<PAGE>

                                     FORM 10-Q
                                          
                                          
                         SECURITIES AND EXCHANGE COMMISSION
                               WASHINGTON, D.C. 20549
                                          
                                          
                                          
                                          
[X]  Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act
                of 1934 for the Quarterly Period Ended June 30, 1998
                                          
                                         or

[ ]  Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Transition Period from _____________ to ___________
                                          
                                          

Commission File Number:   0-27384
                        ------------
                               CAPITAL CORP OF THE WEST
                ------------------------------------------------------
                (Exact name of registrant as specified in its charter)

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


                           550 West Main, Merced, CA  95340
                       ----------------------------------------
                       (Address of principal executive offices)

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

Former name, former address and former fiscal year, if changed since last
report:  NOT APPLICABLE

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

The number of shares outstanding of the registrant's common stock, no par value,
as of June 30, 1998 was 4,602,261.  No shares of preferred stock, no par value,
were outstanding at June 30, 1998.


                                          1
<PAGE>

                              CAPITAL CORP OF THE WEST
                                 Table of Contents

PART I.  --  FINANCIAL INFORMATION
<TABLE>
<CAPTION>

<S>                                                                         <C>
Item 1.  Financial Statements                                                  
            Consolidated Balance Sheets                                       3
            Consolidated Statements of Income                                 4
            Consolidated Statements of Cash Flows                             5
            Consolidated Statement of Changes in Stockholders Equity          6
            Notes to Consolidated Financial Statements                        7

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


Item 3.  Quantitative and Qualitative Disclosures about Market Risk          27


PART II.  --  OTHER INFORMATION

Item 1.   Legal Proceedings                                                  28
Item 2.   Changes in Securities                                              28
Item 3.   Defaults Upon Senior Securities                                    28
Item 4.   Submission of matters to a vote of Security Holders                28
Item 5.   Other Information                                                  28
Item 6.   Exhibits and Reports on Form 8-K                                   29
          
SIGNATURES                                                                   30

</TABLE>

                                          2
<PAGE>

                              Capital Corp of the West
                            Consolidated Balance Sheets
                                    (Unaudited)

<TABLE>
<CAPTION>
 

                                                                                  06/30/98           12/31/97          06/30/97
                                                                                -------------      ------------      ------------
                                                                                                 (In thousands)
                                   ASSETS                                        
<S>                                                                             <C>                <C>               <C>
  Cash and noninterest-bearing deposits in other banks                           $   23,144         $   21,035        $   13,414
  Federal funds sold                                                                  4,300              2,400             7,775
  Time deposits at other financial institutions                                       1,250                599               266
  Investment securities available for sale, at fair value                           133,034            135,257            42,747
  Investment securities held to maturity at cost, fair value of 
     $8,403,000, $12,780,000, and  $11,324,000 as of June 30,
     1998, December 31, 1997 and June 30, 1997 respectively                           8,384             12,775            11,451
  Loans, net of allowance for loan losses of  $4,246,000, 
     $3,833,000, and $2,268,000 at June 30, 1998, December 
     31, 1997 and June 30, 1997 respectively                                        241,532            214,144           193,092
  Interest receivable                                                                 2,925              2,741             2,041
  Premises and equipment, net                                                        13,467             12,945             9,429
  Intangible assets                                                                   6,258              6,653             2,401
  Other assets                                                                       13,278             12,845            10,408
                                                                                 -----------        -----------        ----------
Total assets                                                                     $  447,572         $  421,394          $293,024
                                                                                 -----------        -----------        ----------
                                                                                 -----------        -----------        ----------

                    LIABILITIES AND SHAREHOLDERS' EQUITY
  Deposits
  Noninterest-bearing demand                                                     $   62,636         $   58,836           $33,263
  Negotiable orders of withdrawal                                                    56,622             54,202            36,829
  Savings                                                                           153,206            143,562           116,220
  Time, under $100,000                                                               77,033             69,534            49,047
  Time, $100,000 and over                                                            32,875             30,261            22,319
                                                                                 -----------        -----------        ----------
  Total deposits                                                                    382,372            356,395           257,678

  Short term Borrowings                                                              18,020             13,645            14,189
  Long term Borrowings                                                                3,388              8,404               105
  Accrued interest, taxes and other liabilities                                       1,828              2,702                88
                                                                                 -----------        -----------        ----------
Total liabilities                                                                   405,608            381,146           272,060

Common stock, no par value
  20,000,000 shares authorized; 
  4,602,261; 4,595,824; and 2,746,744 issued & outstanding at 
  June 30, 1998, December 31, 1997, and June 30, 1997 
  respectively                                                                       33,998             33,928            15,664
Retained earnings                                                                     7,811              6,125             5,273
Investment securities unrealized gains, net                                             155                195                27
                                                                                 -----------        -----------        ----------
  Total shareholders' equity                                                         41,964             40,248            20,964
                                                                                 -----------        -----------        ----------
  Total liabilities and shareholders' equity                                     $  447,572         $  421,394         $ 293,024
                                                                                 -----------        -----------        ----------
                                                                                 -----------        -----------        ----------
 

</TABLE>


                                See accompanying notes 


                                          3
<PAGE>

                               Capital Corp of the West
                          Consolidated Statements of Income
                                     (Unaudited)
<TABLE>
<CAPTION>
                                                                  For the three months      For the six months 
                                                                     ended June 30,           ended June 30,
                                                                    1998        1997       1998         1997
                                                                    ----        ----       ----         ----
                                                                        (In thousands)       (In thousands)
<S>                                                               <C>        <C>         <C>         <C>
INTEREST INCOME:
     Interest and fees on loans                                   $6,081     $  4,943    $11,780      $ 9,630
     Interest on deposits with other financial institutions           23           94         34          181
     Interest on taxable investments held to maturity                171          160        369          408
     Interest on investments available for sale:
           Taxable                                                 1,571          663      3,354        1,138
           Non-taxable                                               146           49        267          108
     Interest on federal funds sold                                  377           47        650           92
                                                                  ------      -------    -------      -------
           Total interest income                                   8,369        5,956     16,454       11,557

INTEREST EXPENSE:
     Interest on negotiable orders of withdrawal                     123           80        241          158
     Interest on savings deposits                                  1,446        1,150      2,880        2,272
     Interest on time deposits, under $100,000                     1,201          724      2,251        1,417
     Interest on time, $100,000 and over                             296          193        661          299
     Interest on other borrowings                                    320          188        656          261
                                                                  ------      -------    -------      -------
     Total interest expense                                        3,386        2,335      6,689        4,407

Net interest income                                                4,983        3,621      9,765        7,150
Provision for loan losses                                            738        3,236        990        3,476
                                                                  ------      -------    -------      -------
Net interest income after provision for loan losses                4,245          385      8,775        3,674
                                                                  ------      -------    -------      -------

OTHER INCOME:
     Service charges on deposit accounts                             690          396      1,338          733
     Income from real estate held for sale or development            341          504        363          511
     Other                                                           358          312        746          702
                                                                  ------      -------    -------      -------
           Total other income                                      1,389        1,212      2,447        1,946

OTHER EXPENSES:
     Salaries and related benefits                                 1,911        1,487      3,874        3,031
     Premises and occupancy                                          325          297        650          576
     Equipment                                                       542          248      1,044          635
     Professional fees                                               211          119        365          260
     Marketing                                                       188          152        290          311
     Branch purchase                                                   -            -        101            -
     Supplies                                                        161          148        312          251
     Other                                                          1040          589      1,777        1,277
                                                                  ------      -------    -------      -------
Total other expenses                                               4,378        3,180      8,701        6,420
                                                                  ------      -------    -------      -------

Income (loss) before income taxes                                  1,256       (1,583)     2,521         (800)
Provision (benefit) for income taxes                                 393         (640)       828         (370)
                                                                  ------      -------    -------      -------
Net income (loss)                                                 $  863     $   (943)   $ 1,693      $  (430)
                                                                  ------      -------    -------      -------
                                                                  ------      -------    -------      -------
Comprehensive income:
      Change in unrealized gain on securities available
      for sale, net                                                  (55)         189        (40)          96
                                                                  ------      -------    -------      -------
COMPREHENSIVE INCOME                                              $  808     $   (754)   $ 1,653      $  (334)
                                                                  ------      -------    -------      -------
                                                                  ------      -------    -------      -------

Basic earnings (loss) per share                                   $ 0.19     $  (0.34)   $  0.37      $ (0.16)
                                                                  ------      -------    -------      -------
                                                                  ------      -------    -------      -------
Diluted earnings (loss) per share                                 $ 0.18                 $  0.36
                                                                  ------                 -------
                                                                  ------                 -------
</TABLE>

                                See accompanying notes 

                                          4
<PAGE>

                               Capital Corp of the West
                        Consolidated Statements of Cash Flows
                                     (Unaudited)
<TABLE>
<CAPTION>
 

