<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 MARCH 31, 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                    IRS Employer ID Number 
   of 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 March 31, 1998 was $4,381,975.  No shares of preferred stock, no 
par value, were outstanding at March 31, 1998.

<PAGE>

                              CAPITAL CORP OF THE WEST
                                 Table of Contents

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

Item 1.   Financial Statements                                                
              Consolidated Balance Sheets                                    3
              Consolidated Statements of Income                              4
              Consolidated Statements of Cash Flows                          5
              Notes to Consolidated Financial Statements                     6
                                                                              
Item 2.   Management's Discussion and Analysis of Financial                   
           Condition and Results of Operations                               7
                                                                              
                                                                              
PART II.  --  OTHER INFORMATION                                               
                                                                              
Item 1.   Legal Proceedings                                                 25
Item 2.   Changes in Securities                                             25
Item 3.   Defaults Upon Senior Securities                                   25
Item 4.   Submission of matters to a vote of Security Holders               25
Item 5.   Other Information                                                 25
Item 6.   Exhibits and Reports on Form 8-K                                  25

SIGNATURES                                                                  27
</TABLE>


                                       2
<PAGE>

                            Capital Corp of the West
                          Consolidated Balance Sheets
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                          03/31/98        12/31/97          03/31/97
                                                                          ---------       --------          --------
                                                                                      (In thousands)
<S>                                                                      <C>               <C>             <C>      
ASSETS                                                                                                    
  Cash & noninterest-bearing deposits in other banks                       $ 21,626          $ 21,035       $ 17,967
  Federal funds sold                                                         44,900             2,400              -
  Time deposits at other financial institutions                               1,000               599          1,288
  Investment securities available for sale, at fair value                   107,210           135,257         46,046
  Investment securities held-to-maturity at cost                              9,789            12,775         11,456
  Loans, net of allowance for loan losses of $3,799,000 at                                                          
     March 31, 1998; $3,833,000 at December 31, 1997;                                                               
     and $2,674,000 at March 31, 1997                                       217,309           214,144        185,381
  Interest receivable                                                         2,462             2,741          1,985
  Premises and equipment, net                                                13,167            12,945          8,095
  Goodwill and other intangible assets                                        6,456             6,653          2,310
  Other assets                                                               14,042            12,845         11,356
                                                                           --------          --------       --------
Total assets                                                               $437,961          $421,394       $285,884
                                                                           --------          --------       --------
                                                                           --------          --------       --------
LIABILITIES                                                                                                         
  Deposits                                                                                                          
  Noninterest-bearing demand                                               $ 63,114        $   58,836       $ 35,179
  Negotiable orders of withdrawal                                            53,509            54,202         35,002
  Savings                                                                   151,138           143,562        111,903
  Time, under $100,000                                                       74,902            69,534         51,082
  Time, $100,000 and over                                                    30,557            30,261         14,280
                                                                           --------          --------       --------
  Total deposits                                                            373,220           356,395        247,446

  Borrowed funds                                                             21,429            22,049         12,388
  Accrued interest, taxes and other liabilities                               2,162             2,702          4,381
                                                                           --------          --------       --------
Total Liabilities                                                           396,811           381,146        264,215
                                                                                                                    
SHAREHOLDERS' EQUITY                                                                                                
  Preferred Stock, no par value;  10,000,000 shares                                                                 
    authorized; none outstanding                                                -                 -              -  
  Common stock, no par value, 20,000,000 shares                                                                     
    authorized; 4,381,975 issued & outstanding at March                                                             
    31, 1998; 4,376,975 issued & outstanding at December                                                            
    31, 1997; and 2,606,478 issued & outstanding at                          33,978            33,928         15,592
    March 31, 1997                                                                                                  
  Retained earnings                                                           6,962             6,125          6,239
  Investment securities unrealized gains(losses), net                           210               195           (162)
                                                                           --------          --------       --------
Total shareholders' equity                                                   41,150            40,248         21,669
                                                                           --------          --------       --------
Total liabilities and shareholders' equity                                 $437,961          $421,394       $285,884
                                                                           --------          --------       --------
                                                                           --------          --------       --------
</TABLE>


                                       3
<PAGE>

                          Capital Corp of The West
                      Consolidated Statements of Income
                                 (Unaudited)

<TABLE>
<CAPTION>
                                                                   Three Months Ending      Three Months Ending
(In thousands except  share data)                                        3/31/98                  3/31/97
<S>                                                                    <C>                     <C>
Interest income:
  Interest and fees on loans                                              $5,699                   $4,687
  Interest on taxable investment securities held to maturity                 205                      248
  Interest on investment securities available for sale:                                                  
    Taxable                                                                1,794                      562
    Non-taxable                                                              121                       59
  Interest on federal funds sold                                             273                       45
                                                                          ------                   ------
    Total interest income                                                  8,092                    5,601
                                                                                                         
Interest expense:                                                                                        
  Deposits:                                                                                              
  Negotiable orders of withdrawal                                            118                       78
  Savings                                                                  1,434                    1,122
  Time, under $100,000                                                     1,050                      660
  Time, $100,000 and over                                                    365                      139
  Other                                                                      336                       73
                                                                          ------                   ------
    Total interest expense                                                 3,303                    2,072
                                                                                                         
Net interest income                                                        4,789                    3,529
Provision for loan losses                                                    252                      240
                                                                          ------                   ------
Net interest income after provision for loan losses                        4,537                    3,289
                                                                                                         
Other income:                                                                                            
  Service charges on deposit accounts                                        648                      337
  Income from real estate held for sale or development                        22                        7
  Other                                                                      388                      390
                                                                          ------                   ------
Total other income                                                         1,058                      734
                                                                                                         
