----

----

| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|---|-----------------------------------------------------------------------------------------|

| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|---|------------------------------------------------------------------------------------------|

| California                                                     | 77-0446957                           |
|----------------------------------------------------------------|--------------------------------------|
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |

| 445 Pine Avenue, Goleta, California      | 93117      |
|------------------------------------------|------------|
| (Address of principal executive offices) | (Zip Code) |

| Large accelerated filer o |   | Accelerated filer o         |
|---------------------------|--------|-----------------------------|
| Non-accelerated filer o   |   | Smaller reporting company x |

----

----

----

TABLE OF CONTENTS

| PART I.  FINANCIAL INFORMATION                                                                                                                                                      | PAGE    |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------|
|                                                                                                                                                                                          |    |   |   |
|                                                                                                                                                                                          | ITEM 1. | FINANCIAL STATEMENTS (UNAUDITED) |   |
|                                                                                                                                                                                          |    | CONSOLIDATED BALANCE SHEETS | 3 |
|                                                                                                                                                                                          |    | CONSOLIDATED INCOME STATEMENTS | 4 |
|                                                                                                                                                                                          |    | CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY | 5 |
|                                                                                                                                                                                          |    | CONSOLIDATED STATEMENTS OF CASH FLOWS | 6 |
|                                                                                                                                                                                          |    | NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS | 7 |
|                                                                                                                                                                                          |    |   |   |
| The financial statements included in this Form 10-Q should be read with reference to Community West Bancshares’ Annual Report on Form 10-K for the fiscal year ended December 31, 2009. |
|                                                                                                                                                                                          |    |   |   |
|                                                                                                                                                                                          | ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 17 |
|                                                                                                                                                                                          |    |   |   |
|                                                                                                                                                                                          | ITEM 4. | CONTROLS AND PROCEDURES | 29 |
|                                                                                                                                                                                          |    |   |   |
| PART II.  OTHER INFORMATION                                                                                                                                                         |    |
|                                                                                                                                                                                          |    |   |   |
|                                                                                                                                                                                          | ITEM 1. | LEGAL PROCEEDINGS | 29 |
|                                                                                                                                                                                          |    |   |   |
|                                                                                                                                                                                          | ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | 29 |
|                                                                                                                                                                                          |    |   |   |
|                                                                                                                                                                                          | ITEM 3. | DEFAULTS UPON SENIOR SECURITIES | 29 |
|                                                                                                                                                                                          |    |   |   |
|                                                                                                                                                                                          | ITEM 5. | OTHER INFORMATION | 30 |
|                                                                                                                                                                                          |    |   |   |
|                                                                                                                                                                                          | ITEM 6. | EXHIBITS | 30 |
|                                                                                                                                                                                          |    |   |   |
| SIGNATURES                                                                                                                                                                                    |    |   |

----

Table of Contents

PART I – FINANCIAL INFORMATION

COMMUNITY WEST BANCSHARES

|                                                                                                                                      |   | September 30, 2010     |    |   | December 31, 2009 |   |
|-------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------|---------|--------|-------------------|--------|
|                                                                                                                                      |   | (unaudited)            |    |   |              |   |
| ASSETS                                                                                                                                    |   | (dollars in thousands) |    |
| Cash and due from banks                                                                                                                   |   | $                      | 12,306  |   |              | $      | 4,906 |   |
| Federal funds sold                                                                                                                        |   |                   | 26      |   |              |   | 605 |   |
| Cash and cash equivalents                                                                                                                 |   |                   | 12,332  |   |              |   | 5,511 |   |
| Time deposits in other financial institutions                                                                                             |   |                   | 475     |   |              |   | 640 |   |
| Investment securities available-for-sale, at fair value; amortized cost of $22,332 at September 30, 2010 and $17,367 at December 31, 2009 |   |                   | 22,652  |   |              |   | 17,670 |   |
| Investment securities held-to-maturity, at amortized cost; fair value of $17,381 at September 30, 2010 and $23,538 at December 31, 2009   |   |                   | 16,534  |   |              |   | 22,678 |   |
| Federal Home Loan Bank stock, at cost                                                                                                     |   |                   | 5,240   |   |              |   | 5,660 |   |
| Federal Reserve Bank stock, at cost                                                                                                       |   |                   | 1,322   |   |              |   | 1,322 |   |
| Loans:                                                                                                                                    |   |                   |    |   |              |   |   |   |
| Loans held for sale, at lower of cost or fair value                                                                                       |   |                   | 93,643  |   |              |   | 102,574 |   |
| Loans held for investment, net of allowance for loan losses of $13,395 at September 30, 2010 and $13,733 at December 31, 2009             |   |                   | 493,602 |   |              |   | 500,866 |   |
| Total loans                                                                                                                               |   |                   | 587,245 |   |              |   | 603,440 |   |
| Servicing rights                                                                                                                          |   |                   | 811     |   |              |   | 998 |   |
| Foreclosed real estate and repossessed assets                                                                                             |   |                   | 5,466   |   |              |   | 1,822 |   |
| Premises and equipment, net                                                                                                               |   |                   | 2,999   |   |              |   | 3,279 |   |
| Other assets                                                                                                                              |   |                   | 21,394  |   |              |   | 21,196 |   |
| TOTAL ASSETS                                                                                                                              |   | $                      | 676,470 |   |              | $      | 684,216 |   |
| LIABILITIES                                                                                                                               |   |                   |    |   |              |   |   |   |
| Deposits:                                                                                                                                 |   |                   |    |   |              |   |   |   |
| Non-interest-bearing demand                                                                                                               |   | $                      | 39,140  |   |              | $      | 37,703 |   |
| Interest-bearing demand                                                                                                                   |   |                   | 246,576 |   |              |   | 191,905 |   |
| Savings                                                                                                                                   |   |                   | 18,848  |   |              |   | 16,396 |   |
| Time certificates                                                                                                                         |   |                   | 231,109 |   |              |   | 285,388 |   |
| Total deposits                                                                                                                            |   |                   | 535,673 |   |              |   | 531,392 |   |
| Other borrowings                                                                                                                          |   |                   | 68,000  |   |              |   | 89,000 |   |
| Convertible debentures                                                                                                                    |   |                   | 8,085   |   |              |   | - |   |
| Other liabilities                                                                                                                         |   |                   | 3,930   |   |              |   | 3,517 |   |
| Total liabilities                                                                                                                         |   |                   | 615,688 |   |              |   | 623,909 |   |
| STOCKHOLDERS' EQUITY                                                                                                                      |   |                   |    |   |              |   |   |   |
| Preferred stock, no par value; 10,000,000 shares authorized; 15,600 shares issued and outstanding                                         |   |                   | 14,740  |   |              |   | 14,540 |   |
| Common stock, no par value; 10,000,000 shares authorized;  5,915,130 shares issued and outstanding                         |   |                   | 33,126  |   |              |   | 33,110 |   |
| Retained earnings                                                                                                                         |   |                   | 12,728  |   |              |   | 12,479 |   |
| Accumulated other comprehensive income, net                                                                                               |   |                   | 188     |   |              |   | 178 |   |
| Total stockholders' equity                                                                                                                |   |                   | 60,782  |   |              |   | 60,307 |   |
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                                          |   | $                      | 676,470 |   |              | $      | 684,216 |   |
|                                                                                                                                      |   |                   |    |   |              |   |   |   |
| See accompanying notes.                                                                                                                   |   |                   |    |   |              |   |   |   |

