##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 for the Quarterly Period Ended March 31, 2008
 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
 
  California
    
    77-0405791(State or other jurisdiction of 
incorporation or organization)
    
    IRS Employer ID Number
  
  (209) 725-2200
 Not applicable
 þ o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer   o
(Do not check if a smaller reporting company)
    
    Smaller Reporting Company o
 o þ




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##### 



Capital Corp of the West
 PART I. FINANCIAL INFORMATIONItem 1. Financial Statements (unaudited)Condensed Consolidated Balance Sheets (unaudited)
    
    
    3Condensed Consolidated Statements of Operations (unaudited)
    
    
    4Condensed Consolidated Statements of Changes in Shareholders Equity
(unaudited)
    
    
    5Condensed Consolidated Statements of Comprehensive Income (unaudited)
    
    
    6Condensed Consolidated Statements of Cash Flows (unaudited)
    
    
    7Notes to the Condensed Consolidated Financial Statements (unaudited)
    
    
    8Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
    
    
    22Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    40Item 4. Controls and Procedures
    
    
    41PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    42Item 1A. Risk Factors
    
    
    42Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    46Item 3. Defaults Upon Senior Securities
    
    
    46Item 4. Submission of Matters to a Vote of Security Holders
    
    
    46Item 5. Other Information
    
    
    46Item 6. Exhibits
    
    
    46SIGNATURES
    
    
    47Exhibit Index
    
    
    48EXHIBIT 10.1EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2
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##### Table of Contents



PART I  Financial Information
 
 Item 1. Financial Statements (unaudited)
 Capital Corp of the West
 
 Condensed Consolidated Balance Sheets
 As of March 31,
    
    
    As of December 31,(Dollars in thousands)
    
    2008
    
    
    2007ASSETS:Cash and non-interest-bearing deposits in other banks
    
    $
    69,330
    
    
    $
    66,708Federal funds sold
    
    
    15,675
    
    
    
    17,165Time deposits at other financial institutions
    
    
    100
    
    
    
    100Investment securities available for sale, at fair value
    
    
    216,635
    
    
    
    223,016Investment securities held to maturity, at cost; fair
value of $152,220 and $155,767 at March 31, 2008
and December 31, 2007
    
    
    150,830
    
    
    
    155,483Loans, net of allowance for loan losses of $36,300 and
$35,800 at March 31, 2008 and December 31, 2007
    
    
    1,465,546
    
    
    
    1,458,881Interest receivable
    
    
    9,177
    
    
    
    10,541Premises and equipment, net
    
    
    53,706
    
    
    
    54,192Goodwill
    
    
    34,313
    
    
    
    34,313Other intangibles
    
    
    6,634
    
    
    
    6,940Cash value of life insurance
    
    
    44,447
    
    
    
    43,677Investment in housing tax credit limited partnerships
    
    
    5,955
    
    
    
    6,186Other real estate owned
    
    
    7,604
    
    
    
    7,550Other assets
    
    
    24,137
    
    
    
    23,987Total assets:
    
    $
    2,104,089
    
    
    $
    2,108,739LIABILITIES:Deposits:Non-interest-bearing demand
    
    $
    278,437
    
    
    $
    310,622Negotiable orders of withdrawal
    
    
    247,703
    
    
    
    254,735Savings
    
    
    410,044
    
    
    
    471,016Time, under $100,000
    
    
    363,849
    
    
    
    368,765Time, $100,000 and over
    
    
    240,970
    
    
    
    270,127Total deposits:
    
    
    1,541,003
    
    
    
    1,675,265Other borrowings
    
    
    346,027
    
    
    
    217,816Junior subordinated debentures
    
    
    57,734
    
    
    
    57,734Accrued interest, taxes and other liabilities
    
    
    14,960
    
    
    
    16,197Total liabilities:
    
    
    1,959,724
    
    
    
    1,967,012Commitments and contingencies (note 10)
    
    
    
    
    
    
    SHAREHOLDERS EQUITY:Preferred stock, no par value; 10,000,000 shares
authorized; none outstanding
    
    
    
    
    
    
    Common stock, no par value; 54,000,000 shares
authorized; 10,804,588 issued and outstanding at
March 31, 2008 and December 31, 2007
    
    
    66,956
    
    
    
    66,599Retained earnings
    
    
    75,689
    
    
    
    74,757Accumulated other comprehensive income, net
    
    
    1,720
    
    
    
    371Total shareholders equity:
    
    
    144,365
    
    
    
    141,727Total liabilities and shareholders equity:
    
    $
    2,104,089
    
    
    $
    2,108,739
 See accompanying notes to condensed consolidated financial statements.
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Capital Corp of the West
 
 Condensed Consolidated Statements of Operations
 For the Three Months EndedMarch 31(Amounts in thousands, except per share data)
    
    2008
    
    2007INTEREST INCOME:Interest and fees on loans
    
    $
    28,470
    
    
    $
    25,278Interest on time deposits with other financial institutions
    
    
    1
    
    
    
    5Interest on Investment Securities Held to Maturity:Taxable
    
    
    747
    
    
    
    813Non-taxable
    
    
    848
    
    
    
    921Interest on Investment Securities Available for Sale:Taxable
    
    
    2,673
    
    
    
    2,952Non-taxable
    
    
    8
    
    
    
    11Interest on federal funds sold
    
    
    179
    
    
    
    1,235Total Interest Income
    
    
    32,926
    
    
    
    31,215INTEREST EXPENSE:Deposits:Negotiable orders of withdrawal
    
    
    465
    
    
    
    585Savings
    
    
    3,024
    
    
    
    3,510Time, under $100,000
    
    
    3,789
    
    
    
    3,659Time, $100,000 and over
    
    
    2,565
    
    
    
    4,184Total Interest on Deposits
    
    
    9,843
    
    
    
    11,938Interest on junior subordinated debentures
    
    
    897
    
    
    
    675Interest on other borrowings
    
    
    2,425
    
    
    
    1,858Total Interest Expense
    
    
    13,165
    
    
    
    14,471Net interest income
    
    
    19,761
    
    
    
    16,744Provision for loan losses
    
    
    1,407
    
    
    
    200Net Interest Income after Provision for Loan Losses
    
    
    18,354
    
    
    
    16,544NON-INTEREST INCOME:Service charges on deposit accounts
    
    
    2,240
    
    
    
    1,705Gain on sale of available for sale securities
    
    
    733
    
    
    
    37Increase in cash surrender value of life insurance policies
    
    
    770
    
    
    
    409Other
    
    
    845
    
    
    
    808Total Non-Interest Income
    
    
    4,588
    
    
    
    2,959NON-INTEREST EXPENSE:Salaries and related benefits
    
    
    10,187
    
    
    
    7,808Premises and occupancy
    
    
    1,885
    
    
    
    1,544Equipment
    
    
    1,707
    
    
    
    1,184Professional fees
    
    
    1,578
    
    
    
    811Supplies
    
    
    209
    
    
    
    229Marketing
    
    
    704
    
    
    
    313Intangible amortization
    
    
    306
    
    
    
    Charitable donations
    
    
    134
    
    
    
    180Communications
    
    
    447
    
    
    
    348Other real estate owned
    
    
    158
    
    
    
    Other
    
    
    2,449
    
    
    
    1,490Total Non-Interest Expenses
    
    
    19,764
    
    
    