Other Expenses:                                                                                          
  Salaries and related benefits                                            1,963                    1,544
  Premises and occupancy                                                     325                      279
  Equipment                                                                  502                      287
  Professional fees                                                          154                      141
  Marketing                                                                  102                      159
  Goodwill and intangible amortization                                       198                       36
  Branch purchase                                                            101                        -
  Supplies                                                                   151                       98
  Other                                                                      827                      696
                                                                          ------                   ------
Total other expenses                                                       4,323                    3,240
                                                                                                         
Income before income taxes                                                 1,272                      783
Provision for income taxes                                                   435                      270
                                                                          ------                   ------
Net income                                                                $  837                   $  513
                                                                          ------                   ------
Basic earnings per share                                                  $ 0.18                   $ 0.19
                                                                          ------                   ------
                                                                          ------                   -------
Weighted average shares outstanding (000)                                  4,599                    2,724
                                                                          ------                   ------
                                                                          ------                   -------

</TABLE>

                                       4
<PAGE>
                                        
                          Capital Corp of The West
                    Statement of Consolidated Cash Flows
                                 (Unaudited)

<TABLE>
<CAPTION>
                                                                  3 months ended        3 months ended
                                                                       3/31/98              3/31/97
                                                                  ---------------       ---------------
                                                                               (In thousands)
<S>                                                                  <C>                    <C>
OPERATING ACTIVITIES: 
Net Income                                                              $   837              $    513
   Adjustments to reconcile net income to net cash                                                 
    provided by operating activities:                                                               
  Provision for loan losses                                                252                   240
  Depreciation, amortization and accretion, net                            752                   281
  Benefit for deferred income taxes                                          -                   (65)
  Gain on sale of real estate held for sale                                 22                     -
Net (increase) in interest receivable & other assets                      (367)                 (415)
Net decrease in mortgage loans held for sale                                -                    880
Net (decrease) increase in deferred loan fees                              (23)                   57
Net (decrease) increase in accrued interest payable                                                 
  & other liabilities                                                     (540)                1,606
                                                                       -------              --------
Net cash provided by operating activities                                  933                 3,097
                                                                                                    
INVESTING ACTIVITIES:                                                                               
Investment security purchases                                              (21)              (17,788)
Proceeds from maturities of investment securities                       15,219                 2,899
Proceeds from sales of investment securities                            15,615                 2,519
Net increase in time deposits in other financial institiutions            (401)                    -
Proceeds from sales of commercial and real estate loans                    814                   205
Net increase in loans                                                   (4,208)               (5,428)
Purchases of premises and equipment                                       (637)               (2,051)
Net increase in real estate held for sale or development                  (478)                  (72)
                                                                       -------              --------
Net cash provided (used) by investing activities                        25,903               (19,716)
                                                                                                     
FINANCING ACTIVITIES:                                                                                
Net increase (decrease) in demand, NOW and deposits                     11,161                (2,661)
Net increase in certificates of deposit                                  5,664                11,762
Net (decrease) increase in other borrowings                               (620)                8,493
Issued shares for benefit plan purchases                                     -                   176
Exercise of stock options                                                   50                    99
                                                                       -------              --------
Net cash provided by financing activities                               16,255                17,869
                                                                                                    
Net increase in cash and cash equivalents                               43,091                 1,250
                                                                                                    
Cash and cash equivalents at beginning of year                          23,435                16,717
                                                                       -------              --------
Cash and cash equivalents at end of quarter                            $66,526              $ 17,967
                                                                                                    
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING                                                        
AND FINANCING ACTIVITIES:                                                                           
     Investment securities net unrealized gains (losses)               $    15              $   (152)
</TABLE>


                                       5
<PAGE>

                                       
                           Capital Corp of the West
                  Notes to Consolidated Financial Statements
            March 31, 1998, December 31, 1997, and March 31, 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 March 31, 1998 there were 4,381,975 common 
shares outstanding, held of record by approximately 1,300 shareholders.  
There were no preferred shares outstanding at March 31, 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 north 
Merced currently designated as the head office, 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.

OTHER FINANCIAL NOTES

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


                                       6
<PAGE>

     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.  The weighted average number of shares outstanding were 
4,599,000 for the three-month period ended March 31, 1998 and 2,724,000 for 
March 31, 1997.

     Comprehensive Income for Capital Corp of the West for the periods ending 
March 31, 1998 and March 31, 1997 were $852,000 or $.19 per share and $606,000 
or $.22 per share respectively.

     In June 1997, the Financial Accounting Standards Board ("FASB") issued 
Statement of Financial Accounting Board No. 130, "Reporting Comprehensive 
Income". Under the provisions of SFAS 130, the Company is required to report 
comprehensive income in its financial statements, the term comprehensive 
income describes the total of all components of comprehensive income 
including net income as well as other revenues, expenses, gains and losses 
that are included in comprehensive income but excluded from earnings (net 
income). The Company started to report comprehensive income as part of its 
notes to financial statements, including other comprehensive income items 
added separately to net income resulting in total comprehensive income. SFAS 
130 is effective with the year-end 1998 financial statements, however, the 
total comprehensive income is required in the financial statements for 
interim periods beginning in 1998. The Company adopted SFAS 130 as of January 
1, 1998, the adoption of the statement did not have a material impact on the 
Company's financial statements.

     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 1, 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.

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 MONTHS ENDED MARCH 31, 1998 COMPARED WITH THREE MONTHS ENDED MARCH 
31, 1997

     OVERVIEW.  For the three months ended March 31, 1998, the Company 
reported net income of $837,000 compared with net income of $513,000 for the 
three months ended March 31, 1997.  Earnings per share were $.18 and $.19, 
respectively.  The annualized return on average assets was .78% and .76% for 
the first three months of 1998 and 1997, respectively.  The Company's 
annualized return on average equity was 8.12% and 9.61% for the three months 
ended March 31, 1998 and 1997, respectively.

