**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 March
31, 2005





or





o 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 incorporation or
    organization)
    
    IRS
      Employer ID Number




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 o





Indicate
by check mark whether the registrant is an accelerated filer (as defined in Rule
12b-2 of the Exchange Act). Yes x No o





The
number of shares outstanding of the registrant’s common stock, no par value, as
of April 8, 2005 was 10,469,3 88.





1




**Capital
Corp of the West**


Table of
Contents





PART I.
-- FINANCIAL INFORMATION








Item
      1.  Financial StatementsConsolidated Balance Sheets (unaudited)
    3Consolidated Statements of Income and Comprehensive
      Income (unaudited)
    4Consolidated Statement of Changes in Shareholders’
      Equity (unaudited)
    5Consolidated Statements of Cash Flows
      (unaudited)
    6Notes to the Consolidated Financial Statements
      (unaudited)
    7Item
      2.  Management’s Discussion and Analysis of
      Financial Condition and Results of Operations
    10Item
      3.  Quantitative and Qualitative Disclosures
      about Market Risk
    26Item
      4.  Controls and Procedures
    27PART II. -- OTHER INFORMATION


Item
      1.Legal Proceedings
    28Item
      2.Unregistered Sales of Equity Securities and Use of
      Proceeds
    28Item
      3.Defaults Upon Senior Securities
    28Item
      4.Submission of Matters to a vote of Security
      Holders
    28Item
      5.Other Information
    28Item
      6.Exhibits
    29SIGNATURES
    30Exhibit Index
    31




2





Capital Corp of the West


Consolidated
Balance Sheets


(Unaudited)





(Unaudited)
      March
      31,
      2005
    
    December
      31,
      2004(Dollars
      in thousands)**Assets**Cash
      and noninterest-bearing deposits in other banks
    
    $
    38,627
    
    $
    40,454Federal
      funds sold
    
    
    4,295
    
    
    17,365Time
      deposits at other financial institutions
    
    
    350
    
    
    3,350Investment
      securities available for sale, at fair value
    
    
    290,374
    
    
    269,189Investment
      securities held to maturity at cost, fair value of $177,122 and $168,265
      at March 31, 2005 and December 31, 2004
    
    
    179,714
    
    
    166,987Loans,
      net of allowance for loan losses of $13,358 and$13,605
      at March 31, 2005 and December 31, 2004
    
    
    909,019
    
    
    871,488Interest
      receivable
    
    
    6,398
    
    
    5,979Premises
      and equipment, net
    
    
    23,933
    
    
    22,426Goodwill
    
    
    1,405
    
    
    1,405Other
      intangibles
    
    
    58
    
    
    69Cash
      value of life insurance
    
    
    28,012
    
    
    28,362Investment
      in housing tax credit limited partnerships
    
    
    8,507
    
    
    8,623Other
      assets
    
    
    14,690
    
    
    12,750Total
      assets
    
    $
    1,505,382
    
    $
    1,448,447**Liabilities
      and Shareholders’ Equity**DepositsNoninterest-bearing
      demand
    
    $
    261,942
    
    $
    262,315Negotiable
      orders of withdrawal
    
    
    185,647
    
    
    170,870Savings
    
    
    362,166
    
    
    360,319Time,
      under $100,000
    
    
    198,497
    
    
    193,913Time,
      $100,000 and over
    
    
    177,069
    
    
    166,740Total
      deposits
    
    
    1,185,321
    
    
    1,154,157Borrowed
      funds
    
    
    185,371
    
    
    164,119Junior
      subordinated debentures
    
    
    16,496
    
    
    16,496Accrued
      interest, taxes and other liabilities
    
    
    11,323
    
    
    10,194Total
      liabilities
    
    
    1,398,511
    
    
    1,344,966Preferred
      stock, no par value; 10,000,000 shares authorized; None
      outstanding
    
    
    -
    
    
    -Common
      stock, no par value; 54,000,000 shares authorized; 10,469,389 and
      10,429,754 issued & outstanding at March 31, 2005 and December 31,
      2004
    
    
    57,502
    
    
    57,139Retained
      earnings
    
    
    50,677
    
    
    45,981Accumulated
      other comprehensive (loss) income
    
    
    (1,308
    )
    
    361Total
      shareholders’ equity
    
    
    106,871
    
    
    103,481Total
      liabilities and shareholders’ equity
    
    $
    1,505,382
    
    $
    1,448,447





See
accompanying notes to consolidated financial statements





3





Capital Corp of the West


Consolidated
Statements of Income and Comprehensive Income


(Unaudited)





For
      the three monthsended
      March 31,(Dollars
      in thousands, except per share data)
    
    2005
    
    2004**Interest
      income:**Interest
      and fees on loans
    
    $
    15,489
    
    $
    13,148Interest
      on deposits with other financial institutions
    
    
    12
    
    
    2Interest
      on investments held to maturity:Taxable
    
    
    1,109
    
    
    601Non-taxable
    
    
    740
    
    
    480Interest
      on investments available for sale:Taxable
    
    
    2,617
    
    
    2,653Non-taxable
    
    
    11
    
    
    11Interest
      on federal funds sold
    
    
    35
    
    
    11Total
      interest income
    
    
    20,013
    
    
    16,906**Interest
      expense:**Interest
      on negotiable orders of withdrawal
    
    
    20
    
    
    15Interest
      on savings deposits
    
    
    1,005
    
    
    765Interest
      on time deposits, under $100
    
    
    1,121
    
    
    1,083Interest
      on time deposits, $100 and over
    
    
    1,273
    
    
    927Interest
      on Subordinated Debentures
    
    
    295
    
    
    264Interest
      on other borrowings
    
    
    1,359
    
    
    1,065Total
      interest expense
    
    
    5,073
    
    
    4,119Net
      interest income
    
    
    14,940
    
    
    12,787Provision
      for loan losses
    
    
    220
    
    
    615Net
      interest income after provision for loan losses
    
    
    14,720
    
    
    12,172**Noninterest
      income:**Service
      charges on deposit accounts
    
    
    1,367
    
    
    1,434Increase
      in cash surrender value of life insurance policies
    
    
    261
    
    
    234Other
    
    
    1,041
    
    
    772Total
      noninterest income
    
    
    2,669
    
    
    2,440**Noninterest
      expenses:**Salaries
      and related benefits
    
    
    5,553
    
    
    5,056Premises
      and occupancy
    
    
    985
    
    
    779Equipment
    
    
    858
    
    
    826Professional
      fees
    
    
    562
    
    
    370Supplies
    
    
    264
    
    
    222Marketing
    
    
    295
    
    
    348Intangible
      amortization
    
    
    11
    
    
    167Other
    
    
    1,780
    
    
    1,563Total
      noninterest expenses
    
    
    10,308
    
    
    9,331Income
      before provision for income taxes
    
    
    7,081
    
    
    5,281Provision
      for income taxes
    
    
    2,093
    
    
    1,637Net
      income
    
    $
    4,988
    
    $
    3,644Comprehensive
      income:Unrealized
      (loss) gain on securities arising during the period
    
    
    (1,669
    )
    
    1,045Comprehensive
      income
    
    $
    3,319
    
    $
    4,689Basic
      earnings per share
    
    $
    0.48
    
    $
    0.36Diluted
      earnings per share
    
    $
    0.46
    
    $
    0.34





See
accompanying notes to consolidated financial statements





4







Capital Corp of the West


Consolidated
Statement of Changes in Shareholders’ Equity


(Unaudited)