    13,907Income before provision for income taxes
    
    
    3,178
    
    
    
    5,596Provision for income taxes
    
    
    869
    
    
    
    1,620Net Income
    
    $
    2,309
    
    
    $
    3,976Basic earnings per share
    
    $
    0.21
    
    
    $
    0.37Diluted earnings per share
    
    $
    0.21
    
    
    $
    0.36
  4




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Capital Corp of the West
 
 Condensed Consolidated
Statements of Changes in Shareholders Equity
 AccumulatedCommon Stock
    
    
    
    
    
    
    otherNumber of
    
    
    
    
    
    
    Retained
    
    
    Comprehensive(Amounts in thousands)
    
    Shares
    
    
    Amounts
    
    
    earnings
    
    

(loss)
income
    
    
    TotalBalance, December 31, 2006
    
    
    10,761
    
    
    $
    64,586
    
    
    $
    82,803
    
    
    $
    (1,620
    )
    
    $
    145,769Exercise of stock
options, including tax
benefit of $18
    
    
    17
    
    
    
    215
    
    
    
    
    
    
    
    
    
    
    
    215Effect of share-based
payment expense
    
    
    
    
    
    
    549
    
    
    
    
    
    
    
    
    
    
    
    549Net change in fair value
of available for sale
investment securities,
net of tax effect of $129
(1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    142
    
    
    
    142Net change in fair value
of interest rate floor,
net of tax effect of $34
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    47
    
    
    
    47Cash dividends
    
    
    
    
    
    
    
    
    
    
    (864
    )
    
    
    
    
    
    
    (864
    )Net income
    
    
    
    
    
    
    
    
    
    
    3,976
    
    
    
    
    
    
    
    3,976Balance, March 31, 2007
    
    
    10,778
    
    
    $
    65,350
    
    
    $
    85,915
    
    
    $
    (1,431
    )
    
    $
    149,834Balance, January 1, 2008,
before cumulative effect
of change in accounting
principle
    
    
    10,805
    
    
    $
    66,599
    
    
    $
    74,757
    
    
    $
    371
    
    
    $
    141,727Cumulative effect of
change in accounting
principle (note 2)
    
    
    
    
    
    
    
    
    
    
    (186
    )
    
    
    
    
    
    
    (186
    )Balance, January 1, 2008,
after cumulative effect
of change in accounting
principle
    
    
    10,805
    
    
    
    66,599
    
    
    
    74,571
    
    
    
    371
    
    
    
    141,541Effect of share-based
payment expense
    
    
    
    
    
    
    357
    
    
    
    
    
    
    
    
    
    
    
    357Net change in fair value
of available for sale
investment securities,
net of tax effect of $944
(2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,269
    
    
    
    1,269Amortization of interest
rate floor, net of tax
effect of $59
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    80
    
    
    
    80Cash dividends
    
    
    
    
    
    
    
    
    
    
    (1,191
    )
    
    
    
    
    
    
    (1,191
    )Net income
    
    
    
    
    
    
    
    
    
    
    2,309
    
    
    
    
    
    
    
    2,309Balance, March 31, 2008
    
    
    10,805
    
    
    $
    66,956
    
    
    $
    75,689
    
    
    $
    1,720
    
    
    $
    144,365
 
 (1)
    
    Includes reclassification adjustment for net losses included in net income of $22 (net of $15
tax benefit).(2)
    
    Includes reclassification adjustment for net gains included in net income of $425 (net of $308
tax expense). See accompanying notes to condensed consolidated financial statements.
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Capital Corp of the West
 
 Condensed Consolidated Statements of Comprehensive Income
 For the three months endedMarch 31,(Amounts in thousands)
    
    2008
    
    
    2007Net income
    
    $
    2,309
    
    
    $
    3,976Unrealized gain on securities arising during the period, net
    
    
    1,694
    
    
    
    142Reclassification adjustment for losses (gains) realized in net income, net of tax
(expense of $308 in 2008 and benefit of $15 in 2007)
    
    
    (425
    )
    
    
    22Unrealized
gain or amortization on interest rate floor arising during the period, net
    
    
    80
    
    
    
    25Comprehensive income
    
    $
    3,658
    
    
    $
    4,165
 See accompanying notes to condensed consolidated financial statements.
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Capital Corp of the West
 
 Condensed Consolidated Statements of Cash Flows
 For The Three MonthsEnded March 31,(Amounts in thousands)
    
    2008
    
    
    2007Operating activities:Net income
    
    $
    2,309
    
    
    $
    3,976Adjustments to reconcile net income to net cash provided by
operating activities:Provision for loan losses
    
    
    1,407
    
    
    
    200Depreciation, amortization and accretion, net
    
    
    2,820
    
    
    
    1,979Origination of loans held for sale
    
    
    (2,720
    )
    
    
    (1,517
    )Proceeds from sales of loans
    
    
    1,106
    
    
    
    2,262Gain on sale of loans
    
    
    (63
    )
    
    
    (65
    )Gain on sale of available for sale securities
    
    
    (733
    )
    
    
    Increase in cash value of bank owned life insurance
    
    
    (770
    )
    
    
    (409
    )Non-cash share based payment expense
    
    
    357
    
    
    
    549Net decrease in interest receivable and other assets
    
    
    1,021
    
    
    
    9,887Net decrease in accrued interest, taxes and other liabilities
    
    
    (2,462
    )
    
    
    (1,788
    )Net cash provided by operating activities:
    
    
    2,272
    
    
    
    15,074Investing activities:Investment securities purchased  available for sale securities
    
    
    (34,878
    )
    
    
    (107
    )Proceeds from maturities of available for sale investment securities
    
    
    13,121
    
    
    
    8,084Proceeds from maturities of held to maturity investment securities
    
    
    4,483
    
    
    
    1,947Proceeds from sales of available for sale securities
    
    
    31,223
    
    
    
    Net increase in loans
    
    
    (7,064
    )
    
    
    (12,208
    )Purchases of premises and equipment
    
    
    (783
    )
    
    
    (4,056
    )Net cash used in investing activities:
    
    
    6,102
    
    
    
    (6,340
    )Financing activities:Net decrease in demand, NOW and savings deposits
    
    
    (100,189
    )
    
    
    (47,656
    )Net decrease in certificates of deposit
    
    
    (34,073
    )
    
    
    (33,180
    )Proceeds from borrowings
    
    
    25,000
    
    
    
    Net increase (decrease) in short-term borrowings
    
    
    103,211
    
    
    
    (26,373
    )Payment of cash dividends
    
    
    (1,191
    )
    
    
    (864
    )Exercise of stock options
    
    
    
    
    
    
    197Tax benefits related to exercise of stock options
    
    
    
    
    
    
    18Net cash (used in) provided by financing activities:
    
    
    (7,242
    )
    
    
    (107,858
    )Net (decrease) increase in cash and cash equivalents
    
    
    1,132
    
    
    
    (99,124
    )Cash and cash equivalents at beginning of period
    
    
    83,873
    
    
    
    195,533Cash and cash equivalents at end of period
    
    $
    85,005
    
    
    $
    96,409
 See accompanying notes to condensed consolidated financial statements.
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Capital Corp of the West
 
 Notes to Condensed Consolidated Financial Statements
      Basis of Presentation :
   8