     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 months ended March 31, 1998 
totaled $4,789,000 compared with $3,529,000 for the same period in 1997, an 
increase of $1,260,000 or 36%.

     Total interest and fees on earning assets were $8,092,000 for the first 
three months of 1998, an increase of $2,491,000 or 44% from $5,601,000 for 
the same three 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, 

                                       7
<PAGE>

investment securities and federal funds sold. The increase in interest income 
in the first three months of 1998 was primarily the result of an increase in 
the volume of interest-earning assets.  Average interest-earning assets for 
the first three months of 1998 were $375,683,000 compared with $240,196,000 
for the first three months of 1997, an increase of $135,487,000 or 56%.  

     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 
$3,303,000 for the three months ended March 31, 1998, compared with 
$2,072,000 for the three months ended March 31, 1997, an increase of 
$1,231,000 or 59%.  This increase was primarily the result of an increase in 
the volume of interest-bearing liabilities.  Average interest-bearing 
liabilities were $326,930,000 for the first three months of 1997 compared 
with $211,161,000 for the same three months in 1997, an increase of 
$115,769,000 or 55%.  

     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 5.17% for the three months ended March 
31, 1998 compared with 5.96% 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 77% for the three months ended March 31, 1997 to 58% 
for the three months ended March 31, 1998.
     
     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 And Analysis of Net Interest Income

<TABLE>
<CAPTION>
                                                           Three Months ended                      Three Months ended
                                                             March 31, 1998                          March 31, 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                                   $ 20,041   $  273      5.52%       $  3,589        $    45        5.09%
Taxable investment securities:                        128,828    1,999      6.29%         47,994            810        6.85%
Nontaxable investment securities (1)                    9,215      121      5.33%          4,195             59        5.70%
Loans, gross: (2)                                     217,599    5,699     10.62%        184,418          4,687       10.31%
                                                    --------- ---------- -----------    -----------     ----------   -----------
Total interest-earning assets:                        375,683    8,092      8.74%        240,196          5,601        9.46%
Allowance for loan losses                             (4,073)                             (2,977)
Cash and due from banks                                20,606                             10,806
Premises and equipment, net                            13,153                              7,334
Interest receivable and other assets                   22,094                             15,516
                                                     --------                           --------
Total assets                                         $427,463                           $270,875
                                                     --------                           --------
                                                     --------                           --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Negotiable order of withdrawal                       $ 53,560   $  118      0.89%       $ 33,368        $    78        0.95%
Savings deposits                                      148,508    1,434      3.92%        112,564          1,122        4.04%
Time deposits                                         102,965    1,415      5.57%         59,415            799        5.45%
Other borrowings                                       21,898      336      6.22%          5,814             73        5.09%
                                                    --------- ---------- -----------    -----------     ----------   -----------
Total interest-bearing liabilities                    326,930    3,303      4.10%        211,161          2,072        3.98%


                                       8
<PAGE>

Noninterest-bearing deposits                           56,419                             32,871
Accrued interest, taxes and other liabilities           2,342                              5,432
                                                    ---------                           -----------
     Total liabilities                                385,691                            249,464

Total shareholders' equity                             41,772                             21,411
                                                    ---------                           -----------
Total liabilities and shareholders' equity           $427,463                           $270,875
                                                    ---------                           -----------
                                                    ---------                           -----------
Net interest income and margin (3)                               $  4,789       5.17%                 $   3,529    5.96%
                                                                 --------       ----                  ---------    ----
                                                                 --------       ----                  ---------    ----
</TABLE>

(1)  Interest on nontaxable securities is not computed on a tax-equivalent
     basis.  
(2)  Amounts of interest earned includes loan fees of $343,000 and $233,000 for
     March 31, 1998 and 1997 respectively.  
(3)  Net interest margin is computed by dividing net interest income by total
     average interest-earning assets.  



                                       9
<PAGE>

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

Net Interest Income Variance Analysis:

<TABLE>
<CAPTION>
                                                   March 31, 1998 compared to
                                                          March 31, 1997
                                                       Volume    Rate    Total
                                                     --------    ----    -----
                                                  (Dollar amounts in thousands)
          <S>                                        <C>       <C>       <C>
          Increase (decrease) in interest  income:
          Taxable investment securities              $  1,640    (451)    1,189
          Tax-exempt investment securities                 89     (27)       62
          Federal funds sold                              224       4       228
          Loans                                           865     147     1,012
                                                       ------    ----     -----
          Total                                         2,818    (327)    2,491
                                                       ------    ----     -----
                                                       ------    ----     -----
          Increase (decrease) in interest expense:
          Interest-bearing demand                          70     (30)       40
          Savings deposits                                544    (232)      312
          Time deposits                                   598      18       616
          Other borrowings                                243      20       263
                                                       ------    ----     -----
          Total                                         1,455    (224)    1,231
                                                       ------    ----     -----
                                                       ------    ----     -----
          Increase (decrease) in net interest income $  1,363  $ (103)  $ 1,260
                                                       ------    ----     -----
                                                       ------    ----     -----
</TABLE>

     PROVISION FOR LOAN LOSSES.  The provision for loan losses for the first
three months of 1998 was $252,000 compared with $240,000 in the three months
ended March 31, 1997.  As of March 31, 1998 the allowance for loan losses was
$3,799,000 or 1.72% of total loans.  At March 31, 1998, nonperforming assets
totaled $1,802,000 or .41% of total assets, nonperforming loans totaled
$1,279,000 or .81% of total loans and the allowance for loan losses totaled
297.02% 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 $324,000 or 44% to
$1,058,000 for the three months ended March 31, 1998 compared with $734,000 in
the same period in 1997.  Service charges on deposit accounts increased by
$311,000 or 92%, income from the sale of real estate held for sale or
development increased by $15,000 or 214% and other income decreased by $2,000 or
1%.  The increases in service charges are primarily due to general growth of the
Company and the purchases of the branches from Bank of America.

