U.S. SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   FORM 10-QSB

/ X /    Quarterly Report under Section 13 or 15(d) of the Securities
         Exchange Act of 1934 For the Quarterly Period ended September 30, 2003.
                                                             ------------------

/   /    Transition report under Section 13 or 15(d) of the Securities
         Exchange Act For the transition period from            to            .
                                                     ----------    -----------
         Commission file number  0-28360.
                                 -------

                            IBW FINANCIAL CORPORATION
                 ----------------------------------------------
                 (Name of Small Business Issuer in its Charter)

       District of Columbia                                52-1943477
---------------------------------              ---------------------------------
   (State or other jurisdiction                (IRS Employer Identification No.)
of incorporation or organization)


                  4812 Georgia Avenue, NW, Washington, DC 20011
               ---------------------------------------------------
               (Address of Principal Executive Offices) (Zip Code)

                                  (202)722-2000
                ------------------------------------------------
                (Issuer's Telephone Number, Including Area Code)

                                       N/A
              -----------------------------------------------------
              (Former Name, Former Address, and Former Fiscal Year,
                          If Changed Since Last Report)

         Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file reports), and (2) has
been subject to such filing requirements for the past 90 days.

                              Yes  /X/      NO  / /

         State the number of shares outstanding of each of the issuer's classes
of common equity as of the latest practicable date: As of August 6, 2003, there
were 668,360 shares of the common stock $1.00 par value of IBW Financial
Corporation outstanding.

         Transitional Small Business Disclosure Format (check one)

                              Yes  / /      NO  /X/


<PAGE>



PART  I   FINANCIAL INFORMATION
          ---------------------

ITEM 1.   FINANCIAL STATEMENTS

                    IBW FINANCIAL CORPORATION AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS
              SEPTEMBER 30, 2003 (UNAUDITED) AND DECEMBER 31, 2002

<TABLE>
<CAPTION>
                                                           September 30,    December 31,
                                                               2003            2002
                                                           -------------    ------------
                                                               (dollars in thousands)
<S>                                                          <C>              <C>
ASSETS
     Cash and cash equivalents:
     Cash and due from banks                                 $ 11,547         $  8,890
     Federal funds sold                                         5,500            5,900
                                                             -------------------------
         Total cash and cash equivalents                       17,047           14,790
     Interest-bearing deposits in other banks                   5,832              887
     Investment securities available-for-sale,
       at fair value                                          116,393          137,235
     Loans receivable, net of allowance
       for loan losses of $2,851 and $3,059                   159,459          134,859
     Other real estate owned, net                                  37               --
     Bank premises and equipment, net                           3,467            3,455
     Bank owned life insurance                                  5,504               --
     Accrued interest receivable                                1,970            1,909
     Other assets                                               1,846            2,201
                                                             -------------------------
         TOTAL ASSETS                                         311,555          295,336
                                                             =========================
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
     Demand deposits                                         $ 69,939         $ 68,432
     Time and savings deposits                                180,775          168,754
                                                             -------------------------
         Total deposits                                      $250,714         $237,186
     Short term borrowings                                     28,157           25,084
     Long term borrowings                                       4,000            4,000
     Accrued expenses and other liabilities                     2,580            2,825
                                                             -------------------------
         Total liabilities                                    285,451          269,095
                                                             -------------------------
SHAREHOLDERS' EQUITY
     Preferred stock - $1 par value; 1,000,000
      authorized (500,000 voting and 500,000 nonvoting);
     20,000 series A nonvoting issued and outstanding,
     stated at liquidation value                                  500              500
     Common stock - $1 par value; 1,000,000 authorized;
      668,360 shares issued and outstanding                       668              668
     Paid in Capital                                            5,051            5,051
     Retained earnings                                         17,301           16,310
     Accumulated other comprehensive income                     2,584            3,712
                                                             -------------------------
         Total shareholders' equity                            26,104           26,241
                                                             -------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                   $311,555         $295,336
                                                             =========================
</TABLE>



Notes to Consolidated Financial Statements are an integral part of these
statements.


                                       2
<PAGE>


                    IBW FINANCIAL CORPORATION AND SUBSIDIARY
                        CONSOLIDATED STATEMENTS OF INCOME
                  NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                       Nine Months Ended September 30
                                                               ---------------------------------------------
                                                                           2003              2002
                                                               ---------------------------------------------
                                                               (dollars in thousands, except per share data)
<S>                                                                      <C>               <C>
INTEREST INCOME:
     Interest and fees on loans                                          $  8,456          $  8,267
     U.S. treasury securities                                                   8                14
     Obligations of U.S. government agencies and
       corporations                                                         1,634             1,815
     Collateralized mortgage obligations                                    1,618             2,502
     Obligations of states and political subdivisions                       1,181             1,102
     Bank balances and other securities                                        63                79
     Federal funds sold                                                        34               209
                                                                         ----------------------------
         Total interest income                                             12,994            13,988
                                                                         ----------------------------
INTEREST EXPENSE:
     Interest-bearing deposits                                              1,454             1,916
     Time certificates over $100,000                                          483               541
     Short-term borrowings                                                    192               371
     Long-term borrowings                                                     132               336
                                                                         ----------------------------
         Total interest expense                                             2,261             3,164
                                                                         ----------------------------
NET INTEREST INCOME                                                        10,733            10,824
PROVISION FOR LOAN LOSSES                                                     700                --
                                                                         ----------------------------
NET INTEREST INCOME AFTER PROVISION
       FOR LOAN LOSSES                                                     10,033            10,824
                                                                         ----------------------------
NONINTEREST INCOME
     Service charges on deposit accounts                                    2,401             2,235
     Other fee income                                                         752               684
     Gain on sales of investment securities                                   653               432
     Gain on sale of loans                                                     --                 6
     Other operating income                                                   136               168
                                                                         ----------------------------
         Total noninterest income                                           3,942             3,525
                                                                         ----------------------------
NONINTEREST EXPENSE
     Salaries and employee benefits                                         7,287             6,775
     Occupancy                                                                727               696
     Furniture and equipment                                                1,056               938
     Data processing                                                          576               657
     Stationary and supplies                                                  648               576
     Advertising                                                              164               157
     Other expenses                                                         1,749             2,339
                                                                         ----------------------------
         Total noninterest expense                                         12,207            12,138
                                                                         ----------------------------
INCOME BEFORE INCOME TAXES                                                  1,768             2,211

INCOME TAX PROVISION                                                          224               422
                                                                         ----------------------------
NET INCOME                                                               $  1,544          $  1,789
                                                                         ============================
BASIC & DILUTED NET INCOME PER COMMON SHARE                              $   2.28          $   2.65
                                                                         ============================
WEIGHTED AVERAGE COMMON SHARES                                            668,360           668,360
                                                                         ============================
</TABLE>

Notes to Consolidated Financial Statements are an integral part of these
statements.