                                                                     6 months ended       6 months ended
                                                                        06/30/98             06/30/97
                                                                               (In thousands)
<S>                                                                  <C>                  <C>
OPERATING ACTIVITIES:
Net income (loss)                                                      $   1,693            $   (430)
  Adjustments to reconcile net income (loss) to net cash 
  provided by operating activities:
      Provision for loan losses                                              990               3,476
      Depreciation, amortization and accretion, net                        1,723                 713
      Benefit for deferred income taxes                                        -                 (35)
      Gain on sale of real estate held for sale                              363                 511
  Net increase in interest receivable & other assets                        (980)             (1,167)
  Net increase in deferred loan fees                                          64                  63
  Net decrease in accrued interest payable & other liabilities              (874)             (2,686)
                                                                       ---------           ---------
Net cash provided by operating activities                                  2,979                 445

INVESTING ACTIVITIES:
  Investment security purchases                                          (35,612)            (24,520)
  Proceeds from maturities of investment securities                       26,099              10,264
  Proceeds from sales of investment securities                            15,615               6,155
  Net increase in time deposits in other financial institutions             (651)                  -
  Proceeds from sales of commercial and real estate loans                  5,630               1,250
  Net increase in loans                                                  (34,550)            (16,547)
  Purchases of premises and equipment                                     (1,378)             (3,680)
  Proceeds from sales of real estate held for sale                           478               1,050
                                                                       ---------           ---------
Net cash used in investing activities                                    (24,369)            (26,028)

FINANCING ACTIVITIES:
  Net increase in demand, NOW and deposits                                15,864               1,567
  Net increase in certificates of deposit                                 10,113              17,766
  Net (decrease) increase in other borrowings                               (641)             10,398
  Exercise of stock options                                                   70                 178
  Issued shares for benefit plan purchases                                     -                 163
  Fractional shares purchased                                                 (7)                (17)
                                                                       ---------           ---------
Net cash provided by financing activities                                 25,399              30,055

Net increase in cash and cash equivalents                                  4,009               4,472

Cash and cash equivalents at beginning of year                            23,435              16,717
                                                                       ---------           ---------
Cash and cash equivalents at end of quarter                            $  27,444            $ 21,189
                                                                       ---------           ---------
                                                                       ---------           ---------

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
  Investment securities net unrealized gains (losses); net of tax            (40)                 96
  Interest paid                                                            6,612               4,387
  Income tax payments                                                        200                 850
  Transfer of securities from available for sale to held to maturity           -              11,455
  Loans transferred to other real estate owned                               478                   -

 

</TABLE>
                                See accompanying notes 


                                          5
<PAGE>

                               Capital Corp of the West
              Consolidated Statement of Changes in Shareholders' Equity
                                     (Unaudited)
<TABLE>
<CAPTION>

(Amount in thousands except number of shares)

                                               Common Stock                                          Unrealized
                                     -----------------------------                                   Securities
                                       Number of                    Comprehensive      Retained         Gain
                                        shares            Amounts      Income          earnings      (loss), net      Total  
                                     ------------      -----------  -------------   -------------   ------------   ------------
<S>                                  <C>               <C>          <C>             <C>             <C>            <C>
Balance,
     December 31, 1997                4,595,824        $   33,928                   $     6,125     $      195     $   40,248
                                                                                 
Exercise of stock option                  6,437                70                             -              -             70
                                                                                 
Common stock cash-in-lieu                                                        
     Dividends                                -                 -                            (7)             -             (7)
                                                                                 
Change in fair market value of                                                   
     Investment securities                    -                 -          (40)               -            (40)           (40)
                                                                                 
Net income, June 30, 1998                     -                 -        1,693            1,693              -          1,693
                                     ------------      -----------  -------------   -------------   ------------   ------------
                                                                                 
Balance,                                                                         
     June 30, 1998                    4,602,261        $   33,998   $    1,653      $     7,811     $      155     $   41,964
                                     ------------      -----------  -------------   -------------   ------------   ------------
                                     ------------      -----------  -------------   -------------   ------------   ------------
</TABLE>

                                See accompanying notes 

                                          6
<PAGE>

                               Capital Corp of the West
                      Notes to Consolidated Financial Statements
                 June 30, 1998, December 31, 1997, and June 30, 1997
                                     (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")
and all of the capital stock of Town and Country Finance and Thrift (the
"Thrift").  During 1997 the Company formed Capital West Group, a new 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 20,000,000 shares
of Common Stock, no par value, and 10,000,000 shares of Preferred Stock.  As of
June 30, 1998 there were 4,602,261 common shares outstanding, held of record by
approximately 1,800 shareholders.  There were no preferred shares outstanding at
June 30, 1998.  The Bank has two wholly owned subsidiaries, Merced Area
Investment & Development, Inc. ("MAID") and County Asset Advisors ("CAA").  CAA
is currently inactive.  All references herein to the "Company" include the Bank,
and the Bank's subsidiaries, Capital West Group and the Thrift, unless 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 and 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.

GENERAL - THRIFT

     The Company acquired the Thrift on June 28, 1996 for a combination of cash
and stock with an aggregate value of approximately $5.8 million.  The Thrift is
an industrial loan company with four offices.  It specializes in direct loans to
the public and the purchase of financing contracts.  It was originally
incorporated in 1957.  Its deposits (technically known as investment
certificates or certificates of deposit rather than deposits) are insured by the
FDIC up to applicable limits.  

BANK'S INDUSTRY AND MARKET AREA

     The Bank engages in general commercial banking business primarily in
Merced, Tuolumne, Mariposa, Madera and Stanislaus counties.  The Bank has
thirteen branch offices:  two in Merced with the branch located in downtown
Merced located within the Bank's administrative office building, offices in
Atwater, Turlock, Hilmar, Sonora, Los Banos, Mariposa, Livingston, Dos Palos,
Madera and two offices in Modesto.  The Bank relocated its existing
administrative office and existing branch in downtown Merced to a new facility
constructed in 1997. The Thrift engages in the general consumer lending business
primarily in Stanislaus, Fresno, and Tulare counties from its main office in
Turlock; and branch offices located in Modesto, Visalia, and Fresno.


                                          7
<PAGE>

OTHER FINANCIAL NOTES

     All adjustments, in the opinion of Management, which are necessary for a
fair presentation of the Company's financial position at June 30, 1998, December
31, 1997 and at June 30, 1997 and the results of operations and statements of
cash flows for the six month periods ended June 30, 1998 and 1997, have been
included.  These interim statements are not necessarily indicative of the
results for a full year.

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

     Per share information is based on weighted average number of shares of
common stock outstanding during each three-month period after giving retroactive
effect for the five percent stock dividend declared for shareholders of record
May 7, 1998, payable June 1, 1998, the three-for-two stock split declared for
shareholders of record on April 11, 1997, payable on May 2, 1997.  Basic
earnings per share (EPS) is computed by dividing net income available to
shareholders by the weighted average common shares outstanding during the
period.  Diluted earnings per share is computed by dividing net income available
to shareholders by the weighted average 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.  An EPS adjustment for potential common stock dilution for the three 
and six months ended June 30, 1997 has not been presented due to the 
antidilutive nature of the adjustment during this time period.

     The following table provides a reconciliation of the numerator and
denominator of the basic and diluted earnings per share computation of the three
and six month periods ending June 30, 1998 and 1997:

<TABLE>
<CAPTION>
 

                                                  For  The Three Months     For The Six Months
                                                        Ended  June 30,        Ended June 30,
                                                  ---------------------   -----------------------
<S>                                               <C>         <C>         <C>            <C>
 (In thousands, except per share data)               1998        1997         1998         1997
                                                  ----------  --------    -----------    --------
 Basic EPS computation:                                                  
      Net income (loss)                              $   863  $  (943)      $   1,693    $   (430)
      Average common shares                                              
           outstanding                                 4,602    2,741           4,600       2,733
                                                  ----------  --------    -----------    --------
 Basic EPS                                           $  0.19  $ (0.34)      $    0.37    $  (0.16)
                                                  ----------  --------    -----------    --------
                                                  ----------  --------    -----------    --------
 Diluted EPS Computations:                                               
      Net income (loss)                              $   863  $  (943)      $   1,693    $   (430)
      Average common shares                                              
           Outstanding                                 4,602    2,741           4,600       2,733
      Stock options                                      134      128             134         128
                                                  ----------  --------    -----------    --------
                                                       4,736    2,869           4,734       2,861
                                                  ----------  --------    -----------    --------
 Diluted EPS                                         $  0.18                 $   0.36
                                                  ----------              -----------
                                                  ----------              -----------

</TABLE>

                                          8
<PAGE>

     In June 1997, the FASB issued SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF
AN ENTERPRISE AND RELATED INFORMATION.  SFAS No. 131 is effective for annual
periods beginning after December 15, 1997 and is to be applied retroactively to
all periods presented.  SFAS No. 131 establishes standards for the way public
business enterprises are to report information about operating segments in
annual financial statements and requires those enterprises to report selected
information about operating segments in interim financial reports issued to
shareholders.  It also establishes standards for related disclosures about
products and services, geographic areas, and major customers.   SFAS No. 131
supersedes SFAS No. 14, FINANCIAL REPORTING FOR SEGMENTS OF A BUSINESS
ENTERPRISE but retains the requirement to report information about major
customers.  Management does not expect that adoption of SFAS No. 131 will have a
material impact on the Company's consolidated financial statements.