AccumulatedCommon
      Stock
    
    
    
    other(Amounts
      in thousands)
    
    Number
      of shares
    
    Amounts
    
    Retained
      earnings
    
    comprehensive
      income
    
    TotalBalance,
      December 31, 2004
    
    
    10,430
    
    $
    57,139
    
    $
    45,981
    
    $
    361
    
    $
    103,481Exercise
      of stock options, Including tax effect of $80
    
    
    39
    
    
    363
    
    
    -
    
    
    -
    
    
    363Issuance
      of shares pursuant to 401K and ESOP plans
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    -Net
      change in fair market value of investment securities, net of tax benefit
      of $1,097
    
    
    -
    
    
    -
    
    
    -
    
    $
    (1,669
    )
    $
    (1,669
    )Cash
      dividends
    
    
    -
    
    
    -
    
    $
    (292
    )
    
    -
    
    $
    (292
    )Net
      income
    
    
    -
    
    
    -
    
    $
    4,988
    
    
    -
    
    $
    4,988Balance,
      March 31, 2005
    
    
    10,469
    
    $
    57,502
    
    $
    50,677
    
    $
    (1,308
    )
    $
    106,871




See
accompanying notes to consolidated financial statements





5







Capital Corp of the West


Consolidated
Statements of Cash Flows


(Unaudited)




(Dollars
      in thousands)
    
    Three
      months ended
      March
      31,
      2005
    
    Three
      months ended
      March
      31,
      2004**Operating
      activities:**Net
      income
    
    $
    4,988
    
    $
    3,644Adjustments
      to reconcile net income to net cash provided byoperating
      activities:Provision
      for loan losses
    
    
    220
    
    
    615Depreciation,
      amortization and accretion, net
    
    
    1,625
    
    
    1,659Increase
      in cash surrender value of life insurance policies
    
    
    (261
    )
    
    (216
    )Death
      benefit income from bank owned life insurance
    
    
    539
    
    
    -Net
      increase in interest receivable & other assets
    
    
    (1,075
    )
    
    (305
    )Net
      increase (decrease) in accrued interest payable & other
      liabilities
    
    
    1,129
    
    
    (1,941
    )Net
      cash provided by operating activities
    
    
    7,165
    
    
    3,456**Investing
      activities:**Investment
      securities purchases - available for sale securities
    
    
    (42,402
    )
    
    (19,270
    )Investment
      securities purchases - held to maturity securities
    
    
    (16,380
    )
    
    (8,325
    )Proceeds
      from maturities of available for sale investment
securities
    
    
    17,990
    
    
    8,839Proceeds
      from maturities of held to maturity investment securities
    
    
    3,654
    
    
    2,746Net
      decrease in time deposits in other financial institutions
    
    
    3,000
    
    
    -Proceeds
      from sales of available for sale securities
    
    
    -
    
    
    5,577Proceeds
      from sales of loans
    
    
    134
    
    
    1,205Net
      increase in loans
    
    
    (38,461
    )
    
    (26,260
    )Purchases
      of premises and equipment
    
    
    (2,084
    )
    
    (1,173
    )Net
      cash used in investing activities
    
    
    (74,549
    )
    
    (36,661
    )**Financing
      activities:**Net
      increase in demand, NOW and savings deposits
    
    
    16,251
    
    
    4,800Net
      increase in certificates of deposit
    
    
    14,913
    
    
    5,148Net
      proceeds from other borrowings
    
    
    21,252
    
    
    20,531Payment
      of cash dividends
    
    
    (292
    )
    
    (286
    )Issuance
      of shares pursuant to 401K and ESOP plans
    
    
    -
    
    
    160Exercise
      of stock options
    
    
    363
    
    
    346Net
      cash provided by financing activities
    
    
    52,487
    
    
    30,699Net
      decrease in cash and cash equivalents
    
    
    (14,897
    )
    
    (2,506
    )Cash
      and cash equivalents at beginning of period
    
    
    57,819
    
    
    45,482Cash
      and cash equivalents at end of period
    
    $
    42,922
    
    $
    42,976**Cash
      paid during the quarter:**Interest
      paid
    
    $
    4,867
    
    $
    3,703Income
      tax payments
    
    
    -
    
    
    5,761**Supplemental
      disclosure of noncash investing****and
      financing activities:**Investment
      securities unrealized (losses) gains and swaps, net of tax
    
    $
    (1,669
    )
    $
    1,045


See
accompanying notes to consolidated financial statements





6





Capital Corp of the West


Notes to
Consolidated Financial Statements


March 31,
2005 and December 31, 2004


(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 engages 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 54,000,000 shares of common stock, no par value, and 10,000,000 shares of
authorized preferred stock. As of April 8, 2005 there were 10,469,388 common
shares outstanding, held of record by approximately 1,700 shareholders. There
were no preferred shares outstanding. The Bank has three wholly owned
subsidiaries, Merced Area Investment & Development, Inc. ("MAID"), County
Asset Advisors ("CAA"), and County Investment Trust (“REIT”). CAA is currently
inactive. The Company also has two unconsolidated trusts, County Statutory Trust
and County Statutory Trust II (the “Trusts”). In the second quarter of 2002, the
Company purchased Regency Investment Advisors, Inc (“RIA”). RIA was sold in
October 2004. The Company has one wholly owned subsidiary, Capital West Group,
Inc. (“CWG”). CWG is currently inactive. All references herein to the "Company"
include the Company, the Company’s subsidiaries, the Bank and the Bank's
subsidiaries, unless the context otherwise requires.





GENERAL -
BANK





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





INDUSTRY
AND MARKET AREA





The Bank
engages in general commercial banking business primarily in Fresno, Madera,
Mariposa, Merced, San Francisco, San Joaquin, Stanislaus and Tuolomne counties.
The Bank has twenty full service branch offices; two of which are located in
Merced with the branch located in downtown Merced currently serving as both a
branch and as administrative headquarters. There are offices in Atwater, Dos
Palos, Hilmar, Livingston, Los Banos, Madera, Mariposa, San Francisco, Sonora,
Stockton, two offices in Modesto, four in Fresno and two offices in Turlock. The
Bank’s administrative headquarters also provides accommodations for the
activities of MAID, the Bank's wholly owned real estate subsidiary.




7





OTHER
FINANCIAL NOTES





All
adjustments which in the opinion of Management are necessary for a fair
presentation of the Company’s financial position at March 31, 2005 and December
31, 2004 and the results of operations for the three month periods ended March
31, 2005 and 2004, and the statements of cash flows for the three months ended
March 31, 2005 and 2004 have been included. The interim results for the three
months ended March 31, 2005 and 2004 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, 2004.





The
accompanying unaudited financial statements have been prepared on a basis
consistent with 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. Earnings per share data is adjusted for the
effect of the nine for five stock split announced on March 29, 2005 with a
distribution date of April 29, 2005.