                                       3
<PAGE>


                    IBW FINANCIAL CORPORATION AND SUBSIDIARY
                        CONSOLIDATED STATEMENTS OF INCOME
                 THREE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                 Three Months Ended Sept 30
                                                       ---------------------------------------------
                                                                   2003         2002
                                                       ---------------------------------------------
                                                       (dollars in thousands, except per share data)
<S>                                                             <C>          <C>
INTEREST INCOME:
     Interest and fees on loans                                 $   2,951    $   2,760
     U.S. treasury securities                                           2            5
     Obligations of U.S. government agencies and
       corporations                                                   520          595
     Collateralized mortgage obligations                              336          749
     Obligations of states and political subdivisions                 379          389
     Bank balances and other securities                                25           27
     Federal funds sold                                                 8           62
                                                              -------------------------------
       Total interest income                                        4,221        4,587
                                                              -------------------------------
INTEREST EXPENSE:
     Interest-bearing deposits                                        391          656
     Time certificates over $100,000                                  189          169
     Short-term borrowings                                             62          100
     Long-term borrowings                                              44           88
                                                              -------------------------------
         Total interest expense                                       686        1,013
                                                              -------------------------------
NET INTEREST INCOME                                                 3,535        3,574
PROVISION FOR LOAN LOSSES                                             400           --
                                                              -------------------------------
NET INTEREST INCOME AFTER PROVISION
       FOR LOAN LOSSES                                              3,135        3,574
                                                              -------------------------------
NONINTEREST INCOME
     Service charges on deposit and checking accounts                 777          735
     Other fee income                                                 266          218
     Gain on sales of investment securities                           156          152
     Gain on sale of loans                                             --            4
     Other operating income                                            76           69
                                                              -------------------------------
         Total noninterest income                                   1,275        1,178
                                                              -------------------------------
NONINTEREST EXPENSE
     Salaries and employee benefits                                 2,418        2,246
     Occupancy                                                        239          237
     Furniture and equipment                                          384          315
     Data processing                                                  179          207
     Stationary and supplies                                          195          197
     Advertising                                                       38           28
     Other expenses                                                   628          821
                                                              -------------------------------
         Total noninterest expense                                  4,081        4,051
                                                              -------------------------------
INCOME BEFORE INCOME TAXES                                            329          701

INCOME TAX PROVISION                                                  (12)         106
                                                              -------------------------------
NET INCOME                                                      $     341    $     595
                                                              ===============================
BASIC & DILUTED NET INCOME PER COMMON SHARE                     $    0.50    $    0.88
                                                              ===============================
WEIGHTED AVERAGE OF COMMON SHARES                                 668,360      668,360
                                                              ===============================
</TABLE>


Notes to Consolidated Financial Statements are an integral part of these
statements.


                                       4
<PAGE>



IBW FINANCIAL CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED) FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                                    ACCUMULATED
                                                                                                        OTHER
                                                                                                   COMPREHENSIVE     TOTAL
                                                        PREFERRED    COMMON     PAID IN    RETAINED    INCOME,    STOCKHOLDERS
                                                          STOCK       STOCK     CAPITAL    EARNINGS  NET OF TAX     EQUITY
                                                          -----       -----     -------    --------  ----------     ------
<S>                                                     <C>          <C>       <C>         <C>         <C>        <C>
BALANCES, JANUARY 1, 2003                               $    500     $   668   $  5,051    $ 16,310    $ 3,712    $  26,241
                                                                                                                  ---------
   Net income                                                 --                     --       1,544         --        1,544
   Other comprehensive income, net of tax
     unrealized gain on securities available for sale         --                     --          --     (1,128)      (1,128)
                                                                                                                  ---------
          Total comprehensive income                          --                     --          --         --          416

Cash dividends paid:
    Preferred stock $0.94 per share                                                            (19)         --          (19)
    Common stock $0.80 per share                              --          --        --        (534)         --         (534)
                                                        --------    --------   --------    --------                --------
BALANCES,  SEPTEMBER 30, 2003                           $    500    $    668   $  5,051    $ 17,301    $  2,584    $ 26,104
                                                        ========    ========   ========    ========    ========    ========
BALANCES, January 1, 2002                               $    500    $    668   $  5,051    $ 14,756    $  2,176    $ 23,151
                                                                                                                  ---------
   Net income                                                 --                     --      1,789          --        1,789
   Other comprehensive income, net of tax
     unrealized gain on securities available for sale         --                     --         --       2,114        2,114
                                                                                                                  ---------
          Total comprehensive income                          --                     --         --          --        3,903

Cash dividends paid
    Preferred stock $0.94 per share                           --          --         --         (19)         --         (19)
    Common stock $0.70 per share                              --          --         --        (468)         --        (468)
                                                        --------    --------   --------    --------    --------    --------
BALANCES, SEPTEMBER 30, 2002                            $    500    $    668   $  5,051    $ 16,058    $  4,290    $ 26,567
                                                        ========    ========   ========    ========    ========    ========
</TABLE>

Notes to Consolidated Financial Statements are an integral part of these
statements.


                                        5
<PAGE>


                    IBW FINANCIAL CORPORATION AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
           NINE MONTHS ENDED SEPTEMBER 30, 2003 AND SEPTEMBER 30, 2002
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                    Nine Months Ended
                                                                                       September 30
                                                                                  ----------------------
                                                                                     2003         2002
                                                                                  ----------------------
                                                                                  (dollars in thousands)
<S>                                                                               <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES
 Net income                                                                       $  1,544      $  1,789
 Adjustments to reconcile net income to net cash
  provided by operating activities:
  Depreciation                                                                         503           401
 Amortization of intangible assets                                                      41            89
 Accretion/amortization of premiums                                                    675           239
  Gain on sale of investment securities                                               (653)         (432)
  Gain on sale of loans                                                                 --            (6)
  (Increase) Decrease in accrued interest receivable                                   (61)          (42)
  (Decrease) Increase in other assets                                                1,249        (2,046)
  Decrease (Increase) in accrued expenses and other liabilities                       (245)        1,301
                                                                                  -----------------------
        Net cash provided by operating activities                                    3,053         1,293
                                                                                  -----------------------
CASH FLOWS FROM INVESTING ACTIVITIES
 Proceeds from principal payments on investment securities available-for-sale       30,993        13,231
 Proceeds from maturities of investment securities available-for-sale               18,104        10,561
 Proceeds from sales of investment securities available-for-sale                    14,698        20,465
 Purchase of investment securities available-for-sale                              (45,387)      (56,706)
 Net (increase) decrease in interest-bearing deposits in banks                      (4,945)          154
 Net decrease (increase) in loans                                                  (24,392)        1,929
 Purchase of bank owned life insurance                                              (5,400)           --
 Additions to bank premises and equipment, net                                        (515)         (392)
                                                                                  -----------------------
 Net cash used by  investing activities                                            (16,844)      (10,758)
                                                                                  -----------------------
CASH FLOWS FROM FINANCING ACTIVITIES
 Net increase in deposits                                                           13,528        18,092
 Net increase in short-term borrowings                                               3,073       (12,505)
 Net decrease in long-term borrowings                                                   --        (5,000)
 Dividends paid                                                                       (553)         (487)
                                                                                  -----------------------
        Net cash provided by financing activities                                   16,048           100
                                                                                  -----------------------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                                     2,257        (9,365)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                      14,790        25,159
                                                                                  -----------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD                                          $ 17,047      $ 15,794
                                                                                  =======================
 Supplemental disclosures of cash flow information
  Income taxes                                                                    $     --      $    365
  Interest                                                                        $  2,252      $  3,121
Non-cash activity:
  Transfer of other real estate owned                                             $     37      $     --

</TABLE>

Notes to Consolidated Financial Statements are an integral part of these
statements.

