##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended March 31, 2006
 OR
 o
    
    Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from  to
 COMMISSION FILE No.: 000-50545
 SOUTHWEST COMMUNITY BANCORP
 Incorporated Under the Laws of the State of California
 I.R.S. EMPLOYER IDENTIFICATION NO.: 30-0136231
 5810 EL CAMINO REAL
CARLSBAD, CALIFORNIA 92008
TELEPHONE: (760) 918-2616
 Indicate by checkmark 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 þ No o
 Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated
filer, or a non-accelerated filer.
 Large Accelerated Filero
    
    Accelerated Filerþ
    
    Non-Accelerated Filero
 Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act).
 Yes o No þ
 Number of shares of Common Stock outstanding as of April 30, 2006: 4,038,748




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##### 



INDEX
 PART I  Financial InformationItem 1 Financial Statements
    
    
    3Consolidated Balance Sheets as of March 31, 2006 (Unaudited) and December 31, 2005
    
    
    3Consolidated Statements of Income for the Three Months Ended March 31, 2006 and 2005 (Unaudited)
    
    
    4Consolidated Statements of Changes in Shareholders Equity and Comprehensive Income
For the Three Months Ended March 31, 2006 and 2005 (Unaudited)
    
    
    5Consolidated Statements of Cash Flows for the Three Months Ended
March 31, 2006 and 2005 (Unaudited)
    
    
    6Notes to Consolidated Financial Statements (Unaudited)
    
    
    7Item 2 Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    11Item 3 Quantitative and Qualitative Disclosures about Market Risk
    
    
    18Item 4 Controls and Procedures
    
    
    19PART II  Other InformationItem 1 Legal Proceedings
    
    
    19Item 1A Risk Factors
    
    
    19Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    19Item 3 Defaults upon Senior Securities
    
    
    20Item 4 Submission of Matters to a Vote of Security Holders
    
    
    20Item 5 Other Information
    
    
    20Item 6 Exhibits
    
    
    20SIGNATURES
    
    
    20Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
  2




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##### Table of Contents



PART I  Financial Information
 
 Item 1  Financial Statements
 SOUTHWEST COMMUNITY BANCORP AND SUBSIDIARIES
 
 Consolidated Balance Sheets
 (dollars in thousands)
 March 31,
    
    
    December 31,2006
    
    
    2005(Unaudited)AssetsCash and due from banks
    
    $
    88,799
    
    
    $
    133,830Federal funds sold
    
    
    135,410
    
    
    
    93,095Cash and cash equivalents
    
    
    224,209
    
    
    
    226,925Interest-bearing deposits in financial institutions
    
    
    167
    
    
    
    167Investment securities available-for-sale
    
    
    95,347
    
    
    
    96,502Investment securities held-to-maturity
    
    
    177
    
    
    
    188Loans, net of unearned income
    
    
    310,825
    
    
    
    314,806Less allowance for loan losses
    
    
    4,532
    
    
    
    4,494Net loans
    
    
    306,293
    
    
    
    310,312Premises and equipment
    
    
    1,891
    
    
    
    2,044Federal Home Loan Bank stock at cost
    
    
    1,468
    
    
    
    1,451Cash surrender value of life insurance
    
    
    9,127
    
    
    
    9,042Other assets
    
    
    9,840
    
    
    
    9,872Total Assets
    
    $
    648,519
    
    
    $
    656,503Liabilities and Shareholders EquityNoninterest-bearing demand
    
    $
    438,968
    
    
    $
    432,117Money market and NOW
    
    
    117,886
    
    
    
    136,097Savings
    
    
    7,450
    
    
    
    7,630Time deposits under $100,000
    
    
    4,497
    
    
    
    3,504Time deposits $100,000 and over
    
    
    14,300
    
    
    
    14,786Total Deposits
    
    
    583,101
    
    
    
    594,134Accrued interest and other liabilities
    
    
    3,208
    
    
    
