SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2012

OR

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 333-12892

MISSION COMMUNITY BANCORP

(Exact name of registrant as specified in its charter)

California	77-0559736
(State or other jurisdiction of incorporation)	(I.R.S. Employer Identification No.)

3380 S. Higuera St., San Luis Obispo, California  93401

(Address of principal executive offices)

(805) 782-5000

Issuer’s telephone number

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 þNo o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 or Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

þ Yes oNo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o	Accelerated filer  o
Non-accelerated filer o   (Do not check if a smaller reporting company)	Smaller reporting company þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

  Yes oNo þ

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:  7,755,066 shares of common stock outstanding as of May 1, 2012.

Page 1 of 50

Mission Community Bancorp

March 31, 2012

Index

PART I – FINANCIAL INFORMATION

Item 1.  Financial Statements (Unaudited)

Condensed Consolidated Balance Sheets at

March 31, 2012 and December 31, 2011

Condensed Consolidated Statements of Operations

for the Three-Month Periods Ended March 31, 2012 and 2011

Consolidated Statements of Comprehensive Loss

for the Three-Month Periods Ended March 31, 2012 and 2011

Condensed Consolidated Statements of Changes of Shareholders’ Equity

for the Three-Month Period Ended March 31, 2012

Condensed Consolidated Statements of Cash Flows

for the Three-Month Periods Ended March 31, 2012 and 2011

Notes to Consolidated Financial Statements

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

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

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

Item 3.     Defaults Upon Senior Securities

Item 4.     Mine Safety Disclosures

Item 5.     Other Information

Item 6.     Exhibits

Page 2 of 50

PART I

Item 1.   Financial Statements

Mission Community Bancorp and Subsidiaries

Condensed Consolidated Balance Sheets

Unaudited

(dollars in thousands)

	March 31, 2012			December 31, 2011
Assets
Cash and due from banks	$	67,093		$	61,621
Certificates of deposit in other banks		3,492			3,592
Investment securities available for sale		128,622			128,310
Loans held for sale		5,874			3,720
Loans, net of unearned income		220,096			229,949
Less allowance for loan and lease losses		(3,562	)		(3,326	)
Net loans		216,534			226,623
Federal Home Loan Bank stock and other stock, at cost		3,801			3,926
Premises and equipment		15,723			15,713
Other real estate owned		2,031			5,026
Company owned life insurance		7,844			7,786
Core deposit intangible asset, net of accumulated amortization		3,068			3,170
Accrued interest and other assets		2,990			3,123
Total Assets	$	457,072		$	462,610
Liabilities and Shareholders' Equity
Deposits:
Noninterest-bearing demand	$	113,387		$	105,105
Money market, NOW and savings		156,912			156,273
Time certificates of deposit		134,981			149,196
Total deposits		405,280			410,574
Junior subordinated debt securities		5,519			5,491
Accrued interest and other liabilities		4,710			4,271
Warrant liability		199			5,184
Total liabilities		415,708			425,520
Mezzanine financing:
Redeemable Bancorp-issued preferred stock, Series A, B and C; liquidation value of $1,205		1,205			1,205
Redeemable subsidiary-issued preferred stock; liquidation value of $7,000		7,000			7,000
Shareholders' equity:
Common stock - 50,000,000 shares authorized; issued and outstanding: 7,755,066 at March 31, 2012 and December 31, 2011		40,825			40,825
Additional paid-in capital		7,795			2,803
Accumulated deficit		(17,444	)		(16,438	)
Accumulated other comprehensive income		1,983			1,695
Total shareholders' equity		33,159			28,885
Total Liabilities and Shareholders' Equity	$	457,072		$	462,610

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Page 3 of 50

Mission Community Bancorp and Subsidiaries

Condensed Consolidated Statements of Operations

Unaudited

(dollars in thousands, except per share data)