The
following table provides a reconciliation of the numerator and denominator of
the basic and diluted earnings per share computation of the three month periods
ended March 31, 2005 and 2004:





For
      The Three MonthsEnded
      March 31,(Dollars
      in thousands, except per share data)
    
    2005
    
    2004Basic
      EPS computation:Net
      income
    
    $
    4,988
    
    $
    3,644Average
      common shares outstanding
    
    
    10,454
    
    
    10,212Basic
      EPS
    
    $
    0.48
    
    $
    0.36Diluted
      EPS Computations:Net
      income
    
    $
    4,988
    
    $
    3,644Average
      common shares outstanding
    
    
    10,454
    
    
    10,212Effect
      of stock options
    
    
    337
    
    
    42310,791
    
    
    10,635Diluted
      EPS
    
    $
    0.46
    
    $
    0.34




8





INTANGIBLE
ASSETS





The
Company has intangible assets consisting of core deposit premiums and goodwill.
Core deposit premiums are amortized using an accelerated method over a period of
ten years. Intangible assets related to goodwill have not been amortized after
December 31, 2001 but are reviewed periodically for potential impairment. During
the first quarter of 2005, management determined there had been no impairment of
goodwill. As of March 31, 2005 and December 31, 2004, the Company had
unamortized core deposit premiums of $58,000 and $69,000, respectively.
Amortization of core deposit premiums and other intangibles was $11,000 and
$167,000 during the first quarter of 2005 and 2004, respectively. Core deposit
premiums of $460,000 and $4,340,000 were initially recorded as a result of
purchasing deposits from Town and Country Finance and Thrift in July, 1996 and
the purchase of three branches from Bank of America in December, 1997,
respectively.








BORROWED
FUNDS





During
the first quarter of 2005, the Bank increased its short term borrowings. The
borrowings were obtained from the Federal Home Loan Bank, Pacific Coast Banker
Bank, and Fed Funds purchased. The increase in short term borrowings totaled
$21,252,000 between December 31, 2004 and March 31, 2005.





STOCK
COMPENSATION





The
Company provides stock-based compensation to certain officers and directors. The
Company uses the intrinsic value method to account for its stock option plans
(in accordance with the provisions of Accounting Principles Board Opinion No.
25). Under this method, compensation expense is recognized for awards of options
to purchase shares of common stock to employees under compensatory plans only if
the fair market value of the stock at the option grant date (or other
measurement date, if later) is greater than the amount the employee must pay to
acquire the stock. Statement of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation (SFAS 123) permits companies to continue
using the intrinsic value method or to adopt a fair value based model to account
for stock option plans. The fair value based method results in recognizing as
expense over the vesting period the fair value of all stock-based awards on the
date of grant. The Company has elected to continue to use the intrinsic value
method.





Had
compensation cost for the Company’s option plans been determined in accordance
with SFAS 123, the Company’s net income and earnings per share would have been
reduced to the pro forma amounts indicated as follows:





Three
      months ended March 31,(dollars
      in thousands except per share amounts)
    
    2005
    
    2004Net
      income:As
      reported
    
    $
    4,988
    
    $
    3,644Pro
      forma
    
    $
    4,578
    
    $
    3,279Basic
      earnings per share:As
      reported
    
    $
    0.48
    
    $
    0.36Pro
      forma
    
    $
    0.44
    
    $
    0.32Diluted
      earnings per share:As
      reported
    
    $
    0.46
    
    $
    0.34Pro
      forma
    
    $
    0.42
    
    $
    0.31Stock-based
      employee compensation cost, net of related tax effects, included in net
      income:As
      reported
    
    $
    -
    
    $
    -Pro
      forma
    
    $
    410
    
    $
    365




9





Compensation
expense that would have been reported for the quarter ended March 31, 2005 for
stock options was $490,000, compared to $422,000 for the same quarter in March
31, 2004.





RECLASSIFICATIONS





Certain
amounts previously reported in the 2004 financial statements have been
reclassified to conform to the 2005 presentation. Additionally, in the first
quarter of 2005, the Company reclassified the reserve for unfunded commitments
from the allowance for losses to other liabilities, and reclassified the
provision for unfunded commitments from the provision for loan losses to other
noninterest expense. These reclassifications did not affect previously reported
net income of total shareholders’ equity. Share and per share data for all
periods have been adjusted to reflect the nine-for-five stock split which was
effective on April 29, 2005 to shareholders of record on April 8,
2005.





**Recent
Accounting Pronouncements**





In May
2003, FASB issued Statement No. 150, *Accounting
for Certain Financial Instruments with Characteristics of both Liabilities and
Equity.* This
Statement establishes standards for the classification and measurement of
certain financial instruments with characteristics of both liabilities and
equity. The Statement also includes required disclosures for financial
instruments within its scope. For the Company, the Statement was effective for
instruments entered into or modified after May 11, 2004 and otherwise will be
effective as of January 1, 2004 except for mandatorily redeemable financial
instruments. For certain mandatorily redeemable instruments, the Statement will
be effective for the Company on January 1, 2005. The effective date has been
deferred indefinitely for certain other types of mandatorily redeemable
financial instruments. The Company does not currently have any financial
instruments that are within the scope of this Statement.





In
December 2003, the Accounting Standards Executive Committee of the AICPA issued
Statement of Position No. 03-3 (“SOP 03-3”), *Accounting
for Certain Loans or Debt Securites Acquired in a Transfer.* SOP 03-3
addresses the accounting for differences between the contractual cash flows and
the cash flows expected to be collected from purchased loans or debt securities
if those differences are attributable, in part, to credit quality. SOP 03-3
requires purchased loans and debt securities to be recorded initially at fair
value based on the present value of the cash flows expected to be collected with
no carryover of any valuation allowance previously recognized by the seller.
Interest income should be recognized based on the effective yield from the cash
flows expected to be collected. To the extent that the purchased loans or debt
securities experience subsequent deterioration in credit quality, a valuation
allowance would be established for any additional cash flows that are not
expected to be received. However, if more cash flows subsequently are expected
to be received than originally estimated, the effective yield would be adjusted
on a prospective basis. SOP 03-3 will be effective for loans and debt securities
acquired after December 31, 2004. Although we anticipate that the
implementation of SOP 03-3 may require loan system and operational changes to
track credit related losses on loans purchased starting in 2005, we do not
expect these changes to have a significant effect on the consolidated financial
statements.





10





In March
2004, the Emerging Issues Task Force (“EITF”) Issue No. 03-1 “The Meaning of
Other-Than-Temporary Impairment and its Application to Certain Investments”
consensus was published. Issue No. 03-1 contained new guidance effectively
codifying the provisions of SEC Staff Accounting Bulletin No. 59 and creates a
new model that calls for new judgments and additional evidence gathering. In
September 2004, the FASB delayed the requirement to record impairment losses
under EITF 03-1. The disclosure requirements of EITF 03-1 remain in effect.
Management has done an analysis of the impact of this accounting pronouncement,
which is discussed in the section of this report entitled, Financial Condition.
The Company does not expect the adoption of the final EITF **** will have
a material impact of the Company’s Consolidated Financial
Statements.





In
December 2004, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 123 (Revised 2004), *Share-Based
Payment* . The
statement requires that compensation cost relating to share-based payment
transactions be recognized in financial statements and that this cost be
measured based on the fair value of the equity or liability instruments issued.
SFAS No. 123 (Revised 2004) covers a wide range of share-based compensation
arrangements including share options, restricted share plans, performance-based
awards, share appreciation rights, and employee share purchase plans. In April,
2005, the SEC delayed the required adoption date for this standard. The Company
will adopt SFAS No 123 (Revised 2004) on January 1, 2006 and is currently
evaluating the impact the adoption of the standard will have on the Company's
results of operations. The impact on the first quarter of 2004 and 2005 is
discussed in the “Other Financial Notes” section of this report. SEC Staff
Accounting Bulletin No. 107, *Share-Based
Payment* SAB 107
provides guidance that will assist issuers in their initial implementation of
FASB Statement No. 123 (revised 2004), *Share-Based
Payment.* The SEC
staff expressed its views regarding the interaction between Statement 123(R) and
certain SEC rules and regulations. SAB 107 also provides the staff’s views on
the valuation of share-based payment arrangements for public companies.




