<PAGE>


                                    FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

[X] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of
1934 for the Quarterly Period Ended SEPTEMBER 30, 2000

                                       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 Number: 0-27384
                       ---------

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

               CALIFORNIA                               77-0405791
               ----------                               ----------
    (State or other jurisdiction of               IRS Employer ID Number
    incorporation or organization)

                         550 WEST MAIN, MERCED, CA 95340
                         -------------------------------
                    (Address of principal executive offices)

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

Former name, former address and former fiscal year, if changed since last
report: Not Applicable
        --------------
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 X  No
                                      ---   ---

The number of shares outstanding of the registrant's common stock, no par value,
as of September 30, 2000 was 4,541,136. No shares of preferred stock, no par
value, were outstanding at September 30, 2000.


                                       1
<PAGE>



                            CAPITAL CORP OF THE WEST
                                Table of Contents

<TABLE>
<CAPTION>


PART I.  -- FINANCIAL INFORMATION

<S>                                                                                                   <C>
Item 1.  Financial Statements

                    Consolidated Balance Sheets                                                             3
                    Consolidated Statements of Income and Comprehensive Income                              4
                    Consolidated Statement of Changes in Stockholders' Equity                               5
                    Consolidated Statements of Cash Flows                                                   6
                    Notes to Consolidated Financial Statements                                              7

Item 2.  Management's Discussion and Analysis of Financial Condition and
                    Results of Operations                                                                  10

Item 3.  Quantitative and Qualitative Disclosures about Market Risk                                        31


PART II.  -- OTHER INFORMATION
Item 1.    Legal Proceedings                                                                               32
Item 2.    Changes in Securities                                                                           32
Item 3.    Defaults Upon Senior Securities                                                                 32
Item 4.    Submission of matters to a vote of Security Holders                                             32
Item 5.    Other Information                                                                               32
Item 6.    Exhibits and Reports on Form 8-K                                                                32

SIGNATURES                                                                                                 34


</TABLE>

                                       2
<PAGE>


                            Capital Corp of the West
                           Consolidated Balance Sheets
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                                      09/30/00          12/31/99
                                                                                      --------          --------
                                                                                        (Dollars in thousands)

<S>                                                                              <C>               <C>
                                     ASSETS
         Cash and noninterest-bearing deposits in other banks                         $ 28,841          $ 41,582
         Federal funds sold                                                                  -             8,640
         Time deposits at other financial institutions                                     600               850
         Investment securities available for sale, at fair value                       150,346           117,814
           Investment securities held to maturity at cost, fair value of
           $31,300,000, and $28,675,000 at September 30, 2000 and
           December 31, 1999                                                            31,702            29,554
          Loans, net of allowance for loan losses of  $7,309,000, and
           $6,542,000 at September 30, 2000 and December 31, 1999                      387,671           324,726
         Interest receivable                                                             4,720             3,436
         Premises and equipment, net                                                    12,855            13,163
         Intangible assets                                                               4,475             5,069
         Other assets                                                                   19,233            18,716
                                                                                      --------          --------
             Total assets                                                             $640,443          $563,550
                                                                                      ========          ========

                      LIABILITIES AND SHAREHOLDERS' EQUITY
         Deposits
           Noninterest-bearing demand                                                 $ 96,104          $ 87,564
           Negotiable orders of withdrawal                                              76,083            72,788
           Savings                                                                     176,024           164,158
           Time, under $100,000                                                        125,155           101,395
           Time, $100,000 and over                                                      83,134            68,996
                                                                                      --------          --------
             Total deposits                                                            556,500           494,901

         Short term borrowings                                                          24,698            17,600
         Long term borrowings                                                            3,169             3,214
         Accrued interest, taxes and other liabilities                                   6,315             4,158
                                                                                      --------          --------
             Total  liabilities                                                        590,682           519,873

         Preferred stock, no par value; 10,000,000 shares authorized;
            None outstanding
         Common stock, no par value; 20,000,000 shares authorized; 4,541,136 and
           4,496,201 issued & outstanding at September 30, 2000,
           and December 31, 1999                                                        35,808            35,593
         Retained earnings                                                              15,703            10,743
         Accumulated other comprehensive loss, net                                      (1,750)           (2,659)
                                                                                      --------          --------
             Total shareholders' equity                                                 49,761            43,677
                                                                                      --------          --------
             Total liabilities and shareholders' equity                               $640,443          $563,550
                                                                                      ========          ========

</TABLE>


                             See accompanying notes


                                       3
<PAGE>


                            Capital Corp of the West
           Consolidated Statements of Income and Comprehensive Income
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                             For the Three Months       For the Nine Months
                                                                              Ended September 30,         Ended September 30,
                                                                                2000        1999         2000        1999
                                                                             ---------  -----------   ----------   ---------
                                                                              (Dollars in thousands, except per share data)

<S>                                                                          <C>        <C>           <C>          <C>
Interest income:
         Interest and fees on loans                                             $10,178   $   7,881    $ 27,899     $21,898
         Interest on deposits with other financial institutions                      11          45          29          84
         Interest on investments held to maturity:
               Taxable                                                              502         300       1,499         667
               Non-taxable                                                           55          56         167         134
         Interest on investments available for sale:
               Taxable                                                            2,148       1,499       6,025       4,463
               Non-taxable                                                          281         288         852         901
         Interest on federal funds sold                                             124          37         422         340
                                                                               --------  -----------   ----------   ---------
                  Total interest income                                          13,299      10,106      36,893      28,487

Interest expense:
         Interest on negotiable orders of withdrawal                                125         117         370         339
         Interest on savings deposits                                             1,900       1,501       5,187       4,285
         Interest on time deposits, under $100,000                                1,832       1,148       4,627       3,289
         Interest on time deposits, $100,000 and over                             1,368         599       3,594       1,696
         Interest on other borrowings                                               367         193       1,159         423
                                                                               --------  -----------   ----------   ---------
         Total interest expense                                                   5,592       3,558      14,937      10,032

Net interest income                                                               7,707       6,548      21,956      18,455
Provision for loan losses                                                           792         672       2,323       1,772
                                                                               --------  -----------   ----------   ---------
Net interest income after provision for loan losses                               6,915       5,876      19,633      16,683

Other income:
         Service charges on deposit accounts                                        921         846       2,605       2,383
         Income from real estate held for sale                                       --          --         381         250
         Other                                                                      419         361       1,145       1,177
                                                                               --------  -----------   ----------   ---------
                  Total other income                                              1,340       1,207       4,131       3,810

Other Expenses:
         Salaries and related benefits                                            2,969       2,545       8,190       7,163
         Premises and occupancy                                                     431         418       1,259       1,141
         Equipment                                                                  618         539       1,862       1,547
         Professional fees                                                          307         228         802         921
         Marketing                                                                  214         188         678         540
         Goodwill and intangible amortization                                       198         198         594         594
         Supplies                                                                   160         126         474         419
         Other                                                                      991       1,053       2,827       2,913
                                                                                -------       -----   ------------    -----
Total other expenses                                                              5,888       5,295      16,686      15,238

Income before income taxes                                                        2,367       1,788       7,078       5,255
Provision for income taxes                                                          721         492       2,118       1,603
                                                                               --------  -----------   ----------   ---------
Net income                                                                      $ 1,646   $   1,296     $ 4,960     $ 3,652
Comprehensive Income:
Unrealized gain (loss) on securities arising during the period, net               1,173        (547)        909      (2,071)
Less: reclassification adjustment for losses included in net income, net             --         (93)         --         (72)
                                                                               --------  -----------   ----------   ---------
Comprehensive income, net                                                       $ 2,819   $     656    $  5,869     $ 1,509
                                                                                =======  ===========   ==========   =========

Basic earnings per share                                                        $  0.36   $    0.28    $   1.10     $  0.80

Diluted earnings per share                                                      $  0.35   $    0.28    $   1.07     $  0.77

-------------------------------------------------------------------------------------------------------------------------------
                             See accompanying notes

</TABLE>

                                       4
<PAGE>


                            Capital Corp of the West
            Consolidated Statement of Changes in Shareholders' Equity
                                   (Unaudited)

(Amounts in thousands except number of shares)

<TABLE>
<CAPTION>

                                          Common Stock                         Accumulated
                                    -------------------------                     other
                                      Number of                  Retained      comprehensive
                                       shares       Amounts      earnings       loss, net          Total
                                    ------------  -----------  -----------  -----------------  -------------

<S>                                <C>           <C>          <C>           <C>               <C>

Balance, December 31, 1999            4,496,201     $ 35,593     $ 10,743          $  (2,659)     $ 43,677

Exercise of stock options                44,935          215           --                 --           215

Net change in fair market value
  of  investment securities, net of
  tax effect of  $(182)                      --           --           --                909           909

Net income                                   --           --        4,960                 --         4,960
                                      ---------      -------     --------         ----------      --------
Balance, September 30, 2000           4,541,136      $35,808     $ 15,703         $  ( 1,750)     $ 49,761
                                      =========      =======     ========         ==========      ========

</TABLE>





                             See accompanying notes

                                       5
<PAGE>



                            Capital Corp of the West
                      Consolidated Statements of Cash Flows
                                   (Unaudited)


<TABLE>
<CAPTION>


                                                                                 9 months ended        9 months ended
                                                                                     09/30/00             09/30/99
                                                                              -----------------       ---------------
                                                                                      (Dollars in thousands)

<S>                                                                          <C>                  <C>

OPERATING ACTIVITIES:
Net income                                                                           $    4,960           $    3,652
         Adjustments to reconcile net income to net cash provided by
         operating activities:
                  Provision for loan losses                                               2,323                1,772
                  Depreciation, amortization and accretion, net                           1,713                2,185
                  Gain on sale of real estate held for sale                                 381                  250
                  Gain on sale of premises and equipment                                      -                   10
         Net increase in interest receivable & other assets                              (2,812)              (3,808)
         Net decrease (increase) in deferred loan fees                                      100                 (690)
         Net increase in accrued interest payable & other liabilities                     2,209                1,880
                                                                              -----------------       ---------------
Net cash provided by operating activities                                                 8,874                5,251

INVESTING ACTIVITIES:
         Investment security purchases                                                  (44,931)             (47,591)
         Proceeds from maturities of investment securities                                9,941               26,160
         Proceeds from sales of AFS investment securities                                 1,725               21,351
         Net decrease (increase) in time deposits in other financial                        250               (6,601)
         institutions
         Proceeds from sales of commercial and real estate loans                          2,315                  939
         Net increase in loans                                                          (67,609)             (55,396)
         Purchases of premises and equipment                                             (1,142)                (873)
         Proceeds from sales of real estate held for sale                                   381                  250
                                                                              -----------------       ---------------
Net cash used by investing activities                                                   (99,070)             (61,761)

