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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

Form 10-Q

(Mark One)



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

For the quarterly period ended September 30, 2006

OR



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

For the transition period from _____________ to _____________

Commission File No.:
333-126401

FCB BANCORP

(Exact Name of Registrant as Specified in its Charter)



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|California                                                     |  | 20-3074387                          
|(State or other jurisdiction of Incorporation or organization) |  | (I.R.S. Employer Identification No.)



|                                           |  |           
|------------------------------------------ |  | ----------
|1100 Paseo Camarillo Camarillo, California |  | 93010     
|(Address of principal executive offices)   |  | (Zip Code)

(805) 484-0534

(Registrants telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  þ    No ̈

Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer ̈Accelerated filer ̈Non-accelerated filer  þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ̈No  þ

Common Stock
 As of November 1, 2006 there were 3,277,807 shares of the issuers common stock outstanding.



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##### Table of Contents

TABLE OF CONTENTS



|                                                                                                                 |  |   
|---------------------------------------------------------------------------------------------------------------- |  | --
|PART I. FINANCIAL INFORMATION                                                                                    |  |   
|                                                                                                                 | 
|I
tem 1. Financial Statements                                                                                    |  | 3 
|                                                                                                                 | 
|Consolidated Balance Sheets at September 30, 2006 and December 31, 2005                                          |  | 3 
|                                                                                                                 | 
|Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2006 and 2005            |  | 4 
|                                                                                                                 | 
|Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2006 and 2005  |  | 5 
|                                                                                                                 | 
|Consolidated Statements of Changes in Shareholders Equity for the Nine Months Ended September 30, 2006 and 2005 |  | 5 
|                                                                                                                 | 
|Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2006 and 2005                      |  | 6 
|                                                                                                                 | 
|Notes to Consolidated Financial Statements                                                                       |  | 7 
|                                                                                                                 | 
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations                    |  | 13
|                                                                                                                 | 
|Item 3. Quantitative and Qualitative Disclosures about Market Risk                                               |  | 33
|                                                                                                                 | 
|Item 4. Controls and Procedures                                                                                  |  | 34
|                                                                                                                 | 
|PART II. OTHER INFORMATION                                                                                       |  |   
|                                                                                                                 | 
|Item 1. Legal proceedings                                                                                        |  | 34
|                                                                                                                 | 
|Item 1A. Risk factors                                                                                            |  | 34
|                                                                                                                 | 
|Item 2. Unregistered Sales of Equity Securities and Use of Proceeds                                              |  | 34
|                                                                                                                 | 
|Item 3. Defaults Upon Senior Securities                                                                          |  | 34
|                                                                                                                 | 
|Item 4. Submission of Matters to a Vote of Security Holders                                                      |  | 34
|                                                                                                                 | 
|Item 5. Other Information                                                                                        |  | 34
|                                                                                                                 | 
|Item 6. Exhibits                                                                                                 |  | 34
|                                                                                                                 | 
|SIGNATURES                                                                                                       |  | 35



2



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##### Table of Contents

PART 1. FINANCIAL INFORMATION



|ITEM 1. | FINANCIAL INFORMATION
|------- | ---------------------

FCB BANCORP
and subsidiaries

Consolidated balance sheets



|                                                                                                                                        |  |                   |         |   |                  |   |         |  
|--------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ------- | - | ---------------- | - | ------- | -
|                                                                                                                                        |  | September 30,2006 |         |   | December 31,2005 |  
|(in thousands, except share data)                                                                                                       |  |                   |         |   |                  |  
|Cash and due from banks                                                                                                                 |  | $                 | 11,754  |   |                  | $ | 14,435  |  
|Federal funds sold                                                                                                                      |  |                   |        |   |                  |   | 306     |  
|Securities available-for-sale                                                                                                           |  |                   | 65,709  |   |                  |   | 73,419  |  
|Loans, net                                                                                                                              |  |                   | 350,908 |   |                  |   | 338,778 |  
|Loans held for sale                                                                                                                     |  |                   | 29,675  |   |                  |   |        |  
|Premises and equipment, net                                                                                                             |  |                   | 10,239  |   |                  |   | 10,315  |  
|Goodwill and other intangibles                                                                                                          |  |                   | 17,393  |   |                  |   | 16,951  |  
|Federal Home Loan Bank stock                                                                                                            |  |                   | 2,572   |   |                  |   | 2,395   |  
|Cash surrender value of life insurance                                                                                                  |  |                   | 10,424  |   |                  |   | 5,171   |  
|Accrued interest receivable and other assets                                                                                            |  |                   | 3,877   |   |                  |   | 5,341   |  
|                                                                                                                                        |  |                   |         |   |                  |   |         |  
|Total assets                                                                                                                            |  | $                 | 502,551 |   |                  | $ | 467,111 |  
|                                                                                                                                        |  |                   |         |   |                  |   |         |  
|Checking                                                                                                                                |  | $                 | 100,542 |   |                  | $ | 112,596 |  
|Interest checking                                                                                                                       |  |                   | 19,043  |   |                  |   | 23,691  |  
|Savings                                                                                                                                 |  |                   | 82,641  |   |                  |   | 79,273  |  
|Certificates of deposit, under $100,000                                                                                                 |  |                   | 88,784  |   |                  |   | 82,770  |  
|Certificates of deposit, $100,000 and over                                                                                              |  |                   | 99,523  |   |                  |   | 74,018  |  
|                                                                                                                                        |  |                   |         |   |                  |   |         |  
|Total deposits                                                                                                                          |  |                   | 390,533 |   |                  |   | 372,348 |  
|Federal Home Loan Bank advances                                                                                                         |  |                   | 50,111  |   |                  |   | 36,319  |  
|Junior subordinated debentures                                                                                                          |  |                   | 10,310  |   |                  |   | 10,310  |  
|Accrued interest payable and other liabilities                                                                                          |  |                   | 2,138   |   |                  |   | 2,355   |  
|                                                                                                                                        |  |                   |         |   |                  |   |         |  
|Total liabilities                                                                                                                       |  |                   | 453,092 |   |                  |   | 421,332 |  
|                                                                                                                                        |  |                   |         |   |                  |   |         |  
|Common stock, no par value, 10,000,000 authorized; shares issued and outstanding: 3,277,807 at September 30, 2006 and December 31,
2005 |  |                   | 32,732  |   |                  |   | 32,666  |  
|Retained earnings                                                                                                                       |  |                   | 17,448  |   |                  |   | 14,063  |  
|Accumulated other comprehensive loss                                                                                                    |  |                   | (721    | ) |                  |   | (950    | )
|                                                                                                                                        |  |                   |         |   |                  |   |         |  
|Total shareholders equity                                                                                                              |  |                   | 49,459  |   |                  |   | 45,779  |  
|                                                                                                                                        |  |                   |         |   |                  |   |         |  
|Total liabilities and shareholders equity                                                                                              |  | $                 | 502,551 |   |                  | $ | 467,111 |  
|                                                                                                                                        |  |                   |         |   |                  |   |         |  

See accompanying notes.



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FCB BANCORP and subsidiaries

Consolidated statements of operations



|                                                             |  |                                  |       |                                |      |   |       |  |   |        |   |  |   |       
|------------------------------------------------------------ |  | -------------------------------- | ----- | ------------------------------ | ---- | - | ----- |  | - | ------ | - |  | - | ------
|                                                             |  | Three Months Ended September 30, |       | Nine Months EndedSeptember 30,
|                                                             |  | 2006                             |       |                                | 2005 |   | 2006  |  |   | 2005  
|(in thousands, except per share data)                        |  |                                  |       |                                |      |   |       |  |   |       
|Interest and fees on loans                                   |  | $                                | 7,981 |                                |      | $ | 3,804 |  | $ | 22,132 |   |  | $ | 10,128
|Taxable interest on securities                               |  |                                  | 536   |                                |      |   | 547   |  |   | 1,707  |   |  |   | 1,716 
|Nontaxable interest on securities                            |  |                                  | 123   |                                |      |   | 86    |  |   | 313    |   |  |   | 234   
|Interest on federal funds sold                               |  |                                  | 8     |                                |      |   | 9     |  |   | 170    |   |  |   | 77    
|                                                             |  |                                  |       |                                |      |   |       |  |   |        |   |  |   |       
|Total interest income                                        |  |                                  | 8,648 |                                |      |   | 4,446 |  |   | 24,322 |   |  |   | 12,155
|                                                             |  |                                  |       |                                |      |   |       |  |   |        |   |  |   |       
|Interest on deposits                                         |  |                                  | 2,614 |                                |      |   | 600   |  |   | 6,887  |   |  |   | 1,456 
|Interest on borrowings                                       |  |                                  | 739   |                                |      |   | 279   |  |   | 1,654  |   |  |   | 670   
|                                                             |  |                                  |       |                                |      |   |       |  |   |        |   |  |   |       
|Total interest expense                                       |  |                                  | 3,353 |                                |      |   | 879   |  |   | 8,541  |   |  |   | 2,126 
|                                                             |  |                                  |       |                                |      |   |       |  |   |        |   |  |   |       
|Net interest income                                          |  |                                  | 5,295 |                                |      |   | 3,567 |  |   | 15,781 |   |  |   | 10,029
|Provision (credit) for loan losses                           |  |                                  | (450  | )                              |      |   | 122   |  |   | (297   | ) |  |   | 366   
|                                                             |  |                                  |       |                                |      |   |       |  |   |        |   |  |   |       
|Net interest income after provision (credit) for loan losses |  |                                  | 5,745 |                                |      |   | 3,445 |  |   | 16,078 |   |  |   | 9,663 
|                                                             |  |                                  |       |                                |      |   |       |  |   |        |   |  |   |       
|Service charges on deposit accounts                          |  |                                  | 281   |                                |      |   | 290   |  |   | 791    |   |  |   | 839   
|Earnings on cash surrender value of life insurance           |  |                                  | 112   |                                |      |   | 57    |  |   | 319    |   |  |   | 168   
|Commissions on brokered loans                                |  |                                  | 16    |                                |      |   | 49    |  |   | 63     |   |  |   | 139   
|Net gain on sales of loans                                   |  |                                  | 73    |                                |      |   | 20    |  |   | 106    |   |  |   | 98    
|Net servicing fees                                           |  |                                  | 16    |                                |      |   | 15    |  |   | 41     |   |  |   | 36    
|Net gain (loss) on sales of securities                       |  |                                  |      |                                |      |   |      |  |   | (20    | ) |  |   | 2     
|Other income                                                 |  |                                  | 135   |                                |      |   | 77    |  |   | 387    |   |  |   | 169   
|                                                             |  |                                  |       |                                |      |   |       |  |   |        |   |  |   |       
|Total noninterest income                                     |  |                                  | 633   |                                |      |   | 508   |  |   | 1,687  |   |  |   | 1,451 
|                                                             |  |                                  |       |                                |      |   |       |  |   |        |   |  |   |       
|Salaries and employee benefits                               |  |                                  | 2,361 |                                |      |   | 1,521 |  |   | 6,919  |   |  |   | 4,541 
|Premises and equipment                                       |  |                                  | 668   |                                |      |   | 445   |  |   | 1,927  |   |  |   | 1,220 
|Data processing                                              |  |                                  | 198   |                                |      |   | 145   |  |   | 568    |   |  |   | 418   
|Legal, audit, and other professional services                |  |                                  | 355   |                                |      |   | 116   |  |   | 755    |   |  |   | 377   
|Printing, stationary, and supplies                           |  |                                  | 70    |                                |      |   | 39    |  |   | 214    |   |  |   | 133   
|Telephone                                                    |  |                                  | 66    |                                |      |   | 39    |  |   | 206    |   |  |   | 111   
|Directors fees                                              |  |                                  | 33    |                                |      |   | 33    |  |   | 99     |   |  |   | 99    
|Advertising and marketing                                    |  |                                  | 223   |                                |      |   | 79    |  |   | 556    |   |  |   | 288   
|Postage                                                      |  |                                  | 34    |                                |      |   | 20    |  |   | 83     |   |  |   | 48    
|Other expenses                                               |  |                                  | 336   |                                |      |   | 290   |  |   | 1,064  |   |  |   | 708   
|                                                             |  |                                  |       |                                |      |   |       |  |   |        |   |  |   |       
|Total noninterest expense                                    |  |                                  | 4,344 |                                |      |   | 2,727 |  |   | 12,391 |   |  |   | 7,943 
|                                                             |  |                                  |       |                                |      |   |       |  |   |        |   |  |   |       
|Income before provision for income taxes                     |  |                                  | 2,034 |                                |      |   | 1,226 |  |   | 5,374  |   |  |   | 3,171 
|Provision for income taxes                                   |  |                                  | 732   |                                |      |   | 464   |  |   | 1,989  |   |  |   | 1,203 
|                                                             |  |                                  |       |                                |      |   |       |  |   |        |   |  |   |       
|Net income                                                   |  | $                                | 1,302 |                                |      | $ | 762   |  | $ | 3,385  |   |  | $ | 1,968 
|                                                             |  |                                  |       |                                |      |   |       |  |   |        |   |  |   |       
|Earnings per share                                           |  |                                  |       |                                |      |   |       |  |   |        |   |  |   |       
|Basic                                                        |  | $                                | 0.40  |                                |      | $ | 0.35  |  | $ | 1.03   |   |  | $ | 0.91  
|Diluted                                                      |  | $                                | 0.39  |                                |      | $ | 0.35  |  | $ | 1.03   |   |  | $ | 0.90  

See accompanying notes.



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FCB BANCORP and subsidiaries

Consolidated statements of comprehensive income



|                                                                                             |  |                                 |       |   |                                |   |      |      |  |   |       |   |  |   |       |  
|-------------------------------------------------------------------------------------------- |  | ------------------------------- | ----- | - | ------------------------------ | - | ---- | ---- |  | - | ----- | - |  | - | ----- | -
|                                                                                             |  | Three Months EndedSeptember 30, |       |   | Nine Months EndedSeptember 30, |  
|(in thousands)                                                                               |  | 2006                            |       |   | 2005                           |   |      | 2006 |  |   | 2005  |  
|Unrealized holding gains (losses) on securities available-for-sale arising during the period |  | $                               | 1,164 |   |                                | $ | (286 | )    |  | $ | 369   |   |  | $ | (431  | )
|Reclassification adjustments for (gains) losses included in net income                       |  |                                 |      |   |                                |   |     |      |  |   | 20    |   |  |   | (2    | )
|                                                                                             |  |                                 |       |   |                                |   |      |      |  |   |       |   |  |   |       |  
|Other comprehensive income (loss), before taxes                                              |  |                                 | 1,164 |   |                                |   | (286 | )    |  |   | 389   |   |  |   | (433  | )
|Income tax (expense) benefit related to items of other comprehensive income                  |  |                                 | (478  | ) |                                |   | 115  |      |  |   | (160  | ) |  |   | 175   |  
|                                                                                             |  |                                 |       |   |                                |   |      |      |  |   |       |   |  |   |       |  
|Other comprehensive income (loss), net of tax                                                |  |                                 | 686   |   |                                |   | (171 | )    |  |   | 229   |   |  |   | (258  | )
|Net income                                                                                   |  |                                 | 1,302 |   |                                |   | 762  |      |  |   | 3,385 |   |  |   | 1,968 |  
|                                                                                             |  |                                 |       |   |                                |   |      |      |  |   |       |   |  |   |       |  
|Comprehensive income                                                                         |  | $                               | 1,988 |   |                                | $ | 591  |      |  | $ | 3,614 |   |  | $ | 1,710 |  
|                                                                                             |  |                                 |       |   |                                |   |      |      |  |   |       |   |  |   |       |  

Consolidated statements of changes in shareholders equity



|                                                                   |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|------------------------------------------------------------------ |  | ------------------------------- | ------ | - | ------------------------------ | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                                                   |  | Three Months EndedSeptember 30, |        |   | Nine Months EndedSeptember 30, |  
|(in thousands)                                                     |  | 2006                            |        |   | 2005                           |   |        | 2006 |  |   | 2005   |  
|Common stock                                                       |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|Common stock, beginning of period                                  |  | $                               | 32,707 |   |                                | $ | 11,965 |      |  | $ | 32,666 |   |  | $ | 11,965 |  
|Share-based compensation                                           |  |                                 | 25     |   |                                |   |       |      |  |   | 66     |   |  |   |       |  
|                                                                   |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|Common stock, end of period                                        |  | $                               | 32,732 |   |                                | $ | 11,965 |      |  | $ | 32,732 |   |  | $ | 11,965 |  
|                                                                   |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|Retained earnings                                                  |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|Net income                                                         |  | $                               | 1,302  |   |                                | $ | 762    |      |  | $ | 3,385  |   |  | $ | 1,968  |  
|Retained earnings, beginning of period                             |  |                                 | 16,146 |   |                                |   | 12,045 |      |  |   | 14,063 |   |  |   | 10,839 |  
|                                                                   |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|Retained earnings, end of period                                   |  | $                               | 17,448 |   |                                | $ | 12,807 |      |  | $ | 17,448 |   |  | $ | 12,807 |  
|                                                                   |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|Accumulated other comprehensive income (loss)                      |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|Accumulated other comprehensive income (loss)                      |  | $                               | 686    |   |                                | $ | (171   | )    |  | $ | 229    |   |  | $ | (258   | )
|Accumulated other comprehensive income (loss), beginning of period |  |                                 | (1,407 | ) |                                |   | (346   | )    |  |   | (950   | ) |  |   | (259   | )
|                                                                   |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|Accumulated other comprehensive income (loss), end of period       |  | $                               | (721   | ) |                                | $ | (517   | )    |  | $ | (721   | ) |  | $ | (517   | )
|                                                                   |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  

See accompanying notes.