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##### Table of Contents



Investment Securities:
     Loans:
   Allowance for Loan Losses:
 9




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
    
    changes in lending policies and procedures, including underwriting standards and
collection, charge-off and recovery practices and resources,
    
    changes in the national and local economic and business conditions and developments,
including the condition of various market segments,
    
    changes in the nature and volume of the portfolio,
    
    changes in the experience, ability and depth of lending management staff,
    
    changes in the trend of the volume and severity of past due and classified loans, and
trends in the volume of non-accruals, troubled debt restructuring and other loan
modifications,
    
    changes in the home lending construction industry and effect on the Companys construction
loans,
    
    changes in the quality of the Companys loan review system and the degree of oversight by
the Companys Board of Directors,
    
    the existence and effect of any concentrations of credit, and changes in the levels of
concentrations, and
    
    the effect of external forces such as competitive and legal regulatory requirements on
the level of estimated credit losses in the Companys current portfolio.
   10




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Uncollectible Loans and Write-offs:
 Reserve for Unfunded Loan Commitments:
 Goodwill and Other Intangible Assets:
 Business Combinations
 Income Taxes:
  11




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Postretirement Split-Dollar Life Insurance Arrangements
 Reclassifications:
 Recent Accounting Pronouncements
     12




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For The Three MonthsEnded March 31,(Amounts in thousands, except per share data)
    
    2008
    
    
    2007Basic EPS computation:Net income
    
    $
    2,309
    
    
    $
    3,976Average common shares outstanding
    
    
    10,805
    
    
    
    10,774Basic EPS
    
    $
    0.21
    
    
    $
    0.37Diluted EPS Computations:Net income
    
    $
    2,309
    
    
    $
    3,976Average common shares outstanding
    
    
    10,805
    
    
    
    10,774Effect of stock options
    
    
    100
    
    
    
    19510,905
    
    
    
    10,969Diluted EPS
    
    $
    0.21
    
    
    $
    0.36
    13




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Three Months EndedMarch 31, 2008
    
    
    March 31, 2007(Dollars in thousands except per share data)Stock option compensation expense
    
    $
    357
    
    
    $
    549Tax benefit recorded related to stock option compensation
expense
    
    
    (79
    )
    
    
    (91
    )Decrease in net income
    
    $
    278
    
    
    $
    458Effect on:Net income per share  basic
    
    $
    (0.03
    )
    
    $
    (0.04
    )Net income per share  diluted
    
    $
    (0.03
    )
    
    $
    (0.04
    )
  Number of
    
    Weighted-Average Exercise(Shares in thousands)
    
    Shares
    
    Price per ShareOutstanding at January 1, 2008
    
    
    849
    
    
    $
    22.55Options granted
    
    
    272
    
    
    
    12.20Options exercised
    
    
    
    
    
    
    Options forfeited
    
    
    (40
    )
    
    
    25.58Outstanding at March 31, 2008
    
    
    1,081
    
    
    
    19.82Exercisable at March 31, 2008
    
    
    687
    
    
    $
    20.16
  March 31,2008
    
    2007Number of
    
    Weighted-Average Fair
    
    Number of
    
    Weighted-Average(Shares in thousands)
    
    Shares
    
    Value per Share
    
    Shares
    
    Fair Value per ShareOptions granted
    
    
    272
    
    
    $
    4.56
    
    
    
    152
    
    
    $
    9.67
  Number of
    
    Weighted-Average Fair Value per(Shares in thousands)
    
    Shares
    
    ShareNonvested options at January 1, 2008
    
    
    239
    
    
    $
    9.10Options granted
    
    
    272
    
    
    
    4.56Options vested
    
    
    (97
    )
    
    
    7.54Options forfeited
    
    
    (20
    )
    
    
    8.22Nonvested options at March 31, 2008
    
    
    394
    
    
    $
    6.39
  Weighted-Average
    
    Weighted-Aggregate
    
    Remaining
    
    AverageNumber
    
    Intrinsic
    
    Contractual
    
    Exercise Price(Shares and dollars in thousands, except per share data)
    
    of Shares
    
    Value
    
    Life in Years
    
    per ShareVested options exercisable at March 31, 2008
    
    
    687
    
    
    $
    284
    
    
    
    6.96
    
    
    $
    20.16Total options outstanding at March 31, 2008
    
    
    1,081
    
    
    $
    294
    
    
    
    6.98
    
    
    $
    19.82
 14




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Fair Value Measurements
     Level 1
    
    inputs to the valuation methodology are quoted priced
(unadjusted) for identical assets or liabilities in
active markets.
     Level 2
    
    inputs to the valuation methodology include quoted prices
for similar assets and liabilities in active markets, and
inputs that are observable for the asset or liability,
either directly or indirectly, for substantially the full
term of the financial instrument.
     Level 3
    
    inputs to the valuation methodology are unobservable and
significant to the fair value measurement.
  Assets
 Securities
  Loans held for sale
  Impaired loans
 Accounting by Creditors for Impairment of a Loan
 Other Real Estate Owned
  16




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Fair Value Measurements at Reporting Date UsingQuoted Price in
    
    
    Significant Other
    
    
    SignificantActive Markets for
    
    
    Observable
    
    
    UnobservableMarch 31,
    
    
    Identical Assets
    
    
    Inputs
    
    
    Inputs2008
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)(Amounts in thousands)Available for Sale Securities:State and political subdivisions
    
    $
    793
    
    
    $
    
    
    
    $
    793
    
    
    $
    Mortgage-backed securities
    
    
    187,217
    
    
    
    
    
    
    
    187,217
    
    
    
    Collateralized mortgage obligations
    
    
    9,011
    
    
    
    
    
    
    
    9,011
    
    
    
    Agency preferred stock
    
    
    3,514
    
    
    
    
    
    
    
    3,514
    
    
    
    Equity securities
    
    
    16,100
    
    
    
    16,100
    
    
    
    
    
    
    
    Total available for sale securities
    
    $
    216,635
    
    
    $
    16,100
    
    
    $
    200,535
    
    
    $
    
   Three months endedFair Value at March 31, 2008
    
    
    March 31, 2008Description
    
    Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Total GainImpaired loans
    
    $
    77,296
    
    
    $
    
    
    
    $
    74,205
    
    
    $
    3,091
    
    
    $
    244Other real estate owned
    
    $
    7,604
    
    
    
    
    
    
    
    
    
    
    
    7,604
    
    
    
    54
  Liabilities
    Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    Value(Amounts in thousands)March 31, 2008AVAILABLE FOR SALE SECURITIES:State & political subdivisions
    
    $
    780
    
    
    $
    13
    
    
    $
    
    
    
    $
    793Mortgage-backed securities
    
    
    184,297
    
    
    
    3,074
    
    
    
    154
    
    
    
    187,217Collateralized mortgage obligations
    
    
    9,134
    
    
    
    18
    
    
    
    141
    
    
    
    9,011Total Debt Securities
    
    
    194,211
    
    
    
    3,105
    
    
    
    295
    
    
    
    197,021Agency preferred stock
    
    
    4,116
    
    
    
    
    
    
    
    602
    
    
    
    3,514Equity securities
    
    
    16,165
    
    
    
    562
    
    
    
    627
    
    
    
    16,100Total Available for Sale Securities
    
    $
    214,492
    
    
    $
    3,667
    
    
    $
    1,524
    
    
    $
    216,635HELD TO MATURITY SECURITIES:State and political subdivisions
    
    $
    91,359
    
    
    $
    1,311
    
    
    $
    137
    
    
    $
    92,533Mortgage-backed securities
    
    
    49,106
    
    
    