11





**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 from those expressed in our forward-looking
statements. Words such as “expects”, “anticipates”, ”believes”, “estimates”,
“intends,” “plans,” “assumes,” “projects,” “predicts,” “forecasts,” and
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 2004 Annual Report on Form
10-K filed on or about March 15, 2005. 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; or sell or buy participations of loans; the quality
and adequacy of management of our borrowers; 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 on liquidity requirements and market volatility,
as well as on and 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 rates 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.





12





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 nonbank 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 enhancements; fee
pricing strategies, mergers and acquisitions and their integration into the
Company, civil disturbances or terrorist threats or acts, or apprehension about
the possible future occurrences or acts of this type, outbreak or escalation of
hostilities in which the United States is involved, any declaration of war by
the U.S. Congress or any other national or international calamity, crisis or
emergency changes in laws and regulations, recently issued accounting
pronouncements, government policies, regulations, and their enforcement
(including Bank Secrecy Act-related matters, taxing statutes and regulations);
restrictions on dividends that our subsidiaries are allowed to pay to us; the
ability to satisfy requirements related to the Sarbanes-Oxley Act and other
regulation on internal control; and management’s ability to manage these and
other risks. For additional information relating to the risks of the Company's
business see "Risk Factors" in the Company's Annual Report on Form 10-K.





**Critical
accounting policies and estimates**





The
Company discussion and analysis of its financial condition and results of
operations are based upon the Company’s consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States. The preparation of these financial statements requires the
Company to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses, and related disclosure of contingent
assets and liabilities. On an on-going basis, the Company evaluates its
estimates, including those related to the adequacy of the allowance for loan
losses, intangible assets, valuation of deferred income taxes and contingencies.
The Company bases its estimates on historical experience and on various other
assumptions that are believed to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under different assumptions or
conditions. (See caption “Allowance for Loan Losses” for a more detailed
discussion).




13





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**





**Three
Months Ended March 31, 2005 Compared With Three Months Ended March 31,
2004**





OVERVIEW





For the
three months ended March 31, 2005 the Company reported record net income of
$4,988,000. This compares to $3,644,000 for the same period in 2004 and
represents an increase of $1,344,000 or 37%. Basic and fully diluted earnings
per share were $0.48 and $0.46 for the three months ended March 31, 2005. This
compares to basic and fully diluted earnings per share of $0.36 and $0.34 for
the three months ended March 31, 2004 and represents an increase of $0.12 per
share for basic and fully diluted earnings per share. The basic and fully
diluted earnings per share are reflective of the nine for five stock split that
was announced in March, 2005, with a distribution date of April 29, 2005. The
annualized return on average assets was 1.37% and 1.17% for the first three
months of 2005 and 2004. The Company's annualized return on average equity was
18.85% and 15.83% for the three months ended March 31, 2005 and
2004.





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
months ended March 31, 2005 totaled $14,940,000 and represented an increase of
$2,153,000 or 17% when compared to the $12,787,000 achieved during the three
months ended March 31, 2004.





Total
interest and fees on earning assets were $20,013,000 for the three months ended
March 31, 2005, an increase of $3,107,000 or 18% from the $16,906,000 for the
same period in 2004. 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 total interest income for the three months ended March 31, 2005 was
primarily the result of an increase in volume of interest-earning assets.
Average interest-earning assets for the three months ended March 31, 2005 were
$1,345,801,000 compared with $1,150,109,000 for the three months ended March 31,
2004, an increase of $195,692,000 or 17%. Average interest rates earned on
interest-earning assets were 6.12% for the three months ended March 31, 2005
compared with 5.96% for the same three months of 2004, an increase of 16 basis
points or 3%. The modest increase in interest rates earned in the first quarter
of 2005 compared to the same period in 2004 was primarily the result of an
increase in market interest rates during this time period.





Interest
expense is a function of the volume and rates paid on interest-bearing
liabilities. Interest-bearing liabilities consist primarily of certain deposits
and borrowed funds. Total interest expense was $5,073,000 for the three months
ended March 31, 2005, compared with $4,119,000 for the three months ended March
31, 2004, an increase of $954,000 or 23%. This increase was primarily the result
of an increase in the volume of interest-bearing liabilities. Average
interest-bearing liabilities were $1,082,650,000 for the three months ended
March 31, 2005 compared with $952,111,000 for the same three months in 2004, an
increase of $130,539,000 or 14%. Average interest rates paid on interest-bearing
liabilities were 1.90% for the three months ending March 31, 2005 compared with
1.74% for the same three months of 2004, an increase of 16 basis points or 9%.
The increase was primarily the result of increased market interest rates and the
corresponding repricing of maturing, lower yielding liabilities during the
period.





14





The
increase in interest-earning assets and interest-bearing liabilities was
primarily the result of increased market penetration within our target markets
which has been accomplished by increasing the utilization of existing facilities
and the addition of branches in Fresno, California.





The
Company's taxable equivalent net interest margin, the ratio of net interest
income to average interest-earning assets, was 4.59% for the three months ended
March 31, 2005 compared with 4.53% for the same period in 2004. Net interest
margin provides a measurement of the Company's ability to employ funds
profitably during the period being measured. The Company's increase in net
interest margin in 2005 was primarily attributable to a gain of 21 basis points
in the loan portfolio yield and an increase of 142 basis point in federal funds
sold through March 31, 2005 as compared to the same time period in 2004. Loans
as a percentage of average interest-earning assets decreased slightly to 66% for
the three months ended March 31, 2005 compared with 67% for the three months
ended March 31, 2004.




15








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 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




Three
      months ended
    
    Three
      months endedMarch
      31, 2005
    
    March
      31, 2004Average
      Balance
    
    Taxable
      Equivalent
      Interest
    
    Taxable
      Equivalent
      Yield/rate
    
    Average
      Balance
    
    Taxable
      Equivalent
      Interest
    
    Taxable
      Equivalent
      Yield/rate(Dollars
      in thousands)**Assets**Federal
      funds sold
    
    $
    5,747
    
    $
    35
    
    
    2.47
    %
    $
    4,216
    
    $
    11
    
    
    1.05
    %Time
      deposits at other financial institutions
    
    
    1,883
    
    
    12
    
    
    2.58
    
    
    350
    
    
    2
    
    
    2.29Taxable
      investment securities (1)
    
    
    368,717
    
    
    3,763
    
    
    4.14
    
    
    325,790
    
    
    3,285
    
    
    4.04Nontaxable
      investment securities (1)
    
    
    78,391
    
    
    996
    
    
    5.15
    
    
    48,755
    
    
    651
    
    
    5.36Loans,
      gross: (2)
    
    
    891,063
    
    
    15,489
    
    
    7.05
    
    
    770,998
    
    
    13,148
    
    
    6.84Total
      interest-earning assets
    
    
    1,345,801
    
    $
    20,295
    
    
    6.12
    
    
    1,150,109
    
    
    17,097
    
    
    5.96Allowance
      for loan losses
    
    
    (13,519
    )
    
    
    
    
    
    
    
    (13,472
    )Cash
      and due from banks
    
    
    40,285
    
    
    
    
    
    
    
