  services  from a  competitor.  In
addition,  federal law imposes  certain  restrictions  on  transactions  between
Capital Corp and its subsidiaries.  In addition,  Capital Corp is subject,  with
certain  exceptions,  to provisions of federal law imposing  limitations  on and
requiring collateral for, extensions of credit by Capital Corp's subsidiary bank
to its other affiliates.

Directors,  officers  and  principal  shareholders  of  Capital  Corp,  and  the
companies  with which they are  associated,  have had and will  continue to have
banking  transactions  with the Bank and the  Thrift in the  ordinary  course of
business.  Any loans and commitments to lend included in such  transactions  are
made in  accordance  with  applicable  law,  on  substantially  the same  terms,
including  interest rates and  collateral,  as those  prevailing at the time for
comparable transactions with other persons of similar  creditworthiness,  and on
terms not involving more than the normal risks of  collectibility  or presenting
other unfavorable  features. At December 31, 1996, loans to such persons totaled
$573,000 or 2.7% of Capital Corp's shareholders' equity.

Capital Adequacy Requirements
Federal  regulators have established  minimum  risk-based  capital standards for
commercial banks and bank holding companies.  These guidelines provide a measure
of capital levels and are intended to reflect the degree of risk associated with
both on- and  off-balance  sheet items.  The risk-based  capital rules establish
minimum standards;  they do not evaluate all factors affecting an organization's
financial  condition,  and overall  capital  assessments  by federal  regulators
include  analysis  of such  additional  factors  as (i)  overall  interest  rate
exposure; (ii) liquidity, 

                                       8

<PAGE>

funding and market risk; (iii) quality and level of earnings; (iv) investment or
loan portfolio  concentrations;  (v) quality of loans and investments;  (vi) the
effectiveness of loan and investment  policies;  and (vii) management's  overall
ability to monitor and control other financial and operating risks.

A financial institution's risk-based capital ratio is calculated by dividing its
qualifying   capital  by  its   period-end   risk-weighted   assets.   Financial
institutions,  including the Bank and the Thrift, generally are expected to meet
a minimum ratio of qualifying  total  capital to  risk-weighted  assets of eight
percent, at least one-half of which capital must be in the form of core (Tier 1)
capital,  consisting of common stock,  noncumulative  perpetual preferred stock,
minority  interests in equity capital accounts of consolidated  subsidiaries and
limited  amounts  of  qualifying  mortgage  servicing  rights,  less most  other
intangible  assets.  Supplementary  (Tier 2) capital  consists  of,  among other
things,  the  allowance  for loan  losses up to 1.25  percent  of  risk-weighted
assets,  cumulative,  perpetual and term preferred stock, certain hybrid capital
instruments,  and term  subordinated  debt. The maximum amount of Tier 2 capital
which may be  recognized  for  risk-based  capital  purposes  is  limited to 100
percent of Tier 1 capital (after any deductions for disallowed  intangibles  and
other items).  The aggregate amount of term  subordinated  debt and intermediate
term  preferred  stock  that may be  treated  as Tier 2 capital is limited to 50
percent of Tier 1 capital.  Certain other limitations and restrictions  apply as
well.

The  risk-based  capital  requirements  did not replace or eliminate the minimum
leverage ratios of capital to total assets that are required to be maintained by
financial  institutions.  The federal  regulatory  agencies have adopted a three
percent  minimum  leverage  ratio,  which is intended to  supplement  risk-based
capital requirements and to ensure that all financial  institutions,  even those
that invest  predominantly  in low-risk  assets,  continue to maintain a minimum
level of core capital. These regulations provide that a financial  institution's
minimum  leverage  ratio is  determined  by  dividing  its Tier 1 capital by its
quarterly  average  total  assets,  less  intangibles  not  includable in Tier 1
capital.

Under these rules,  a minimum  leverage  ratio of three  percent is required for
institutions  which  have  been  determined  to be in the  highest  of the  five
categories  used  by  regulators  to  rate  financial  institutions.  All  other
organizations  are required to maintain  leverage  ratios of at least l00 to 200
basis points above the three percent minimum. It is improbable, however, that an
institution  with a three percent  leverage  ratio would be rated in the highest
category,  since a strong  capital  position  is so  closely  tied to the rating
system.  Therefore, the "minimum" leverage ratio is, for all practical purposes,
significantly above three percent.

The leverage  ratio  establishes  a minimum  standard  affecting  the ability of
financial  institutions,  including the Bank and the Thrift,  to increase assets
and liabilities  without  increasing  capital  proportionately.  A state bank or
thrift  which  fails  to  maintain  sufficient  capital  to  meet  both  capital
requirements  is required to submit a plan to the FDIC  describing the means and
schedule by which the  institution  will  achieve its  minimum  capital  ratios.
Failure to submit a plan,  or  failure  to comply  with an  approved  plan,  may
subject a institution to restrictions  on its operations and activities,  and to
other  regulatory  actions,  including  assessments  of civil  money  penalties.
Pursuant  to  federal  law,   continued   failure  to  achieve  minimum  capital
requirements may result in placement of the institution  under a conservatorship
or  receivership  and,  ultimately,  in  liquidation  by the FDIC.  Pursuant  to
California law, the  Superintendent has authority,  under certain  circumstances
(e.g., if the institution's capital is impaired or the institution is conducting
its business in an unsafe or unsound  manner) to take possession of the property
and business of the  institution and tender it to the FDIC for  liquidation.  In
addition,  if the  Superintendent  believes  that  a  institution's  capital  is
impaired, the Superintendent is required to order the institution to correct the
impairment.  In such a case, the institution must levy and collect an assessment
on the shares of the institution's common stock.

Regulatory Ratios
As of December  31, 1996,  the  Company's  total  risk-based  capital  ratio was
approximately  11.2% and its leverage ratio was approximately  8.2%. The Company
does not presently expect that compliance with the risk-based capital guidelines
or minimum leverage  requirements  will have a materially  adverse effect on its
business in the reasonably  foreseeable  future.  For further  information about
regulatory  capital  requirements  see "Note 8--Notes to Consolidated  Financial
Statements"  section entitled  "Regulatory  Matters" at page 16 of the Company's
1996 Annual Report to the Shareholders incorporated herein by reference.

                                        9

<PAGE>

Prompt Corrective Action
The Federal  Deposit  Insurance  Corporation  Improvement Act of 1991 ("FDICIA")
requires federal  regulators to take "prompt  corrective action" with respect to
institutions that do not meet minimum capital requirements.  In response to this
requirement,  federal  regulators adopted rules based upon FDICIA's five capital
tiers. These rules, which will apply to the Bank and the Thrift, provide that an
institution is "well capitalized" if its risk-based capital ratio is ten percent
or greater,  its Tier 1 risk-based capital ratio is six percent or greater,  its
leverage ratio is five percent or greater, and the institution is not subject to
a  capital  directive  or other  enforceable  order by  federal  regulators.  An
institution is "adequately capitalized" if its risk-based capital ratio is eight
percent or  greater,  its Tier 1  risk-based  capital  ratio is four  percent or
greater;  and its leverage  ratio is four percent or greater  (three  percent or
greater for the most highly-rated institutions, as rated by federal regulators).
An institution is considered  "undercapitalized" if its risk-based capital ratio
is less than eight  percent;  its Tier 1 risk-based  capital  ratio is less than
four  percent;  or its  leverage  ratio is four percent or less (less than three
percent   for  the  most   highly-rated   institutions).   An   institution   is
"significantly  undercapitalized"  if (i) its  risk-based  capital ratio is less
than six percent;  (ii) its Tier 1 risk-based  capital  ratio is less than three
percent;  or (iii) its leverage ratio is less than three percent. An institution
is deemed to be "critically  undercapitalized"  if its ratio of tangible  equity
(Tier 1  capital)  to total  assets  is equal to or less  than two  percent.  An
institution may be deemed to be in a capitalization  category that is lower than
is  indicated by its actual  capital  position if the FDIC  determines  that the
institution is in an unsafe and unsound  condition or if the FDIC deems the bank
to be engaged in an unsafe or unsound banking practice.

No sanctions apply to  institutions  which are "well  capitalized."  "Adequately
capitalized"  institutions  are  prohibited  from  accepting  brokered  deposits
without  the  consent of their  primary  federal  regulator.  "Undercapitalized"
institutions are (i) required to submit a capital restoration plan for improving
capital,  and  are  prohibited  from  making  capital  distributions  or  paying
management  fees to  controlling  persons  if such  distributions  or fees would
result in the institution being undercapitalized;  (ii) may be subject to growth
limitations;  and (iii)  acquisitions,  branching and entering into new lines of
business  would  be  subject  to  prior  regulatory   approval.   Finally,   the
institution's  regulatory  agency  has  discretion  to  impose  certain  of  the
restrictions   generally   applicable   to   "significantly    undercapitalized"
institutions.

In the event an institution is deemed to be "significantly undercapitalized," it
may be required  to (i) sell  additional  shares of its stock;  (ii) merge or be
acquired;  (iii) restrict  transactions with affiliates;  (iv) restrict interest
rates paid;  (v) restrict  asset growth or reduce  total  assets;  (vi) divest a
subsidiary;  or (vii)  dismiss  specified  directors or officers.  A "critically
undercapitalized"  institution is generally  prohibited  from making payments on
subordinated  debt and among other things may not, without the prior approval of
the FDIC,  (i) enter into a  material  transaction  other  than in the  ordinary
course of business;  (ii) engage in certain  transactions  with  affiliates;  or
(iii) pay  excessive  compensation  or  bonuses.  "Critically  undercapitalized"
institutions  are subject to  appointment  of a receiver or  conservator  by the
institution's federal regulator. As of the most recent data available,  the Bank
and Thrift were both well capitalized institutions.

Enforcement Powers
FIRREA  provided civil and criminal  penalties that are available for use by the
federal  regulatory   agencies  against  depository   institutions  and  certain
"institution-affiliated  parties" (primarily including management, employees and
agents of a financial institution, independent contractors such as attorneys and
accountants,  and  others  who  participate  in the  conduct  of  the  financial
institution's   affairs).   These  practices  can  include  the  failure  of  an
institution to timely file required reports or the filing of false or misleading
information or the submission of inaccurate  reports.  Civil penalties may be as
high as $1 million a day for  violations  and criminal  penalties  for financial
institution  crimes range up to 20 years.  In addition,  federal  regulators are
provided  with  great  flexibility  to  commence   enforcement  actions  against
institutions and  institution-affiliated  parties.  Possible enforcement actions
include the termination of deposit insurance.  Furthermore,  FIRREA expanded the
appropriate  banking  agencies' power to issue cease and desist orders that may,
among other things,  require  affirmative  action to correct any harm  resulting
from  a   violation   or   practice,   including   restitution,   reimbursement,
indemnifications or guarantees against loss. A financial institution may also be
ordered to restrict its growth, dispose of certain assets,

                                       10

<PAGE>

rescind  agreements  or  contracts,  or take other  actions as determined by the
ordering federal agency to be appropriate.

In addition, California law provides the Superintendent with certain enforcement
powers.  For  example,  if it  appears  to the  Superintendent  that  a bank  is
violating its articles of  incorporation  or state law, or is engaging in unsafe
or unsound business  practices,  the Superintendent can order the bank to comply
with the law or to cease the unsafe or injurious  practices.  The Superintendent
also has the power to suspend or remove bank  officers,  directors and employees
who (i) violate any law,  regulation or fiduciary duty to the bank;  (ii) engage
in any unsafe or unsound practices related to the business of the bank, or (iii)
are charged  with or  convicted  of a crime  involving  dishonesty  or breach of
trust.

Limitations on Dividends by the Company
Under the California General  Corporation Law (The "California Law") the holders
of common  stock are entitled to receive  dividends  when and as declared by the
Board of Directors,  out of funds  legally  available  therefor,  subject to the
restrictions set forth in the California Law. The California Law provides that a
corporation  may make a distribution to its  shareholders  if the  corporation's
retained earnings will equal at least the amount of the proposed distribution.