NONINTEREST EXPENSE.  Noninterest expenses increased by $1,083,000 or 33% to
$4,323,000 for the three months ended March 31, 1998 compared with $3,240,000
for the same period in 1997.  The primary components of noninterest expenses
were salaries and employee benefits, occupancy expenses, furniture and equipment
expenses, and other operating expenses. 

     For the three months ended March 31, 1998 compared with the three months
ended March 31, 1997, salaries and related benefits increased by $419,000 or
27%, equipment expenses increased $215,000 or 75%, occupancy expenses increased
$46,000 or 17%, marketing expenses decreased by $57,000 or 36% and other
expenses, including professional fees, and supplies increased by $281,000 or
11%.  The expense increases were primarily the result of expansion, including
expenses associated with acquisition, operation and staffing of the branches
purchased from Bank of America in December, 1997 and the opening of a new branch
in Madera in late 1997.

                                      10
<PAGE>

     PROVISION FOR INCOME TAXES.  The Company recorded a $435,000 tax expense 
for the three months ended March 31, 1998 compared with $270,000 for the same 
three months 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 $4,300,000 as of March 31, 
1998 and $2,700,000 as of March 31, 1997, resulting in tax credits of $79,000 
and $35,000 respectively.  

     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 within 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 
Bank's interest-earning assets and interest-bearing liabilities as of March 
31, 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 MARCH 31, 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                   $    250      $     750     $        -      $        -     $       -      $   1,000
Federal funds sold                               44,900              -              -               -             -         44,900
Investment securities                             3,445         21,181          7,813          84,560             -        116,999
Loans                                           124,194         27,494         56,087          13,333             -        221,108
                                               --------       ---------      ---------       --------     ------------    ---------
Total earning assets                            172,789         49,425         63,900          97,893             -        384,007
Noninterest-earning assets and allowances 
     for loan losses                                  -              -              -               -        53,954         53,954
                                               --------       ---------      ---------       --------     ------------    ---------
Total assets                                  $ 172,789       $ 49,425     $   63,900        $ 97,893     $  53,954      $ 437,961
 
LIABILITIES AND SHAREHOLDERS' EQUITY

Savings, money market and NOW deposits        $ 204,647       $      -     $        -        $      -     $       -      $ 204,647
Time deposits                                    18,518         65,590         21,351               -             -        105,459
Other interest-bearing liabilities                    -         18,029            103           3,297             -         21,429
Other liabilities and shareholders' equity            -              -              -               -       106,426        106,426

Total liabilities and shareholders' equity      223,165         83,619         21,454           3,297       106,426      $ 437,961
Incremental gap                                 (50,376)       (34,194)        42,446          94,596       (52,472)
Cumulative gap                                 $(50,376)    $  (84,570)    $  (42,124)       $ 52,472     $       -
                                               --------       ---------      ---------       --------     ---------
                                               --------       ---------      ---------       --------     ---------
Cumulative gap as a % of earning assets           (13.1)%        (22.1)%        (10.9)%          53.9%
</TABLE>


                                      11
<PAGE>

     The Company was liability-sensitive with a negative cumulative one-year 
gap of $84,570,000 or 22.1% of interest-earning assets at March 31, 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 earnings.  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 return on equity. 
Based upon the March 31, 1998 mix of interest-sensitive assets and 
liabilities, given an immediate and sustained increase in the federal funds 
rate of 1%, this model estimates the Company's cumulative return on equity 
over the next year would decrease by less than 1%.  No assurance can be given 
that the actual return on equity would not decrease by more than 1% in 
response to a 1% increase in federal funds rate, or that actual return on 
equity would not decrease substantially if market interest rates increased by 
more than 1%.  Also see "Memorandum of Understanding" contained herein.  The 
Bank's most recent examination, the regulators felt that the current model 
that is used by the Bank was not adequate for a bank of its current size and 
complexity.  The Bank is currently updating the model it uses for interest 
rate risk analysis and expects to have this new model in place by June 30, 
1998.   

FINANCIAL CONDITION

     Total assets at March 31, 1998 were $437,961,000, an increase of 
$16,567,000 or 4% compared with total assets of $421,394,000 at December 31, 
1997, and an increase of $152,077,000 or 53% compared with total assets of 
$285,884,000 at March 31, 1997.  Net loans were $217,309,000 at March 31, 
1998, an increase of $3,165,000 or 2% compared with net loans of $214,144,000 
on December 31, 1997, and an increase of $31,928,000 or 17% compared with net 
loans of $185,381,000 at March 31, 1997. Deposits were $373,220,000 at March 
31, 1998, an increase of $16,825,000 or 5% compared with deposits of 
$356,395,000 at December 31, 1997, and an increase of $125,774,000 or 51% 
compared with deposits of $247,446,000 at March 31, 1997. The growth of the 
Company from March 31, 1997 to March 31, 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 $41,150,000 at March 31, 1998, an 
increase of $902,000 or 2% from $40,248,000 at December 31, 1997, and a 90% 
increase from $21,669,000 at March 31, 1997.  The growth in shareholders' 
equity 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 
shareholders' equity in August 1997.
     