     In June, 1998, the Financial Accounting Standards Board issued Statement 
of Financial Accounting Standards No. 133 "Accounting for Derivative 
Instruments and Hedging Activities" ("SFAS 133"), which amends the disclosure 
requirements of Statement No. 52, "Foreign Currency Translations" and of 
Statement No. 107, "Disclosures about Fair Value of Financial Instruments." 
SFAS 133 supersedes Statements No. 80 "Accounting for Future Contracts", No. 
105 "Disclosure of Information about Financial Instruments with Off-Balance 
Sheet Risk and Financial Instruments with Concentrations of Credit Risk" and 
No. 119, "Disclosure about Derivative Financial Instruments and Fair Value of 
Financial Instruments." Under the provisions of SFAS 133, the Company is 
required to recognize all derivatives as either assets or liabilities in the 
statement of financial condition and measure those instruments at fair value. 
If certain conditions are met, a derivative may be specifically designated as 
(a) a hedge of the exposure to changes in the fair value of a recognized 
asset or liability or an unrecognized firm commitment, (b) a hedge of the 
exposure to variable cash flows of a forecasted transaction, or (c) a hedge 
of the foreign currency exposure of a net investment in a foreign operation, 
an unrecognized firm committment, an available-for-sale security or a 
foreign-currency-denominated forecasted transaction. The accounting for 
changes in the fair value of a derivative (that is, gains and losses) depends 
on the intended use of the derivative and the resulting operation. SFAS 133 
is effective for all fiscal quarters of fiscal years beginning June 15, 1999, 
with early application encouraged, but it is permitted only as of the 
beginning of any fiscal quarter that begins after the issuance of the 
statement. SFAS 133 should not be applied retroactively to financial 
statements of prior periods. The Company does not expect that the adoption of 
SFAS 133 will have a material impact on its financial condition.

                                          9
<PAGE>

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

     THE FOLLOWING MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS
AND UNCERTAINTIES.  THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM
THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN
FACTORS.  THESE FACTORS INCLUDE GENERAL RISKS INHERENT TO COMMERCIAL LENDING;
RISKS RELATED TO ASSET QUALITY; RISKS RELATED TO THE COMPANY'S DEPENDENCE ON KEY
PERSONNEL AND ITS ABILITY TO MANAGE EXISTING AND FUTURE GROWTH; RISKS RELATED TO
COMPETITION; RISKS POSED BY PRESENT AND FUTURE GOVERNMENT REGULATION AND
LEGISLATION; AND RISKS RESULTING FROM FEDERAL MONETARY POLICY.   

     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 AND SIX MONTHS ENDED JUNE 30, 1998 COMPARED WITH THREE AND SIX MONTHS 
   ENDED JUNE 30, 1997

     OVERVIEW.  For the three and six months ended June 30, 1998, the Company 
reported net income of $863,000 and $1,693,000 compared with a net loss for the 
three and six months ended June 31, 1997 of $943,000 and $430,000, an increase 
in net income of $1,806,000 and $2,123,000, respectively.  Basic earnings per 
share were $.19 and $.37 for the three and six months ending June 30, 1998 
compared to a net loss per share of $.34 and $.15 for the three and six 
months ended June 30, 1997.  The annualized return on average assets was .78% 
and .79% for the first three and six months of 1998 compared with (1.32)% and 
(.31)% for the three and six months ended June 30, 1997.  The Company's 
annualized return on average equity was 8,32% and 8.31% for the three and six 
months ended June 30, 1998 compared with (17.14)% and (3.97)% for the three 
and six months ended June 30, 1997.

     NET INTEREST INCOME.  The Company's primary source of income is the 
difference between interest income and fees derived from earning assets and 
interest paid on liabilities.  The difference between the two is net interest 
income.  Net interest income for the three and six months ended June 30, 1998 
totaled $4,983,000 and $9,765,000 compared with $3,621,000 and $7,150,000 for 
the same periods in 1997, an increase of $1,362,000 and $2,615,000 or 38% and 
37% respectively.

     Total interest and fees on earning assets were $8,369,000 and $16,454,000 
for the three and six months ended June 30, 1998, an increase of $2,413,000 and 
$4,897,000 or 41% and 42% from $5,956,000 and $11,557,000 for the same three 
and six months in 1997.  The level of interest income is affected by changes in 
volume of and rates earned on interest-earning assets.  Interest-earning assets 
consist primarily of loans, investment securities and federal funds sold.  The 
increase in interest income in the three and six months ended June 30, 1998 was 
primarily the result of an increase in the volume of interest-earning assets.  
Average interest-earning assets for the three and six months ended June 30, 
1998 were $387,576,000 and $381,797,000 compared with $252,264,000 and 
$245,765,000 for the three and six months ended June 30, 1997, an increase of 
$135,312,000 and $136,032,000 or 54% and 55% respectively.

     Interest expense is a function of the volume of and the rates paid on 
interest-bearing liabilities.  Interest-bearing liabilities consist primarily 
of certain deposits and borrowed funds.  Total interest expense was $3,386,000 
and $6,689,000 for the three and six months ended June 30, 1998, compared with 
$2,335,000 and $4,407,000 for the three and six months ended June 30, 1997, an 
increase of $1,051,000 and $2,282,000 or 45% and 52%, respectively.  This 
increase was primarily the result of an increase in the volume of 
interest-bearing liabilities.  Average interest-bearing liabilities were 
$338,292,000 and $331,759,000 for the three and six months ended June 30, 1998 
compared with $228,890,000 and $219,612,000 for the same three and six months 
in 1997, an increase of $109,402,000 and $112,147,000 or 48% and 51% 
respectively.

                                          10
<PAGE>

     The increase in interest-earning assets and interest-bearing liabilities is
primarily the result of the Company's purchase of three branches of Bank of
America in December 1997 and the completion of a successful stock offering in
August 1997.  The branch purchase increased deposits by $60,849,000 (there were
no loans purchased) and the stock offering increased capital by $17,951,000.  In
addition, two branch offices opened in late 1996 and a third in late 1997 which
also contributed to growth.

     The Company's net interest margin, the ratio of net interest income to 
average interest-earning assets, was 5.14% and 5.12% for the three and six 
months ended June 30, 1998 compared with 5.74% and 5.83% for the same period in 
1997.  Net interest margin provides a measurement of the Company's ability to 
employ funds profitably during the period being measured.  The Company's 
decrease in net interest margin was primarily attributable to a moderate change 
in the mix of interest-earning assets.  Loans as a percentage of average 
interest-earning assets decreased from 76% and 77% for the three and six months 
ended June 30, 1997 to 60% and 59% for the three and six months ended June 30, 
1998, primarily due to the purchase of the three branches of Bank of America.

     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
<TABLE>
<CAPTION>
                                                              Six months ended                         Six months ended 
                                                                June 30, 1998                            June 30, 1997       
                                                     Average                                    Average
                                                     Balance        Interest     Yield/rate     Balance      Interest     Yield/rate
                                                                               (DOLLARS IN THOUSANDS)
<S>                                               <C>            <C>          <C>          <C>        <C>               <C>
ASSETS
Federal funds sold                                $   23,845     $      650       5.45%    $   3,488  $       92        5.29%
Time deposits at other financial institutions            986             34       6.90         5,344         181        6.77
Taxable investment securities:                       122,000          3,723       6.10        44,736       1,546        6.91
Nontaxable investment securities (1)                  10,318            267       5.18         3,989         108        5.41
Loans, gross: (2)                                    224,648         11,780      10.49       188,208       9,630       10.26
                                                  ----------     ----------   ---------    ---------   ---------     --------
Total interest-earning assets:                       381,797         16,454       8.62       245,765      11,557        9.43
Allowance for loan losses                            (3,946)                                 (2,881)
Cash and due from banks                               20,404                                  10,998
Premises and equipment, net                           13,265                                   8,150
Interest receivable and other assets                  22,255                                  15,294
                                                  ----------                               ---------
Total assets                                      $  433,755                               $ 277,326
                                                  ----------                               ---------
                                                  ----------                               ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
Negotiable order of withdrawal                    $   54,392     $      241       0.89     $  34,769  $      158        0.91
Savings deposits                                     149,855          2,880       3.89       111,588       2,272        4.08
Time deposits                                        105,849          2,912       5.50        63,305       1,716        5.44
Other borrowings                                      21,663            656       6.06         9,950         261        5.26
                                                  ----------     ----------   ---------    ---------   ---------     --------
Total interest-bearing liabilities                   331,759          6,689       4.03       219,612       4,407        4.02

Noninterest-bearing deposits                          57,921                                  32,166
Accrued interest, taxes and other liabilities          3,011                                   3,877
                                                  ----------                               ---------
  Total liabilities                                  392,691                                 255,655

Total shareholders' equity                            41,084                                  21,671
                                                  ----------                               ---------
Total liabilities and shareholders' equity        $  433,775                               $ 277,326
                                                  ----------                               ---------
                                                  ----------                               ---------
Net interest income and margin (3)                               $    9,765       5.12%               $    7,150        5.83%
                                                                 ----------   ---------               ----------      ---------
                                                                 ----------   ---------               ----------      ---------
</TABLE>

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

                                          11
<PAGE>

(2)  Amounts of interest earned includes loan fees of $648,000 and $670,000 for
     June 30, 1998 and 1997 respectively.  