    4,703Junior subordinated debt
    
    
    8,248
    
    
    
    8,248Total Liabilities
    
    
    594,557
    
    
    
    607,085Shareholders EquityCommon stock, no par value, 28,125,000 shares
authorized, 3,929,560 and 3,808,348 shares issued
and outstanding in 2006 and 2005, respectively
    
    
    39,472
    
    
    
    37,254Retained earnings
    
    
    15,597
    
    
    
    13,200Accumulated other comprehensive income (loss)
    
    
    (1,107
    )
    
    
    (1,036
    )Total Shareholders Equity
    
    
    53,962
    
    
    
    49,418Total Liabilities and Shareholders Equity
    
    $
    648,519
    
    
    $
    656,503
  3




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##### Table of Contents



SOUTHWEST COMMUNITY BANCORP AND SUBSIDIARIES
 
 Consolidated Statements of Income
 (dollars in thousands, except per share data)
 Three Months Ended March 31,2006
    
    
    2005(Unaudited)Interest IncomeInterest and fees on loans
    
    $
    6,867
    
    
    $
    5,353Investment securities
    
    
    1,004
    
    
    
    737Federal funds sold and other
    
    
    926
    
    
    
    339Total interest income
    
    
    8,797
    
    
    
    6,429Interest ExpenseDeposits
    
    
    1,069
    
    
    
    495Borrowings
    
    
    159
    
    
    
    119Total interest expense
    
    
    1,228
    
    
    
    614Net interest income
    
    
    7,569
    
    
    
    5,815Provision for loan losses
    
    
    
    
    
    
    315Net interest income after provision
    
    
    7,569
    
    
    
    5,500Noninterest IncomeFees and service charges
    
    
    620
    
    
    
    602Loan referral fees
    
    
    47
    
    
    
    111Gain on sale of SBA loans
    
    
    513
    
    
    
    338Other income
    
    
    227
    
    
    
    204Total noninterest income
    
    
    1,407
    
    
    
    1,255Noninterest ExpenseSalaries and employee benefits
    
    
    2,575
    
    
    
    2,151Occupancy and equipment
    
    
    848
    
    
    
    759Other
    
    
    1,384
    
    
    
    1,297Total noninterest expense
    
    
    4,807
    
    
    
    4,207Income from continuing operations before income taxes
    
    
    4,169
    
    
    
    2,548Income taxes
    
    
    1,644
    
    
    
    1,003Income from continuing operations
    
    
    2,525
    
    
    
    1,545Loss from discontinued operations, net of income taxes
    
    
    
    
    
    
    (20
    )Net income
    
    $
    2,525
    
    
    $
    1,525Earnings per common share:Income from continuing operations  Basic
    
    $
    0.66
    
    
    $
    0.42Income from continuing operations  Diluted
    
    $
    0.57
    
    
    $
    0.35Income from discontinued operations  Basic
    
    $
    
    
    
    $
    Income from discontinued operations  Diluted
    
    $
    
    
    
    $
    Net Income  Basic
    
    $
    0.66
    
    
    $
    0.42Net Income  Diluted
    
    $
    0.57
    
    
    $
    0.35
  4




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SOUTHWEST COMMUNITY BANCORP AND SUBSIDIARIES
 
 Consolidated Statements of Shareholders Equity and Comprehensive Income
 (dollars in thousands)
 AccumulatedOtherCommon Stock
    
    
    Comprehensive
    
    
    Retained
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    Income
    
    
    Earnings
    
    
    Income (loss)
    
    
    TotalBalance, December 31, 2004
    
    
    3,484,266
    
    
    $
    29,901
    
    
    
    
    
    
    $
    9,107
    
    
    $
    (120
    )
    
    $
    38,888Options exercised, including tax
benefit of $928
    
    
    84,650
    
    
    
    1,277
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,277Warrants exercised
    