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FCB BANCORP and subsidiaries

Consolidated statements of cash flows



|                                                                               |  |                                |         |   |      |   |         |  
|------------------------------------------------------------------------------ |  | ------------------------------ | ------- | - | ---- | - | ------- | -
|                                                                               |  | Nine Months EndedSeptember 30, |        
|(in thousands)                                                                 |  | 2006                           |         |   | 2005 |  
|Net income                                                                     |  | $                              | 3,385   |   |      | $ | 1,968   |  
|Adjustments to reconcile net income to net cash from operating activities:     |  |                                |         |   |      |   |         |  
|Realized net gains on sale of securities and loans                             |  |                                | (86     | ) |      |   | (100    | )
|Net amortization of premiums and discounts on securities available-for-sale    |  |                                | 51      |   |      |   | 280     |  
|Federal Home Loan Bank stock dividends                                         |  |                                | (88     | ) |      |   | (43     | )
|Provision (credit) for loan losses                                             |  |                                | (297    | ) |      |   | 366     |  
|Share-based compensation                                                       |  |                                | 66      |   |      |   |        |  
|Origination of loans held for sale                                             |  |                                | (29,675 | ) |      |   |        |  
|Deferred income taxes                                                          |  |                                | 953     |   |      |   | 183     |  
|Depreciation and amortization                                                  |  |                                | 538     |   |      |   | 376     |  
|Net appreciation in cash surrender value of life insurance                     |  |                                | (319    | ) |      |   | (168    | )
|Change in accrued interest receivable and other assets                         |  |                                | (91     | ) |      |   | (291    | )
|Change in accrued interest payable and other liabilities                       |  |                                | (151    | ) |      |   | 1,185   |  
|                                                                               |  |                                |         |   |      |   |         |  
|Net cash (used for) from operating activities                                  |  |                                | (25,714 | ) |      |   | 3,756   |  
|                                                                               |  |                                |         |   |      |   |         |  
|Net change in federal funds sold                                               |  |                                | 306     |   |      |   | 3,200   |  
|Proceeds from maturities, calls, and paydowns of securities available-for-sale |  |                                | 13,194  |   |      |   | 12,112  |  
|Proceeds from sales of securities available-for-sale                           |  |                                | 2,998   |   |      |   | 774     |  
|Purchases of securities available-for-sale                                     |  |                                | (8,164  | ) |      |   | (6,516  | )
|Purchases of Federal Home Loan Bank stock                                      |  |                                | (89     | ) |      |   | (337    | )
|Net increase in loans                                                          |  |                                | (18,555 | ) |      |   | (23,922 | )
|Net decrease from sale of loans                                                |  |                                | 6,828   |   |      |   |        |  
|Cash paid, net of cash received for net assets of bank subsidiary              |  |                                |        |   |      |   | (29,585 | )
|Purchases of premises and equipment                                            |  |                                | (462    | ) |      |   | (1,666  | )
|Purchases of life insurance                                                    |  |                                | (4,934  | ) |      |   |        |  
|                                                                               |  |                                |         |   |      |   |         |  
|Net cash used for investing activities                                         |  |                                | (8,878  | ) |      |   | (45,940 | )
|                                                                               |  |                                |         |   |      |   |         |  
|Net increase in deposits                                                       |  |                                | 18,185  |   |      |   | 6,252   |  
|Net change in FHLB overnight advances                                          |  |                                | 14,981  |   |      |   | 24,516  |  
|Proceeds from FHLB term advances                                               |  |                                | 10,000  |   |      |   | 5,000   |  
|Payments on FHLB term advances                                                 |  |                                | (11,189 | ) |      |   | (14,800 | )
|Share-based compensation                                                       |  |                                | (66     | ) |      |   |        |  
|Proceeds from issuance of junior subordinated debentures                       |  |                                |        |   |      |   | 10,310  |  
|Proceeds from issuance of common stock                                         |  |                                |        |   |      |   | 20,701  |  
|                                                                               |  |                                |         |   |      |   |         |  
|Net cash from financing activities                                             |  |                                | 31,911  |   |      |   | 51,979  |  
|                                                                               |  |                                |         |   |      |   |         |  
|Change in cash and due from banks                                              |  | $                              | (2,681  | ) |      | $ | 9,795   |  
|Cash and due from banks, beginning of period                                   |  |                                | 14,435  |   |      |   | 7,194   |  
|                                                                               |  |                                |         |   |      |   |         |  
|Cash and due from banks, end of period                                         |  | $                              | 11,754  |   |      | $ | 16,989  |  
|                                                                               |  |                                |         |   |      |   |         |  
|Supplemental cash flow information:                                            |  |                                |         |   |      |   |         |  
|Cash paid for interest                                                         |  | $                              | 2,403   |   |      | $ | 1,965   |  
|Cash paid for income taxes                                                     |  | $                              | 1,316   |   |      | $ | 1,037   |  
|Supplemental disclosure of noncash investing activities                        |  |                                |         |   |      |   |         |  
|Change in fair value of securities available-for-sale, net of taxes            |  | $                              | 229     |   |      | $ | (258    | )
|Non-cash increase of goodwill                                                  |  | $                              | 494     |   |      | $ | 16,341  |  

See accompanying notes.



6



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##### Table of Contents

NOTE 1  BASIS OF PRESENTATION AND MANAGEMENT REPRESENTATION

Organization and nature of operations
- FCB Bancorp is a bank holding company arising from a transaction in which the shareholders of First California Bank exchanged their common stock for that of FCB Bancorp on a share-for-share basis on September 30, 2005. As a result of that
transaction First California Bank became a wholly-owned subsidiary of FCB Bancorp. FCB Bancorp and First California Bank are related entities; accordingly, the consolidated financial position and results of operations as of and for the year ended
December 31, 2005 and all other prior periods have been restated to reflect the combined entities.

The accompanying unaudited
consolidated financial statements for FCB Bancorp and subsidiaries include the parent company, FCB Bancorp (FCB), and its wholly-owned subsidiaries, First California Bank (the Bank), and SC Financial (all collectively
referred to as the Company). SC Financial is an inactive subsidiary and FCB Statutory Trust I, an unconsolidated wholly-owned subsidiary, is a special purpose entity formed to issue trust preferred securities and related junior
subordinated debentures. First California Bank is a commercial bank doing business primarily in Ventura, Orange and Los Angeles Counties, California.

Consolidation The consolidated financial statements include, in conformity with generally accepted accounting principles, the accounts of FCB and the Bank and exclude the accounts of FCB Statutory Trust
I. All material intercompany transactions and balances of FCB and the Bank have been eliminated.

Basis of presentation These
unaudited consolidated financial statements should be read in conjunction with our audited consolidated financial statements and related notes for the year ended December 31, 2005. A summary of our significant accounting policies is included in
the notes that accompany the audited consolidated financial statements. These unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America on a basis
consistent with the accounting policies reflected in the audited consolidated financial statements for the year ended December 31, 2005. They do not, however, include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of management, all adjustments, including normal recurring accruals considered necessary for a fair presentation, have been included. Operating results for the interim periods
presented are not necessarily indicative of the results that may be expected for any other interim period or for the year as a whole.

Managements estimates and assumptions  The preparation of the consolidated financial statements, in conformity with generally accepted accounting principles, requires us to make estimates and assumptions that affect the
reported amounts of assets and liabilities as of the date of the balance sheets, and revenues and expenses for the reporting period. Actual results could differ significantly from those estimates. Significant estimations made by us primarily involve
the calculation of the allowance for loan losses, the carrying amount of goodwill and deferred tax assets or liabilities.

NOTE 2  STOCK-BASED
COMPENSATION

Statement of Financial Accounting Standards (SFAS) No. 123 (Revised 2004) Share-Based Payments addresses
the accounting for transactions in which an entity exchanges its equity instruments for goods and services. We adopted this standard on January 1, 2006.

SFAS No. 123R eliminated the ability to account for grants under our stock option plans using the intrinsic value-based method. The intrinsic value-based method recognized compensation cost as the difference
between the exercise price of each option and the market price of our stock at the date of each grant. The exercise price of each of our stock options was equal to the market price of our stock at each date of grant. Before 2006, no compensation
cost was recognized.

On January 1, 2006, using the modified-prospective method in adoption, we began determining compensation costs
using the fair-value method as provided for under SFAS No. 123R. The modified-prospective method of adoption requires the recognition of compensation cost using the fair-value method for all new grants after 2005 or for any grants modified,
repurchased or cancelled after 2005. For grants prior to 2006, the modified-prospective method of adoption requires the recognition of compensation cost for the portion of grants not yet vested based on the fair-value of the grant as was disclosed
in our prior year consolidated financial statements.

We use the Black-Scholes-Merton formula to determine the fair value of our stock
options using the following estimates and assumptions. The fair value of the option at the grant date also follows.



7



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##### Table of Contents

|                        |  |            |           |   |            |   |           |            |  |   |            |   |  |   |           |  
|----------------------- |  | ---------- | --------- | - | ---------- | - | --------- | ---------- |  | - | ---------- | - |  | - | --------- | -
|                        |  | 2003 Grant |           |   | 2004 Grant |   |           | 2005 Grant |  |   | 2006 Grant |  
|Expected option term    |  |            | 6.0 years |   |            |   | 6.0 years |            |  |   | 6.0 years  |   |  |   | 5.2 years |  
|Expected volatility     |  |            | Nil       |   |            |   | Nil       |            |  |   | Nil        |   |  |   | 5.71      | %
|Expected dividend yield |  |            | 0         | % |            |   | 0         | %          |  |   | 0          | % |  |   | 0         | %
|Risk-free interest rate |  |            | 2.87      | % |            |   | 3.95      | %          |  |   | 4.50       | % |  |   | 4.59      | %
|Stock option fair value |  | $          | 1.77      |   |            | $ | 4.24      |            |  | $ | 4.92       |   |  | $ | 4.49      |  

Our only stock option plan began in 2003 and we consider our options to be plain
vanilla. None of our options have vested. We used the simplified method to determine the expected term of the 2006 stock option grant which is the average of the sum of the contractual period and the average vesting period. We
looked to our 5-year historical volatility for our expected volatility because we believe that our historical period reflects our business strategy of de novo branch expansion and acquisition and we do not anticipate at this time that our strategy
or business model will differ in the future. We used the minimum value method for options granted before 2006. We have not paid dividends for the past several years and our business strategy does not anticipate that we will do so in the
future. The risk-free rate for the contractual term of the options was based on the prevailing U.S. treasury strip rate in effect at the date of grant.

Our shareholder approved stock option plan permits the grant of up to 200,000 shares of common stock to directors, officers and key employees of FCB or the Bank. Option awards are granted with an exercise price equal
to the market price of our stock at the grant date. Option awards vest based on 3 to 5 years of continuous service and have contractual terms from 6 to 8 years.

No options vested during the nine months ended September 30, 2006. The following table is a summary of our options activity:



|                              |  |         |   |  |                                 |      
|----------------------------- |  | ------- | - |  | ------------------------------- | -----
|Options                       |  | Shares  |   |  | Weighted average exercise price
|Balance, beginning of year    |  | 119,500 |   |  | $                               | 17.64
|Issued                        |  | 40,600  |   |  |                                 | 21.00
|Exercised                     |  |        |   |  |                                 |     
|Cancelled, forfeited, expired |  | (3,400  | ) |  |                                 | 20.81
|                              |  |         |   |  |                                 |      
|Balance, end of period        |  | 156,700 |   |  | $                               | 18.51
|                              |  |         |   |  |                                 |      

The weighted average grant date fair value of options outstanding was $3.70 at December 31,
2005 and $3.89 at September 30, 2006. The intrinsic value was $544,000 at September 30, 2006. Compensation cost for the three and nine months ended September 30, 2006 was $25,000 and $66,000, respectively. Unrecognized compensation
cost at September 30, 2006 was $312,000 and the weighted average period of unamortized cost recognition was 3.40 years.

The weighted
average grant date fair value of options outstanding was $3.70 at December 31, 2005 and $3.89 at September 30, 2006. The intrinsic value was $544,000 at September 30, 2006. Compensation cost for the three and nine months ended
September 30, 2006 was $25,000 and $66,000, respectively. Unrecognized compensation cost at September 30, 2006 was $312,000 and the weighted average period of unamortized cost recognition was 3.40 years.

The stock-based compensation expense determined under the fair value-based method for the three and nine months ended September 30, 2005, disclosed
but not recognized, was $7,000 and $65,000, respectively, net of related tax effects. Earnings per share for the three and nine months ended September 30, 2005 would not have changed had we recognized compensation expense under the fair
value-based method.



8



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##### Table of Contents

NOTE 3  SECURITIES

The amortized cost and estimated fair values of securities available-for-sale are summarized as follows:



|                                                  |  |                    |        |                      |   |                       |  |   |                    |   |  |   |       
|------------------------------------------------- |  | ------------------ | ------ | -------------------- | - | --------------------- |  | - | ------------------ | - |  | - | ------
|                                                  |  | September 30, 2006
|(in thousands)                                    |  | AmortizedCost      |        | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | EstimatedFairValue
|U.S. Treasury notes                               |  | $                  | 2,502  |                      | $ |                      |  | $ | (39                | ) |  | $ | 2,463 
|U.S. government agency notes                      |  |                    | 8,966  |                      |   | 4                     |  |   | (85                | ) |  |   | 8,885 
|U.S. government agency mortgage-backed securities |  |                    | 38,322 |                      |   | 4                     |  |   | (1,233             | ) |  |   | 37,093
|Collateralized mortgage obligations               |  |                    | 4,032  |                      |   |                      |  |   | (70                | ) |  |   | 3,962 
|Municipal securities                              |  |                    | 13,113 |                      |   | 221                   |  |   | (28                | ) |  |   | 13,306
|                                                  |  |                    |        |                      |   |                       |  |   |                    |   |  |   |       
|Securities available-for-sale                     |  | $                  | 66,935 |                      | $ | 229                   |  | $ | (1,455             | ) |  | $ | 65,709
|                                                  |  |                    |        |                      |   |                       |  |   |                    |   |  |   |       
|                                                  | 
|                                                  |  | December 31, 2005 
|(in thousands)                                    |  | AmortizedCost      |        | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | EstimatedFairValue
|U.S. Treasury notes                               |  | $                  | 6,976  |                      | $ |                      |  | $ | (33                | ) |  | $ | 6,943 
|U.S. government agency notes                      |  |                    | 10,376 |                      |   |                      |  |   | (156               | ) |  |   | 10,220
|U.S. government agency mortgage-backed securities |  |                    | 45,089 |                      |   | 1                     |  |   | (1,274             | ) |  |   | 43,816
|Collateralized mortgage obligations               |  |                    | 3,414  |                      |   | 1                     |  |   | (89                | ) |  |   | 3,326 
|Municipal securities                              |  |                    | 9,179  |                      |   | 36                    |  |   | (101               | ) |  |   | 9,114 
|                                                  |  |                    |        |                      |   |                       |  |   |                    |   |  |   |       
|Securities available-for-sale                     |  | $                  | 75,034 |                      | $ | 38                    |  | $ | (1,653             | ) |  | $ | 73,419
|                                                  |  |                    |        |                      |   |                       |  |   |                    |   |  |   |       

NOTE 4  LOANS AND ALLOWANCE FOR LOAN LOSSES

Loans consist of the following:



|                            |  |                      |         |   |                     |   |         |  
|--------------------------- |  | -------------------- | ------- | - | ------------------- | - | ------- | -
|(in thousands)              |  | At September 30,2006 |         |   | At December 31,2005 |  
|Commercial mortgage         |  | $                    | 181,629 |   |                     | $ | 192,263 |  
|Multifamily mortgage        |  |                      | 19,369  |   |                     |   | 31,708  |  
|Construction                |  |                      | 37,161  |   |                     |   | 28,157  |  
|Commercial loans and lines  |  |                      | 57,007  |   |                     |   | 64,271  |  
|Home equity loans and lines |  |                      | 9,605   |   |                     |   | 8,689   |  
|Home mortgage               |  |                      | 47,626  |   |                     |   | 13,443  |  
|Installment & credit card   |  |                      | 2,203   |   |                     |   | 4,352   |  
|                            |  |                      |         |   |                     |   |         |  
|Total loans                 |  |                      | 354,600 |   |                     |   | 342,883 |  
|Allowance for loan losses   |  |                      | (3,692  | ) |                     |   | (4,105  | )
|                            |  |                      |         |   |                     |   |         |  
|Loans, net                  |  | $                    | 350,908 |   |                     | $ | 338,778 |  
|                            |  |                      |         |   |                     |   |         |  
|Loans held for sale         |  | $                    | 29,675  |   |                     | $ |        |  

At September 30, 2006, loans held for sale were $29.7 million and consist of commercial and multifamily
mortgages originated for sale into the secondary market as well as SBA 7(a) loans, the government guaranteed portion of which will be sold into the secondary market. Loans held for sale are carried at the lower of aggregate cost or market value.
Loan sale gains or losses are recorded in noninterest income based on the difference between loan sale proceeds and carrying value.

As of
September 30, 2006, loans with a carrying value of $324.7 million were included as blanket pledges of security for FHLB advances. Most of the Companys lending activity is with customers located in Ventura, Orange and Los Angeles Counties.
The Company has no significant credit exposure to any individual customer; however, the economic condition in Southern California could adversely affect customers. A significant portion of our loans are collateralized by real estate. Changes in the
economic condition in Southern California could adversely affect the value of real estate.