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

     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:

<TABLE>
<CAPTION>

                                                                      June 30, 1998 compared to June 30, 1997
                                                                       Volume          Rate            Total
                                                                      --------       --------        --------
                                                                            (Dollar amounts in thousands) 
               <S>                                                    <C>            <C>             <C>
               Increase (decrease) in interest  income:
               Federal funds sold                                        $   555              3           558
               Time deposits at other financial institutions                (150)             3          (147)
               Taxable investment securities                               2,379           (202)        2,177
               Tax-exempt investment securities                              164             (5)          159
               Loans                                                       1,909            241         2,150
                                                                         -------        -------        ------
               Total                                                       4,857             40         4,897
                                                                         -------        -------        ------
                                                                         -------        -------        ------
               Increase (decrease) interest expense:
               Interest bearing demand                                        88             (5)           83
               Savings deposits                                              739           (131)          608
               Time deposits                                               1,169             27         1,196
               Other borrowings                                              349             46           395
                                                                         -------        -------        ------
               Total                                                       2,345            (63)        2,282
                                                                         -------        -------        ------
                                                                         -------        -------        ------
               Increase in net interest income                           $ 2,512        $   103        $2,615
                                                                         -------        -------        ------
                                                                         -------        -------        ------

</TABLE>

     PROVISION FOR LOAN LOSSES.  The provision for loan losses for the three 
and six months ended June 30, 1998 was $738,000 and $990,000 compared with 
$3,236,000 and $3,476,000 in the three and six months ended June 30, 1997.  
Also see "ALLOWANCE FOR LOAN LOSSES" contained herein. As of June 30, 1998 
the allowance for loan losses was $4,246,000 or 1.72% of total loans.  At 
June 30, 1998, nonperforming assets totaled $3,205,000 or .72% of total 
assets, nonperforming loans totaled $3,007,000 or 1.30% of total loans and 
the allowance for loan losses totaled 141.20% 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.  Also see "Memorandum of Understanding" contained herein.

     NONINTEREST INCOME.  Noninterest income increased by $177,000 and 
$501,000 or 15% and 26% to $1,389,000 and $2,447,000 for the three and six 
months ended June 30, 1998 compared with $1,212,000 and $1,946,000 in the 
same period in 1997.  Service charges on deposit accounts increased by 
$$294,000 and $605,000 or 74% and 80% for the three and six months ended June 
30, 1998 compared with this same period in 1997. Income from the sale of real 
estate held for sale or development decreased by $163,000 and $148,000 or 32% 
and 29% and other income increased by $451,000 and $44,000 or 77% and 6% for 
the three and six month period ended June 30, 1998 when compared to the same 
period in 1997.  The increases in service charges are primarily due to 
general growth of the Company and the purchase of three branches from Bank of 
America in December of 1997.

     NONINTEREST EXPENSE.  Noninterest expenses increased by $1,198,000 and 
$2,281,000 or 38% and 17% to $4,378,000 and $8,701,000 for the three and six 
months ended June 30, 1998 compared with $3,180,000 and $6,420,000 for the 
same period in 1997.  The primary components of noninterest expenses were 
salaries and employee benefits, furniture and equipment expenses, occupancy 
expenses, and other operating expenses. 

                                          12
<PAGE>

     For the three and six months ended June 30, 1998 compared with the three 
and six months ended June 30, 1997, salaries and related benefits increased 
by $424,000 and $843,000 or 29% and 28%, respectively, equipment expenses 
increased by $294,000 and $409,000 or 119% and 64%, respectively, occupancy 
expenses increased $28,000 and $74,000 or 9% and 13%, respectively, 
professional fees increased by $92,000 and $105,000 or 77% and 40%, 
respectively, marketing expenses increased (decreased) by $36,000 and 
$(21,000) or 24% and (7)%, respectively, goodwill and intangible amortization 
expense increased by $170,000 and 210,000 or 425% and 226%, respectively, 
supplies expense increased by $13,000 and $61,000 or 9% and 24%, 
respectively, and other expenses increased by $451,000 and $500,000 or 77% 
and 39%, respectively.  The expense increases were primarily the result of 
expansion, including expenses associated with acquisition of the branches 
purchased from Bank of America in December, 1997 and the opening of a new 
branch in Madera in late 1997.

     PROVISION FOR INCOME TAXES.  The Company recorded a $393,000 and 
$828,000 tax expense for the three and six months ended June 30, 1998 
compared with a benefit for income taxes of $690,000 and $370,000 for the 
same period in 1997.  Tax rates were positively affected by the purchase of 
limited partnership investments in low-income affordable housing projects 
providing the investor with affordable housing income tax credits.  The 
Company had investments in these partnerships of $4,261,000 as of June 30, 
1998 and $2,700,000 as of June 30, 1997, resulting in tax credits of $148,000 
and $70,000 respectively. The effective tax rate for the three and six months 
ended June 30, 1998 was 31% and 33% compared to (40)% and (46)% for the three 
and six months ended June 30, 1997.

     INTEREST RATE RISK

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

     The following tables set forth the interest rate sensitivity of the
Company's interest-earning assets and interest-bearing liabilities as of June
30, 1998, using the interest rate sensitivity gap ratio.  For purposes of the
following table, an asset or liability is considered rate-sensitive within a
specified period when it can be repriced or matures within its contractual
terms.  

<TABLE>
<CAPTION>
 

                                                                               AT JUNE 30, 1998
                                            ----------------------------------------------------------------------------------
                                                             AFTER 3         AFTER 1
                                                               BUT          YEAR BUT
                                              WITHIN         WITHIN          WITHIN         AFTER       NONINTEREST-
                                             3 MONTHS       12 MONTHS        5 YEARS       5 YEARS        BEARING       TOTAL
                                            ---------      ----------        -------       -------        -------       ------
                                                                        (DOLLARS IN THOUSANDS)
<S>                                         <C>            <C>              <C>           <C>           <C>            <C>
 ASSETS
 Time deposits at other banks               $      750     $      500        $      -     $      -       $     -       $  1,250
 Federal funds sold                              4,300              -               -            -             -          4,300
 Investment securities                           6,549         18,925          51,759       64,185             -        141,418
 Loans                                         139,567         32,284          55,326       18,601             -        245,778
                                            ----------       --------        --------       ------             -       --------
 Total earning assets                          151,166         51,709         107,085       82,786                      392,746
 Noninterest-earning assets and
   allowances for loan losses                        -              -               -            -        54,826         54,826
                                            ----------       --------        --------       ------       -------       --------


                                       13

<PAGE>

 Total assets                               $  151,166     $   51,709        $107,085     $ 82,786       $54,826       $447,572

 LIABILITIES AND 
   SHAREHOLDERS' EQUITY
 Savings, money market and NOW deposits     $  272,464     $        -        $      -     $      -       $     -       $272,464
 Time deposits                                  20,731         68,068          18,793        2,316             -        109,908
 Other interest-bearing liabilities                  -         18,020             103        3,285             -         21,408
 Other liabilities and shareholders'
   equity                                            -              -               -            -        43,792         43,792
                                            ----------       --------        --------       ------       -------       --------
 Total liabilities and shareholders'
   equity                                      293,195         86,088          18,896        5,601        43,792       $447,572
 Incremental gap                             (142,029)        (34,379)         88,189       77,185        11,034
 Cumulative gap                             $(142,029)      $(176,408)       $(88,219)    $(11,034)      $     -
 Cumulative gap as a % of earning assets        (36.2)%         (44.9)%         (22.5)%       (2.8)%

</TABLE>

     The Company was liability-sensitive with a negative cumulative one-year gap
of $176,408,000 or 44.9% of interest-earning assets at June 30, 1998.  In
general, based upon the Company's mix of deposits, loans and investments,
increases in interest rates would be expected to result in a decrease in the
Company's net interest margin.  

     The interest rate gaps reported in the tables arise when assets are 
funded with liabilities having different repricing intervals.  Since these 
gaps are actively managed and change daily as adjustments are made in 
interest rate views and market outlook, positions at the end of any period 
may not be reflective of the Company's interest rate sensitivity in 
subsequent periods.  Active management dictates that longer-term economic 
views are balanced against prospects for short-term interest rate changes in 
all repricing intervals.  For purposes of the analysis above, repricing of 
fixed-rate instruments is based upon the contractual maturity of the 
applicable instruments.  Actual payment patterns may differ from contractual 
payment patterns.  The change in net interest income may not always follow 
the general expectations of an asset-sensitive or liability-sensitive balance 
sheet during periods of changing interest rates, because interest rates 
earned or paid may change by differing increments and at different time 
intervals for each type of interest-sensitive asset and liability.  As a 
result of these factors, at any given time, the Company may be more sensitive 
or less sensitive to changes in interest rates than indicated in the above 
tables.  Greater sensitivity would have a more adverse effect on net interest 
margin if market interest rates were to increase, and a more favorable effect 
if rates were to decrease.  