	For theThree Months Ended
	March 31, 2012			March 31, 2011
Interest Income
Interest and fees on loans	$	4,299		$	1,789
Interest on investment securities		632			419
Other interest income		44			10
Total interest income		4,975			2,218
Interest Expense
Interest on money market, NOW and savings deposits		72			115
Interest on time certificates of deposit		256			247
Other interest expense		82			30
Total interest expense		410			392
Net interest income		4,565			1,826
Provision for loan and lease losses		225			-
Net interest income (loss) after provision for loan and lease losses		4,340			1,826
Non-interest income
Service charges on deposit accounts		207			77
Gain on sale of loans		8			106
Loan servicing fees, net of amortization		38			24
Gain on sale or call of available-for-sale securities		1			-
Loss or writedown of other real estate owned		(358	)		(47	)
Change in fair value of warrant liability		30			552
Other income and fees		112			112
Total non-interest income		38			824
Non-interest expense
Salaries and employee benefits		2,483			1,315
Occupancy expenses		455			321
Furniture and equipment		179			114
Data processing		792			201
Professional fees		409			130
Marketing and business development		125			37
Office supplies and expenses		210			59
Insurance and regulatory assessments		153			145
Loan and lease expenses		64			37
Other real estate expenses		46			56
Amortization of core deposit intangible asset		101			-
Other expenses		192			150
Total non-interest expense		5,209			2,565
Income (loss) before income taxes		(831	)		85
Income tax expense		-			-
Net income (loss)	$	(831	)	$	85
Less dividends on preferred stock		175			64
Net income (loss) attributable to common stock	$	(1,006	)	$	21
Per Common Share Data:
Net income (loss) - basic and diluted	$	(0.13	)	$	-
Average common shares outstanding - basic		7,755,066			7,094,274

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Page 4 of 50

Mission Community Bancorp and Subsidiaries

Consolidated Statements of Comprehensive Loss

Unaudited

(dollars in thousands)

	For theThree Months Ended
	March 31, 2012			March 31, 2011
Net income (loss)	$	(831	)	$	85
Other comprehensive income (loss) - unrealized gains (losses) on securities		288			(184	)
Comprehensive (loss)	$	(543	)	$	(99	)

Mission Community Bancorp and Subsidiaries

Condensed Consolidated Statements of Changes in Shareholders' Equity

(Unaudited - dollars in thousands)

												Accumulated
							Additional					Other
	Preferred		Common Stock				Paid-In		Accumulated			Comprehensive
	Stock		Shares		Amount		Capital		Deficit			Income		Total
Balance at December 31, 2011, as previously reported	$	-		7,755,066	$	40,825	$	2,375	$	(16,438	)	$	1,695	$	28,457
Adjustment to net contribution from shareholder recognized in additional paid-in capital for Santa Lucia merger		-		-		-		428		-			-		428
Balance at January 1, 2012, as adjusted	$	-		7,755,066	$	40,825	$	2,803	$	(16,438	)	$	1,695	$	28,885
Dividends declared on subsidiary-issued preferred stock										(175	)				(175	)
Stock-based compensation								37							37
Cancellation of warrants accounted for as liabilities								4,955							4,955
Net (loss)										(831	)				(831	)
Other comprehensive income		-		-		-		-		-			288		288
Balance at March 31, 2012	$	-		7,755,066	$	40,825	$	7,795	$	(17,444	)	$	1,983	$	33,159

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Page 5 of 50

Mission Community Bancorp and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited - dollars in thousands)

	For the Three Months Ended
		March 31, 2012			March 31, 2011
Operating Activities
Net (loss) income	$	(831	)	$	85
Adjustments to reconcile net (loss) income to net cash (used in) operating activities:
Depreciation		222			125
Accretion of discount on securities and loans, net		334			119
Amortization of core deposit intangible asset		101			-
Accretion of discount on assets acquired in merger		(753	)		-
Amortization of discount on liabilities assumed in merger		28			-
Provision for loan and lease losses		225			-
Stock-based compensation		37			34
Gain on sale or call of available-for-sale securities		(1	)		-
Change in the fair value of warrant liability		(30	)		(552	)
Gain on sale of loans		(8	)		(106	)
Gains on disposition of loans held for sale		(12	)		(50	)
Net losses and writedowns of fixed assets or other real estate		358			47
Increase in company-owned life insurance		(59	)		(22	)
Other, net		(459	)		(723	)
Proceeds from loan sales		183			965
Loans originated for sale		(154	)		(933	)
Net cash used in operating activities		(819	)		(1,011	)
Investing Activities
Net decrease in Federal Home Loan Bank and other stock		125			76
Net decrease in deposits in other banks		100			248
Purchase of available-for-sale securities		(7,717	)		(7,995	)
Proceeds from maturities, calls and paydowns of available-for-sale securities		9,122			3,703
Proceeds from sales of available-for-sale securities		223			-
Net decrease in loans		7,326			1,550
Purchases of premises and equipment		(232	)		(91	)
Additional investments in other real estate owned		-			(32	)
Proceeds from sale of other real estate owned		2,638			139
Net cash provided by (used in) investing activities		11,585			(2,402	)
Financing Activities
Net increase (decrease) in demand deposits and savings accounts		8,922			(4,868	)
Net increase (decrease) in time deposits		(14,216	)		6,287
Net decrease in other borrowings		-			(349	)
Additional costs of 2010 shareholder rights offering		-			(40	)
Payment of TARP-CPP dividends		-			(64	)
Net cash provided by (used in) financing activities		(5,294	)		966
Net increase (decrease) in cash and cash equivalents		5,472			(2,447	)
Cash and cash equivalents at beginning of period		61,621			10,817
Cash and cash equivalents at end of period	$	67,093		$	8,370
Non-cash changes:
Change in unrealized gains (losses) on available-for-sale securities	$	288			(184	)
Loans reclassified to held for sale		4,583			-
Real estate acquired by foreclosure		-			1,070
Adjustment to net contribution from shareholder recognized in additional paid-in capital for Santa Lucia merger		428			-
Cancellation of warrants accounted for as liabilities		(4,955	)		-
Supplemental disclosures of cash flow information:
Interest paid		536			382
Taxes paid		-			-