FINANCING ACTIVITIES:
         Net increase in demand, NOW and savings deposits                                23,648                2,225
         Net increase in certificates of deposit                                         37,899               26,065
         Net increase in other borrowings                                                 7,053               19,864
         Purchase of treasury stock                                                          --               (1,768)
         Exercise of stock options                                                          215                  121
                                                                              -----------------       ---------------
Net cash provided by financing activities                                                68,815               46,507

Net decrease in cash and cash equivalents                                               (21,381)             (10,003)

Cash and cash equivalents at beginning of period                                         50,222               44,896
                                                                              -----------------       ---------------
Cash and cash equivalents at end of period                                           $   28,841           $   34,893
                                                                              =================       ===============

CASH PAID DURING THE NINE MONTHS ENDED SEPTEMBER 30, 2000:
              Interest paid                                                          $   15,031           $    9,559
              Income tax payments                                                         1,895                1,511
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
         Investment securities net unrealized gains (losses); net of tax                    909               (2,143)
         Transfer of securities from available for sale to held to maturity                  --                4,327
         Loans transferred to other real estate owned                                       443                   --

</TABLE>


                             See accompanying notes

                                       6
<PAGE>


                            Capital Corp of the West
                   Notes to Consolidated Financial Statements
                    September 30, 2000 and December 31, 1999
                                   (Unaudited)

GENERAL - COMPANY

         Capital Corp of the West (the "Company" or "Capital Corp") is a bank
holding company incorporated under the laws of the State of California on April
26, 1995. On November 1, 1995, the Company became registered as a bank holding
company, and is a holder of all of the capital stock of County Bank (the
"Bank"). During 1998, the Company formed Capital West Group, a subsidiary that
engaged in the financial institution advisory business but is currently
inactive. The Company's primary asset is the Bank and the Bank is the Company's
primary source of income.

         The Company's securities consist of 20,000,000 shares of Common Stock,
no par value, and 10,000,000 shares of Authorized Preferred Stock. As of
September 30, 2000 there were 4,541,136 common shares outstanding, held of
record by approximately 2,500 shareholders. There were no preferred shares
outstanding at September 30, 2000. The Bank has two wholly owned subsidiaries,
Merced Area Investment & Development, Inc. ("MAID") and County Asset Advisors
("CAA"). CAA is currently inactive. All references herein to the "Company"
include the Bank, and the Bank's subsidiaries, and Capital West Group, unless
context otherwise requires.

GENERAL - BANK

         The Bank was organized and commenced operations, in 1977, as County
Bank of Merced, a California state banking corporation. In November 1992, the
Bank changed its legal name to County Bank. The Bank's securities consist of one
class of Common Stock, no par value and are wholly owned by the Company. The
Bank's deposits are insured under the Federal Deposit Insurance Act by the
Federal Deposit Insurance Corporation ("FDIC") up to applicable limits stated
therein. County Bank is a member of the Federal Reserve System.

INDUSTRY AND MARKET AREA

         The Bank engages in general commercial banking business primarily in
Fresno, Madera, Mariposa, Merced, Tulare, Toulumne and Stanislaus counties. The
Bank has sixteen branch offices: two in Merced with one branch centrally located
in Merced and the other in downtown Merced within the Bank's administrative
office building, two in Modesto, two in Turlock and single offices in Atwater,
Dos Palos, Fresno, Hilmar, Los Banos, Livingston, Madera, Mariposa, Sonora and
Visalia.

OTHER FINANCIAL NOTES

         All adjustments which in the opinion of Management are necessary for a
fair presentation of the Company's financial position at September 30, 2000 and
the results of operations for the three and nine month periods ended September
30, 2000 and 1999, and the statements of cash flows for the nine months ended
September 30, 2000 and 1999 have been included. The interim results for the
three and nine months ended September 30, 2000 and 1999 are not necessarily
indicative of results for the full year. These financial statements should be
read in conjunction with the financial statements and the notes included in the
Company's Annual Report for the year ended December 31, 1999.



                                       7
<PAGE>

         The accompanying unaudited financial statements have been prepared on a
basis consistent with the generally accepted accounting principles and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X.

         Basic earnings per share (EPS) is computed by dividing net income
available to shareholders by the weighted average number of common shares
outstanding during the period. Diluted earnings per share is computed by
dividing net income available to common shareholders by the weighted average
number of common shares outstanding during the period plus potential common
shares outstanding. Diluted earnings per share reflects the potential dilution
that could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the Company.

    The following table provides a reconciliation of the numerator and
denominator of the basic and diluted earnings per share computation of the three
and nine month periods ending September 30, 2000 and 1999:

<TABLE>
<CAPTION>

                                                              For the three months                For the nine months
                                                              ended September 30,                 ended September 30,
                                                        ---------------------------------    -------------------------------
  (Dollars in thousands, except per share data)              2000              1999              2000             1999
                                                        ---------------   ---------------    --------------   --------------

<S>                                                  <C>               <C>               <C>             <C>

  Basic EPS computation:
           Net income                                         $  1,646          $  1,296          $  4,960        $ 3,652
                                                              ========          ========          ========        =======
           Average common shares outstanding                     4,539             4,550             4,524          4,585
                                                              ========          ========          ========        =======
  Basic EPS                                                   $   0.36          $   0.28           $  1.10        $  0.80
                                                              ========          ========           =======        =======
  Diluted EPS Computations:
           Net income                                         $  1,646          $  1,296          $  4,960        $ 3,652
                                                              ========          ========          ========        =======
           Average common shares outstanding                     4,539             4,550             4,524          4,602
           Stock options                                           123               140               123            140
                                                              --------          --------          --------        -------
                                                                 4,662             4,690             4,647          4,725
                                                              ========          ========           =======        =======
  Diluted EPS                                                 $   0.35          $   0.28           $  1.07        $  0.77
                                                              ========          ========           =======        =======



</TABLE>



                                       8
<PAGE>


         In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133 "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"), which amends the disclosure
requirements of Statement No. 52, "Foreign Currency Translations" and of
Statement No. 107, "Disclosures about Fair Value of Financial Instruments." SFAS
133 supersedes Statements No. 80 "Accounting for Future Contracts", No. 105
"Disclosure of Information about Financial Instruments with Off-Balance Sheet
Risk and Financial Instruments with Concentrations of Credit Risk" and No. 119,
"Disclosure about Derivative Financial Instruments and Fair Value of Financial
Instruments." Under the provisions of SFAS 133, the Company is required to
recognize all derivatives as either assets or liabilities in the statement of
financial condition and measure those instruments at fair value. If certain
conditions are met, a derivative may be specifically designated as (a) a hedge
of the exposure to changes in the fair value of a recognized asset or liability
or an unrecognized firm commitment, (b) a hedge of the exposure to cash flows of
a forecasted transaction, or (c) a hedge of the foreign currency exposure of a
net investment in a foreign operation, an unrecognized firm commitment, an
available-for-sale security or a foreign-currency-denominated forecasted
transaction. The accounting for changes in the fair value of a derivative (that
is, gains and losses) depends on the intended use of the derivative and the
resulting operation. Certain sections of SFAS No. 133 were amended in June 2000,
when the FASB issued Statement No. 138 "Accounting for Certain Derivative
Instruments and Certain Hedging Activities, an amendment of FASB Statement No.
133" (SFAS No. 138). SFAS No. 133, as amended by SFAS No. 138, also nullifies or
modifies the consensuses reached in a number of issues addressed by the Emerging
Issues Task Force. SFAS No. 133, as amended by SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities - Deferral of the Effective Date
of FASB Statement No. 133" and SFAS No. 138 are effective for all fiscal
quarters of fiscal years beginning after June 15, 2000. Initial application of
these statement should be as of the beginning of an entity's fiscal quarter; on
that date, hedging relationships must be designated anew and documented pursuant
to the provisions of these statements. Neither SFAS No. 133 nor SFAS No. 138
should be applied retroactively to financial statements of prior periods. The
Company has a program in place to evaluate its financial instruments and
purchase contracts. Management believes the effects of adopting SFAS No. 133 and
SFAS No. 138 will not have a significant impact on its results of operations or
financial position.
         On March 31, 2000, the Financial Accounting Standards Board ("FASB")
issued FASB Interpretation No. 44, "Accounting for Certain Transactions
Involving Stock Compensation - an interpretation of APB Opinion No. 25" (FIN No.
44). This interpretation provides guidance for issues that have arisen in
applying APB Opinion No. 25, "Accounting for Stock Issued to Employees." FIN 44
applies prospectively to new awards, exchanges of awards in a business
combination, modifications to outstanding awards, and changes in grantee status
that occur on or after July 1, 2000, except for the provisions related to
repricing and the definition of an employee which apply to awards issued after
December 31, 1998. The provisions related to modifications to fixed stock option
awards are effective for awards modified after January 12, 2000. Management
believes the effects of adopting FIN No. 44 will not have a significant impact
on its results of operations or financial position.


                                       9


<PAGE>


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

         The following Management's Discussion and Analysis of Financial
Condition and Results of Operations contains forward-looking statements that are
subject to risks and uncertainties and include information about possible or
assumed future results of operations. Many possible events or factors could
affect the future financial results and performance of the company. This could
cause results or performance to differ materially form those expressed in our
forward-looking statements. Words such as "experts", "anticipates", "believes",
"estimates", variations of such words and other similar expressions are intended
to identify such forward-looking statements. These statements are not guarantees
of future performance and involve certain risks, uncertainties and assumptions
which are difficult to predict. Therefore, actual outcomes and results may
differ materially from what is expressed or forecasted in, or implied by, such
forward-looking statements.

         Readers of the Company's Form 10-Q should not rely solely on forward
looking statements and should consider all uncertainties and risks discussed
throughout this report, as well as those discussed in the Company's 1999 annual
Report on Form 10-K filed March 17, 2000. These statements are representative
only on the date hereof, and the Company undertakes no obligation to update any
forward-looking statements made. Some possible events or factors that could
occur that may cause differences from expected results include the following:
the company's loan growth is dependent on economic conditions, as well as
various discretionary factors, such as decisions to sell, or purchase certain
loans or loan portfolios; participations of loans and the management of
borrower, industry, product and geographic concentrations and the mix of the
loan portfolio. The rate of charge-offs and provision expense can be affected by
local, regional and international economic and market conditions, concentrations
of borrowers, industries, products and geographical conditions, the mix of the
loan portfolio and management's judgements regarding the collectibility of
loans. Liquidity requirements may change as a result of fluctuations in assets
and liabilities and off-balance sheet exposures, which will impact the capital
and debt financing needs of the company and the mix of funding sources.
Decisions to purchase, hold, or sell securities are also dependent of liquidity
requirements and market volatility, as well as on the off-balance sheet
positions. Factors that may impact interest rate risk include local, regional
and international economic conditions, levels, mix, maturities, yields or rates
of assets and liabilities and the wholesale and retail funding sources of the
Company.