----

Table of Contents

COMMUNITY WEST BANCSHARES

|                                                                         |   | Three Months Ended September 30,                 |   |   | Nine Months Ended September 30, |   |
|------------------------------------------------------------------------------|--------|--------------------------------------------------|--------|--------|---------------------------------|--------|
|                                                                         |   | 2010                                             |   |   | 2009                            |   |   | 2010 |   |   | 2009 |   |
|                                                                         |   | (dollars in thousands, except per share amounts) |   |
| INTEREST INCOME                                                              |   |                                             |   |   |                            |   |   |   |   |   |   |   |
| Loans                                                                        |   | $                                                | 9,393  |   |                            | $      | 9,907 |   |   | $ | 28,250 |   |   | $ | 29,405 |   |
| Investment securities                                                        |   |                                             | 328    |   |                            |   | 452 |   |   |   | 1,102 |   |   |   | 1,338 |   |
| Other                                                                        |   |                                             | 6      |   |                            |   | 19 |   |   |   | 20 |   |   |   | 52 |   |
| Total interest income                                                        |   |                                             | 9,727  |   |                            |   | 10,378 |   |   |   | 29,372 |   |   |   | 30,795 |   |
| INTEREST EXPENSE                                                             |   |                                             |   |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                                                     |   |                                             | 1,812  |   |                            |   | 2,572 |   |   |   | 5,829 |   |   |   | 8,870 |   |
| Other borrowings and convertible debentures                                  |   |                                             | 607    |   |                            |   | 895 |   |   |   | 1,709 |   |   |   | 3,017 |   |
| Total interest expense                                                       |   |                                             | 2,419  |   |                            |   | 3,467 |   |   |   | 7,538 |   |   |   | 11,887 |   |
| NET INTEREST INCOME                                                          |   |                                             | 7,308  |   |                            |   | 6,911 |   |   |   | 21,834 |   |   |   | 18,908 |   |
| Provision for loan losses                                                    |   |                                             | 1,518  |   |                            |   | 2,592 |   |   |   | 7,464 |   |   |   | 15,890 |   |
| NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES                          |   |                                             | 5,790  |   |                            |   | 4,319 |   |   |   | 14,370 |   |   |   | 3,018 |   |
| NON-INTEREST INCOME                                                          |   |                                             |   |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Other loan fees                                                              |   |                                             | 521    |   |                            |   | 385 |   |   |   | 1,367 |   |   |   | 1,370 |   |
| Gains from loan sales, net                                                   |   |                                             | 90     |   |                            |   | 75 |   |   |   | 285 |   |   |   | 251 |   |
| Document processing fees                                                     |   |                                             | 149    |   |                            |   | 175 |   |   |   | 399 |   |   |   | 644 |   |
| Loan servicing, net                                                          |   |                                             | 89     |   |                            |   | 180 |   |   |   | 217 |   |   |   | 692 |   |
| Service charges                                                              |   |                                             | 128    |   |                            |   | 116 |   |   |   | 390 |   |   |   | 336 |   |
| Other                                                                        |   |                                             | 46     |   |                            |   | 35 |   |   |   | 137 |   |   |   | 96 |   |
| Total non-interest income                                                    |   |                                             | 1,023  |   |                            |   | 966 |   |   |   | 2,795 |   |   |   | 3,389 |   |
| NON-INTEREST EXPENSES                                                        |   |                                             |   |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Salaries and employee benefits                                               |   |                                             | 2,909  |   |                            |   | 2,756 |   |   |   | 8,775 |   |   |   | 9,139 |   |
| Occupancy and equipment                                                      |   |                                             | 499    |   |                            |   | 524 |   |   |   | 1,508 |   |   |   | 1,594 |   |
| FDIC assessment                                                              |   |                                             | 260    |   |                            |   | 393 |   |   |   | 908 |   |   |   | 1,216 |   |
| Professional services                                                        |   |                                             | 187    |   |                            |   | 194 |   |   |   | 629 |   |   |   | 706 |   |
| Advertising and marketing                                                    |   |                                             | 47     |   |                            |   | 69 |   |   |   | 217 |   |   |   | 250 |   |
| Depreciation and amortization                                                |   |                                             | 102    |   |                            |   | 122 |   |   |   | 323 |   |   |   | 372 |   |
| Loss on sale and write-down of foreclosed real estate and repossessed assets |   |                                             | 128    |   |                            |   | 124 |   |   |   | 694 |   |   |   | 288 |   |
| Data processing                                                              |   |                                             | 150    |   |                            |   | 145 |   |   |   | 410 |   |   |   | 459 |   |
| Other operating expenses                                                     |   |                                             | 753    |   |                            |   | 838 |   |   |   | 1,939 |   |   |   | 2,331 |   |
| Total non-interest expenses                                                  |   |                                             | 5,035  |   |                            |   | 5,165 |   |   |   | 15,403 |   |   |   | 16,355 |   |
| Income (loss) before provision for income taxes                              |   |                                             | 1,778  |   |                            |   | 120 |   |   |   | 1,762 |   |   |   | (9,948 | ) |
| Provision (benefit) for income taxes                                         |   |                                             | 733    |   |                            |   | 51 |   |   |   | 728 |   |   |   | (4,088 | ) |
|                                                                         |   |                                             |   |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| NET INCOME (LOSS)                                                            |   | $                                                | 1,045  |   |                            | $      | 69 |   |   | $ | 1,034 |   |   | $ | (5,860 | ) |
|                                                                         |   |                                             |   |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Preferred stock dividends                                                    |   |                                             | 261    |   |                            |   | 261 |   |   |   | 785 |   |   |   | 784 |   |
| NET INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS                          |   | $                                                | 784    |   |                            | $      | (192 | ) |   | $ | 249 |   |   | $ | (6,644 | ) |
|                                                                         |   |                                             |   |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Earnings (loss)  per common share:                                 |   |                                             |   |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                                        |   | $                                                | .13    |   |                            | $      | (.03 | ) |   | $ | .04 |   |   | $ | (1.12 | ) |
| Diluted                                                                      |   | $                                                | .12    |   |                            | $      | (.03 | ) |   | $ | .04 |   |   | $ | (1.12 | ) |
| Basic weighted average number of common shares outstanding                   |   |                                             | 5,915  |   |                            |   | 5,915 |   |   |   | 5,915 |   |   |   | 5,915 |   |
| Diluted weighted average number of common shares outstanding                 |   |                                             | 7,246  |   |                            |   | 5,915 |   |   |   | 5,915 |   |   |   | 5,915 |   |
|                                                                         |   |                                             |   |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| See accompanying notes.                                                      |   |                                             |   |   |                            |   |   |   |   |   |   |   |   |   |   |   |

----

Table of Contents

COMMUNITY WEST BANCSHARES

|   |   |   |      |   |   |   |         |   |   |   |     |   |   |   | Accumulated Other |   |   |   | Total               |   |
|--------|--------|--------|-----------|--------|--------|--------|--------------|--------|--------|--------|----------|--------|--------|--------|-------------------|--------|--------|--------|---------------------|--------|
|   |   |   | Preferred |   |   |   | Common Stock |   |   |   | Retained |   |   |   | Comprehensive     |   |   |   | Stockholders’ |   |
|   |   |   | Stock     |   |   |   | Shares       |   |   |   | Amount   |   |   |   | Earnings          |   |   |   | Income              |   |   |   | Equity |   |

| (in thousands)                                                  |   |
|-----------------------------------------------------------------|--------|
| BALANCES AT                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| JANUARY 1, 2010                                                 |   | $ | 14,540 |   |   |   | 5,915 |   |   | $ | 33,110 |   |   | $ | 12,479 |   |   | $ | 178 |   |   | $ | 60,307 |   |
| Stock option expense, recognized in earnings                    |   |   |   |   |   |   |   |   |   |   | 16 |   |   |   |   |   |   |   |   |   |   |   | 16 |   |
| Comprehensive income:                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 1,034 |   |   |   |   |   |   |   | 1,034 |   |
| Change in unrealized gain on securities available-for-sale, net |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 10 |   |   |   | 10 |   |
| Comprehensive income                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 1,044 |   |
| Preferred stock dividends                                       |   |   | 200 |   |   |   |   |   |   |   |   |   |   |   | (785 | ) |   |   |   |   |   |   | (585 | ) |
| BALANCES AT                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| SEPTEMBER 30, 2010                                              |   | $ | 14,740 |   |   |   | 5,915 |   |   | $ | 33,126 |   |   | $ | 12,728 |   |   | $ | 188 |   |   | $ | 60,782 |   |
|                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| See accompanying notes.                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

Table of Contents

COMMUNITY WEST BANCSHARES

|                                                                            |   | Nine Months Ended September 30, |    |
|---------------------------------------------------------------------------------|--------|---------------------------------|---------|
|                                                                            |   | 2010                            |    |   | 2009 |   |
|                                                                            |   | (in thousands)                  |    |
| CASH FLOWS FROM OPERATING ACTIVITIES:                                           |   |                            |    |   |   |   |
| Net income (loss)                                                               |   | $                               | 1,034   |   |   | $ | (5,860 | ) |
| Adjustments to reconcile net loss to net cash provided by operating activities: |   |                            |    |   |   |   |   |   |
| Provision for loan losses                                                       |   |                            | 7,464   |   |   |   | 15,890 |   |
| Depreciation and amortization                                                   |   |                            | 323     |   |   |   | 372 |   |
| Stock-based compensation                                                        |   |                            | 16      |   |   |   | 22 |   |
| Net amortization of discounts and premiums for investment securities            |   |                            | (114    | ) |   |   | (29 | ) |
| (Gain) loss on:                                                                 |   |                            |    |   |   |   |   |   |
| Sale and write-down of foreclosed real estate and repossessed assets            |   |                            | 694     |   |   |   | 288 |   |
| Sale of loans held for sale                                                     |   |                            | (285    | ) |   |   | (251 | ) |
| Loan originated for sale and principal collections, net                         |   |                            | (161    | ) |   |   | 3,081 |   |
| Changes in:                                                                     |   |                            |    |   |   |   |   |   |
| Servicing rights, net of amortization                                           |   |                            | 187     |   |   |   | 109 |   |
| Other assets                                                                    |   |                            | (214    | ) |   |   | (4,739 | ) |
| Other liabilities                                                               |   |                            | 423     |   |   |   | (438 | ) |
| Net cash provided by operating activities                                       |   |                            | 9,367   |   |   |   | 8,445 |   |
| CASH FLOWS FROM INVESTING ACTIVITIES:                                           |   |                            |    |   |   |   |   |   |
| Purchase of held-to-maturity securities                                         |   |                            | -       |   |   |   | (1,233 | ) |
| Purchase of available-for-sale securities                                       |   |                            | (14,120 | ) |   |   | (13,433 | ) |
| Redemption (purchase) of Federal Home Loan Bank and Federal Reserve stock       |   |                            | 420     |   |   |   | (227 | ) |
| Principal pay downs and maturities of available-for-sale securities             |   |                            | 9,273   |   |   |   | 2,008 |   |
| Principal pay downs and maturities of held-to-maturity securities               |   |                            | 6,139   |   |   |   | 10,515 |   |
| Loan originations and principal collections, net                                |   |                            | 1,658   |   |   |   | (35,523 | ) |
| Proceeds from sale of other assets acquired through foreclosure                 |   |                            | 3,181   |   |   |   | 2,274 |   |
| Net decrease (increase) in time deposits in other financial institutions        |   |                            | 165     |   |   |   | (20 | ) |
| Purchase of premises and equipment, net                                         |   |                            | (43     | ) |   |   | (27 | ) |
| Net cash provided by (used in) investing activities                             |   |                            | 6,673   |   |   |   | (35,666 | ) |
| CASH FLOWS FROM FINANCING ACTIVITIES:                                           |   |                            |    |   |   |   |   |   |
| Preferred stock dividends                                                       |   |                            | (785    | ) |   |   | (784 | ) |
| Amortization of discount on preferred stock                                     |   |                            | 200     |   |   |   | 173 |   |
| Net increase in demand deposits and savings accounts                            |   |                            | 58,560  |   |   |   | 108,729 |   |
| Net decrease in time certificates of deposit                                    |   |                            | (54,279 | ) |   |   | (54,471 | ) |
| Proceeds from issuance of other borrowings                                      |   |                            | 39,000  |   |   |   | 88,000 |   |
| Repayment of other borrowings                                                   |   |                            | (60,000 | ) |   |   | (118,000 | ) |
| Proceeds from issuance of convertible debentures                                |   |                            | 8,085   |   |   |   | - |   |
| Net cash (used in) provided by financing activities                             |   |                            | (9,219  | ) |   |   | 23,647 |   |
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                            |   |                            | 6,821   |   |   |   | (3,574 | ) |
| CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                                    |   |                            | 5,511   |   |   |   | 12,253 |   |
| CASH AND CASH EQUIVALENTS, END OF PERIOD                                        |   | $                               | 12,332  |   |   | $ | 8,679 |   |
| Supplemental Disclosure of Cash Flow Information:                               |   |                            |    |   |   |   |   |   |
| Cash paid for interest                                                          |   | $                               | 7,451   |   |   | $ | 12,630 |   |
| Cash paid for income taxes                                                      |   |                            | 561     |   |   |   | 86 |   |
| Supplemental Disclosure of Noncash Investing Activity:                          |   |                            |    |   |   |   |   |   |
| Transfers to other assets acquired through foreclosure                          |   | $                               | 7,519   |   |   | $ | 4,706 |   |
|                                                                            |   |                            |    |   |   |   |   |   |
| See accompanying notes.                                                         |   |                            |    |   |   |   |   |   |