    
    39,317Premises
      and equipment, net
    
    
    23,097
    
    
    
    
    
    
    
    
    16,866Interest
      receivable and other assets
    
    
    56,518
    
    
    
    
    
    
    
    
    48,088Total
      assets
    
    $
    1,452,182
    
    
    
    
    
    
    
    $
    1,240,908**Liabilities
      And Shareholders' Equity**Negotiable
      order of withdrawal
    
    $
    166,451
    
    $
    20
    
    
    0.05
    
    $
    134,678
    
    $
    15
    
    
    0.04Savings
      deposits
    
    
    361,335
    
    
    1,005
    
    
    1.13
    
    
    340,444
    
    
    765
    
    
    0.90Time
      deposits
    
    
    373,929
    
    
    2,394
    
    
    2.60
    
    
    361,653
    
    
    2,010
    
    
    2.23Other
      borrowings
    
    
    164,439
    
    
    1,359
    
    
    3.35
    
    
    98,840
    
    
    1,065
    
    
    4.32Subordinated
      Debentures
    
    
    16,496
    
    
    295
    
    
    7.25
    
    
    16,496
    
    
    264
    
    
    6.42Total
      interest-bearing liabilities
    
    
    1,082,650
    
    
    5,073
    
    
    1.90
    
    
    952,111
    
    
    4,119
    
    
    1.74Noninterest-bearing
      deposits
    
    
    253,277
    
    
    
    
    
    
    
    
    190,585Accrued
      interest, taxes and other liabilities
    
    
    10,401
    
    
    
    
    
    
    
    
    6,110Total
      liabilities
    
    
    1,346,328
    
    
    
    
    
    
    
    
    1,148,806Total
      shareholders' equity
    
    
    105,854
    
    
    
    
    
    
    
    
    92,102Total
      liabilities and shareholders' equity
    
    $
    1,452,182
    
    
    
    
    
    
    
    $
    1,240,908Net
      interest income and margin (3)
    
    
    
    
    $
    15,222
    
    
    4.59
    %
    
    
    
    $
    12,978
    
    
    4.53
    %


(1)
    Tax-equivalent
      adjustments included in the nontaxable investment securities portfolio are
      $245,000 and $160,000 for the three months ended March 31, 2005 and 2004.
      Tax equivalent adjustments included in the taxable investment securities
      created by a dividends received deduction were $37,000 and $31,000 for the
      three months ended March 31, 2005 and 2004.


(2)
    Amounts
      of interest earned included loan fees of $645,000 and $511,000 and loan
      costs of $70,000 and $102,000 for the three months ended March 31, 2005
      and 2004, respectively.


(3)
    Net
      interest margin is computed by dividing net interest income by total
      average interest-earning assets.




16





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.





Net
Interest Income Variance Analysis:




Three
      months endedMarch
      31, 2005 compared to March 31, 2004(Dollar
      in thousands)
    
    Volume
    
    Rate
    
    TotalIncrease
      (decrease) in interest income:Federal
      funds sold
    
    $
    5
    
    $
    19
    
    $
    24Time
      deposits at other financial institutions
    
    
    10
    
    
    -
    
    
    10Taxable
      investment securities
    
    
    406
    
    
    72
    
    
    478Tax-exempt
      investment securities
    
    
    371
    
    
    (26
    )
    
    345Loans
    
    
    1,956
    
    
    385
    
    
    2,341Total:
    
    $
    2,748
    
    $
    450
    
    $
    3,198Increase
      (decrease) in interest expense:Interest
      bearing demand
    
    $
    4
    
    $
    1
    
    $
    5Savings
      deposits
    
    
    47
    
    
    193
    
    
    240Time
      deposits
    
    
    66
    
    
    318
    
    
    384Other
      borrowings
    
    
    578
    
    
    (284
    )
    
    294Subordinated
      Debentures
    
    
    -
    
    
    31
    
    
    31Total:
    
    $
    695
    
    $
    259
    
    $
    954Increase
      (decrease) in net interest income
    
    $
    2,053
    
    $
    191
    
    $
    2,244
 
 PROVISION
FOR LOAN LOSSES





The
provision for loan losses for the three months ended March 31, 2005 was $220,000
compared with $615,000 for the three months ended March 31, 2004, a decrease of
$395,000 or 64%. See "Allowance for Loan Losses" contained herein. As of
March 31, 2005 the allowance for loan losses was $13,358,000 or 1.45% of total
loans compared to $13,605,000 or 1.54% of total loans as of December 31, 2004.
At March 31, 2005, nonperforming assets totaled $3,145,000 or 0.21% of total
assets, nonperforming loans totaled $3,085,000 or 0.33% of total loans and the
allowance for loan losses totaled 433% of nonperforming loans. At December 31,
2004, nonperforming assets totaled $4,454,000 or 0.30% of total assets,
nonperforming loans totaled $4,394,000 or 0.50% of total loans and the allowance
for loan losses totaled 310% 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.





17





NONINTEREST
INCOME





Noninterest
income increased by $229,000 or 9% to $2,669,000 for the three months ended
March 31, 2005 compared with $2,440,000 in the same period during 2004. Service
charges on deposit accounts decreased by $67,000 or 4.7% to $1,367,000 for the
three months ended March 31, 2005 compared with $1,434,000 for the same period
in 2004. The decrease was primarily the result of growth obtained from existing
customers in 2005 that resulted in larger balances per customer and a relatively
smaller number of fee paying deposit customers. Also, the larger account
balances reduced fees paid by deposit customers, especially commercial accounts
that utilize account analysis to determine customer fees charged. Other
noninterest income increased by $272,000 or 35% for the three month period ended
March 31, 2005 when compared to the same period in 2004. The primary reason for
the increased other income was the receipt of $539,000 in death benefit proceeds
received from a bank owned life insurance policy on a retired executive manager
during the first quarter of 2005.








NONINTEREST
EXPENSE **** ****





Noninterest
expenses increased by $977,000 or 10% to $10,308,000 for the three months ended
March 31, 2005 compared with $9,331,000 for the same period in 2004. The primary
components of noninterest expenses were salaries and employee benefits, premises
and occupancy expenses, equipment expenses, professional fees, supplies
expenses, marketing expenses, intangible amortization and other operating
expenses.





For the
three months ended March 31, 2005, salaries and related benefits increased by
$497,000 or 10% to $5,553,000 from the $5,056,000 recorded for the same period
in 2004. The increase was primarily the result of normal salary progression and
increased support staff used in operations and regulatory compliance support
functions. Premises and occupancy expense increased by $206,000 or 26% to
$985,000 for the three months ending March 31, 2005 from $779,000 during the
same period in 2004. The primary reason for the increase in 2005 was related to
the addition of a new customer support center in late 2004. Equipment expenses
increased by $32,000 or 4% to $858,000 during the three months ended March 31,
2005 from the $826,000 experienced during the same period in 2004. The
additional equipment expenses were primarily the result of branch and department
equipment upgrades. When comparing the results of the three months ended March
31, 2005 to the three months ended March 31, 2004, professional fees increased
by $192,000 or 52%, marketing expenses decreased by $53,000 or 15%, supplies
expenses increased by $42,000 or 19%, intangible amortization expenses decreased
by $156,000, and other expenses increased $217,000 or 14% from 2004 levels.
Increased professional fees in 2005 were attributable to the costs associated
with the Sarbanes Oxley Act and Bank Secrecy Act (“BSA”) compliance efforts. The
decrease in marketing expenses was primarily the result of decreased advertising
expenses. The increase in supplies expenses was related to increased
administrative supplies for the customer support center. The decrease in
intangible amortization expense was related to the complete amortization of the
premium paid on branch deposits purchased from Bank of America in December 1997.
The increased other expenses were primarily the result of increased
correspondent bank charges caused by increased transaction volumes and an
increase of $72,000 in management and Board of Director training and meeting
expenses.