The  California  Law  further  provides  that in the event  sufficient  retained
earnings are not  available  for the proposed  distribution  a  corporation  may
nevertheless  make a distribution to its shareholders if, after giving effect to
the  distribution,  it meets  two  conditions,  which  generally  stated  ate as
follows:  (i)  the  corporation's  assets  must  equal  at  least  125%  of  its
liabilities;  and (ii) the corporation's  current assets must equal at least its
current  liabilities  or, if the average of the  corporation's  earnings  before
taxes on income and before interest  expense for the two preceding  fiscal years
was less than the  average of the  corporation's  current  assets  must equal at
least 125% of its current liabilities. Most bank holding companies are unable to
meet this test.

The  payment of cash  dividends  by the  Company  depends  on  various  factors,
including the earnings and capital  requirements of itself and its subsidiaries,
and other  financial  conditions.  The  primary  source of funds for  payment of
dividends by the Company to its  shareholders  is the receipt of  dividends  and
management fees from the Bank and, to a lesser extent, the Thrift.

Payment of Dividends
Under  California  law,  the  directors  of  California   state-licensed  banks,
including the Bank, may declare  distributions  to  shareholders  (which include
cash  dividends),  subject to the restriction  that the amount available for the
payment of cash dividends  shall be the lesser of retained  earnings of the bank
or the bank's net income for its last three fiscal years (less the amount of any
distributions to shareholders made during such period). If the above test is not
met,  distributions  to shareholders  may be made with the prior approval of the
Superintendent  in an  amount  not  exceeding  the  greatest  of (i) the  bank's
retained earnings, (ii) the bank's net income for its last fiscal year, or (iii)
the bank's net income for its current fiscal year. If the  Superintendent  finds
that the shareholders' equity of a bank is not adequate, or that the making by a
bank of a distribution to shareholders  would be unsafe or unsound for the bank,
the  Superintendent  can  order  the  bank  not  to  make  any  distribution  to
shareholders.

The ability of the Bank to pay  dividends is further  restricted  under  FDICIA,
which prohibits a bank from paying dividends if, after making such payment,  the
bank would fail to meet any of its minimum capital requirements.  As a result of
these  provisions,  the Bank  may  find it  difficult  to pay  dividends  out of
retained  earnings from historical  periods prior to the most recent fiscal year
or to take advantage of earnings  generated by  extraordinary  items.  Under the
Financial Institutions  Supervisory Act and FIRREA, federal regulators also have
authority to prohibit financial institutions from engaging in business practices
which are considered to be unsafe or unsound. It is possible, depending upon the
financial  condition of the Bank and other factors,  that the  regulators  could
assert that the payment of  dividends  in some  circumstances  might  constitute
unsafe or unsound practices,  and that the regulators might prohibit the payment
of  dividends  even  though  under  the  circumstances  such  payments  would be
technically permissible.

Accordingly,  the future  payment of cash dividends of the Company will not only
depend upon the Bank's  earnings  during any fiscal  period but will also depend
upon an assessment by the Bank's Board of Directors of

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<PAGE>

the capital  requirements of the Bank and other factors,  including the dividend
guidelines  and the  maintenance  of an  adequate  allowance  for loan and lease
losses.  As noted above the Bank pays dividends to the Company which in turn can
pay  dividends  to its  shareholders  subject  to the  laws  limiting  corporate
dividends.

The Thrift may not pay dividends  unless its remaining  capital exceeds $750,000
plus $50,000 for each branch office.

Governmental Monetary Policies
The principal  sources of funds essential to the business of banks are deposits,
shareholders'  equity,  and borrowed funds. The availability of these sources of
funds and other potential sources,  such as preferred stock or commercial paper,
and the extent to which they are  utilized,  depends on many  factors,  the most
important of which are the FRB's  monetary  policies  and the relative  costs of
different  types of funds.  An important  function of the FRB is to regulate the
national  supply  of  bank  credit  in  order  to  combat   recession  and  curb
inflationary pressures. Among the instruments of monetary policy used by the FRB
to implement  these  objectives are (i) open market  operations in United States
Government securities, (ii) changes in the discount rate on bank borrowings, and
(iii) changes in reserve requirements against bank deposits.

The monetary policies of the FRB have had a significant  effect on the operating
results of commercial banks in the past and are expected to continue to do so in
the future.  Since banking is a business which depends  largely on interest rate
differentials,  the influence of economic  conditions  and monetary  policies on
interest rates may directly affect the Company's earnings. In view of the recent
changes in regulations affecting commercial banks and other actions and proposed
actions by the  federal  government  and its  monetary  and fiscal  authorities,
including  proposed changes in the structure of banking in the United States, no
prediction  can  be  made  as  to  future  changes  in  interest  rates,  credit
availability, deposit levels or the overall performance of banks generally or of
the Company in particular.

Community Reinvestment Act
Pursuant to the  Community  Reinvestment  Act of 1977,  the  federal  regulatory
agencies which oversee the banking  industry are required to use their authority
to encourage  financial  institutions to help meet the credit needs of the local
communities in which such  institutions are chartered,  consistent with safe and
sound  banking  practices.   When  conducting  an  examination  of  a  financial
institution  such  as  the  Bank  and  the  Thrift,   the  agencies  assess  the
institution's  record of  meeting  the  credit  needs of its  entire  community,
including  low- and  moderate-income  neighborhoods.  This  record is taken into
account in an agency's  evaluation of an application  for creation or relocation
of domestic branches or for merger with another institution.  Failure to address
the credit needs of a institution's  community may also result in the imposition
of certain other regulatory  sanctions,  including a requirement that corrective
action  be  taken.  As of the  last  exam in  August  of  1995  and  April  1995
respectively, the Bank and the Thrift were each given "satisfactory" ratings for
community reinvestment.

New Community Reinvestment Act Regulations
Under the revised CRA  regulations,  the  agencies  determine  an  institution's
rating  under the CRA by  evaluating  its  performance  on lending,  service and
investment tests, with the lending test as the most important.  The tests are to
be applied in an  "assessment  context"  that is developed by the agency for the
particular  institution.  The assessment context takes into account  demographic
data  about the  community,  the  community's  characteristics  and  needs,  the
institution's  capacities and constraints,  the institution's  product offerings
and  business  strategy,  the  institution's  prior  performance,  and  data  on
similarly  situated  lenders.  Since the assessment  context is developed by the
regulatory  agencies,  a  particular  bank  will not know  until it is  examined
whether its CRA programs and efforts have been sufficient.

Larger  institutions  are required under the revised  regulations to compile and
report certain data on their lending activities in order to measure performance.
Some of this data is already  required under other laws, such as the ECOA. Small
institutions (with less than $250 million in assets) are now being examined on a
"streamlined   assessment   method."  The  streamlined  method  focuses  on  the
institution's loan to deposit ratio, degree of local lending,  record of lending
to  borrowers  and  neighborhoods  of  differing  income  levels,  and record of
responding to complaints.  The Federal  regulators who are  implementing the new
regulations  have  reported  that  the  time  spent  

                                       12

<PAGE>

at the banks during CRA  examination is reduced under the new  regulations,  and
the institutions spend less time on paperwork evidencing compliance.

Large and small institutions have the option of being evaluated for CRA purposes
in relation to their own pre-approved strategic plan. Such a strategic plan must
be submitted to the  institution's  regulator  three months before its effective
date and be published for public comment.

Limitation on Activities
FDICIA prohibits state  chartered-banks and their subsidiaries from engaging, as
principal,   in  activities   not   permissible  to  national  banks  and  their
subsidiaries,  unless the FDIC determines the activity poses no significant risk
to the Bank  Insurance Fund and the state bank is and continues to be adequately
capitalized. Similarly, state bank subsidiaries may not engage, as principal, in
activities  impermissible  to subsidiaries of national banks.  This  prohibition
extends to acquiring or retaining  any  investment,  including  those that would
otherwise be permissible under California law.

Bank Sales of Insurance Products
If the Bank elects to make insurance products available to its customers,  those
sales will be subject to various legal and regulatory  restrictions.  California
state-chartered  banks now have  statutory  authority to engage in the insurance
business as an agent or broker. FDICIA prohibits state-chartered banks and their
subsidiaries  from  engaging,  as principal,  in activities  not  permissible to
national banks and their  subsidiaries,  unless the FDIC determines the activity
poses no  significant  risk to the bank insurance fund and the state bank is and
continues to be adequately capitalized.  Similarly,  state bank subsidiaries may
not engage,  as  principal,  in  activities  impermissible  to  subsidiaries  of
national banks. This prohibition extends to insurance underwriting activities by
California  state chartered  banks.  It does not,  however,  prevent  California
chartered banks from engaging in insurance agency activities.

Change in Senior Executives or Board Members
Certain banks and bank holding  companies  must file a notice with their primary
regulator  prior to (i) adding or replacing a member of the board of  directors,
or (ii)  the  employment  of or a  change  in the  responsibilities  of a senior
executive officer.  Notice is required if the bank or holding company is failing
to meet its minimum capital standards or is otherwise in a "troubled condition,"
as defined in FDIC  regulations,  has  undergone a change in control  within the
past two years, or has received its bank charter within the past two years.

Environmental Liability
Compliance with federal,  state and local regulations regarding the discharge of
materials into the  environment  could have a substantial  effect on the capital
expenditures,  earnings and competitive  position of the Company.  Under federal
law,  liability for environmental  damage and the cost of cleanup may be imposed
upon any person or entity who is an owner or operator of contaminated  property.
State law  provisions,  which were modeled after federal law, are  substantially
similar. Especially relevant for the Company are judicial interpretations of the
law which have held that banks that take real estate as  security  for loans may
be deemed to be owners or operators of the  property if their  involvement  with
the  borrower's  management  is broad  enough to support an  inference  that the
institution,  if it  chose  to do so,  could  affect  hazardous  waste  disposal
decisions made by the borrower.

Environmental Regulation
Both  Federal and state laws were  amended in 1996 to provide  generally  that a
lender who is not actively  involved in causing  contamination  to property will
not be  liable  to clean up the  property,  even if the  lender  has a  security
interest  in  the  property  or  becomes  an  owner  of  the  property   through
foreclosure,  so long as it merely maintains the property and moves to divest it
at the earliest possible time after foreclosure.  Under California law, a lender
generally will not be liable to the State for the cost  associated with cleaning
up  contaminated  property  unless the lender  realized  some  benefit  from the
property,  failed to divest the property promptly after  foreclosure,  caused or
contributed to the release of the hazardous materials or made the loan primarily
for purpose of investing in the  property.  This  amendment  to  California  law
became  effective with respect to judicial  proceedings  filed and orders issued
after January 1, 1997.

                                       13

<PAGE>

It is the Bank's policy to perform environmental due diligence procedures in the
following cases: prior to foreclosure upon any commercial or industrial property
or any suspect  residential  property;  prior to commitment on any commercial or
industrial  or/and real estate  development  loan greater  than  $100,000 or any
single  family  or  multifamily  loan  greater  than  $200,000.   Due  diligence
procedures  include an  environmental  questionnaire  completed by the borrower,
onsite  inspection  of the  property by the  originating  loan  officer  and, in
certain cases, a formal environmental audit report. A formal environmental audit
report may be required on  properties  that are in a high risk  category,  where
Management believes potential risk exists on a property or where the loan amount
exceeds  $500,000.  The  Bank  establishes  a  list  of  approved  environmental
consultants which it contracts with for these services.

The extent of the  protection  provided  by both the  federal  and state  lender
protection  statutes will depend on their  interpretation by the  administrative
agencies  and  courts,  and  the  Company  cannot  predict  whether  it  will be
adequately protected for the types of loans made by the Bank.

In the  event  the Bank  was held  liable  as an  owner or  operator  of a toxic
property,  it could be  responsible  for the  entire  cost of the  environmental
damage and cleanup. Depending on the amount of liability assessed and the amount
of  cleanup  required,  such an  outcome  could  have a  serious  effect  on the
Company's consolidated financial condition.

In  addition,  the  Company  and the Bank are still  subject to the risks that a
borrower's   financial   position  will  be  impaired  by  liability  under  the
environmental  laws and that  property  securing  a loan made by the Bank may be
environmentally  impaired  and not  provide  adequate  security  for  the  Bank.
California law provides some protection against the second risk, by establishing
certain additional, alternative remedies for a lender in the situation where the
property  securing  a  loan  is  later  found  to be  environmentally  impaired.
Primarily,  the law permits the lender in such a case to pursue remedies against
the borrower other than foreclosure under the deed of trust.