----

Table of Contents

COMMUNITY WEST BANCSHARES

| 1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
|----|--------------------------------------------|

|   | · | SBA – A migration analysis and various portfolio specific factors are used to determine the required allowance for all non-impaired loans.  In addition, the migration results are adjusted based upon qualitative factors.  Qualitative factors include, but are not limited to, adjustments for existing economic conditions, past due trends and concentration exposure.   Impaired loans are assigned a specific reserve based upon the individual characteristics of the loan. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Relationship Banking – Primarily includes commercial, commercial real estate and construction loans.  A migration analysis and various portfolio specific factors are used to calculate the required allowance for all non-impaired loans. In addition, the migration results are adjusted based upon qualitative factors.  Qualitative factors include, but are not limited to, adjustments for existing economic conditions, past due trends and concentration exposure. Impaired loans are assigned a specific reserve based upon the individual characteristics of the loan. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Manufactured Housing – The allowance is calculated on the basis of loss history and risk rating, which is primarily a function of delinquency.  In addition, the loss history is adjusted based upon qualitative factors similar to those used for SBA loans and relationship banking. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Table of Contents

----

Table of Contents

| 2. | INVESTMENT SECURITIES |
|----|-----------------------|

|                          |   |           |   |
|-------------------------------|--------|----------------|--------|
| September 30, 2010            |   | (in thousands) |   |
|                          |   |           |   |   | Gross |   |   | Gross |   |   |   |   |
|                          |   | Amortized      |   |   | Unrealized |   |   | Unrealized |   |   | Fair |   |
| Available-for-sale securities |   | Cost           |   |   | Gains |   |   | Losses |   |   | Value |   |
| U.S. Government agency: MBS   |   | $              | 5,816  |   |   | $ | 209 |   |   | $ | - |   |   | $ | 6,025 |   |
| U.S. Government agency: CMO   |   |           | 16,516 |   |   |   | 114 |   |   |   | (3 | ) |   |   | 16,627 |   |
| Total                         |   | $              | 22,332 |   |   | $ | 323 |   |   | $ | (3 | ) |   | $ | 22,652 |   |
|                          |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Held-to-maturity securities   |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S. Government agency: MBS   |   | $              | 16,534 |   |   | $ | 847 |   |   | $ | - |   |   | $ | 17,381 |   |
| U.S. Government agency: CMO   |   |           | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Total                         |   | $              | 16,534 |   |   | $ | 847 |   |   | $ | - |   |   | $ | 17,381 |   |
|                          |   |           |   |
| December 31, 2009             |   |           |   |
|                          |   |           |   |   |   | Gross |   |   | Gross |   |   |   |   |   |
|                          |   | Amortized      |   |   | Unrealized |   |   | Unrealized |   |   | Fair |   |
| Available-for-sale securities |   | Cost           |   |   | Gains |   |   | Losses |   |   | Value |   |
| U.S. Government agency: MBS   |   | $              | 10,175 |   |   | $ | 286 |   |   | $ | - |   |   | $ | 10,461 |   |
| U.S. Government agency: CMO   |   |           | 7,192  |   |   |   | 37 |   |   |   | (20 | ) |   |   | 7,209 |   |
| Total                         |   | $              | 17,367 |   |   | $ | 323 |   |   | $ | (20 | ) |   | $ | 17,670 |   |
|                          |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Held-to-maturity securities   |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S. Government agency: MBS   |   | $              | 22,678 |   |   | $ | 891 |   |   | $ | (31 | ) |   | $ | 23,538 |   |
| U.S. Government agency: CMO   |   |           | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Total                         |   | $              | 22,678 |   |   | $ | 891 |   |   | $ | (31 | ) |   | $ | 23,538 |   |

----

Table of Contents

|                          |   | Total Amount |   |   | Less than One Year |   |   | One to Five Years |   |   | Five toTen Years |   |
|-------------------------------|--------|--------------|--------|--------|--------------------|--------|--------|-------------------|--------|--------|------------------|--------|
|                          |   | Amount       |   |   | Yield              |   |   | Amount            |   |   | Yield            |   |   | Amount |   |   | Yield |   |   | Amount |   |   | Yield |   |
| (dollars in thousands)        |   |
| Available-for-sale securities |   |         |   |   |               |   |   |              |   |   |             |   |   |   |   |   |   |   |   |
| U. S. Government:             |   |         |   |   |               |   |   |              |   |   |             |   |   |   |   |   |   |   |   |
| Agency: MBS                   |   | $            | 6,025  |   |               |   | 2.5    | %                 |   | $      | -                |   |   |   | - |   |   | $ | 5,952 |   |   |   | 2.5 | % |   | $ | 73 |   |   |   | 2.7 | % |
| Agency: CMO                   |   |         | 16,627 |   |               |   | 1.4    | %                 |   |   | 8,124            |   |   |   | 1.4 | % |   |   | 8,503 |   |   |   | 1.4 | % |   |   | - |   |   |   | - |   |
| Total                         |   | $            | 22,652 |   |               |   | 1.7    | %                 |   | $      | 8,124            |   |   |   | 1.4 | % |   | $ | 14,455 |   |   |   | 1.8 | % |   | $ | 73 |   |   |   | 2.7 | % |
|                          |   |         |   |   |               |   |   |              |   |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Held-to-maturity securities   |   |         |   |   |               |   |   |              |   |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S. Government:              |   |         |   |   |               |   |   |              |   |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Agency: MBS                   |   | $            | 16,534 |   |               |   | 4.6    | %                 |   | $      | 77               |   |   |   | 5.0 | % |   | $ | 14,281 |   |   |   | 4.7 | % |   | $ | 2,176 |   |   |   | 3.8 | % |
| Agency: CMO                   |   |         | -      |   |               |   | -      |              |   |   | -                |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Total                         |   | $            | 16,534 |   |               |   | 4.6    | %                 |   | $      | 77               |   |   |   | 5.0 | % |   | $ | 14,281 |   |   |   | 4.7 | % |   | $ | 2,176 |   |   |   | 3.8 | % |

| September 30, 2010            |   | Less than 12 months |   |   | More than 12 months |   |   | Total  |   |
|-------------------------------|--------|---------------------|--------|--------|---------------------|--------|--------|--------|--------|
|                          |   | Fair                |   |   | Unrealized          |   |   | Fair   |   |   | Unrealized |   |   | Fair |   |   | Unrealized |   |
|                          |   | Value               |   |   | Losses              |   |   | Value  |   |   | Losses |   |   | Value |   |   | Losses |   |
|                          |   | (in thousands)      |   |
| Available-for-sale securities |   |                |   |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S. Government agency: MBS   |   | $                   | -      |   |                | $      | -      |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |
| U.S. Government agency: CMO   |   |                | 1,896  |   |                |   | 3      |   |   |   | - |   |   |   | - |   |   |   | 1,896 |   |   |   | 3 |   |
| Total                         |   | $                   | 1,896  |   |                | $      | 3      |   |   | $ | - |   |   | $ | - |   |   | $ | 1,896 |   |   | $ | 3 |   |
|                          |   |                |   |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

| December 31, 2009             |   | Less than 12 months |   |   | More than 12 months |   |   | Total  |   |
|-------------------------------|--------|---------------------|--------|--------|---------------------|--------|--------|--------|--------|
|                          |   | Fair                |   |   | Unrealized          |   |   | Fair   |   |   | Unrealized |   |   | Fair |   |   | Unrealized |   |
|                          |   | Value               |   |   | Losses              |   |   | Value  |   |   | Losses |   |   | Vale |   |   | Losses |   |
|                          |   | (in thousands)      |   |
| Available-for-sale securities |   |                |   |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S. Government agency: MBS   |   | $                   | -      |   |                | $      | -      |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |
| U.S. Government agency: CMO   |   |                | 1,816  |   |                |   | 20     |   |   |   | - |   |   |   | - |   |   |   | 1,816 |   |   |   | 20 |   |
| Total                         |   | $                   | 1,816  |   |                | $      | 20     |   |   | $ | - |   |   | $ | - |   |   | $ | 1,816 |   |   | $ | 20 |   |
|                          |   |                |   |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Held-to-maturity securities   |   |                |   |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S. Government agency: MBS   |   | $                   | 2,854  |   |                | $      | 31     |   |   | $ | - |   |   | $ | - |   |   | $ | 2,854 |   |   | $ | 31 |   |
| U.S. Government agency: CMO   |   |                | -      |   |                |   | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Total                         |   | $                   | 2,854  |   |                | $      | 31     |   |   | $ | - |   |   | $ | - |   |   | $ | 2,854 |   |   | $ | 31 |   |