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##### Table of Contents

Changes in the allowance for loan losses were as follows:



|                                        |  |                                  |       |                                 |      |   |       |  |   |       |   |  |   |       |  
|--------------------------------------- |  | -------------------------------- | ----- | ------------------------------- | ---- | - | ----- |  | - | ----- | - |  | - | ----- | -
|                                        |  | Three Months Ended September 30, |       | Nine Months Ended September 30, |     
|(dollars in thousands)                  |  | 2006                             |       |                                 | 2005 |   | 2006  |  |   | 2005  |  
|Beginning balance                       |  | $                                | 4,209 |                                 |      | $ | 2,593 |  | $ | 4,105 |   |  | $ | 2,346 |  
|Balance acquired in purchase            |  |                                  |      |                                 |      | $ | 1,184 |  |   |      |   |  | $ | 1,184 |  
|Provision (credit) for loan losses      |  |                                  | (450  | )                               |      |   | 122   |  |   | (297  | ) |  |   | 366   |  
|Loans charged-off                       |  |                                  | (25   | )                               |      |   |      |  |   | (37   | ) |  |   | (73   | )
|Transfer to undisbursed commitment      |  |                                  | (50   | )                               |      |   |      |  |   | (125  | ) |  |   |      |  
|Recoveries on loans charged-off         |  |                                  | 8     |                                 |      |   | 96    |  |   | 46    |   |  |   | 172   |  
|                                        |  |                                  |       |                                 |      |   |       |  |   |       |   |  |   |       |  
|Ending balance                          |  | $                                | 3,692 |                                 |      | $ | 3,995 |  | $ | 3,692 |   |  | $ | 3,995 |  
|                                        |  |                                  |       |                                 |      |   |       |  |   |       |   |  |   |       |  
|Allowance to loans                      |  |                                  |       |                                 |      |   |       |  |   | 1.04  | % |  |   | 1.22  | %
|Accruing loans past due 90 days or more |  |                                  |       |                                 |      |   |       |  | $ | 312   |   |  | $ |      |  
|Nonaccrual loans                        |  |                                  |       |                                 |      |   |       |  | $ |      |   |  | $ |      |  

There were no nonaccrual loans at September 30, 2006 or December 31,
2005.

NOTE 5  GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill relates to the acquisition of South Coast Bancorp on September 30, 2005. At September 30, 2006 and December 31, 2005, goodwill was $16.8 million and $16.3 million, respectively. The change in
goodwill represents the finalization of estimated tax effects. No impairment loss was recognized for the periods ended September 30, 2006 and December 31, 2005.

Core deposit intangible, net of accumulated amortization, was $558,000 at September 30, 2006 and $610,000 at December 31, 2005. Amortization expense for the three and nine months ended September 30,
2006 was $18,000 and $35,000 respectively.

NOTE 6 EARNINGS PER SHARE

Basic earnings per share excludes dilution and is computed by dividing income available to common shareholders by the weighted average number of common
shares outstanding for the period. Diluted earnings per share reflect the potential dilution that could occur if common shares were issued pursuant to the exercise of common stock options under the stock option plan. The following table illustrates
the computations of basic and diluted earnings per share for the periods indicated:



|                                                   |  |                                  |       |                                 |   |         |  |       |       |         |   |       |  |         |       |       |   |       |  |   |       |  |   |      
|-------------------------------------------------- |  | -------------------------------- | ----- | ------------------------------- | - | ------- |  | ----- | ----- | ------- | - | ----- |  | ------- | ----- | ----- | - | ----- |  | - | ----- |  | - | -----
|                                                   |  | Three Months Ended September 30, |       | Nine Months Ended September 30,
|                                                   |  | 2006                             |       | 2005                            |   | 2006    |  | 2005 
|(in thousands, except per share data)              |  | Diluted                          |       | Basic                           |   | Diluted |  | Basic |       | Diluted |   | Basic |  | Diluted |       | Basic
|Income available to common shareholders            |  | $                                | 1,302 |                                 | $ | 1,302   |  | $     | 762   |         | $ | 762   |  | $       | 3,385 |       | $ | 3,385 |  | $ | 1,968 |  | $ | 1,968
|                                                   |  |                                  |       |                                 |   |         |  |       |       |         |   |       |  |         |       |       |   |       |  |   |       |  |   |      
|Weighted average basic common shares outstanding   |  |                                  | 3,278 |                                 |   | 3,278   |  |       | 2,175 |         |   | 2,175 |  |         | 3,278 |       |   | 3,278 |  |   | 2,167 |  |   | 2,163
|Net effect of dilutive options                     |  |                                  | 27    |                                 |   |        |  |       | 15    |         |   |      |  |         | 21    |       |   |      |  |   | 22    |  |   |     
|                                                   |  |                                  |       |                                 |   |         |  |       |       |         |   |       |  |         |       |       |   |       |  |   |       |  |   |      
|Weighted average diluted common shares outstanding |  |                                  | 3,305 |                                 |   | 3,278   |  |       | 2,190 |         |   | 2,175 |  |         | 3,299 |       |   | 3,278 |  |   | 2,189 |  |   | 2,167
|                                                   |  |                                  |       |                                 |   |         |  |       |       |         |   |       |  |         |       |       |   |       |  |   |       |  |   |      
|Earnings per share                                 |  | $                                | 0.39  |                                 | $ | 0.40    |  | $     | 0.35  |         | $ | 0.35  |  | $       | 1.03  |       | $ | 1.03  |  | $ | 0.90  |  | $ | 0.91 
|                                                   |  |                                  |       |                                 |   |         |  |       |       |         |   |       |  |         |       |       |   |       |  |   |       |  |   |      



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NOTE 7RECENTLY ISSUED ACCOUNTING STANDARDS

In February 2006, the FASB issued SFAS No. 155, Accounting for Certain Hybrid Financial Instruments which amends SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities and SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. SFAS 155 simplifies the accounting for certain
derivatives embedded in other financial instruments by allowing them to be accounted for as a whole if the holder elects to account for the whole instrument on a fair value basis. SFAS 155 also clarifies and amends certain other provisions of SFAS
133 and SFAS 140. SFAS 155 is effective for all financial instruments acquired, issued or subject to a remeasurement event occurring in fiscal years beginning after September 15, 2006. Earlier adoption is permitted, provided the Company has not
yet issued financial statements, including for interim periods, for that fiscal year. Management does not expect the adoption of SFAS 155 to have a material impact on the consolidated financial statements.

In March 2006, the FASB issued SFAS No. 156, Accounting for Servicing of Financial Assets which amends SFAS No. 140. SFAS 156
requires that all separately recognized servicing assets and servicing liabilities be initially measured at fair value, if practicable. The statement permits, but does not require, the subsequent measurement of servicing assets and servicing
liabilities at fair value. SFAS 156 is effective for fiscal years beginning after September 15, 2006. Management does not expect the adoption of SFAS 156 to have a material impact on the consolidated financial statements.

In July 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxesan interpretation of FASB Statement
No. 109 (FIN 48), which clarifies the accounting and disclosure for uncertainty in income in a companys financial statements. FIN 48 seeks to reduce the diversity in practice associated with certain aspects of the recognition and
measurement related to accounting for income taxes. FIN 48 is effective for fiscal years beginning after December 15, 2006. Management does not expect the adoption of FIN 48 to have a material impact on the consolidated financial statements.

In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin (SAB) No. 108,
Considering the Effects of Prior Year Misstatements when Quantifying Current Year Misstatements. SAB 108 provides guidance on quantifying prior year reversals or carryovers of financial statement misstatements. Management does not
expect the adoption of SAB 108 to have a material impact on the consolidated financial statements.

In September 2006, the FASB issued SFAS
No. 157, Fair Value Measurements. SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. The provisions of
this standard apply to other accounting pronouncements that require or permit fair value measurements. SFAS 157 is effective for fiscal years beginning after November 15, 2007. Management does not expect the adoption of SFAS 157 to have a
material impact on the consolidated financial statements.

In September 2006, the FASB issued SFAS No. 158 Employers
Accounting for Defined Benefit Pension and Other Postretirement Plans. SFAS 158 requires employers to recognize the funded status of defined benefit postretirement plans as an net asset or liability in its statement of financial position
and to recognize changes in the funded status in the year in which the changes occur through accumulated other comprehensive income. SFAS 158 also requires employers to measure the funded status of a plan as of the date of its year-end statement of
financial position. The new reporting requirements and related new footnote disclosure rules of SFAS No. 158 are effective for fiscal years ending after December 15, 2006. The new measurement date requirement applies for fiscal
years ending after December 15, 2008. Management does not expect SFAS No.158 to have a material impact on the consolidated financial statements.

NOTE 8  AGREEMENT AND PLAN OF MERGER

On June 15, 2006, we entered into an Agreement and Plan of Merger with
National Mercantile Bancorp, the parent company of Mercantile National Bank, and First California Financial Group, or FCFG. Subject to the satisfaction or waiver of the conditions contained in that merger agreement, National Mercantile will merge
into FCFG, its newly formed Delaware subsidiary, followed immediately by a merger of equals whereby we will merge with FCFG. FCFG will be the surviving entity. Pursuant to the mergers, FCB Bancorp shareholders will receive 1.7904 shares of First
California common stock for each of their shares of FCB Bancorp common stock.



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##### Table of Contents

On a pro forma basis, giving effect to the merger, at September 30, 2006, the combined company would
have consolidated assets of approximately $1 billion, with twelve full service offices and four loan production offices in Los Angeles, Orange and Ventura counties. The leadership team for the new combined company, to be called First California
Financial Group, Inc. will be as follows:



|                                      |  |   |  |                                                               
|------------------------------------- |  | - |  | --------------------------------------------------------------
|President and Chief Executive Officer |  | » |  | C. G. Kum, FCB Bancorps Chief Executive Officer              
|                                      |  |  
|Chief Financial Officer               |  | » |  | Romolo Santarosa, FCB Bancorps Chief Financial Officer       
|                                      |  |  
|Chief Credit Officer                  |  | » |  | Robert Bartlett, National Mercantiles Chief Operating Officer
|                                      |  |  
|Chief Strategy Officer                |  | » |  | David Brown, National Mercantiles Chief Financial Officer    
|                                      |  |  
|Head of Commercial Banking            |  | » |  | Thomas Anthony, FCB Bancorps Chief Credit Officer            

Scott Montgomery, National Mercantiles President and Chief Executive Officer will retire
after assisting in the transition. The merger, expected to close in the first quarter of 2007, is subject to customary regulatory approvals and approval by the shareholders of both companies.



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##### Table of Contents

Item 2  Managements Discussion and Analysis of Financial Condition and Results of Operations

The following discussion is designed to provide a better understanding of significant trends related to the consolidated results of operations and financial condition of FCB Bancorp and its wholly-owned subsidiaries. This discussion and
information is derived from our unaudited consolidated financial statements and related notes for the three and nine months ended September 30, 2006 and 2005 and our audited consolidated financial statements and related notes for the three
years ended December 31, 2005. You should read this discussion in conjunction with those consolidated financial statements.

This
discussion contains certain forward-looking information about us, which statements are intended to be covered by the safe harbor for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995. All
statements other than statements of historical fact are forward-looking statements. Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond our control. We caution readers that a
number of important factors could cause actual results to differ materially from those expressed in, implied or projected by, such forward-looking statements. Risks and uncertainties include, but are not limited to:



| |  |  | revenues are lower than expected;
| | - |  | ---------------------------------



| |  |  | credit quality deterioration which could cause an increase in the provision for credit losses;
| | - |  | ----------------------------------------------------------------------------------------------



| |  |  | competitive pressure among depository institutions increases significantly;
| | - |  | ---------------------------------------------------------------------------



| |  |  | our ability to complete planned acquisitions, to successfully integrate acquired entities, or to achieve expected synergies and operating efficiencies within expected time-frames or
at all;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the integration of acquired businesses costs more, takes longer or is less successful than expected;
| | - |  | ----------------------------------------------------------------------------------------------------



| |  |  | the cost of additional capital is more than expected;
| | - |  | -----------------------------------------------------



| |  |  | a change in the interest rate environment reduces interest margins;
| | - |  | -------------------------------------------------------------------



| |  |  | asset/liability re-pricing risks and liquidity risks;
| | - |  | -----------------------------------------------------



| |  |  | general economic conditions, either nationally or in the market areas in which we do or anticipate doing business, are less favorable than expected;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the economic and regulatory effects of the continuing war on terrorism and other events of war, including the war in Iraq;
| | - |  | --------------------------------------------------------------------------------------------------------------------------



| |  |  | legislative or regulatory requirements or changes adversely affecting our business;
| | - |  | -----------------------------------------------------------------------------------



| |  |  | changes in the securities markets; and
| | - |  | --------------------------------------



| |  |  | regulatory approvals for announced or future acquisitions cannot be obtained on the terms expected or on the anticipated schedule.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------



| |  |  | relative cost savings cannot be realized or realized within the expected time frame
| | - |  | -----------------------------------------------------------------------------------



| |  |  | FCFGs ability to integrate the operation of National Mercantile and FCB Bancorp and to achieve expected synergies, operating efficiencies or other benefits within expected
time-frames or at all, or within expected cost projections
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the possibility that personnel changes will not proceed as planned.
| | - |  | -------------------------------------------------------------------

If any of these risks or uncertainties materializes, or if any of the assumptions underlying such forward-looking statements proves to be incorrect, our results could differ materially from those expressed in, implied
or projected by, such forward-looking statements. We assume no obligation to update such forward-looking statements.



13



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##### Table of Contents

Critical Accounting Policies

The discussion and analysis of our consolidated results of operations and financial condition are based upon our unaudited and our audited consolidated
financial statements which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires us to make estimates and judgments that
affect the reported amounts of assets and liabilities, income and expense, and the related disclosures of contingent assets and liabilities at the date of these consolidated financial statements. We believe these estimates and assumptions to be
reasonably accurate; however, actual results may differ from these estimates under different assumptions or circumstances. The following are our critical accounting policies.

Allowance for loan losses

An
estimate of probable losses incurred in the loan portfolio is necessary in determining the amount of the allowance for loan losses which is presented as a reduction of our loan balances. The provision, or credit, for loan losses, charged, or
credited to operations, is the amount that is necessary to establish the allowance. The information used by us to make this estimate is described later in this section and in the notes to the audited consolidated financial statements. The allowance
for loan losses was $3,692,000 at September 30, 2006 and was $4,105,000 at December 31, 2005.



14



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##### Table of Contents

Income taxes

An estimate of probable income tax benefits that will not be realized in future years is required in determining the necessity for a valuation allowance for deferred tax assets. The information used by us to make this
estimate is described later in this section and in the notes to the audited consolidated financial statements. There were no net deferred tax assets at September 30, 2006. Net deferred tax assets were $730,000 at December 31, 2005; there
was no valuation allowance at either period end.

Goodwill

An estimate of probable impairment loss is required in determining the carrying value of goodwill. An impairment loss is the condition that exists when
the carrying amount of goodwill exceeds its implied fair value. The information used by us to make this estimate is described later in this section and in the notes to the audited consolidated financial statements. Goodwill was $16.8 million at
September 30, 2006 and $16.3 million December 31, 2005; there was no impairment loss at either period end.

Overview

FCB Bancorp is a bank holding company arising from a transaction in which the shareholders of First California Bank exchanged their common shares for that
of FCB Bancorp on a share-for-share basis on September 30, 2005. As a result of that transaction, First California Bank became a wholly-owned subsidiary of FCB Bancorp. FCB Bancorp and First California Bank are related entities; accordingly,
the consolidated financial position and results of operations for the year ended December 31, 2005 reflect the combined entities. Prior periods have been restated to reflect financial position and results of operation as if the entities had
been previously consolidated.

Also, on September 30, 2005, FCB Bancorp completed its acquisition of South Coast Bancorp, Inc. and its
wholly-owned subsidiaries, South Coast Commercial Bank and SC Financial. SC Financial is an inactive subsidiary. Shareholders of South Coast Bancorp, Inc. received cash of $36.0 million in exchange for their common shares; South Coast Bancorp, Inc.
was then merged with and into FCB Bancorp.

In connection with this acquisition, FCB Bancorp issued 1,115,000 shares of common stock to
accredited investors at $19.75 per share on September 30, 2005. Net proceeds from this offering were $20.7 million. In addition, FCB Bancorp issued $10.3 million of junior subordinated debentures (commonly referred to as trust preferred
securities) on September 30, 2005 through an unconsolidated, wholly-owned subsidiary, FCB Statutory Trust I. Substantially all the proceeds from these offerings were used to fund the acquisition.

The acquisition was accounted for using the purchase method of accounting; accordingly, the December 31, 2005 consolidated financial position of the
Company includes the fair value of the assets acquired and the liabilities assumed of South Coast Bancorp, Inc. The consolidated results of operations, however, reflect only the consolidated activities after the merger was consummated on
September 30, 2005.

On December 5, 2005, FCB Bancorp sold South Coast Commercial Bank to Woori America Bank pursuant to a merger
transaction for a premium of $1.0 million before taxes and expenses (the Woori Merger). The net premium reduced previously recognized goodwill that arose from our purchase of South Coast Commercial Bank on September 30, 2005. Also
on December 5, 2005, in a separate but related transaction, our subsidiary, First California Bank, acquired essentially all of the assets and liabilities of South Coast Commercial Bank, including substantially all current loan and deposit
accounts. The purchase and assumption transaction closed immediately prior to the Woori Merger.

Results of Operations  for the three and nine
months ended September 30, 2006 and 2005

Net income for the third quarter of 2006 was $1.3 million, a 71 percent increase from the
same period a year ago. Net income for the first nine months of 2006 increased 72 percent to $3.4 million from $2.0 million last year. The change in interim results is due primarily to the acquisition completed at the end of the third quarter of
2005.