Money Laundering Control Act
The Money Laundering  Control Act of 1986 provides  sanctions for the failure to
report high levels of cash deposits to non-bank financial institutions.  Federal
banking  regulators  possess  the  power to  revoke  the  charter  or  appoint a
conservator  for  any  institution  convicted  of  money  laundering.  Offending
state-chartered  banks  could lose their  federal  deposit  insurance,  and bank
officers  could face lifetime bans from working in financial  institutions.  The
Community Development Act, which contains a number of provisions which amend the
Bank  Secrecy  Act,  allows the  Secretary  of the  Treasury  to exempt  certain
currency  transactions  from  reporting  requirements,  and allows  the  federal
banking  agencies to impose civil money penalties on banks for violations of the
currency transaction reporting requirements.

Recent Accounting Rules
The  Company  adopted  the  provisions  of  Statement  of  Financial  Accounting
Standards  ("SFAS") No. 121,  Accounting for the Impairment of Long-Lived Assets
and for Long-Lived  Assets to Be Disposed Of, on January 1, 1996. This Statement
requires that long-lived assets and certain identifiable intangibles be reviewed
for impairment  whenever  events or changes in  circumstances  indicate that the
carrying amount of an asset may not be recoverable.  Recoverability of assets to
be held and used is measured by a comparison of the carrying  amount of an asset
to future net cash flows  expected to be generated by the asset.  If such assets
are  considered to be impaired,  the  impairment to be recognized is measured by
the amount which the carrying value exceeds the fair value of the assets. Assets
to be disposed of are reported at the lower of the carrying amount or fair value
less costs to sell. Adoption of this Statement did not have a material impact on
the Company's financial position, results of operations, or liquidity.

On January 1, 1996, the Company adopted SFAS No.123,  Accounting for Stock-Based
Compensation,  which  permits  entities to recognize as expense over the vesting
period  the  fair  value  of all  stock-based  awards  on  the  date  of  grant.
Alternatively,  SFAS No.  123 also  allows  entities  to  continue  to apply the
provisions of Accounting Principles Board ("APB") Opinion No. 25 and provide pro
forma net income and pro forma earnings per share disclosures for employee stock
option grants made in 1995 and future years as if the fair-value-based method

                                       14

<PAGE>

defined in SFAS No. 123 had been applied. The Company has elected to continue to
apply the provisions of APB Opinion No. 25 and provide the pro forma  disclosure
provisions of SFAS No. 123.

Interstate  Banking  and  The  Riegle-Neal   Interstate  Banking  and  Branching
Efficiency Act Certain restrictions in the BHC Act, have historically  prevented
interstate  banking.  Provisions  of  FIRREA  allow  out-of-state  bank  holding
companies to acquire  depository  institutions  located in California which have
failed or are in danger of failing provided certain  requirements are satisfied,
including an assessment  of the  estimated  cost to the FDIC of not allowing the
acquisition.

Since 1991,  California  law has allowed banks and bank holding  companies to be
acquired by bank holding companies from other states on a reciprocal basis; that
is, such  transactions  are  permissible  if the state in which the bank holding
company is located would permit a California  bank holding  company to acquire a
bank located in that state on substantially the same terms and conditions as are
applicable to bank holding companies located in that state.

The  Riegle-Neal  Interstate  Banking  and  Branching  Efficiency  Act  of  1994
("IBBEA")  was enacted to enable banks and bank holding  companies to merge with
and  acquire  other  banks  and  bank  holding  companies   without   geographic
limitations.  Beginning in September 1995, bank holding companies were permitted
to acquire  banks  located in any state  regardless  of state laws that prohibit
such  acquisition.  Bank  holding  companies  are only  permitted  to make  such
acquisitions if they are adequately  capitalized and managed.  Beginning June 1,
1997,  banks will be  permitted  to merge with  banks  located in other  states,
provided that neither  state acts to opt out of the IBBEA before that date.  The
IBBEA also permits a bank to establish an agency relationship with an affiliated
insured  depository  institution  located  in another  state for the  purpose of
receiving deposits,  renewing time deposits,  closing loans, servicing loans and
receiving  payments.  Additionally,  the IBBEA allows  states to enact  statutes
permitting interstate bank mergers before June 1, 1997.

The IBBEA prohibits an interstate  acquisition  where the resulting bank or bank
holding company would control more than ten percent of the insured deposits held
by  depository  institutions  nationwide  or more than 30 percent of the insured
deposits in any state  affected by the merger.  States are permitted to waive or
increase the 30 percent limit. Further, the IBBEA permits states to prohibit the
acquisition of banks that have been established fewer than five years.

In October 1995,  the California  Interstate  Banking and Branching Act of 1995,
became  effective.  Assembly  Bill  1482 was  designed  to  implement  important
features  of the  IBBEA in  California.  Assembly  Bill  1482  opts-in  early to
interstate  branching by permitting a bank domiciled in another state to acquire
an entire  California  bank by merger or purchase and thereby  establish  one or
more California branch offices. To be eligible to be acquired, a California bank
must have been in  existence  for at least five years.  In  addition,  while the
IBBEA  authorizes  agency   relationships  only  between  affiliated   financial
institutions,  Assembly Bill 1482 is more expansive in that it allows California
state  banks  to  establish  agency   relationships  with  both  affiliated  and
unaffiliated  insured  depository  institutions.  It also  expands  the  list of
authorized agency activities to include, in addition to the activities listed in
the IBBEA,  the evaluation of loan  applications  and the  disbursement  of loan
funds.

The full impact of interstate  banking  legislation  cannot be estimated at this
time.  However,  the IBBEA and Assembly Bill 1482 are generally expected to have
the effect of  increasing  competition  and  consolidation  within the financial
services industry.

The Riegle Community Development and Regulatory Improvement Act of 1994
The  Riegle  Community  Development  and  Regulatory  Improvement  Act  of  1994
("Community  Development  Act") is broad in scope,  and many  aspects of banking
regulation  are affected.  Among other things,  the Act  encourages and provides
funding for community  development  institutions.  Also included are  provisions
meant to increase  small  business  access to  capital.  The Act also amends the
Truth in  Lending  Act by  creating  additional  restrictions  on and  requiring
disclosures for some loans secured by a consumer's  principal  dwelling,  and by
creating penalties for violations of Truth in Lending.

                                       15

<PAGE>

The Community  Development Act offers banks  regulatory  relief by requiring the
federal  banking  agencies  to  coordinate  examinations,  to  streamline  their
regulations,   to  consider  the  burden  of   compliance   when   enacting  new
requirements,  and to create a formal appeals  process for material  examination
determinations.  Additionally,  the  Community  Development  Act  created a new,
alternative procedure for the formation of a bank holding company, with the time
period  within  which a merger  or  acquisition  governed  by the BHC Act can be
affected  following FRB approval  reduced from 30 days to 15 days. The Community
Development  Act also  modified and  clarified  the FDIC's powers as receiver or
conservator,  provided an exemption  under the Truth in Savings Act for business
purpose accounts,  and simplified certain  disclosure  requirements for mortgage
lenders.  A number of the Act's  provisions  were directed at suppressing  money
laundering.

The full impact of the Community  Development  Act cannot be estimated until the
federal banking agencies  complete  implementation of regulations under the Act.
It is anticipated that the Act may reduce the overall  regulatory  burden on the
Bank.

Safety and Soundness Standards
FDICIA,  along with the  Community  Development  Act,  mandated  the creation of
safety and soundness  standards  that will allow federal  regulators to identify
and address problems at financial  institutions before capital becomes impaired.
Accordingly, the federal regulators have adopted a Safety and Soundness Rule and
Interagency   Guidelines   Prescribing   Standards   for  Safety  and  Soundness
("Guidelines").  Rather than  requiring  rules,  the Community  Development  Act
allows the regulators to enact  guidelines that do not dictate how  institutions
must be managed and operated.  The Guidelines  create standards for a wide range
of  operational  and  managerial   matters  including  (i)  internal   controls,
information systems, and internal audit systems; (ii) loan documentation;  (iii)
credit  underwriting;  (iv) interest rate exposure;  (v) asset growth;  and (vi)
compensation  and benefits.  In addition,  the agencies will soon issue proposed
standards for asset quality and earnings for public comment.

The  Community  Development  Act required  the  agencies to prescribe  standards
prohibiting  as  an  unsafe  and  unsound  practice  the  payment  of  excessive
compensation that could result in material financial loss to an institution, and
to specify when compensation,  fees or benefits become excessive. The Guidelines
characterize compensation as excessive if it is unreasonable or disproportionate
to the services actually performed by the executive officer, employee,  director
or principal shareholder being compensated.

The federal  regulators have stated that the Guidelines are meant to be flexible
and  general  enough to allow each  institution  to develop  its own systems for
compliance. With the exception of the standards for compensation and benefits, a
failure to comply with the Guidelines' standards does not necessarily constitute
an unsafe or unsound practice or an unsafe and unsound  condition.  On the other
hand, an institution in conformance  with the standards may still be found to be
engaged  in an unsafe and  unsound  practice  or to be in an unsafe and  unsound
condition.

Although  meant  to  be  flexible,  an  institution  that  falls  short  of  the
Guidelines'  standards  may be  requested  to  submit  a  compliance  plan or be
subjected to regulatory  enforcement  actions.  Generally,  the federal  banking
agencies will request a compliance plan if an institution's  failure to meet one
or more of the standards is of such severity that it could threaten the safe and
sound operation of the  institution.  An institution must file a compliance plan
within 30 days of request by its primary federal regulator (the FDIC in the case
of the Bank and the Thrift).  The Guidelines  provide for prior notice of and an
opportunity to respond to the agency's proposed order. An enforcement action may
be commenced  if, after being  notified  that it is in violation of a safety and
soundness  standard,  the institution  fails to submit an acceptable  compliance
plan or fails in any material respect to implement an accepted plan. The Federal
Deposit  Insurance  Act provides the agencies  with a wide range of  enforcement
powers. An agency may, for example, obtain an enforceable cease and desist order
in the United States District Court, or may assess civil money penalties against
an institution or its affiliated parties.

Insurance Premiums
FDICIA  also  required  the FDIC to adopt a  risk-based  assessment  system  for
insurance  premiums.  For an  individual  institution,  the FDIC  must take into
consideration  the probability that the Bank Insurance Fund ("BIF") will incur a
loss with respect to the institution.  In making that assessment,  the FDIC must
consider the different  categories and  concentrations of assets and liabilities
of the institution, the likely amount of any loss, the revenue 

                                       16

<PAGE>

needs of BIF, and any other  factors the FDIC  considers  relevant.  The FDIC is
permitted  to establish  separate  risk-based  assessment  systems for large and
small members of BIF. Regardless of the potential risk to BIF, FDICIA prohibited
assessment  rates from falling  below 23 cents per $100 of eligible  deposits if
the FDIC has outstanding  borrowings from the U.S. Treasury Department or if the
reserve ratio is below 1.25 percent.

The 1.25 percent  reserve ratio was met during 1995.  The FDIC will continue the
risk-based  assessment system for insurance  premiums,  causing premiums to vary
between  institutions.  The assessment  for the  highest-rated  institutions  is
currently set at the statutory  annual minimum of $2,000.  Assessment  rates for
institutions  that are not well  capitalized  can  range as high as 27 cents per
$100. The FDIC has maintained the current  assessment  rate schedule of 23 to 31
cents per $100 of deposits for the  institutions  whose  deposits are subject to
assessment by the Savings Association Insurance Fund ("SAIF").

The  disparity  between  the cost of deposit  insurance  for  healthy  banks and
similarly  situated  thrifts  over the last  several  years  caused many healthy
thrifts  to seek ways to  either  convert  to BIF  insurance  or to  obtain  BIF
insurance for some portions of their  deposits,  in order to remain  competitive
with banks.  The  migration of deposits  increased the pressure on the remaining
thrifts to build up reserves at the SAIF and pay the cost of servicing Financing
Company  ("FICO") bonds that were issued to cover some of the losses incurred by
failed savings associations in the late 1980s.