----

Table of Contents

| 3. | LOAN SALES AND SERVICING |
|----|--------------------------|

| 4. | LOANS HELD FOR INVESTMENT |
|----|---------------------------|

|                           |   | September 30,  |    |   | December 31, |   |
|--------------------------------|--------|----------------|---------|--------|--------------|--------|
|                           |   | 2010           |    |   | 2009         |   |
|                           |   | (in thousands) |    |
| Commercial                     |   | $              | 55,120  |   |         | $      | 61,810 |   |
| Real estate                    |   |           | 189,554 |   |         |   | 195,480 |   |
| SBA                            |   |           | 45,263  |   |         |   | 43,863 |   |
| Manufactured housing           |   |           | 196,451 |   |         |   | 195,656 |   |
| Other installment              |   |           | 20,907  |   |         |   | 18,189 |   |
|                           |   |           | 507,295 |   |         |   | 514,998 |   |
| Less:                          |   |           |    |   |         |   |   |   |
| Allowance for loan losses      |   |           | 13,395  |   |         |   | 13,733 |   |
| Deferred costs                 |   |           | (194    | )      |         |   | (204 | ) |
| Purchased premiums             |   |           | (16     | )      |         |   | (24 | ) |
| Discount on SBA loans          |   |           | 508     |   |         |   | 627 |   |
| Loans held for investment, net |   | $              | 493,602 |   |         | $      | 500,866 |   |

----

Table of Contents

|                                       |   | Three Months Ended September 30, |   |   | Nine Months Ended September 30, |   |
|--------------------------------------------|--------|----------------------------------|--------|--------|---------------------------------|--------|
|                                       |   | 2010                             |   |   | 2009                            |   |   | 2010 |   |   | 2009 |   |
|                                       |   | (in thousands)                   |   |
| Balance, beginning of period               |   | $                                | 13,837 |   |                            | $      | 13,419 |   |   | $ | 13,733 |   |   | $ | 7,341 |   |
|                                       |   |                             |   |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Loans charged off                          |   |                             | (2,166 | )      |                            |   | (2,742 | ) |   |   | (8,250 | ) |   |   | (10,041 | ) |
| Recoveries on loans previously charged off |   |                             | 206    |   |                            |   | 5 |   |   |   | 448 |   |   |   | 84 |   |
| Net charge-offs                            |   |                             | (1,960 | )      |                            |   | (2,737 | ) |   |   | (7,802 | ) |   |   | (9,957 | ) |
|                                       |   |                             |   |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Provision for loan losses                  |   |                             | 1,518  |   |                            |   | 2,592 |   |   |   | 7,464 |   |   |   | 15,890 |   |
| Balance, end of period                     |   | $                                | 13,395 |   |                            | $      | 13,274 |   |   | $ | 13,395 |   |   | $ | 13,274 |   |

|                                                      |   | September 30,  |   |   | December 31, |   |
|-----------------------------------------------------------|--------|----------------|--------|--------|--------------|--------|
|                                                      |   | 2010           |   |   | 2009         |   |
|                                                      |   | (in thousands) |   |
| Impaired loans without specific valuation allowances      |   | $              | 12,498 |   |         | $      | 13,699 |   |
| Impaired loans with specific valuation allowances         |   |           | 3,538  |   |         |   | 716 |   |
| Specific valuation allowances allocated to impaired loans |   |           | (386   | )      |         |   | (622 | ) |
| Impaired loans, net                                       |   | $              | 15,650 |   |         | $      | 13,793 |   |

| The following schedule reflects the average investment in impaired loans: |   | Three Months Ended September 30, |   |   | Nine Months Ended September 30, |   |
|---------------------------------------------------------------------------|--------|----------------------------------|--------|--------|---------------------------------|--------|
|                                                                      |   | 2010                             |   |   | 2009                            |   |   | 2010 |   |   | 2009 |   |
|                                                                      |   | (in thousands)                   |   |
| Average investment in impaired loans                                      |   | $                                | 15,421 |   |                            | $      | 9,518 |   |   | $ | 15,860 |   |   | $ | 8,107 |   |
| Interest income recognized on impaired loans                              |   | $                                | 61     |   |                            | $      | 5 |   |   | $ | 276 |   |   | $ | 173 |   |

| 5. | FAIR VALUE MEASUREMENT |
|----|------------------------|

----

Table of Contents

|                                            |   | Fair value measurements at September 30, 2010 using |   |
|-------------------------------------------------|--------|-----------------------------------------------------|--------|
|                                            |   |                                                |   |   | Quoted prices in active markets for identical assets |   |   | Significant other observable inputs |   |   | Significant unobservable inputs |   |
| Description                                     |   | Total                                               |   |   | (Level 1) |   |   | (Level 2) |   |   | (Level 3) |   |
|                                            |   | (in thousands)                                      |   |
| Investment securities available-for-sale        |   | $                                                   | 22,652 |   |   | $ | - |   |   | $ | 22,652 |   |   | $ | - |   |
| Interest only strips (included in other assets) |   |                                                | 500    |   |   |   | - |   |   |   | - |   |   |   | 500 |   |
| Total                                           |   | $                                                   | 23,152 |   |   | $ | - |   |   | $ | 22,652 |   |   | $ | 500 |   |

|                                            |   | Fair value measurements at December 31, 2009 using |   |
|-------------------------------------------------|--------|----------------------------------------------------|--------|
|                                            |   |                                               |   |   | Quoted prices in active markets for identical assets |   |   | Significant other observable inputs |   |   | Significant unobservable inputs |   |
| Description                                     |   | Total                                              |   |   | (Level 1) |   |   | (Level 2) |   |   | (Level 3) |   |
|                                            |   | (in thousands)                                     |   |
| Investment securities available-for-sale        |   | $                                                  | 17,670 |   |   | $ | - |   |   | $ | 17,670 |   |   | $ | - |   |
| Interest only strips (included in other assets) |   |                                               | 623    |   |   |   | - |   |   |   | - |   |   |   | 623 |   |
| Total                                           |   | $                                                  | 18,293 |   |   | $ | - |   |   | $ | 17,670 |   |   | $ | 623 |   |

|           |   | Fair value measurements at September 30, 2010 using |   |
|----------------|--------|-----------------------------------------------------|--------|
|           |   |                                                |   |   | Quoted prices in active markets for identical assets |   |   | Significant other observable inputs |   |   | Significant unobservable inputs |   |
| Description    |   | Total                                               |   |   | (Level 1) |   |   | (Level 2) |   |   | (Level 3) |   |
|           |   | (in thousands)                                      |   |
| Impaired loans |   | $                                                   | 15,650 |   |   | $ | - |   |   | $ | 14,217 |   |   | $ | 1,433 |   |

|           |   | Fair value measurements at December 31, 2009 using |   |
|----------------|--------|----------------------------------------------------|--------|
|           |   |                                               |   |   | Quoted prices in active markets for identical assets |   |   | Significant other observable inputs |   |   | Significant unobservable inputs |   |
| Description    |   | Total                                              |   |   | (Level 1) |   |   | (Level 2) |   |   | (Level 3) |   |
|           |   | (in thousands)                                     |   |
| Impaired loans |   | $                                                  | 13,793 |   |   | $ | - |   |   | $ | 13,562 |   |   | $ | 231 |   |

----

Table of Contents

| 6. | BORROWINGS |
|----|------------|

| 7. | STOCKHOLDERS’ EQUITY |
|----|----------------------------|

----

Table of Contents

| 8. | EARNINGS PER SHARE |
|----|--------------------|

|                                                                   |   | Three Months Ended September 30,         |   |   | Nine Months Ended September 30, |   |
|------------------------------------------------------------------------|--------|------------------------------------------|--------|--------|---------------------------------|--------|
|                                                                   |   | 2010                                     |   |   | 2009                            |   |   | 2010 |   |   | 2009 |   |
|                                                                   |   | (in thousands, except per share amounts) |   |
| Net income (loss)                                                      |   | $                                        | 1,045  |   |                            | $      | 69 |   |   | $ | 1,034 |   |   | $ | (5,860 | ) |
| Less: Preferred stock dividends                                        |   |                                     | 261    |   |                            |   | 261 |   |   |   | 785 |   |   |   | 784 |   |
| Net income (loss) applicable to common shareholders                    |   | $                                        | 784    |   |                            | $      | (192 | ) |   | $ | 249 |   |   | $ | (6,644 | ) |
|                                                                   |   |                                     |   |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Add: Debenture interest expense and costs, net of income taxes         |   | $                                        | 65     |   |                            | $      | - |   |   | $ | - |   |   | $ | - |   |
| Net income for diluted calculation of earnings (loss) per common share |   | $                                        | 849    |   |                            | $      | (192 | ) |   | $ | 249 |   |   | $ | (6,644 | ) |
| Basic weighted average number of common shares outstanding             |   |                                     | 5,915  |   |                            |   | 5,915 |   |   |   | 5,915 |   |   |   | 5,915 |   |
| Add: Dilutive effect of convertible debentures                         |   |                                     | 1,331  |   |                            |   | - |   |   |   | - |   |   |   | - |   |
| Dilutive weighted average number of common shares outstanding          |   |                                     | 7,246  |   |                            |   | 5,915 |   |   |   | 5,915 |   |   |   | 5,915 |   |
| Earnings (loss) per common share:                                      |   |                                     |   |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                                  |   | $                                        | .13    |   |                            | $      | (.03 | ) |   | $ | .04 |   |   | $ | (1.12 | ) |
| Diluted                                                                |   | $                                        | .12    |   |                            | $      | (.03 | ) |   | $ | .04 |   |   | $ | (1.12 | ) |