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


                                      12
<PAGE>

<TABLE>
<CAPTION>
                                                                  MARCH  31       DECEMBER 31
                                                             ------------------   -----------
                                                               1998      1997         1997
                                                            ---------   -------   -----------
            (Dollars in thousands)
           <S>                                              <C>         <C>       <C>
           AVAILABLE FOR SALE SECURITIES:
           U.S. Treasury and U.S.  Government agencies      $     817   $  5,599   $  1,824
           State and political subdivisions                     8,739      4,254      9,640
           Mortgage-backed securities                          65,393     34,669     68,808
           Collateralized mortgage obligations                 29,129          0     51,874
           Other securities                                     3,132      1,524      3,111
                                                            ---------   --------  ---------
           Carrying amount and fair value                   $ 107,210   $ 46,046  $ 135,257
                                                            ---------   --------  ---------
                                                            ---------   --------  ---------
</TABLE>

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

<TABLE>
<CAPTION>
                                                                    MARCH 31           DECEMBER 31
                                                          ---------------------------- -----------
            (Dollars in thousands)                           1998            1997         1997
                                                             ----            ----         ----
           <S>                                            <C>              <C>            <C>
           HELD TO MATURITY SECURITIES:
           U.S.  Treasury and U.S.
             Government agencies                          $       6,439    $  11,456      $   9,442
           Mortgage-backed securities                             3,350            -          3,333
                                                          -------------    -----------    ---------
           Carrying amount (amortized cost)                       9,789       11,456         12,775
                                                          -------------    -----------    ---------
                                                          -------------    -----------    ---------
            Fair value                                    $       9,791    $  11,058      $  12,780
                                                          -------------    -----------    ---------
                                                          -------------    -----------    ---------
</TABLE>


    The following table sets forth the maturities of the Company's investment 
securities at March 31, 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 MARCH 31, 1998
                                    -----------------------------------------------------------------------------------------------
                                    WITHIN ONE YEAR        ONE TO 5 YEARS      FIVE TO TEN YEARS      OVER TEN YEARS        TOTAL
                                    ------------------    -----------------   ------------------    -------------------------------
                                    AMOUNT      YIELD     AMOUNT    YIELD      AMOUNT       YIELD     AMOUNT      YIELD     AMOUNT
                                     --------   -------   ---------  -------   -------   --------   ---------   -------   ---------
(Dollars in thousands)
<S>                                  <C>          <C>     <C>          <C>     <C>         <C>      <C>         <C>       <C>
Available for Sale Securities:
Treasury and U.S. Government
agencies                             $      -        -    $     505     5.52%  $      -       -     $    312     7.40 %   $     817
State and political                       420     3.54%         801     3.71          -       -        7,517     5.01         8,739
Mortgage-backed securities                  -        -          440     5.94      2,815    6.27%      59,478     6.11        62,734
Collateralized mortgage
obligations                                 -        -       16,164     6.72          -       -       15,625     6.64        31,789
Other securities                            -        -            -        -          -       -        3,132        -         3,132
                                     --------   -------   ---------  -------   -------   --------   ---------   -------   ---------
Carrying amount and fair value            420     3.54%      17,912     6.53%     2,815    6.27%      86,064     6.12 %     107,210
                                     --------   -------   ---------  -------   -------   --------   ---------   -------   ---------
                                     --------   -------   ---------  -------   -------   --------   ---------   -------   ---------
Held to maturity securities:
Treasury and U.S. Government                -        -            -        -      4,039    6.95        2,400     7.17         6,439
agency
Mortgage-backed securities                  -        -            -        -          -       -        3,350     7.35         3,350
                                     --------   -------   ---------  -------   -------   --------   ---------   -------   ---------
 Carrying amount (amortized cost)           -        -            -        -      4,039    6.95        5,750     7.27         9,789
                                     --------   -------   ---------  -------   -------   --------   ---------   -------   --------- 
 Total securities                    $    420     3.54%   $  17,912     6.53%  $  6,854    6.67%    $ 91,813     5.98 %    $116,999
</TABLE>


                                      13
<PAGE>

     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 MARCH 31,                        AT DECEMBER 31,
                                 ---------------------------------------------------    ------------------
                                           1998                      1997                       1997
                                  -----------------------   ------------------------    ------------------
(DOLLARS IN THOUSANDS)
                                  Dollar Amount   Percent   Dollar Amount Percent of    Dollar     Percent
Loan Categories:                                 of loans                   loans       Amount    of loans
----------------                  -------------  ---------  -------------  ----------   -------   --------
<S>                                  <C>             <C>       <C>            <C>       <C>         <C>   
Commercial                           $ 37,360         17 %     $ 28,261         15%    $ 34,992        16%
Agricultural                           41,337         19         42,633         23       43,558        20
Real estate-construction               13,101          6         14,796          8       12,657         6
Real estate-mortgage                   70,711         32         59,869         32       70,802        32
Consumer                               58,599         26         42,496         22       55,968        26
                                     --------       -----      --------        ---     --------       ---
  Total                               221,108        100 %     $188,055        100%    $217,977       100%
Less allowance for loan losses         (3,799)                   (2,674)                 (3,833)
                                     --------                  --------                --------
  Net loans                          $217,309                  $185,381                $214,144
                                     --------                  --------                --------
                                     --------                  --------                --------
</TABLE>


     The following tables show the maturity distribution of the loan 
portfolio at March 31, 1998.