                                       6
<PAGE>


                    IBW FINANCIAL CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

Note A:  BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements of IBW Financial
Corporation and Subsidiary (the Company) have been prepared in accordance with
accounting principles generally accepted in the United States of America for
interim financial information and with the instructions to Form 10-QSB.
Accordingly, they do not include all the information and footnotes required for
complete financial statements. In the opinion of management, all adjustments and
reclassifications consisting of a normal and recurring nature, considered
necessary for a fair presentation, have been included. The amounts as of
December 31, 2002 were derived from audited financial statements. Operating
results for the three and nine month periods ended September 30, 2003 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 2003. These unaudited consolidated financial statements should be
read in conjunction with the consolidated financial statements and footnotes for
the year-ended December 31, 2002 included on Form 10-KSB.

Reclassifications - Certain reclassifications have been made to the prior year's
reported balances to conform to the current year presentation.

Note B:  NATURE OF BUSINESS

The Company, through its bank subsidiary, provides domestic financial services
primarily in Maryland and Washington, DC. The primary financial services include
real estate, commercial and consumer lending, as well as traditional demand
deposits and savings products.

Note C:  INCOME TAXES

The Company uses the liability method of accounting for income taxes as required
by SFAS No. 109, "Accounting for Income Taxes". Under the liability method,
deferred-tax assets and liabilities are determined based on differences between
the financial statement carrying amounts and the tax bases of existing assets
and liabilities (i.e. temporary differences) and are measured at the enacted
rates that will be in effect when these differences reverse.

Note D:  EARNINGS PER COMMON SHARE

Earnings per common share are computed by dividing net income available to
common shareholders (net income less dividends on preferred stock) by the
weighted average number of common shares outstanding during the period. The
Company has no options for common stock or other types of common stock
equivalents outstanding.

NOTE E FORMAL AGREEMENT WITH THE OFFICE OF THE COMPTROLLER OF THE CURRENCY (OCC)

         On April 21, 2003, Industrial Bank, N.A., the Company's subsidiary
bank, entered into a new Formal Agreement (the "Agreement") with the Office of
the Comptroller of the Currency (the "OCC").

         The Agreement is focused largely on adoption and implementation of
programs and internal controls to ensure compliance with the Bank Secrecy Act,
with the requirement to file Suspicious Activity Reports, and with consumer laws
and regulations. It also requires the Board to take all necessary steps to
ensure that Bank management corrects each violation of law, rule or regulation
cited in the current Report of Examination prepared by the OCC and in any
subsequent report of examination. It requires the Bank to adopt, implement and
ensure adherence to a performance management program designed to ensure
accountability through a review process to demonstrate that the Board is
discharging its responsibility to properly supervise management.


                                       7
<PAGE>

         Compliance with the Agreement is to be monitored by a committee (the
"Committee") of at least three directors, none of whom is an employee of the
Bank or a family member of an employee. The Committee, presently composed of Mr.
King (Chairman), Mrs. Fleming, and Mr. Chapman, is required to submit written
progress reports on a monthly basis. The Agreement requires the Bank to make
periodic reports and filings with the OCC.

         The Agreement does not contain any capital directive or other
requirement that the Bank increase its capital, or maintain a minimum level of
capital in excess of generally applicable capital requirements.

         There can be no assurance that its regulators will deem the Bank to be
compliant under the Agreement, or that they will not require additional
compliance efforts. Failure to comply with the provisions of the Formal
Agreement could subject the Bank and its directors to additional enforcement
actions, including but not limited to a cease and desist order, a safety and
soundness order or civil money penalties.

Note F:  OTHER EXPENSES

OTHER EXPENSES IN THE CONSOLIDATED STATEMENTS OF INCOME INCLUDE THE FOLLOWING:

                          Nine Months Ended
                            September 30
                       ----------------------
                          2003       2002
                       ----------------------
                       (dollars in thousands)
Directors fees           $  166     $  187
Professional fees           319        374
Bank security               245        235
Other                     1,019      1,543
                         -----------------
TOTAL OTHER EXPENSES     $1,749     $2,339
                         =================

Note G:  NEW ACCOUNTING STANDARDS

In July 2002, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 146 "Accounting for Costs Associated with
Exit or Disposal Activities" ("SFAS No. 146"). The requirements of SFAS No. 146
are effective prospectively for qualifying activities initiated after December
31, 2002. SFAS No. 146 applies to costs associated with an exit activity,
including restructuring, or with a disposal of long-lived assets. The Statement
has had no effect on the Company's financial statements.

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others" ("Interpretation No. 45"). Beginning in 2003,
Interpretation No. 45 requires recognition of liabilities at their fair value
for newly issued guarantees. The adoption of Interpretation No. 45 did not have
a material effect on the Company's financial statements.


                                       8
<PAGE>


In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities" ("SFAS No. 149"). SFAS No. 149
amends and clarifies accounting for derivative instruments, including certain
derivative instruments imbedded in other contracts, and for hedging activities
under Statement 133. SFAS No. 149 is effective for contracts entered into or
modified after June 30, 2003, with some exceptions. The Company does not believe
that SFAS No. 149 will have a material impact on its financial statements.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity" ("SFAS No.
150"), effective for financial instruments entered into or modified after May
31, 2003. This statement established standards for classifying and measuring
certain financial instruments with characteristics of both liabilities and
equity. It requires that an issuer classify a financial instrument that is
within the scope of the statement as a liability rather than as an equity, such
as obligations that a reporting entity can or must settle by issuing its own
equity shares. SFAS No. 150 did not have an impact on the Company's earnings,
financial condition or equity.



                                       9
<PAGE>


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 (DOLLARS IN THOUSANDS,
EXCEPT AS OTHERWISE INDICATED AND PER SHARE AMOUNTS)

Forward looking statements. This discussion contains forward looking statements
within the meaning of the Securities Exchange Act of 1934, as amended, including
statements of goals, intentions, and expectations as to future trends, plans,
events or results of Company operations and policies and regarding general
economic conditions. These statements are based upon current and anticipated
economic conditions, nationally and in the Company's market, interest rates and
interest rate policy, competitive factors, government agencies and other third
parties, which by their nature are not susceptible to accurate forecast, and are
subject to significant uncertainty. Because of these uncertainties and the
assumptions on which this discussion and the forward looking statements are
based, actual future operations and results in the future may differ materially
from those indicated herein. Readers are cautioned against placing undue
reliance on any such forward looking statement.