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##### Table of Contents

The following table presents a summary of net income and per share data.



|                                 |      |                                |       |                               |      |       |      |   |       |  |   |      
|-------------------------------- | ---- | ------------------------------ | ----- | ----------------------------- | ---- | ----- | ---- | - | ----- |  | - | -----
|(in thousands, except per share) |      | Three MonthsEndedSeptember 30, |       | Nine MonthsEndedSeptember 30,
|                                 | 2006 |                                | 2005  |                               | 2006 |       | 2005
|Net income                       |      | $                              | 1,302 |                               | $    | 762   |      | $ | 3,385 |  | $ | 1,968
|Basic earnings per share         |      | $                              | 0.40  |                               | $    | 0.35  |      | $ | 1.03  |  | $ | 0.91 
|Diluted earnings per share       |      | $                              | 0.39  |                               | $    | 0.35  |      | $ | 1.03  |  | $ | 0.90 
|Basic weighted average shares    |      |                                | 3,278 |                               |      | 2,175 |      |   | 3,278 |  |   | 2,167
|Diluted weighted average shares  |      |                                | 3,305 |                               |      | 2,190 |      |   | 3,299 |  |   | 2,189

Diluted earnings per share for the third quarter of 2006 increased 11 percent to $0.39 from $0.35
for the same period last year. Diluted earnings per share for the first nine months of 2006 were $1.03, up 14 percent from $0.90 last year. The earnings per share data for 2006 reflect the increase in outstanding weighted average shares that
resulted from the issuance of 1,115,000 shares of common stock at the end of the third quarter of 2005. At September 30, 2006 and 2005, there were a total of 3,227,807 shares of our common stock outstanding.

Net interest income

Net
interest income for the third quarter of 2006 was $5.3 million, an increase of 48 percent from $3.6 million posted in third quarter of last year. Net interest income for the first nine months of 2006 was $15.8 million, up 57 percent from the same
period in 2005. The increase in our net interest income reflects the higher level of earning assets due to the acquisition. Average earning assets increased 62 percent to $449.7 million for the third quarter of 2006 from $278.5 million for the third
quarter of 2005. For the first nine months of the year, average earning assets increased 60 percent to $432.7 million from $270.8 million.

The net interest margin on a tax equivalent basis for the third quarter of 2006 was 4.73% compared with 5.13% for the same quarter a year ago. The net interest margin on a tax equivalent basis for the first nine months of 2006 was 4.93%
compared with 4.95% during the same period in 2005. The decrease in our net interest margin reflects the higher proportion of interest bearing funds to interest earning assets as well as an increase in rates paid for these funds. Average interest
bearing funds for the third quarter of 2006 and 2005 represented 77 and 64 percent of earning assets, respectively. Average interest bearing funds for the first nine months of 2006 and 2005 represented 76 and 64 percent of earning assets,
respectively. The average rate paid for interest bearing funds increased to 3.84% for the third quarter of 2006 from 1.97% for the same quarter last year. The average rate paid for interest bearing funds for the first nine months of 2006 increased
to 3.45% from 1.64% for the same period in 2005.

Average loans were $381.6 million for the third quarter of 2006 and represented 85
percent of average earning assets, compared with $204.0 million and 73 percent for the same quarter a year ago. Average loans for the nine months ended September 30, 2006 were $358.6 million and represented 83 percent of average earning assets,
compared with $191.6 million and 71 percent for the year ago period. The increase in average loans reflects the 2005 acquisition, the expansion of our branch network and the success of our business strategy.

Average securities were $67.5 million for the third quarter of 2006 and represented 15 percent of average earning assets, compared with $73.4 million and
26 percent for the same quarter a year ago. For the first nine months of 2006, average securities were $69.2 million, or 16 percent of average earning assets, compared with $75.6 million, or 28 percent of average earning assets for the same period a
year ago.

Average deposits for the third quarter of 2006 were $392.4 million and represented 87 percent of average earning assets,
compared with $239.4 million and 84 percent of average earning assets for the same quarter last year. Average deposits for the first nine months of 2006 were $385.1 million and represented 89 percent of average earning assets, compared with $233.9
million and 86 percent for the year ago period. The increase in deposits reflects the 2005 acquisition, the expansion of our branch network and the success of our business strategy. We do not accept broker certificates of deposits.

Average borrowed funds for the third quarter of 2006 were $57.3 million compared with $35.1 million for the same quarter last year. For the first nine
months of 2006, average borrowed funds were $47.6 million, compared with $33.1 million for the same period a year ago. The increase in borrowings reflects the issuance of $10.3 million of junior subordinated debentures at the end of the 2005 third
quarter and higher levels of advances from the FHLB in support of earning asset growth.



16



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##### Table of Contents

The following table presents average balances and interest income or interest expense, with resulting
average yield or rates on a tax equivalent basis, by earning asset or interest bearing liability category.



|                                           |  |                                  |         |                |      |             |  |      |                |  |                |         |             |   |       |  |      |  
|------------------------------------------ |  | -------------------------------- | ------- | -------------- | ---- | ----------- |  | ---- | -------------- |  | -------------- | ------- | ----------- | - | ----- |  | ---- | -
|                                           |  | Three months ended September 30, |        
|                                           |  | 2006                             |         |                | 2005 |            
|(in thousands)                             |  | AverageBalance                   |         | Income/Expense |      | AverageRate |  |      | AverageBalance |  | Income/Expense |         | AverageRate |  
|Commercial                                 |  | $                                | 106,465 |                | $    | 2,544       |  | 9.48 | %              |  | $              | 91,089  |             | $ | 1,859 |  | 8.10 | %
|Real estate                                |  |                                  | 267,664 |                |      | 5,284       |  | 7.83 | %              |  |                | 105,122 |             |   | 1,810 |  | 6.83 | %
|Consumer                                   |  |                                  | 7,477   |                |      | 153         |  | 8.11 | %              |  |                | 7,821   |             |   | 135   |  | 6.86 | %
|                                           |  |                                  |         |                |      |             |  |      |                |  |                |         |             |   |       |  |      |  
|Total loans                                |  |                                  | 381,606 |                |      | 7,981       |  | 8.30 | %              |  |                | 204,032 |             |   | 3,804 |  | 7.40 | %
|                                           |  |                                  |         |                |      |             |  |      |                |  |                |         |             |   |       |  |      |  
|Taxable                                    |  |                                  | 54,830  |                |      | 536         |  | 3.91 | %              |  |                | 64,443  |             |   | 547   |  | 3.40 | %
|Nontaxable                                 |  |                                  | 12,705  |                |      | 123         |  | 5.83 | %              |  |                | 8,968   |             |   | 86    |  | 5.78 | %
|                                           |  |                                  |         |                |      |             |  |      |                |  |                |         |             |   |       |  |      |  
|Total securities                           |  |                                  | 67,535  |                |      | 659         |  | 4.25 | %              |  |                | 73,411  |             |   | 633   |  | 3.69 | %
|                                           |  |                                  |         |                |      |             |  |      |                |  |                |         |             |   |       |  |      |  
|Federal funds sold                         |  |                                  | 533     |                |      | 8           |  | 5.06 | %              |  |                | 985     |             |   | 9     |  | 3.46 | %
|Deposits with banks                        |  |                                  | 41      |                |      |            |  | 3.36 | %              |  |                | 27      |             |   |      |  | 1.86 | %
|                                           |  |                                  |         |                |      |             |  |      |                |  |                |         |             |   |       |  |      |  
|Total earning assets                       |  |                                  | 449,715 |                |      | 8,648       |  | 7.69 | %              |  |                | 278,455 |             |   | 4,446 |  | 6.40 | %
|                                           |  |                                  |         |                |      |             |  |      |                |  |                |         |             |   |       |  |      |  
|                                           |  |                                  |         |                |      |             |  |      |                |  |                |         |             |   |       |  |      |  
|Non-earning assets                         |  |                                  | 50,794  |                |      |             |  |      |                |  |                | 22,102  |             |   |       |  |      |  
|                                           |  |                                  |         |                |      |             |  |      |                |  |                |         |             |   |       |  |      |  
|Total assets                               |  | $                                | 500,509 |                |      |             |  |      |                |  | $              | 300,557 |             |   |       |  |      |  
|                                           |  |                                  |         |                |      |             |  |      |                |  |                |         |             |   |       |  |      |  
|Interest bearing demand deposits           |  | $                                | 17,548  |                | $    | 17          |  | 0.37 | %              |  | $              | 19,333  |             | $ | 5     |  | 0.10 | %
|Savings                                    |  |                                  | 88,967  |                |      | 531         |  | 2.37 | %              |  |                | 64,197  |             |   | 160   |  | 0.99 | %
|Certificates of deposit                    |  |                                  | 182,381 |                |      | 2,066       |  | 4.49 | %              |  |                | 58,572  |             |   | 435   |  | 2.95 | %
|                                           |  |                                  |         |                |      |             |  |      |                |  |                |         |             |   |       |  |      |  
|Total interest bearing deposits            |  |                                  | 288,896 |                |      | 2,614       |  | 3.59 | %              |  |                | 142,102 |             |   | 600   |  | 1.67 | %
|                                           |  |                                  |         |                |      |             |  |      |                |  |                |         |             |   |       |  |      |  
|Federal funds purchased                    |  |                                  | 719     |                |      | 5           |  | 2.97 | %              |  |                | 308     |             |   |      |  | 0.11 | %
|FHLB advances                              |  |                                  | 46,308  |                |      | 580         |  | 4.97 | %              |  |                | 34,842  |             |   | 279   |  | 3.18 | %
|Junior subordinated debentures             |  |                                  | 10,310  |                |      | 154         |  | 6.15 | %              |  |                |        |             |   |      |  |      |  
|                                           |  |                                  |         |                |      |             |  |      |                |  |                |         |             |   |       |  |      |  
|Total borrowed funds                       |  |                                  | 57,337  |                |      | 739         |  | 5.11 | %              |  |                | 35,150  |             |   | 279   |  | 3.15 | %
|                                           |  |                                  |         |                |      |             |  |      |                |  |                |         |             |   |       |  |      |  
|Total interest bearing funds               |  |                                  | 346,233 |                |      | 3,353       |  | 3.84 | %              |  |                | 177,252 |             |   | 879   |  | 1.97 | %
|                                           |  |                                  |         |                |      |             |  |      |                |  |                |         |             |   |       |  |      |  
|Noninterest bearing demand deposits        |  |                                  | 103,480 |                |      |             |  |      |                |  |                | 97,332  |             |   |       |  |      |  
|Other liabilities                          |  |                                  | 2,140   |                |      |             |  |      |                |  |                | 1,508   |             |   |       |  |      |  
|Shareholders equity                       |  |                                  | 48,656  |                |      |             |  |      |                |  |                | 24,465  |             |   |       |  |      |  
|                                           |  |                                  |         |                |      |             |  |      |                |  |                |         |             |   |       |  |      |  
|Total liabilities and shareholders equity |  | $                                | 500,509 |                |      |             |  |      |                |  | $              | 300,557 |             |   |       |  |      |  
|                                           |  |                                  |         |                |      |             |  |      |                |  |                |         |             |   |       |  |      |  
|Net interest income                        |  |                                  |         |                | $    | 5,295       |  |      |                |  |                |         |             | $ | 3,567 |  |      |  
|Net interest margin (tax equivalent)       |  |                                  |         |                |      |             |  | 4.73 | %              |  |                |         |             |   |       |  | 5.13 | %



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##### Table of Contents

|                                           |  |                                 |         |                |      |             |  |      |                |  |                |         |             |   |        |  |      |  
|------------------------------------------ |  | ------------------------------- | ------- | -------------- | ---- | ----------- |  | ---- | -------------- |  | -------------- | ------- | ----------- | - | ------ |  | ---- | -
|                                           |  | Nine months ended September 30, |        
|                                           |  | 2006                            |         |                | 2005 |            
|(in thousands)                             |  | AverageBalance                  |         | Income/Expense |      | AverageRate |  |      | AverageBalance |  | Income/Expense |         | AverageRate |  
|Commercial                                 |  | $                               | 105,985 |                | $    | 7,267       |  | 9.17 | %              |  | $              | 84,006  |             | $ | 4,837  |  | 7.70 | %
|Real estate                                |  |                                 | 244,431 |                |      | 14,405      |  | 9.17 | %              |  |                | 100,470 |             |   | 4,935  |  | 7.70 | %
|Consumer                                   |  |                                 | 8,206   |                |      | 460         |  | 7.50 | %              |  |                | 7,107   |             |   | 356    |  | 6.69 | %
|                                           |  |                                 |         |                |      |             |  |      |                |  |                |         |             |   |        |  |      |  
|Total loans                                |  |                                 | 358,622 |                |      | 22,132      |  | 8.25 | %              |  |                | 191,583 |             |   | 10,128 |  | 7.07 | %
|                                           |  |                                 |         |                |      |             |  |      |                |  |                |         |             |   |        |  |      |  
|Taxable                                    |  |                                 | 58,352  |                |      | 1,707       |  | 3.90 | %              |  |                | 67,563  |             |   | 1,716  |  | 3.39 | %
|Nontaxable                                 |  |                                 | 10,832  |                |      | 313         |  | 5.85 | %              |  |                | 8,042   |             |   | 234    |  | 5.89 | %
|                                           |  |                                 |         |                |      |             |  |      |                |  |                |         |             |   |        |  |      |  
|Total securities                           |  |                                 | 69,184  |                |      | 2,020       |  | 4.22 | %              |  |                | 75,605  |             |   | 1,950  |  | 3.65 | %
|                                           |  |                                 |         |                |      |             |  |      |                |  |                |         |             |   |        |  |      |  
|Federal funds sold                         |  |                                 | 4,796   |                |      | 169         |  | 4.70 | %              |  |                | 3,540   |             |   | 76     |  | 2.88 | %
|Deposits with banks                        |  |                                 | 48      |                |      | 1           |  | 3.06 | %              |  |                | 78      |             |   | 1      |  | 0.91 | %
|                                           |  |                                 |         |                |      |             |  |      |                |  |                |         |             |   |        |  |      |  
|Total earning assets                       |  |                                 | 432,650 |                |      | 24,322      |  | 7.57 | %              |  |                | 270,806 |             |   | 12,155 |  | 6.06 | %
|                                           |  |                                 |         |                |      |             |  |      |                |  |                |         |             |   |        |  |      |  
|                                           |  |                                 |         |                |      |             |  |      |                |  |                |         |             |   |        |  |      |  
|Non-earning assets                         |  |                                 | 50,085  |                |      |             |  |      |                |  |                | 21,345  |             |   |        |  |      |  
|                                           |  |                                 |         |                |      |             |  |      |                |  |                |         |             |   |        |  |      |  
|Total assets                               |  | $                               | 482,735 |                |      |             |  |      |                |  | $              | 292,151 |             |   |        |  |      |  
|                                           |  |                                 |         |                |      |             |  |      |                |  |                |         |             |   |        |  |      |  
|Interest bearing demand deposits           |  | $                               | 21,135  |                | $    | 70          |  | 0.44 | %              |  | $              | 20,149  |             | $ | 16     |  | 0.10 | %
|Savings                                    |  |                                 | 81,807  |                |      | 1,212       |  | 1.98 | %              |  |                | 63,584  |             |   | 389    |  | 0.82 | %
|Certificates of deposit                    |  |                                 | 179,997 |                |      | 5,605       |  | 4.16 | %              |  |                | 56,225  |             |   | 1,051  |  | 2.50 | %
|                                           |  |                                 |         |                |      |             |  |      |                |  |                |         |             |   |        |  |      |  
|Total interest bearing deposits            |  |                                 | 282,939 |                |      | 6,887       |  | 3.25 | %              |  |                | 139,958 |             |   | 1,456  |  | 1.39 | %
|                                           |  |                                 |         |                |      |             |  |      |                |  |                |         |             |   |        |  |      |  
|Federal funds purchased                    |  |                                 | 261     |                |      | 12          |  | 6.04 | %              |  |                | 111     |             |   | 3      |  | 3.97 | %
|FHLB advances                              |  |                                 | 37,005  |                |      | 1,181       |  | 4.27 | %              |  |                | 33,011  |             |   | 667    |  | 2.70 | %
|Junior subordinated debentures             |  |                                 | 10,310  |                |      | 461         |  | 6.15 | %              |  |                |        |             |   |       |  |      |  
|                                           |  |                                 |         |                |      |             |  |      |                |  |                |         |             |   |        |  |      |  
|Total borrowed funds                       |  |                                 | 47,576  |                |      | 1,654       |  | 4.65 | %              |  |                | 33,122  |             |   | 670    |  | 2.70 | %
|                                           |  |                                 |         |                |      |             |  |      |                |  |                |         |             |   |        |  |      |  
|Total interest bearing funds               |  |                                 | 330,515 |                |      | 8,541       |  | 3.45 | %              |  |                | 173,080 |             |   | 2,126  |  | 1.64 | %
|                                           |  |                                 |         |                |      |             |  |      |                |  |                |         |             |   |        |  |      |  
|                                           |  |                                 |         |                |      |             |  |      |                |  |                |         |             |   |        |  |      |  
|Noninterest bearing demand deposits        |  |                                 | 102,195 |                |      |             |  |      |                |  |                | 93,958  |             |   |        |  |      |  
|Other liabilities                          |  |                                 | 1,980   |                |      |             |  |      |                |  |                | 1,294   |             |   |        |  |      |  
|Shareholders equity                       |  |                                 | 48,045  |                |      |             |  |      |                |  |                | 23,820  |             |   |        |  |      |  
|                                           |  |                                 |         |                |      |             |  |      |                |  |                |         |             |   |        |  |      |  
|Total liabilities and shareholders equity |  | $                               | 482,735 |                |      |             |  |      |                |  | $              | 292,151 |             |   |        |  |      |  
|                                           |  |                                 |         |                |      |             |  |      |                |  |                |         |             |   |        |  |      |  
|Net interest income                        |  |                                 |         |                | $    | 15,781      |  |      |                |  |                |         |             | $ | 10,029 |  |      |  
|Net interest margin(tax equivalent)        |  |                                 |         |                |      |             |  | 4.93 | %              |  |                |         |             |   |        |  | 4.95 | %

Net interest income is affected by changes in the level and mix of average earning assets and
average interest-bearing funds. The changes between periods in these balances are referred to as balance changes. The effect on net interest income from changes in average balances is measured by multiplying the change in the average balance between
the current period and the prior period by the prior period average rate. Net interest income is also affected by changes in the average rate earned or paid on earning assets and interest-bearing funds and these are referred to as rate changes. The
effect on net interest income from changes in average rates is measured by multiplying the change in the average rate between the current period and the prior period by the prior period average balance. Changes attributable to both rate and volume
are allocated on a pro rata basis to the change in average volume and the change in average rate.