PROVISION
FOR INCOME TAXES





The
Company recorded an increase of $456,000 or 28% in the income tax provision to
$2,093,000 for the three months ended March 31, 2005 compared to the $1,637,000
recorded for the same period in 2004. During the first quarter of 2005 and 2004,
the Company achieved an effective tax rate of 30% and 31%, respectively. The
effective tax rate for the first quarter of 2005 was lower than the rate
recorded during the same period in 2004 primarily due to the receipt of $539,000
in nontaxable bank owned life insurance death benefits during the quarter.
Excluding the bank owned life insurance death benefits, the income tax rate for
the first quarter of 2005 would have been 32%, an increase of 1% over the 31%
realized in the first quarter of 2004. This increase in the year over year
income tax rate is due to the increased level of fully taxable income generated
in 2005.





18





**Financial
Condition**





Total
assets at March 31, 2005 were $1,505,382,000, an increase of $56,935,000 or 4%
compared with total assets of $1,448,447,000 at December 31, 2004. Net loans
were $909,019,000 at March 31, 2005, an increase of $37,531,000 or 4% compared
with net loans of $871,488,000 at December 31, 2004. Deposits were
$1,185,321,000 at March 31, 2005, an increase of $31,164,000 or 3% compared with
deposits of $1,154,157,000 at December 31, 2004. The increase in total assets of
the Company between December 31, 2004 and March 31, 2005 was primarily funded by
an increase in borrowings and deposits. Cash inflows generated from the
increased deposits and borrowings were primarily used to fund growth in the loan
and investment portfolios.





Total
shareholders' equity was $106,871,000 at March 31, 2005, an increase of
$3,390,000 or 3% from the $103,481,000 at December 31, 2004. The growth in
shareholders’ equity between December 31, 2004 and March 31, 2005 was primarily
achieved through the retention of accumulated earnings.





** OFF-BALANCE
SHEET COMMITMENTS





The
following table shows the distribution of the Company's undisbursed loan
commitments at the dates indicated.




**March
      31,**
    
    **December
      31,**(Dollars
      in thousands)
    
    **2005**
    
    **2004**Letters
      of credit
    
    $
    12,676
    
    $
    13,875Commitments
      to extend credit
    
    
    378,756
    
    
    393,039Total
    
    $
    391,432
    
    $
    406,914





In 2005,
the Company reclassified the reserve for unfunded lending commitments from the
allowance for loan losses to other liabilities. The reclassifications had no
effect on the income before provision for income taxes as reported. The
reclassified allowance for loan losses for the three months ended March 31, 2005
and 2004, and for the year ended December 31, 2004, is presented on page 22 and
the reserve for unfunded commitments is presented on page 24.





CASH
VALUE OF LIFE INSURANCE





The Bank
maintains certain cash surrender value life insurance policies to help offset
some of the cost of employee benefit programs. They are also associated with a
salary continuation plan for the Company's executive management and deferred
retirement benefits for participating board members. These plans are informally
linked with universal life insurance policies maintained by the Bank. Income
from these policies is reflected in noninterest income. At March 31 2005, the
Bank held $28,012,000 in cash surrender value life insurance, a decrease of
$350,000 from the $28,362,000 maintained at December 31, 2004.





19





INVESTMENT
IN HOUSING TAX CREDIT LIMITED PARTNERSHIPS





The Bank
invests in housing tax credit limited partnerships to help meet the Bank’s
Community Reinvestment Act low income housing investment requirements as well as
to obtain federal and state income tax credits. These partnerships provide the
funding for low-income housing projects that might not otherwise be created. The
bank had a balance of $10,901,000 the quarter ended March 31, 2005 and the year
ended December 31, 2004





INVESTMENT
SECURITIES





At March
31, 2005 equity securities included $14.7 million of preferred stock issued by
the Federal National Mortgage Association and the Federal Home Loan Mortgage
Corporation. These issues of preferred stock are tied to various short term
indexes ranging from the one year LIBOR interest rate to the five year U.S.
Treasury rate. These securities have AA- credit ratings from the securities
rating agencies and are callable by the issuer at par. At March 31, 2005, the
unrealized gain on these securities totaled $199,000 compared to a $209,000
unrealized gain at December 31, 2004, after recording a $3,709,000 other than
temporary impairment charge during the fourth quarter of 2004.





NONPERFORMING
ASSETS





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





Nonperforming
loans are those which the borrower fails to perform in accordance with the
original terms of the obligation and include loans on nonaccrual status, loans
past due 90 days or more 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 opinion of the ultimate risk of loss on the individual loan. Cash
payments are treated as interest income where management believes the remaining
principal balance is fully collectible. Additional loans not 90 days past due
may also be placed on nonaccrual status if management reasonably believes the
borrower will not be able to comply with the contractual loan repayment terms
and collection of principal or interest is in question.





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.





20





The
following table summarizes nonperforming assets of the Company at March 31, 2005
and December 31, 2004:




March
      31,
    
    December
      31,2005
    
    2004(Dollars
      in thousands)Nonaccrual
      loans
    
    $
    2,948
    
    $
    4,394Accruing
      loans past due 90 days or more
    
    
    137
    
    
    -Total
      nonperforming loans
    
    
    3,085
    
    
    4,394Other
      real estate owned
    
    
    60
    
    
    60Total
      nonperforming assets
    
    $
    3,145
    
    $
    4,454Nonperforming
      loans to total loans
    
    
    0.33
    %
    
    0.50
    %Nonperforming
      assets to total assets
    
    
    0.21
    %
    
    0.30
    %


Contractual
accrued interest income on loans on nonaccrual status as of March 31, 2005 and
2004, that would have been recognized if the loans had been current in
accordance with their original terms was approximately $44,000 and $61,000,
respectively.





At March
31, 2005, nonperforming assets represented 0.21% of total assets, a decrease of
9 basis point when compared to the 0.30% at December 31, 2004. Nonperforming
loans represented 0.33% of total loans at March 31, 2005, a decrease of 17 basis
points compared to the 0.50% at December 31, 2004. Nonperforming loans that were
secured by first deeds of trust on real property were $2,946,000 and $4,390,000
at March 31, 2005 and December 31, 2004. The decrease in nonperforming loans and
nonperforming assets was primarily the result of the continuation of a strong
real estate market that has allowed for successful workouts on a few struggling
commercial real estate and agricultural properties. Other forms of collateral
such as inventory and equipment secured a portion of the 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.





At March
31, 2005 and December 31, 2004, the Company had $60,000 invested in one property
that had been acquired through foreclosure. The property was 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. The Company does not expect to sell its one remaining property
within the next twelve month period due to the fact that the property is subject
to a lifetime tenancy for the current occupant of the residence. During the
first quarter of 2005, no new foreclosure properties were acquired or sold. No
assurance can be given that the Company will sell the remaining property during
2005 or at any time or the amount for which the 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 March 31, 2005
and December 31, 2004, 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 March 31, 2005 were $3,085,000 for which
the Company made provisions to the allowance for loan losses of approximately
$442,000.