    485
    
    
    
    235
    
    
    
    49,356Collateralized mortgage obligations
    
    
    10,365
    
    
    
    87
    
    
    
    121
    
    
    
    10,331Total Held to Maturity Securities
    
    $
    150,830
    
    
    $
    1,883
    
    
    $
    493
    
    
    $
    152,220December 31, 2007AVAILABLE FOR SALE SECURITIES:U.S. government agencies
    
    $
    35,529
    
    
    $
    454
    
    
    $
    54
    
    
    $
    35,929State & political subdivisions
    
    
    1,250
    
    
    
    6
    
    
    
    
    
    
    
    1,256Mortgage-backed securities
    
    
    159,006
    
    
    
    1,119
    
    
    
    724
    
    
    
    159,401Collateralized mortgage obligations
    
    
    10,064
    
    
    
    
    
    
    
    164
    
    
    
    9,900Total Debt Securities
    
    
    205,849
    
    
    
    1,579
    
    
    
    942
    
    
    
    206,486Agency preferred stock
    
    
    4,116
    
    
    
    
    
    
    
    
    
    
    
    4,116Equity securities
    
    
    13,156
    
    
    
    
    
    
    
    742
    
    
    
    12,414Total Available for Sale Securities
    
    $
    223,121
    
    
    $
    1,579
    
    
    $
    1,684
    
    
    $
    223,016HELD TO MATURITY SECURITIES:State and political subdivisions
    
    $
    94,346
    
    
    $
    946
    
    
    $
    65
    
    
    $
    95,227Mortgage-backed securities
    
    
    50,307
    
    
    
    398
    
    
    
    867
    
    
    
    49,838Collateralized mortgage obligations
    
    
    10,830
    
    
    
    
    
    
    
    128
    
    
    
    10,702Total Held to Maturity Securities
    
    $
    155,483
    
    
    $
    1,344
    
    
    $
    1,060
    
    
    $
    155,767
 17




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##### Table of Contents



Less than 12 Months
    
    
    12 months or More
    
    
    TotalUnrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    FairLosses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value(Amounts in thousands)AVAILABLE FOR SALE SECURITIES:Mortgage-backed securities
    
    $
    15
    
    
    $
    7,357
    
    
    $
    139
    
    
    $
    14,860
    
    
    $
    154
    
    
    $
    22,217Collateralized mortgage obligations
    
    
    96
    
    
    
    3,165
    
    
    
    45
    
    
    
    3,821
    
    
    
    141
    
    
    
    6,986Equity securities
    
    
    602
    
    
    
    3,513
    
    
    
    627
    
    
    
    4,904
    
    
    
    1,229
    
    
    
    8,417Total
    
    $
    713
    
    
    $
    14,035
    
    
    $
    811
    
    
    $
    23,585
    
    
    $
    1,524
    
    
    $
    37,620HELD TO MATURITY SECURITIES:State and political subdivisions
    
    $
    127
    
    
    $
    11,854
    
    
    $
    10
    
    
    $
    1,235
    
    
    $
    137
    
    
    $
    13,089Mortgage-backed securities
    
    
    90
    
    
    
    22,580
    
    
    
    145
    
    
    
    8,791
    
    
    
    235
    
    
    
    31,371Collateralized mortgage obligations
    
    
    121
    
    
    
    1,939
    
    
    
    
    
    
    
    
    
    
    
    121
    
    
    
    1,939Total
    
    $
    338
    
    
    $
    36,373
    
    
    $
    155
    
    
    $
    10,026
    
    
    $
    493
    
    
    $
    46,399
  Less than 12 Months
    
    
    12 months or More
    
    
    TotalUnrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    FairLosses
    
    
    Value
    
    
    Losses
    
    
    Value
    
    
    Losses
    
    
    Value(Amounts in thousands)AVAILABLE FOR SALE SECURITIES:U.S. government agencies
    
    $
    
    
    
    $
    
    
    
    $
    54
    
    
    $
    15,018
    
    
    $
    54
    
    
    $
    15,018Mortgage-backed securities
    
    
    
    
    
    
    
    
    
    
    724
    
    
    
    64,873
    
    
    
    724
    
    
    
    64,873Collateralized mortgage obligations
    
    
    
    
    
    
    
    
    
    
    164
    
    
    
    9,900
    
    
    
    164
    
    
    
    9,900Equity securities
    
    
    
    
    
    
    
    
    
    
    742
    
    
    
    4,789
    
    
    
    742
    
    
    
    4,789Total
    
    $
    
    
    
    $
    
    
    
    $
    1,684
    
    
    $
    94,580
    
    
    $
    1,684
    
    
    $
    94,580HELD TO MATURITY SECURITIES:State and political subdivisions
    
    $
    
    
    
    $
    
    
    
    $
    65
    
    
    $
    14,546
    
    
    $
    65
    
    
    $
    14,546Mortgage-backed securities
    
    
    
    
    
    
    
    
    
    
    867
    
    
    
    41,077
    
    
    
    867
    
    
    
    41,077Collateralized mortgage obligations
    
    
    
    
    
    
    
    
    
    
    128
    
    
    
    10,702
    
    
    
    128
    
    
    
    10,702Total
    
    $
    
    
    
    $
    
    
    
    $
    1,060
    
    
    $
    66,325
    
    
    $
    1,060
    
    
    $
    66,325
  18




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March 31,
    
    
    December 31,2008
    
    
    2007(Amounts in thousands)Real estate mortgage
    
    $
    759,418
    
    
    $
    759,108Real estate construction
    
    
    153,527
    
    
    
    152,366Total real estate loans
    
    
    912,945
    
    
    
    911,474Commercial and agricultural
    
    
    466,259
    
    
    
    458,705Factoring receivables
    
    
    21,920
    
    
    
    22,555Consumer installment
    
    
    100,722
    
    
    
    101,947Gross Loans
    
    
    1,501,846
    
    
    
    1,494,681Less Allowance for Loan Losses
    
    
    (36,300
    )
    
    
    (35,800
    )Net Loans
    
    $
    1,465,546
    
    
    $
    1,458,881
      March 31,
    
    
    December 31,2008
    
    
    2007(Amounts in thousands)Real estate construction
    
    $
    49,307
    
    
    $
    32,715Real estate
    
    
    26,327
    
    
    
    15,403Total real estate impaired loans
    
    
    75,634
    
    
    
    48,118Commercial and agricultural
    
    
    1,516
    
    
    
    5,376Consumer and installment
    
    
    146
    
    
    
    127Total
    
    $
    77,296
    
    
    $
    53,621
 19




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##### Table of Contents



2008
    
    
    2007(Amounts in thousands)Balance at beginning of the quarter
    
    $
    35,800
    
    
    $
    14,031Loans charged-off
    
    
    (933
    )
    
    
    (293
    )Recoveries of loans previously charged-off
    
    
    26
    
    
    
    227Provision for loan losses
    
    
    1,407
    
    
    
    200Balance at End of the Quarter
    
    $
    36,300
    
    
    $
    14,165
      March 31, 2008
    
    
    December 31, 2007Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    AverageInterest
    
    
    
    
    