18



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##### Table of Contents

The following tables present changes in net interest income and expenses.



|                                 |  |                                                      |       |   |        |   |       |       |  |   |        |  
|-------------------------------- |  | ---------------------------------------------------- | ----- | - | ------ | - | ----- | ----- |  | - | ------ | -
|                                 |  | Three months endedSeptember 30, 2006 to 2005due to:  |      
|(in thousands)                   |  | Rate                                                 |       |   | Volume |   |       | Total | 
|Interest income                  |  |                                                      |       |   |        |   |       |       |  |   |        |  
|Interest on loans                |  | $                                                    | 1,098 |   |        | $ | 3,079 |       |  | $ | 4,177  |  
|Interest on securities           |  |                                                      | 77    |   |        |   | (51   | )     |  |   | 26     |  
|Interest on Federal funds sold   |  |                                                      | 3     |   |        |   | (4    | )     |  |   | (1     | )
|                                 |  |                                                      |       |   |        |   |       |       |  |   |        |  
|                                 |  |                                                      | 1,178 |   |        |   | 3,024 |       |  |   | 4.202  |  
|Interest expense                 |  |                                                      |       |   |        |   |       |       |  |   |        |  
|Interest bearing demand deposits |  |                                                      | 12    |   |        |   |      |       |  |   | 12     |  
|Savings                          |  |                                                      | 310   |   |        |   | 62    |       |  |   | 372    |  
|Certificates of deposit          |  |                                                      | 711   |   |        |   | 920   |       |  |   | 1,631  |  
|                                 |  |                                                      |       |   |        |   |       |       |  |   |        |  
|Total interest on deposits       |  |                                                      | 1,033 |   |        |   | 982   |       |  |   | 2,015  |  
|                                 |  |                                                      |       |   |        |   |       |       |  |   |        |  
|Interest on borrowings           |  |                                                      | 283   |   |        |   | 176   |       |  |   | 459    |  
|                                 |  |                                                      |       |   |        |   |       |       |  |   |        |  
|Total interest expense           |  |                                                      | 1,316 |   |        |   | 1,158 |       |  |   | 2,474  |  
|                                 |  |                                                      |       |   |        |   |       |       |  |   |        |  
|Net interest income              |  | $                                                    | (138  | ) |        | $ | 1,866 |       |  | $ | 1,728  |  
|                                 |  |                                                      |       |   |        |   |       |       |  |   |        |  
|                                 | 
|                                 |  | Nine months ended September 30, 2006 to 2005 due
to: |      
|(in thousands)                   |  | Rate                                                 |       |   | Volume |   |       | Total | 
|Interest income                  |  |                                                      |       |   |        |   |       |       |  |   |        |  
|Interest on loans                |  | $                                                    | 3,572 |   |        | $ | 8,431 |       |  | $ | 12,003 |  
|Interest on securities           |  |                                                      | 236   |   |        |   | (166  | )     |  |   | 70     |  
|Interest on Federal funds sold   |  |                                                      | 65    |   |        |   | 27    |       |  |   | 92     |  
|Interest on deposits with banks  |  |                                                      | 2     |   |        |   |      |       |  |   | 2      |  
|                                 |  |                                                      |       |   |        |   |       |       |  |   |        |  
|Total interest income            |  |                                                      | 3,875 |   |        |   | 8,292 |       |  |   | 12,167 |  
|                                 |  |                                                      |       |   |        |   |       |       |  |   |        |  
|Interest expense                 |  |                                                      |       |   |        |   |       |       |  |   |        |  
|Interest bearing demand deposits |  |                                                      | 54    |   |        |   | 1     |       |  |   | 55     |  
|Savings                          |  |                                                      | 711   |   |        |   | 112   |       |  |   | 823    |  
|Certificates of deposit          |  |                                                      | 2,240 |   |        |   | 2,314 |       |  |   | 4,553  |  
|                                 |  |                                                      |       |   |        |   |       |       |  |   |        |  
|Total interest on deposits       |  |                                                      | 3,005 |   |        |   | 2,426 |       |  |   | 5,431  |  
|                                 |  |                                                      |       |   |        |   |       |       |  |   |        |  
|Interest on borrowings           |  |                                                      | 692   |   |        |   | 292   |       |  |   | 984    |  
|                                 |  |                                                      |       |   |        |   |       |       |  |   |        |  
|Total interest expense           |  |                                                      | 3,696 |   |        |   | 2,719 |       |  |   | 6,415  |  
|                                 |  |                                                      |       |   |        |   |       |       |  |   |        |  
|Net interest income              |  | $                                                    | 179   |   |        | $ | 5,573 |       |  | $ | 5,752  |  
|                                 |  |                                                      |       |   |        |   |       |       |  |   |        |  



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Provision (credit) for loan losses

We have experienced positive asset quality measures  low levels of delinquencies, low levels of nonaccrual loans, and low levels of net charge-offs
 for an extended period of time. In light of this, as well as our continued critical evaluation of other relevant data, we reduced the allowance for loan losses with a credit to operations of $450,000 for the third quarter of 2006. For the
first nine months of 2006, the credit to operations totaled $297,000.

The provision for loan losses for the third quarter of 2005 was
$122,000. For the first nine months of 2005, the provision for loan losses was $366,000.

Noninterest income

Noninterest income for the third quarter of 2006 was $633,000 compared with $508,000 for the same quarter last year.

Service charges, fees and other income for the third quarter of 2006 increased 13 percent to $432,000 from $382,000 for the same quarter of 2005. The
increase reflects higher customer activity levels from the prior quarter.

Earnings on cash surrender value of life insurance were $112,000
for the third quarter of 2006 compared with $57,000 for the third quarter of 2005. The increase in earnings reflects the purchase of $4.9 million of life insurance policies in the first quarter of 2006 to support life insurance benefits for several
key employees and salary continuation benefits for certain executives.

Gains on loan sales and commissions on brokered loans totaled
$89,000 for the third quarter of 2006 compared with $69,000 for the same period a year ago. In the third quarter of 2006, we sold $6.8 million of our Commercial Mortgage Division (CMD) loans for a gain of $73,000. More recently, in the fourth
quarter of 2006, we sold $26.4 million of CMD loans for a gain of $480,000. This sale and gain activity will be included in our 2006 fourth quarter results. In addition, we originate SBA 7(a) loans and sell the guaranteed portion of the loan into
the secondary market for a gain. There were no SBA loan sales and gains in the third quarter of 2006 compared with gains of $20,000 in the same quarter last year. We also arrange SBA 504 and other loans for customers that are ultimately funded by
others and receive commissions for our services. The change in income reflects the change in the number and amount of loans sold or brokered in each period.

The following table presents a summary of noninterest income.



|                                         |  |                                |     |                               |   |      |  |   |       |   |  |   |      
|---------------------------------------- |  | ------------------------------ | --- | ----------------------------- | - | ---- |  | - | ----- | - |  | - | -----
|                                         |  | Three MonthsEndedSeptember 30, |     | Nine MonthsEndedSeptember 30,
|(in thousands)                           |  | 2006                           |     | 2005                          |   | 2006 |  |   | 2005 
|Service charges on deposit accounts      |  | $                              | 281 |                               | $ | 290  |  | $ | 791   |   |  | $ | 839  
|Net servicing fees                       |  |                                | 16  |                               |   | 15   |  |   | 41    |   |  |   | 36   
|Other income                             |  |                                | 135 |                               |   | 77   |  |   | 387   |   |  |   | 169  
|Earnings on cash value of life insurance |  |                                | 112 |                               |   | 57   |  |   | 319   |   |  |   | 168  
|                                         |  |                                |     |                               |   |      |  |   |       |   |  |   |      
|Service charges, fees and other          |  |                                | 544 |                               |   | 439  |  |   | 1,538 |   |  |   | 1,212
|Loan commissions and sales               |  |                                | 89  |                               |   | 69   |  |   | 169   |   |  |   | 237  
|Gain (loss) on sales of securities       |  |                                |    |                               |   |     |  |   | (20   | ) |  |   | 2    
|                                         |  |                                |     |                               |   |      |  |   |       |   |  |   |      
|Total noninterest income                 |  | $                              | 633 |                               | $ | 508  |  | $ | 1,687 |   |  | $ | 1,451
|                                         |  |                                |     |                               |   |      |  |   |       |   |  |   |      

Noninterest income for the first nine months of 2006 was $1.7 million compared with $1.5 million
for the same period last year.

Service charges, fees and other income for the first nine months of 2006 increased 17 percent to $1.2
million from $1.0 million for the same period of 2005. The increase reflects higher customer activity levels from the prior year.

Earnings
on cash surrender value of life insurance were $319,000 for the first nine months of 2006 compared with $168,000 for the same period last year. The increase in earnings reflects the purchase of the life insurance policies in the first quarter of
2006.

Gains on loan sales and commissions on brokered loans totaled $169,000 for the first nine months of 2006 compared with $237,000 for
the same period a year ago. CMD and SBA loan sale gains totaled $106,000 for the nine months ended September 31, 2006 compared with SBA loan sale gains of $98,000 for the same period last year. The change in income reflects the change in the
number and amount of loans sold or brokered in each period.



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##### Table of Contents

Noninterest expense

Noninterest expense for the third quarter of 2006 was $4.3 million, up 59 percent from $2.7 million for the same quarter last year. The efficiency ratio
was 72.99 percent for the 2006 quarter compared with 66.93 percent for the same quarter in 2005.

Noninterest expense for the nine months
of 2006 was $12.4 million compared with $7.9 million for the same period a year ago. The efficiency ratio for the first nine months of 2006 was 70.56 percent compared with 69.20 percent for the same period last year.

We expanded our business through the acquisition of South Coast Bancorp, increasing personnel, branch and office locations in Orange and Los Angeles
counties. We also built a new branch office in Simi Valley which opened in December 2005. In addition, we opened a new loan production office in Sherman Oaks and have since added lending, business development and credit administration personnel.

The following table presents a summary of noninterest expense.



|                                    |  |                                |       |   |                                |   |       |      |  |   |        |   |  |   |       |  
|----------------------------------- |  | ------------------------------ | ----- | - | ------------------------------ | - | ----- | ---- |  | - | ------ | - |  | - | ----- | -
|                                    |  | Three MonthsEndedSeptember 30, |       |   | Nine Months EndedSeptember 30, |  
|(in thousands)                      |  | 2006                           |       |   | 2005                           |   |       | 2006 |  |   | 2005   |  
|Salaries and benefits               |  | $                              | 2,361 |   |                                | $ | 1,521 |      |  | $ | 6,919  |   |  | $ | 4,541 |  
|Premises and equipment              |  |                                | 668   |   |                                |   | 445   |      |  |   | 1,927  |   |  |   | 1,220 |  
|Data processing                     |  |                                | 198   |   |                                |   | 145   |      |  |   | 568    |   |  |   | 418   |  
|Legal, audit and other professional |  |                                | 355   |   |                                |   | 116   |      |  |   | 755    |   |  |   | 377   |  
|Printing, stationary and supplies   |  |                                | 70    |   |                                |   | 39    |      |  |   | 214    |   |  |   | 133   |  
|Telephone                           |  |                                | 66    |   |                                |   | 39    |      |  |   | 206    |   |  |   | 111   |  
|Directors fees                     |  |                                | 33    |   |                                |   | 33    |      |  |   | 99     |   |  |   | 99    |  
|Advertising and marketing           |  |                                | 223   |   |                                |   | 79    |      |  |   | 556    |   |  |   | 288   |  
|Postage                             |  |                                | 34    |   |                                |   | 20    |      |  |   | 83     |   |  |   | 48    |  
|Other expense                       |  |                                | 336   |   |                                |   | 290   |      |  |   | 1,064  |   |  |   | 708   |  
|                                    |  |                                |       |   |                                |   |       |      |  |   |        |   |  |   |       |  
|Total noninterest expenses          |  | $                              | 4,344 |   |                                | $ | 2,727 |      |  | $ | 12,391 |   |  | $ | 7,943 |  
|                                    |  |                                |       |   |                                |   |       |      |  |   |        |   |  |   |       |  
|Efficiency ratio                    |  |                                | 72.99 | % |                                |   | 66.93 | %    |  |   | 70.56  | % |  |   | 69.20 | %

The efficiency ratio is computed by dividing noninterest expense  before the amortization of
intangible assets  by the sum of net interest income and noninterest income  before realized gains and losses on sale of securities. The ratio is a measurement of the amount of revenue that is utilized to meet overhead expenses.

Income taxes

The provision for income taxes was $2.0 million for the first nine months of 2006 compared with $1.2 million for the same period of 2005. The effective tax rate for 2006 was 37.0 percent compared with 37.9 percent for the same period a year
ago. The effective tax rate was less than the combined statutory tax rate of 41.2 percent as a result of excluding from taxable income interest on municipal securities, earnings on the cash surrender value of life insurance and enterprise zone net
interest deduction.

Financial Position  September 30, 2006 compared with December 31, 2005

Lending and credit risk

We
provide a variety of loan and credit-related products and services to meet the needs of borrowers primarily located in the California counties of Ventura, Orange and Los Angeles. Business loans, represented by commercial real estate loans,
commercial loans and construction loans comprise the largest portion of the loan portfolio. Consumer, or personal loans, represented by home mortgage, home equity and installment loans comprise a smaller portion of the loan portfolio.



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##### Table of Contents

Credit risk is the risk to earnings or capital arising from an obligors failure to meet the terms
of any contract with us or otherwise to perform as agreed. Credit risk is found in all activities in which success depends on counterparty, issuer, or borrower performance. Credit risk is present any time funds are extended, committed, invested, or
otherwise exposed through actual or implied contractual agreements, whether reflected on or off the balance sheet.

All categories of loans
present credit risk. Major risk factors applicable to all loan categories include changes in international, national and local economic conditions such as interest rates, inflation, unemployment levels, consumer and business confidence and the
supply and demand for goods and services.

Commercial real estate loans rely upon the cash flow originating from the underlying real
property. Commercial real estate is a cyclical industry that is affected not only by general economic conditions but also by local supply and demand. In the office sector, the demand for office space is highly dependent on employment levels. In the
retail sector, the demand for retail space and the levels of retail rents are affected by consumer spending and confidence. The industrial sector has exposure to the level of exports, defense spending and inventory levels. Vacancy rates, location,
and other factors affect the amount of rental income for commercial property. Tenants may relocate, fail to honor their lease or go out of business. In the multifamily residential sector the demand for apartments is heavily influenced by the
affordability of ownership housing, employment conditions and the vacancy of existing inventory. Population growth or decline and changing demographics, such as increases in the level of immigrants or retirees, are also factors influencing the
multifamily residential sector.

Construction loans provide developers or owners with funds to build or improve properties that will
ultimately be occupied, sold or leased. Construction loans are generally considered to involve a higher degree of risk than other loan categories because they rely upon the developers or owners ability to complete the project within
specified cost and time limits. Cost overruns can cause the project cost to exceed the project sales price or exceed the amount of the committed permanent funding. Construction projects also can be delayed for a number of reasons such as poor
weather, material or labor shortages, labor difficulties, or substandard work that must be redone to pass inspection.

Commercial loans
rely upon the cash flow originating from the underlying business activity of the enterprise. The manufacture, distribution or sale of goods or sale of services are not only affected by general economic conditions but also by the ability of the
enterprises management to adjust to local supply and demand conditions, maintain good labor, vendor and customer relationships, as well as market, price and sale of their goods or services for a profit. Customer demand for goods and services
of the enterprise may change because of competition or obsolescence.

Home mortgages and home equity loans and lines of credit are secured
by first or second trust deeds on a borrowers real estate property, typically their principal residence. These loans are dependant on a persons ability to regularly pay the principal and interest due on the loan and, secondarily, on the
value of real estate property that serves as collateral for the loan. Home mortgages are generally considered to involve a lower degree of risk than other loan categories because of the relationship of the loan amount to the value of the residential
real estate and a persons reluctance to forego their principal place of residence. Home real estate values however are not only affected by general economic conditions but also on local supply and demand. Installment loans and credit card
lines are also dependant on a persons ability to regularly pay principal and interest on a loan; however, these loans generally are not secured by collateral or, if they are secured, the collateral value can rapidly decline as is the case for
automobiles. A persons ability to service debt is highly dependant upon their continued employment or financial stability. Job loss, divorce, illness, bankruptcy are just a few of the risks that may affect a persons ability to service
their debt.

Since the risks in each category of loan changes based on a number of factors, it is not possible to state whether a
particular type of lending carries with it a greater or lesser degree of risk at any specific time in the economic cycle. In a stabilized economic environment it is generally considered that home mortgage loans have the least risk, followed by home
equity loans, multifamily property loans, commercial property loans, commercial loans and lines and finally construction loans. However, this ordering may vary from time to time and the degree of risk from the credits with the least risk to those
with the highest risk profile may expand or contract with the general economy.