| 9. | FAIR VALUES OF FINANCIAL INSTRUMENTS |
|----|--------------------------------------|

|                                             |   | September 30, 2010 |    |   | December 31, 2009    |   |
|--------------------------------------------------|--------|--------------------|---------|--------|----------------------|--------|
|                                             |   | Carrying Amount    |    |   | Estimated Fair Value |   |   | Carrying Amount |   |   | Estimated Fair Value |   |
|                                             |   | (in thousands)     |    |
| Assets:                                          |   |               |    |   |                 |   |   |   |   |   |   |   |
| Cash and cash equivalents                        |   | $                  | 12,322  |   |                 | $      | 12,322 |   |   | $ | 5,511 |   |   | $ | 5,511 |   |
| Time deposits in other financial institutions    |   |               | 475     |   |                 |   | 475 |   |   |   | 640 |   |   |   | 640 |   |
| Federal Reserve and Federal Home Loan Bank stock |   |               | 6,562   |   |                 |   | 6,562 |   |   |   | 6,982 |   |   |   | 6,982 |   |
| Investment securities                            |   |               | 39,186  |   |                 |   | 40,033 |   |   |   | 40,348 |   |   |   | 41,208 |   |
| Loans                                            |   |               | 587,245 |   |                 |   | 569,345 |   |   |   | 603,440 |   |   |   | 576,125 |   |
| Liabilities:                                     |   |               |    |   |                 |   |   |   |   |   |   |   |   |   |   |   |
| Deposits (other than time deposits)              |   |               | 304,564 |   |                 |   | 304,564 |   |   |   | 246,004 |   |   |   | 246,004 |   |
| Time deposits                                    |   |               | 231,109 |   |                 |   | 234,999 |   |   |   | 285,388 |   |   |   | 287,806 |   |
| Other borrowings and convertible debentures      |   |               | 76,085  |   |                 |   | 80,550 |   |   |   | 89,000 |   |   |   | 89,751 |   |

----

Table of Contents

| 10. | SUBSEQUENT EVENTS |
|-----|-------------------|

----

Table of Contents

| ITEM 2. | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
|---------|---------------------------------------------------------------------------------------|

|   | · | A decline in the provision for loan losses to $1.5 million for 3Q10 compared to $2.6 million for 3Q09, as net charge-offs declined to $2.0 million for 3Q10 compared to $2.7 million for 3Q09. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The decline in rates paid on funding sources contributed to a continued improvement in the margin which increased to 4.49% for 3Q10 compared to 4.12% for 3Q09. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Resulting from the improvement in margin, net interest income increased by $397,000 to $7.3 million for 3Q10 from $6.9 million for 3Q09. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Non-interest expenses experienced a modest decline for 3Q10 compared to 3Q09. |
|--------|--------|-------------------------------------------------------------------------------|

----

Table of Contents

|                                                           |   | Three Months EndedSeptember 30,                  |   |   |   Increase |   |
|----------------------------------------------------------------|--------|--------------------------------------------------|--------|--------|-----------------|--------|
|                                                           |   | 2010                                             |   |   | 2009            |   |   | (Decrease) |   |
|                                                           |   | (dollars in thousands, except per share amounts) |   |
| Interest income                                                |   | $                                                | 9,727  |   |            | $      | 10,378 |   |   | $ | (651 | ) |
| Interest expense                                               |   |                                             | 2,419  |   |            |   | 3,467 |   |   |   | (1,048 | ) |
| Net interest income                                            |   |                                             | 7,308  |   |            |   | 6,911 |   |   |   | 397 |   |
| Provision for loan losses                                      |   |                                             | 1,518  |   |            |   | 2,592 |   |   |   | (1,074 | ) |
| Net interest income  after provision for loan losses |   |                                             | 5,790  |   |            |   | 4,319 |   |   |   | 1,471 |   |
| Non-interest income                                            |   |                                             | 1,023  |   |            |   | 966 |   |   |   | 57 |   |
| Non-interest expenses                                          |   |                                             | 5,035  |   |            |   | 5,165 |   |   |   | (130 | ) |
| Income  before provision for income taxes            |   |                                             | 1,778  |   |            |   | 120 |   |   |   | 1,658 |   |
| Provision for income taxes                                     |   |                                             | 733    |   |            |   | 51 |   |   |   | 682 |   |
| Net income                                                     |   | $                                                | 1,045  |   |            | $      | 69 |   |   | $ | 976 |   |
| Preferred stock dividends                                      |   |                                             | 261    |   |            |   | 261 |   |   |   | - |   |
| Net income (loss) applicable to common shareholders            |   | $                                                | 784    |   |            | $      | (192 | ) |   | $ | 976 |   |
| Earnings (loss)  per common share:                   |   |                                             |   |   |            |   |   |   |   |   |   |   |
| Basic                                                          |   | $                                                | .13    |   |            | $      | (.03 | ) |   | $ | .16 |   |
| Diluted                                                        |   | $                                                | .12    |   |            | $      | (.03 | ) |   | $ | .15 |   |
| Dividends per common share                                     |   | $                                                | -      |   |            | $      | - |   |   | $ | - |   |
| Comprehensive  income                                |   | $                                                | 1,079  |   |            | $      | 63 |   |   | $ | 1,016 |   |

|                               |   | Three Months EndedSeptember 30, |           |
|------------------------------------|--------|---------------------------------|----------------|
|                               |   | 2010 versus 2009                |           |
|                               |   |                            | Total          |   |   |   |   Change due to |   |
|                               |   |                            | change         |   |   |   | Rate |   |   |   | Volume |   |
|                               |   |                            | (in thousands) |   |
| Loans, net                         |   | $                               | (514           | ) |   | $ | (410 | ) |   | $ | (104 | ) |
| Investment securities              |   |                            | (124           | ) |   |   | (103 | ) |   |   | (21 | ) |
| Other                              |   |                            | (13            | ) |   |   | (1 | ) |   |   | (12 | ) |
| Total interest-earning assets      |   |                            | (651           | ) |   |   | (514 | ) |   |   | (137 | ) |
|                               |   |                            |           |   |   |   |   |   |   |   |   |   |
| Deposits                           |   |                            | (760           | ) |   |   | (777 | ) |   |   | 17 |   |
| Other borrowings                   |   |                            | (288           | ) |   |   | 6 |   |   |   | (294 | ) |
| Total interest-bearing liabilities |   |                            | (1,048         | ) |   |   | (771 | ) |   |   | (277 | ) |
| Net interest income                |   | $                               | 397            |   |   | $ | 257 |   |   | $ | 140 |   |

----

Table of Contents

|                 |   |             |   |   | Three Months Ended September 30, 2010 |   |
|----------------------|--------|------------------|--------|--------|---------------------------------------|--------|
|                 |   |             |   |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                 |   | (in thousands)   |   |
|                 |   | Allowance6/30/10 |   |   | Provision                             |   |   | Charge-offs |   |   | Recoveries |   |   | Net Charge-offs |   |   | Allowance9/30/10 |   |
| Real estate          |   | $                | 2,540  |   |                                  | $      | 458 |   |   | $ | (445 | ) |   | $ | 8 |   |   | $ | (437 | ) |   | $ | 2,561 |   |
| Manufactured housing |   |             | 2,894  |   |                                  |   | 1,738 |   |   |   | (861 | ) |   |   | 38 |   |   |   | (823 | ) |   |   | 3,809 |   |
| Commercial           |   |             | 2,532  |   |                                  |   | (219 | ) |   |   | (100 | ) |   |   | 14 |   |   |   | (86 | ) |   |   | 2,227 |   |
| SBA                  |   |             | 5,303  |   |                                  |   | (413 | ) |   |   | (760 | ) |   |   | 143 |   |   |   | (617 | ) |   |   | 4,273 |   |
| Other installment    |   |             | 568    |   |                                  |   | (46 | ) |   |   | - |   |   |   | 3 |   |   |   | 3 |   |   |   | 525 |   |
| Total                |   | $                | 13,837 |   |                                  | $      | 1,518 |   |   | $ | (2,166 | ) |   | $ | 206 |   |   | $ | (1,960 | ) |   | $ | 13,395 |   |

----

Table of Contents

|                                                |   | Nine Months EndedSeptember 30,                   |   |   |   Increase |   |
|-----------------------------------------------------|--------|--------------------------------------------------|--------|--------|-----------------|--------|
|                                                |   | 2010                                             |   |   | 2009            |   |   | (Decrease) |   |
|                                                |   | (dollars in thousands, except per share amounts) |   |
| Interest income                                     |   | $                                                | 29,372 |   |            | $      | 30,795 |   |   | $ | (1,423 | ) |
| Interest expense                                    |   |                                             | 7,538  |   |            |   | 11,887 |   |   |   | (4,349 | ) |
| Net interest income                                 |   |                                             | 21,834 |   |            |   | 18,908 |   |   |   | 2,926 |   |
| Provision for loan losses                           |   |                                             | 7,464  |   |            |   | 15,890 |   |   |   | (8,426 | ) |
| Net interest income after provision for loan losses |   |                                             | 14,370 |   |            |   | 3,018 |   |   |   | 11,352 |   |
| Non-interest income                                 |   |                                             | 2,795  |   |            |   | 3,389 |   |   |   | (594 | ) |
| Non-interest expenses                               |   |                                             | 15,403 |   |            |   | 16,355 |   |   |   | (952 | ) |
| Income (loss) before provision for income taxes     |   |                                             | 1,762  |   |            |   | (9,948 | ) |   |   | 11,710 |   |
| Provision (benefit) for income taxes                |   |                                             | 728    |   |            |   | (4,088 | ) |   |   | 4,816 |   |
| Net income (loss)                                   |   | $                                                | 1,034  |   |            | $      | (5,860 | ) |   | $ | 6,894 |   |
| Preferred stock dividends                           |   |                                             | 785    |   |            |   | 784 |   |   |   | 1 |   |
| Net income (loss) applicable to common shareholders |   | $                                                | 249    |   |            | $      | (6,644 | ) |   | $ | 6,893 |   |
| Earnings (loss) per common share:                   |   |                                             |   |   |            |   |   |   |   |   |   |   |
| Basic                                               |   | $                                                | .04    |   |            | $      | (1.12 | ) |   | $ | 1.16 |   |
| Diluted                                             |   | $                                                | .04    |   |            | $      | (1.12 | ) |   | $ | 1.16 |   |
| Dividends per common share                          |   | $                                                | -      |   |            | $      | - |   |   | $ | - |   |
| Comprehensive  income (loss)              |   | $                                                | 1,044  |   |            | $      | (5,705 | ) |   | $ | 6,749 |   |