The  Economic  Growth  and  Regulatory  Paperwork  Reduction  Act of  1996  (the
"Economic  Growth Act")  required all remaining  SAIF  institutions  (subject to
certain  exceptions) to pay a one-time  deposit  assessment of $.657 per $100 of
insured  deposits in 1996 in order to  recapitalize  the SAIF fund.  The banking
agencies  are now  required by law to take  actions to prevent the  migration of
deposits  from the SAIF to the BIF funds until the year 2000.  In addition,  the
cost of  carrying  the FICO  bonds will now be  allocated  between  BIF  insured
institutions and SAIF insured institutions, with BIF insured institutions paying
1/5 the amount paid by SAIF insured  institutions.  The FDIC recently  estimated
that BIF institutions  will pay an assessment of  approximately  $.0128 annually
per $100 insured deposits;  and SAIF institutions will pay approximately  $.0644
annually per $100 of insured  deposits.  Starting in the year 2000, BIF and SAIF
institutions  will  share  the  FICO  bond  costs  equally,  with  an  estimated
assessment of $.0243 annually per $100 of insured deposits.

The legislation will increase the Bank's premiums, as it will now be required to
share in the cost of carrying the FICO bonds.  The increase will be slight until
the year 2000, at which time it will increase.

The  Economic  Growth  Act also  included  other  regulatory  relief  provisions
applicable to the Company and the Bank.  Application  procedures for the Company
to engage in certain non-banking activities will be streamlined,  so long as the
Company maintains an adequate financial position and is considered well-managed.
The lending  restrictions  on directors and officers have been relaxed to permit
loans having  favorable  terms under  employee  benefit  plans.  The FRB and the
Department of Housing and Urban Development ("HUD") are required to simplify and
improve  their  regulations  with  respect to  disclosures  relating  to certain
mortgage loans,  and certain  exemptions from the disclosure  requirements  were
added.

The Economic  Growth Act also provides  protection for lenders who self-test for
compliance  with the Equal  Credit  Opportunity  Act (the  "ECOA")  and the Fair
Housing Act ("FHA"). The ECOA now provides that the results or reports generated
or obtained by a institution  from a self-test may not be obtained by an agency,
department  or  applicant  to be used with  respect to any  proceeding  or civil
action  alleging a violation  of the ECOA.  This change in the law  protects the
Company against liability based on the results of internal tests done to enhance
compliance  with the law and  encourages  the  Company  to use  self-testing  to
evaluate its compliance with the ECOA and the FHA.

Additional Requirements of FDICIA
FDICIA  restricted  the  acceptance of brokered  deposits by insured  depository
institutions  and included a number of consumer  banking  provisions,  including
disclosure  requirements and substantive contractual limitations with respect to
deposit  accounts.  FDICIA contained  numerous other  provisions,  including new
reporting,  examination, and auditing requirements,  termination of the "too big
to fail" doctrine except in special cases, and revised 

                                       17

<PAGE>

regulatory  standards for, among other things, real estate lending.  FDICIA also
expanded the grounds upon which a conservator  or receiver of a institution  can
be  appointed.  For example,  a  conservator  or receiver can be appointed for a
institution which fails to maintain minimum capital levels and has no reasonable
prospect of becoming adequately capitalized.

Under  FDICIA,  the  federal  regulatory  agencies  are  required  to  establish
loan-to-value guidelines for real estate loans, and to revise risk-based capital
guidelines to reflect interest-rate risk, concentration of credit risk, the risk
of nontraditional  activities and the actual performance of nontraditional  real
estate  loans.  The  federal  bank  regulatory  agencies  are in the  process of
developing  interagency risk exposure guidelines which will establish risk-based
capital standards for interest rate and other risk exposures.

FDICIA also requires, with some exceptions, that each institution have an annual
examination  performed by its primary federal  regulatory  agency, and that each
bank with $500  million  or more in assets  have an annual  outside  independent
audit. The outside audit must consider bank regulatory compliance in addition to
financial statement reporting.  Although the independent audit requirements only
apply to  institutions  with assets of $500 million or more, the FDIC encourages
all institutions,  regardless of size or charter,  to have an annual independent
audit of their financial statements. The Company intends to have an annual audit
conducted by the Company's independent public accountants.

Implementation  of the various  provisions of FDICIA are subject to the adoption
of regulations by the various  federal banking  agencies or to certain  phase-in
periods.  The effect of the FDICIA  provisions  cannot be determined  until such
regulations are promulgated.

State Bank Sales of Non-deposit Investment Products
Securities  activities of state  nonmember  banks,  as well as the activities of
their  subsidiaries  and affiliates,  are governed by guidelines and regulations
issued by the securities and financial  institution  regulatory agencies.  These
agencies  have  taken the  position  that bank sales of  alternative  investment
products, such as mutual funds and annuities,  raise substantial bank safety and
soundness  concerns involving consumer confusion over the nature of the products
offered,  as well as the potential for  mismanagement  of sales  programs  which
could  expose a bank to liability  under the  anti-fraud  provisions  of federal
securities laws.

Accordingly,  the agencies have issued  guidelines  which  require,  among other
things,  the  establishment  of a  compliance  and audit  program to monitor (i)
bank's mutual funds sales activities and its compliance with applicable  federal
securities  laws; (ii) the provision of full  disclosures to customers about the
risks of such  investments  (including the possibility of loss of the customer's
principal  investment);  and (iii) the conduct of securities  activities of bank
subsidiaries or affiliates in separate and distinct locations.  In addition, the
guidelines  prohibit bank employees  involved in deposit-taking  activities from
selling investment products or giving investment advice. Banks are also required
to  establish  qualitative  standards  for the  selection  and  marketing of the
investments  offered  by the bank,  and to  maintain  appropriate  documentation
regarding the suitability of investments recommended to bank customers.

Increased Permitted Activities
During 1996,  the Federal  banking  agencies,  especially  OCC and the FRB, took
steps to  increase  the types of  activities  in which  national  banks and bank
holding  companies  can  engage,  and to  make  it  easier  to  engage  in  such
activities.  The FRB adopted  interim  regulations on November 1, 1996 to permit
certain  well-capitalized  bank  holding  companies  to  engage  (de  novo or by
acquisition) in activities  previously approved by regulation without submitting
a prior  application.  In order  to  qualify,  a bank  holding  company  must be
well-capitalized  and have received a  sufficiently  high  composite  rating and
management rating at its last examination.

To be well-capitalized  for this purpose, a bank holding company must (i) have a
total  risk-based  capital  ratio of 10% or more,  (ii) have a Tier 1 risk-based
capital ratio of 6% or more,  (iii) have either (a) a Tier leverage  ratio of 4%
or more (b) a  composite  rating of 1 or uses a market  risk  adjustment  of its
risk-based  capital  ratio,  and has a tier 1 leverage  ratio of 3% or more, and
(iv) not be subject to any written agreement,  order or capital directive issued
by the Federal Reserve.  The Company is considered  well-capitalized  under this
rule.

                                       18

<PAGE>

On November 20, 1996, the OCC issued final regulations permitting national banks
to  engage  in a wider  range  of  activities  through  subsidiaries.  "Eligible
Institutions"  (those  national  banks  that are well  capitalized,  have a high
overall  rating  and a  satisfactory  CRA  rating,  and  are not  subject  to an
enforcement order) may engage in activities related to banking through operating
subsidiaries  after  going  through  a new  expedited  application  process.  In
addition,  the new regulations  include a provision  whereby a national bank may
apply to the OCC to engage in an activity through a subsidiary in which the bank
itself may not engage. In determining whether to permit the subsidiary to engage
in the  activity,  the OCC will evaluate why the bank itself is not permitted to
engage in the activity and whether a Congressional purpose will be frustrated if
the OCC permits the subsidiary to engage in the activity.  Parity legislation in
California may permit  state-licensed banks to engage in similar new activities,
subject to the  discretion  of the  Superintendent.  See "State Bank Parity Act"
below.

State Bank Parity Act
Recent California legislation has ended some of the disparities between national
banks and California  state-chartered  banks.  Commencing January 1, 1996, state
banks  are able to  repurchase  their  shares  with the  prior  approval  of the
California State Banking Department.  Moreover, like national banks, they are no
longer  required to publish  their  statement of condition in a local  newspaper
(replaced  by a  lobby  notice  requiring  prompt  availability  of a copy  upon
request).  In addition,  much of the confusing interplay between the federal and
state insider lending rules  (Pursuant to the Federal Reserve  Regulation 0) has
been  ironed out.  Lastly,  the  legislation  included,  a "wild  card"  statute
empowering the Superintendent to remove future disparities by regulation.

ATM Fee Legislation
In April of 1996, two of the larger  Automatic  Teller Machines ("ATM") networks
lifted  their  prior   restriction   prohibiting  ATM  operators  from  directly
surcharging  the  users of the ATMs,  which  triggered  a series of  legislative
proposals and hearings with respect to whether the fees charged by the operators
of ATM machines  should be regulated.  The lifting of the prior  restriction  on
surcharges was  controversial  in part because  customers may be required to pay
two charges for a single  transaction,  one to the bank issuing the ATM card and
another to the operator of the ATM being used.

Currently,  Federal law  requires a bank at which a depositor  has an account to
disclose to its own customers the amount of fees it charges,  and California law
requires  an ATM  operator to disclose to users of the ATM machine who are using
an ATM card  issued by someone  other than the ATM  operator  that a fee will be
charged.  California law was amended in 1996, effective July 1, 1997, to require
the  operators of ATMs in  California  to disclose to customers any surcharge or
fee  that the  operator  of the  machine  will  charge,  including  charges  for
mini-statements and other services.

This  legislation  will  not  have a  significant  effect  on the  Bank as it is
currently  stated.  Other proposed changes could affect the Bank by limiting ATM
charges to  customers,  but the impact  would not be material  to the  financial
condition of the Company.

Americans With Disabilities Act
The Americans With Disabilities Act ("ADA") enacted by Congress,  in conjunction
with similar  California  legislation,  is having an impact on institutions  and
increasing their cost of doing business. The legislation requires employers with
15 or more employees and all  businesses  operating  "commercial  facilities" or
"public accommodations" to accommodate disabled employees and customers. The ADA
has two major  objectives:  (1) to prevent  discrimination  against disabled job
applicants,  job candidates and employees,  and (2) to provide  disabled persons
with ready access to commercial facilities and public accommodations. Commercial
facilities,  such as the Bank and the Thrift, must ensure all new facilities are
accessible to disabled  persons,  and in some instances may be required to adapt
existing facilities to make them accessible, such as ATMs and bank premises.

Recent and Proposed Legislation and Regulation
From time to time, legislation is proposed or enacted which has the potential to
increase the cost of doing business, limit or change permissible activities,  or
affect the competitive  balance between banks and other financial  institutions.
In recent  years,  legislation  has resulted in major  changes to  interest-rate
structures and the permissible powers of banks,  increasing the relative cost of
funds and generally  exposing  banks to interest rate

                                       19

<PAGE>

risks in their liability portfolios.  At the same time, legislation  authorizing
changes  in the  powers  of other  types  of  financial  institutions  has had a
substantial  impact on  certain  fundamental  aspects  of the  Bank's  business.
Proposals  to change  the laws and  regulations  governing  the  operations  and
taxation of bank holding companies,  banks and other financial  institutions are
frequently  made in Congress,  in the California  legislature and before various
bank holding company and bank regulatory  agencies.  The likelihood of any major
changes and the impact such changes might have been impossible to predict.

Conclusions
It is impossible to predict with any degree of accuracy the  competitive  impact
the laws and  regulations  described  above will have on  commercial  banking in
general and on the business of the Company in particular,  or to predict whether
or when any of the proposed  legislation and regulations will be adopted.  It is
anticipated  that the banking  industry will  continue to be a highly  regulated
industry.  Additionally,  if experience is any indication, there appears to be a
continued  lessening of the historical  distinction between the services offered
by financial  institutions and other  businesses  offering  financial  services.
Finally, the trend toward nationwide  interstate banking is expected to continue
as a result of the enactment of the IBBEA and Assembly Bill 1482. As a result of
these factors, it is anticipated banks will experience increased competition for
deposits  and loans  and,  possibly,  further  increases  in their cost of doing
business.

Selected Statistical Information

The  following  tables  in pages  21  through  30  present  certain  statistical
information  concerning the business of the Company.  This information should be
read in  conjunction  with  "MANAGEMENT'S  DISCUSSION  AND ANALYSIS OF FINANCIAL
CONDITION  AND RESULTS OF  OPERATIONS"  at ITEM 7, at page 19 of the Bank's 1996
Annual Report to  Shareholders  incorporated  herein by reference,  and with the
Bank's Consolidated  Financial Statements and the Notes thereto included in Item
14, at pages 9 through 18 of the Company's  1996 Annual  Report to  Shareholders
incorporated  herein by reference.  Statistical  information  below is generally
based on average daily amounts.