We manage credit risk through Board approved policies and
procedures. These policies are reviewed and approved at least annually by the Directors. Lending policies provide us with a framework for consistent loan underwriting and a basis for sound credit decisions. Lending policies specify, among other
things, the parameters for the type or purpose of the loan, the required debt service coverage and the required collateral requirements. Credit limits are also established and certain loans require approval by the Directors Loan Committee. The
Directors Audit Committee also engages a third party to perform a credit review of the loan portfolio to ensure compliance with policies and assist in the evaluation of the credit risk inherent in the loan portfolio.



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##### Table of Contents

Loans

Total loans, excluding loans held for sale, increased 3 percent to $354.6 million at September 30, 2006 from $342.9 million at December 31, 2005. Purchases of adjustable rate home mortgage loans account for
most of the increase. The decline in the other categories reflect a slowing in business activity, borrower pre-payments and our decision to de-emphasize CFM activity.

Loans held for sale comprise multifamily and commercial loans originated by our new Commercial Mortgage Division as well as loans originated by our SBA department. Loans held for sale increased to $29.7 million at
September 30, 2006 from $11.6 million at June 30, 2006. There were no loans held for sale at March 31, 2006 or December 31, 2005. In the third quarter of 2006, we sold $6.8 million of CMD loans for a gain of $73,000. More
recently in the fourth quarter of 2006, we sold $26.4 million of CMD loans for a gain of $480,000. This sale and gain activity will be included in our 2006 fourth quarter results. We expect to continue to originate commercial and multifamily
property mortgages for sale into the secondary market. In addition, we originate SBA 7(a) loans and sell the guaranteed portion of the loan into the secondary market for a gain.

The following table presents the portfolio of loans.



|                            |  |                      |         |   |                     |   |         |  
|--------------------------- |  | -------------------- | ------- | - | ------------------- | - | ------- | -
|(in thousands)              |  | At September 30,2006 |         |   | At December 31,2005 |  
|Commercial mortgage         |  | $                    | 181,629 |   |                     | $ | 192,263 |  
|Multifamily mortgage        |  |                      | 19,369  |   |                     |   | 31,708  |  
|Construction                |  |                      | 37,161  |   |                     |   | 28,157  |  
|Commercial loans and lines  |  |                      | 57,007  |   |                     |   | 64,271  |  
|Home equity loans and lines |  |                      | 9,605   |   |                     |   | 8,689   |  
|Home mortgage               |  |                      | 47,626  |   |                     |   | 13,443  |  
|Installment & credit card   |  |                      | 2,203   |   |                     |   | 4,352   |  
|                            |  |                      |         |   |                     |   |         |  
|Total loans                 |  |                      | 354,600 |   |                     |   | 342,883 |  
|Allowance for loan losses   |  |                      | (3,692  | ) |                     |   | (4,105  | )
|                            |  |                      |         |   |                     |   |         |  
|Loans, net                  |  | $                    | 350,908 |   |                     | $ | 338,778 |  
|                            |  |                      |         |   |                     |   |         |  
|Loans held for sale         |  | $                    | 29,675  |   |                     | $ |        |  

The loan categories above are derived from bank regulatory reporting standards for loans secured
by real estate; however, a portion of the mortgage loans above are loans that we consider to be a commercial loan for which we have taken real estate collateral as additional support or from an abundance of caution. In these instances we are not
looking to the real property as its primary source of repayment, but rather as a secondary or tertiary source of repayment.

Commercial
mortgage loans, the largest segment of our portfolio, were 51 percent of total loans at September 30, 2006, down from 56 percent at December 31, 2005. Commercial mortgage loans are collateralized by many different commercial property
types. Our top three categories have been office, industrial, and retail, representing approximately 80 percent of commercial mortgage loans. In addition, most of our commercial property lending is in Ventura, Orange and Los Angeles counties.

Commercial mortgage loans are underwritten with a maximum loan-to-value of 80 percent and a minimum debt service coverage ratio of 1.15.
These criteria may become more stringent depending on the type of property. We focus on cash flow; consequently, regardless of the value of the collateral, the commercial real estate project must provide sufficient cash flow, or alternatively the
principals must supplement the project with other cash flow, to service the debt. We generally require the principals to guarantee the loan. We also stress-test commercial mortgage loans to determine the potential affect changes in
interest rates, vacancy rates, and lease or rent rates would have on the cash flow of the project. Additionally, at least on an annual basis, we require updates on the cash flow of the project and, where practicable, we visit the properties.

Multifamily residential mortgage loans were 5 percent of total loans at September 30, 2006 compared with 9 percent at
December 31, 2005. Multifamily mortgage loans are collateralized by apartments mostly located in our tri-county market area. Multifamily mortgage loans are underwritten in a fashion similar to commercial mortgage loans described above.



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##### Table of Contents

Commercial loans represent the next largest category of loans and were 16 percent of total loans at
September 30, 2006 compared with 19 percent at December 31, 2005. Commercial loans are made for the purpose of providing working capital, equipment purchases and business expansion. Commercial loans may be unsecured or secured by assets
such as equipment, inventory, accounts receivables, and real property. Personal guarantees of the business owner may also be present. Additionally, these loans may also have partial guarantees from the U.S. Small Business Administration
(SBA) or other federal or state agencies. The commercial loan portfolio is made up of broadly diversified business sectors with the largest sectors in real estate/construction, finance and insurance, healthcare, manufacturing and
professional services.

Commercial loans are underwritten with maturities not to exceed seven years and we generally require the loan to be
fully amortized within the term of the loan. Traditional working capital lines are underwritten for a 12 month period and have a 30-day out-of-debt requirement. Accounts receivable and inventory financing revolving lines of credit have an annual
maturity date, a maximum advance rate, and an annual field audit for lines of $200,000 or more. Field audits are performed by third-party vendors. The maximum advance rate for accounts receivable is 75 percent and the maximum advance rate for
eligible inventory is 25 percent.

We also have a portfolio of higher-yielding, asset-based loans that involves us purchasing customer
invoices on a recourse basis. This product is called Cash Flow Maximizer (CFM). Using software, technical and marketing support provided by a third-party vendor, we are able to purchase customer invoices, with full recourse,
at a discount and pay the customer 98.5 to 95.0 percent of the face value of the invoice. The amount is repaid, generally in 30 to 45 days, by the merchant remitting payment of the invoice directly to us. The discount is recognized in income at the
time of purchase. We further reduce the purchase amount to the customer by an average of 10 percent of the face value of the invoice; setting aside this reserve amount in a restricted interest-bearing savings account held by us to cover any losses
on any purchase. Additionally, as part of our normal analysis of the adequacy of our allowance for loan losses, we allocate approximately one percent to outstanding CFM balances. As of September 30, 2006 , there were 19 active accounts with
outstanding balances of $6.5 million. At December 31, 2005, there were 20 active accounts with outstanding balances of $8.7 million. The decline reflects our decision to de-emphasize this activity. CFM is included in the commercial loan
category in the loan distribution table.

Construction loans represent 10 percent of total loans at September 30, 2006 compared with 8
percent at December 31, 2005. Construction loans represent single-family and commercial building projects and are approximately evenly divided between the two types. Construction loans are typically short term, with maturities ranging from 12
to 18 months. For commercial projects, we have a maximum loan-to-value requirement of 70 percent of the FIRREA conforming appraised value. For residential projects, the maximum loan-to-value ranges from 80 percent on loans under $500,000 to 70
percent on loans of $1,000,000 or more. We require the borrower to provide in cash at least 20 percent of the cost of the project. At the borrowers expense, we use a third party vendor for funds control, lien releases and inspections. In
addition, we regularly monitor the marketplace and the economy for evidence of deterioration in real estate values.



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##### Table of Contents

The following table presents the scheduled maturities of fixed and adjustable rate loans.



|                                      |  |                    |         |                           |   |                 |  |       |         |  |   |        
|------------------------------------- |  | ------------------ | ------- | ------------------------- | - | --------------- |  | ----- | ------- |  | - | -------
|                                      |  | September 30, 2006
|(in thousands)                        |  | One yearor less    |         | After oneyear tofiveyears |   | After fiveyears |  | Total
|Fixed rate loan                       |  |                    |         |                           |   |                 |  |       |         |  |   |        
|Commercial mortgage                   |  | $                  | 373     |                           | $ | 4,540           |  | $     | 86      |  | $ | 4,999  
|Multifamily mortgage                  |  |                    |        |                           |   |                |  |       | 1,573   |  |   | 1,573  
|Commercial loans and lines            |  |                    | 6,856   |                           |   | 2,833           |  |       |        |  |   | 9,689  
|Construction                          |  |                    |        |                           |   | 2,019           |  |       |        |  |   | 2,019  
|Home equity loans                     |  |                    |        |                           |   |                |  |       |        |  |   |       
|Home mortgage                         |  |                    |        |                           |   |                |  |       | 1,004   |  |   | 1,004  
|Installment & credit card             |  |                    | 63      |                           |   | 243             |  |       |        |  |   | 306    
|                                      |  |                    |         |                           |   |                 |  |       |         |  |   |        
|Total fixed rate loan maturities      |  |                    | 7,292   |                           |   | 9,635           |  |       | 2,663   |  |   | 19,590 
|                                      |  |                    |         |                           |   |                 |  |       |         |  |   |        
|Adjustable rate loan                  |  |                    |         |                           |   |                 |  |       |         |  |   |        
|Commercial mortgage                   |  |                    | 7,722   |                           |   | 25,551          |  |       | 135,454 |  |   | 168,727
|Multifamily mortgage                  |  |                    | 1,013   |                           |   | 2,365           |  |       | 22,057  |  |   | 25,435 
|Commercial loans and lines            |  |                    | 29,829  |                           |   | 10,608          |  |       | 7,423   |  |   | 47,860 
|Construction                          |  |                    | 34,893  |                           |   | 242             |  |       |        |  |   | 35,135 
|Home equity loans                     |  |                    | 2,147   |                           |   | 964             |  |       | 6,489   |  |   | 9,600  
|Home mortgage                         |  |                    | 1,559   |                           |   | 3,479           |  |       | 41,570  |  |   | 46,608 
|Installment & credit card             |  |                    | 869     |                           |   | 42              |  |       | 734     |  |   | 1,645  
|                                      |  |                    |         |                           |   |                 |  |       |         |  |   |        
|Total adjustable rate loan maturities |  |                    | 78,032  |                           |   | 43,251          |  |       | 213,727 |  |   | 335,010
|                                      |  |                    |         |                           |   |                 |  |       |         |  |   |        
|Total maturities                      |  | $                  | 85,324  |                           | $ | 52,886          |  | $     | 216,390 |  | $ | 354,600
|                                      |  |                    |         |                           |   |                 |  |       |         |  |   |        
|                                      | 
|                                      |  | December 31, 2005 
|(in thousands)                        |  | One yearor less    |         | After oneyear tofiveyears |   | After fiveyears |  | Total
|Fixed rate loan                       |  |                    |         |                           |   |                 |  |       |         |  |   |        
|Commercial real estate                |  | $                  | 3,574   |                           | $ | 9,039           |  | $     | 9,311   |  | $ | 21,924 
|Commercial loans and lines            |  |                    | 620     |                           |   | 2,340           |  |       | 508     |  |   | 3,468  
|Construction                          |  |                    |        |                           |   |                |  |       |        |  |   |       
|Consumer                              |  |                    | 184     |                           |   | 345             |  |       |        |  |   | 529    
|Other                                 |  |                    |        |                           |   |                |  |       | 3,882   |  |   | 3,882  
|                                      |  |                    |         |                           |   |                 |  |       |         |  |   |        
|Total fixed rate loan maturities      |  |                    | 4,378   |                           |   | 11,724          |  |       | 13,701  |  |   | 29,803 
|                                      |  |                    |         |                           |   |                 |  |       |         |  |   |        
|Adjustable rate loan                  |  |                    |         |                           |   |                 |  |       |         |  |   |        
|Commercial real estate                |  |                    | 166,701 |                           |   | 30,575          |  |       | 1,300   |  |   | 198,576
|Commercial loans and lines            |  |                    | 69,777  |                           |   | 5,202           |  |       |        |  |   | 74,979 
|Construction                          |  |                    | 26,859  |                           |   |                |  |       |        |  |   | 26,859 
|Consumer                              |  |                    | 3,514   |                           |   | 426             |  |       |        |  |   | 3,940  
|Other                                 |  |                    | 5,583   |                           |   | 3,143           |  |       |        |  |   | 8,726  
|                                      |  |                    |         |                           |   |                 |  |       |         |  |   |        
|Total adjustable rate loan maturities |  |                    | 272,434 |                           |   | 39,346          |  |       | 1,300   |  |   | 313,080
|                                      |  |                    |         |                           |   |                 |  |       |         |  |   |        
|Total maturities                      |  | $                  | 276,813 |                           | $ | 51,070          |  | $     | 15,001  |  | $ | 342,883
|                                      |  |                    |         |                           |   |                 |  |       |         |  |   |        

Allowance for Loan Losses

We maintain an allowance for loan losses to provide for inherent losses in the loan portfolio. Additions to the allowance are established through a
provision charged to expense. Reductions to the allowance are established through a credit to expense. All loans which are judged to be uncollectible are charged against the allowance while any recoveries are credited to the allowance. It is our
policy to charge off any known losses at the time of determination. Any unsecured loan more than 90 days delinquent in payment of principal or interest and not in the process of collection is charged off in total. Secured loans are evaluated on a
case by case basis to determine the ultimate loss potential to us subsequent to the liquidation of collateral. In those cases where we are inadequately protected, a charge off will be made to reduce the loan balance to a level equal to the
liquidation value of the collateral.



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Our loan policy provides procedures designed to evaluate and assess the risk factors associated with our
loan portfolio, to enable us to assess such risk factors prior to granting new loans and to evaluate the sufficiency of the allowance for loan losses. We conduct an assessment of the allowance on a monthly basis and undertake a more critical
evaluation quarterly. At the time of the monthly review, the Board of Directors will examine and formally approve the adequacy of the allowance. The quarterly evaluation includes an assessment of the following factors: any external loan review and
any regulatory examination, estimated potential loss exposure on each pool of loans, concentrations of credit, value of collateral, the level of delinquency and non-accruals, trends in the portfolio volume, effects of any changes in the lending
policies and procedures, changes in lending personnel, present economic conditions at the local, state and national level, the amount of undisbursed off-balance sheet commitments, and a migration analysis of historical losses and recoveries for the
prior eight quarters.

We have experienced positive asset quality measures  low levels of delinquencies, low levels of nonaccrual
loans, and low levels of net charge-offs  for an extended period of time. For the first nine months of 2006 we had net loan recoveries of $9,000. For the year ended December 31, 2005, we had net loan recoveries of $136,000. For the five
years ended December 31, 2005, we had cumulative net loan charge-offs of $496,000. There were no nonaccrual loans at September 30, 2006 or at December 31, 2005. For the five years ended December 31, 2005, nonaccrual loans have
not exceeded 1.70 percent of total loans. We also have begun a critical evaluation of the probability of default, and the estimated loss given a default, by principal loan type. In light of this, as well as our evaluation of other relevant data, we
reduced the allowance for loan losses with a credit to operations of $450,000 for the third quarter of 2006. For the first nine months of 2006, the credit to operations totaled $297,000.

The ratio of the allowance for loan losses to loans was 1.04 percent at September 30, 2006 compared with 1.20 percent at December 31, 2005.
While we believe that our allowance for loan losses was adequate at September 30, 2006 and December 31, 2005, we cannot assure you that we will not further increase or decrease the allowance or that bank regulators will not require us to
increase or decrease the allowance.

The following table presents the allowance for loan losses.



|                                        |  |                                |       |                               |      |   |       |  |   |       |   |  |   |       |  
|--------------------------------------- |  | ------------------------------ | ----- | ----------------------------- | ---- | - | ----- |  | - | ----- | - |  | - | ----- | -
|                                        |  | Three MonthsEndedSeptember 30, |       | Nine MonthsEndedSeptember 30, |     
|(in thousands)                          |  | 2006                           |       |                               | 2005 |   | 2006  |  |   | 2005  |  
|Beginning balance                       |  | $                              | 4,209 |                               |      | $ | 2,593 |  | $ | 4,105 |   |  | $ | 2,346 |  
|Balance acquired in purchase            |  |                                |      |                               |      | $ | 1,184 |  |   |      |   |  | $ | 1,184 |  
|Provision to (reduction in) allowance   |  |                                | (450  | )                             |      |   | 122   |  |   | (297  | ) |  |   | 366   |  
|Loans charged-off                       |  |                                | (25   | )                             |      |   |      |  |   | (37   | ) |  |   | (73   | )
|Transfer to undisbursed commitment      |  |                                | (50   | )                             |      |   |      |  |   | (125  | ) |  |   |      |  
|Recoveries on loans charged-off         |  |                                | 8     |                               |      |   | 96    |  |   | 46    |   |  |   | 172   |  
|                                        |  |                                |       |                               |      |   |       |  |   |       |   |  |   |       |  
|Ending balance                          |  | $                              | 3,692 |                               |      | $ | 3,995 |  | $ | 3,692 |   |  | $ | 3,995 |  
|                                        |  |                                |       |                               |      |   |       |  |   |       |   |  |   |       |  
|Allowance to loans                      |  |                                |       |                               |      |   |       |  |   | 1.04  | % |  |   | 1.22  | %
|Accruing loans past due 90 days or more |  |                                |       |                               |      |   |       |  | $ | 312   |   |  | $ |      |  
|Nonaccrual loans                        |  |                                |       |                               |      |   |       |  | $ |      |   |  | $ |      |  

The allowance for losses on undisbursed commitments was $325,000 at September 30, 2006
compared with $200,000 at December 31, 2005. There have been no charges to the allowance since its inception. The allowance for losses on undisbursed commitments is included as an other liability category on the balance sheet.