         The Company is also exposed to the potential of losses arising from
adverse changes in market rate and prices which can adversely impact the value
of financial products, including securities, loans, and deposits. In addition,
the banking industry in general is subject to various monetary and fiscal
policies and regulations, which include those determined by the Federal Reserve
Board, the Federal Deposit Insurance Corporation and state regulators, whose
policies and regulations could affect the Company's results.


                                       10
<PAGE>

         Other factors that may cause actual results to differ from the
forward-looking statements include the following: competition with other local
and regional banks, savings and loan associations, credit unions and other
non-bank financial institutions, such as investment banking firms, investment
advisory firms, brokerage firms, mutual funds and insurance companies, as well
as other entities which offer financial services; interest rate, market and
monetary fluctuations; inflation; market volatility; general economic
conditions; introduction and acceptance of new banking-related products,
services and enhancement; fee pricing strategies, mergers and acquisitions and
their integration into the Company and management's ability to manage these and
other risks.

         The following discussion and analysis is designed to provide a better
understanding of the significant changes and trends related to the Company and
its subsidiaries' financial condition, operating results, asset and liability
management, liquidity and capital resources and should be read in conjunction
with the Consolidated Financial Statements of the Company and the Notes thereto.

RESULTS OF OPERATIONS

         OVERVIEW. For the three and nine months ended September 30, 2000 the
Company reported record net income of $1,646,000 and $4,960,000. This compares
to $1,296,000 and $3,652,000 for the same periods in 1999 and represents an
increase of $350,000 and $1,308,000. Basic and diluted earnings per share were
$.36 and $.35 for the three months ended September 30, 2000. This compares to
basic and diluted earnings per share of $.28 and $.28 for the three months ended
September 30, 1999 and represents an increase of $0.08 per basic and $0.07 per
diluted share. The annualized return on average assets was 1.04% and 0.99% for
the three months ended September 30, 2000 and 1999, respectively. The Company's
annualized return on average equity was 13.67% and 11.92% for the three months
ended September 30, 2000 and 1999, respectively.

         The following tables provide a summary of the major categories of
income and expense for the third quarter of 2000 compared with the third quarter
of 1999 and for the first nine months of 2000 compared with the first nine
months of 1999:

<TABLE>
<CAPTION>

                                               Three Months Ended
                                                  September 30,
                                        --------------------------------       Percentage Change
                                              2000             1999                Increase
                                        ---------------   --------------    ------------------------
                                       (Dollars in thousands, except earnings
                                        per share)


<S>                                  <C>              <C>                     <C>

Interest income                               $ 13,299         $ 10,106                31.6 %
Interest expense                                 5,592            3,558                57.2
Net interest income                              7,707            6,548                17.7
Provisions for loan losses                         792              672                17.9
Net interest income after provision
         for loan losses                         6,915            5,876                17.7
Other income                                     1,340            1,207                11.0
Other expenses                                   5,888            5,295                11.2
Net income before income taxes                   2,367            1,788                32.4
Income taxes                                       721              492                46.5
Net income                                       1,646            1,296                27.0
Diluted earnings per common share                 0.35             0.28                25.0


</TABLE>

                                       11
<PAGE>


<TABLE>
<CAPTION>

                                                    Nine Months
                                                Ended September 30,            Percentage Change
                                                 2000            1999              Increase
                                        ---------------   --------------    ------------------------
                                            (Dollars in thousands, except
                                                 earnings per share)

<S>                                  <C>               <C>                  <C>

Interest income                               $ 36,893         $ 28,487                29.5%
Interest expense                                14,937           10,032                48.9
Net interest income                             21,956           18,455                19.0
Provisions for loan losses                       2,323            1,772                31.1
Net interest income after provision
         for loan losses                        19,633           16,683                17.7
Other income                                     4,131            3,810                 8.4
Other expenses                                  16,686           15,238                 9.5
Net income before income taxes                   7,078            5,255                34.7
Income taxes                                     2,118            1,603                32.1
Net income                                       4,960            3,652                35.8
Diluted earnings per common share                 1.07             0.77                39.0

</TABLE>

         NET INTEREST INCOME. The Company's primary source of income is net
interest income and is determined by the difference between interest income and
fees derived from earning assets and interest paid on interest bearing
liabilities. Net interest income for the three and nine months ended September
30, 2000 totaled $7,707,000 and $21,956,000 and represented an increase of
$1,159,000 and $3,501,000 or 17.7% and 19.0% when compared to the $6,548,000 and
$18,455,000 achieved during the three and nine months ended September 30, 1999.

         Total interest and fees on earning assets were $13,299,000 and
$36,893,000 for the three and nine months ended September 30, 2000, an increase
of $3,193,000 and $8,406,000 or 31.6% and 29.5% from the $10,106,000 and
$28,487,000 for the same period in 1999. The level of interest income is
affected by changes in volume of and rates earned on interest-earning assets.
Interest-earning assets consist primarily of loans, investment securities and
federal funds sold. The increase in interest income for the three and nine
months ended September 30, 2000 was the result of both an increase in the
interest rate earned and the volume of interest-earning assets. Average
interest-earning assets for the three and nine months ended September 30, 2000
were $574,465,000 and $541,689,000 compared with $467,085,000 and $450,140,000
for the three and nine months ended September 30, 1999, an increase of
$107,380,000 and $91,549,000 or 23.0% and 20.3%. The average interest rate
earned on interest-earnings assets during the three and nine months ending
September 30, 2000 was 9.26% and 9.08% which is an increase of 61 and 64 basis
points or 7.1% and 7.6% from the 8.65% and 8.44% earned during the three and
nine months ending September 30, 1999.

         Interest expense is a function of the volume of and the rates paid on
interest-bearing liabilities. Interest-bearing liabilities consist primarily of
certain deposits and borrowed funds. Total interest expense was $5,592,000 and
$14,937,000 for the three and nine months ended September 30, 2000, compared
with $3,558,000 and $10,032,000 for the three and nine months ended September
30, 1999, an increase of $2,034,000 and $4,905,000 or 57.2% and 48.9%. This
increase was primarily the result of both an increase in the rates and volumes
of interest-bearing liabilities. Average interest-bearing liabilities were
$487,234,000 and $464,332,000 for the three and nine months ended September 30,
2000 compared with $398,308,000 and $383,805,000 for the same three and nine
months in 1999, an increase of $88,926,000 and $80,527,000 or 22.3% and 21.0%.
Average interest rates paid on interest-bearing liabilities were 4.59% and 4.29%
for the three and nine months ending September 30, 2000 compared with 3.57% and
3.49% for the same three and nine months of 1999, an increase of 102 and 80
basis points or 28.6% and 22.9%.


                                       12
<PAGE>


         The increase in interest-earning assets and interest-bearing
liabilities is primarily the result of increased market penetration within our
target markets. Internal growth has been achieved primarily through expanding
existing loan and deposit balances within our existing branch network.

         The Company's net interest margin, the ratio of net interest income to
average interest-earning assets, was 5.37% and 5.40% for the three and nine
months ended September 30, 2000 compared with 5.61% and 5.47% for the same
periods in 1999, a decrease of 24 and 7 basis points for the three and nine
months ending September 30, 2000 compared to the same period in 1999. Net
interest margin provides a measurement of the Company's ability to employ funds
profitably during the period being measured. The Company's decrease in net
interest margin for the three and nine months ending September 30, 2000 was
primarily attributable to the increase in short term market interest rates
experienced during the latter part of 1999 and through the first nine months of
2000.

         AVERAGE BALANCES AND RATES EARNED AND PAID. The following table
presents condensed average balance sheet information for the Company, together
with interest rates earned and paid on the various sources and uses of its funds
for each of the three month periods indicated. Nonaccruing loans are included in
the calculation of the average balances of loans, but the nonaccrued interest on
such loans is excluded.

            AVERAGE BALANCE SHEET & ANALYSIS OF NET INTEREST EARNINGS


<TABLE>
<CAPTION>

                                                          Three months ended                    Three months ended
                                                         September 30, 2000                   September 30, 1999
                                                   Average                              Average
                                                   Balance     Interest   Yield/rate    Balance     Interest  Yield/rate
                                                                         (Dollars in thousands)

<S>                                            <C>          <C>         <C>         <C>           <C>        <C>

    Assets
    Federal funds sold                               $  7,910     $  124      6.27 %      $  2,866      $  37      5.16%
    Time deposits at other financial                      603         11      7.30           3,381         45      5.32
       institutions
    Taxable investment securities                     150,688      2,650      7.03         113,383      1,799      6.35
    Nontaxable investment securities (1)               29,517        336      4.55          30,070        344      4.58
    Loans, gross: (2)                                 385,747     10,178     10.55         317,385      7,881      9.93
                                                    ---------     ------     -----         -------     ------     -----
    Total interest-earning assets:                    574,465     13,299      9.26         467,085     10,106      8.65
    Allowance for loan losses                          (7,133)                              (6,048)
    Cash and due from banks                            25,300                               22,682
    Premises and equipment, net                        12,876                               13,042
    Interest receivable and other assets               27,959                               25,145
                                                    ---------                             --------
    Total assets                                    $ 633,467                             $521,906
                                                    =========                             ========

    Liabilities and shareholders' equity

    Negotiable order of withdrawal                   $ 74,116     $  125      0.67 %      $ 68,992     $  117      0.68%
    Savings deposits                                  182,283      1,900      4.17         177,809      1,501      3.38
    Time deposits                                     209,681      3,200      6.10         139,721      1,747      5.00
    Other borrowings                                   21,154                 6.94          11,786        193      6.55
                                                    ---------     ------     -----         -------     ------     -----
    Total interest-bearing liabilities                487,234      5,592      4.59         398,308      3,558      3.57

    Noninterest-bearing deposits                       92,154                               75,964
    Accrued interest, taxes and other liabilities       5,925                                4,135
                                                    ---------                               ------
       Total liabilities                              585,313                              478,407

    Total shareholders' equity                         48,154                               43,499
                                                    ---------                               ------
    Total liabilities and shareholders' equity      $ 633,467                            $ 521,906
                                                    =========                            =========

    Net interest income and margin (3)                           $ 7,707      5.37%                   $ 6,548      5.61%
                                                                 =======      ====                    =======      ====

</TABLE>

(1) Interest on nontaxable securities is not computed on a tax-equivalent basis.

(2) Amount of interest earned includes loan fees of $214,000 and $53,000 for
    September 30, 2000 and 1999 respectively.
(3) Net interest margin is computed by dividing net interest income by total
    average interest-earning assets.