    
    InterestMaturity Dates
    
    
    Amount
    
    
    Rate
    
    
    Amount
    
    
    Rate(Amounts in thousands)FHLB advances
    
    
    2008 to 2011
    
    
    $
    192,500
    
    
    
    2.05 - 3.59
    
    
    $
    107,500
    
    
    
    4.44 - 4.76
    %Repurchase agreement
    
    
    2010
    
    
    
    100,000
    
    
    
    4.73
    %
    
    
    100,000
    
    
    
    5.73
    %Treasury tax loan
    
    
    2008
    
    
    
    927
    
    
    
    1.98
    %
    
    
    4,912
    
    
    
    4.00
    %Mortgage note
    
    
    2008
    
    
    
    
    
    
    
    
    %
    
    
    2,711
    
    
    
    7.80
    %Federal funds purchased
    
    
    2008
    
    
    
    50,000
    
    
    
    2.78
    %
    
    
    
    
    
    
    
    %Other interest-bearing
obligations
    
    
    2008 to 2010
    
    
    
    2,600
    
    
    
    7.00
    %
    
    
    2,693
    
    
    
    7.00
    %Total borrowings
    
    
    
    
    
    $
    346,027
    
    
    
    
    
    
    $
    217,816
    20




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##### Table of Contents



Financial Instruments Whose Contractual Amount represents Risk:
 As of
    
    
    As ofMarch 31,
    
    
    December 31,2008
    
    
    2007(Amounts in thousands)Commitments to extend credit
    
    $
    380,968
    
    
    $
    477,619Standby letters of credit
    
    $
    5,740
    
    
    $
    6,505Total
    
    $
    386,708
    
    
    $
    484,124
        21




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
     22




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##### Table of Contents



Critical Accounting Policies and Estimates
    Three Months Ended March 31, 2008 Compared With Three Months Ended March 31, 2007
    23




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##### Table of Contents



For the Three Months EndedMarch 31,
    
    Percent(Dollars in thousands)
    
    2008
    
    2007
    
    ChangeTotal interest income
    
    $
    32,926
    
    
    $
    31,215
    
    
    
    5.5
    %Total interest expense
    
    
    13,165
    
    
    
    14,471
    
    
    
    (9.0
    )%Net interest income:
    
    $
    19,761
    
    
    $
    16,744
    
    
    
    18.0
    %
  For the Three MonthsEnded March 31,
    
    Percent(Dollars in thousands)
    
    2008
    
    2007
    
    ChangeAverage interest-earning assets
    
    $
    1,874,612
    
    
    $
    1,738,074
    
    
    
    7.9
    %Average interest-bearing
liabilities
    
    $
    1,627,937
    
    
    $
    1,473,996
    
    
    
    10.4
    %Average interest rate earned
    
    
    7.11
    %
    
    
    7.36
    %
    
    
    (3.4
    )%Average interest rate paid
    
    
    3.24
    %
    
    
    3.98
    %
    
    
    (18.6
    )%Net interest margin:
    
    
    4.29
    %
    
    
    3.98
    %
    
    
    7.8
    %
   24




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25




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##### Table of Contents



INTEREST RATES AND MARGINS (Fully Taxable-Equivalent Basis)
  Three Months Ended March 31, 2008
    
    
    Three Months Ended March 31, 2007Average
    
    
    
    
    
    
    
    
    
    
    Average(Dollars in thousands)
    
    Balance
    
    
    Interest
    
    
    Yield/Rate
    
    
    Balance
    
    
    Interest
    
    
    Yield/RateASSETS:Federal funds sold
    
    $
    20,623
    
    
    $
    179
    
    
    
    3.48
    %
    
    $
    95,294
    
    
    $
    1,235
    
    
    
    5.26
    %Time deposits at other financial
institutions
    
    
    100
    
    
    
    1
    
    
    
    4.01
    
    
    
    350
    
    
    
    5
    
    
    
    5.79Taxable investment securities(1)
    
    
    278,898
    
    
    
    3,435
    
    
    
    4.94
    
    
    
    318,932
    
    
    
    3,787
    
    
    
    4.82Nontaxable investment securities(1)
    
    
    93,407
    
    
    
    1,142
    
    
    
    4.90
    
    
    
    100,666
    
    
    
    1,231
    
    
    
    4.96Loans, gross(2)(3)
    
    
    1,481,584
    
    
    
    28,470
    
    
    
    7.71
    
    
    
    1,222,832
    
    
    
    25,278
    
    
    
    8.38Total Interest-Earning Assets
    
    
    1,874,612
    
    
    
    33,227
    
    
    
    7.11
    
    
    
    1,738,074
    
    
    
    31,536
    
    
    
    7.36Allowance for loan losses
    
    
    (36,278
    )
    
    
    
    
    
    
    
    
    
    
    (14,023
    )Cash and due from banks
    
    
    53,796
    
    
    
    
    
    
    
    
    
    
    
    44,121Premises and equipment, net
    
    
    54,088
    
    
    
    
    
    
    
    
    
    
    
    44,128Interest receivable and other assets
    
    
    129,682
    
    
    
    
    
    
    
    
    
    
    
    74,843Total Assets
    
    $
    2,075,900
    
    
    
    
    
    
    
    
    
    
    $
    1,887,143LIABILITIES AND SHAREHOLDERS
EQUITY:Negotiable orders of withdrawal
    
    $
    250,639
    
    
    $
    465
    
    
    
    0.74
    
    
    $
    219,934
    
    
    $
    585
    
    
    
    1.08Savings deposits
    
    
    468,666
    
    
    
    3,024
    
    
    
    2.59
    
    
    
    413,341
    
    
    
    3,510
    
    
    
    3.44Time deposits
    
    
    622,275
    
    
    
    6,354
    
    
    
    4.10
    
    
    
    667,787
    
    
    
    7,843
    
    
    
    4.76Junior subordinated debentures
    
    
    57,734
    
    
    
    897
    
    
    
    6.23
    
    
    
    31,960
    
    
    
    675
    
    
    
    8.57Federal funds purchased
    
    
    5,700
    
    
    
    39
    
    
    
    2.74
    
    
    
    0
    
    
    
    0
    
    
    
    0.00Other borrowings
    
    
    222,923
    
    
    
    2,386
    
    
    
    4.29
    
    
    
    140,974
    
    
    
    1,858
    
    
    
    5.35Total Interest-Bearing Liabilities
    
    
    1,627,937
    
    
    
    13,165
    
    
    
    3.24
    
    
    
    1,473,996
    
    
    
    14,471
    
    
    
    3.98Non-interest bearing deposits
    
    
    289,283
    
    
    
    
    
    
    
    
    
    
    
    251,155Accrued interest, taxes and other
liabilities
    
    
    14,026
    
    
    
    
    
    
    
    
    
    
    
    14,897Total Liabilities
    
    $
    1,931,246
    
    
    
    
    
    
    
    
    
    
    $
    1,740,048Average shareholders equity
    
    
    144,654
    
    
    
    
    
    
    
    
    
    
    
    147,095Average liabilities and
shareholders equity
    
    $
    2,075,900
    
    
    
    
    
    
    
    
    
    
    $
    1,887,143Net interest income and Margin (4)
    
    
    
    
    
    $
    20,062
    
    
    
    4.29
    %
    
    
    
    
    
    $
    17,065
    
    
    
    3.98
    %
 
 (1)
    