                                       20

<PAGE>



Item I. Distribution of Average Assets,  Liabilities and  Shareholders'  Equity;
Interest Rates and Differentials

The following table presents for the periods indicated condensed average balance
sheet information for the Company,  together with interest rates earned and paid
on the various sources and uses of its funds. The table is arranged to group the
elements of  interest-earning  assets and  interest-bearing  liabilities,  these
items  being the major  sources of income  and  expense.  Nonaccruing  loans are
included in the table for computational  purposes,  but the nonaccrued  interest
thereon is excluded.

Average Balance Sheet & Analysis of Net Interest Earnings
<TABLE>
<CAPTION>

                                      Year Ended December 31, 1996             Year Ended December 31, 1995    
                                -------------------------------------    ------------------------------------- 
                                              Interest        Average                      Interest   Average  
                                 Average      Income/        Interest     Average          Income/    Interest 
                                 Balance      Expense          Rate       Balance         Expense       Rate   
                                ---------    ---------         -----     ---------       ---------      ----   
                                                             (Dollar amounts in thousands)                     
<S>                             <C>          <C>             <C>         <C>             <C>         <C>
ASSETS                                                                                                         
Federal funds sold              $   3,920    $     207          5.28%    $   6,253       $     358      5.73%  
                                ---------    ---------         -----     ---------       ---------      ----   
Taxable investment                                                                                             
  securities                       38,331        2,596          6.77%       34,095           2,219      6.51% 
Nontaxable investment                                                                                          
  securities(1)                     4,531          246          5.43%        5,858             327      5.58%  
Loans gross(2)                    157,098       16,302         10.38%      120,620          12,969     10.75%  
                                ---------    ---------         -----     ---------       ---------      ----   
  Total interest                                                                                               
     earning assets               203,880       19,351          9.49%      166,826          15,873      9.51%  
                                                                                                               
                                                                                                               
Allowance for loan losses          (1,913)                                  (1,616)                            
Cash and noninterest-                                                                                          
  bearing deposits at                                                                                          
  other banks                      10,436                                    8,832                             
Premises and equipment,                                                                                        
  net                               4,775                                    3,783                             
Interest, receivable                                                                                           
  and other assets                 10,946                                    8,056                             
                                ---------                                ---------                             
  Total Assets                  $ 228,124                                $ 185,881                             
                                =========                                =========                             
                                                                                                               
LIABILITIES AND SHAREHOLDER                                                                                    
EQUITY                                                                                                         
Interest-bearing demand         $  29,376          268           .91%    $  26,192             239       .91%   
Savings deposits                  104,938        4,350          4.15%       91,509           4,213      4.65%  
Time deposits                      40,994        2,167          5.29%       25,431           1,254      4.93%  
Other borrowings                    1,020           80          7.84%          141              11      7.80%  
                                ---------        -----          -----    ---------           -----      -----  
  Total interest-bearing                                                                                       
     liabilitiies                 176,328        6,865          3.89%      143,273           5,717      3.99%  
                                                                                                               
Noninterest-bearing                                                                                            
  demand deposits                  30,549                                   26,478                             
Accrued interest,                                                                                              
  taxes and other liabilities       3,067                                      641                             
                                  -------                                  -------                             
  Total Liabilities               209,944                                  170,392                             
                                  =======                                  =======                             
                                                                                                               
  Total shareholders'                                                                                          
    equity                         18,810                                   15,489                             
                                ---------                                ---------                            
  Total Liabilities and                                                                                        
    shareholder's equity        $ 228,124                                $ 185,881                            
                                =========                                =========                            
                                                                                                               
Net interest income                                                                                            
  and margin(3)                                $ 12,486         6.12%                     $  10,156     6.09%  
                                                                                                               
</TABLE>


                                       Year Ended December 31, 1994
                                       -----------------------------
                                                 Interest  Average
                                       Average   Income/  Interest
                                        Balance   Expense     Rate
                                        ------    -------     ---- 
                                       
ASSETS                                 
Federal funds sold                      $6,330    $   261     4.12%
                                        ------    -------     ---- 
Taxable investment                                
  securities                            26,966      1,479     5.48%
Nontaxable investment                             
  securities(1)                          4,579        272     5.94%
Loans gross(2)                         110,690     10,795     9.75%
                                        ------    -------     ---- 
  Total interest                                  
     earning assets                    148,565     12,807     8.62%
                                                  
                                                  
Allowance for loan losses               (1,690)   
Cash and noninterest-                             
  bearing deposits at                             
  other banks                            8,750    
Premises and equipment,                           
  net                                    2,578    
Interest, receivable                              
  and other assets                       7,528    
                                       --------   
  Total Assets                         $165,831   
                                       ========   
                                                  
LIABILITIES AND SHAREHOLDER                       
EQUITY                                            
Interest bearing demand                $25,126        237      .94%
Savings deposits                        65,516      2,298     3.45%
Time deposits                           34,420      1,312     3.81%
Other borrowings                            48          3     6.25%
                                       -------      -----     ---- 
  Total interest-bearing                          
     liabilitiies                      126,110      3,850     3.05%
                                                  
Noninterest-bearing                               
  demand deposits                       25,326    
Accrued interest,                                 
  taxes and other liabilities              842    
                                       -------    
  Total Liabilities                    152,278    
                                       =======    
                                                  
  Total shareholders'                             
    equity                              13,553    
                                ---------------   
  Total Liabilities and                           
    shareholder's equity        $       165,831   
                                ===============   
                                                  
Net interest income                               
  and margin(3)                                     $8,957    6.03%
                                                  
                                                  

----------
(1)  Interest on municipal securities is not computed on tax-equivalent basis.
(2)  Amounts of interest earned  includes loan fees of $1,106,000,  $901,000 and
     $812,000 for 1996, 1995, and 1994, respectively.
(3)  Net interest  margin is computed by dividing  net interest  income by total
     average interest-earning assets.


                                       21

<PAGE>



The  following  tables set forth,  for the periods  indicated,  a summary of the
changes in average asset and liability balances and interest earned and interest
paid resulting from changes in average asset and liability balances (volume) and
changes in average  interest rates.  The change in interest due to both rate and
volume has been  allocated  to volume  and rate  changes  in  proportion  to the
relationship  of the absolute  dollar amount of the change in each.  Nonaccruing
loans are included in the table for computational  purposes,  but the nonaccrued
interest thereon is excluded.



Net Interest Income Changes Due to Volume and Rate
<TABLE>
<CAPTION>
                                                                          1996 vs. 1995                  1995 vs. 1994
                                                                          -------------                  -------------
                                                                  Due to    Due to      Total    Due to      Due to     Total
                                                                  Volume     Rate      Change     Volume      Rate      Change
                                                                -------    -------    -------    -------    -------    -------
                                                                                    (Dollar amounts in thousands)
<S>                                                             <C>        <C>        <C>        <C>        <C>        <C>    
Interest Income:
   Investment securities                                        $   276    $   101    $   377    $   434    $   306    $   740
   Tax-exempt investment securities                                 (74)        (7)       (81)        70        (15)        55
   Federal funds sold                                              (125)       (26)      (151)        (3)       100         97
   Loans, gross (2)                                               3,767       (434)     3,333      1,015      1,159      2,174
                                                                -------    -------    -------    -------    -------    -------
     Total                                                        3,844       (366)     3,478      1,516      1,550      3,066

Interest Expense:
   Interest-bearing demand deposits                             $    29    $  --      $    29    $     9    $    (7)   $     2
   Savings deposits                                                 427       (290)       137      1,016        899      1,915
   Time deposits                                                    817         96        913        (90)        32        (58)
   Other borrowings                                                  69       --           69          7          1          8
                                                                -------    -------    -------    -------    -------    -------
     Total                                                        1,342       (194)     1,148        942        925      1,867

Net Interest Income                                             $ 2,502    $  (172)   $ 2,330    $   574    $   625    $ 1,199
                                                                =======    =======    =======    =======    =======    =======
                                                                                                                             
</TABLE>

(1)  Interest on municipal securities is not computed on a tax-equivalent basis.
(2)  Amounts of interest  earned  includes loan fees of $1,106,000  for 1996 and
     $901,000 for 1995.



                                       22

<PAGE>

Interest Rate Sensitivity

The interest  rate gaps  reported in the table arise when assets are funded with
liabilities having different repricing intervals.  Since these gaps are actively
managed and change  daily as  adjustments  are made in  interest  rate views and
market outlook,  positions at the end of any period may not be reflective of the
Company's  interest rate sensitivity in subsequent  periods.  Active  management
dictates that  longer-term  economic  views are balanced  against  prospects for
short-term interest rate changes in all repricing intervals. For purposes of the
analysis  below,   repricing  of  fixed-rate   instruments  is  based  upon  the
contractual maturity of the applicable instruments.  Actual payment patterns may
differ from contractual payment patterns.



Interest Rate Sensitivity
<TABLE>
<CAPTION>
                                                                        By Repricing Interval
                                                     ----------------------------------------------------------------------
                                                              After three                After one
                                                                months,                    year,
                                                       Within three within one    within five   After five    Noninterest-
                                                        months         year           years        years      bearing funds  Total
                                                        ------         ----           -----        -----      -------------  -----
                                                                                (Dollar amounts in thousands)
<S>                                                   <C>           <C>           <C>           <C>          <C>           <C>    
Assets
Federal funds sold                                    $   3,735     $    --       $    --       $    --      $    --       $   3,735
Time deposits at other institutions                       1,800           308           993          --           --           3,101
Investment securities                                       315         3,976         8,279        30,808         --          43,378
Loans                                                   115,848        20,857        36,856         9,686         --         183,247
Other interest-bearing assets                               880         3,134          --            --           --           4,014
Noninterest-earning assets
   and allowances for loan losses                          --            --            --            --         28,514        28,514
                                                      ---------       --------    ---------     ---------     --------     ---------
Total Assets                                            122,578        28,275        46,128        40,494       28,514       265,989
                                                                                                                           =========

Liabilities and shareholders' equity
Savings, money market & NOW deposits                    145,588          --            --            --         39,157       184,745
Time deposits                                            12,180        29,877        11,543          --           --          53,600
Other interest-bearing liabilities                         --             791          --             105        3,000         3,896
Other liabilities and
   Shareholders' equity                                    --            --            --            --         23,748        23,748
                                                      ---------       --------    ---------     ---------     --------     ---------
Total liabilities and shareholders' equ                 157,768        30,668        11,543           105       65,905     $ 265,989
                                                                                                                           =========
Interest rate sensitivity
   Gap                                                  (35,190)       (2,393)       34,585        40,389    $ (37,391)
                                                      ---------       --------    ---------     ---------    =========
Cumulative interest rate
   Sensitivity Gap                                    $ (35,190)      $(37,583)   $  (2,998)    $  37,391
                                                      =========       ========    =========     =========
</TABLE>


                                                               23

<PAGE>

Item II: Investment Portfolio

All Company  securities  are  classified  available-for-sale  as of December 31,
1996. The following table sets forth the fair value of investment  securities at
the dates indicated:


Fair Value of Investment Securities
<TABLE>
<CAPTION>
                                                                     Fair Value
                                                                     December 31
                                                       ------------------------------------
                                                          1996          1995         1994
                                                          ----          ----         ----
                                                               (Amount in thousands)
<S>                                                      <C>           <C>         <C> 
U.S. Treasury, U.S. Government agencies and corporatio   $17,711       $22,521     $20,593
Obligations of states and political subdivisions           4,271         4,297       6,571
Mortgage-backed securities                                20,751        17,932       8,175
Other securities                                             645           552         487
                                                         -------       -------     -------
Total                                                    $43,378       $45,302     $35,826
                                                         =======       =======     =======
</TABLE>


The  following  table sets forth the  maturities  of  investment  securities  at
December 31, 1996 and the weighted average yields of such securities  calculated
on the basis of the cost and effective yields based on the scheduled maturity of
each security.  Maturities of mortgage-backed securities are stipulated in their
respective  contracts,  however,  actual  maturities may differ from contractual
maturities  because  borrowers may have the right to call or prepay  obligations
with or without call prepayment  penalties.  Yields on municipal securities have
not been calculated on a tax-equivalent basis.