    
    1,800
    
    
    
    17
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    $
    1,525
    
    
    
    1,525
    
    
    
    
    
    
    
    1,525Net unrealized loss on securities
net of tax benefit of $421
    
    
    
    
    
    
    
    
    
    
    (603
    )
    
    
    
    
    
    
    (603
    )
    
    
    (603
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    $
    922Balance, March 31, 2005
(unaudited)
    
    
    3,570,716
    
    
    $
    31,195
    
    
    
    
    
    
    $
    10,632
    
    
    $
    (723
    )
    
    $
    41,104Balance, December 31, 2005
    
    
    3,808,348
    
    
    $
    37,254
    
    
    
    
    
    
    $
    13,200
    
    
    $
    (1,036
    )
    
    $
    49,418Options exercised, including tax
benefit of $1,367
    
    
    110,187
    
    
    
    2,118
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,118Warrants exercised
    
    
    11,025
    
    
    
    100
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100Share based compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    72
    
    
    
    
    
    
    
    72Cash dividend declared at
$0.05 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (200
    )
    
    
    
    
    
    
    (200
    )Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    $
    2,525
    
    
    
    2,525
    
    
    
    
    
    
    
    2,525Net unrealized loss on securities
net of tax benefit of $50
    
    
    
    
    
    
    
    
    
    
    (71
    )
    
    
    
    
    
    
    (71
    )
    
    
    (71
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    $
    2,454Balance, March 31, 2006
(unaudited)
    
    
    3,929,560
    
    
    $
    39,472
    
    
    
    
    
    
    $
    15,597
    
    
    $
    (1,107
    )
    
    $
    53,962
  5




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##### Table of Contents



SOUTHWEST COMMUNITY BANCORP AND SUBSIDIARIES
 
 Consolidated Statements of Cash Flows
 (dollars in thousands)
 Three Months Ended March 31,2006
    
    
    2005(Unaudited)Operating ActivitiesNet Income
    
    $
    2,525
    
    
    $
    1,525Depreciation and amortization
    
    
    226
    
    
    
    423Amortization/accretion of premiums/discounts on
investment securities, net
    
    
    174
    
    
    
    226Provision for loan losses
    
    
    
    
    
    
    315Deferred income tax benefit
    
    
    (43
    )
    
    
    (159
    )Increase in cash value of life insurance
    
    
    (85
    )
    
    
    (77
    )Share based compensation expense
    
    
    72
    
    
    
    Tax benefits from equity based compensation
    
    
    (1,367
    )
    
    
    Net change in other assets and liabilities
    
    
    (13
    )
    
    
    (125
    )Net Cash Provided by Operating Activities
    
    
    1,489
    
    
    
    2,128Investing ActivitiesRedemption (purchase) of FHLB stock, net
    
    
    (17
    )
    
    
    418Purchase of investment securities available-for-sale
    
    
    (2,691
    )
    
    
    (24,267
    )Proceeds from maturities of investment securities available-for-sale
    
    
    3,551
    
    
    
    2,001Proceeds from maturities of investment securities held-to-maturity
    
    
    11
    
    
    
    30Purchases of premises and equipment
    
    
    (73
    )
    
    
    (183
    )Net (increase) decrease in loans
    
    
    4,019
    
    
    
    (3,709
    )Purchase of life insurance
    
    
    
    
    
    
    (2,400
    )Net Cash Provided (Used) in Investing Activities
    
    
    4,800
    
    
    
    (28,110
    )Financing ActivitiesNet increase (decrease) in deposits
    
    
    (11,033
    )
    
    
    69,470Tax benefits from equity based compensation
    
    
    1,367Proceeds from exercise of stock options
    
    
    751
    
    
    
    349Proceeds from exercise of stock warrants
    
    
    100
    
    
    
    17Dividends paid
    
    
    (190
    )
    
    
    Net Cash Provided (Used) by Financing Activities
    
    
    (9,005
    )
    