    Tax equivalent adjustments recorded at the statutory rate of 35% that are included in
nontaxable investment securities portfolio are $261,000 and $276,000 for the three months
ended March 31, 2008 and 2007, respectively. Tax equivalent adjustments included in the
nontaxable investment securities portfolio were derived from nontaxable municipal interest
income. Tax equivalent adjustments recorded at the statutory federal rate of 35% that are
included in taxable investment securities portfolio were created by a dividends received
deduction of $15,000 and $22,000 for the three months ended March 31, 2008 and 2007,
respectively. Tax equivalent income adjustments recorded at the statutory federal rate of 35%
that are included in taxable investment securities income were created by a qualified zone
academy bond of $23,000 in the first three months of 2008.(2)
    
    Interest on non-accrual loans is recognized into income on a cash received basis.(3)
    
    Amounts of interest earned included loan fees of $726,000 and $861,000 and loan costs of
$142,000 and $123,000 for the three months ended March 31, 2008 and 2007, respectively.(4)
    
    Net interest margin is computed by dividing net interest income by total average
interest-earning assets. 26




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##### Table of Contents



NET INTEREST INCOME VARIANCE ANALYSIS (Fully Taxable-Equivalent Basis)
  Three Months EndedMarch 31, 2008 Compared to March 31, 2007(Amounts in thousands)
    
    Rate
    
    
    Volume
    
    
    TotalIncrease (decrease) in interest income:Federal funds sold
    
    $
    (88
    )
    
    $
    (968
    )
    
    $
    (1,056
    )Time deposits at other institutions
    
    
    0
    
    
    
    (4
    )
    
    
    (4
    )Taxable investment securities
    
    
    123
    
    
    
    (475
    )
    
    
    (352
    )Tax-exempt investment securities
    
    
    0
    
    
    
    (89
    )
    
    
    (89
    )Loans
    
    
    (2,157
    )
    
    
    5,349
    
    
    
    3,192Total:
    
    $
    (2,122
    )
    
    $
    3,813
    
    
    $
    1,691Increase (decrease) in interest expense:Interest bearing demand
    
    
    (202
    )
    
    
    82
    
    
    
    (120
    )Savings deposits
    
    
    (956
    )
    
    
    470
    
    
    
    (486
    )Time deposits
    
    
    (954
    )
    
    
    (535
    )
    
    
    (1,489
    )Federal funds purchased
    
    
    39
    
    
    
    0
    
    
    
    39Other borrowings
    
    
    (552
    )
    
    
    1,080
    
    
    
    528Junior subordinated debentures
    
    
    (322
    )
    
    
    544
    
    
    
    222Total:
    
    
    (2,947
    )
    
    
    1,641
    
    
    
    (1,306
    )Increase in net interest income:
    
    $
    825
    
    
    $
    2,172
    
    
    $
    2,997
    27




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##### Table of Contents



March 31, 2008
    
    
    
    
    
    March 31, 2007Stockmens
    
    Bay View(Amounts in thousands)
    
    Branches
    
    Funding
    
    All Other
    Total
    TotalSalaries and benefits
    
    
    $754
    
    
    
    909
    
    
    
    8,524
    
    
    
    10,187
    
    
    
    7,808Premises and occupancy expense
    
    
    174
    
    
    
    37
    
    
    
    1,674
    
    
    
    1,885
    
    
    
    1,544Equipment expense
    
    
    75
    
    
    
    28
    
    
    
    1,604
    
    
    
    1,707
    
    
    
    1,184
    28




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##### Table of Contents



Financial Condition
        29




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##### Table of Contents



March 31, 2008
    
    
    December 31, 2007(Dollars in thousands)
    
    Dollar Amount
    
    
    Percent of loans
    
    
    Dollar Amount
    
    
    Percent of loansLoan Categories:Real estate construction, non
residential
    
    $
    122,638
    
    
    
    8
    %
    
    $
    120,570
    
    
    
    8
    %Real estate construction
residential
    
    
    30,889
    
    
    
    2
    
    
    
    31,796
    
    
    
    2Real estate mortgage, non
residential
    
    
    725,211
    
    
    
    48
    
    
    
    725,262
    
    
    
    49Real estate mortgage residential
    
    
    34,207
    
    
    
    2
    
    
    
    33,846
    
    
    
    2Total real estate loans
    
    
    912,945
    
    
    
    60
    
    
    
    911,474
    
    
    
    61Commercial
    
    
    397,057
    
    
    
    26
    
    
    
    373,512
    
    
    
    25Agricultural
    
    
    69,202
    
    
    
    5
    
    
    
    85,193
    
    
    
    6Factoring
    
    
    21,920
    
    
    
    2
    
    
    
    22,555
    
    
    
    1Consumer
    
    
    100,722
    
    
    
    7
    
    
    
    101,947
    
    
    
    7Total
    
    
    1,501,846
    
    
    
    100
    %
    
    
    1,494,681
    
    
    
    100
    %Less allowance for loan losses
    
    
    (36,300
    )
    
    
    
    
    
    
    (35,800
    )Net loans
    
    $
    1,465,546
    
    
    
    
    
    
    $
    1,458,881
   San Francisco
    
    
    Merced/
    
    
    Stockton/
    
    
    
    
    
    
    Fresno/
    
    
    All(Dollars in thousands)
    
    Bay Area
    
    
    Mariposa
    
    
    Modesto
    
    
    Sacramento
    
    
    Bakersfield
    
    
    Other
    
    
    TotalReal estate construction, non
residential
    
    $
    5,660
    
    
    $
    33,129
    
    
    $
    27,224
    
    
    $
    19,634
    
    
    $
    36,991
    
    
    $
    
    
    
    $
    122,638Real estate construction
residential
    
    
    4,341
    
    
    
    4,176
    
    
    
    4,143
    
    
    
    6,699
    
    
    
    11,530
    
    
    
    
    
    
    
    30,889Real estate mortgage, non
residential
    
    
    80,020
    
    
    
    196,947
    
    
    
    178,106
    
    
    
    51,165
    
    
    
    211,841
    
    
    
    7,132
    
    
    
    725,211Real estate mortgage
residential
    
    
    639
    
    
    
    13,082
    
    
    
    7,427
    
    
    
    966
    
    
    
    9,700
    
    
    
    2,393
    
    
    
    34,207Total
    
    $
    90,660
    
    
    $
    247,334
    
    
    $
    216,900
    
    
    $
    78,464
    
    
    $
    270,062
    
    
    $
    9,525
    
    
    $
    912,945
    30




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##### Table of Contents



(Dollars in thousands)
    
    March 31, 2008
    
    
    December 31, 2007Non-accrual loans
    
    $
    77,296
    
    
    $
    53,621Accruing loans past due 90 days or more
    
    
    3,610
    
    
    
    583Total non-performing loans
    
    
    80,906
    
    
    
    54,204Other real estate owned
    
    
    7,604
    
    
    
    7,550Total non-performing assets
    
    $
    88,510
    
    
    $
    61,754Non-performing loans to total loans
    
    
    5.39
    %
    
    
    3.63
    %Non-performing assets to total assets
    
    
    4.20
    %
    
    
    2.93
    %
  Impaired and Non-Accrual Loans
  31




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##### Table of Contents



(Dollars in thousands)Balance, at December 31, 2007
    
    $
    53,621Loans newly
placed on non-accrual status attributable to downgraded appraisal
values
    