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Page 6 of 50

Mission Community Bancorp and Subsidiary

Notes to Condensed Consolidated Financial Statements (unaudited)

Note 1 – Basis of Presentation and Management Representations

The unaudited consolidated financial statements include accounts of Mission Community Bancorp (“the Company”) and its subsidiaries, Mission Community Bank (“the Bank”) and Mission Asset Management, Inc. (“MAM”), and the Bank’s subsidiary, Mission Community Development Corporation.  All material inter-company balances and transactions have been eliminated.

These financial statements have been prepared in accordance with the Securities and Exchange Commission’s rules and regulations for quarterly reporting and, therefore, do not necessarily include all information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles.  These financial statements should be read in conjunction with the Company’s Form 10-K for the year ended December 31, 2011, which was filed on March 30, 2012.

Operating results for interim periods are not necessarily indicative of operating results for an entire fiscal year.  In the opinion of management, the unaudited financial statements for the three-month periods ended March 31, 2012 and 2011 reflect all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the Company’s financial position and results of operations.

The Bank has been organized as a single reporting segment and operates seven branches in the Central Coast area of California (in the cities of San Luis Obispo, Paso Robles, Atascadero, Arroyo Grande and Santa Maria).  In addition, the Bank operates a loan production office in San Luis Obispo, with a primary focus on Small Business Administration (“SBA”) lending, and a Food and Agriculture Division, operating through a loan production office in Oxnard, California.

The Bank’s primary source of revenue is providing real estate, commercial (including SBA-guaranteed loans) and agricultural loans to customers, who are predominately small and middle-market businesses and individuals.

The Bank’s deposits are insured by the Federal Deposit Insurance Corporation (FDIC) up to applicable legal limits.

Certain reclassifications have been made to prior period balances to conform to classifications in 2012, with no impact to previously reported net loss or shareholders’ equity.

Note 2 – Stock Based Compensation Plans

The Company has a stock option plan, adopted in 1998, which is more fully described in Note J to the consolidated financial statements in the Company’s Annual Report on Form 10-K.  The 1998 Stock Option Plan has been terminated with respect to the granting of future options under the Plan.  In 2008 the Company adopted the Mission Community Bancorp 2008 Stock Incentive Plan, which provides for the grant of various equity awards, including stock options.

Page 7 of 50

On September 27, 2011 the Board of Directors of the Company approved and adopted the Mission Community Bancorp 2011 Equity Incentive Plan (the “2011 Plan”).  The 2011 Plan has also been approved by the Company’s shareholders.  The 2011 Plan provides for the issuance of both “incentive” and “nonqualified” stock options, restricted stock awards, stock appreciation rights and stock awards.  Awards under the 2011 Plan may be made to salaried officers and employees of the Company and its affiliates, to non-employee directors of the Company and its affiliates, and to consultants providing services to the Company and its affiliates.  Awards under the 2011 Plan may be granted on such terms and conditions as are established by the Board of Directors or an authorized Committee of the Board of Directors in its discretion.  Awards may be granted as performance-based compensation under section 162(m) of the Internal Revenue Code.

The Company determines the fair value of options granted on the date of grant using a Black-Scholes-Merton option pricing model, which uses assumptions based on expected option life, expected stock volatility and the risk-free interest rate. The expected volatility assumptions used by the Company are based on the historical volatility of the Company’s common stock over the most recent period commensurate with the estimated expected life of the Company’s stock options. The Company bases its expected life assumption on its historical experience and on the terms and conditions of the stock options it grants to employees. The risk-free rate is based on the U.S. Treasury yield curve for the periods within the contractual life of the options in effect at the time of the grant. The Company also makes assumptions regarding estimated forfeitures that will impact the total compensation expenses recognized.

