President’s Message

Dear Shareholders, Clients and Friends,

To say that 2007 was a challenging year would be the classic understatement. At the very least, it was the most difficult year that we at Capital Corp of the West and County Bank have ever faced. Although County Bank has never been a significant mortgage lender and was never involved in subprime lending, the collapse of the real estate market greatly impacted our 2007 performance.

During the fourth quarter of last year, as we saw the rapid decline in real estate property values especially in Merced County, we took proactive steps to evaluate the properties that secured our commercial loans. More than 70 percent of the dollar amount of the $1.3 billion of commercial loan portfolio as of December 31, 2007 was reviewed, and of that total, approximately half, or $600 million in loans, were required to be re-appraised, causing a lengthy delay in the reporting of our 2007 results.

We posted a net after-tax loss of $3.6 million for the year ended December 31, 2007, compared to a net income of $22.7 million for the year ended December 31, 2006.

Although 2007 was a difficult year, we also had number of very positive events, including the celebration of our 30th anniversary. In November, we acquired the California branches of Arizona-based Stockmen’s Bank, which now brings our California footprint to 40 branches in 13 counties. These new branches, which have been fully integrated into our system, provide us with a strong retail deposit base for future growth. We offer our customers a full suite of lending and deposit products and services, meeting their every need for business or personal growth.

During 2007 we also acquired Bay View Funding, a factoring company with offices nationwide. Bay View allows us to offer new and expanded services to our business customers while providing an additional profit center for the company.

In partnership with the FDIC and Fresno Unified School District, the bank was also the first in California to open a student-run branch at a high school. Only one of a handful in the nation, the McLane High School Highlander branch opened in September and is designed to teach financial literacy to young people and the local community. The branch was built using an underutilized testing room on campus, and most of the labor and equipment to build the branch was donated by our business partners. The Students operating the branch get class credit for the experience, and upon graduation received a small scholarship to continue their education. To date, the branch has generated substantial local and even some national media coverage in addition to positive community attention.

Over the past few years we have expanded our services to include Asset Based Lending, Factoring, Trust Management, Remote Deposit Capture, Health Savings Plans, and Home Owners’ Association banking services. Our growth plans include continuing to introduce new and innovative services such as Internet and mobile banking programs and focusing on the acquisition of low cost deposits with aggressive marketing campaigns.

As has been said, 2007 was perhaps the most difficult of my 40+ year career in banking. I am pleased to report that our Team Members — which now number nearly 600 — were very supportive. I am grateful for the dedication and commitment they have shown. I am also incredibly thankful for our investors and customers whose continued support is the key to our success.

As many in the banking community know, I previously announced my intention to retire this year and will be doing so when my successor is named and on board. I am confident the Team Members will continue to find success in the bank and will continue to build upon the past 30 years for the next 30 years. I wish them all the best.

Despite the challenges in 2007, in the past few months the company has made great strides and continues to be Central California’s leading and largest community bank. The Board of Directors and Senior Management intend to lead the Company to sustained growth, shareholder value and independence.

Sincerely,

Thomas T. Hawker
CEO/President

For details about Capital Corp’s financial performance, visit our Capital Corp of the West web site at http://www.ccow.com or contact Dave Heaberlin, Chief Financial Officer at (209)725-7435.