<TABLE>
<CAPTION>
                                                                    AT MARCH 31, 1998
                                              --------------------------------------------------------
                                                                 AFTER 1 BUT
                                              WITHIN 1 YEAR    WITHIN 5 YEARS  AFTER 5 YEARS     TOTAL
                                              -------------    --------------  -------------     -----
                                                                             (IN THOUSANDS)
<S>                                           <C>              <C>             <C>              <C>
    Commercial and agricultural
     Loans with floating interest rates          $45,187       $14,083         $ 5,591          $ 64,861
     Loans with fixed interest rates               4,671         5,212             837            10,720
                                                 -------       -------         -------          --------
             Subtotal                             49,858        19,295           6,428            75,581
                                                 -------       -------         -------          --------
    Real estate-construction
     Loans with floating interest rates            6,922         1,279           1,877            10,078
     Loans with fixed interest rates               1,617         1,266             137             3,020
                                                 -------       -------         -------          --------
             Subtotal                              8,539         2,545           2,014            13,098
                                                 -------       -------         -------          --------
   Real estate-mortgage                            5,092        40,273          25,537            70,902
   Consumer                                       30,713        29,888             926            61,527
                                                 -------       -------         -------          --------
             Total                               $94,202       $92,001         $34,905          $221,108
                                                 -------       -------         -------          --------
                                                 -------       -------         -------          --------
</TABLE>

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

<TABLE>
<CAPTION>

                                                           MARCH 31,             DECEMBER 31,
                                                      -------------------       --------------
                                                      1998           1997            1997     
                                                      ----           ----            ----     
                                                                (IN THOUSANDS)
<S>                                                  <C>           <C>              <C>       
                Letters of credit                    $ 2,740       $ 2,267          $ 3,233   
                Commitments to extend credit          73,191        48,111           55,248   
                                                     -------       -------          -------   
                Total                                $75,931       $50,378          $58,481   
                                                     -------       -------          -------   
                                                     -------       -------          -------   
</TABLE>

                                       14

<PAGE>

     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 MARCH 31,        AT  DECEMBER 31,
                                   ----------------------     ----------------
                                      1998          1997           1997
                                      ----          ----           ----
                                               (IN THOUSANDS)
       
<S>                               <C>            <C>          <C>
      Cash surrender value of
      life insurance              $    3,974     $  3,172          $  3,839
                                  ----------     --------          --------
                                  ----------     --------          --------
</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 table below.  

     The following table summarizes nonperforming assets of the Company at March
31, 1998 and 1997 and at December 31, 1997:

<TABLE>
<CAPTION>
                                                                                   
                                                                     
                                                            March 31,        At December 31,
                                                       -------------------   ---------------
              (Dollars in thousands)                    1998         1997         1997
                                                        ----         ----         ----
<S>                                                   <C>           <C>          <C>  
   Nonaccrual loans                                    $  823       $5,101       $2,611
   Accruing loans past due 90 days or more                456        1,565          131
                                                       ------       ------       ------
     Total nonperforming loans                          1,279        6,666        2,742
   Other real estate owned                                523        1,466           60
                                                       ------       ------       ------
     Total nonperforming assets                        $1,802       $8,132       $2,802
                                                       ------       ------       ------
                                                       ------       ------       ------
   Nonperforming assets:
        To total loans                                    .81%        4.32%        1.29%

                                       15

<PAGE>

        To total assets                                   .41%        2.84%         .66%
</TABLE>


     Interest income on loans on nonaccrual status during the three months ended
March 31, 1998, and the three months ended March 31, 1997, that would have been
recognized if the loans had been current in accordance with their original terms
was approximately $143,000 and $511,000, respectively. 

     At March 31, 1998, nonperforming assets represented .41% of total assets,
and nonperforming loans represented .81% of total loans.  Nonperforming loans
that were secured by first deeds of trust on real property were $145,000 at
March 31, 1998 and $1,635,000 at December 31, 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 decrease in nonperforming loans and nonperforming assets as of March
31, 1998 compared with their levels as of December 31, 1997, was due primarily
to the payoff of a nonperforming commercial real estate loan with a principal
balance of $384,000 and the return of a certain borrower's loans to accrual 
status with a principal balance of $478,000.

     At March 31, 1998, the Company had $523,000 in two properties acquired
through foreclosure.  These properties are carried at the lower of its estimated
market value, as evidenced by an independent appraisal, or the recorded
investment in the related loan, less estimated selling expenses.  At
foreclosure, if the fair value of the real estate is less than the Company's
recorded investment in the related loan, a charge is made to the allowance for
loan losses.  The Company expects to sell one of these properties during 1998. 
No assurance can be given that the Company will sell such property in 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 March 31, 1998.  These investments were completely written off in
1995, although County Bank still retains title to these properties.  In the
first quarter of 1998, one lot was sold for a pre-tax gain of $22,000.  

     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
March 31, 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 March 31, 1998 were $823,000 (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 March
31, 1998, where known information about possible credit problems of the borrower
causes management to have serious doubts as to the ability of the borrower to
comply with the present loan repayment terms and which may become nonperforming
assets.  Given the magnitude of the Company's loan portfolio, however, it is
always possible that current credit problems may exist that may not have been
discovered by management.  

                                       16

<PAGE>

ALLOWANCE FOR LOAN LOSSES


The following table summarizes the loan loss experience of the Company for the
quarter ended March 31, 1998 and 1997 and for years ended December 31, 1997, 
and 1996.