CRITICAL ACCOUNTING POLICIES
----------------------------

The Company's financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America (GAAP). The
financial information contained within our statements is, to a significant
extent, financial information that is based on measures of the financial effects
of transactions and events that have already occurred. A variety of factors
could affect the ultimate value that is obtained either when earning income,
recognizing an expense, recovering an asset or relieving a liability. We use
historical loss factors as one factor in determining the inherent loss that may
be present in our loan portfolio. Actual losses could differ significantly from
the historical factors that we use. In addition, GAAP itself may change from one
previously acceptable method to another method. Although the economics of our
transactions would be the same, the timing of events that would impact our
transactions could change.

The Company considers the allowance for loan losses to be a critical accounting
policy. The allowance for loan losses is an estimate of the losses that may be
sustained in our loan portfolio. The allowance is based on two basic principles
of accounting: (i) SFAS No. 5, "Accounting for Contingencies", which requires
that losses be accrued when they are probable of occurring and estimable and
(ii) SFAS No. 114, "Accounting by Creditors for Impairment of a Loan", which
requires that losses be accrued based on the differences between the value of
collateral, present value of future cash flows or values that are observable in
the secondary market and the loan balance.

Three basic components comprise our allowance for loan losses: a specific
allowance, a formula allowance and a nonspecific allowance. The formula
allowance is based, in part, on a loss migration analysis. Migration analysis is
affected by losses experienced in prior periods and therefore, higher levels of
historic losses will affect the current allowance levels. Each component is
determined based on estimates that can and do change when the actual events
occur. The specific allowance is used to individually allocate an allowance to
loans identified as impaired. An impaired loan may show deficiencies in the
borrower's overall financial condition, payment record, support available from
financial guarantors and/or the fair market value of collateral. When a loan is
identified as impaired a specific reserve is established based on the Company's
assessment of the loss that may be associated with the individual loan. The
formula allowance is used to estimate the loss on internally risk rated loans,
exclusive of those identified as impaired. Loans identified as special mention,
substandard, doubtful and loss, as well as impaired, are segregated from
performing loans. Remaining loans are then grouped by type (commercial,
commercial real estate, home equity or consumer). Each loan type is assigned an
allowance factor based on management's estimate of the risk, complexity and size
of individual loans within a particular category. Classified loans may be
assigned a higher allowance factor than non-rated loans due to management's
concerns regarding collectibility or management's knowledge of particular
elements regarding the borrower. Allowance factors grow with the worsening of
the internal risk rating. The nonspecific formula is used to estimate the loss
of non-classified loans stemming from more global factors such as delinquencies,
loss history, trends in volume and terms of loans, effects of changes in lending
policy, the experience and depth of management, national and local economic
trends, concentrations of credit, quality of loan review system and the effect
of external factors such as competition and regulatory requirements. The
nonspecific allowance captures losses whose impact on the portfolio have
occurred but have yet to be recognized in either the formula or specific
allowance.


                                       10
<PAGE>

Management has significant discretion in making the judgments inherent in the
determination of the provision and allowance for loan losses, including in
connection with the valuation of collateral, a borrower's prospects of
repayment, and in establishing allowance factors on the formula allowance and
unallocated allowance components of the allowance. The establishment of
allowance factors is a continuing exercise, based on management's continuing
assessment of the global factors such as delinquencies, loss history, trends in
volume and terms of loans, effects of changes in lending policy, the experience
and depth of management, national and local economic trends, concentrations of
credit, quality of loan review system and the effect of external factors such as
competition and regulatory requirements, and their impact on the portfolio, and
allowance factors may change from period to period, resulting in an increase or
decrease in the amount of the provision or allowance, based upon the same volume
and classification of loans. Changes in allowance factors will have a direct
impact on the amount of the provision, and a corresponding effect on net income.
Errors in management's perception and assessment of the global factors and their
impact on the portfolio could result in the allowance not being adequate to
cover losses in the portfolio, and may result in additional provisions or
charge-offs.

Overview

OPERATIONS

IBW Financial Corporation's net income through three quarters of 2003 totaled
$1,544, a decrease of $245, or 14% from $1,789 for September 2002. This was the
net result of an increase in the provision for loan losses of $700, an increase
in non-interest income of $417, an increase of $69 in non-interest expenses, and
a decrease of $198 in income taxes, and a decrease in net interest income of
$91. Return on average assets (ROAA) was .68% for through three quarters ended
September 30, 2003, as compared to .79% for the same period in 2002, and return
on average shareholder's equity (ROAE) was 7.76% and 10.10% for the same
periods.

The decrease in net income was attributed primarily to the increase in the
provision for loan losses. Through three quarters of 2003, $700 in provisions
for loan losses were made compared to none for the same period in 2002. These
provisions were made largely as a result of one major commercial loan that was
charged-off totaling $726 during the second quarter of 2003, resulting in a
provision expense of $300 during the second quarter. During the third quarter of
2003 an additional $400 in provision expense was made. This additional $400 in
provision expense was primarily attributed to $207 of additional provision for
loans with possible credit problems, $128 for net charge offs for the quarter,
and $65 for additional growth in the portfolio. Overall, loans with possible
credit problems have increased $6 million since year-end 2002. Additionally,
loans have increased $25 million since year-end 2002 and centered in residential
loans increasing $12 million and commercial real estate loans increasing $8
million.

Through three quarters of 2003, gains of $653 were realized from the sale of
securities gains compared to $432 in 2002, a difference of $221 or 51%. Salaries
and benefits have increased $512 or 8% due primarily to increased personnel
costs associated hiring of several new key personnel and increased health
insurance costs.

NET INTEREST INCOME

Net interest income on a tax equivalent basis of $11,341 for the three quarters
ended September 30, 2003 decreased $36, or less than 1%, compared to the same
period last year. The average balance of interest-earning assets for the period
ending September 30, 2003 was $283 million a decrease of $715 or less than 1%
from the comparable period ended September 30, 2002. While the volume of earning
assets declined minimally, the yield on average interest-earning assets
decreased by 43 basis points to 6.42% for the nine-months ended September 30,
2003 compared to 6.85% for the same period last year. The volume of average
interest-bearing liabilities also decreased through three quarters of 2003,
decreasing $3 million from the average for 2002 to $206 million. Additionally,
the rate paid on interest-bearing liabilities declined 55 basis points to 1.47%
for the three quarters ended September 30, 2003 from 2.02% for the same period
last year. Overall, the net interest spread increased 12 basis points to 4.95%
from 4.83% a year ago, and the net yield on interest earning assets decreased 1
basis point to a tax equivalent 5.35% for the three quarters ended September 30,
2003.