     An additional measure of interest rate sensitivity that the Company 
monitors through a detailed model is its expected change in net interest 
income. This model's estimate of interest rate sensitivity takes into account 
the differing time intervals and differing rate change increments of each 
type of interest-sensitive asset and liability.  It then measures the 
projected impact of changes in market interest rates on the Company's net 
interest income.  Based upon the June 30, 1998 mix of interest-sensitive 
assets and liabilities, given an immediate and sustained increase in the 
market interest rates of 2%, this model estimates the Company's cumulative 
change in net interest income over the next year would decrease by $388,000 
or 2% of net interest income.  No assurance can be given that the actual net 
interest income would not decrease by more than $388,000 or 2% in response to 
a 2% increase in market interest rates or that actual net interest income 
would not decrease substantially if market interest rates increased by more 
than 2%.  Also see "Memorandum of Understanding" contained herein.  At the 
Bank's most recent examination, the regulators felt that the then current model 
that was used by the Bank was not adequate for a bank of its current size and 
complexity.  During the second quarter of 1998, the Company has contracted 
with interest rate sensitivity consultants to provide additional expertise in 
the interest rate sensitivity 

                                          14
<PAGE>

modeling process and has updated the model it uses for interest rate risk
analysis.  The estimates stated above were derived from this updated model.  

FINANCIAL CONDITION

     Total assets at June 30, 1998 were $447,572,000, an increase of 
$26,178,000 or 6% compared with total assets of $421,394,000 at December 31, 
1997, and an increase of $154,548,000 or 53% compared with total assets of 
$293,024,000 at June 30, 1997.  Net loans were $241,532,000 at June 30, 1998, 
an increase of $27,388,000 or 13% compared with net loans of $214,144,000 on 
December 31, 1997, and an increase of $48,440,000 or 25% compared with net 
loans of $193,092,000 at June 30, 1997. Deposits were $382,372,000 at June 
30, 1998, an increase of $25,977,000 or 7% compared with deposits of 
$356,395,000 at December 31, 1997, and an increase of $124,694,000 or 48% 
compared with deposits of $257,678,000 at June 30, 1997. The growth of the 
Company from June 30, 1997 to June 30, 1998 was primarily the result of the 
purchase of three branch offices of Bank of America in December 1997, a 
successful capital offering in 1997 and the opening of a branch office of 
County Bank in late 1997.

     Total shareholders' equity was $41,964,000 at June 30, 1998, an increase 
of $1,716,000 or 4% from $40,248,000 at December 31, 1997, and a 100% 
increase from $20,964,000 at June 30, 1997.  The growth in shareholders' 
equity from June 30, 1997 to December 31, 1997 was primarily due to the 
issuance of 1,725,000 additional shares of no par common stock which 
generated a net addition of $17,951,000 to stockholders' equity.  The 
additional shares were the result of an equity offering that was completed in 
August 1997.

INVESTMENT PORTFOLIO.  The following table sets forth the carrying amount (fair
value) of available for sale investment securities as of June 30, 1998 and 1997
and December 31, 1997.

<TABLE>
<CAPTION>

                                                            JUNE  30         DECEMBER 31        JUNE  30   
                                                        ---------------------------------------------------
                                                              1998              1997               1997
 <S>                                                    <C>                 <C>                <C>
 (In thousands)
 Available for sale securities:
 -------------------------------
 U.S.  Treasury and U.S.  Government agencies            $    12,719        $    1,824         $     5,673
 State and political subdivisions                             17,028             9,640               3,379
 Mortgage-backed securities                                   58,208            68,808              32,634
 Collateralized mortgage obligations                          37,632            51,874
 Corporate debt securities                                     4,272                 -                   -        
 Other securities                                              3,175             3,111               1,061
                                                         -----------        ----------         -----------
 Carrying amount and fair value                          $   133,034        $  135,257         $    42,747
                                                         -----------        ----------         -----------
                                                         -----------        ----------         -----------
</TABLE>

     The following table sets forth the carrying amount (amortized cost) and 
fair value of held to maturity securities at June 30, 1998 and 1997, and 
December 31, 1997.

<TABLE>
<CAPTION>
                                                             June 30        December 31          June 30
 (In thousands)                                       1998           1997                 1997
 Held To Maturity Securities:
 ----------------------------
 <S>                                                     <C>                <C>                <C>
 U.S.  Treasury and U.S.  Government agency              $     5,034        $   9,442          $    11,451
 Mortgage-backed securities                                    3,350            3,333                    -
                                                         -----------        ----------         -----------
 Carrying amount (amortized cost)                        $     8,384        $  12,775          $    11,451
                                                         -----------        ----------         -----------
                                                         -----------        ----------         -----------
 Fair value                                              $     8,403        $  12,780          $    11,324
                                                         -----------        ----------         -----------
                                                         -----------        ----------         -----------

</TABLE>

                                         15
<PAGE>

     The following table sets forth the maturities of the Company's investment
securities at June 30, 1998 and the weighted average yields of such securities
calculated on the basis of the cost and effective yields based on the scheduled
maturity of each security.  Maturities of mortgage-backed securities are
stipulated in their respective contracts.  However, actual maturities may differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call prepayment penalties.  Yields on
municipal securities have not been calculated on a tax-equivalent basis.  

<TABLE>
<CAPTION>
                                                                             AT JUNE 30, 1998
                                        ------------------------------------------------------------------------------------------
                                         WITHIN ONE YEAR                        FIVE TO TEN YEARS
                                                             ONE TO 5 YEARS                            OVER TEN YEARS      TOTAL
                                         AMOUNT    YIELD     AMOUNT     YIELD    AMOUNT     YIELD     AMOUNT     YIELD    AMOUNT
<S>                                      <C>       <C>       <C>        <C>     <C>         <C>       <C>        <C>      <C> 
(In thousands)
Available for Sale Securities:
Treasury and U.S. Government agency       $   503    5.55%   $  6,008    5.70%   $      -        -    $  6,208     5.93% $  12,719
State and political                           418    4.08         796    3.81         236     4.33      15,578     4.79     17,028
Mortgage-backed securities                     90    5.67         138    6.69       2,425     6.31      55,555     5.99     58,208
Collateralized mortgage obligations         2,034    7.15      22,683    6.44       5,002     6.24       7,913     6.57     37,632
Corporate debt securities                       -       -       4,272    6.09           -        -           -        -      4,272
Other securities                                -       -           -       -           -        -       3,175        -      3,175
                                        ------------------------------------------------------------------------------------------
Carrying amount and fair value              3,045    6.42      33,897    6.19       7,663     6.21      88,429     5.83    133,034
                                        ------------------------------------------------------------------------------------------
Held to maturity securities:
Treasury and U.S. Government agency             -       -           -       -       4,021     6.94       1,000     7.06      5,021
Mortgage-backed securities                      -       -           -       -           -        -       3,363     7.34      3.363
                                        ------------------------------------------------------------------------------------------
Carrying amount (amortized cost)                -       -           -       -       4,021     6.94       4,363     7.28      8,384
                                        ------------------------------------------------------------------------------------------
Total securities                          $ 3,045    6.42%   $ 33,897    6.19%  $  11,684     6.50%  $  92,792     5.91%  $141,418
                                        ---------   -----    --------    -----  ---------    -----   ---------   ------   --------
                                        ---------   -----    --------    -----  ---------    -----   ---------   ------   --------
</TABLE>

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

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

<TABLE>
<CAPTION>

                                       AT JUNE 30,                  AT DECEMBER  31,                      AT JUNE 30,
                               ---------------------------------------------------------------------------------------------------
(Dollars in thousands)                     1998                          1997                               1997
                                           ----                          ----                               ----
                                               Percent                         Percent                            Percent
Loan Categories:               Dollar Amount   of loans        Dollar Amount    of loans         Dollar Amount    of loans
                               -------------   --------        -------------   ---------         ------------    ---------
<S>                            <C>             <C>             <C>             <C>               <C>             <C>
Commercial                        $ 36,847        15%            $ 34,992           16%            $ 32,744         17%
Agricultural                        46,012        19               43,558           20               39,886         20
Real estate-construction            13,980         6               12,657            6                9,315          5
Real estate-mortgage                83,508        34               70,802           32               67,181         34
Consumer                            65,431        26               55,968           26               46,234         24
                                  --------      -----            --------         -----           ---------       -----
Total                              245,778       100%             217,977          100%            $195,360        100%
                                  --------      -----            --------         -----           ---------       -----
                                                -----                             -----                           -----
Less allowance for loan losses      (4,246)                        (3,833)                           (2,268)    
                                  --------                       --------                         ---------
Net loans                         $241,532                       $214,144                          $193,092
                                  --------                       --------                         ---------
                                  --------                       --------                         ---------
</TABLE>

                                          16
<PAGE>

The table that follows shows the maturity distribution of the portfolio of
commercial, agricultural, real estate construction, real estate mortgage, and
consumer loans at June 30, 1998:  