<TABLE>
<CAPTION>
 
                                               MARCH 31                     DECEMBER 31
                                       ------------------------      ------------------------
                                         1998          1997           1997               1996
                                         ----          ----           ----               ----
<S>                                    <C>             <C>             <C>             <C>
 ALLOWANCE FOR LOAN LOSSES:
 Balance at beginning of period        $  3,833        $  2,792        $  2,792        $  1,701 
                                       --------        --------        --------        --------
 Provision for loan losses                  252             240           5,825           1,513 
 Allowance acquired through merger            -               -               -             148 
 Charge-offs:
   Commercial and  agricultural             121             341           1,121             518 
   Real estate-construction                   -               -           3,458               - 
   Real estate-mortgage                       -               -               -               - 
   Consumer                                 223              77             471             140 
                                       --------        --------        --------        --------
      Total charge-offs                     344             418           5,050             658 
                                       --------        --------        --------        --------
 Recoveries
   Commercial and agricultural               20              56             155              27 
   Real estate-construction                   -               -               1               - 
   Real estate-mortgage                       -               -               -               - 
   Consumer                                  37               4             110              61 
                                       --------        --------        --------        --------
      Total recoveries                       57              60             266              88 
                                       --------        --------        --------        --------
 Net charge-offs                            287             358           4,784             570 
                                       --------        --------        --------        --------
 Balance at end of period              $  3,799        $  2,674        $  3,833        $  2,792 
                                       --------        --------        --------        --------
                                       --------        --------        --------        --------
 Loans outstanding at period-end       $221,108        $188,055        $217,977        $183,247 
                                       --------        --------        --------        --------
                                       --------        --------        --------        --------
 Average loans outstanding             $217,599        $184,418        $198,140        $157,098 
                                       --------        --------        --------        --------
                                       --------        --------        --------        --------
 Net charge-offs to average loans           .13  %          .19 %          2.41 %          0.36  %
 Allowance for loan losses
      To total loans                       1.72            1.42           1.76            1.52  
      To nonperforming assets            297.02           32.88         136.80           39.69  
</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
appraisal for significant properties to determine loss exposure on nonperforming
loans.  

     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 three months of
1998 of $252,000 compared with $240,000 in the same period of 1997.

                                       17
<PAGE>

The Company made provisions to the allowance of $5,825,000 in the year ended 
December 31, 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 $287,000 for the 
three months ended March 31, 1998 compared with $358,000 for the same three 
months in 1997.  The Company's charge-offs, net of recoveries, were 
$4,784,000 in the year ended December 31, 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 March 31, 1998, the allowance for loan losses was $3,799,000 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 $2,674,000 or 1.42% of total loans 
outstanding as of March 31, 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, sometimes known as a migration analysis, applies relevant
risk factors to the entire loan portfolio, including nonperforming loans.  The
methodology is based, in part, on the Bank's loan grading and classification
system.  The Bank grades its loans through internal reviews and periodically
subjects loans to external reviews which then are assessed by the Bank'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 Bank'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 3% 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%.  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 Company will also maintain its allowance at a level consistent with the
requirements of the interagency Statement of Policy.  This Statement includes a
benchmark for the allowance to include amounts equal to 50% of loans classified
"doubtful", 15% of loans classified "substandard", and an appropriate percentage
of unclassified loans based upon historical loss experience and other factors. 
Also see "Memorandum of Understanding". 

     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,


                                       18

<PAGE>

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.  

<TABLE>
<CAPTION>
                                              MARCH 31, 1998                      DECEMBER 31,
                                              --------------                      ------------
                                        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   $ 1,833         48%   $    802         30%     $  1,868         48%
 Real estate- construction         681         18       1,364         31           640         17
 Real estate- mortgage           1,013         27         214          8         1,058         28
 Consumer                          272          7         294         11%          267          7
                               -------        ---    --------        ---      --------        --- 
 Total                         $ 3,799        100%   $  2,674        100%     $  3,833        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.  See also "Memorandum Of Understanding" contained herein.

     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.  As recently as January of 1997, parts of the Company's market 
area experienced severe flooding.  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 areas 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.  

     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


                                       19

<PAGE>

and investments and potential loan sales as sources of asset liquidity.  
Deposit growth and access to credit lines established with correspondent 
banks and market sources of funds are considered by the Company as sources of 
liability liquidity.

     The 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 $171,604,000
$159,291,000 and $65,301,000 on March 31, 1998, December 31, 1997, and March
31, 1997, respectively, and constituted 39.2%, 37.8% and 22.8%, 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 $47,295,000 at March 31, 1998 compared with $45,812,000 at
December 31, 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 $17,851,000.  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 $22,400,000, of which $16,003,000
was outstanding as of March 31, 1998 and $16,004,000 was outstanding as of
December 31, 1997.  The amount of credit outstanding is primarily due to the
Company borrowing against their available line with the Federal Home Loan Bank
to purchase securities.  Management believes that the Company maintains adequate
amounts of liquid assets to meet its liquidity needs.  The Company's liquidity
might be insufficient if deposit withdrawals were to exceed anticipated levels. 
Deposit withdrawals can increase if a company experiences financial difficulties
or receives adverse publicity for other reasons, or if its pricing, products or
services are not competitive with those offered by other institutions. 

     CAPITAL RESOURCES.  Capital serves as a source of funds and helps protect
depositors against potential losses.  The primary source of capital for the
Company has been internally generated capital through retained earnings.  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 in light
of 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 $902,000 or 2% from December 31, 1997 to March
31, 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 March 31, 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 March 31, 1998 was
8.03% as compared with 8.58% as of December 31, 1997.  The Company's total risk
based capital ratio at March 31, 1998 was 11.94% as compared to 12.78% as of
December 31, 1997.

                                       20

<PAGE>

     The Company's and Bank's actual capital amounts and ratios and regulatory
minimums as of March 31, 1998 are as follows.