    
    29,487Less loans
removed from non-accrual status due to additional collateral or
principal repayments
    
    
    (5,425
    )Net change
in loans in non-accrual status
    
    
    (387
    )Balance, at
March 31, 2008
    
    $
    77,296
  (Dollars in thousands)
    
    March 31, 2008
    
    
    December 31, 2007Real estate construction, non residential
    
    $
    35,638
    
    
    $
    27,284Real estate construction, residential
    
    
    13,669
    
    
    
    5,431Real estate mortgage, non-residential
    
    
    26,228
    
    
    
    15,403Real estate mortgage, residential
    
    
    99
    
    
    
    0Total real
estate non-accrual loans
    
    
    75,634
    
    
    
    48,118Commercial
    
    
    1,204
    
    
    
    5,012All other
    
    
    458
    
    
    
    491Total
    
    $
    77,296
    
    
    $
    53,621
  (Dollars in thousands)
    
    March 31, 2008
    
    
    December 31, 2007Construction of single/multi-family residence
    
    $
    13,669
    
    
    $
    5,431Construction and land development
    
    
    59,180
    
    
    
    40,372Single/multi-family residence
    
    
    1,456
    
    
    
    1,006Non-farm, non-residential property
    
    
    1,330
    
    
    
    1,500Commercial property
    
    
    1,365
    
    
    
    5,028Agricultural production and farming
    
    
    150
    
    
    
    157Personal property
    
    
    146
    
    
    
    127Total
    
    $
    77,296
    
    
    $
    53,621
  (Dollars in thousands)
    
    March 31, 2008
    
    
    December 31, 2007Land subdivision
    
    $
    42,859
    
    
    $
    16,047Construction of new single family housing
    
    
    17,114
    
    
    
    16,767Wholesale/retail
    
    
    5,520
    
    
    
    5,544Real estate agent and broker offices
    
    
    4,976
    
    
    
    3,812Medical offices
    
    
    4,268
    
    
    
    4,300Lessors of residential buildings
    
    
    1,828
    
    
    
    1,006Other activities relating to real estate
    
    
    41
    
    
    
    4,976Other
    
    
    690
    
    
    
    1,169Total
    
    $
    77,296
    
    
    $
    53,621
 32




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##### Table of Contents



(Dollars in thousands)
    
    March 31, 2008Collateral impaired and not performing
    
    $
    49,469Collateral impaired and performing
    
    
    14,189Collateral
adequate and performing
    
    
    13,638Total
    
    $
    77,296
  Collateral Impaired and Not Performing:
 Collateral Impaired and Performing:
 Collateral
Adequate and Performing:
  33




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##### Table of Contents



ALLOWANCE FOR LOAN LOSSES
  March 31,
    
    
    December 31,(Dollars in thousands)
    
    2008
    
    
    2007
    
    
    2007Allowance for Loan Losses:Balance at beginning of period
    
    $
    35,800
    
    
    $
    14,031
    
    
    $
    14,031Allowance from The California
Stockmens Bank
    
    
    
    
    
    
    
    
    
    
    1,900Provision for loan losses
    
    
    1,407
    
    
    
    200
    
    
    
    29,803Charge-offs:Commercial and agricultural
    
    
    680
    
    
    
    2
    
    
    
    1,128Real estate  construction
    
    
    19
    
    
    
    
    
    
    
    8,357Consumer
    
    
    234
    
    
    
    291
    
    
    
    934Total charge-offs
    
    
    933
    
    
    
    293
    
    
    
    10,419RecoveriesCommercial and agricultural
    
    
    17
    
    
    
    178
    
    
    
    364Real estate  mortgage
    
    
    4
    
    
    
    
    
    
    
    Consumer
    
    
    5
    
    
    
    49
    
    
    
    121Total recoveries
    
    
    26
    
    
    
    227
    
    
    
    485Net (charge-offs) recoveries
    
    
    (907
    )
    
    
    (66
    )
    
    
    (9,934
    )Balance at end of period
    
    $
    36,300
    
    
    $
    14,165
    
    
    $
    35,800Loans outstanding at period-end
    
    $
    1,501,846
    
    
    $
    1,235,419
    
    
    $
    1,494,681Average loans outstanding
    
    $
    1,481,584
    
    
    $
    1,222,832
    
    
    $
    1,320,594Annualized net charge-offs to
average loans
    
    
    0.25
    %
    
    
    0.02
    %
    
    
    0.75
    %Allowance
for loan losses:To total loans
    
    
    2.42
    %
    
    
    1.15
    %
    
    
    2.40
    %To non-performing loans
    
    
    44.87
    %
    
    
    93.09
    %
    
    
    66.05
    %To non-performing assets
    
    
    41.01
    %
    
    
    92.72
    %
    
    
    57.97
    %
   34




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##### Table of Contents



Charge-offs
  ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
   March 31, 2008
    
    
    December 31, 2007Loans
    
    
    
    
    
    
    Loans% to
    
    
    
    
    
    
    % toTotal
    
    
    
    
    
    
    Total(Amounts in thousands)
    
    Amount
    
    
    Loans
    
    
    Amount
    
    
    LoansCommercial and Agricultural
    
    $
    5,505
    
    
    
    33
    %
    
    $
    7,757
    
    
    
    32
    %Real Estate Construction
    
    
    17,584
    
    
    
    10
    %
    
    
    17,413
    
    
    
    10Real Estate Mortgage
    
    
    11,826
    
    
    
    50
    %
    
    
    8,940
    
    
    
    51Installment
    
    
    1,385
    
    
    
    7
    %
    
    
    1,690
    
    
    
    7Total
    
    $
    36,300
    
    
    
    100
    %
    
    $
    35,800
    
    
    
    100
    %
  (Dollars in thousands)
    
    March 31, 2008
    
    
    December 31, 2007Specific allowance established for
impaired loans
    
    $
    20,415
    
    
    $
    21,432General component of allowance for loan losses
    
    
    15,885
    
    
    
    14,368Total
    
    $
    36,300
    
    
    $
    35,800
  (Dollars in thousands)Balance at December 31, 2007
    
    $
    21,432New reserves required for specifically identified loans
    
    
    10,998Impact of reduction in estimate for selling costs from 10% to 8%
    
    
    (1,070
    )Less release resulting from additional collateral or repayment
by customers
    
    
    (10,945
    )Balance at March 31, 2008
    
    $
    20,415
 Other Real Estate Owned
  35




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CREDIT RISK MANAGEMENT AND ASSET QUALITY
    36




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##### Table of Contents



OTHER EARNING ASSETS
  March 31, 2008
    
    December 31, 2007(Amounts in thousands)Cash surrender value of life insurance
    
    $
    44,447
    
    
    $
    43,677
  DEPOSITS
    (Dollars in thousands)
    
    March 31, 2008
    
    
    December 31, 2007Three months or less
    
    $
    106,376
    
    
    $
    157,659Over three to six months
    
    
    53,820
    
    
    
    44,511Over six to twelve months
    
    
    61,998
    
    
    
    26,175Over twelve months
    
    
    18,776
    
    
    
    41,782Total
    
    $
    240,970
    
    
    $
    270,127
 37




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##### Table of Contents



RESERVE FOR COMMITMENTS
  March 31,
    
    
    December(Amounts in thousands)
    
    2008
    
    
    31, 2007Balance at the beginning of quarter
    
    $
    1,800
    
    
    $
    710Provision for credit losses
    
    
    145
    
    
    