<TABLE>
<CAPTION>

                                                                AT JUNE 30, 1998
                                             -------------------------------------------------------
                                                              AFTER 1 BUT
                                             WITHIN 1 YEAR     WITHIN 5    AFTER 5 YEARS     TOTAL
                                                                YEARS
                                             -------------------------------------------------------
                                                               (IN THOUSANDS)
<S>                                          <C>           <C>            <C>            <C>
Commercial and agricultural
  Loans with floating interest rates         $   47,949    $     16,767   $    3,410     $   64,451
  Loans with fixed interest rates                 3,367           7,897          833         14,099
                                             ----------    ------------   ----------     ----------
          Subtotal                               51,316          24,664        6,879         82,859
                                             ----------    ------------   ----------     ----------
Real estate-construction
  Loans with floating interest rates              8,071           1,667        1,286         11,024
  Loans with fixed interest rates                 1,560           1,261          135          2,956
                                             ----------    ------------   ----------     ----------
          Subtotal                                9,631           2,928        1,421         13,980
                                             ----------    ------------   ----------     ----------
Real estate-mortgage                              6,938          42,962       33,608         83,508
Consumer                                         33,021          31,220        1,190         65,431
                                             ----------    ------------   ----------     ----------
          Total                              $  100,906     $   101,774   $   43,098     $  245,778
                                             ----------    ------------   ----------     ----------
                                             ----------    ------------   ----------     ----------

</TABLE>

The table that follows shows the maturity distribution of the portfolio of 
commercial, agricultural, real estate construction, real estate mortgage, and 
consumer loans at December 31, 1997:

<TABLE>
<CAPTION>

                                                         AT DECEMBER 31, 1997
                                          ------------------------------------------------------
                                                          AFTER 1 BUT
                                           WITHIN 1 YEAR    WITHIN 5   AFTER 5 YEARS      TOTAL
                                                             YEARS
                                          ------------------------------------------------------
                                                               (IN THOUSANDS)
<S>                                       <C>             <C>            <C>            <C>
Commercial and agricultural
  Loans with floating interest rates        $   44,792    $    16,249   $    3,410     $  64,451
  Loans with fixed interest rates                6,916          6,350          833        14,099
                                            ----------    -----------   ----------     ---------
          Subtotal                              51,708         22,599        4,243        78,550
                                            ----------    -----------   ----------     ---------
Real estate-construction
  Loans with floating interest rates             6,394          1,602        2,100        10,096
  Loans with fixed interest rates                1,433            989          139         2,561
                                            ----------    -----------   ----------     ---------
          Subtotal                               7,827          2,591        2,239        12,657
                                            ----------    -----------   ----------     ---------
Real estate-mortgage                             7,654         39,829       23,319        70,802
Consumer                                        33,609         21,450          909        55,968
                                            ----------    -----------   ----------     ---------
          Total                             $  100,798     $   86,469   $   30,710     $ 217,977
                                            ----------    -----------   ----------     ---------
                                            ----------    -----------   ----------     ---------

</TABLE>

                                          17
<PAGE>

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

<TABLE>
<CAPTION>
                                             JUNE 30,       DECEMBER 31,    JUNE 30,
                                               1998            1997            1997
                                              ------          ------           ----
                                                           (IN THOUSANDS)
<S>                                          <C>            <C>             <C>
     Letters of credit                       $    3,306      $   3,233      $   3,231
     Commitments to extend credit                76,764         55,248         42,928
                                             ----------      ---------      ---------
     Total                                   $   80,070      $  58,481      $  46,159
                                             ----------      ---------      ---------
                                             ----------      ---------      ---------
</TABLE>

     OTHER INTEREST-EARNING ASSETS.  The following table relates to other
interest-earning assets not disclosed previously for the dates indicated.  This
item consists of a salary continuation plan for the Company's executive
management and deferred retirement benefits for participating board members. 
The plan is informally linked with universal life insurance policies for the
salary continuation plan.  Income from these policies is reflected in
noninterest income.  

<TABLE>
<CAPTION>
                                             AT JUNE 30,  AT DECEMBER 31,  AT JUNE 30,
                                                1998           1997           1997
                                               ------         ------         ------
                                                    (IN THOUSANDS) 
     <S>                                     <C>          <C>              <C>
     Cash surrender value of life insurance  $4,019         $3,389         $3,210
</TABLE>

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 above table.

     The following table summarizes nonperforming assets of the Company at June
30, 1998 and at December 31, for the years indicated:


                                      18
<PAGE>

<TABLE>
<CAPTION>
                                                    June 30,     December 31,     June 30,
(Dollars in thousands)                                1998          1997            1997  
                                                      ----          ----            ----
<S>                                                 <C>          <C>              <C>
Nonaccrual loans                                      $1,995         $2,611         $1,568
Accruing loans past due 90 days or more                1,012            131            337
                                                      ------         ------         ------
  Total nonperforming loans                            3,007          2,742          1,905
Other real estate owned                                   60             60            417
Repossessed automobiles                                  198              -              -
                                                      ------         ------         ------
  Total nonperforming assets                          $3,205         $2,802         $2,322
                                                      ------         ------         ------
                                                      ------         ------         ------

Nonperforming assets:
  To total loans                                       1.30%          1.26%           .98%
  To total assets                                       .72%           .66%           .79%

</TABLE>

      Interest income on loans on nonaccrual status during the six months ended
June 30, 1998, and the six months ended June 30, 1997, that would have been
recognized if the loans had been current in accordance with their original terms
was approximately $143,000 and $111,000, respectively. 

     At June 30, 1998, nonperforming assets represented .72% of total assets,
and nonperforming loans represented 1.22% of total loans.  Nonperforming loans
that were secured by first deeds of trust on real property were $671,000 at June
30, 1998, $1,635,000 at December 31, 1997, and $5,000 at June 30, 1997.  Other
forms of collateral such as inventory and equipment secured the remaining
nonperforming loans as of each date.  No assurance can be given that the
collateral securing nonperforming loans will be sufficient to prevent losses on
such loans.  

     The increase in nonperforming loans and nonperforming assets as of June 30,
1998 compared with their levels as of December 31, 1997 and June 30, 1997, was
due primarily to an increase in delinquent agricultural loans coupled with an
increase in repossessed automobiles.

     At June 30, 1998, the Company had $60,000 in one property acquired through
foreclosure.  The property is 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 this property during 1998.  No assurance can be given
that the Company will sell such property during 1998 or at any time or the
amount for which such property might be sold.  

     In addition to property acquired through foreclosure, the Company has 
investments in residential real estate lots in various stages of development 
in Merced County through MAID.  MAID held two separate properties for sale or 
development at June 30, 1998.  These investments were completely written off 
in 1995, although County Bank still retains title to this property.  During 
the first six months of 1998, two lots were sold for a pre-tax gain of 
$298,000.  

     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
June 30, 1998 and December 31, 1997, 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 June 30, 1998 were 1,995,000 (all of
which were also nonaccrual loans), on account of which the Company had made
provisions to the allowance for loan losses of $502,000.  

     Except for loans that are disclosed above, there were no assets as of June
30, 1998, where known information about possible credit problems of 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 


                                          19
<PAGE>

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
six months ended June 30, 1998 and 1997, and for year ended December 31, 1997.

<TABLE>
<CAPTION>

                                                                             JUNE 30               DECEMBER 31   
                                                                   ----------------------------   -------------
                                                                        1998            1997          1997    
                                                                       ------          ------         -----
     <S>                                                              <C>            <C>           <C>
     ALLOWANCE FOR LOAN LOSSES:
     Balance at beginning of period                                   $    3,833     $    2,792     $    2,792
                                                                      ----------     ----------     ----------
     Provision for loan losses                                               990          3,476          5,825
     Charge-offs:
       Commercial and agricultural                                           348            403          1,121
       Real estate-construction                                                -          3,456          3,458
       Real estate-mortgage                                                    -              -              -
       Consumer                                                              479            278            471
                                                                      ----------     ----------     ----------
         Total charge-offs                                                   827          4,137          5,050
                                                                      ----------     ----------     ----------
     Recoveries
       Commercial and agricultural                                           101            103            155
       Real estate construction                                                -              -              1
       Real estate mortgage                                                    -              -              -
       Consumer                                                              149             34            110
                                                                      ----------     ----------     ----------
         Total recoveries                                                    250            137            266
     Net charge-offs                                                         577          4,000          4,784
                                                                      ----------     ----------     ----------
     Balance at end of period                                         $    4,246     $    2,268     $    3,833
                                                                      ----------     ----------     ----------

     Loans outstanding at year-end                                    $  245,043     $  195,360     $  217,977
                                                                      ----------     ----------     ----------
                                                                      ----------     ----------     ----------
     Average loans outstanding                                        $  239,862     $  188,208     $  198,140
                                                                      ----------     ----------     ----------
                                                                      ----------     ----------     ----------
     Net charge-offs to average loans                                        .26%          2.13%          2.41%
     Allowance for loan losses
       To total loans                                                       1.73%          1.16%          1.76%
       To nonperforming assets                                            132.48%        119.06%        136.80%

</TABLE>

     The Company maintains an allowance for loan losses at a level considered by
management to be adequate to cover the inherent risks of loss associated with
its loan portfolio under prevailing 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 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.  