|                               |   | Nine Months Ended September 30, |           |
|------------------------------------|--------|---------------------------------|----------------|
|                               |   | 2010 versus 2009                |           |
|                               |   |                            | Total          |   |   |   | Change due to |   |
|                               |   |                            |  change   |   |   |   | Rate |   |   |   | Volume |   |
|                               |   |                            | (in thousands) |   |
| Loans, net                         |   | $                               | (1,155         | ) |   | $ | (1,082 | ) |   | $ | (73 | ) |
| Investment securities              |   |                            | (236           | ) |   |   | (227 | ) |   |   | (9 | ) |
| Other                              |   |                            | (32            | ) |   |   | (1 | ) |   |   | (31 | ) |
| Total interest-earning assets      |   |                            | (1,423         | ) |   |   | (1,310 | ) |   |   | (113 | ) |
|                               |   |                            |           |   |   |   |   |   |   |   |   |   |
| Deposits                           |   |                            | (3,041         | ) |   |   | (3,364 | ) |   |   | 323 |   |
| Other borrowings                   |   |                            | (1,308         | ) |   |   | (396 | ) |   |   | (912 | ) |
| Total interest-bearing liabilities |   |                            | (4,349         | ) |   |   | (3,760 | ) |   |   | (589 | ) |
| Net interest income                |   | $                               | 2,926          |   |   | $ | 2,450 |   |   | $ | 476 |   |

----

Table of Contents

|                 |   |              |   |   | Nine Months Ended September 30, 2010 |   |
|----------------------|--------|-------------------|--------|--------|--------------------------------------|--------|
|                 |   |              |   |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                 |   | (in thousands)    |   |
|                 |   | Allowance12/31/09 |   |   | Provision                            |   |   | Charge-offs |   |   | Recoveries |   |   | Net Charge-offs |   |   | Allowance9/30/10 |   |
| Real estate          |   | $                 | 3,012  |   |                                 | $      | 716 |   |   | $ | (1,178 | ) |   | $ | 11 |   |   | $ | (1,167 | ) |   | $ | 2,561 |   |
| Manufactured housing |   |              | 2,255  |   |                                 |   | 3,247 |   |   |   | (1,734 | ) |   |   | 41 |   |   |   | (1,693 | ) |   |   | 3,809 |   |
| Commercial           |   |              | 3,448  |   |                                 |   | (481 | ) |   |   | (828 | ) |   |   | 88 |   |   |   | (740 | ) |   |   | 2,227 |   |
| SBA                  |   |              | 4,801  |   |                                 |   | 3,345 |   |   |   | (4,151 | ) |   |   | 278 |   |   |   | (3,873 | ) |   |   | 4,273 |   |
| Other installment    |   |              | 217    |   |                                 |   | 637 |   |   |   | (359 | ) |   |   | 30 |   |   |   | (329 | ) |   |   | 525 |   |
| Total                |   | $                 | 13,733 |   |                                 | $      | 7,464 |   |   | $ | (8,250 | ) |   | $ | 448 |   |   | $ | (7,802 | ) |   | $ | 13,395 |   |

----

Table of Contents

|                                                       |   | Three Months Ended September 30, |    |   | Nine MonthsEnded September 30, |   |
|------------------------------------------------------------|--------|---------------------------------------|---------|--------|--------------------------------|--------|
|                                                       |   | 2010                                  |    |   | 2009                           |   |   | 2010 |   |   | 2009 |   |
| Interest-earning assets:                                   |   | (dollars in thousands)                |    |
| Interest-earning deposits in other financial institutions: |   |                                  |    |   |                           |   |   |   |   |   |   |   |
| Average balance                                            |   | $                                     | 578     |   |                           | $      | 1,078 |   |   | $ | 678 |   |   | $ | 1,095 |   |
| Interest income                                            |   |                                  | 5       |   |                           |   | 9 |   |   |   | 15 |   |   |   | 24 |   |
| Average yield                                              |   |                                  | 3.32    | %      |                           |   | 3.42 | % |   |   | 3.06 | % |   |   | 2.88 | % |
| Federal funds sold:                                        |   |                                  |    |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Average balance                                            |   | $                                     | 941     |   |                           | $      | 11,410 |   |   | $ | 2,021 |   |   | $ | 11,183 |   |
| Interest income                                            |   |                                  | 1       |   |                           |   | 10 |   |   |   | 5 |   |   |   | 28 |   |
| Average yield                                              |   |                                  | 0.30    | %      |                           |   | 0.33 | % |   |   | 0.31 | % |   |   | 0.34 | % |
| Investment securities:                                     |   |                                  |    |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Average balance                                            |   | $                                     | 44,013  |   |                           | $      | 46,380 |   |   | $ | 44,674 |   |   | $ | 45,027 |   |
| Interest income                                            |   |                                  | 328     |   |                           |   | 452 |   |   |   | 1,102 |   |   |   | 1,338 |   |
| Average yield                                              |   |                                  | 2.96    | %      |                           |   | 3.86 | % |   |   | 3.30 | % |   |   | 3.97 | % |
| Gross loans:                                               |   |                                  |    |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Average balance                                            |   | $                                     | 600,233 |   |                           | $      | 606,066 |   |   | $ | 604,514 |   |   | $ | 603,802 |   |
| Interest income                                            |   |                                  | 9,393   |   |                           |   | 9,907 |   |   |   | 28,250 |   |   |   | 29,405 |   |
| Average yield                                              |   |                                  | 6.21    | %      |                           |   | 6.49 | % |   |   | 6.25 | % |   |   | 6.51 | % |
| Total interest-earning assets:                             |   |                                  |    |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Average balance                                            |   | $                                     | 645,765 |   |                           | $      | 664,934 |   |   | $ | 651,887 |   |   | $ | 661,107 |   |
| Interest income                                            |   |                                  | 9,727   |   |                           |   | 10,378 |   |   |   | 29,372 |   |   |   | 30,795 |   |
| Average yield                                              |   |                                  | 5.98    | %      |                           |   | 6.19 | % |   |   | 6.02 | % |   |   | 6.23 | % |

| Interest-bearing liabilities:       |   |   |    |
|-------------------------------------|--------|--------|---------|
| Interest-bearing demand deposits:   |   |   |    |
| Average balance                     |   | $      | 236,786 |   |   | $ | 135,254 |   |   | $ | 224,989 |   |   | $ | 99,876 |   |
| Interest expense                    |   |   | 722     |   |   |   | 638 |   |   |   | 2,357 |   |   |   | 1,361 |   |
| Average cost of funds               |   |   | 1.21    | % |   |   | 1.87 | % |   |   | 1.40 | % |   |   | 1.82 | % |
| Savings deposits:                   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Average balance                     |   | $      | 18,963  |   |   | $ | 16,557 |   |   | $ | 19,316 |   |   | $ | 17,108 |   |
| Interest expense                    |   |   | 112     |   |   |   | 110 |   |   |   | 335 |   |   |   | 344 |   |
| Average cost of funds               |   |   | 2.35    | % |   |   | 2.64 | % |   |   | 2.32 | % |   |   | 2.69 | % |
| Time certificates of deposit:       |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Average balance                     |   | $      | 243,461 |   |   | $ | 314,663 |   |   | $ | 255,555 |   |   | $ | 339,125 |   |
| Interest expense                    |   |   | 978     |   |   |   | 1,824 |   |   |   | 3,137 |   |   |   | 7,165 |   |
| Average cost of funds               |   |   | 1.59    | % |   |   | 2.30 | % |   |   | 1.64 | % |   |   | 2.82 | % |
| Other borrowings:                   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Average balance                     |   | $      | 70,355  |   |   | $ | 112,005 |   |   | $ | 74,762 |   |   | $ | 117,077 |   |
| Interest expense                    |   |   | 501     |   |   |   | 895 |   |   |   | 1,603 |   |   |   | 3,017 |   |
| Average cost of funds               |   |   | 2.83    | % |   |   | 3.17 | % |   |   | 2.87 | % |   |   | 3.45 | % |
| Convertible debentures:             |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Average balance                     |   | $      | 4,694   |   |   |   | - |   |   | $ | 1,570 |   |   |   | - |   |
| Interest expense                    |   |   | 106     |   |   |   |   |   |   |   | 106 |   |   |   |   |   |
| Average cost of funds               |   |   | 9.0     | % |   |   | - |   |   |   | 9.0 | % |   |   | - |   |
| Total interest-bearing liabilities: |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Average balance                     |   | $      | 574,259 |   |   | $ | 578,479 |   |   | $ | 576,192 |   |   | $ | 573,186 |   |
| Interest expense                    |   |   | 2,419   |   |   |   | 3,467 |   |   |   | 7,538 |   |   |   | 11,887 |   |
| Average cost of funds               |   |   | 1.67    | % |   |   | 2.38 | % |   |   | 1.75 | % |   |   | 2.77 | % |
|                                |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income                 |   | $      | 7,308   |   |   | $ | 6,911 |   |   | $ | 21,834 |   |   | $ | 18,908 |   |
| Net interest spread                 |   |   | 4.30    | % |   |   | 3.81 | % |   |   | 4.27 | % |   |   | 3.46 | % |
| Net interest margin                 |   |   | 4.49    | % |   |   | 4.12 | % |   |   | 4.48 | % |   |   | 3.82 | % |