    
    69,836Net Increase (Decrease) in Cash and Cash Equivalents
    
    
    (2,716
    )
    
    
    43,854Cash and Cash Equivalents at Beginning of Period
    
    
    226,925
    
    
    
    170,352Cash and Cash Equivalents at End of Period
    
    $
    224,209
    
    
    $
    214,206Supplemental Disclosures of Cash Flow InformationCash Paid for Interest
    
    $
    1,224
    
    
    $
    611Cash Paid for Taxes
    
    $
    1,805
    
    
    $
    Non-Cash Investing ActivitiesNet Change in Accumulated Other Comprehensive Income
    
    $
    (71
    )
    
    $
    (603
    )Dividends declared and accrued in other liabilities
    
    $
    200
    
    
    $
    
  6




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##### Table of Contents



SOUTHWEST COMMUNITY BANCORP
 
 Notes to Consolidated Financial Statements (Unaudited)
 Note 1
 Summary of Significant Accounting Policies
 
  Nature of Operations
   Principles of Consolidation
  Use of Estimates in the Preparation of Financial Statements
   7




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Allowance for Loan Losses
  Note 2  Earnings Per Share
  March 31, 2006
    
    
    March 31, 2005Income
    
    
    Shares
    
    
    Income
    
    
    Shares(dollars in thousands, except per share)Net income as reported
    
    $
    2,525
    
    
    
    
    
    
    $
    1,525
    
    
    
    Shares outstanding at period end
    
    
    
    
    
    
    3,929,560
    
    
    
    
    
    
    
    3,749,252Impact of weighting shares
issued during the period
    
    
    
    
    
    
    (107,473
    )
    
    
    
    
    
    
    (72,679
    )Used in basic earnings per share
    
    
    2,525
    
    
    
    3,822,087
    
    
    
    1,525
    
    
    
    3,676,573Dilutive Effect of Outstanding
Stock Options
    
    
    
    
    
    
    583,068
    
    
    
    
    
    
    
    729,867Used in diluted earnings per share
    
    $
    2,525
    
    
    
    4,405,155
    
    
    $
    1,525
    
    
    
    4,406,440Basic net income per share
    
    $
    0.66
    
    
    
    
    
    
    $
    0.42Diluted net income per share
    
    $
    0.57
    
    
    
    
    
    
    $
    0.35
 Note 3
 Stock-Based Compensation
 Share-Based Payment Accounting for Stock-Based Compensation Accounting for Stock Issued to Employees
 
 8




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##### Table of Contents



Three Months EndedMarch 31, 2005(dollars in thousands,except per share)Net income as reported
    
    $
    1,525Stock-based compensation using the intrinsic value method
    
    
    Stock-based compensation that would have been reported
using the fair value method of SFAS 123
    
    
    (146
    )Pro forma net income
    
    $
    1,379Basic earnings per share:As reported
    
    $
    0.42Pro forma
    
    
    0.38Diluted earnings per share:As reported
    
    $
    0.35Pro forma
    
    
    0.31
  Weighted
    
    
    Weighted
    
    
    AggregateAverage
    
    
    Average
    
    
    InstrinsicExercise
    
    
    Remaining
    
    
    ValueOptions
    
    
    Price
    
    
    Term (yrs)
    
    

(000s)Options outstanding at December 31, 2005
    
    
    863,841
    
    
    $
    12.13Granted
    
    
    
    
    
    
    Exercised
    
    
    (110,187
    )
    
    
    6.82Forfeited
    
    
    (14,413
    )
    
    
    19.05Options outstanding at March 31, 2006
    
    
    739,241
    
    
    
    12.78
    
    
    
    5.7
    
    
    $
    18,864Options exercisable at March 31, 2006
    
    
    647,850
    
    
    
    11.71
    
    
    
    5.4
    
    
    