                                          20
<PAGE>

     The balance in the allowance is affected by the amounts provided from
operations, amounts charged off and recoveries of loans previously charged off. 
The Company recorded provisions for loan losses in the first six months of 1998
of $990,000 compared with $3,476,000 in the same period of 1997. The increase in
loan loss provisions in 1997 was primarily due to increased reserves established
for the commercial real estate development loan that was charged off in 1997
and, to a lesser extent, reserves to support the general loan growth of the
Company.  

     The Company's charge-offs, net of recoveries, were $577,000 for the six
months ended June 30, 1998 compared with $4,000,000 for the same six months in
1997.  The increase in net charge-offs for the year ended December 31, 1997 was
primarily due to the write-off of the commercial real estate loan with a balance
of $3,458,000.  

     As of June 30, 1998, the allowance for loan losses was $4,246,000 or 1.72%
of total loans outstanding, compared with $3,833,000 or 1.76% of total loans
outstanding as of December 31, 1997 and $2,268,000 or 1.16% of total loans
outstanding as of June 30, 1997.  

     From 1992 to 1996, loan losses were relatively low and stable.  In 1997,
the Company experienced loan problems and made provisions at levels not
previously experienced.  As a result, the Company concluded that its historical
method of determining the appropriate levels for its allowance and provisions
for loan losses should be revised.  The Company therefore adopted a new
methodology of determining the appropriate level of its allowance for loan
losses.  This method applies relevant risk factors to the entire loan portfolio,
including nonperforming loans.  The methodology is based, in part, on the
Company's loan grading and classification system.  The Company grades its loans
through internal reviews and periodically subjects loans to external reviews
which then are assessed by the Company's audit committee.  Credit reviews are
performed on a monthly basis and the quality grading process occurs on a
quarterly basis.  The "migration" of loans from grade to grade is then tracked
to help predict future losses and thus more accurately set allowance levels. 
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 1.5% 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 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.  


                                          21
<PAGE>

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

<TABLE>
<CAPTION>
                                                JUNE 30,                    DECEMBER 31,                      JUNE 30,
                                                  1998                         1997                             1997     
                                                 ------                       ------                          -------
                                                       AMOUNT                         AMOUNT                            AMOUNT
                                                      TO TOTAL                       TO TOTAL                          TO TOTAL
                                                      LOANS IN                       LOANS IN                          LOANS IN
                                           AMOUNT      CATEGORY       AMOUNT          CATEGORY           AMOUNT         CATEGORY
                                          ---------   ---------     ---------        ----------         ----------     ---------
                                                                         (DOLLARS IN THOUSANDS)
<S>                                       <C>         <C>           <C>              <C>                <C>            <C>
Commercial and agricultural               $   2,135        50%      $   1,868           48%              $  1,101         49%
Real estate- construction                        72         2             640           17                    265         12
Real estate- mortgage                         1,679        40           1,058           28                    556         24
Consumer                                        360         8             267            7                    346         15
                                          ---------   ---------     ---------        ------             ---------      ------
Total                                     $   4,246       100%      $   3,833          100%              $  2,268        100%
                                          ---------   ---------     ---------        ------             ---------      ------
                                          ---------   ---------     ---------        ------             ---------      ------
</TABLE>

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

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

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

     Parts of California experienced significant floods in early 1998.  The
Company has completed an analysis of its collateral as a result of the recent
floods.  Current estimates indicate that there were no material adverse effects
to the collateral position of the Company as a result of these events.  No
assurance can be given that future flooding will not have an adverse impact on
the Company and its borrowers and depositors.   During the second quarter of
1998, an additional $200,000 was added to the loan loss reserve for possible
losses to agricultural loans due to adverse weather conditions.

     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.  A 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 

                                          22
<PAGE>

lines established with correspondent banks and market sources of funds are
considered by the Company as sources of liability liquidity.  

     The Company reviews its liquidity position on a regular basis based upon
its current position and expected trends of loans and deposits. These assets
include cash and deposits in other banks, available-for-sale securities and
federal funds sold.  The Company's liquid assets totaled $161,728,000,
$159,291,000 and $64,202,000 on June 30, 1998, December 31, 1997, and June 30,
1997, respectively, and constituted 36.1%, 37.8% and 21.9%, respectively, of
total assets on those dates.  Liquidity is also affected by the collateral
requirements of its public deposits and certain borrowings.  Total pledged
securities were $75,478,000 at June 30, 1998 compared with $45,812,000 at
December 31, 1997 and $21,963,000 at June 30, 1997. 

     When the Company acquired three Bank of America branches in December 1997,
it acquired approximately $60,849,000 in deposits and no loans. In addition, the
capital offering raised additional cash of $17,951,000.  The Company initially
invested this cash in liquid assets but intends over time to invest a larger
portion of these funds in higher yielding assets such as loans.

     Although the Company's primary sources of liquidity include liquid assets
and a stable deposit base, the Company maintains lines of credit with the
Federal Reserve Bank of San Francisco, Federal Home Loan Bank of San Francisco
and Pacific Coast Bankers' Bank aggregating $27,379,000, of which $16,003,000
was outstanding as of June 30, 1998 and $16,004,000 was outstanding as of
December 31, 1997.  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.  In
1997, the Company successfully completed a common stock offering which netted
the Company approximately $17,951,000 to add to its capital resources.  This
addition to capital was necessary to maintain favorable capital ratios through
the Company's purchase of the three branches from Bank of America and to support
internal growth on the Company's balance sheet. The Company's shareholders'
equity increased by $1,716,000 or 4% from December 31, 1997 to June 30, 1998. 
The Company's shareholders' equity increased $21,000,000 or 100% from June 1997
to June 1998.

     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 effect on
the Company's financial statements.  Management believes, as of June 30, 1998,
that the Company, the Bank and the Thrift meet all capital requirements to which
they are subject.  The Company's leverage capital ratio at June 30, 1998 was
8.02% as compared with 8.58% as of December 31, 1997.  The Company's total risk
based capital ratio at June 30, 1998 was 12.50% as compared to 12.78% as of
December 31,1997.

The Company's and Bank's actual capital amounts and ratios as of June 30, 1998
are as follows:


                                      23

<PAGE>

<TABLE>
<CAPTION>

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

----------------------------------------------------------------------------------------------------------------------------------
  Consolidated                                  Amount           Ratio           Amount         Ratio        Amount         Ratio
----------------------------------------------------------------------------------------------------------------------------------
<S>                                             <C>              <C>             <C>            <C>          <C>            <C>
  As of June 30, 1998
  Total capital (to risk weighted assets)       $    38,730      12.50%          $   24,786       8.0%       $    30,982    10.0%
  Tier 1 capital (to risk weighted assets)           34,853      11.25               12,393       4.0             18,589     6.0
  Leverage ratio*                                    34,853       8.02               17,387       4.0             21,734     5.0

 The Bank:
----------------------------------------------------------------------------------------------------------------------------------
  As of June 30, 1998
  Total capital (to risk weighted assets)        $   31,017      11.44%          $   21,692       8.0%        $   27,115    10.0%
  Tier 1 capital (to risk weighted assets)           27,621      10.19               10,846       4.0             16,269     6.0
  Leverage ratio*                                    27,621       7.03               15,717       4.0             19,646     5.0
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------

</TABLE>

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

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

     DEPOSITS.  Deposits are the Company's primary source of funds.  At June 30,
1998, the Company had a deposit mix of 40% in savings deposits, 29% in time
deposits, 15% in interest-bearing checking accounts and 16% 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 June 30, 1998, the Company had no brokered
deposits.

     In December 1997 the Company acquired three branches of Bank of America. 
It acquired $60,849,000 in deposits.  Deposits in these three acquired branches
as of March 31, 1998 were approximately $61,281,000.  

     Maturities of time certificates of deposits of $100,000 or more outstanding
at June 30, 1998 and December 31, 1997 are summarized as follows: 

<TABLE>
<CAPTION>

                                AT JUNE 30, 1998         AT DECEMBER 31, 1997
                               --------------------      --------------------
                                              (IN THOUSANDS)
     <S>                       <C>                       <C>
     Three months or less          $  8,981                 $    8,404
     Over three to six months        14,037                      7,799
     Over six to twelve months        5,319                      7,870
     Over twelve months               4,538                      6,188
                                   --------                 ----------
     Total                         $ 32,875                 $   30,261
                                   --------                 ----------
                                   --------                 ----------

</TABLE>

                                          24
<PAGE>

BORROWED FUNDS

At June 30 1998 and December 31, 1997, the Company's borrowed funds consisted of
the following:

<TABLE>
<CAPTION>

                                                                                        YEAR ENDED
                                                                         JUNE 30        DECEMBER 31
                                                                        ---------       ------------
      (Dollars in thousands)                                               1998             1997
      <S>                                                               <C>             <C>
      Securities sold under agreements to repurchase; dated 
        March 25, 1998; fixed rate of 5.74%; payable on                                       
        March 25, 1999                                                    $ 2,120       $ 2,459
                                                                      

      Unsecured loan from unaffiliated bank dated July 26, 
        1996; effective interest rate of 9%; interest payable 
        quarterly at prime + .50%; principal payable quarterly 
        at $135,714; final payment due on April 30 1998                     -               286
                                                                      
     
      FHLB loan, dated December 18, 1997; effective rate of 
        5.61%; rate reprices  monthly based on the 1 month 
        LIBOR; payable on December 18, 1998                                10,900        10,900
     
      FHLB loan, dated January 16, 1997; variable rate of 
        5.68%; rate reprices monthly based on the 1 month 
        LIBOR; payable on January 25, 1999                                  5,000         5,000

      FHLB loan, dated July 15, 1994; fixed rate of 7.58% 
        payable on July 15, 1999                                              103           104
     
      Long-term note from unaffiliated bank dated December 
        22, 1997; fixed rate of 7.80%; principal and interest 
        payable monthly at $25,047; payments calculated as 
        fully amortizing over 25 years with a 10 year call                  3,285         3,300
                                                                          -------       --------
      Total                                                               $21,408       $22,049
                                                                          -------       --------
                                                                          -------       --------

</TABLE>

     The decrease in the borrowings are primarily due to amortized principal 
payments on available lines of credit with the Federal Home Loan Bank to 
purchase securities and the origination of a loan to assist in financing the 
new administrative building and main branch.