----

Table of Contents

|   | · | Average yields and rates are derived by dividing interest income by the average balances of interest-earning assets and by dividing interest expense by the average balances of interest-bearing liabilities for the periods indicated.  Amounts outstanding are averages of daily balances during the applicable periods. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Nonaccrual loans are included in the average balance of loans outstanding. |
|--------|--------|----------------------------------------------------------------------------|

|   | · | Net interest income is the difference between the interest and fees earned on loans and investments and the interest expense paid on deposits and other liabilities.  The amount by which interest income will exceed interest expense depends on the volume or balance of earning assets compared to the volume or balance of interest-bearing deposits and liabilities and the interest rate earned on those interest-earning assets compared to the interest rate paid on those interest-bearing liabilities. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Net interest margin is net interest income expressed as a percentage of average earning assets.  It is used to measure the difference between the average rate of interest earned on assets and the average rate of interest that must be paid on liabilities used to fund those assets.  To maintain its net interest margin, the Company must manage the relationship between interest earned and paid. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   Selected balance sheet accounts (dollars in thousands) |   | September 30,2010      |    |   | December 31, 2009 |   |    | Increase (Decrease) |   |   | Percent of Increase (Decrease) |   |
|--------------------------------------------------------------------|--------|------------------------|---------|--------|-------------------|--------|---------|---------------------|--------|--------|--------------------------------|--------|
|                                                               |   | (dollars in thousands) |    |
| Cash and cash equivalents                                          |   | $                      | 12,332  |   |              | $      | 5,511   |                |   | $      | 6,821                          |   |   |   | 123.8 | % |
| Investment securities available-for-sale                           |   |                   | 22,652  |   |              |   | 17,670  |                |   |   | 4,982                          |   |   |   | 28.2 | % |
| Investment securities held-to-maturity                             |   |                   | 16,534  |   |              |   | 22,678  |                |   |   | (6,144                         | )      |   |   | (27.1 | )% |
| Loans-held for sale                                                |   |                   | 93,643  |   |              |   | 102,574 |                |   |   | (8,931                         | )      |   |   | (8.7 | )% |
| Loans-held for investment, net                                     |   |                   | 493,602 |   |              |   | 500,866 |                |   |   | (7,264                         | )      |   |   | (1.5 | )% |
| Total assets                                                       |   |                   | 676,470 |   |              |   | 684,216 |                |   |   | (7,746                         | )      |   |   | (1.1 | )% |
|                                                               |   |                   |    |   |              |   |    |                |   |   |                           |   |   |   |   |   |
| Total deposits                                                     |   |                   | 535,673 |   |              |   | 531,392 |                |   |   | 4,281                          |   |   |   | 0.8 | % |
| Other borrowings                                                   |   |                   | 68,000  |   |              |   | 89,000  |                |   |   | (21,000                        | )      |   |   | (23.6 | )% |
| Convertible debentures                                             |   |                   | 8,085   |   |              |   | -       |                |   |   | 8,085                          |   |   |   | - |   |
|                                                               |   |                   |    |   |              |   |    |                |   |   |                           |   |   |   |   |   |
| Total stockholders' equity                                         |   |                   | 60,782  |   |              |   | 60,307  |                |   |   | 475                            |   |   |   | 0.8 | % |

|                                  |   | September 30, 2010 |    |   | December 31,2009 |   |    | Increase (Decrease) |   |   | Percent of Increase (Decrease) |   |
|---------------------------------------|--------|-------------------------|---------|--------|------------------|--------|---------|---------------------|--------|--------|--------------------------------|--------|
|                                  |   | (dollars in thousands)  |    |
| Non-interest-bearing deposits         |   | $                       | 39,140  |   |             | $      | 37,703  |                |   | $      | 1,437                          |   |   |   | 3.8 | % |
| Interest-bearing deposits             |   |                    | 246,576 |   |             |   | 191,905 |                |   |   | 54,671                         |   |   |   | 28.5 | % |
| Savings                               |   |                    | 18,848  |   |             |   | 16,396  |                |   |   | 2,452                          |   |   |   | 15.0 | % |
| Time certificates of $100,000 or more |   |                    | 170,130 |   |             |   | 173,594 |                |   |   | (3,464                         | )      |   |   | (2.0 | )% |
| Other time certificates               |   |                    | 60,979  |   |             |   | 111,794 |                |   |   | (50,815                        | )      |   |   | (45.5 | )% |
| Total deposits                        |   | $                       | 535,673 |   |             | $      | 531,392 |                |   | $      | 4,281                          |   |   |   | 0.8 | % |

----

Table of Contents

|                                                      |   | September 30,2010 |   |   | December 31,2009 |   |
|-----------------------------------------------------------|--------|-------------------|--------|--------|------------------|--------|
|                                                      |   | (in thousands)    |   |
| Impaired loans without specific valuation allowances      |   | $                 | 12,498 |   |             | $      | 13,699 |   |
| Impaired loans with specific valuation allowances         |   |              | 3,538  |   |             |   | 716 |   |
| Specific valuation allowances allocated to impaired loans |   |              | (386   | )      |             |   | (622 | ) |
| Impaired loans, net                                       |   | $                 | 15,650 |   |             | $      | 13,793 |   |

| The following schedule reflects the average investment in impaired loans: |   | Three Months Ended September 30, |   |   | Nine Months Ended September 30, |   |
|---------------------------------------------------------------------------|--------|----------------------------------|--------|--------|---------------------------------|--------|
|                                                                      |   | 2010                             |   |   | 2009                            |   |   | 2010 |   |   | 2009 |   |
|                                                                      |   | (in thousands)                   |   |
| Average investment in impaired loans                                      |   | $                                | 15,421 |   |                            | $      | 9,518 |   |   | $ | 15,860 |   |   | $ | 8,107 |   |
| Interest income recognized on impaired loans                              |   | $                                | 61     |   |                            | $      | 5 |   |   | $ | 276 |   |   | $ | 173 |   |

|                                                                    |   | September 30,2010      |    |   | December 31,2009 |   |
|-------------------------------------------------------------------------|--------|------------------------|---------|--------|------------------|--------|
|                                                                    |   | (dollars in thousands) |    |
| Nonaccrual loans                                                        |   | $                      | 38,997  |   |             | $      | 40,265 |   |
| SBA guaranteed portion of loans included above                          |   |                   | (23,893 | )      |             |   | (24,088 | ) |
| Nonaccrual loans, net                                                   |   | $                      | 15,104  |   |             | $      | 16,177 |   |
|                                                                    |   |                   |    |   |             |   |   |   |
| Troubled debt restructured loans, gross                                 |   | $                      | 5,803   |   |             | $      | 7,013 |   |
| Loans 30 through 89 days past due with interest accruing                |   | $                      | 4,879   |   |             | $      | 17,686 |   |
| Allowance for loan losses to gross loans (including loansheld for sale) |   |                   | 2.23    | %      |             |   | 2.23 | % |

----

Table of Contents

|                 |   | September 30, 2010     |   |   | December 31, 2009 |   |
|----------------------|--------|------------------------|--------|--------|-------------------|--------|
|                 |   | (dollars in thousands) |   |
|                 |   | Amount                 |   |   | Percent           |   |   | Amount |   |   | Percent |   |
| Commercial           |   | $                      | 915    |   |              |   | 6.1 | % |   | $ | 1,108 |   |   |   | 6.8 | % |
| Real estate          |   |                   | 7,220  |   |              |   | 47.8 | % |   |   | 6,443 |   |   |   | 39.8 | % |
| SBA                  |   |                   | 4,432  |   |              |   | 29.4 | % |   |   | 6,125 |   |   |   | 37.9 | % |
| Manufactured housing |   |                   | 2,406  |   |              |   | 15.9 | % |   |   | 2,105 |   |   |   | 13.0 | % |
| Other                |   |                   | 131    |   |              |   | .8 | % |   |   | 396 |   |   |   | 2.5 | % |
|                 |   | $                      | 15,104 |   |              |   | 100.0 | % |   | $ | 16,177 |   |   |   | 100.0 | % |

| Liquidity and Capital Resources |
|---------------------------------|

----

Table of Contents

|    | ● | Lag Risk – lag risk results from the inherent timing difference between the repricing of the Company’s adjustable rate assets and liabilities.  For instance, certain loans tied to the prime rate index may only reprice on a quarterly basis.  However, at a community bank such as CWB, when rates are rising, funding sources tend to reprice more slowly than the loans.  Therefore, for CWB, the effect of this timing difference is generally favorable during a period of rising interest rates and unfavorable during a period of declining interest rates.  This lag can produce some short-term volatility, particularly in times of numerous prime rate changes. |
|--------------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ● | Repricing Risk – repricing risk is caused by the mismatch in the maturities / repricing periods between interest-earning assets and interest-bearing liabilities.  If CWB was perfectly matched, the net interest margin would expand during rising rate periods and contract during falling rate periods.  This is so since loans tend to reprice more quickly than do funding sources.  Typically, since CWB is somewhat asset sensitive, this would also tend to expand the net interest margin during times of interest rate increases. |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ● | Basis Risk – item pricing tied to different indices may tend to react differently, however, all CWB’s variable products are priced off the prime rate. |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ● | Prepayment Risk – prepayment risk results from borrowers paying down / off their loans prior to maturity.  Prepayments on fixed-rate products increase in falling interest rate environments and decrease in rising interest rate environments.  Since a majority of CWB’s loan originations are adjustable rate and set based on prime, and there is little lag time on the reset, CWB does not experience significant prepayments.  However, CWB does have more prepayment risk on its securitized and manufactured housing loans and its mortgage-backed investment securities. |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Table of Contents