    334Provision (credit) for mechanics liens and bonded stop notices
    
    
    (279
    )
    
    
    1,840Payment of mechanics liens and bonded stop notices
    
    
    
    
    
    
    (1,084
    )Balance at the end of quarter
    
    $
    1,666
    
    
    $
    1,800
             38




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##### Table of Contents



To Be Well Capitalized UnderActual
    
    
    For Capital Adequacy Purposes
    
    
    Prompt Corrective Action ProvisionsThe Company:
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio(Amounts in thousands)Total capital (to risk weighted assets)
    
    $
    181,221
    
    
    
    10.46
    %
    
    $
    138,756
    
    
    
    8
    %
    
    $
    173,220
    
    
    
    10
    %Tier I capital (to risk weighted assets)
    
    $
    149,159
    
    
    
    8.61
    %
    
    $
    69,388
    
    
    
    4
    %
    
    $
    103,932
    
    
    
    6
    %Leverage ratio(1)
    
    $
    149,159
    
    
    
    7.22
    %
    
    $
    82,647
    
    
    
    4
    %
    
    $
    103,308
    
    
    
    5
    %THE BANK:Total capital (to risk weighted assets)
    
    $
    170,864
    
    
    
    9.92
    %
    
    $
    137,831
    
    
    
    8
    %
    
    $
    172,289
    
    
    
    10
    %Tier I capital (to risk weighted assets)
    
    $
    129,125
    
    
    
    7.49
    %
    
    $
    68,916
    
    
    
    4
    %
    
    $
    103,373
    
    
    
    6
    %Leverage ratio(1)
    
    $
    129,125
    
    
    
    6.38
    %
    
    $
    80,991
    
    
    
    4
    %
    
    $
    101,239
    
    
    
    5
    %
 
 (1)
    
    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. 39




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##### Table of Contents



To Be Well Capitalized UnderActual
    
    
    For Capital Adequacy Purposes
    
    
    Prompt Corrective Action ProvisionsThe Company:
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio(Amounts in thousands)Total capital (to risk weighted assets)
    
    $
    177,480
    
    
    
    10.26
    %
    
    $
    138,406
    
    
    
    8
    %
    
    $
    173,008
    
    
    
    10
    %Tier I capital (to risk weighted assets)
    
    $
    142,122
    
    
    
    8.21
    %
    
    $
    69,203
    
    
    
    4
    %
    
    $
    103,805
    
    
    
    6
    %Leverage ratio(1)
    
    $
    142,122
    
    
    
    6.97
    %
    
    $
    81,510
    
    
    
    4
    %
    
    $
    101,887
    
    
    
    5
    %THE BANK:Total capital (to risk weighted assets)
    
    $
    170,940
    
    
    
    9.94
    %
    
    $
    137,518
    
    
    
    8
    %
    
    $
    171,898
    
    
    
    10
    %Tier I capital (to risk weighted assets)
    
    $
    129,253
    
    
    
    7.52
    %
    
    $
    68,759
    
    
    
    4
    %
    
    $
    103,139
    
    
    
    6
    %Leverage ratio(1)
    
    $
    129,253
    
    
    
    6.41
    %
    
    $
    80,703
    
    
    
    4
    %
    
    $
    100,879
    
    
    
    5
    %
 
 (1)
    
    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.  RETURN ON EQUITY AND ASSETS
  Three Months Ended
    
    Year endedMarch 31,
    
    December 31,2008
    
    2007
    
    2007Annualized return on average assets
    
    
    0.45
    %
    
    
    0.84
    %
    
    
    (0.19
    )%Annualized return on average equity
    
    
    6.40
    %
    
    
    10.68
    %
    
    
    (2.36
    )Average equity to average assets
    
    
    6.97
    %
    
    
    7.88
    %
    
    
    7.93Dividend payout ratio
    
    
    51.58
    %
    
    
    21.62
    %
    
    NM%
 
 NM
      Not Meaningful IMPACT OF INFLATION
  
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
  40




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##### Table of Contents



Item 4. Controls and Procedures
 EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
  CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
  
    
    Engaging independent credit specialists to evaluate a substantial portion of the
commercial, real estate and construction loan portfolios;
    
    Ensuring via review by qualified senior management that managements assessment of
loans requiring impairment analysis in accordance with SFAS 114 is supported by
comprehensive documentation;
 41




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##### Table of Contents




    
    Training of lending and credit personnel to ensure that loans are appropriately
classified and that problem loans are identified and communicated to Credit
Administration on a timely basis;
    
    Putting a process in place to involve the Accounting department in the preparation
and review of comprehensive documentation developed by Credit Administration to support
the loan loss provisioning and the adequacy of the Allowance for Loan Losses;
    
    Hiring of additional accounting and credit personnel to ensure that personnel with
adequate experience, skills and knowledge particularly in relation to complex or
non-routine transactions are directly involved in the review and accounting evaluation of
such transactions;
    
    Documenting of processes and procedures, along with appropriate training, to ensure
that the accounting policies, conform to GAAP and are consistently applied prospectively;
and
    
    Ensuring through appropriate review by senior level personnel that managements
analysis of the appropriate accounting treatment for Affordable Housing Partnership
investments is supported by comprehensive documentation.
   
 PART II  Other Information
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
    Market and Interest Rate Risk
 We may need to raise additional capital in the near future, but capital may not be available or may
be available only on unfavorable terms when it is needed.
 42




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##### Table of Contents



Liquidity risk could impair our ability to fund operations and jeopardize our financial condition.
  Risks related to the nature and geographical location of Capital Corp of the Wests business
 We determined that our methodology for grading loans and establishing the level of the allowance
for loan losses had material weaknesses.
  Our allowance for loan losses may prove to be insufficient to absorb losses inherent in our loan
portfolio.
  43




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##### Table of Contents



Our dependence on loans secured by real estate subjects us to risks relating to fluctuations in the
real estate market.
  Our concentration in real estate construction loans subjects us to additional risks.
  Continuation of local economic conditions could hurt our profitability.
  Risks associated with acquisitions or divestitures or restructuring may adversely affect us.
  44




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##### Table of Contents



Regulatory Risks
 Restrictions on dividends and other distributions could limit amounts payable to us.
  Systems, Accounting and Internal Control Risks
 The accuracy of the Companys judgments and estimates about financial and accounting matters will
impact operating results and financial condition
  The Companys information systems may experience an interruption or breach in security.
  The Companys controls and procedures may fail or be circumvented.
  45




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##### Table of Contents



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
  
 Item 3. Defaults Upon Senior Securities.
  
 Item 4. Submission of Matters to a Vote of Security Holders.
  
 Item 5. Other Information.
  
 Item 6. Exhibits
  46




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##### Table of Contents



SIGNATURES
  CAPITAL CORP OF THE WEST
(Registrant)Date: May 19, 2008
    By
    /s/   Thomas T. HawkerThomas T. HawkerPresident and Chief Executive Officer Date: May 19, 2008
    By
    /s/   David A. HeaberlinDavid A. HeaberlinChief Financial Officer/Treasurer 47




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##### Table of Contents



Exhibit
    
    Description10.1
    
    Employment Agreement dated March 27, 2008 between Capital Corp of the West and County
Bank and Donald T. Briggs, Jr.
    
    *31.1
    
    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