Securities Available-for-Sale-Fair Value and Maturity Distribution

<TABLE>
<CAPTION>

                                                                           Stated Maturity
                                   -------------------------------------------------------------------------------------------------
                                     Within One Year         One to Five Years     Five to Ten Years    Over Ten Years
                                   ------------------      --------------------   -----------------    -----------------
                                      Amount     Yield      Amount      Yield      Amount     Yield    Amount     Yield      Total
                                      ------     -----      ------      -----      ------     -----    ------     -----      -----
                                                                   (Dollar amounts in thousands)
<S>                                  <C>         <C>        <C>         <C>        <C>        <C>      <C>        <C>       <C>   
U.S. Treasury and other 
   U.S. government
   agencies and corporations (1)     $   362     7.03%      $ 6,455      6.05%    $  8,276    7.19%    $ 23,369     7.35%   $ 38,462
                                                                                                                  
State and political subdivisions         619     9.05%        2,439      5.60%          83    4.20%          37     6.92%      4,271
                                     -------               --------               --------             --------             --------
   Total debt securities                 981                  8,894                  9,111               23,747              42,733
Equity securities                        -                      -                    -                      -                   645
                                                                                                                            -------
   Total                             $   981               $  8,894               $  9,111             $ 23,747             $ 43,378
                                     =======               ========               ========             ========             ========
                                                                                                              
</TABLE>

(1) Mortgage-backed securities are shown in this table at the contractual 
    maturity dates.



The Company does not own  securities  of a single  issuer whose  aggregate  book
value is in excess of 10% of its total equity.




                                       24

<PAGE>



Item III:      Loan Portfolio

The following  table shows the  composition  of the loan  portfolio at the dates
indicated:



Loans Outstanding
<TABLE>
<CAPTION>

                                                                                          December 31,
                                                          --------------------------------------------------------------------------
                                                             1996            1995           1994            1993            1992
                                                          ---------       ---------       ---------       ---------       ---------
<S>                                                       <C>              <C>            <C>             <C>             <C>     

Commercial, financial and agricultural                    $  71,786        $ 65,563       $  55,827       $  54,925       $  57,091
Real estate--construction                                    13,923          12,006          11,726           9,143           7,131
Real estate--mortgage                                        57,098          42,128          34,743          32,984          21,338
Installment                                                  40,440          14,039          11,304          10,072          11,775
                                                          ---------       ---------       ---------       ---------       ---------
  Total                                                     183,247         133,736         113,600         107,124          97,335

Less: Allowance for possible loan losses                     (2,792)         (1,701)         (1,621)         (1,747)         (1,616)
                                                          ---------       ---------       ---------       ---------       ---------
  Total loans, net                                        $ 180,455       $ 132,035       $ 111,979       $ 105,377       $  95,719
                                                          =========       =========       =========       =========       =========
</TABLE>


At December 31, 1996, the Company had  approximately  $46,159,000 in undisbursed
loan  commitments  of which  approximately  $6,305,000  related  to real  estate
construction loans. This compares with $28,321,000 at December 31, 1995 of which
$4,232,000 related to real estate construction loans.  Standby letters of credit
were $3,213,000 and $2,465,000,  respectively, at December 31, 1996 and December
31, 1995. For further  information  about the  composition of the Company's loan
portfolio  see  "ITEM  7--MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF  FINANCIAL
CONDITION AND RESULTS OF OPERATIONS" section entitled "Asset Quality" at page 21
of the  Company's  1996 Annual  Report to  Shareholders  incorporated  herein by
reference.

The  Company  seeks to mitigate  the risks  inherent  in its loan  portfolio  by
adhering to certain  underwriting  practices.  They include careful  analysis of
prior  credit  histories,  financial  statements,  tax  returns  and  cash  flow
projections  of  its  potential  borrowers  as  well  as  obtaining  independent
appraisals  on real  property  and  chattel  taken as  collateral  and audits of
accounts receivable or inventory pledged as security.

The Company also has an internal loan review system as well as periodic external
reviews.  The results of these  external  reviews are assessed by the  Company's
audit committee.  Collection of delinquent loans is generally the responsibility
of the Company's credit administration staff. However, certain problem loans may
be dealt with by the originating loan officer. The Board of Directors review the
status of  delinquent  and  problem  loans on a  monthly  basis.  The  Company's
underwriting  and review  practices  notwithstanding,  in the  normal  course of
business, the Company expects to incur loan losses in the future.



                                       25

<PAGE>




The table that  follows  shows the  maturity  distribution  of the  portfolio of
commercial, financial, and agricultural loans and real estate construction loans
on December 31, 1996, as well as sensitivity to changes in interest rates:


Loan Maturity Distribution and Sensitivity to Changes in Interest Rates
<TABLE>
<CAPTION>

                                                                                               December 31, 1996
                                                                 -------------------------------------------------------------------
                                                                   Within              One to               Over
                                                                   One Year          Five Years          Five Years          Total
                                                                   --------           --------           --------           --------
<S>                                                                <C>               <C>                 <C>                <C>   

Commerical, financial and agricultural
Loans with floating rates                                          $ 39,515           $ 20,150           $  4,337           $ 64,002
Loans with predetermined rates                                          630              6,116              1,038              7,784
                                                                   --------           --------           --------           --------
  Subtotal                                                           40,145             26,266              5,375             71,786
Real Estate--Construction
Loans with floating rates                                             5,419              4,528              2,542             12,489
Loans with predetermined rates                                          674                 32                728              1,434
                                                                   --------           --------           --------           --------
  Subtotal                                                            6,093              4,560              3,270             13,923
Real Estate--Mortgage                                                 4,384             39,845             12,809             57,098
Installment                                                           3,909             33,192              3,339             40,440
                                                                   --------           --------           --------           --------
  Total                                                            $ 54,531           $103,863           $ 24,793           $183,247
                                                                   ========           ========           ========           ========
</TABLE>



Item IV:  Nonperforming Assets

The following table  summarizes the Company's  nonaccrual,  90 days or more past
due and other real estate owned:


                                                    December 31
                                      -----------------------------------------
                                       1996     1995     1994     1993     1992
                                      ------   ------   ------   ------   ------
Nonaccrual loans                      $4,968   $4,626   $  653   $1,019   $1,064
Accruing loans past due
  90 days or more                        600      224       46       64      145
Other real estate owned                1,466       47     --       --        676
                                      ------   ------   ------   ------   ------
                                      $7,034   $4,897   $  699   $1,083   $1,885
                                      ======   ======   ======   ======   ======

                                       26

<PAGE>


The Company  generally places loans on nonaccrual  status and accrued but unpaid
interest  is  reversed  against  the  current  year's  income  when  interest or
principal  payments  become  90 days or more  past due  unless  the  outstanding
principal and interest is adequately  secured and, in the opinion of Management,
is deemed in the process of collection.  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  where
Management  believes  the  remaining  principal  balance  is fully  collectible.
Additional loans not 90 days past due may also be placed on nonaccrual status if
Management  reasonably believes the borrower will not be able to comply with the
contractual  loan repayment  terms and collection of principal or interest is in
question.

Interest income of loans on nonaccrual status during the year ended December 31,
1996,  that would have been  recognized  during  that same year if the loans had
been current in accordance with their original terms was approximately $497,000.
In the prior years of 1995, 1994, 1993 and 1992 the amounts were not material.

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, loans on nonaccrual status and restructured loans.  Nonperforming loans
on December 31, 1996 amounted to $8,220,000. As of December 31, 1995, such loans
were  $4,850,000.  Included in these totals are loans  secured by first deeds of
trust on real property  totaling  $3,626,000 in 1996 and $3,286,000 in 1995. The
reason for the  increase is the  purchased  portfolio  of the lease  receivables
discussed  below,  a newly  restructured  commercial  real  estate  loan and two
agricultural real estate properties acquired through foreclosure.

In late 1995, a $3.4 million  commercial real estate development loan was placed
on  non-accrual  status  due to  restructuring  of the loan and is  included  in
nonperforming loans for both years.

The Bank  purchased a portfolio of lease  receivables in 1994. The company which
packages  and sells these leases to  financial  institutions  filed a Chapter 11
reorganization in April 1996 and its chief financial officer has been charged by
the Securities and Exchange  Commission with  participating in securities fraud.
More than 360 banks nationwide had acquired similar lease receivable  contracts.
The Bank has $1,281,000 of these leases on nonaccrual  status as of December 31,
1996. The Bank has retained  counsel jointly with other  California banks and is
monitoring  its position to ascertain the extent of loss the Bank may incur.  As
of December 31, 1996,  specific  reserves of $385,000 have been  established for
this portfolio.  As of February 12, 1997, the Bank signed a settlement agreement
in regards to this portfolio of leases that  established the projected  recovery
rate at 78.5% or approximately $1,006,000.

The Bank closely  monitors its loans  classified by the regulatory  agencies and
such loans totaled $10,239,000 at December 31, 1996.

Except for loans which are disclosed  above,  there are no assets as of December
31, 1996,  where known  information  about possible  credit problems of borrower
causes  Management  to have serious  doubts as to the ability of the borrower to
comply with the present loan repayment terms and which may become  nonperforming
assets.  Given the magnitude of the Company's  loan  portfolio,  however,  it is
always  possible that current  credit  problems may exist that may not have been
discovered by management.

At December 31, 1996, the Company had $1,466,000 in real estate acquired through
foreclosure.  At  December  31,  1995,  the  Company  had $47,000 in real estate
acquired  through  foreclosure.  The increase was due to the  foreclosure on two
agricultural  properties in late 1996.  Current  projections  are that these two
properties will be sold in 1997.


                                      27

<PAGE>




Reconciliation of allowance for possible loan losses
<TABLE>
<CAPTION>

                                                                                        December 31,
                                                           -------------------------------------------------------------------------
                                                                                (Dollar amount in thousands)
                                                             1996            1995            1994            1993             1992
                                                           --------        --------        --------        --------        --------
<S>                                                        <C>             <C>             <C>             <C>             <C>    
Balance at beginning of period                             $  1,701        $  1,621        $  1,747        $  1,616        $  1,699
Due to Acquisition of Thrift                                    148            --              --              --              --
Provision for Possible Loan Losses                            1,513             228            --               254             162
Charge-Offs
  Commercial, Financial, and Agricultural                       518             160             206             217             250
  Real Estate--Construction and
     Land Development                                          --              --              --              --              --
  Real Estate--Mortgage                                        --              --              --              --              --
  Installment Loans to Individuals                              140              63              42              83             109
                                                           --------        --------        --------        --------        --------
     Total Loans Charged Off                                    658             223             248             300             359
Recoveries
  Commercial, Financial, and Agricultural                        27              66              99             145              87
  Real Estate--Construction and
     Land Development                                          --              --                 8            --              --
  Real Estate--Mortgage                                        --              --              --              --              --
  Installment Loans to Individuals                               61               9              15              32              27
                                                           --------        --------        --------        --------        --------
     Total Recoveries                                            88              75             122             177             114
  Net Loans Charged Off                                         570             148           1,621             123             245
                                                           --------        --------        --------        --------        --------
Balance at End of Period                                   $  2,792        $  1,701        $  1,621        $  1,747        $  1,616
                                                           ========        ========        ========        ========        ========

Loans:
Average Loans Outstanding During Period,
  Gross                                                    $157,098        $120,620        $110,690        $102,236        $ 91,458
Total Loans at End of Period, Gross                        $183,247        $133,736        $113,600        $107,124        $ 97,335

Ratio of net charge-offs to average
  loans outstanding                                            0.36%           0.12%           0.12%           0.12%           0.27%
</TABLE>


                                       28

<PAGE>





                                       29

<PAGE>



The  provision  for loan losses  represents  Management's  determination  of the
amount  necessary to be added to the  allowance for loan losses to bring it to a
level which is considered adequate in relation to the risk of foreseeable losses
inherent in the loan portfolio.  Immediately  upon  determination  of a specific
loss in the portfolio, an adjustment to the loan loss reserve is made.