RETURN ON EQUITY AND ASSETS

<TABLE>
<CAPTION>

                                        Six months ended    Six months ended       Year ended
                                            June 30             June 30           December 31
                                               1998                1997                1997
                                             -------            -------              -------
     <S>                                <C>                 <C>                   <C>
     Annualized return on average assets        .79%              (.31)%                .13%
     Annualized return on average equity       8.31%             (3.97)%               1.46%
     Average equity to average assets          9.60%              7.81 %               8.76%

</TABLE>

                                          25
<PAGE>

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.

REAL ESTATE DEVELOPMENT ACTIVITIES

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

     At June 30, 1998, MAID held two real estate projects including unimproved 
land.  MAID continues to develop this property and any amount realized upon 
sale or other disposition of this asset above its current carrying value of 
zero will result in noninterest income at the time of such sale or disposition. 
 During the first six months of 1998, 51 lots were sold which resulted in the 
recognition of approximately $298,000 in noninterest income.  Although the 
Company expects that sale or disposition of its remaining assets will result in 
some positive contribution to noninterest income at some time in the future, no 
assurance can be given as to whether or when such sales or dispositions will be 
completed or that the amounts, if any, that the Company will ultimately realize 
on such assets or whether such amounts will exceed the future expenses required 
to hold and complete development of the projects.  The amounts, if any, 
realized on future disposition of these properties will depend on conditions in 
the local real estate market and the demand, if any, for new development.  The 
Company's regulatory deadline for completing its divestiture of these assets is 
December 31, 2000.

YEAR 2000

     The Company is aware of the issues associated with the programming code in
existing computer systems as the millennium (Year 2000) approaches.  The "Year
2000" problem is pervasive and complex as virtually every computer operation
will be affected in some way by the rollover of the two digit year value to 00. 
The issue is whether computer systems will properly recognize date sensitive
information when the year changes to 2000.  Systems that do not properly
recognize such information could generate erroneous data or cause a system to
fail.

     The Company has a year 2000 compliance plan that has bee approved by their
board of directors.  The board of directors is updated monthly on the progress
of the plan.  The company is utilizing both internal and external resources to
identify, correct or reprogram the systems in order that they be Year 2000
compliant.  The Bank's core banking system, Jack Henry Associates Inc.
Silverlake, is anticipating a release in August 1998 that will be Year 2000
compliant.  This will allow adequate time for testing of all other systems to be
completed by mid 1999.  Additionally, the Company continues to communicate with
significant customers and vendors to determine the extent of risk created by
those third parties' failure to remediate their own Year 2000 issue.  However,
it is not possible, at present, to determine the financial effect if significant
customer and vendor remediation efforts are not resolved in a timely manner.


                                          26
<PAGE>

     With respect to external systems, the Company is in contact with vendors
and customers in order to monitor the progress with Year 2000 compliance efforts
and assess the need for contingency plans, if applicable.  To date, most vendors
have provided confirmations that they are either compliant or are making
progress toward planned compliance.

     Based on a preliminary study, the Company expects to spend approximately
$200,000 to bring its information systems into Year 2000 compliance.  A
significant proportion of these costs are not likely to be incremental costs to
the Company, but rather will represent the redeployment of existing information
technology resources. The expenditures to date, in 1998 and 1997 have been
negligible. Also see "Memorandum of Understanding" contained herein. 

MEMORANDUM OF UNDERSTANDING

     As a result of a joint examination of the Bank conducted as of January 12,
1998 by the Federal Deposit Insurance Corporation (the "FDIC") and the
Department of Financial Institutions (the "DFI"), the FDIC and the DFI have
indicated that they intend to require the Bank to enter into a Memorandum of
Understanding requiring the Bank to do the following:

     1) Conduct a comprehensive management review of the Bank's executive
     management to maintain a management structure suitable to its needs in
     light of its recent rapid growth.
     2) Have and retain qualified management with qualifications and experience
     commensurate with their duties and responsibilities at the Bank.
     3) Develop a plan to reduce the Bank's economic value of equity exposure
     to loss from interest rate changes to acceptable levels.
     4) Formulate, adopt and implement a comprehensive risk management process
     that will strengthen management expertise and improve securities portfolio
     management and management information and measurement systems.
     5) Establish and maintain an adequate reserve for loan losses and develop
     and revise, adopt and implement a comprehensive policy to ensure the
     adequacy of the allowance.
     6) Develop, adopt and implement a plan to control overhead and restore the
     Bank's profitability.
     7) Correct deficiencies relating to the Year 2000 project.  
     8) Furnish written progress reports.

     As of the date of this report, the Company believes it can comply with the
terms of the agreement.

     A Memorandum of Understanding is an enforceable agreement.  Failure to
comply with its terms can lead to further enforcement action by bank regulators,
including cease-and-desist orders, imposition of a receiver or conservator,
termination of deposit insurance, imposition of civil money penalties and
removal and prohibition orders against institution-affiliated parties.

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.


                                          27
<PAGE>

     On June 30, 1998, the interest rate position of the Company was relatively
neutral as the impact of a gradual parallel 100 basis-point rise or fall in
interest rates over the next 12 months was estimated to be approximately 1-2% of
net interest income when compared to stable rates.   See "BUSINESS - Selected
Statistical Information - Interest Rate Sensitivity" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Interest Rate Risk Management."


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.  Also see "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Memorandum of
Understanding." contained herein.

ITEM 2.        CHANGES IN SECURITIES.

None.

ITEM 3.        DEFAULTS UPON SENIOR SECURITIES.

None.

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

     (a)  Proxies for the Annual Meeting of shareholders held on May 12, 1998,
          were solicited pursuant to Regulation 14A of the Securities Exchange
          Act of 1934.  The Report of the Inspector of election indicates that
          the number of shares represented in person or by proxy was 3,574,839,
          or 81.58% of the common shares outstanding. 

     (b)  Election of directors                             VOTES FOR

<TABLE>

               <S>                                          <C>
               Jack F. Cauwels                              3,490,966
               John D. Fawcett                              3,490,966
               Thomas T. Hawker                             3,158,150

</TABLE>

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.


                                          28
<PAGE>

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

           (a) Exhibits.
<TABLE>
<CAPTION>

 Exhibits   Description of Exhibits
---------   -----------------------
<S>         <C>                                                              <C>
 3.1        Articles of Incorporation, incorporated by reference             *
            from (filed as Exhibit 3.1 of the Company's September 
            30, 1996 Form 10Q filed with the SEC on or about
            November 14, 1996).

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

 10         Employment agreement between Thomas T. Hawker and                *
            Capital Corp.

 10.1       Administration Construction Agreement (filed as                  *
            Exhibit 10.4 of the Company's 1995 Form 10K filed with
            the SEC on or about March 31, 1996).

 10.2       Stock Option Plan (filed as Exhibit 10.6 of the                  *
            Company's 1995 Form 10K filed with the SEC on or about
            March 31, 1996).

 10.3       401 (k) Plan (filed as Exhibit 10.7 of the Company's             *
            1995 Form 10K filed with the SEC on or about March 31,
            1996

 10.4       Employee Stock Ownership Plan (filed as Exhibit 10.8             *
            of the Company's 1995 Form 10K filed with the SEC on
            or about March 31, 1996).

</TABLE>

     (b)  REPORTS ON FORM 8-K

          None

            * DENOTES DOCUMENTS WHICH HAVE BEEN INCORPORATED BY REFERENCE.


                                          29
<PAGE>

                                      SIGNATURES

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

                                        CAPITAL CORP OF THE WEST
                                        (Registrant)


                                        By    /s/ Thomas T. Hawker
                                           ------------------------
                                             Thomas T. Hawker
                                             President and
                                             Chief Executive Officer
     
                                        By    /s/ Janey E. Boyce            
                                           -------------------------
                                             Janey E. Boyce
                                             Principal Financial Officer


                                          30