21





Except
for loans that are disclosed above, there were no assets as of March 31, 2005,
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.





**Allowance
for Loan Losses**





The
following table summarizes the loan loss experience of the Company for the three
months ended March 31, 2005 and 2004, and for the year ended December 31,
2004.





**March
      31**
    
    **December
      31****2005**
    
    **2004**
    
    **2004**(Dollars
      in thousands)**Allowance
      for Loan Losses:**Balance
      at beginning of period
    
    $
    13,605
    
    $
    12,524
    
    $
    12,524Provision
      for loan losses
    
    
    220
    
    
    615
    
    
    2,731Charge-offs:Commercial
      and agricultural
    
    
    565
    
    
    249
    
    
    1,860Real
      estate - mortgage
    
    
    -
    
    
    -
    
    
    -Consumer
    
    
    111
    
    
    201
    
    
    436Total
      charge-offs
    
    
    676
    
    
    450
    
    
    2,296RecoveriesCommercial
      and agricultural
    
    
    149
    
    
    21
    
    
    344Real-Estate
      - mortgage
    
    
    -
    
    
    -
    
    
    12Consumer
    
    
    60
    
    
    121
    
    
    290Total
      recoveries
    
    
    209
    
    
    142
    
    
    646Net
      charge-offs
    
    
    467
    
    
    308
    
    
    1,650Balance
      at end of period
    
    
    13,358
    
    $
    12,831
    
    $
    13,605Loans
      outstanding at period-end
    
    $
    922,377
    
    $
    788,380
    
    $
    885,093Average
      loans outstanding
    
    $
    891,063
    
    $
    770,998
    
    $
    813,050Annualized
      net charge-offs to average loans
    
    
    0.21
    %
    
    0.16
    %
    
    0.20
    %Allowance
      for loan lossesTo
      total loans
    
    
    1.45
    %
    
    1.63
    %
    
    1.54
    %To
      nonperforming loans
    
    
    433.00
    %
    
    395.77
    %
    
    309.63
    %To
      nonperforming assets
    
    
    424.74
    %
    
    388.58
    %
    
    305.46
    %





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 and anticipated economic conditions. In
determining the adequacy of the allowance for loan losses, management takes into
consideration growth trends in the portfolio, examination of 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.





22





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 a provision for loan losses in the first three months of 2005 of
$220,000 compared with $615,000 in the same period of 2004. The decrease was
related to the overall improvement in graded loans in the first quarter of 2005
when compared to the same period in 2004. The Company's charge-offs, net of
recoveries, were $467,000 for the three months ended March 31, 2005 compared
with $308,000 for the same three months in 2004. The increase primarily occurred
within the commercial and agricultural segment of the loan portfolio. The
increased charge-offs in this segment were primarily attributable to problems
specific to individual borrowers rather than market or industry concerns that
apply to a broader customer base.





As of
March 31, 2005, the allowance for loan losses was $13,358,000 or 1.45% of total
loans outstanding, compared with $13,605,000 or 1.54% of total loans outstanding
as of December 31, 2004 and $12,831,000 or 1.63% of total loans outstanding as
of March 31, 2004.





The
Company uses a method developed by management for 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 and management. 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. General reserves are applied to various
categories of loans at percentages ranging up to 1.8% based on the Company's
assessment of credit risks for each category. Risk factors are applied to the
carrying value of each classified loan: (i) loans internally graded "Watch"
or "Special Mention" carry a risk factor from 1.0% to 2.0%;
(ii) "Substandard" loans carry a risk factor from 15% to 40% depending on
collateral securing the loan, if any; (iii) "Doubtful" loans carry a 50% risk
factor; and (iv) "Loss" loans are charged off 100%. In addition, a portion of
the allowance is specially allocated to identified problem credits. 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.





23





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.








RESERVE
FOR UNFUNDED LENDING COMMITMENTS





The
reserve for unfunded lending commitments at March 31, 2005 and 2004, and
December 31, 2004, is presented below.





**March
      31**
    
    **December
      31****2005**
    
    **2004**
    
    **2004**(Dollars
      in thousands)**Balance
      at the beginning of period**
    
    $
    679
    
    $
    739
    
    $
    739Provision
      for credit losses
    
    
    0
    
    
    (5
    )
    
    (60
    )Balance
      at the end of period
    
    $
    679
    
    $
    734
    
    $
    679





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 natural disaster could impair the ability of many of
the Company's borrowers to meet their obligations to the Company.





Parts of
California have experienced significant floods in the late 1990s. No assurance
can be given that future flooding will not have an adverse impact on the Company
and its borrowers and depositors.





24





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 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 restrictions.





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, time deposits at other financial institutions,
available-for-sale securities and federal funds sold. The Company's liquid
assets totaled $333,646,000 and $330,358,000 on March 31, 2005 and December 31,
2004, respectively, and constituted 22% and 23% of total assets on both those
dates. Liquidity is also affected by the collateral requirements of its public
deposits and certain borrowings. Total pledged securities were $360,596,000 at
March 31, 2005 compared with $321,688,000 at December 31, 2004.





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, Pacific Coast
Bankers' Bank, Union Bank of California, Wells Fargo Bank and First Tennessee
Bank aggregating $271,339,000 of which $181,346,000 was outstanding as of March
31, 2005 and $217,832,000 of which $155,326,000 was outstanding as of December
31, 2004. The increase in borrowings outstanding during the first quarter of
2004 produced an inflow of funds that were used to purchase additional
investment securities. 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 shareholders' equity
increased by $3,390,000 or 3% from December 31, 2004 to March 31, 2005. This
increase was caused by the retention of accumulated earnings.





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 March 31, 2005, that
the Company and the Bank met all applicable capital requirements. The Company’s
leverage capital ratio at March 31, 2005 was 8.45% as compared with 8.46% as of
December 31, 2004. The Company’s total risk based capital ratio at March 31,
2005 was 11.44% as compared to 11.55% as of December 31, 2004.





The
Company’s and Bank’s actual capital amounts and ratios met all regulatory
requirements as of March 31, 2005 and were summarized as follows:




25




Dollars
      in thousands
    
    Actual
    
    For
      Capital
      Adequacy
      Purposes
    
    To
      Be Well Capitalized Under Prompt Corrective
      Action
      Provisions:Consolidated
    
    Amount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    RatioAs
      of March 31, 2005Total
      capital (to risk weighted assets)
    
    $
    136,640
    
    
    11.44
    %
    $
    95,579
    
    
    8.0
    %
    $
    119,473
    
    
    10.0
    %Tier
      1 capital (to risk weighted assets)
    
    
    122,603
    
    
    10.26
    
    
    47,789
    
    
    4.0
    
    
    71,684
    
    
    6.0Leverage
      ratio*
    
    
    122,603
    
    
    8.45
    
    
    58,029
    
    
    4.0
    
    
    72,536
    
    
    5.0The
      Bank:As
      of March 31, 2005Total
      capital (to risk weighted assets)
    
    $
    124,308
    
    
    10.44
    %
    $
    95,256
    
    
    8.0
    %
    $
    119,070
    
    
    10.0
    %Tier
      1 capital (to risk weighted assets)
    
    
    110,271
    
    
    9.26
    
    
    47,628
    
    
    4.0
    
    
    71,442
    
    
    6.0Leverage
      ratio*
    
    
    110,271
    
    
    7.62
    
    
    57,883
    
    
    4.0
    
    
    57,354
    
    
    5.0


* The
leverage ratio consists of Tier 1 capital divided by adjusted 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.