                                       13
<PAGE>


         The following table presents condensed average balance sheet
information for the Company, together with interest rates earned and paid on the
various sources and uses of its funds for each of the nine month periods
indicated. Nonaccruing loans are included in the calculation of the average
balances of loans, but the nonaccrued interest on such loans is excluded.

<TABLE>
<CAPTION>

                                                      Nine months ended             Nine months ended
                                                     September 30, 2000             September 30, 1999
                                             Average                          Average
                                             Balance   Interest  Yield/rate   Balance       Interest   Yield/rate
                                                                      (Dollars in thousands)

<S>                                       <C>        <C>         <C>           <C>           <C>          <C>

  Assets
  Federal funds sold                             $ 8,996    $  422      6.25%         $  9,503      $  340       4.77%
  Time deposits at other financial                   668        29      5.79             2,095          84       5.35
     institutions
  Taxable investment securities                  143,000     7,524      7.02           112,711       5,130       6.07
  Nontaxable investment securities (1)            29,677     1,019      4.58            30,099       1,035       4.58
  Loans, gross: (2)                              359,348    27,899     10.35           295,732      21,898       9.87
                                                --------    ------     -----          --------      ------       ----
  Total interest-earning assets:                 541,689    36,893      9.08           450,140      28,487       8.44
  Allowance for loan losses                       (6,887)                               (5,769)
  Cash and due from banks                         23,658                                21,168
  Premises and equipment, net                     13,042                                13,141
  Interest receivable and other assets            27,704                                24,285
                                                --------                              --------
  Total assets                                  $599,206                              $502,965
                                                ========                              ========

  Liabilities and shareholders' equity
  Negotiable order of withdrawal                $ 73,297    $  370      0.67%         $ 67,350      $  339       0.67%
  Savings deposits                               176,905     5,187      3.91           175,363       4,285       3.26
  Time deposits                                  191,031     8,221      5.74           133,431       4,985       4.98
  Other borrowings                                23,099     1,159      6.69             7,661         423       7.36
                                                --------    ------     -----          --------      ------       ----

  Total interest-bearing liabilities             464,332    14,937      4.29           383,805      10,032       3.49

  Noninterest-bearing deposits                    83,889                                71,717
  Accrued interest, taxes and other
     liabilities                                   4,990                                 3,899
                                                --------                              --------
     Total liabilities                           553,211                               459,421

  Total shareholders' equity                      45,995                                43,544
                                                --------                              --------
  Total liabilities and shareholders' equity    $599,206                              $502,965
                                                ========                              ========

  Net interest income and margin (3)                       $21,956      5.40%                     $ 18,455       5.47%
                                                           =======      ====                      ========       ====

</TABLE>


(1)      Interest on nontaxable securities is not computed on a tax-equivalent
         basis.
(2)      Amount of interest earned includes loan fees of $540,000 and $329,000
         for September 30, 2000 and 1999 respectively.
(3)      Net interest margin is computed by dividing net interest income by
         total average interest-earning assets.


                                       14
<PAGE>



NET INTEREST INCOME CHANGES DUE TO VOLUME AND RATE. The following table sets
forth, for the periods indicated, a summary of the changes in average asset and
liability balances and interest earned and interest paid resulting from changes
in average asset and liability balances (volume) and changes in average interest
rates and the total net change in interest income and expenses. The changes in
interest due to both rate and volume have been allocated to volume and rate
changes in proportion to the relationship of the absolute dollar amount of the
change in each.

<TABLE>
<CAPTION>

                                                    Three Months Ended
                                        Sept. 30, 2000 compared to Sept. 30, 1999
                                         ----------------------------------------
                                            Volume         Rate          Total
                                         ----------- ------------ ---------------
                                                   (Dollars in thousands)

<S>                                    <C>          <C>           <C>

Increase (decrease) in interest income:
Federal funds sold                            $   21       $   66        $    87
Time deposits at other financial                 (46)          12            (34)
   institutions
Taxable investment securities                    367          484            851
Tax-exempt investment securities                  (4)          (4)            (8)
Loans                                          1,780          517          2,297
                                         ----------- ------------ ---------------
Total                                        $ 2,118      $ 1,075       $  3,193
                                         =========== ============ ===============

Increase (decrease) interest expense:
Interest bearing demand                       $    9       $   (1)      $      8
Savings deposits                                  39          360            399
Time deposits                                  1,009          444          1,453
Other borrowings                                 162           12            174
                                         ----------- ------------ ---------------
Total                                       $  1,219      $   815      $   2,034
                                         =========== ============ ===============

Increase in net interest income              $   899      $   260      $   1,159
                                         =========== ============ ===============

</TABLE>

<TABLE>
<CAPTION>


                                                     Nine Months Ended
                                        Sept. 30, 2000 compared to Sept. 30, 1999
                                         ----------------------------------------
                                            Volume         Rate          Total
                                         ----------- ------------ ---------------
                                                   (Dollars in thousands)

<S>                                    <C>          <C>           <C>

Increase (decrease) in interest income:
Federal funds sold                           $   (19)      $  101        $    82
Time deposits at other financial                 (61)           6            (55)
   institutions
Taxable investment securities                  1,515          879          2,394
Tax-exempt investment securities                 (14)          (2)           (16)
Loans                                          4,897        1,104          6,001
                                         ----------- ------------ ---------------
Total                                       $  6,318      $ 2,088       $  8,406
                                         =========== ============ ===============

Increase (decrease) interest expense:

Interest bearing demand                       $   30       $    1        $    31
Savings deposits                                  38          864            902
Time deposits                                  2,394          842          3,236
Other borrowings                                 778          (42)           736
                                         ----------- ------------ ---------------
Total                                       $  3,240      $ 1,665      $   4,905
                                         =========== ============ ===============

Increase in net interest income             $  3,078       $  423      $   3,501
                                         =========== ============ ===============

</TABLE>


                                       15
<PAGE>



         PROVISION FOR LOAN LOSSES. The provision for loan losses for the three
and nine months ended September 30, 2000 were $792,000 and $2,323,000 which
compares with $672,000 and $1,772,000 for the three and nine months ended
September 30, 1999. See "Allowance for Loan Losses" contained herein. As of
September 30, 2000 the allowance for loan losses was $7,309,000 or 1.85% of
total loans. At September 30, 2000, nonperforming assets totaled $2,459,000 or
 .38% of total assets, nonperforming loans totaled $1,912,000 or .48% of total
loans and the allowance for loan losses totaled 382% of nonperforming loans. At
December 31, 1999, nonperforming assets totaled $2,237,000 or .40% of total
loans, nonperforming loans totaled $1,990,000 or .60% of total loans and the
allowance for loan losses totaled 328.74% of nonperforming loans. No assurance
can be given that nonperforming loans will not increase or that the allowance
for loan losses will be adequate to cover losses inherent in the loan portfolio.

         OTHER INCOME. Total other income for the three and nine months ended
September 30, 2000 was $1,340,000 and $4,131,000 which is an increase of
$133,000 and $321,000 or 11.0% and 8.4% from the $1,207,000 and $3,810,000
realized during the same three and nine month periods in 1999. Service charges
on deposit accounts increased by $75,000 and $222,000 or 8.9% and 9.3% to
$921,000 and $2,605,000 for the three and nine months ended September 30, 2000
compared with $846,000 and $2,383,000 for the same periods in 1999. Income from
the sale of real estate held for sale did not change in the third quarter of
2000 or 1999 and there were no real estate sales during this time period. Income
from the sale of real estate totaled $381,000 for the first nine month of 2000,
which is an increase of $131,000 or 52.4% from the $250,000 realized during the
first nine months of 1999. Other income, which includes commissions earned on
the retail sale of securities and annuities, increased by $58,000 or 16.1% for
the three month period ended September 30, 2000 to $419,000 which compares to
$361,000 recorded in the same period in 1999. During the nine months ending
September 30, 2000, other income declined by $32,000 or 2.7% to $1,145,000 from
the $1,177,000 recorded during the first nine months of 1999.

         OTHER EXPENSE. Noninterest expenses for the three and nine months ended
September 30, 2000 were $5,888,000 and $16,686,000, an increase of $593,000 and
$1,448,000 or 11.2% and 9.5% when compared with the $5,295,000 and $15,238,000
recorded during the three and nine months ended September 30, 1999. The primary
components of noninterest expenses were salaries and related benefits, equipment
expenses, premises and occupancy expenses, professional fees, marketing
expenses, goodwill and intangible amortization expense, supplies expense, and
other operating expenses.

         For the three and nine months ended September 30, 2000, salaries and
related benefits increased by $424,000 and $1,027,000 or 16.7% and 14.3% over
the same period in 1999 to $2,969,000 and $8,190,000. Equipment expenses
increased by $79,000 and $315,000 or 14.7% and 20.4% during the three and nine
months ended September 30, 2000 to $618,000 and $1,862,000 from the $539,000 and
$1,547,000 experienced during the three and nine months ended September 30,
1999. Professional fees increased by $79,000 or 34.6% for the three months ended
September 30, 2000 to $307,000 from the $228,000 realized for the three months
ended September 30, 1999. For the nine months ended September 30, 2000, the
professional fees decreased by $119,000 or 12.9% to $802,000 from the $921,000
recorded for the nine months ended September 30, 1999. When comparing the
results of the three and nine months ended September 30, 2000 to three and nine
months ended September 30, 1999, premises and occupancy expenses increased
$13,000 and $118,000 or 3.1% and 10.3%, marketing expenses increased by $26,000
and $138,000 or 13.8% and 25.6%, supplies expense increased by $34,000 and
$55,000 or 27.0% and 13.1%, and other expenses decreased by $62,000 and $86,000
or 5.9% and 3.0%. The salary expense increases were primarily the result of
increased staffing levels and normal salary progression. Increased equipment
expenses were primarily the result of increased


                                       16
<PAGE>

spending on technology and processing equipment. Increased spending on premises
and occupancy is primarily related to increased spending on branch office
maintenance and repair. Increased professional fees during the three months
ended September 30, 2000 when compared to the same period in 1999 were the
result of consulting expenses aimed at improving operational efficiencies during
the quarter. Decreased professional fees for the nine months ending September
30, 2000 as compared with September 30, 1999 were primarily the result of the
decreased use of outside consulting firms during this nine month period.
Increased marketing expenses were primarily the result of increased media
spending on network and cable television advertising. Increased supplies expense
was primarily the result of increased use of supplies in supporting increased
loan and deposit volumes.