    17,228
 Note 4
 Recent Accounting Pronouncements
 Accounting for Servicing of Financial Assets an
amendment of FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities
 9




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##### Table of Contents



Note 5
 Discontinued Operations
   Three Months Ended March 31,2006
    
    
    2005(dollars in thousands)Item processing income
    
    $
    
    
    
    $
    1,490Loss from operations, net of tax
    
    $
    
    
    
    $
    (20
    )Loss from discontinued operations
    
    $
    
    
    
    $
    (20
    )
 Note 6
 Pending Merger
  10




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##### Table of Contents



Item 2
 Managements Discussion and Analysis of Financial Condition and Results of Operations
  SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
  
 FINANCIAL SUMMARY
    11




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##### Table of Contents



Three Months EndedMarch 31,2006
    
    
    2005(dollars in thousands,except per share data)Continuing Operations:Income from continuing operations
    
    $
    2,525
    
    
    $
    1,545Discontinued Operations:Loss from discontinued operations
    
    
    
    
    
    
    (20
    )Net Income
    
    $
    2,525
    
    
    $
    1,525Diluted earnings per shareContinuing operations
    
    $
    0.66
    
    
    $
    0.42Net income
    
    $
    0.57
    
    
    $
    0.35Consolidated assets
    
    $
    648,519
    
    
    $
    605,148Average earning assets
    
    $
    492,921
    
    
    $
    416,428Return on average equity (a)
    
    
    19.7
    %
    
    
    15.3
    %Return on average assets (a)
    
    
    1.6
    %
    
    
    1.2
    %Net interest margin  tax equivalent basis
    
    
    6.23
    %
    
    
    5.61
    %Efficiency ratio
    
    
    53.6
    %
    
    
    59.5
    %
 
 (a)
    
    Based on continuing operations, annualized. Results of Continuing Operations for the Three Months Ended March 31, 2006 Compared to 2005
  Balance Sheet as of March 31, 2006 compared to December 31, 2005
  12




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##### Table of Contents



Critical Accounting Policies That May Affect Our Reported Income
   RESULTS OF OPERATIONS
 Net Interest Income
  
 13




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##### Table of Contents



Analysis of Average Rates and Balances and Changes in Net Interest Income
 Three Months Ended March 31,2006
    
    
    2005Interest
    
    
    Rates
    
    
    
    
    
    
    Interest
    
    
    RatesAverage
    
    
    Income/
    
    
    Earned/
    
    
    Average
    
    
    Income/
    
    
    Earned/Balance
    
    
    Expense
    
    
    Paid (3)
    
    
    Balance
    
    
    Expense
    
    
    Paid (3)(dollars in thousands)AssetsInvestment securities  taxable
    
    $
    75,547
    
    
    $
    798
    
    
    
    4.23
    %
    
    $
    71,406
    
    
    $
    692
    
    
    
    3.88
    %Investment securities  tax-exempt (1)
    
    
    21,918
    
    
    
    312
    
    
    
    5.69
    %
    
    
    4,957
    
    
    
    68
    
    
    
    5.49
    %Federal funds sold and other
    
    
    83,184
    
    
    
    926
    
    
    
    4.45
    %
    
    
    54,325
    
    
    
    339
    
    
    
    2.50
    %Loans (2)
    
    
    312,272
    
    
    
    6,867
    
    
    
    8.80
    %
    
    
    285,740
    
    
    
    5,353
    
    
    
    7.49
    %Total Interest-Earning Assets
    
    
    492,921
    
    
    
    8,903
    
    
    
    7.22
    %
    
    
    416,428
    
    
    
    6,452
    
    
    
    6.20
    %Noninterest-earning assets
    
    
    119,770
    
    
    
    
    
    
    
    
    
    
    
    99,187Total Assets
    
    $
    612,691
    
    
    
    
    
    
    
    
    
    
    $
    515,615LiabilitiesInterest-bearing demand
    
    $
    13,397
    
    
    