| (dollars in thousands)                |   | Total Capital |   |   | Tier 1 Capital |   |   | Risk-Weighted Assets |   |   | Adjusted Average Assets |   |   | Total Risk-Based Capital Ratio |    |   | Tier 1 Risk-Based Capital Ratio |   |   | Tier 1 Leverage Ratio |   |
|---------------------------------------|--------|---------------|--------|--------|----------------|--------|--------|----------------------|--------|--------|-------------------------|--------|--------|--------------------------------|---------|--------|---------------------------------|--------|--------|-----------------------|--------|
| (dollars in thousands)                |   |
| September 30, 2010                    |   |          |   |   |           |   |   |                 |   |   |                    |   |   |                           |    |   |                            |   |   |
| CWBC (Consolidated)                   |   | $             | 75,404 |   |           | $      | 60,513 |                 |   | $      | 537,675                 |   |   | $                              | 673,851 |   |                            |   | 14.02  | %                     |   |   | 11.25 | % |   |   | 8.98 | % |
| Capital in excess of well capitalized |   |          |   |   |           |   |   |                 |   |   |                    |   |   |                           |    |   |                            | $      | 21,637 |                  |   | $ | 28,253 |   |   | $ | 26,820 |   |
| CWB                                   |   |          | 68,063 |   |           |   | 61,253 |                 |   |   | 538,054                 |   |   |                           | 674,145 |   |                            |   | 12.65  | %                     |   |   | 11.38 | % |   |   | 9.09 | % |
| Capital in excess of well capitalized |   |          |   |   |           |   |   |                 |   |   |                    |   |   |                           |    |   |                            | $      | 14,258 |                  |   | $ | 28,970 |   |   | $ | 27,546 |   |
|                                  |   |          |   |   |           |   |   |                 |   |   |                    |   |   |                           |    |   |                            |   |   |                  |   |   |   |   |   |   |   |   |
| December 31, 2009                     |   |          |   |   |           |   |   |                 |   |   |                    |   |   |                           |    |   |                            |   |   |                  |   |   |   |   |   |   |   |   |
| CWBC (Consolidated)                   |   | $             | 66,984 |   |           | $      | 60,029 |                 |   | $      | 549,207                 |   |   | $                              | 681,101 |   |                            |   | 12.20  | %                     |   |   | 10.93 | % |   |   | 8.81 | % |
| Capital in excess of well capitalized |   |          |   |   |           |   |   |                 |   |   |                    |   |   |                           |    |   |                            | $      | 12,063 |                  |   | $ | 27,077 |   |   | $ | 25,974 |   |
| CWB                                   |   |          | 66,175 |   |           |   | 59,219 |                 |   |   | 549,240                 |   |   |                           | 681,129 |   |                            |   | 12.05  | %                     |   |   | 10.78 | % |   |   | 8.69 | % |
| Capital in excess of well capitalized |   |          |   |   |           |   |   |                 |   |   |                    |   |   |                           |    |   |                            | $      | 11,251 |                  |   | $ | 26,265 |   |   | $ | 25,163 |   |
|                                  |   |          |   |   |           |   |   |                 |   |   |                    |   |   |                           |    |   |                            |   |   |                  |   |   |   |   |   |   |   |   |
| Well capitalized ratios               |   |          |   |   |           |   |   |                 |   |   |                    |   |   |                           |    |   |                            |   | 10.00  | %                     |   |   | 6.00 | % |   |   | 5.00 | % |
|                                  |   |          |   |   |           |   |   |                 |   |   |                    |   |   |                           |    |   |                            |   |   |                  |   |   |   |   |   |   |   |   |
| Minimum capital ratios                |   |          |   |   |           |   |   |                 |   |   |                    |   |   |                           |    |   |                            |   | 8.00   | %                     |   |   | 4.00 | % |   |   | 4.00 | % |

----

Table of Contents

| Supervision and Regulation |
|----------------------------|

|   | · | The Dodd-Frank Acts establishes a new Financial Stability Oversight Counsel to monitor systemic financial risks.  The Board of Governors of the Federal Reserve is given extensive new authorities to impose strict controls on large bank holding companies with total consolidated assets equal to or in excess of $50 billion and systemically significant non-bank financial companies to limit the risk they might pose for the economy and to other large interconnected companies.  The Dodd-Frank Act also grants to the Treasury Department, FDIC and the FRB broad new powers to seize, close and wind-down “too big to fail” financial institutions (including non-bank institutions) in an orderly fashion. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The Dodd-Frank Act also establishes a new independent federal regulatory body for consumer protection within the Federal Reserve System known as the Bureau of Consumer Financial Protection (the “Bureau”), which will assume responsibility for most consumer protection laws.  It will also be in charge of setting appropriate consumer banking fees and caps.  The Bureau has examination and enforcement authority over all banks and savings institutions with more than $10 billion in assets.  Banks and savings institutions with $10 billion or less in assets will be examined by their applicable bank regulators. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The Dodd-Frank Act restricts the amount of trust preferred securities that may be considered as Tier 1 capital.  For depository institution holding companies below $15 billion in total assets, trust preferred securities issued before May 19, 2010 will be grandfathered, so their status as Tier 1 capital does not change.  However, going forward trust preferred securities will be disallowed as Tier 1 capital. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Table of Contents

|   | · | The Dodd-Frank Act effects changes in the FDIC assessment base with stricter oversight.  A new council of regulators led by the U.S. Treasury will set higher requirements for the amount of cash banks must keep on hand.  The minimum reserve ratio is to be increased from 1.15% to 1.35%; however, financial institutions with assets of less than $10 billion, like Community West Bancshares are to be exempt from the cost of the increase.  FDIC insurance coverage is made permanent at the $250 thousand level retroactive to January 1, 2008 and unlimited FDIC insurance is provided for non-interest-bearing demand deposits, which coverage will continue until December 31, 2013. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Under the Dodd-Frank Act, the Comptroller of the Currency’s ability to preempt state consumer protection laws was made more difficult by raising the applicable preemption standards and state attorneys general are granted greater authority to enforce state consumer protection laws against national banks and their operating subsidiaries. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The Dodd-Frank Act adopts the so-called “Volcker rule,” which, subject to certain exceptions, prohibits any banking entity from engaging in proprietary trading, or sponsoring or investing in a hedge fund or private equity fund. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ITEM 4. | CONTROLS AND PROCEDURES |
|---------|-------------------------|

| ITEM 1. | LEGAL PROCEEDINGS |
|---------|-------------------|

| ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
|---------|-------------------------------------------------------------|

| ITEM 3. | DEFAULTS UPON SENIOR SECURITIES |
|---------|---------------------------------|

----

Table of Contents

| ITEM 5. | OTHER INFORMATION |
|---------|-------------------|

| ITEM 6. | EXHIBITS |
|---------|----------|

|   | 31.1 | Certification of Chief Executive Officer of the Registrant pursuant to Rule 13a-14(a) or Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as amended. |
|--------|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 31.2 | Certification of Chief Financial Officer of the Registrant pursuant to Rule 13a-14(a) or Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as amended. |
|--------|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | *32.1 | Certification of Chief Executive Officer and Chief Financial Officer of the Registrant pursuant to Rule 13a-14(b) or Rule 15d-14(b), promulgated under the Securities Exchange Act of 1934, as amended, and 18 U.S.C. 1350. |
|--------|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | * | This certification is furnished to, but shall not be deemed filed with, the Commission.  This certification shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the Company specifically incorporates it by reference. |
|--------|---|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Table of Contents

SIGNATURES

|                    | COMMUNITY WEST BANCSHARES                  |
|-------------------------|--------------------------------------------|
|                    | (Registrant)                               |
|                    |                                       |
|                    |                                       |
| Date: November 12, 2010 | /s/Charles G. Baltuskonis                  |
|                    | Charles G. Baltuskonis                     |
|                    | Executive Vice President and               |
|                    | Chief Financial Officer                    |
|                    |                                       |
|                    | On Behalf of Registrant and as             |
|                    | Principal Financial and Accounting Officer |

----

Table of Contents

| ExhibitNumber                                                                                                                                                                                                                                                                                                                                           |   | Description of Document                                                                                                                                                                                                               |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                    |   |                                                                                                                                                                                                                                  |
| 31.1                                                                                                                                                                                                                                                                                                                                                    |   | Certification of Chief Executive Officer of the Registrant pursuant to Rule 13a-14(a) or Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as amended.                                                           |
|                                                                                                                                                                                                                                                                                                                                                    |   |                                                                                                                                                                                                                                  |
| 31.2                                                                                                                                                                                                                                                                                                                                                    |   | Certification of Chief Financial Officer of the Registrant pursuant to Rule 13a-14(a) or Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as amended.                                                           |
|                                                                                                                                                                                                                                                                                                                                                    |   |                                                                                                                                                                                                                                  |
| 32.1*                                                                                                                                                                                                                                                                                                                                                   |   | Certification of Chief Executive Officer and Chief Financial Officer of the Registrant pursuant to  Rule 13a-14(b) or Rule 15d-14(b), promulgated under the Securities Exchange Act of 1934, as amended, and 18 U.S.C.1350. |
|                                                                                                                                                                                                                                                                                                                                                    |   |                                                                                                                                                                                                                                  |
|                                                                                                                                                                                                                                                                                                                                                    |
| *This certification is furnished to, but shall not be deemed filed, with the Commission.  This certification shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the Registrant specifically incorporates it by reference. |

----