         PROVISION FOR INCOME TAXES. The Company recorded an increase of
$229,000 and $515,000 in the income tax provision to $721,000 and $2,118,000 for
the three and nine months ended September 30, 2000 compared to the $492,000 and
$1,603,000 recorded for the same periods in 1999. For the three and nine months
ended September 30, 2000, the Company experienced an effective tax rate of 30.5%
and 29.9% compared to 27.5% and 30.5% recorded for three and nine months ended
September 30, 1999. The increase in income taxes during the three and nine
months ending September 30, 2000 as compared to the same period in 1999 is
primarily related to an overall increase in pretax earnings. The increase in
effective tax rates during the three months ended September 30, 2000 as compared
to the same period in 1999 is primarily related to an increased level of taxable
income, primarily net interest income, without a corresponding increase in
nontaxable income and tax credits. The primary source of nontaxable income
during the three and nine months ending September 30, 2000 and 1999 was interest
generated from investments in bank qualified municipal securities. The primary
source of tax credits during these same periods was tax credits derived from
investments in housing tax credit limited partnerships. These partnership
investments allow the Company to utilize federal and state housing credits
obtained from investments in low-income affordable housing projects. The Company
had investments in these partnerships of $5,800,000 as of September 30, 2000 and
1999 which generated estimated tax credits of $130,000 and $375,000 for the
three and nine months ended September 30, 2000 compared with $105,000 and
$330,000 for the same periods in 1999.

INTEREST RATE RISK MANAGEMENT

         Managing interest rate risk is an integral part of managing a banking
institution's primary source of income, net interest income. The Company manages
the balance between rate-sensitive assets and rate-sensitive liabilities being
repriced in any given period with the objective of stabilizing net interest
income during periods of fluctuating interest rates. The Company considers its
rate-sensitive assets to be those which either contain a provision to adjust the
interest rate periodically or mature within one year. These assets include
certain loans, investment securities and federal funds sold. Rate-sensitive
liabilities are those which allow for periodic interest rate changes within one
year and include maturing time certificates, certain savings deposits and
interest-bearing demand deposits. The difference between the aggregate amount of
assets and liabilities that reprice at various time frames is called the "gap."
Generally, if repricing assets exceed repricing liabilities in a time period the
Company would be considered to be asset-sensitive. If repricing liabilities
exceed repricing assets in a time period the Company would be considered to be
liability-sensitive. Generally, the Company seeks to maintain a balanced
position whereby there is no significant asset or liability sensitivity within a
one-year period to ensure net interest margin stability in times of volatile
interest rates. This is accomplished through maintaining a significant level of
loans, investment securities and deposits available for repricing within one
year.




                                       17
<PAGE>





         The following tables set forth the interest rate sensitivity of the
Company's interest-earning assets and interest-bearing liabilities as of
September 30, 2000, using the interest rate sensitivity gap ratio. For purposes
of the following table, an asset or liability is considered rate-sensitive
within a specified period when it can be repriced or matures within its
contractual terms.

<TABLE>
<CAPTION>

                                                                               September 30, 2000
                                              -------------------------------------------------------------------------------------
                                                                  After 3        After 1
                                                                    But         Year But
                                                    Within         Within        Within        After       Noninterest-
                                                   3 Months      12 Months       5 Years      5 Years         Bearing      TOTAL
                                                   --------      ---------       -------      -------      -------------   -----
                                                                               (Dollars in thousands)

<S>                                          <C>               <C>            <C>           <C>          <C>             <C>
ASSETS
Time deposits at other banks                       $    600      $     --       $     --      $    --      $          --  $    600
Investment securities                                 6,238         6,831         71,374       95,197              2,408   182,048
Loans                                               177,703        54,577        116,033       46,667                 --   394,980
                                                   --------      ---------       -------      -------      -------------   -------
Total earning assets                                184,541        61,408        187,407      141,864              2,408   577,628
Noninterest-earning assets and
  allowances for loan losses                             --             --            --           --             62,815    62,815
                                                   --------      ---------       -------      -------      -------------   -------
Total assets                                       $184,541      $  61,408      $187,407     $141,864      $      65,223  $640,443

LIABILITIES AND
  SHAREHOLDERS' EQUITY
Demand deposits                                    $     --      $      --      $    --      $     --      $      96,104  $ 96,104
Savings, money market and NOW deposits              252,107             --           --            --                 --   252,107
Time deposits                                        32,336        146,445       29,508            --                 --   208,289
Other interest-bearing liabilities                   18,698          6,000           --         3,169                 --    27,867
Other liabilities and shareholders' equity               --             --           --            --             56,076    56,076
Total liabilities and shareholders'
   equity                                           303,141        152,445       29,508         3,169            152,180   640,443
Incremental gap                                    (118,600)       (91,037)     157,899       138,695            (86,957)       --
Cumulative gap                                     (118,600)      (209,637)     (51,738)       86,957                 --        --
Cumulative gap as a % of earning
    assets                                           (20.53)%       (36.29)%      (8.96)%       15.05%                --        --

</TABLE>


    The Company was liability-sensitive with a negative cumulative one-year gap
of $209,637,000 or (36.29)% of interest-earning assets at September 30, 2000. In
general, based upon the Company's mix of deposits, loans and investments,
increases in interest rates would be expected to result in a decrease in the
Company's net interest margin.

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


                                       18
<PAGE>


contractual payment patterns. The change in net interest income may not always
follow the general expectations of an asset-sensitive or liability-sensitive
balance sheet during periods of changing interest rates, because interest rates
earned or paid may change by differing increments and at different time
intervals for each type of interest-sensitive asset and liability. As a result
of these factors, at any given time, the Company may be more sensitive or less
sensitive to changes in interest rates than indicated in the above tables.
Greater liability sensitivity would have a more adverse effect on net interest
margin if market interest rates were to increase, and a more favorable effect if
rates were to decrease.

         In order to manage interest rate sensitivity, the Company utilizes a
detailed model to project an expected change in net interest income. The model's
estimate of interest rate sensitivity takes into account the differing time
intervals and differing rate change increments of each type of
interest-sensitive asset and liability. It then measures the projected impact of
changes in market interest rates on the Company's net interest income. Based
upon the September 30, 2000 mix of interest-sensitive assets and liabilities,
given an immediate and sustained increase in the market interest rates of 2%,
this model estimates the Company's cumulative change in net interest income over
the next year would decrease by approximately $237,000 or 1% of annualized net
interest income. No assurance can be given that the actual net interest income
would not decrease by more than $237,000 or 1% in response to a 2% increase in
market interest rates or that actual net interest income would not decrease
substantially if market interest rates increased by more than 2%.

FINANCIAL CONDITION

          Total assets at September 30, 2000 were $640,443,000, an increase of
$76,893,000 or 13.6% compared with total assets of $563,550,000 at December 31,
1999. Net loans were $387,671,000 at September 30, 2000, an increase of
$62,945,000 or 19.4% compared with net loans of $324,726,000 at December 31,
1999. Deposits totaled $556,500,000 at September 30, 2000, an increase of
$61,599,000 or 12.4% compared with total deposits of $494,901,000 at December
31, 1999. Brokered deposits totaled $1,549,000 and $12,000,000 as of September
30, 2000 and December 31, 1999. The increase in total assets of the Company from
December 31, 1999 to September 30, 2000 was primarily the result of increased
efforts in gathering retail deposits through the Bank's retail branch network.
During the third quarter of 2000, maturities that occurred within the investment
portfolio and new deposit monies received were primarily used to fund loan
growth. All short term borrowings were secured by a portion of the Company's
investment portfolio.

         Total shareholders' equity was $49,761,000 at September 30, 2000, an
increase of $6,084,000 or 13.9% from $43,677,000 at December 31, 1999. The
growth in shareholders' equity between September 30, 2000 and December 31, 1999
was primarily achieved through the retention of accumulated earnings.




                                       19
<PAGE>


INVESTMENT PORTFOLIO. The following table sets forth the carrying amount (fair
value) of available for sale investment securities as of September 30, 2000 and
December 31, 1999.


<TABLE>
<CAPTION>
                                                   September 30,         December 31,
                                                      2000                    1999
                                               ----------------------------------------
<S>                                            <C>                <C>
(Dollars in thousands)
AVAILABLE FOR SALE SECURITIES:
U.S.  Treasury and U.S.  government agencies              $36,553            $  16,756
State and political subdivisions                           23,999               23,371
Mortgage-backed securities                                 48,175               43,723
Collateralized mortgage obligations                        29,657               20,341
Corporate debt securities                                   9,554                9,660
Other securities                                            2,408                3,963
                                               -------------------    ----------------
Carrying amount and fair value                          $ 150,346            $ 117,814
                                               ===================    ================

</TABLE>


         The following table sets forth the carrying amount (amortized cost) and
fair value of held to maturity securities at September 30, 2000 and December 31,
1999:

<TABLE>
<CAPTION>

                                                   September 30,          December 31,
                                                       2000                 1999
                                                ---------------------------------------

<S>                                             <C>                 <C>
(Dollars in thousands)
HELD TO MATURITY SECURITIES:
Amortized Cost:
U.S. Treasury and U.S. government agency               $      --             $   1,004
State and political subdivisions                           4,379                 4,389
Mortgage-backed securities                                23,309                24,161
Collateralized mortgage obligations                        4,014                    --
                                                       ---------             ---------
Carrying amount (amortized cost)                       $  31,702             $  29,554
                                                       =========             =========

Fair Value:
U.S.  Treasury and U.S. government agency              $      --             $   1,001
State and political subdivisions                           4,311                 4,159
Mortgage-backed securities                                22,929                23,515
Collateralized mortgage obligations                        4,060                    --
Fair value                                             $  31,300             $  28,675
                                                       =========             =========

</TABLE>



                                       20
<PAGE>


         The following table sets forth the maturities of the Company's
investment securities at September 30, 2000 and the weighted average yields
of such securities based on cost and the scheduled maturity of each security.
Maturities of mortgage-backed securities are stipulated in their respective
contracts. However, actual maturities may differ from contractual maturities
because borrowers may have the right to prepay obligations with or without
prepayment penalties. Yields on municipal securities have not been calculated
on a tax-equivalent basis.