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##### Table of Contents

The following table presents the allocation of the allowance to each loan category and the percentage
relationship of loans in each category to total loans.



|                            |  |                    |       |                                        |                   |   |        |   |                                        |  |     |  
|--------------------------- |  | ------------------ | ----- | -------------------------------------- | ----------------- | - | ------ | - | -------------------------------------- |  | --- | -
|                            |  | September 30, 2006 |       |                                        | December 31, 2005 |  
|(in thousands)              |  | Amount             |       | Percentof LoansinCategoryto TotalLoans |                   |   | Amount |   | Percentof LoansinCategoryto Totalloans | 
|Commercial mortgage         |  | $                  | 1,146 |                                        | 49                | % |        | $ | 1,273                                  |  | 39  | %
|Mulitfamily mortgage        |  |                    | 172   |                                        | 8                 | % |        |   | 159                                    |  | 5   | %
|Commercial loans            |  |                    | 927   |                                        | 10                | % |        |   | 1,062                                  |  | 32  | %
|Construction loans          |  |                    | 806   |                                        | 16                | % |        |   | 620                                    |  | 19  | %
|Home equity loans           |  |                    | 58    |                                        | 3                 | % |        |   | 43                                     |  | 1   | %
|Home mortgage               |  |                    | 286   |                                        | 13                | % |        |   | 67                                     |  | 2   | %
|Installment and credit card |  |                    | 47    |                                        | 1                 | % |        |   | 60                                     |  | 2   | %
|                            |  |                    |       |                                        |                   |   |        |   |                                        |  |     |  
|Subtotal                    |  | $                  | 3,442 |                                        |                   |   |        | $ | 3,284                                  |  |     |  
|Unallocated                 |  |                    | 250   |                                        |                   |   |        |   | 821                                    |  |     |  
|                            |  |                    |       |                                        |                   |   |        |   |                                        |  |     |  
|                            |  |                    |       |                                        |                   |   |        |   |                                        |  |     |  
|Total                       |  | $                  | 3,692 |                                        | 100               | % |        | $ | 4,105                                  |  | 100 | %
|                            |  |                    |       |                                        |                   |   |        |   |                                        |  |     |  

The allocation presented above should not be interpreted as an indication that charges to the
allowance will be incurred in these amounts or proportions. The amounts attributed to each loan category are based on the analysis described above.

Investing, funding and liquidity risk

Liquidity risk is the risk to earnings or capital arising from the inability
to meet obligations when they come due without incurring unacceptable losses. Liquidity risk includes the inability to manage unplanned decreases or changes in funding sources as well as the failure to recognize or address changes in market
conditions that affect the ability to liquidate assets quickly and with minimal loss in value.

We manage liquidity risk through Board
approved policies and procedures. These policies are reviewed and approved at least annually by the Directors. Liquidity risk policies provide us with a framework for consistent evaluation of risk and establish risk tolerance parameters.
Managements Asset and Liability Committee meets regularly to evaluate liquidity risk, review and establish deposit interest rates, review loan and deposit in-flows and out-flows and reports quarterly to the Directors Funds Management
Committee on compliance with policies. The Directors Audit Committee also engages a third party to perform a review of managements asset and liability practices to ensure compliance with policies.

We enjoy a large base of core deposits (representing checking, savings and small balance certificates of deposit). At September 30, 2006, core
deposits totaled $291.0 million, down 2 percent from $298.3 million at December 31, 2005. Core deposits represent a significant low-cost source of funds that support our lending activities and represent a key part of our funding strategy. We
seek and stress the importance of both loan and deposit relationships with customers in our business plans.

Alternative funding sources
include large balance certificates of deposits, federal funds purchased from other institutions, and borrowings.

Large balance
certificates of deposits are not central to our funding strategy; however, we have participated in the State of California time deposit program, which began in 1977, for several years. The time deposit program is one element of a pooled investment
account managed by the State Treasurer for the benefit of the State of California and all participating local agencies. The pooled investment account had approximately $60 billion in investments of which approximately $7 billion represented time
deposits placed at various financial institutions. At September 30, 2006, State of California time deposits placed with us, with original maturities of three months, were $30.0 million compared with $18.0 million at December 31, 2005. The
increase in these deposits was used to off-set the anticipated non-renewal of certificates of deposits acquired in the business combination. We believe that the State Treasurer will continue this program; we also believe that we have the ability to
establish large balance certificates of deposit rates that will enable us to attract, replace, or retain those deposits accepted in our local market area if it becomes necessary under a modified funding strategy.



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We, as a member of the FHLB, have access to borrowing arrangements with a maximum available borrowing of
approximately $156.4 million. Borrowings under these arrangements are collateralized with our FHLB stock as well as with our loans and securities. As of September 30, 2006, we had borrowings outstanding with the FHLB of $50.1 million compared
with $36.3 million as of December 31, 2005. The increase in borrowings was used to support loan growth.

In addition, we have lines of
credit with three other financial institutions providing for federal funds facilities up to a maximum of $14.0 million. The lines of credit support short-term liquidity needs and cannot be used for more than 15 consecutive days. These lines are
unsecured, have no formal maturity date and can be revoked at any time by the granting institutions. There were no borrowings under these lines of credit at September 30, 2006.

We also maintain a secured borrowing facility of $800,000 with the Federal Reserve Bank of San Francisco. There were no borrowings under this facility at
September 30, 2006.

Federal funds sold to other institutions provide an immediate source of liquidity. The securities portfolio also
provides a source of liquidity through the periodic remittance of interest and principal. We had no Federal funds sold at September 30, 2006 compared with $306,000 at December 31, 2005.

Securities

We purchase
securities to generate interest income and to assist in the management of liquidity risk. Securities are classified as available-for-sale for accounting purposes and, as such, are recorded at their fair or market values in the balance
sheet. Fair values are based on quoted market prices. Changes in the fair value of securities (that is, unrealized holding gains or losses) are reported as other comprehensive income, net of tax and carried as accumulated comprehensive
income or loss within shareholders equity until realized. Securities were $65.7 million at September 30, 2006 compared with $73.4 million at December 31, 2005.

The following table presents securities, at amortized cost, by maturity distribution and weighted average yield.



|                                                  |  |                       |       |   |                           |   |        |                            |  |   |              |   |  |       |       |   |  |   |        |  
|------------------------------------------------- |  | --------------------- | ----- | - | ------------------------- | - | ------ | -------------------------- |  | - | ------------ | - |  | ----- | ----- | - |  | - | ------ | -
|                                                  |  | At September 30, 2006 |      
|(in thousands)                                    |  | Oneyear orless        |       |   | After oneyear tofiveyears |   |        | Afterfiveyears toten years |  |   | Overtenyears |   |  | Total |      
|Maturity distribution                             |  |                       |       |   |                           |   |        |                            |  |   |              |   |  |       |       |   |  |   |        |  
|U.S. Treasury notes                               |  | $                     | 1,499 |   |                           | $ | 1,003  |                            |  | $ |             |   |  | $     |      |   |  | $ | 2,502  |  
|U.S. government agency notes                      |  |                       | 3,958 |   |                           |   | 5,008  |                            |  |   |             |   |  |       |      |   |  |   | 8,966  |  
|U.S. government agency mortgage-backed securities |  |                       | 1,484 |   |                           |   | 29,603 |                            |  |   | 6,121        |   |  |       | 1,114 |   |  |   | 38,322 |  
|Collateralized mortgage obligations               |  |                       |      |   |                           |   | 957    |                            |  |   | 3,075        |   |  |       |      |   |  |   | 4,032  |  
|Municipal securities                              |  |                       |      |   |                           |   | 834    |                            |  |   | 5,628        |   |  |       | 6,651 |   |  |   | 13,113 |  
|                                                  |  |                       |       |   |                           |   |        |                            |  |   |              |   |  |       |       |   |  |   |        |  
|Total                                             |  | $                     | 6,941 |   |                           | $ | 37,405 |                            |  | $ | 14,824       |   |  | $     | 7,765 |   |  | $ | 66,935 |  
|                                                  |  |                       |       |   |                           |   |        |                            |  |   |              |   |  |       |       |   |  |   |        |  
|Weighted average yield                            |  |                       |       |   |                           |   |        |                            |  |   |              |   |  |       |       |   |  |   |        |  
|U.S. Treasury notes                               |  |                       | 2.94  | % |                           |   | 3.30   | %                          |  |   |             |   |  |       |      |   |  |   | 3.09   | %
|U.S. government agency notes                      |  |                       | 3.90  | % |                           |   | 4.02   | %                          |  |   |             |   |  |       |      |   |  |   | 3.97   | %
|U.S. government agency mortgage-backed securities |  |                       | 4.07  | % |                           |   | 4.00   | %                          |  |   | 4.46         | % |  |       | 5.89  | % |  |   | 4.13   | %
|Collateralized mortgage obligations               |  |                       |      |   |                           |   | 4.93   | %                          |  |   | 4.81         | % |  |       |      |   |  |   | 4.84   | %
|Municipal securities                              |  |                       |      |   |                           |   | 5.74   | %                          |  |   | 5.54         | % |  |       | 6.13  | % |  |   | 5.82   | %
|                                                  |  |                       |       |   |                           |   |        |                            |  |   |              |   |  |       |       |   |  |   |        |  
|Total                                             |  |                       | 3.73  | % |                           |   | 4.19   | %                          |  |   | 4.95         | % |  |       | 6.09  | % |  |   | 4.23   | %
|                                                  |  |                       |       |   |                           |   |        |                            |  |   |              |   |  |       |       |   |  |   |        |  



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|                                                  |  |                      |        |   |                           |   |        |                           |  |   |              |   |  |       |       |   |  |   |        |  
|------------------------------------------------- |  | -------------------- | ------ | - | ------------------------- | - | ------ | ------------------------- |  | - | ------------ | - |  | ----- | ----- | - |  | - | ------ | -
|                                                  |  | At December 31, 2005 |       
|(in thousands)                                    |  | One yearor less      |        |   | After oneyear tofiveyears |   |        | Afterfiveyears totenyears |  |   | Overtenyears |   |  | Total |      
|Maturity distribution                             |  |                      |        |   |                           |   |        |                           |  |   |              |   |  |       |       |   |  |   |        |  
|U.S. Treasury notes                               |  | $                    | 4,524  |   |                           | $ | 2,452  |                           |  | $ |             |   |  | $     |      |   |  | $ | 6,976  |  
|U.S. government agency notes                      |  |                      | 5,779  |   |                           |   | 4,597  |                           |  |   |             |   |  |       |      |   |  |   | 10,376 |  
|U.S. government agency mortgage-backed securities |  |                      |       |   |                           |   | 41,053 |                           |  |   | 2,810        |   |  |       | 1,226 |   |  | $ | 45,089 |  
|Collateralized mortgage obligations               |  |                      |       |   |                           |   |       |                           |  |   | 3,414        |   |  |       |      |   |  |   | 3,414  |  
|State and municipal securities                    |  |                      | 100    |   |                           |   | 679    |                           |  |   | 3,525        |   |  |       | 4,875 |   |  |   | 9,179  |  
|                                                  |  |                      |        |   |                           |   |        |                           |  |   |              |   |  |       |       |   |  |   |        |  
|Total                                             |  | $                    | 10,403 |   |                           | $ | 48,781 |                           |  | $ | 9,749        |   |  | $     | 6,101 |   |  | $ | 75,034 |  
|                                                  |  |                      |        |   |                           |   |        |                           |  |   |              |   |  |       |       |   |  |   |        |  
|Weighted average yield                            |  |                      |        |   |                           |   |        |                           |  |   |              |   |  |       |       |   |  |   |        |  
|U.S. Treasury notes                               |  |                      | 3.11   | % |                           |   | 4.19   | %                         |  |   |             |   |  |       |      |   |  |   | 3.50   | %
|U.S. government agency notes                      |  |                      | 3.25   | % |                           |   | 3.50   | %                         |  |   |             |   |  |       |      |   |  |   | 3.36   | %
|U.S. government agency mortgage-backed securities |  |                      |       |   |                           |   | 3.74   | %                         |  |   | 4.64         | % |  |       | 5.41  | % |  |   | 3.84   | %
|Collateralized mortgage obligations               |  |                      |       |   |                           |   |       |                           |  |   | 4.79         | % |  |       |      |   |  |   | 4.79   | %
|State and municipal securities                    |  |                      | 8.03   | % |                           |   | 5.69   | %                         |  |   | 5.45         | % |  |       | 6.00  | % |  |   | 5.79   | %
|                                                  |  |                      |        |   |                           |   |        |                           |  |   |              |   |  |       |       |   |  |   |        |  
|Total                                             |  |                      | 3.24   | % |                           |   | 3.77   | %                         |  |   | 4.99         | % |  |       | 5.88  | % |  |   | 4.03   | %
|                                                  |  |                      |        |   |                           |   |        |                           |  |   |              |   |  |       |       |   |  |   |        |  

Securities, at amortized cost, declined 11 percent to $66.9 million at September 30, 2006
from $75.0 million at December 31, 2005. The change in securities reflects the principal pay-downs on mortgage-backed securities and the sale of a U. S. Treasury securities.

Net unrealized holding losses at September 30, 2006 and December 31, 2005 were $1.2 and $1.6 million, respectively. As a percentage of
securities, at amortized cost, unrealized holding losses were 1.83 percent and 2.15 percent at the end of each respective period. Securities are comprised largely of U.S. government agency obligations and mortgage-backed securities and California
municipal general obligation bonds. We have evaluated the unrealized losses of these securities and determined, as of September 30, 2006, that they were temporary and were related to the fluctuation in market interest rates since purchase.

Deposits

We
primarily accept deposits of small businesses located principally in Ventura, Orange and Los Angeles Counties. Core deposits (representing checking, savings and small balance certificates of deposit (balances under $100,000)) averaged $290.2 million
for the nine months ended September 30, 2006, up 38 percent from $210.2 million for the same period last year. Core deposits represent a significant low-cost source of funds that support our lending activities.

The following tables present the average balance and the average rate paid on each deposit category for the periods indicated.



|                                    |  |                                 |         |      |      |   |                |   |         |  |      |  
|----------------------------------- |  | ------------------------------- | ------- | ---- | ---- | - | -------------- | - | ------- |  | ---- | -
|                                    |  | Nine months ended September 30, |        
|                                    |  | 2006                            |         |      | 2005 |  
|(in thousands)                      |  | AverageBalance                  |         | Rate |      |   | AverageBalance |   | Rate    | 
|Core deposits                       |  |                                 |         |      |      |   |                |   |         |  |      |  
|Noninterest bearing demand deposits |  | $                               | 102,195 |      |     |   |                | $ | 93,958  |  |     |  
|Interest checking                   |  |                                 | 21,135  |      | 0.44 | % |                |   | 20,148  |  | 0.10 | %
|Savings accounts                    |  |                                 | 81,807  |      | 1.98 | % |                |   | 63,584  |  | 0.82 | %
|Time deposits less than $100,000    |  |                                 | 85,056  |      | 4.00 | % |                |   | 32,515  |  | 2.40 | %
|                                    |  |                                 |         |      |      |   |                |   |         |  |      |  
|Total core deposits                 |  |                                 | 290,193 |      | 2.72 | % |                |   | 210,205 |  | 1.00 | %
|                                    |  |                                 |         |      |      |   |                |   |         |  |      |  
|Noncore deposits                    |  |                                 |         |      |      |   |                |   |         |  |      |  
|Time deposits of $100,000 or more   |  |                                 | 94,941  |      | 4.62 | % |                |   | 23,711  |  | 2.64 | %
|                                    |  |                                 |         |      |      |   |                |   |         |  |      |  
|Total core and noncore deposits     |  | $                               | 385,134 |      | 2.34 | % |                | $ | 233,916 |  | 0.83 | %
|                                    |  |                                 |         |      |      |   |                |   |         |  |      |  



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Large balance certificates of deposits (balances of $100,000 or more) totaled $99.5 million at
September 30, 2006, up from $74.0 million at December 31, 2005. A portion of these large balance time deposits represent deposits placed by the State of California with the Bank. The remainder represent time deposits accepted from
customers in our market area. State of California time deposits represent $12.0 million of the increase since year end; time deposits from customers in our market area represent the remaining increase of $13.5 million. There were no broker deposits
during or as of any period presented.

The following table presents the maturity of large balance certificates of deposits for the periods
indicated.



|                                     |  |                    |        |                    |                   |   |        |   |                    |  |     |  
|------------------------------------ |  | ------------------ | ------ | ------------------ | ----------------- | - | ------ | - | ------------------ |  | --- | -
|                                     |  | September 30, 2006 |        |                    | December 31, 2005 |  
|(in thousands)                       |  | Amount             |        | Percentageof total |                   |   | Amount |   | Percentageof total | 
|Three months or less                 |  | $                  | 42,125 |                    | 43                | % |        | $ | 28,960             |  | 39  | %
|Over three months through six months |  |                    | 22,389 |                    | 22                | % |        |   | 19,947             |  | 27  | %
|Over six months through one year     |  |                    | 26,342 |                    | 26                | % |        |   | 9,358              |  | 13  | %
|Over one year                        |  |                    | 8,667  |                    | 9                 | % |        |   | 15,753             |  | 21  | %
|                                     |  |                    |        |                    |                   |   |        |   |                    |  |     |  
|Total                                |  | $                  | 99,523 |                    | 100               | % |        | $ | 74,018             |  | 100 | %
|                                     |  |                    |        |                    |                   |   |        |   |                    |  |     |  

Borrowings

First California Bank is a member of the FHLB. Membership allows us to borrow, approximately $156.4 million at September 30, 2006, to meet funding
needs and otherwise assist in the management of liquidity risk. Borrowings with the FHLB are collateralized with our investment in FHLB stock as well as with loans or securities from time to time. At September 30, 2006, our investment in FHLB
stock totaled $2.6 million compared with $2.4 million at December 31, 2005. The change in the amount of FHLB coincides with the change in the amount of borrowings.