                                       11
<PAGE>

Net loans averaged $144 million through three quarters of 2003 compared to $131
million through three quarters of 2002, reflecting an increase of $13 million.
Interest and fees on loans increased $189 or 2% to $8.4 million for the three
quarters ended September 30, 2003. Additionally, the average yield on net loans
decreased 56 basis points to 7.85% for the three quarters ended September 30,
2003 compared to 8.41% for the same period last year. The increase in loans
largely reflects growth in the residential real estate and the commercial real
estate sector, increasing $12 million and $8 million respectively since year-end
2002. At September 30, 2003, net loans were $159 million, an increase of $25
million from December 31, 2002.

Taxable securities averaged $103 million through three quarters of 2003,
compared to $107 million through three quarters of 2002. Interest income from
taxable securities decreased $1.1 million or 25% to $3.3 million for the three
quarters ended September 30, 2003 compared to $4.4 million for the same period
last year. This decrease in interest income on taxable securities is attributed
primarily with the historical low interest environment over the past year,
coupled with the accelerated increase in the amortization of premiums on
mortgage-backed securities resulting from faster pay-downs. Through three
quarters of 2003, the amortization of premiums on mortgage-backed securities
totaled $721 compared to $394 the same period in 2002. As a result of this low
interest environment, the average yield on taxable securities decreased 122
basis points to 4.29% for the three quarters ended September 30, 2003 compared
to 5.51% for the same period last year.

Non-taxable securities averaged $30 million during through three quarters of
2003 compared to $27 million for through three quarters of 2002, reflecting an
increase of $3 million. Interest income from non-taxable securities increased
$162 thousand or 10% to $1.8 million for the three quarters ended September 30,
2003 compared to $1.6 for the same period last year. The tax equivalent yield on
non-taxable securities decreased to 7.85% for the three quarters ended September
30, 2003 compared to 7.90% for the same period last year.

The investment portfolio at September 30, 2003 was $116 million, a decline of
$21 million from December 31, 2002, primarily due to approximately $5 million of
security sales utilized to fund Bank Owned Life Insurance ("BOLI"), and another
$16 million decline due to prepayments, sales and maturities of securities, the
proceeds of which were utilized to fund loans.

Federal funds sold averaged $4 million during through three quarters of 2003
compared to $17 million for through three quarters of 2002, reflecting a
decrease of $13 million, and stood at $5.5 million at September 30, 2003.
Interest income from federal funds sold decreased $175 to $34 for the three
quarters ended September 30, 2003 compared to $209 for the same period last
year. The yield on federal funds sold decreased 62 basis points to 1.07% for the
three quarters ended September 30, 2003 compared to 1.69% for the same period
last year.

Average interest-bearing liabilities decreased $3.3 million or 2% to $206
million for the three quarters ended September 30, 2003 compared to $209 million
for the same period last year. The average cost on interest-bearing liabilities
decreased 55 basis points to 1.47% for the three quarters ended September 30,
2003 compared to 2.02% for the same period last year. The total cost of
interest-bearing liabilities decreased $903 thousand or 29% from a year ago and
reflects the general decline in rates over the past year in the market place.

PROVISION AND ALLOWANCE FOR LOAN LOSSES

An allowance for loan losses is maintained at a level considered adequate to
provide for loan losses existing as of the balance sheet date. Management is
responsible for determining the adequacy of the allowance for loan losses and
the periodic provisioning for estimated losses included financial statements.
The evaluation process is undertaken on a quarterly basis, but may increase in
frequency should conditions arise that would require management's prompt
attention, such as any material effect on the allowance for loan losses or any
development which may indicate an adverse trend in asset quality. The
methodology employed for assessing the appropriateness of the allowance consists
of the following criteria: 1). Establishment of reserve amounts for all
specifically identified criticized assets that have been designated as requiring
attention by management's internal loan review program, bank regulatory



                                       12
<PAGE>

examinations or the external loan review 2). An allocation to the remaining
loans giving effect to historical loss experience over several years and 3) an
external factor for unused outstanding loan commitments. Please refer to the
discussion under the caption, "Critical Accounting Policies" for additional
information regarding the underlying methodology management employs in
determining the allowance.

The allowance for loan losses was $2.9 million and $3.1 million as of September
30, 2003 and December 31, 2002, or 1.7% of total loans at September 30, 2003,
compared to 2.2% at December 31, 2002. A provision for loan losses of $700 was
made during the first three quarters of 2003 compared to no provision for loan
losses for the year 2002. The decrease in the allowance for loan losses since
December 31, 2002 reflects net charged off loans of $908 and the $700 provision.
Non-performing assets increased $13 or less than 1% to $3,387 from $3,374 at
year-end 2002.

The $700 provision made through three quarters of 2003 was affected by the level
of charge offs during 2003, which was due primarily to the charge-off of one
commercial loan in the amount of $726. The loss was experienced on a commercial
loan to a professional firm that was guaranteed by the principals of the firm
and collateralized by accounts receivable and certificates of deposits. The loan
became delinquent during the first quarter of 2003, as numerous attempts to
contact the borrower were unsuccessful. As a result, the entire amount of the
loan, net of the deposits, was charged-off in June of 2003. The level of the
allowance is affected by several factors, including the following:

     o   Increase in residential mortgage loans of $12 million since December
         31, 2002. Residential mortgage loans comprise 50% of the loan portfolio
         as of September 30, 2003 compared to 43% as of December 31, 2002.
         Additionally, the net loss associated with residential loans over the
         past three and three quarter years totaled $22, with $8 in losses
         through September 30, 2003 and a recovery of $44.

     o   Loans collateralized by real estate comprise 92% of the loan portfolio.
         The Maryland and Washington DC market in which the Company operates
         continues to experience significant increases in real estate values.
         This increase in value in real estate has helped to insulate the
         Company from the need to recognize losses on loans classified as
         non-performing, and from the effects of a slow economy in the Company's
         market.

     o   Analysis of individually significant loans classified as non-performing
         indicated the allowance allocated to those loans reflects the losses
         associated with those loans in the management's judgment.

When determining the provision for loan losses, management assesses the risk
inherent in its loan portfolio based on information available at such time
relating to the volume and type of lending conducted, the Company's historical
loan loss experience, adverse situations that may affect the borrower's ability
to repay, the estimated value of any underlying collateral, any concentrations
of credit, the experience and ability of the depth in the lending staff, and
trends in the local and national economy. At September 30, 2003 non-performing
assets totaled $3.4 million, or 2.1% of total loans, compared to $3.4 million at
year-end 2002, or 2.4% of total loans. At September 30, 2003, the Company's
allowance for loan losses was $2.9 million compared to $3.1 million at year-end
2002, resulting in a ratio of the allowance to total loans of 1.8% and 2.2%,
respectively over these two periods. As a result of the changes in the
composition of the portfolio and the collateral underlying nonperforming and
potential problem loans, the Company believes that the allowance remains
adequate. See also the "Non-Performing Assets" section for additional
information related to the Company's problem assets and allowance for loan
losses.