<TABLE>
<CAPTION>

                                                                         September 30, 2000
                                       ----------------------------------------------------------------------------------------
                                        Within One Year    One To 5 Years    Five To Ten Years    Over Ten Years      Total
                                         Amount   Yield    Amount    Yield     Amount    Yield    Amount    Yield     Amount

<S>                                   <C>         <C>      <C>     <C>        <C>       <C>     <C>       <C>        <C>
(Dollars in thousands)
Available for Sale Securities:
Treasury and U.S. Government agency     $    --       --%  $ 30,225    6.62%   $  6,328   7.26%   $   --      --%    $ 36,553
State and political                         500     7.80         --      --       3,436   4.28    20,063    4.44       23,999
Mortgage-backed securities                   12     8.09        950    6.67         551   7.56    46,662    6.72       48,175
Collateralized mortgage obligations          --       --      5,171    7.12       9,020   7.29    15,466    6.53       29,657
Corporate debt securities                   986     6.09      3,149    6.38          --     --     5,419    7.86        9,554
Equity Securities                            --       --         --      --          --     --     2,408      --        2,408
                                       ----------------------------------------------------------------------------------------
Carrying amount and fair value            1,498     6.68     39,495    6.75      19,335   6.75    90,018    6.07      150,346
                                       ----------------------------------------------------------------------------------------

Held to maturity securities:
State and political                                                                                4,379    5.14       4,379
Mortgage-backed securities                   --       --         --      --          --     --    23,309    7.21      23,309
Collateralized Mortgage Obligations          --       --      4,014    7.82          --     --        --      --       4,014
                                       ----------------------------------------------------------------------------------------
Carrying amount (amortized cost)             --       --      4,014    7.82          --     --    27,688    6.88      31,702
                                       ----------------------------------------------------------------------------------------

Total securities                         $  1,498   6.68%  $ 43,509    6.85%   $ 19,335   6.75%  $ 117,706    6.26%   $182,048
                                         ========  =====   ========    =====   ========   =====  =========    =====   ========


</TABLE>


         In the above table, mortgage-backed securities and collateralized
mortgage obligations are shown repricing at the time of maturity rather than in
accordance with their principal amortization schedules. The Company does not own
securities of a single issuer whose aggregate book value is in excess of 10% of
its total equity.

LOAN PORTFOLIO. The following table shows the composition of the Company's loan
portfolio at the dates indicated.

<TABLE>
<CAPTION>

                                                    September 30,                      December 31,
       (Dollars in thousands)                            2000                              1999
                                              ---------------------------    ---------------------------------
                                                               Percent                            Percent
                                               Dollar Amount   of Loans      Dollar Amount        of Loans
                                               -------------   --------      -------------        --------

<S>                                          <C>              <C>          <C>                  <C>
       Loan Categories:
       Commercial                                 $  93,470        23%           $  53,932             16%
       Agricultural                                  87,207        22               58,247             17
       Real estate construction                      14,851         4               11,926              4
       Real estate mortgage                         113,494        29              120,978             37
       Consumer                                      85,958        22               86,185             26
                                               -------------   --------      -------------        --------
       Total                                        394,980       100%             331,268            100%
                                               -------------   ========      -------------        ========
       Less allowance for loan losses                (7,309)                        (6,542)
                                               -------------                 -------------

       Net loans                                 $  387,671                      $ 324,726
                                               -------------                 -------------


</TABLE>

                                       21
<PAGE>

         The following table shows the maturity distribution of the portfolio of
commercial, agricultural, real estate construction, real estate mortgage, and
consumer loans at September 30, 2000:


<TABLE>
<CAPTION>

                                                                                    September 30, 2000
                                                             ------------------------------------------------------------------
                                                                                 After 1 but
                                                               Within 1 year    within 5 years   After 5 years      Total
                                                             ------------------------------------------------------------------
                                                                                  (Dollars in thousands)

<S>                                                          <C>               <C>            <C>               <C>
         Commercial and agricultural
           Loans with floating interest rates                       $   69,394        $  26,345      $   35,914     $  131,653
           Loans with fixed interest rates                               7,311           19,016          22,697         49,024
                                                                    ----------        ---------      ----------     ----------
               Subtotal                                                 76,705           45,361          58,611        180,677

         Real estate construction
           Loans with floating interest rates                            7,101              252           5,525         12,878
           Loans with fixed interest rates                               1,305               --             668          1,973
                                                                    ----------        ---------      ----------     ----------
               Subtotal                                                  8,406              252           6,193         14,851

         Real estate mortgage
           Loans with floating interest rates                            8,439           14,708          52,482         75,629
           Loans with fixed interest rates                               4,762            1,976          31,127         37,865
                                                                    ----------        ---------      ----------     ----------
               Subtotal                                                 13,201           16,684          83,609        113,494

         Consumer installment
           Loans with floating interest rates                              558              996           8,777         10,331
           Loans with fixed interest rates                               4,185           68,806           2,636         75,627
                                                                    ----------        ---------      ----------     ----------
                  Subtotal                                               4,743           69,802          11,413         85,958
                                                                    ----------        ---------      ----------     ----------

               Total                                                $  103,055       $  132,099       $ 159,826      $ 394,980
                                                                    ==========       ==========       =========      =========

</TABLE>


         OFF-BALANCE SHEET COMMITMENTS. The following table shows the
distribution of the Company's undisbursed loan commitments at the dates
indicated.

<TABLE>
<CAPTION>

                                           September 30,     December 31,
                                               2000             1999
                                               ----             ----
                                               (Dollars in thousands)

<S>                                      <C>                  <C>

Letters of credit                          $   1,480             $   2,674
Commitments to extend credit                 127,483               101,847
                                           ---------             ---------
Total                                      $ 128,963             $ 104,521
                                           =========             =========

</TABLE>


         OTHER INTEREST-EARNING ASSETS. The following table presents other
interest-earning for the dates indicated. This item consists of a salary
continuation plan for the Company's executive management and deferred retirement
benefits for participating board members. The plan is informally linked with
universal life insurance policies for the salary continuation plan. Income from
these policies is reflected in noninterest income.


<TABLE>
<CAPTION>

                                                  September 30,                 December 31,
                                                     2000                           1999
                                                     ----                           ----
                                                           (Dollars in thousands)

<S>                                              <C>                            <C>

Cash surrender value of life insurance              $6,009                         $5,792
                                                    ======                         ======


</TABLE>

                                       22
<PAGE>


NONPERFORMING ASSETS. Nonperforming assets include nonaccrual loans, loans 90
days or more past due, restructured loans and other real estate owned.

         Nonperforming loans include loans on nonaccrual status, loans past due
90 days or more and still accruing and restructured loans. The Company generally
places loans on nonaccrual status and accrued but unpaid interest is reversed
against the current year's income when interest or principal payments become 90
days or more past due unless the outstanding principal and interest is
adequately secured and, in the opinion of management, is deemed in the process
of collection. Interest income on nonaccrual loans is recorded on a cash basis.
Payments may be treated as interest income or return of principal depending upon
management's analysis of the ultimate risk of loss on the individual loan. Cash
payments are treated as interest income where management believes the remaining
principal balance is fully collectible. Additional loans not 90 days past due
may also be placed on nonaccrual status if management reasonably believes the
borrower will not be able to comply with the contractual loan repayment terms
and collection of principal or interest is in question.

         A "restructured loan" is a loan on which interest accrues at a below
market rate or upon which certain principal has been forgiven so as to aid the
borrower in the final repayment of the loan, with any interest previously
accrued, but not yet collected, being reversed against current income. Interest
is reported on a cash basis until the borrower's ability to service the
restructured loan in accordance with its terms is established. The Company had
no restructured loans as of the dates indicated in the table below.

         The following table summarizes nonperforming assets of the Company at
September 30, 2000 and December 31, 1999:


<TABLE>
<CAPTION>

                                                              September 30,  December 31,
                                                                  2000          1999
                                                                  ----          ----
                                                                (Dollars in thousands)

      <S>                                                    <C>         <C>

             Nonaccrual loans                                      $ 1,896     $ 1,984
             Accruing loans past due 90 days or more                    16           6
                                                                   -------     -------
               Total nonperforming loans                             1,912       1,990
             Other real estate owned                                   547         247
                                                                   -------     -------
               Total nonperforming assets                          $ 2,459     $ 2,237
                                                                   =======     =======

             Nonperforming assets:
               To total loans                                          .62%        .60%
               To total assets                                         .38%        .40%

</TABLE>


         The amount of gross interest income that would have been recorded in
the periods then ended if the loans had been current in accordance with the
original terms and had been outstanding throughout the period, or since
origination, if held for part of the period, was $115,000 for the nine month
period ended September 30, 2000 and $143,000 for the twelve month period ended
December 31, 1999. The amount of interest income on these loans that was
included in net income was $18,000 for the nine months ended September 30, 2000
and $126,000 for the twelve months ended December 31, 2000.

         At September 30, 2000, nonperforming assets represented .38% of total
assets, a decrease of 2 basis points when compared to the .40% at December 31,
1999. Nonperforming loans represented .62% of total loans at September 30, 2000,
an increase of .02% of total loans compared to the .60% at December 31, 1999.
Nonperforming loans that were secured by first deeds of trust on real property
were

                                       23
<PAGE>


$0 at September 30, 2000 and $623,000 at December 31, 1999. Other forms of
collateral such as inventory and equipment secured the remaining nonperforming
loans as of each date. No assurance can be given that the collateral securing
nonperforming loans will be sufficient to prevent losses on such loans.

         The decrease in nonperforming loans and increase in nonperforming
assets as of September 30, 2000 compared with their levels as of December 31,
1999, was due primarily to a decrease in non performing agricultural and
commercial loans, and an increase in properties acquired through foreclosure.

         As of September 30, 2000, the Company had $547,000 in three properties
acquired through foreclosure. The properties are carried at the lower of its
estimated market value, as evidenced by an independent appraisal, or the
recorded investment in the related loan, less estimated selling expenses. At
foreclosure, if the fair value of the real estate is less than the Company's
recorded investment in the related loan, a charge is made to the allowance for
loan losses. No assurance can be given that the Company will sell such property
during 2000 or at any time or the amount for which such property might be sold.

         Management defines impaired loans, regardless of past due status on
loans, as those on which principal and interest are not expected to be collected
under the original contractual loan repayment terms. An impaired loan is charged
off at the time management believes the collection process has been exhausted.
At September 30, 2000 and December 31, 1999, impaired loans were measured based
on the present value of future cash flows discounted at the loan's effective
rate, the loan's observable market price or the fair value of collateral if the
loan is collateral-dependent. Impaired loans at September 30, 2000 were
$1,912,000, on account of which the Company had made provisions to the allowance
for loan losses of $459,000.

         Except for loans that are disclosed above, there were no assets as of
September 30, 2000, where known information about possible credit problems of
the borrower causes management to have serious doubts as to the ability of the
borrower to comply with the present loan repayment terms and which may become
nonperforming assets. Given the magnitude of the Company's loan portfolio,
however, it is always possible that current credit problems may exist that may
not have been discovered by management.