    6
    
    
    
    0.18
    %
    
    $
    8,505
    
    
    
    4
    
    
    
    0.19
    %Savings & money market
    
    
    126,660
    
    
    
    910
    
    
    
    2.87
    %
    
    
    107,726
    
    
    
    456
    
    
    
    1.69
    %Time deposits
    
    
    18,470
    
    
    
    153
    
    
    
    3.31
    %
    
    
    10,084
    
    
    
    35
    
    
    
    1.39
    %Borrowings
    
    
    8,248
    
    
    
    159
    
    
    
    7.71
    %
    
    
    8,248
    
    
    
    119
    
    
    
    5.77
    %Total Interest-Bearing Liabilities
    
    
    166,775
    
    
    
    1,228
    
    
    
    2.95
    %
    
    
    134,563
    
    
    
    614
    
    
    
    1.83
    %Demand deposits
    
    
    387,487
    
    
    
    
    
    
    
    
    
    
    
    338,266Other liabilities
    
    
    7,281
    
    
    
    
    
    
    
    
    
    
    
    3,030Total Liabilities
    
    
    561,543
    
    
    
    
    
    
    
    
    
    
    
    475,859Shareholders Equity
    
    
    51,148
    
    
    
    
    
    
    
    
    
    
    
    39,756Total Liabilities and Equity
    
    $
    612,691
    
    
    
    
    
    
    
    
    
    
    $
    515,615Net interest income/margin  tax
equivalent basis
    
    
    
    
    
    
    7,675
    
    
    
    6.23
    %
    
    
    
    
    
    
    5,838
    
    
    
    5.61
    %Net interest spread
    
    
    
    
    
    
    
    
    
    
    4.27
    %
    
    
    
    
    
    
    
    
    
    
    4.37
    %Less tax equivalent adjustment
    
    
    
    
    
    
    106
    
    
    
    
    
    
    
    
    
    
    
    23Net interest income
    
    
    
    
    
    $
    7,569
    
    
    
    6.14
    %
    
    
    
    
    
    $
    5,815
    
    
    
    5.59
    %
 
 (1)
    
    The interest income and yields on tax-exempt investment securities are presented on a tax-equivalent basis
using the statutory federal income tax rate of 34%.(2)
    
    Loans, net of unearned income, include non-accrual loans, but do not reflect average allowances for loan
losses. Interest income from loans includes loan fees of $588,000 in 2006 and $490,000 in 2005.(3)
    
    The rates have been annualized. No assurance can be given regarding the actual results for the year ending
December 31, 2006.   14




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##### Table of Contents



Analysis of Volume and Interest Rates
 2006 from 2005Change due to
    
    
    TotalVolume
    
    
    Rate
    
    
    Change(dollars in thousands)Investment securities   taxable
    
    $
    41
    
    
    $
    65
    
    
    $
    106Investment securities   tax-exempt
    
    
    241
    
    
    
    3
    
    
    
    244Federal funds sold
    
    
    237
    
    
    
    350
    
    
    
    587Loans
    
    
    527
    
    
    
    987
    
    
    
    1,514Total interest income
    
    
    1,046
    
    
    
    1,405
    
    
    
    2,451Interest-bearing demand
    
    
    2
    
    
    
    
    
    
    
    2Savings & Money Market
    
    
    91
    
    
    
    363
    
    
    
    454Time deposits
    
    
    90
    
    
    
    28
    
    
    
    118Borrowings
    
    
    
    
    
    
    40
    
    
    
    40Total interest expense
    
    
    183
    
    
    
    431
    
    
    
    614Net Interest
Income 
tax equivalent basis
    
    $
    863
    
    
    $
    974
    
    
    $
    1,837
 Three Months Ended March 31, 2006 Compared to Three Months Ended March 31, 2005
  