The following table presents the amounts and weighted average interest rate of FHLB advances.



|                                                              |  |                                      |        |                               |                              |   |                               |   |                               |  |      |  
|------------------------------------------------------------- |  | ------------------------------------ | ------ | ----------------------------- | ---------------------------- | - | ----------------------------- | - | ----------------------------- |  | ---- | -
|                                                              |  | Nine Months Ended September 30, 2006 |        |                               | Year Ended December 31, 2005 |  
|(in thousands)                                                |  | Federal HomeLoan BankAdvances        |        | Weighted averageinterest rate |                              |   | Federal HomeLoan BankAdvances |   | Weighted averageinterest rate | 
|Amount outstanding at end of period                           |  | $                                    | 50,111 |                               | 5.03                         | % |                               | $ | 36,319                        |  | 3.70 | %
|Maximum amount outstanding at any month-end during the period |  | $                                    | 54,084 |                               | 4.37                         | % |                               | $ | 47,566                        |  | 3.39 | %
|Average amount outstanding during the period                  |  | $                                    | 37,005 |                               | 4.27                         | % |                               | $ | 35,202                        |  | 3.71 | %

The following table presents the maturities for FHLB advances at September 30, 2006.



|                   |  |        |        |              |      |                             |      |  
|------------------ |  | ------ | ------ | ------------ | ---- | --------------------------- | ---- | -
|(in thousands)     |  | Amount |        | MaturityYear |      | WeightedAverageInterestRate |     
|Overnight advances |  | $      | 23,861 |              | 2006 |                             | 5.47 | %
|Term advances      |  |        | 3,500  |              | 2006 |                             | 4.46 | %
|Term advances      |  |        | 12,250 |              | 2007 |                             | 4.33 | %
|Term advances      |  |        | 7,500  |              | 2008 |                             | 4.95 | %
|Term advances      |  |        | 3,000  |              | 2009 |                             | 5.19 | %
|                   |  |        |        |              |      |                             |      |  
|                   |  | $      | 50,111 |              |      |                             |      |  
|                   |  |        |        |              |      |                             |      |  



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Capital resources

The Board of Directors recognizes that a strong capital position is vital to growth, continued profitability, and depositor and investor confidence. The
policy of the Board of Directors is to maintain sufficient capital at not less than the well-capitalized thresholds established by banking regulators. We have not paid cash or stock dividends since 2001.

The following tables present the capital amounts and ratios of FCB Bancorp with a comparison to the minimum ratios for the periods indicated.



|                                         |  |        |  |       |                             |  |        |  |       |      |  
|---------------------------------------- |  | ------ |  | ----- | --------------------------- |  | ------ |  | ----- | ---- | -
|                                         |  | Actual |  |       | For CapitalAdequacyPurposes | 
|(in thousands)                           |  | Amount |  | Ratio |                             |  | Amount |  | Ratio |     
|September 30, 2006                       |  |        |  |       |                             |  |        |  |       |      |  
|Total capital (to risk weighted assets)  |  | 47,266 |  | 11.88 | %                           |  | 31,829 |  | 3     | 8.00 | %
|Tier I capital (to risk weighted assets) |  | 43,249 |  | 10.87 | %                           |  | 15,915 |  | 3     | 4.00 | %
|Tier I capital (to average assets)       |  | 43,249 |  | 8.71  | %                           |  | 14,896 |  | 3     | 3.00 | %
|                                         |  |       
|                                         |  | Actual |  |       | For CapitalAdequacyPurposes | 
|                                         |  | Amount |  | Ratio |                             |  | Amount |  | Ratio |     
|December 31, 2005                        |  |        |  |       |                             |  |        |  |       |      |  
|Total capital (to risk weighted assets)  |  | 44,545 |  | 11.74 | %                           |  | 30,352 |  | 3     | 8.00 | %
|Tier I capital (to risk weighted assets) |  | 40,239 |  | 10.60 | %                           |  | 15,181 |  | 3     | 4.00 | %
|Tier I capital (to average assets)       |  | 40,239 |  | 8.69  | %                           |  | 13,889 |  | 3     | 3.00 | %



31



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##### Table of Contents

The following tables present the capital amounts and ratios of First California Bank with a comparison to
the minimum ratios for the periods indicated.



|                                         |  |        |  |       |                              |  |        |                                                              |       |      |   |        |        |       |   |       |  
|---------------------------------------- |  | ------ |  | ----- | ---------------------------- |  | ------ | ------------------------------------------------------------ | ----- | ---- | - | ------ | ------ | ----- | - | ----- | -
|                                         |  | Actual |  |       | For CapitalAdequacy Purposes |  |        | To be WellCapitalized UnderPrompt CorrectiveAction Provision |      
|(in thousands)                           |  | Amount |  | Ratio |                              |  | Amount |                                                              | Ratio |      |   | Amount |        | Ratio |  
|September 30, 2006                       |  |        |  |       |                              |  |        |                                                              |       |      |   |        |        |       |   |       |  
|Total capital (to risk weighted assets)  |  | 46,757 |  | 11.77 | %                            |  | 31,781 |                                                              | 3     | 8.00 | % |        | 39,726 |       | 3 | 10.00 | %
|Tier I capital (to risk weighted assets) |  | 42,740 |  | 10.76 | %                            |  | 15,888 |                                                              | 3     | 4.00 | % |        | 23,833 |       | 3 | 6.00  | %
|Tier I capital (to average assets)       |  | 42,740 |  | 8.85  | %                            |  | 19,317 |                                                              | 3     | 4.00 | % |        | 24,147 |       | 3 | 5.00  | %
|                                         |  |        | 
|                                         |  | Actual |  |       | For CapitalAdequacy Purposes |  |        | To be WellCapitalized UnderPrompt CorrectiveAction Provision |      
|                                         |  | Amount |  | Ratio |                              |  | Amount |                                                              | Ratio |      |   | Amount |        | Ratio |  
|December 31, 2005                        |  |        |  |       |                              |  |        |                                                              |       |      |   |        |        |       |   |       |  
|Total capital (to risk weighted assets)  |  | 43,900 |  | 11.62 | %                            |  | 30,224 |                                                              | 3     | 8.00 | % |        | 37,780 |       | 3 | 10.00 | %
|Tier I capital (to risk weighted assets) |  | 39,595 |  | 10.48 | %                            |  | 15,113 |                                                              | 3     | 4.00 | % |        | 22,669 |       | 3 | 6.00  | %
|Tier I capital (to average assets)       |  | 39,595 |  | 8.88  | %                            |  | 17,836 |                                                              | 3     | 4.00 | % |        | 22,294 |       | 3 | 5.00  | %

Dividends declared by the Bank to FCB in any calendar year may not, without the approval of state
banking regulators, exceed the lesser of the Banks retained earnings or the sum of net income for the three previous years less dividend paid. At September 30, 2006, the Bank had approximately $2.7 million available for dividends under
these restrictions.

Commitments, Contingent Liabilities, Contractual Obligations and Off-Balance Sheet Arrangements

In the normal course of business, we make commitments to extend credit or issues letters of credit to customers. These commitments generally are not
recognized in the balance sheet. These commitments do involve, to varying degrees, elements of credit risk; however, we use the same credit policies and procedures as we do for on-balance sheet credit facilities. Commitments to extend credit totaled
$76.9 million at September 30, 2006, compared with $79.1 million at December 31, 2005. Standby letters of credit were $1.0 million and $427,000 at September 30, 2006 and December 31, 2005, respectively.

The following is a schedule of our current contractual obligations by maturity or payment due date.



|                               |  |                    |        |                  |   |                   |  |                       |       |       |   |        |  |   |       
|------------------------------ |  | ------------------ | ------ | ---------------- | - | ----------------- |  | --------------------- | ----- | ----- | - | ------ |  | - | ------
|                               |  | September 30, 2006
|(in thousands)                 |  | LessThanOneYear    |        | One toThreeYears |   | Threeto FiveYears |  | GreaterThan FiveYears |       | Total
|FHLB overnight advances        |  | $                  | 23,861 |                  | $ |                  |  | $                     |      |       | $ |       |  | $ | 23,861
|FHLB term advances             |  |                    | 13,350 |                  |   | 12,900            |  |                       |      |       |   |       |  |   | 26,250
|Salary continuation benefits   |  |                    |       |                  |   |                  |  |                       |      |       |   | 404    |  |   | 404   
|Director post-service award    |  |                    |       |                  |   | 87                |  |                       |      |       |   |       |  |   | 87    
|Junior subordinated debentures |  |                    |       |                  |   |                  |  |                       |      |       |   | 10,310 |  |   | 10,310
|Operating lease obligations    |  |                    | 746    |                  |   | 1,426             |  |                       | 1,117 |       |   | 2,897  |  |   | 6,186 
|                               |  |                    |        |                  |   |                   |  |                       |       |       |   |        |  |   |       
|Total                          |  | $                  | 37,957 |                  | $ | 14,413            |  | $                     | 1,117 |       | $ | 13,611 |  | $ | 67,098
|                               |  |                    |        |                  |   |                   |  |                       |       |       |   |        |  |   |       



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|Item 3. | Quantitative and Qualitative Disclosures about Market Risk
|------- | ----------------------------------------------------------

Interest rate risk

Interest rate risk is the risk to earnings or capital arising from movements in interest rates.
Interest rate risk arises from differences between the timing of rate changes and the timing of cash flows (re-pricing risk), from changing the rate relationships among different yield curves affecting bank activities (basis risk), from changing
rate relationships across the spectrum of maturities (yield curve risk), and from interest-related options embedded in loans and products (options risk).

We manage interest risk through Board approved policies and procedures. These policies are reviewed and approved at least annually by the Directors. Interest rate risk policies provide management with a framework for
consistent evaluation of risk (a modified-gap analysis, an earnings-at-risk analysis and an economic value of equity analysis) and establish risk tolerance parameters. Managements Asset and Liability Committee meets regularly to evaluate
interest rate risk, engages a third party to assist in the measurement and evaluation of risk and reports quarterly to the Directors Funds Management Committee on compliance with policies. The Directors Audit Committee also engages a
third party to perform a review of managements asset and liability practices to ensure compliance with policies.

Our funding sources
are dominated by checking and savings accounts, which either have no interest rate or are re-priced infrequently. Our loan portfolio is dominated by loans that use the Wall Street Journal prime rate as an index. Our securities portfolio is comprised
chiefly of U.S. Agency mortgage-backed securities that are either fixed rate, adjustable or a hybrid. This composition produces a balance sheet that is generally asset-sensitive, that is as the general level of interest rates rise, net interest
income generally increases and as the general level of interest rates fall, net interest income generally decreases.

We focus on the net
re-pricing imbalances in the cumulative 1 year gap and the Board has established a policy of plus or minus 15 percent. The Board also has established a policy of plus or minus 30 percent for the cumulative 5 year gap. No policies have been
established for the cumulative 3 month gap or the gap beyond 5 years. The 1 year gap ratio and the 5 year gap ratio are within policy at September 30, 2006.

The following table presents earning assets and interest bearing funds by re-pricing intervals:



|                                                 |  |                                          |         |   |              |   |          |           |  |   |           |   |  |       |        |   |  |   |        
|------------------------------------------------ |  | ---------------------------------------- | ------- | - | ------------ | - | -------- | --------- |  | - | --------- | - |  | ----- | ------ | - |  | - | -------
|                                                 |  | September 30, 2006 By repricing interval
|(in thousands)                                   |  | 0-3Months                                |         |   | 4 - 12Months |   |          | 1-5 Years |  |   | > 5 Years |   |  | Total
|Loans                                            |  | $                                        | 215,206 |   |              | $ | 40,181   |           |  | $ | 122,526   |   |  | $     | 6,362  |   |  | $ | 384,275
|Securities                                       |  |                                          | 5,153   |   |              |   | 11,854   |           |  |   | 29,712    |   |  |       | 18,990 |   |  |   | 65,709 
|Federal funds sold                               |  |                                          |        |   |              |   |         |           |  |   |          |   |  |       |       |   |  |   |       
|                                                 |  |                                          |         |   |              |   |          |           |  |   |           |   |  |       |        |   |  |   |        
|Total earning assets                             |  |                                          | 220,359 |   |              |   | 52,035   |           |  |   | 152,238   |   |  |       | 25,352 |   |  |   | 449,984
|                                                 |  |                                          |         |   |              |   |          |           |  |   |           |   |  |       |        |   |  |   |        
|Deposits                                         |  |                                          | 98,997  |   |              |   | 152,461  |           |  |   | 38,533    |   |  |       |       |   |  |   | 289,991
|Junior subordinated debentures                   |  |                                          |        |   |              |   |         |           |  |   |          |   |  |       | 10,310 |   |  |   | 10,310 
|Borrowings                                       |  |                                          | 26,111  |   |              |   | 11,100   |           |  |   | 12,900    |   |  |       |       |   |  |   | 50,111 
|                                                 |  |                                          |         |   |              |   |          |           |  |   |           |   |  |       |        |   |  |   |        
|Total deposits and borrowings                    |  |                                          | 125,108 |   |              |   | 163,561  |           |  |   | 51,433    |   |  |       | 10,310 |   |  |   | 350,412
|                                                 |  |                                          |         |   |              |   |          |           |  |   |           |   |  |       |        |   |  |   |        
|Interest rate sensitivity gap                    |  | $                                        | 95,251  |   |              | $ | (111,526 | )         |  | $ | 100,805   |   |  | $     | 15,042 |   |  | $ | 99,572 
|                                                 |  |                                          |         |   |              |   |          |           |  |   |           |   |  |       |        |   |  |   |        
|Cumulative gap                                   |  | $                                        | 95,251  |   |              | $ | (16,275  | )         |  | $ | 84,530    |   |  | $     | 99,572 |   |  |   |        
|                                                 |  |                                          |         |   |              |   |          |           |  |   |           |   |  |       |        |   |  |   |        
|Cumulative gap as a percentage of earning assets |  |                                          | 21.17   | % |              |   | -3.62    | %         |  |   | 18.79     | % |  |       | 22.13  | % |  |   |        
|                                                 |  |                                          |         |   |              |   |          |           |  |   |           |   |  |       |        |   |  |   |        



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##### Table of Contents

|Item 4. | Controls and Procedures
|------- | -----------------------



| | (a) | Evaluation of Disclosure Controls and Procedures: An evaluation of the Companys disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities
Exchange Act of 1934) was carried out under the supervision and with the participation of the Companys Chief Executive Officer, Chief Financial Officer and several other members of the Companys senior management as of the end of the
period covered by this report. The Companys Chief Executive Officer and Chief Financial Officer concluded that the Companys disclosure controls and procedures as currently in effect are effective in ensuring that the information required
to be disclosed by the Company in the reports it files or submits under the Securities Exchange Act of 1934 is (i) accumulated and communicated to the Companys management (including the Chief Executive Officer and Chief Financial Officer)
in a timely manner, and (ii) recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) | Changes in Internal Controls: There was no change in the Companys internal control over financial reporting during the Companys most recently completed fiscal
quarter that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

PART II OTHER INFORMATION



|Item 1. | Legal Proceedings
|------- | -----------------

None



|Item 1A. | Risk factors
|-------- | ------------

There have been no material changes to FCB
Bancorps risk factors previously disclosed under the caption Risk Factors on page 16 of FCB Bancorps Form 10-K filed with the SEC on March 30, 2006, covering the fiscal year ended December 31, 2005.



|Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds
|------- | -----------------------------------------------------------

None



|Item 3. | Defaults Upon Senior Securities
|------- | -------------------------------

None



|Item 4. | Submission of Matters to a Vote of Security Holders:
|------- | ----------------------------------------------------

None



|Item 5. | Other information
|------- | -----------------

None



|Item 6. | Exhibits
|------- | --------

Exhibit Index:

|     |  |                                                                                                                                                                                                    
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     | 
|10.1 |  | Salary Continuation Agreement, dated May 11, 2006, with Romolo Santarosa (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended March 31, 2006 filed
by FCB Bancorp)
|     | 
|10.2 |  | Split Dollar Agreement, dated May 11,2006, with Romolo Santarosa (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended March 31, 2006 filed by FCB
Bancorp)        
|     | 
|10.3 |  | 409A Amendment to the First California Bank Salary Continuation Agreement for Chong Guk Kum (Incorporated by reference to the Current Report on Form 8-K filed by FCB Bancorp on June 7,
2006)     
|     | 
|10.4 |  | 409A Amendment to the First California Bank Salary Continuation Agreement for Thomas E. Anthony (Incorporated by reference to the Current Report on Form 8-K filed by FCB Bancorp on
June 7, 2006) 
|     | 
|31.1 |  | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                 
|     | 
|31.2 |  | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                 
|     | 
|32.1 |  | Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                 
|     | 
|32.2 |  | Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                 



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SIGNATURES

Pursuant to the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized:



|                                                |  |  |  |                  
|----------------------------------------------- |  |  |  | -----------------
|FCB BANCORP                                     |  |  |  |                  
|                                                |  | 
|/s/ C. G. Kum                                   |  |  |  | November 14, 2006
|C. G. Kum President and Chief Executive Officer |  |  |  |                  



|                                                                      |  |  |  |                  
|--------------------------------------------------------------------- |  |  |  | -----------------
|                                                                      |  | 
|/s/ Romolo Santarosa                                                  |  |  |  | November 14, 2006
|Romolo Santarosa Executive Vice President and Chief Financial Officer |  |  |  |                  



35