                                       24
<PAGE>


ALLOWANCE FOR LOAN LOSSES

         The following table summarizes the loan loss experience of the Company
for the nine months ended September 30, 2000 and 1999, and the year ended
December 31, 1999:

<TABLE>
<CAPTION>


                                                    Nine Months Ended              Twelve Months Ended
                                                      September 30,                    December 31,
                                             ---------------------------------    -----------------------
                                                 2000                1999                  1999
                                                 ----                ----                  ----
                                                              Dollars in thousands

<S>                                          <C>               <C>                    <C>

  ALLOWANCE FOR LOAN LOSSES:
  Balance at beginning of period                  $  6,542          $   4,775              $  4,775
                                                 ---------          ---------             ---------
  Provision for loan losses                          2,323              1,772                 2,659

  Charge-offs:
    Commercial and  agricultural                       416                518                   531
    Real estate construction                            --                 --                    --
    Consumer                                         1,502                849                 1,323
                                                 ---------          ---------             ---------

     Total charge-offs                               1,918              1,367                 1,854
                                                 ---------          ---------             ---------
  Recoveries
    Commercial and agricultural                        101                576                   715
    Real estate-mortgage                                --                 --                    --
    Consumer                                           261                260                   247
                                                 ---------          ---------             ---------
     Total recoveries                                  362                836                   962
  Net charge-offs                                    1,556                531                   892
                                                 ---------          ---------             ---------
  Balance at end of period                       $   7,309          $   6,016             $   6,542
                                                 =========          =========             =========

  Loans outstanding at end of period             $ 394,980          $ 323,366             $ 331,268
                                                 =========          =========             =========
  Average loans outstanding                      $ 359,348          $ 295,732             $ 303,463
                                                 =========          =========             =========


  Annualized net charge-offs to average
     loans                                             .58%               .24%                 0.29%
  Allowance for loan losses
     To total loans                                   1.85%              1.86%                 1.97%
     To nonperforming loans                         382.27%            181.15%               328.74%
     To nonperforming assets                        297.22%            162.02%               292.45%

</TABLE>


         The Company maintains an allowance for loan losses at a level
considered by management to be adequate to cover the inherent risks of loss
associated with its loan portfolio under prevailing economic conditions. In
determining the adequacy of the allowance for loan losses, management takes into
consideration growth trends in the portfolio, examination by financial
institution supervisory authorities, prior loan loss experience for the Company,
concentrations of credit risk, delinquency trends, general economic conditions,
the interest rate environment and internal and external credit reviews. In
addition, the risks management considers vary depending on the nature of the
loan. The normal risks considered by management with respect to agricultural
loans include the fluctuating value of the collateral, changes in weather
conditions and the availability of adequate water resources in the Company's
local market area. The normal risks considered by management with respect to
real estate construction loans include fluctuation in real estate values, the
demand for improved commercial and industrial properties and housing, the
availability of permanent financing in the Company's market area and borrowers'
ability to obtain permanent financing. The normal risks considered by management
with respect to real estate mortgage loans include fluctuations in the value of
real estate. Additionally, the Company relies on data obtained through
independent appraisals for significant properties to determine loss exposure on
nonperforming loans.


                                       25
<PAGE>


         The balance in the allowance is affected by the amounts provided from
operations, amounts charged off and recoveries of loans previously charged-off.
The Company recorded provisions for loan losses for the three and nine months
ended September 30, 2000 of $792,000 and $2,323,000 compared with $672,000 and
$1,772,000 for the same periods during 1999. The increase in loan loss
provisions in 2000 compared to 1999 is primarily due to loan portfolio and an
increase in the level of charge-offs.

         The Company's charge-offs, net of recoveries, were $1,556,000 for the
nine months ended September 30, 2000 compared with $531,000 for the same nine
months in 1999. The increase in net charge-offs during the first nine months of
2000 was primarily due to growth within the loan portfolio and an increase in
the level of charge-offs experienced in the consumer segment of the loan
portfolio.

         As of September 30, 2000, the allowance for loan losses was $7,309,000
or 1.85% of total loans outstanding, compared with $6,542,000 or 1.97% of total
loans outstanding as of December 31, 1999. During the nine month period ended
September 30, 2000, the allowance for loan loss increased $767,000 or 11.7%
compared to December 31, 1999 levels. During the three months ended September
30, 2000, the allowance for loan losses increased $384,000 or 5.5% when compared
to the June 30, 2000 levels.

         The Company uses a method developed by management in determining the
appropriate level of its allowance for loan losses. This method applies relevant
risk factors to the entire loan portfolio, including nonperforming loans. The
methodology is based, in part, on the Company's loan grading and classification
system. The Company grades its loans through internal reviews and periodically
subjects loans to external reviews which then are assessed by the Company's
audit committee. Credit reviews are performed on a monthly basis and the quality
grading process occurs on a quarterly basis. Risk factors applied to the
performing loan portfolio are based on the Company's past loss history
considering the current portfolio's characteristics, current economic conditions
and other relevant factors. The analysis also includes reference to factors such
as the delinquency status of the loan portfolio, inherent risk by type of loans,
industry statistical data, recommendations made by the Company's regulatory
authorities and outside loan reviewers, and current economic environment.
Important components of the overall credit rating process are the asset quality
rating process and the internal loan review process.

         The allowance is based on estimates and ultimate future losses may vary
from current estimates. It is always possible that future economic or other
factors may adversely affect the Company's borrowers, and thereby cause loan
losses to exceed the current allowance. In addition, there can be no assurance
that future economic or other factors will not adversely affect the Company's
borrowers, or that the Company's asset quality may not deteriorate through rapid
growth, failure to enforce underwriting standards, failure to maintain
appropriate underwriting standards, failure to maintain an adequate number of
qualified loan personnel, failure to identify and monitor potential problem
loans or for other reasons, and thereby cause loan losses to exceed the current
allowance.


                                       26
<PAGE>



         The following table summarizes a breakdown of the allowance for loan
losses by loan category and the allocation in each category as a percentage of
total loan allowance at the dates indicated:


<TABLE>
<CAPTION>

                                      September 30,             December 31,
                                          2000                      1999
                                      ------------              -----------
                                               Amount                   Amount
                                              To Total                 To total
                                              Loans in                 Loans in
                                   Amount     Category     Amount      Category
                                   ------     --------     ------      --------
                                               (Dollars in thousands)

<S>                              <C>          <C>        <C>            <C>

 Commercial and agricultural         $3,562       45%        $3,365         33%
 Real estate- construction              559        4            358          4
 Real estate- mortgage                2,022       29          1,815         37
 Installment                          1,166       22          1,004         26
                                     ------      ---         ------        ---
 Total                               $7,309      100%        $6,542        100%
                                     ======      ===         ======        ===

</TABLE>


         The allocation of the allowance to loan categories is an estimate by
management of the relative risk characteristics of loans in those categories. No
assurance can be given that losses in one or more loan categories will not
exceed the portion of the allowance allocated to that category or even exceed
the entire allowance.

         EXTERNAL FACTORS AFFECTING ASSET QUALITY. As a result of the Company's
loan portfolio mix, the future quality of its assets could be affected by
adverse economic trends in its region or in the agricultural community. These
trends are beyond the control of the Company.

         California is an earthquake-prone region. Accordingly, a major
earthquake could result in material loss to the Company. At times the Company's
service area has experienced other natural disasters such as floods and
droughts. The Company's properties and substantially all of the real and
personal property securing loans in the Company's portfolio are located in
California. The Company faces the risk that many of its borrowers face uninsured
property damage, interruption of their businesses or loss of their jobs from
earthquakes, floods or droughts. As a result these borrowers may be unable to
repay their loans in accordance with their terms and the collateral for such
loans may decline significantly in value. The Company's service area is a
largely agricultural region and therefore is highly dependent on a reliable
supply of water for irrigation purposes. The area obtains nearly all of its
water from the run-off of melting snow in the mountains of the Sierra Nevada to
the east. Although such sources have usually been available in the past, water
supply can be adversely affected by light snowfall over one or more winters or
by any diversion of water from its present natural courses. Any such event could
impair the ability of many of the Company's borrowers to meet their obligations
to the Company.

         California is a region that also experiences flooding. The Company is
not aware of any material adverse effects to the collateral position of the
Company as a result of flooding, but no assurance can be given that future
flooding will not have an adverse impact on the Company and its borrowers and
depositors.

         LIQUIDITY. In order to maintain adequate liquidity, the Company must
have sufficient resources available at all times to meet its cash flow
requirements. The need for liquidity in a banking institution arises principally
to provide for deposit withdrawals, the credit needs of its customers and to
take advantage of investment opportunities as they arise. The Company may
achieve desired liquidity from both assets and liabilities. The Company
considers cash and deposits held in other banks, federal funds sold, other short
term investments, maturing loans and investments, payments of principal and
interest on

                                       27
<PAGE>


loans and investments and potential loan sales as sources of asset
liquidity. Deposit growth and access to credit lines established with
correspondent banks and market sources of funds are considered by the Company as
sources of liability liquidity. The Holding Company's primary source of
liquidity is from dividends received from the Bank. Dividends from the Bank are
subject to certain regulatory limitations.

         The Company reviews its liquidity position on a regular basis based
upon its current position and expected trends of loans and deposits. These
assets include cash and deposits in other banks, available-for-sale securities
and federal funds sold. The Company's liquid assets totaled $179,787,000 and
$168,886,000 on September 30, 2000 and December 31, 1999, respectively, and
constituted 28%, and 30%, respectively, of total assets on those dates.
Liquidity is also affected by the collateral requirements of its public deposits
and certain borrowings. Total pledged securities were $135,914,000 at September
30, 2000 compared with $105,008,000 at December 31, 1999.

         Although the Company's primary sources of liquidity include liquid
assets and a stable deposit base, the Company maintains lines of credit with the
Federal Reserve Bank of San Francisco, Federal Home Loan Bank of San Francisco
and Pacific Coast Bankers' Bank aggregating $82,733,000 of which $24,699,000 was
outstanding as of September 30, 2000 and $12,600,000 was outstanding as of
December 31, 1999. Funds used to reduce outstanding short term borrowings during
the second quarter of 1999 were obtained from maturities and curtailments that
occurred within the investment portfolio and deposit gathering efforts.
Management believes that the Company maintains adequate amounts of liquid assets
to meet its liquidity needs. The Company's liquidity might be insufficient if
deposit withdrawals were to exceed anticipated levels. Deposit withdrawals can
increase if a company experiences financial difficulties or receives adverse
publicity for other reasons, or if its pricing, products or services are not
competitive with those offered by other institutions.

         CAPITAL RESOURCES. Capital serves as a source of funds and helps
protect depositors against potential losses. The primary source of capital
for the company has been internally generated capital through retained
earnings. The Company's shareholder equity increased by $6,084,000 or 13.9%
from December 31, 1999 to September 30, 2000.

         The Company is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum capital
requirements can initiate mandatory and possibly additional discretionary
actions by the regulators that, if undertaken, could have a material adverse
effect on the Company's financial statements. Management believes, as of
September 30, 2000, that the Company and the Bank met all capital requirements
to which they are subject. The Company's leverage capital ratio at September 30,
2000 was 7.48% as compared with 7.50% as of December 31, 1999. The Company's
total risk based capital ratio at September 30, 2000 was 10.89% as compared to
11.24% as of December 31, 1999.