    15




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##### Table of Contents



Provision for Loan Losses
  Noninterest Income
  Noninterest Expense
   FINANCIAL POSITION
  16




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##### Table of Contents



Loans
  March 31, 2006
    
    
    December 31, 2005Percent
    
    
    
    
    
    
    PercentLoan Category
    
    Amount
    
    
    of Total
    
    
    Amount
    
    
    of Total(dollars in thousands)Real estate loans:Construction
    
    $
    97,464
    
    
    
    31
    %
    
    $
    104,987
    
    
    
    33
    %Residential
    
    
    13,921
    
    
    
    4
    %
    
    
    13,897
    
    
    
    4
    %Commercial
    
    
    117,069
    
    
    
    37
    %
    
    
    106,134
    
    
    
    33
    %Total real estate
    
    
    228,454
    
    
    
    72
    %
    
    
    225,018
    
    
    
    70
    %Commercial
    
    
    83,416
    
    
    
    27
    %
    
    
    91,259
    
    
    
    29
    %Consumer & Other
    
    
    2,091
    
    
    
    1
    %
    
    
    1,714
    
    
    
    1
    %Total Loans
    
    
    313,961
    
    
    
    100
    %
    
    
    317,991
    
    
    
    100
    %Less unearned loan income
    
    
    (3,136
    )
    
    
    
    
    
    
    (3,185
    )Loans, net of unearned income
    
    $
    310,825
    
    
    
    
    
    
    $
    314,806
 Capital Resources and Regulatory Requirements
   Well
    
    
    Southwest
    
    
    SouthwestCapitalized
    
    
    Community
    
    
    CommunityRequirement
    
    
    Bancorp
    
    
    BankAs of March 31, 2006:Tire 1 leverage capital ratio
    
    
    5.0
    %
    
    
    10.3
    %
    
    
    9.3
    %Tier 1 risk-based capital ratio
    
    
    6.0
    %
    
    
    15.2
    %
    
    
    13.7
    %Total risk-based capital ratio
    
    
    10.0
    %
    
    
    16.3
    %
    
    
    14.8
    %As of December 31, 2005:Tire 1 leverage capital ratio
    
    
    5.0
    %
    
    
    9.7
    %
    
    
    9.0
    %Tier 1 risk-based capital ratio
    
    
    6.0
    %
    
    
    13.9
    %
    
    
    12.8
    %Total risk-based capital ratio
    
    
    10.0
    %
    
    
    14.9
    %
    
    
    13.9
    %
  17




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##### Table of Contents



Liquidity and Liability Management
       
 Item 3 Quantitative and Qualitative Disclosures about Market Risk
  Credit Risk
  Interest Rate Risk
  18




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##### Table of Contents



Item 4
 Controls and Procedures
   
 PART II  Other Information
 
 Item 1  Legal Proceedings
  
 Item 1A  Risk Factors
  
 Item 2  Unregistered Sales of Equity Securities and Use of Proceeds
   19




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##### Table of Contents



Item 3
 Defaults upon Senior Securities
  
 Item 4
 Submission of Matters to a Vote of Security Holders
  
 Item 5
 Other Information
  
 Item 6
 Exhibits
  Reg. S-KItem 601Exhibit No.
    
    Description31.1
    
    Certification Pursuant to Section 302 by Chief Executive Officer31.2
    
    Certification Pursuant to Section 302 by Chief Financial Officer32.1
    
    Certification of Chief Executive Officer Pursuant to Section 90632.2
    
    Certification of Chief Financial Officer Pursuant to Section 906
 
 SIGNATURES
  SOUTHWEST COMMUNITY BANCORPDate:
    
    May 8, 2006
    
    
    
    By:
    
    /s/ Frank J. MercardanteFrank J. MercardanteChief Executive OfficerDate:
    
    May 8, 2006
    
    
    
    By:
    
    /s/ James L. LemeryJames L. LemeryExecutive Vice President & Chief Financial Officer
 20