In making this  determination,  Management takes into  consideration the overall
growth  trend  in  the  loan  portfolio,   examinations   of  bank   supervisory
authorities,  internal and external credit  reviews,  prior loan loss experience
for the Company,  concentrations of credit risk, delinquency trends, general and
local economic  conditions and the interest rate  environment.  The normal risks
considered by Management with respect to real estate  construction loans include
fluctuations in real estate values,  the demand for housing and the availability
of permanent  financing in the Company's market area and the home buyers ability
to obtain  permanent  financing.  The normal risks considered by Management with
respect to real estate mortgage loans include  fluctuations in the value of real
estate.  The normal risks  considered by Management with respect to agricultural
loans  include  the  fluctuating  value of the  collateral,  changes  in weather
conditions and the  availability  of adequate  water  resources in the Company's
local market area.  Additionally,  the Company relies upon data obtained through
independent appraisals for significant properties in specific  identification of
loss exposure in nonperforming loans.

The allowance  for loan losses does not represent a specific  judgment that loan
charge-offs of that magnitude will necessarily occur. 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.


The following  table  summarizes a breakdown of the allowance for loan losses by
loan category and the  percentage  by loan category of total loans for the dates
indicated:

Allocation of the Allowance for Loan Losses
<TABLE>
<CAPTION>
                                                                                    December 31
                                        --------------------------------------------------------------------------------------------
                                               1996              1995               1994               1993                1992
                                               ----              ----               ----               ----                ----
                                                                       (Dollar amounts in thousands)
                                         Amount     %      Amount      %      Amount      %      Amount        %      Amount    %
                                         ------     -      ------      -      ------      -      ------        -      ------    -
<S>                                     <C>         <C>    <C>         <C>    <C>         <C>    <C>          <C>   <C>         <C> 
Commercial, financial
  and agricultural                      $  840       39%   $  944       49%   $  898       49%   $  974       51%   $  835       59%
Real estate - constructio                1,421        8%      708        9%      218       10%      317        9%      305        7%
Real estate - mortgage                     219       31%     --         31%      376       31%      296       31%      275       22%
Installment                                312       22%       49       11%      129       10%      160        9%      201       12%
                                        ------   ------    ------   ------    ------   ------    ------   ------    ------   ------
   Total                                $2,792      100%   $1,701      100%   $1,621      100%   $1 747      100%   $1,616      100%
                                        ======   ======    ======   ======    ======   ======    ======   ======    ======   ======
</TABLE>


The following table relates to other interest bearing assets not disclosed above
for the dates indicated.  This item consists of a salary  continuation  plan for
the  Company's  executive   management  and  deferred  retirement  benefits  for
participating  board members.  The plan is informally linked with universal life
insurance policies totaling $3,839,000 for the salary continuation plan.

Other Interest-Bearing Assets
                                                     December 31
                                        ----------------------------------------
                                         1996      1995     1994    1993   1992
                                         ----      ----     ----    ----   ----
                                             (Dollar amounts in thousands)
Cash surrender value of life insurance  $3,134   $1,290   $  288   $  -    $  -
                                        ------   ------   ------   ------  -----


                                       30

<PAGE>




Item V     Deposits

The following table sets forth the average balance and the average rate paid for
the major categories of deposits for the dates indicated:
<TABLE>
<CAPTION>
                                                                              December 31
                                      ----------------------------------------------------------------------------------------------
                                                                    (Amounts in thousands except yield)
                                            1996                1995             1994                  1993               1992
                                     ------------------    -------------   -----------------     ---------------    -------------- 
                                      Amount     Yield     Amount  Yield   Amount      Yield     Amount    Yield    Amount    Yield
                                      --------   -----   --------  ------   -------    ------  --------   ------   --------   -----
<S>                                   <C>        <C>     <C>       <C>     <C>         <C>     <C>         <C>     <C>         <C>

Noninterest-bearing demand deposits   $ 30,549     --    $ 26,478     --   $ 25,326     --     $ 22,913      --    $ 19,662      --
Interest-bearing demand deposits        29,376   0.91%     26,192  0.91%     25,126    0.94%     21,782    12.7%     19,341    2.03%
Savings deposits                       104,938   4.15%     91,509  4.60%     66,517    3.45%     52,385    2.81%     46,440    3.53%
Time deposits under $100,000            34,408   5.26%     19,073  4.84%     27,259    3.82%     24,048    3.86%     26,981    4.98%
Time deposits $100,000 or more           6,586   5.43%      6,358  5.17%      7,160    3.78%     10,148    3.77%     12,080    4.77%
                                      --------           --------          --------             --------             --------  
  Total deposits                      $205,857           $169,610          $151,388            $131,276             $124,504  
                                      ========           ========          ========            ========             ========  
</TABLE>



Maturities of Time Certificates of Deposits of $100,000 or More

Maturities of time  certificates of deposits of $100,000 or more  outstanding at
December 31, 1996 are summarized as follows:

                                   December 31, 1996
                                   -----------------
                                    (In thousands)
Remaining Maturity:
Three months or less                $    2,840
Over three through six months            2,146
Over six through twelve months           3,383
 Over twelve months                      3,178
                                    -----------
   Total                            $   11,547
                                    ==========


Item VI    Return on Equity and Assets

The  following  table  sets  forth  certain  financial  ratios  for the  periods
indicated (averages are computed using actual daily figures):

Return on Average Equity and Assets
                                              For the year ended
                                                  December 31
                                          --------------------------
                                            1996    1995       1994
                                            ----    ----       ----
Return on average assets                    0.88%    0.18%     1.05%
Return on average equity                   11.05%    2.16%    12.81%
Dividend payout ratio                        .05%       -         -
Average equity to average assets            7.96%    8.33%     8.17%



Item VII  Short Term Borrowings

The Company has a loan with an unaffiliated  lender with an outstanding  balance
of $791,000 as of December 31, 1996.  The loan matures in July of 1998. The loan
was related to the cash portion of the purchase of the Thrift.


                                       31


<PAGE>



ITEM 2.                 PROPERTIES

The Bank

(1)     Main Office
The  Bank's  main  office is located  at 490 West  Olive  Avenue in Merced,  and
consists of a  single-story  building  with  approximately  5,600 square feet of
interior  floor  space.  This  building  was  constructed  in  1978 at a cost of
approximately  $400,000 and is situated on a lot of approximately  47,000 square
feet,  which the Bank  purchased in 1977 for  approximately  $186,000.  The site
contains 43 parking spaces and six drive-up lanes, and Management  believes that
this facility will be adequate to accommodate  the operations of this branch for
the foreseeable future.

(2)     Downtown Merced Branch
The Bank's  downtown Merced Branch is located at 606 West 19th Street in Merced.
In August 1991,  the Bank  entered into an 8-1/2 year lease with two  additional
five-year renewal options with a nonaffiliated  third party for the lease of the
facility.  The  facility  is  approximately  7,680  square  feet in size  and is
intended  to  accommodate  the  current  needs of the  existing  branch  and the
agriculture and  agriculture  real estate  departments.  The annual rental under
this lease is $69,120  for the first three  years and  increases  to $78,336 per
year for the remaining 5-1/2 years.  Leasehold improvements including remodeling
and redecorating were approximately  $235,000.  In conjunction with the plans to
move the administrative  facilities of the Company and Bank, as discussed below,
this branch will be relocated. Leasehold improvements will have been written off
and the Bank is  currently  seeking  possible  tenants for the  remainder of the
lease term.

(3)     Atwater Branch
On  October 5,  1981,  the Bank  opened a branch  office at 735  Bellevue  Road,
Atwater. The branch is located on a lot of approximately 40,000 square feet, for
which the Bank entered into a 35-year  ground lease with a  nonaffiliated  third
party,  commencing on October 5, 1981. The building contains approximately 6,000
square  feet  of  interior  floor  space,  and  was  built  at a  total  cost of
approximately  $500,000.  In  1994,  the  Bank  purchased  the  lot at a cost of
$316,000. Management of the Bank believes that this facility will be adequate to
accommodate  the  operations  of this branch for the  foreseeable  future.  This
office has been subsequently  remodeled and also accommodates the Company's data
processing  and  central  services  support  personnel   including  the  related
equipment. The data processing and central service support personnel and related
equipment will be relocated to the new facility in downtown Merced, as discussed
below.

(4)     Administrative Headquarters
On  August  22,  1986,  the  Bank  entered  into  an  eight-year  lease  with  a
nonaffiliated  third  party  for the  relocation  of the  Bank's  administrative
headquarters,  located at 1160 West Olive Avenue,  Suite A, in Merced. The lease
commenced on January 1, 1987 with one  eight-year  option to renew.  The monthly
rental  under the lease is $3,054 per month for the first three  years,  with an
annual  increase  of 3% for years  four,  five and six,  and an  increase  of 5%
annually for years seven and eight. The building  contains  approximately  3,000
square feet of interior floor space.  In 1995, the Bank extended its lease until
April 1, 1997. The facility also  accommodates  the staff of Capital West Group.
The  Company  plans  to move  the  personnel  at this  facility  to the new site
discussed below.

In  addition,  the Bank leased an  additional  1,375 square feet located at 1170
West Olive Avenue, Suite B in September 1990 for administrative  personnel.  The
Bank entered into a two-year  lease in April of 1992 for this facility at a cost
of $1,645 per month for the first year with a 5% increase  for the second  year.
In 1995,  the Bank  extended its lease until April 1, 1997.  This  facility also
accommodates  the staff of Capital  West Group.  The  Company  plans to move the
personnel at this facility to the new site discussed below.

The Company's  administrative  headquarters  are currently  located at 1160 West
Olive  Avenue,  Suite A, in  Merced,  California.  Effective  July 15,  1995 the
Company entered into an agreement to relocate its existing administrative office
and an existing branch in downtown Merced to a new facility in downtown  Merced.
Construction  began in the summer of 1996 and is expected to be complete in late
summer of 1997.  The estimated  construction  cost of the new 29,000 square foot
facility  including a parking  structure  is  estimated  at  approximately  $4.7
million.  In  conjunction  with the  construction  of the  facility,  the Merced
Redevelopment  Agency has provided the Company with an interest-free loan in the
amount of $3.0 million.  The loan matures on August 31, 1997. It is  anticipated
that upon completion of the facility, a permanent mortgage loan will be obtained
from an unaffiliated lender.

(5)     Real Estate Office
In September of 1992,  the Bank  relocated  its real estate  office to 1170 West
Olive  Avenue,  Suite I, in  Merced.  The Bank  entered  into a  two-year  lease
commencing  in October of 1992 with a  nonaffiliated  third  party at a cost per
month of $3,377.  In 1995,  the 

                                       32

<PAGE>



Bank extended its lease until April 1, 1997. The facility contains approximately
3,200  square feet of interior  floor  space.  It is the location for the Bank's
real estate department as well as centralized credit administration, credit card
services and the headquarters for MAID, the Bank's wholly owned subsidiary.  The
Company plans to move the  personnel at this facility to the new  administrative
site discussed above.

(6)     Los Banos Branch
On August 15, 1989,  the Bank opened a fourth branch office at 1341 East Pacheco
Boulevard,  Los Banos,  located in the new Canal Farm Shopping Center.  The Bank
entered into a five-year lease with a nonaffiliated  third party,  commencing on
August 1, 1989. In October of 1994, the Los Banos branch was relocated to 953 W.
Pacheco  Boulevard,  Los Banos.  The Bank entered  into a ten-year  lease with a
non-affiliated  third party on the  facility.  The new facility  contains  4,928
square feet of  interior  floor  space,  parking  facilities,  a walk-up ATM and
drive-up  facilities.  Remodeling and redecorating  expenses were  approximately
$355,000. Management believes that this facility will be adequate to accommodate
the operation of the branch for the foreseeable future.

(7)     Hilmar Branch
On November  15, 1993,  the Bank opened a fifth branch  office at 8019 N. Lander
Avenue, Hilmar. The building was purchased at a cost of $328,000 and consists of
a single story  building of  approximately  4,456 square feet of interior  floor
space. The site contains 22 parking spaces and a drive-up  facility.  Remodeling
and redecorating expenses were approximately  $53,000.  Management believes that
this facility will be adequate to  accommodate  the operation of this branch for
the foreseeable future.

(8)     Sonora Branch
On January 12, 1996, the Bank received  approval to open a full service  banking
facility at the Crossroads  Shopping  Center and entered into a five-year  lease
with a  non-affiliated  third party on January 12, 1996 for a 2,500  square foot
facility. The branch opened April 1, 1996. Management is currently reviewing its
options for relocating this branch to a larger facility.