                                       28
<PAGE>

         The Company's and Bank's actual capital amounts and ratios met all
regulatory requirements as of September 30, 2000 and were summarized as follows:


<TABLE>
<CAPTION>

                                                                                                             To Be Well Capitalized
                                                                                        For Capital         Under Prompt Corrective
         Dollars in thousands                                Actual                  Adequacy Purposes         Action Provisions:
         --------------------------------------------------------------------------------------------------------------------------
         Consolidated                                 Amount          Ratio         Amount        Ratio        Amount       Ratio
         --------------------------------------------------------------------------------------------------------------------------

        <S>                                         <C>          <C>             <C>           <C>          <C>        <C>

         As of September 30, 2000
         Total capital (to risk weighted assets)         $ 53,150     10.89%          $ 39,033      8.0%         $ 48,791   10.0%
         Tier 1 capital (to risk weighted assets)          47,036      9.64             19,516      4.0            29,275    6.0
         Leverage ratio*                                   47,036      7.48             25,160      4.0            31,450    5.0

         The Bank:
         --------------------------------------------------------------------------------------------------------------------------
         As of September 30, 2000
         Total capital (to risk weighted assets)         $ 50,487     10.46%          $ 38,600      8.0%         $ 48,250   10.0%
         Tier 1 capital (to risk weighted assets)          44,440      9.21             19,300      4.0            28,950    6.0
         Leverage ratio*                                   44,440      7.13             24,945      4.0            31,181    5.0
         --------------------------------------------------------------------------------------------------------------------------

</TABLE>


         * The leverage ratio consists of Tier 1 capital divided by quarterly
         average assets. The minimum leverage ratio is 3 percent for banking
         organizations that do not anticipate significant growth and that have
         well-diversified risk, excellent asset quality and in general, are
         considered top-rated banks.

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

         DEPOSITS. Deposits are the Company's primary source of funds. At
September 30, 2000, the Company had a deposit mix of 32% in savings deposits,
37% in time deposits, 14% in interest-bearing checking accounts and 17% in
noninterest-bearing demand accounts. Noninterest-bearing demand deposits enhance
the Company's net interest income by lowering its costs of funds.

         The Company obtains deposits primarily from the communities it serves.
No material portion of its deposits has been obtained from or is dependent on
any one person or industry. The Company's business is not seasonal in nature.
The Company accepts deposits in excess of $100,000 from customers. These
deposits are priced to remain competitive. At September 30, 2000, the Company
had brokered deposits of $1,549,000.

         Maturities of time certificates of deposits of $100,000 or more
outstanding at September 30, 2000 and December 31, 1999 are summarized as
follows:

<TABLE>
<CAPTION>


                                                             September 30, 2000       December 31, 1999
                                                             ------------------       -----------------
                                                                      (Dollars in thousands)
<S>                                                         <C>                      <C>

Three months or less                                                $17,226                  $ 21,157
Over three to six months                                             33,376                    20,655
Over six to twelve months                                            21,962                    16,901
Over twelve months                                                   10,570                    10,283
                                                                    -------                  --------
Total                                                               $83,134                  $ 68,996
                                                                    =======                  ========

</TABLE>


                                       29
<PAGE>



BORROWED FUNDS
At September 30 2000 and 1999, the Company's borrowed funds consisted of the
following:

<TABLE>
<CAPTION>

                                                                                September 30,     December 31,
                                                                                     2000              1999
                                                                                     ----              ----

   <S>                                                                           <C>               <C>

       (Dollars in Thousands)
       Federal funds purchased, dated September 29,2000; variable rate of 6.66%
          rate reprices daily based on changes in the federal funds rate,
          payable October 2, 2000.                                                 $ 2,525            $  --

       Treasury tax loan, dated September 29, 2000; variable rate of 6.25% rate
          reprices monthly based on changes in the federal funds rate; payable
          October 2, 2000.                                                           7,573            5,000

     FHLB loan, dated February 11, 2000; variable rate of 6.54%; rate reprices
        monthly based on the 1 month
        LIBOR; payable on February 12, 2001.                                         3,000            2,600

     FHLB loan, dated February 16, 2000; variable rate of 6.54%; rate reprices
           monthly based on the 1 month LIBOR; payable on February 16, 2001.         3,000               --

     FHLB  loan, dated March 20, 2000; variable rate of 6.53%; rate reprices
           monthly based on the 1 month LIBOR; payable on March 20, 2001             2,600               --

     FHLB loan, dated February 11, 2000; fixed rate of 6.55% payable on
           February 11, 2005                                                         2,000               --

     FHLB loan, dated February 16, 2000; fixed rate of 6.66%; payable on
           February 16, 2005                                                         2,000            5,000

     FHLB loan, dated March 20, 2000; fixed rate of 6.55% payable on
           March 21, 2005                                                            2,000            5,000

     Long-term note from unaffiliated bank dated December 22, 1997; fixed rate
           of 7.80%; principal and interest payable monthly at $25,047; payments
           calculated as fully amortizing over 25 years with a 10 year call          3,169            3,214
                                                                                  --------         --------
     Total                                                                        $ 27,867         $ 20,814
                                                                                  ========         ========

</TABLE>


         The increase in other borrowings during the nine months ending
September 30, 2000 was primarily due to the implementation of a leveraged
investment strategy that used additional FHLB borrowings to fund purchases of
investment securities within the Bank's investment portfolio.

IMPACT OF INFLATION

         The primary impact of inflation on the Company is its effect on
interest rates. The Company's primary source of income is net interest income
which is affected by changes in interest rates. The Company attempts to limit
inflation's impact on its net interest margin through management of rate


                                       30
<PAGE>


sensitive assets and liabilities and the analysis of interest rate sensitivity.
The effect of inflation on premises and equipment, as well as on interest
expenses, has not been significant for the periods covered in this report.

REAL ESTATE DEVELOPMENT ACTIVITIES

         California law allows state-chartered banks to engage in real estate
development activities. The Bank established MAID in 1987 pursuant to this
authorization. After changes in federal law effectively required that these
activities be divested as prudently as possible but in any event before 1997,
MAID reduced its activities and embarked on a plan to liquidate its real estate
holdings. In 1995, the uncertainty about the effect of the investment in MAID on
the results of future operations caused management to write off its remaining
investment of $2,881,000 in real property development.

         The last remaining parcel of land held by MAID was sold on May 3, 2000
for net proceeds less accrued expenses of $381,000 which was recorded as gain on
sale of real estate during the second quarter of 2000. There are no plans to
invest in new real estate investment properties as of September 30, 2000.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

         On September 30, 2000, the interest rate position of the Company was
relatively neutral as the impact of a gradual parallel 100 basis-point rise or
fall in interest rates over the next 12 months was estimated to be approximately
1-2% of net interest income when compared to stable rates. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Interest Rate Risk Management."


                                       31
<PAGE>



PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

The Company is a party to routine litigation in the ordinary course of its
business. In the opinion of management, pending and threatened litigation is not
likely to have a material adverse effect on the financial condition or results
of operations of the Company.

ITEM 2.           CHANGES IN SECURITIES AND USE OF PROCEEDS.

None.

ITEM 3.           DEFAULTS UPON SENIOR SECURITIES.

None.

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

None

ITEM 5.           OTHER INFORMATION.

In the opinion of management, there is no additional information relating to
these periods being reported which warrants inclusion in the report.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

         (a)      Exhibits.

<TABLE>
<CAPTION>

EXHIBITS          DESCRIPTION OF EXHIBITS
--------          -----------------------

<S>               <C>                                                                                    <C>

3.1               Articles of Incorporation, incorporated by reference from (filed as Exhibit                   *
                  3.1 of the Company's June 30, 1996 Form 10Q filed with the SEC on or about
                  November 14, 1996).

3.2               Bylaws (filed as Exhibit 3.2 of the Company's June 30, 1996 Form 10Q filed                    *
                  with the SEC on or about November 14, 1996.)

10                Employment agreement between Thomas T. Hawker and Capital Corp. (Filed as                     *
                  Exhibit 10 of the Company's 1996 form 10K filed with the SEC on or about June
                  30, 1997)

10.1              Administration Construction Agreement (filed as Exhibit 10.4 of the Company's                 *
                  1995 Form 10K filed with the SEC on or about June 30, 1996).

10.2              Stock Option Plan (filed as Exhibit 10.6 of the Company's 1995 Form 10K filed                 *
                  with the SEC on or about June 30, 1996).


                                       32
<PAGE>


10.3              401 (k) Plan (filed as Exhibit 10.7 of the Company's 1995 Form 10K filed with                 *
                  the SEC on or about June 30, 1996).

10.4              Employee Stock Ownership Plan (filed as Exhibit 10.8 of the Company's 1995                    *
                  Form 10K filed with the SEC on or about June 30, 1996).

10.5              Purchase Agreement for three branches from Bank of America is incorporated                    *
                  herein by reference from Note 1 of the Company's Consolidated Financial
                  Statements

10.6              Change-in-Control Agreement between R. Dale McKinney and Capital Corp of the                  *
                  West (filed as Exhibit 10.6 of the Company's 1999 Form 10K with the SEC on or
                  about March 17, 2000).

10.7              Deferred Compensation Agreement between members of the board of directors and                 *
                  Capital Corp of the West (filed as Exhibit 10.7 of the Company's 1999 Form 10K
                  with the SEC on or about March 17, 2000).

10.8              Executive Salary Continuation Agreement between certain members of executive                  *
                  management and Capital Corp of the West (filed as Exhibit 10.8 of the
                  Company's 1999 Form 10K with the SEC on or about March 17, 2000).

</TABLE>


    (B)  REPORTS ON FORM 8-K

         There was a report on Form 8-K filed during the third quarter of 2000.
On July 14, 2000, the Company filed a report on 8-K, dated July 10, 2000 in
conjunction with the Company's 1992 Stock Option Plan, 401(k) Profit Sharing
Plan, and Employee Stock ownership Plan whereby the Company is authorized to
purchase its common stock through open-market transactions.

         * DENOTES DOCUMENTS WHICH HAVE BEEN INCORPORATED BY REFERENCE.

                                       33
<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.

                                  CAPITAL CORP OF THE WEST
                                  (Registrant)

                                   By    /s/  Thomas T. Hawker
                                     ----------------------------------
                                     Thomas T. Hawker
                                     President and
                                     Chief Executive Officer

                                   By    /s/   R. Dale McKinney
                                     ----------------------------------
                                     R. Dale McKinney
                                     Chief Financial Officer


                                       34