                                       13
<PAGE>

NON-INTEREST INCOME

Non-interest income increased $417, or 12%, to $3,942 for the three quarters
ended September 30, 2003 compared to $3,525 for September 30, 2002. The increase
is attributed primarily to higher gain on sale of securities of $653 for the
period ending September 30, 2003 compared to a gain on sale of securities of
$432 for the same period last year, a difference of $221.

NON-INTEREST EXPENSE

Non-interest expenses increased only $69, to $12.2 million for the three
quarters ended September 30, 2003, due largely to the reduction of $590 in other
expenses, which reflects the recovery of $335 in collection expenses associated
with a large loan that was previously charged-off and subsequently recovered.
Excluding this recovery, non-interest expenses would have increased $404 or 3.3%
from the comparable period last year. Increased non-interest expense centered
primarily in salary and benefits, increasing $512 or 8% from a year ago. The
increases in these personnel costs are due largely to higher salary expenses of
$381, increased health insurance expenses of $58, and higher personnel education
and development expenses of $43. Salaries expenses increased primarily due to
the hiring of several key employees compared to the prior period of a year ago,
namely the chief lending officer, operations manager, controller, and a mid
level accountant, in addition to normal salary increases. The increase in health
insurance cost is a reflection of current market conditions, and the increase in
personnel development is the result of improving the overall level of education
of our employee base including compliance training.

PROVISION FOR INCOME TAXES

The provision for income taxes through three quarters of 2003 was $224, compared
to $422 a year ago. The decline in income tax provision primarily reflects the
increased levels of tax-exempt income comprising the Company's earnings. The
effective tax rate was 13% and 19% for through three quarters ending September
30, 2003 and 2002 respectively. The decrease in the effective tax rate was also
primarily attributed to higher tax-exempt income relative to other sources of
income. The tax benefit reflected during the third quarter of 2003 in the amount
of $(12,000) is as a result of the level of interest income from obligations of
states and political subdivisions that may be exempt from federal and state
income taxes as well as the level of interest income from certain US obligations
that is exempt from state taxation relative to net income before taxes. This
relationship between tax exempt interest income to the net income before taxes
resulted in a tax benefit for the third quarter of 2003.

BALANCE SHEET OVERVIEW

Total assets, at $312 million for September 30, 2003 increased $17 million or
5.8% compared to $295 million at December 31, 2002. The change in the
composition of the balance sheet primarily reflects an increase of $25 million
in loans, the purchase of Bank Owned Life Insurance in the amount of $5.5
million, during the second quarter of 2003 which will produce other income, an
increase in interest-bearing deposits in other banks of $4.9 million, and an
increase in cash and due from banks of $2.7 million. These increases in assets
are offset primarily by a decrease in securities of $20.8 million.

On the liability side of the balance sheet, time and savings deposits increased
$12 million, an increase in short-term borrowings of $3 million and demand
deposits increased $1.5 million.

Total stockholders' equity was $26.1 million at September 30, 2003, representing
a slight decrease of $137 due primarily to the increase in retained earnings of
$991 and a decrease of $1,128 in unrealized gain on available-for-sale
securities. Preferred stock dividends of $19 were declared during three quarters
of 2003, and $534 in common stock dividends.

The Company maintained a total risk-based capital ratio of 15.74% at September
30, 2003, compared to 15.88% at December 31, 2002; a tier 1 risk-based capital
ratio of 15.24%, compared to 13.99%; and a leverage ratio of 7.61%, compared to
7.46%. Capital adequacy, as measured by these ratios, was well above regulatory
requirements. The decrease in the risked-based ratios is attributed to an
increase in risk based assets, reflecting the increase in residential mortgage
loans, which have a risk-weight of 50%, and a decrease in investment securities,
most of which have a risk weight of 20%. The increase in the leverage ratio is
attributed to an increase in retained earnings coupled with minimal assets
growth. Management believes the overall level of capital at September 30, 2003
is adequate.


                                       14
<PAGE>

The carrying value of the Company's securities portfolio was $116 million, as of
September 30, 2003 a decrease of $21 million from December 31, 2002. The
composition reflected a change as U. S. Government Agency securities increased
approximately $6 million to $55 million, a decrease in mortgaged-backed
securities of $20 million to $33 million, and a decrease in non-taxable
securities of $4 million to $27 million. The mortgage-backed securities
portfolio had a weighted-average remaining maturity of 1.88 years at September
30, 2003, changing from 2.19 years at December 31, 2002. The collateral
underlying all the mortgage-backed securities is guaranteed by one of the
"Quasi-Governmental" agencies, and therefore maintains a risk weight of 20% for
risk-based capital purposes. Management's analysis of mortgage-related
securities includes, but is not limited to, the average lives, seasonality,
coupon and historic behavior (including prepayment history) of each particular
security over its life, as affected by various interest rate environments. There
are no issuers of securities other than governmental securities, whose
securities held by the Company, have a book value in excess of 10% of
shareholders' equity.

LIQUIDITY
---------

Liquidity describes the ability of the Company to meet financial obligations,
including lending commitments and contingencies, that arise during the normal
course of business. Liquidity is primarily needed to meet the borrowing and
deposit withdrawal requirements of the customers of the Company, as well as to
meet current and planned expenditures.

The Company's major source of liquidity ("financing activities" as used in the
Consolidated Statements of Cash Flows) is its deposit base. At September 30,
2003, total deposits were $251 million. Core deposits, considered to be stable
funding sources and defined as all deposits except certificates of deposit of
$100,000 or more, totaled $219 million or 87% of total deposits. Liquidity is
also provided through the Company's overnight investment in federal funds sold,
as well as securities available-for-sale and investment securities with
maturities less than one year and the Company's ability to sell some or all of
its conforming residential mortgage loans. At September 30, 2003, the Company
had $5.5 million in federal funds sold, investments available-for-sale totaled
$116 million or 37% of total assets that currently includes an appreciation in
the portfolio of $3.9 million. The fair value of investment securities due in
one year or less (excluding mortgage-backed securities) was $14 million or 4% of
total assets. Additionally, due to the historical low interest rate for
mortgages, the Company experienced $13 million in prepayments on mortgage-backed
securities during the third quarter of 2003, providing an annualized prepayment
speed of less than one year for the remaining portion of these securities.
Management does not anticipate that this prepayment speed would continue in the
remainder of 2003 or 2004 as interest rates are not expected to decline further.