26





The
Company issues dividends 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. There are certain regulatory limitations on the payment of
cash dividends by banks.





On
October 26, 2004, the Bank entered into a written agreement (the Agreement) with
the FRBSF relating to certain deficiencies identified by the FRB with respect to
the Bank’s compliance with BSA and other applicable laws and regulations
relating to anti-money laundering (“AML”). CCOW has filed a Form 8-K containing
the Bank’s Agreement with the FRBSF with the SEC.





The
banking industry, including the Bank, is subject to significantly increased
regulatory scrutiny and enforcement regarding BSA matters. Under the Agreement,
the Bank will, among other actions to be taken, (i) develop a written program
designed to improve the Bank’s system of internal controls to ensure compliance
with applicable provisions of the BSA; (ii) develop an enhanced written customer
due diligence program designed to reasonably ensure the identification and
reporting of all known or suspected violations of law and suspicious
transactions against or involving the Bank; (iii) establish enhanced written
policies and procedures designed to strengthen the Bank’s internal controls and
audit program, and (iv) submit quarterly progress reports to the FRBSF detailing
actions taken to secure compliance with the Agreement.





The Bank
has already made significant progress in addressing the deficiencies identified
by the FRBSF. The compliance effort will entail certain additional expenditures.
In addition, while the Agreement is in place, its effect may be to limit the
Bank’s ability to engage in certain expansionary activity. Neither of these
effects are expected to have a material adverse impact on the financial
condition nor results of operations of the Bank or the Company.





DEPOSITS





Deposits
are the Company's primary source of funds. At March 31, 2005, the Company had a
deposit mix of 30% in savings deposits, 32% in time deposits, 16% in
interest-bearing checking accounts and 22% 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 March 31, 2005, the Company had brokered deposits of
$299,000.





Maturities
of time certificates of deposits of $100,000 or more outstanding at March 31,
2005 and December 31, 2004 are summarized as follows:





**March
      31, 2005**
    
    **December
      31, 2004****(Dollars
      in thousands)**Three
      months or less
    
    $
    51,691
    
    $
    77,105Over
      three to six months
    
    
    35,960
    
    
    20,366Over
      six to twelve months
    
    
    33,048
    
    
    38,086Over
      twelve months
    
    
    56,370
    
    
    31,183Total
    
    $
    177,069
    
    $
    166,740




27





**Borrowed
Funds**





Borrowed
funds increased by $21,252,000 or 13% to $185,371,000 at March 31, 2005 compared
to the $164,119,000 outstanding at December 31, 2004. The increase in borrowed
funds during the first quarter of 2005 was primarily due to the use of a
leveraged investment strategy that uses additional FHLB borrowings to fund
purchases of investment securities within the Bank’s investment
portfolio.





**Return
on Equity and Assets**




Three
      months ended
    
    Three
      months ended
    
    Year
      endedMarch
      31
    
    March
      31
    
    December
      312005
    
    2004
    
    2004Annualized
      return on average assets
    
    
    1.39
    %
    
    1.17
    %
    
    0.94
    %Annualized
      return on average equity
    
    
    19.11
    %
    
    15.83
    %
    
    12.69
    %Dividend
      payout ratio
    
    
    5.86
    %
    
    8.06
    %
    
    9.00
    %Average
      equity to average assets
    
    
    7.29
    %
    
    7.42
    %
    
    7.41
    %


28





**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 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.








**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.
Quarterly testing of the Company’s assets and liabilities under both increasing
and decreasing interest rate environments are performed to insure the Company
does not assume a magnitude of risk that is outside approved policy
limits.








The
Company’s success is largely dependent upon its ability to manage interest rate
risk. Interest rate risk can be defined as the exposure of the Company’s net
interest income to adverse movements in interest rates. Although the Company
manages other risks, such as credit and liquidity risk in the normal course of
its business, management considers interest rate risk to be its most significant
market risk and could potentially have the largest material effect on the
Company’s financial condition and results of operations. Correspondingly, the
overall strategy of the Company is to manage interest rate risk, through balance
sheet structure, to be interest rate neutral.





The
Company’s interest rate risk management is the responsibility of the
Asset/Liability Management Committee (ALCO), which reports to the Board of
Directors. ALCO establishes policies that monitors and coordinates the Company’s
sources, uses and pricing of funds. ALCO is also involved in formulating the
economic projections for the Company’s budget and strategic plan. ALCO sets
specific rate sensitivity limits for the Company. ALCO monitors and adjusts the
Company’s exposure to changes in interest rates to achieve predetermined risk
targets that it believes are consistent with current and expected market
conditions. Balance sheet management personnel monitor the asset and liability
changes on an ongoing basis and provide report information and recommendations
to the ALCO committee in regards to those changes.





It is the
opinion of management there has been no material change in the Company’s market
risk during the first quarter of 2005 when compared to the level of market risk
at December 31, 2004. If interest rates were to suddenly and materially fall
from levels experienced during the first quarter of 2005, the Company could
become susceptible to an increased level of market risk.





29





**Item 4.**
    **Controls
      and Procedures**








Evaluation
Of Disclosure Controls And Procedures





Under the
supervision and with the participation of the Company’s management, including
its chief executive officer and chief financial officer, the Company conducted
an evaluation of the effectiveness of the design and operation of its disclosure
controls and procedures as defined by Rule 13a-15(e) under the Securities
Exchange Act of 1934.





Based on
the evaluation, the chief executive officer and chief financial officer
concluded that as of the period covered by this report the disclosure controls
and procedures were adequate and effective, and that the material information
required to be included in this report, including information from the Company’s
consolidated subsidiaries, was properly recorded, processed, summarized and
reported, and was made known to the chief executive officer and chief financial
officer by others within the Company in a timely manner, particularly during the
period when this quarterly report on Form 10-Q was being prepared.





Changes
In Internal Control over Financial Reporting





There was
no change in our internal over financial reporting that occurred during our most
recent fiscal quarter that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.




30





**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.**
    **Unregistered
      Sales of Equity Securities and Use of
Proceeds.**





None.





**Item 3.**
    **Defaults
      Upon Senior Securities.**





None.





**Item 4.**
    **Submission
      of Matters to a Vote of Security
Holders.**





None.





**Item 5.**
    **Other
      Information.**





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




31





**Item 6. Exhibits**





See
Exhibit Index










32





**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)Date:
      May 5, 2005
    By
    /s/   
      Thomas T. HawkerThomas
      T. HawkerPresident
      andChief
      Executive OfficerDate:
      May 5, 2005
    By
    /s/   
      R. Dale McKinneyR.
      Dale McKinneyChief
      Financial Officer




33




Exhibit Index





Exhibit
    
    Description3.1
    
    Certificate
      of Amendment to Registrant’s Articles of Incorporation, dated March 29,
      20053.2
    
    Amended
      Articles of Incorporation of the Registrant, as in effect at April 8,
      200531.1
    
    Certification
      of Registrant's Chief Executive Officer Pursuant to Section 302 of the
      Sarbanes-Oxley Act of 200231.2
    
    Certification
      of Registrant's Chief Financial Officer Pursuant to Section 302 of the
      Sarbanes-Oxley Act of 200232.1
    
    Certification
      of Registrant’s Chief Executive Officer Pursuant to 18 U.S.C. Section
      135032.2
    
    Certification
      of Registrant’s Chief Financial Officer Pursuant to 18 U.S.C. Section
      1350





34