(9)     Turlock Branch
On September 1, 1995,  the Bank opened a branch in Turlock,  California.  In May
1995 the Bank acquired 2 lots for $297,000 at 2001 Geer Road, Turlock.  The Bank
completed the construction of a permanent facility in February 1997 at a cost of
approximately  $694,000 and the branch was  subsequently  relocated there from a
temporary facility at the same location.

(10)    Modesto Branches
On January 24, 1996, the Bank received  approval to open a full service  banking
facility  in Modesto  and entered  into a ten-year  lease with a  non-affiliated
third party on December 2, 1996 for an approximately  5,413 square foot building
at 3508 McHenry Avenue,  Modesto. The branch opened for business on December 10,
1996. Management believes that this facility will be adequate to accommodate the
branch for the foreseeable future.

On September  26, 1996,  the Bank  received  approval to open a second branch in
Modesto and entered into a four-year lease with a non-affiliated  third party on
December 1, 1996 for an  approximately  8,208 square foot  building at 1003 12th
Street, Modesto. The branch opened for business on December 31, 1996. Management
believes  that  this  facility  will be  adequate  to  accommodate  the  banking
operation for the foreseeable future.

The Thrift
The Thrift currently  operates with four branch offices.  The main office is the
office in Turlock and the other branch  offices are located in Modesto,  Visalia
and Fresno.  All branch  offices are leased  facilities  with minimal  leasehold
improvements  which are  anticipated  to be  adequate  to serve the needs of the
Thrift in the foreseeable future.



                                       33

<PAGE>



ITEM 3.                  LEGAL PROCEEDINGS

As of December  31, 1996,  the  Company is not a party to, nor is any of its
property the subject of, any material  pending  legal  proceedings,  nor are any
such proceedings known to be contemplated by government authorities.

The Company is, however, also exposed to certain potential claims encountered in
the normal course of business.  In the opinion of Management,  the resolution of
these  matters  will  not  have a  material  adverse  effect  on  the  Company's
consolidated  financial  position or results of  operations  in the  foreseeable
future.

ITEM 4.                 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

As permitted by the Securities and Exchange  Commission,  the information called
for by this Item relating to Executive Officers is incorporated by reference 
from the section of the Company's 1997 Proxy Statement titled "Executive 
Officers Of Capital Corp" which is incorporated herein by reference and was 
filed on or about March 20, 1997.
                                     PART II

ITEM 5.                 MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
                        SHAREHOLDER MATTERS

For information concerning the market for the Company's common stock and related
shareholder  matters,  see  page  23 of the  Company's  1996  Annual  Report  to
Shareholders incorporated herein by reference.

ITEM 6.                 SELECTED FINANCIAL DATA

For selected consolidated  financial data concerning the Company, see page 24 of
the  Company's  1996  Annual  Report  to  Shareholders  incorporated  herein  by
reference.

ITEM 7.                 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                        CONDITION AND RESULTS OF OPERATIONS

For management's  discussion and analysis of financial  condition and results of
operations,  see pages 19  through 22 of the  Company's  1996  Annual  Report to
Shareholders incorporated herein by reference.

ITEM 8.                 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Audited Consolidated Balance Sheets as of December 31, 1996 and 1995 and Audited
Consolidated  Statements of Income,  Shareholders' Equity and Cash Flows for the
fiscal years ending December 31, 1996,  1995, and 1994 appear on pages 9 through
11 of the Company's 1996 Annual Report to  Shareholders  incorporated  herein by
reference.  Notes to the Consolidated  Financial  Statements  appear on pages 12
through 18 of the  Company's  1996 Annual  Report to  Shareholders  incorporated
herein by reference.  The Independent Auditors' Report appears on page 23 of the
Company's 1996 Annual Report to Shareholders incorporated herein by reference.

                       SELECTED QUARTERLY FINANCIAL INFORMATION

The following tables present selected historical consolidated financial
information, including per share information, for each of the quarterly periods
indicated.  The following financial data should be read in conjunction with the
consolidated financial statements of Capital Corp included or incorporated by
reference in this annual report.

SELECTED QUARTERLY FINANCIAL INFORMATION
(In thousands except per share data)

1995                              FIRST     SECOND         THIRD        FOURTH
Interest income                $  3,636   $  3,893      $  4,077        $4,267
Interest expense                  1,360      1,413         1,449         1,495
Net interest income               2,276      2,480         2,628         2,772
Noninterest income                  355        288           225        (2,092)
Noninterest expense               1,894      2,064         2,112         2,076
Net income (loss)                   421        406           452          (944)
Net income (loss) per share(1)    0.20       0.19          0.22         (0.45)

1996                              FIRST     SECOND         THIRD        FOURTH
Interest income                $  4,250   $  4,313      $  5,226      $  5,562
Interest expense                  1,512      1,530         1,869         1,954
Net interest income               2,738      2,783         3,357         3,608
Noninterest income                  571        684           694           986
Noninterest expense               2,353      2,853         2,986         2,544
Net income (loss)                   501        296           613           599
Net income (loss) per share(1)     0.24       0.13          0.24          0.23

1997                              FIRST     SECOND
Interest income                $  5,601   $  5,956
Interest expense                  2,072      2,335
Net interest income               3,529      3,621
Noninterest income                  734      1,212
Noninterest expense               3,240      3,180
Net income (loss)                   513       (943)
Net income (loss) per share(1)     0.20      (0.36)

(1)  Per share data reflects 15% stock dividends in June 1994 and 
June 1995, 5% stock dividend in August 1996 and three-for-two stock split in 
May 1997 and is based on weighted average shares outstanding excluding shares 
issuable upon exercise of outstanding options.

ITEM 9.                 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
                        ACCOUNTING AND FINANCIAL DISCLOSURE

There were no changes in and there were no  disagreements  with  accountants  on
accounting and financial disclosure.

                                    PART III

ITEM 10.                DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

As  permitted  by  Securities  and  Exchange  Commission   Regulation  14a,  the
information  called  for by this  item is  incorporated  by  reference  from the
section of the Company's 1997 Proxy  Statement  titled  "Election of Directors,"
which was filed on or about March 20, 1997.

                                       34

<PAGE>
ITEM 11.                EXECUTIVE COMPENSATION

As  permitted  by  Securities  and  Exchange  Commission   Regulation  14A,  the
information  called  for by this  item is  incorporated  by  reference  from the
section of the Company's 1997 Proxy Statement titled "Compensation and Other 
Transactions With Management and Others" which was filed on or about 
March 20, 1997.

ITEM 12.                SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                        MANAGEMENT

As  permitted  by  Securities  and  Exchange  Commission   Regulation  14A,  the
information  called  for by this  item is  incorporated  by  reference  from the
Company's 1997 Proxy Statement, which was filed on or about March 20, 1997.

ITEM 13.                CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

As  permitted  by  Securities  and  Exchange  Commission   Regulation  14A,  the
information  called  for by this  item is  incorporated  by  reference  from the
Company's 1997 Proxy Statement, which was filed on or about March 20, 1997.

                                     PART IV

ITEM 14.                EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
                                FORM 8-K

(a) Financial Statements and Schedules
    An index of all financial  statements  and  schedules  filed as part of this
    Form 10-K  appears  below and the pages of the  Company's  Annual  Report to
    Shareholders  for the year ended December 31, 1996 listed,  are incorporated
    herein by reference in response to Item 8 of this report.


    Financial Statement Schedules:                                      Page
    -----------------------------                                       ----
    Independent Auditor's Report                                         23
    Consolidated Balance Sheets as of December 31, 1996 and              10
    1995
    Consolidated Statements of Income for the Years Ended                 9
    1996, 1995, and 1994
    Consolidated Statements of Shareholders' Equity for the              10
    Years Ended 1996, 1995, and 1994
    Consolidated Statements of Cash Flows for the Years Ended            11
    1996, 1995, and 1994
    Notes to Consolidated Financials                                     12


(b) Reports on Form 8-K
    There were no reports filed in the quarter ending  December 31, 1996 on Form
8-K.

                                       35

<PAGE>


(c)  Exhibits
     The following is a list of all exhibits  required by Item 601 of Regulation
      S-K to be filed as part of this Form 10-K:
<TABLE>
<CAPTION>

                                                                                            Sequentially
   Exhibit                                                                                    Numbered
    Number     Exhibit                                                                            Page
    ------     -------                                                                      ----------
   <S>         <C>                                                                          <C>
     3.1       Articles of Incorporation (filed as Exhibit 3.1 of the Company's                 *
               September  30,  1996  Form  10Q  filed  with  the SEC on or about
               November 14, 1996).
     3.2       Bylaws (filed as Exhibit 3.2 of the Company's September 30, 1996 Form            *
               10Q filed with the SEC on or about November 14, 1996).
      10       Employment Agreement between Thomas T. Hawker and Capital Corp.
     10.1      Administration Construction Agreement (filed as Exhibit 10.4 of the              *
               Company's 1995 Form 10K filed with the SEC on or about March 31,
               1996).
     10.2      Stock Option Plan (filed as Exhibit 10.6 of the Company's 1995 Form              *
               10K filed with the SEC on or about March 31, 1996).
     10.3      401(k) Plan (filed as Exhibit 10.7 of the Company's 1995 Form 10K                *
               filed with the SEC on or about March 31, 1996).
     10.4      Employee Stock Ownership Plan (filed as Exhibit 10.8 of the                      *
               Company's 1995 Form 10K filed with the SEC on or about March 31,
               1996).
      11       Statement  Regarding  the  Computation  of Earnings  Per Share is
               incorporated  herein by  reference  from Note 1 of the  Company's
               Consolidated Financial Statements.
      13       Annual Report to Security Holders.
     23.1      Consent of KPMG Peat Marwick LLP
      *        Denotes documents which have been incorporated by reference.

</TABLE>


(d) Financial Statement Schedules
    All other supporting  schedules are omitted because they are not applicable,
    not  required,  or the  information  required  to be set  forth  therein  is
    included in the financial statements or notes thereto incorporated herein by
    reference.


                                       36

<PAGE>



                                   SIGNATURES


Pursuant to the  requirements  of Section 13 of the  Securities  Exchange Act of
1934,  as  amended,  the Company has duly caused this report to be signed on its
behalf by the undersigned,  thereunto duly authorized, on the 26th day of 
August, 1997
                        CAPITAL CORP OF THE WEST

                        By:   /s/ THOMAS T. HAWKER
                           ----------------------------------------------
                             THOMAS T. HAWKER
                            (President and Chief Executive Officer
                             of Capital Corp of the West)


                        By:   /s/ JANEY E. BOYCE
                           ----------------------------------------------
                            JANEY E. BOYCE
                           (Senior Vice President and Chief Financial Officer
                            of Capital Corp of the West)



Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this  report has been  signed  below by the  following  persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature                                            Capacity                        Date
---------                                            --------                        ----
<S>                                                  <C>                             <C>
/s/ JERRY E. CALLISTER                               Chairman of the                 August 26, 1997
-----------------------------------                  Board of Directors
JERRY E. CALLISTER     


/s/ ROBERT E. HOLL                                   Director                        August 26, 1997
----------------------------------
ROBERT E. HOLL


/s/ BERTYL W. JOHNSON                                Director                        August 26, 1997
----------------------------------
BERTYL W. JOHNSON


/s/ DOROTHY L. BIZZINI                               Director                        August 26, 1997
----------------------------------
DOROTHY L. BIZZINI


/s/ LLOYD H. AHLEM                                   Director                        August 26, 1997
----------------------------------
LLOYD H. AHLEM


/s/ JAMES W. TOLLADAY                                Director                        August 26, 1997
----------------------------------
JAMES W. TOLLADAY


/s/ JACK F. CAUWELS                                  Director                        August 26, 1997
----------------------------------
JACK F. CAUWELS

                                       37

<PAGE>



/s/ THOMAS T. HAWKER                                 Director/CEO                    August 26, 1997
----------------------------------
THOMAS T. HAWKER


/s/ JOHN FAWCETT                                     Director                        August 26, 1997
----------------------------------
JOHN FAWCETT


/s/ TAPAN MONROE                                     Director                        August 26, 1997
----------------------------------
TAPAN MONROE


/s/ JANEY E. BOYCE                                   Chief Financial &               August 26, 1997
----------------------------------                   Accounting Officer
JANEY E. BOYCE                    

CAPITAL CORP OF THE WEST
</TABLE>


                                       38