In addition, the Bank has external sources of funds, which can be used as
needed. The Federal Home Loan Bank of Atlanta ("FHLB") is the primary source of
this external liquidity. The FHLB has established credit availability for the
Bank at 8% of the Bank's total assets. Total assets are based on the most recent
quarterly financial information submitted by the Bank to the appropriate
regulatory agency. The ability to borrow funds is subject to the Bank's
continued creditworthiness, compliance with the terms and conditions of the
Advance Application and the pledging of sufficient eligible collateral to secure
advances. At September 30, 2003 the Company had a $25 million credit limit with
the FHLB with advances outstanding of $4 million. The Company had collateral on
deposit sufficient to borrow up to the $25 million limit.


                                       15
<PAGE>

                AVERAGE BALANCES AND NET INTEREST INCOME ANALYSIS

<TABLE>
<CAPTION>
                                             Nine Months Ended           Nine Months Ended                    Year Ended
                                            September 30, 2003           September 30, 2002                December 31, 2002
                                      ---------------------------------------------------------------------------------------------
                                                            Amount                          Amount                          Amount
                                      Average     Average   Paid or   Average    Average   Paid or    Average   Average    Paid or
                                      Balance      Rate     Earned    Balance      Rate     Earned    Balance     Rate      Earned
                                      ---------------------------------------------------------------------------------------------
                                                                         (dollars in thousands)
<S>        <C>                        <C>        <C>        <C>        <C>       <C>       <C>        <C>        <C>       <C>
ASSETS
Loans, net (1)                        $144,105     7.85%   $  8,456   $131,438     8.41%   $  8,267   $131,722     8.33%   $ 10,976
Taxable securities (2)                 103,236     4.29%      3,309    107,027     5.51%      4,408    108,166     5.31%      5,741
Non-taxable securities(2)(3)            30,457     7.85%      1,789     27,532     7.90%      1,627     28,144     7.88%      2,217
Federal funds sold                       4,246     1.07%         34     16,580     1.69%        209     14,211     1.65%        235
Interest-bearing deposits held
  with other banks                       1,119     1.67%         14      1,301     3.08%         30      1,303     2.53%         33
                                      --------             -------------------             -------------------             --------
Total interest-earning assets         $283,163     6.42%   $ 13,602    283,878     6.85%   $ 14,541    283,546     6.77%   $ 19,202
Cash and due from banks                  9,925                          11,552                          10,734
Bank premises and
  equipment, net                         3,461                           2,424                           2,430
Other assets                             5,230                           4,327                           4,241
                                      --------                        --------                        --------
Total assets                          $301,779                        $302,181                        $300,951
                                      ========                        ========                        ========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest-bearing demand deposits       $26,256     0.43%   $     84   $ 25,982     0.38%   $     73   $ 25,247     0.37%   $     93
Savings deposits                        69,583     1.30%        677     64,740     1.81%        878     65,095     1.77%      1,151
Time deposits                           80,021     1.96%      1,176     71,839     2.80%      1,506     72,963     2.69%      1,962
                                      --------             -------------------             -------------------             --------
Total interest-bearing deposits        175,860     1.47%      1,937    162,561     2.02%      2,457    163,305     1.96%      3,206
Short-term borrowings                   26,128     0.98%        192     38,143                          36,147     1.28%        462
Long-term borrowings                     4,000     4.41%        132      8,626     5.21%        336      7,709     5.88%        453
                                      --------             -------------------             -------------------             --------
Total interest-bearing liabilities     205,988     1.47%   $  2,261    209,330     2.02%   $  3,164    207,161     1.99%   $  4,121
Noninterest-bearing liabilities         68,502                          67,196                          67,749
Other liabilities                          765                           2,042                           1,765
Total liabilities                      275,255                         278,568                         276,675
                                      --------                        --------                        --------
Shareholders' equity                    26,524                          23,614                          24,276
                                      --------                        --------                        --------
Total liabilities and
  shareholders' equity                $301,779                        $302,181                        $300,951
                                      ========                        ========                        ========
NET INTEREST INCOME AND NET
YIELD ON INTEREST-EARNING ASSETS
Net interest income                                         $ 11,341                       $ 11,377                        $ 15,801
                                                            ========                       ========                        ========
Interest rate spread                               4.95%                           4.83%                           4.78%
Net yield on average interest-
  earning assets                                   5.35%                           5.36%                           5.32%
Average interest-earning assets
  to average interest-bearing
  liabilities                                    137.47%                         135.61%                         136.87%

</TABLE>

(1) Nonaccruing loans are included in average balances.
(2) Yields on securities available for sale have been computed based upon the
    historical cost of such securities and do not give effect to changes in the
    fair value of those securities, which are reflected as a component of
    stockholder's equity.
(3) Yields on non-taxable securities are presented on a tax-equivalent basis
    using a 34% tax rate. Interest income and net interest income reported in
    the Company's consolidated statements of income were $12,994 and $10,733
    for September 30, 2003, $13,988 and $10,824 for September 30, 2002 and
    $18,448 and $14,327 for the year ended 2002.


                                       16
<PAGE>


                        LOAN LOSS AND RECOVERY EXPERIENCE

<TABLE>
<CAPTION>

                                                      ------------------------------------------------------------------
                                                      Nine Months Ended        Nine Months Ended         Year Ended
                                                      September 30, 2003       September 30, 2002     December 31, 2002
                                                      ------------------------------------------------------------------
                                                                           (dollars in thousands)
<S>                                                        <C>                     <C>                     <C>
Total outstanding loans at end of period,
  (excluding net loan fees)                                $162,310                $136,736                $138,576
Average amount of net loans outstanding                     144,105                 131,438                 131,722
Allowance for loan losses
  at beginning of period                                      3,059                   3,283                   3,283
Loans charged off:
  Commercial                                                    893                     259                     320
  Real estate mortgage                                            8                      82                     131
  Installment loans to individuals                              259                     187                     270
                                                      ------------------------------------------------------------------
Total charge-offs                                             1,160                     528                     721
                                                      ------------------------------------------------------------------
Recoveries of loans previously charged-off:
  Commercial                                                     88                     227                     266
  Real estate mortgage                                           44                     110                     123
  Installment loans to individuals                              120                      59                     108
                                                      ------------------------------------------------------------------
Total recoveries                                                252                     396                     497
                                                      ------------------------------------------------------------------
Net charge-offs                                                 908                     132                     224
Additions to allowance charged to
  operations                                                    700                      --                      --
Allowance for loan losses at end of period
Ratio of net charge-offs during period                        2,851                   3,151                   3,059
  to average outstanding loans during period                   0.63%                   0.10%                   0.17%
Ratio of allowance for possible loan
  losses at period to total loans                              1.76%                   2.30%                   2.21%

</TABLE>


The following table sets for the allocation of the allowance for loan losses as
of the dates indicated. The allocation of the allowance to each category is not
necessarily indicative of future losses and does not restrict the use of the
allowance to absorb losses in any category.