<TABLE>
<CAPTION>

                                                                                                                  Minimum 
                                                                                 For Capital               To Be Well Capitalized
 Dollars in thousands                                 Actual                   Adequacy Purposes           Under Prompt Corrective
                                                                                                             Action Provisions:
-----------------------------------------------------------------------------------------------------------------------------------
 Consolidated                                  Amount             Ratio         Amount              Ratio       Amount        Ratio
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>               <C>            <C>                 <C>         <C>            <C>
 As of March 31, 1998
 Total capital (to risk weighted assets)       $    37,131        13.12%        $   22,683          8.0%        $   28,298     10.0%
 Tier 1 capital (to risk weighted assets)           33,787        11.94             11,319          4.0             16,979      6.0
 Leverage ratio*                                    33,787         8.03             16,840          4.0             21,050      5.0

 The Bank:
-----------------------------------------------------------------------------------------------------------------------------------
 As of March 31, 1998
 Total capital (to risk weighted assets)            29,736        12.06             19,719          8.0             24,649     10.0
 Tier 1 capital (to risk weighted assets)           26,649        10.81              9,860          4.0             14,789      6.0
 Leverage ratio*                               $    26,649         6.98%        $   15,272          4.0%        $   19,090      5.0%
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
     -    The leverage ratio consists of Tier 1 capital divided by quarterly
          average assets.  The minimum leverage ratio is 3 percent for banking
          organizations that do not anticipate significant growth and that have
          well-diversified risk, excellent asset quality and in general, are
          considered top-rated banks.  Most financial institutions are subject
          to a minimum leverage ratio of 4% to 5%. 

     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 March
31, 1998, the Company had a deposit mix of 41% in savings deposits, 28% in time
deposits, 14% in interest-bearing checking accounts and 17% in
noninterest-bearing demand accounts.  Noninterest-bearing demand deposits
enhance the Company's net interest income by lowering its costs of funds.  

     The Company obtains deposits primarily from the communities it serves.  No
material portion of its deposits has been obtained from or is dependent on any
one person or industry.  The Company's business is not seasonal in nature.  The
Company accepts deposits in excess of $100,000 from customers.  These deposits
are priced to remain competitive.  At March 31, 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 March 31, 1998 and 1997 and December 31, 1997 are summarized as follows: 

<TABLE>
<CAPTION>
                                          AT MARCH 31,       
                                       -----------------     
                                       1998        1997      AT DECEMBER 31, 1997
                                       ------     ------     --------------------
                                                  (IN THOUSANDS)
<S>                                   <C>        <C>         <C>
      Three months or less            $ 6,366    $ 1,915            $ 8,404
      Over three to six months         15,107      7,846              7,799
      Over six to twelve months         2,197      2,325              7,870


                                       21

<PAGE>

      Over twelve months                6,887      2,194              6,188
                                      -------    -------            -------
      Total                           $30,557    $14,280            $30,261
                                      -------    -------            -------
                                      -------    -------            -------
</TABLE>

BORROWED FUNDS

     At March 31 1998, 1997 and 1996 the Company's borrowed funds consisted of
the following:

<TABLE>
<CAPTION>
                                                                                  YEAR ENDED
                                                                  MARCH 31        DECEMBER 31
                                                                  --------        -----------
                                                              1998       1997          1997
                                                                 (Dollars in thousands)
<S>                                                         <C>        <C>            <C>
 Securities sold under agreements to repurchase; dated
   March 25, 1998; fixed rate of 5.74%; payable on 
   March 25, 1999                                           $ 2,130    $ 6,953        $ 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                                                  -        330            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          0         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          5,000
 FHLB loan, dated July 15, 1994; fixed rate of 7.58% 
   payable on July 15, 1999                                     103        105            104
 Short-term note from City Redevelopment Agency dated 
   June 24, 1996; interest free; payable on July 8, 
   1997                                                           -          -              -
 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                                               3,296          0          3,300
                                                            -------    -------        -------
 Total                                                      $21,429    $12,388        $22,049
                                                            -------    -------        -------
                                                            -------    -------        -------
</TABLE>

     The increase in the borrowings are primarily due to the Company borrowing
funds from its 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>
                                                     
                                             Three months ended         Year ended
                                                   March 31             December 31
                                        ---------------------------     -----------
                                          1998               1997          1997
                                          ----               ----          ----
<S>                                       <C>                <C>          <C>
 Return on average assets                   .78%              .76%          .13%
 Return on average equity                  8.12%             9.72%         1.46%
 Dividend payout ratio                         -                 -             -
 Average equity to average assets          9.77%             7.90%         8.76%
</TABLE>

                                       22

<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 March 31, 1998, MAID held two real estate projects including improved
and unimproved land in various stages of development.  MAID continues to develop
these projects, and any amounts realized upon sale or other disposition of these
assets above their current carrying value of zero will result in noninterest
income at the time of such sale or disposition.  In the first quarter of 1998,
one lot was sold resulting in noninterest income of approximately $22,000. 
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 been approved by its
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 to be completed by mid
1999.

     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.  Although the Bank was approximately four
months behind

                                       23

<PAGE>

schedule on its year 2000 project as of the time of the examination, as of 
the date of this report, Management believes they are now on schedule with 
the project.  

     Based on a preliminary study, the Company expects to spend approximately
$250,000 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 in 1997 were 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 Memorandum of Understanding was not yet
in final form.  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.


                                       24

<PAGE>

PART II - OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

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

No matters were submitted for shareholder vote in the quarter ended March 31,
1998. 

ITEM 5.   OTHER INFORMATION.

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

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

     (a)  Exhibits.

<TABLE>
<CAPTION>

 Exhibits    Description of Exhibits
 --------    -----------------------
<S>          <C>
 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).

                                       25

<PAGE>
 10.3        401 (k) Plan (filed as Exhibit 10.7 of the Company's             *
             1995 Form 10K filed with the SEC on or about 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.


                                       26

<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.

                                             Dated May 14, 1998

                                             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


                                       27