                     ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
                     September 30,          September 30,          December 31,
                         2003      Percent       2002     Percent      2002      Percent
                     ------------- -------  ------------  -------  ------------  -------
                                               (dollars in thousands)
<S>                      <C>        <C>         <C>       <C>         <C>       <C>
Commercial               $1,949      46.11%     $2,045     52.79%     $1,685     49.37%
Real estate mortgage        635      49.53%        648     42.18%        589     45.79%
Consumer                    266       4.36%        279      5.03%        306      4.84%
Unallocated                   1         --         179        --         479        --
                         -------------------------------------------------------------------
Total                    $2,851     100.00%     $3,151    100.00%     $3,059    100.00%
                         ===================================================================
</TABLE>


                                       17
<PAGE>

The level of the allowance for loan losses is determined by management on the
basis of various assumptions and judgments. These include levels and trends of
past due and non-accrual loans, trends in volume and changes in terms, effects
of policy changes, experience and depth of management, anticipated economic
conditions in the Washington, DC metropolitan area, concentrations of credit,
the composition of the loan portfolio, prior loan loss experience, and the
ongoing and periodic reviews of the loan portfolio by the Company's internal and
external loan review function. For impaired loans, the Company establishes
reserves in accordance with SFAS 114 as amended by SFAS 118, and for
non-impaired loans uses an allocation approach which relies on historical loan
loss experience, adjusted to reflect current conditions and trends.

Although management believes that it uses the best information available to make
such determinations that the allowance for loan losses is adequate as of the
dates shown, future adjustments to the allowance may be necessary, and net
income could be significantly affected, if circumstances and/or economic
conditions differ substantially from the assumptions used in making the initial
determinations. Any downturn in the real estate market or general economic
conditions in the Washington, DC metropolitan area could result in the Company
experiencing increased levels of non-performing assets and charge-offs,
significant provisions for loan losses, and significant reductions in net
income. Additionally, various regulatory agencies periodically review the
Company's allowance for loan losses. Such agencies may require the recognition
of additions to the allowance based on their judgments or information available
to them at the time of their examination. In light of the foregoing, there can
be no assurance that management's determinations as to the future adequacy of
the allowance for loan losses will prove accurate, or that additional provisions
or charge-offs will not be required.

         The following table sets forth information concerning non-performing
assets.

                              NON-PERFORMING ASSETS

<TABLE>
<CAPTION>
                                                ---------------------------------------------------
                                                September 30,      September 30,       December 31,
                                                    2003               2002                2002
                                                ---------------------------------------------------
                                                              (dollars in thousands)
<S>                                               <C>                <C>                 <C>
Non-accrual loans(1)                              $  1,710           $  1,653            $  1,712
Loans past due 90 days or more
  and still accruing                                 1,640                857               1,662
Foreclosed properties                                   37                 --                  --
                                                ---------------------------------------------------
Total                                             $  3,387           $  2,510            $  3,374
                                                ===================================================
Non-performing assets to gross loans
  and foreclosed properties at period end             2.08%              1.83%               2.43%
Non-performing loans to total loans                   2.06%              1.83%               2.43%
Non-performing assets to total
  assets at period end                                1.09%              0.83%               1.14%

</TABLE>


         1. Loans are placed on non-accrual status when in the opinion of
     management the collection of additional interest is unlikely or a specific
     loan meets the criteria for non-accrual status established by regulatory
     authorities. No interest is taken into income on non-accrual loans unless
     received in cash. A loan remains on non-accrual status until the loan is
     current to both principal and interest and the borrower demonstrates the
     ability to pay and remain current, or the loan becomes well secured and is
     in the process of collection. The gross interest income that would have
     been recorded in the three quarters ended September 30, 2003 and the year
     ended December 31, 2002 for non-accrual loans had the loans been current in
     accordance with their original terms was $109 and $103, respectively.

Non-performing assets at September 30, 2003 were $3,387, an increase of $13 or
less than 1% from year-end 2002. Non-accrual loans totaled $1,710 at September
30, 2003. None of the non-accrual loans exceeded $400 at September 30, 2003.
Non-accrual loans at September 30, 2003 consisted of $727 in commercial real
estate, $880 in residential mortgages and $103 in consumer loans. This
represents a decrease of $2 from year-end 2002. As of September 30, 2003, loans
past due 90 days or more and still accruing totaled $1,640, with none exceeding


                                       18
<PAGE>

$201. Such loans consisted of $1,272 in residential real estate loans, $594 in
commercial and commercial real estate loans, and $69 in consumer loans. This
represents a decrease of $22, or 1% from December 31, 2002. At September 30,
2003, total non-performing assets in the amount of $3,637 represented 13% of
total capital compared to 13% at year-end 2002.

At September 30, 2003, there were $11,255 of loans not reflected in the table
above, where known information about possible credit problems of borrowers
caused management to have doubts as to the ability of the borrower to comply
with present loan repayment terms and that may result in disclosure of such
loans in the future. This represents an increase of $6,491 or 136% from year-end
2002. Included in the total are twenty-four loans, totaling $10,915, fully
collateralized by real estate, one at $2.4 million, one at $1.7 million and two
at $1 million, representing 55% of the total. The remaining $340 consists of two
commercial loans totaling $305, one at $284 and one at $21, secured primarily by
accounts receivable and various business equipment, and one consumer loan
totaling $35. Combined, non-performing assets and potential problem loans of
$14,892 represented 57% of total capital, compared to $8,401 or 32% at year-end
2002, reflecting an increase of $6,491 or 77%.

ITEM. 3  CONTROLS AND PROCEDURES

         The Company's management, under the supervision and with the
participation of the Company's Chief Executive Officer and Chief Financial
Officer, evaluated, as of the last day of the period covered by this report, the
effectiveness of the design and operation of the Company's disclosure controls
and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act
of 1934. Based on that evaluation, the Chief Executive Officer and Chief
Financial Officer concluded that the Company's disclosure controls and
procedures were adequate. There were no changes in the Company's internal
control over financial reporting (as defined in Rule 13a-15 under the Securities
Act of 1934) during the quarter ended September 30, 2003 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 2.  CHANGES IN SECURITIES      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 AND REPORTS ON FORM 8-K

         (a)      Exhibits

         11       Statement Regarding Computation of  Per Share Earnings

         31(a)    Certification of President and Chief Executive Officer

         31(b)    Certification of Chief Financial Officer

         32(a)    Certification of President and Chief Executive Officer

         32(b)    Certification of Chief Financial Officer

         (b)      Reports on Form 8-K None.


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<PAGE>


                                   SIGNATURES

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

                                 IBW FINANCIAL CORPORATION

Date:  November 14, 2003         By:  /s/  B. Doyle Mitchell, Jr.
                                      ----------------------------------------
                                      B. Doyle Mitchell, Jr.,
                                      President



Date:  November 14, 2003         By:  /s/ Thomas A. Wilson, Jr.
                                      ---------------------------------------
                                      Thomas A. Wilson, Jr.,
                                      Senior Vice President, Chief Financial
                                      and Accounting Officer


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