No options were granted in the three months ended March 31, 2012.  The fair values of options granted in the three months ended March 31, 2011, were estimated on the date of grant using the following assumptions:

Date of grant	1/25/2011
Number of options granted		20,000
Exercise price	$	5.00
Market price of common stock	$	3.65
Expected stock price volatility		37.4%
Expected option life	6 years
Risk-free interest rate		2.32%
Weighted average fair value of all options granted during the period:
3 months ended 3/31/11	$	1.09

Page 8 of 50

During the three-month periods ended March 31, 2012 and 2011, the Company recognized pre-tax stock-based compensation expense of $37,000 and $34,000, respectively.  As of March 31, 2012, the Company has unvested options outstanding with unrecognized compensation expense totaling $269,000, which is scheduled to be recognized as follows (in thousands):

April 1 through December 31, 2012	$	107
2013		85
2014		29
2015		29
2016		19
Total unrecognized compensation cost	$	269

No options outstanding were “in the money” as of March 31, 2012.

The following table summarizes information about stock option activity for the three months ended March 31, 2012:

						Weighted-		Aggregate
				Weighted-		Average		Intrinsic
				Average		Remaining		Value of
				Exercise		Contractual		In-the-Money
	Shares			Price		Term		Options
Outstanding at beginning of period		297,219		$	7.84
Options granted		-
Options exercised		-
Options forfeited		(12,319	)		18.00
Outstanding at end of period		284,900		$	7.40		8.0 Years	$	-
Options exercisable at end of period		139,338		$	9.53		6.9 Years	$	-
Options Vested or Expected to Vest		284,900		$	7.40		8.0 Years	$	-

Page 9 of 50

Note 3 — Investment Securities

Investment securities have been classified in the consolidated balance sheets as available for sale according to management’s intent.  The amortized cost of securities and their approximate fair values as of the balance sheet dates were as follows:

(in thousands)			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
March 31, 2012:
U.S. Government agencies	$	26,650	$	360	$	(12	)	$	26,998
Residential mortgage-backed securities		85,474		1,404		-			86,878
Municipal securities		4,596		219		(2	)		4,813
Corporate debt securities		3,048		3		(12	)		3,039
Asset-backed securities		6,871		32		(9	)		6,894
	$	126,639	$	2,018	$	(35	)	$	128,622
December 31, 2011:
U.S. Government agencies	$	26,098	$	331	$	(12	)	$	26,417
Residential mortgage-backed securities		88,209		1,122		(38	)		89,293
Municipal securities		4,820		239		(2	)		5,057
Corporate debt securities		2,059		-		(4	)		2,055
Asset-backed securities		5,429		79		(20	)		5,488
	$	126,615	$	1,771	$	(76	)	$	128,310

The scheduled maturities of investment securities at March 31, 2012, were as follows.  Actual maturities may differ from contractual maturities because some investment securities may allow the right to call or prepay the obligation with or without call or prepayment penalties.

(in thousands)	Available-for-Sale Securities
	Amortized		Fair
	Cost		Value
Within one year	$	3,425	$	3,444
Due in one year to five years		16,203		16,294
Due in five years to ten years		32,506		32,879
Due in greater than ten years		74,505		76,005
	$	126,639	$	128,622

Page 10 of 50

Investment securities in a temporary unrealized loss position as of each balance sheet date are shown in the following table, based on the length of time they have been continuously in an unrealized loss position:

(in thousands)	Less than 12 Months				12 Months or Longer				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
March 31, 2012:
U.S. Government agencies		2,988	$	12	$	-	$	-	$	2,988	$	12
Residential mortgage-backed securities		-		-		-		-		-		-
Municipal securities		240		2		-		-		240		2
Corporate debt securities		988		12		-		-		988		12
Asset-backed securities		3,221		9		-		-		3,221		9
	$	7,437	$	35	$	-	$	-	$	7,437	$	35
December 31, 2011:
U.S. Government agencies	$	2,082	$	12	$	-	$	-	$	2,082	$	12
Residential mortgage-backed securities		9,731		38		-		-		9,731		38
Municipal securities		240		2		-		-		240		2
Corporate debt securities		1,055		4		-		-		1,055		4
Asset-backed securities		1,585		20		-		-		1,585		20
	$	14,693	$	76	$	-	$	-	$	14,693	$	76

As of March 31, 2012, the Company held five securities that had been in an unrealized loss position for less than 12 months.  No securities have been in an unrealized loss position for 12 months or longer as of March 31, 2012.  The unrealized losses relate principally to changes in market interest rate conditions.  All of the securities continue to pay as scheduled.  When analyzing the issuer’s financial condition, management considers the length of time and extent to which the market value has been less than cost; the historical and implied volatility of the security; the financial condition of the issuer of the security; and the Bank’s intent and ability to hold the security to recovery.  As of March 31, 2012, management does not have the intent to sell these securities nor does it believe it is more likely than not that it will be required to sell these securities before maturity or the recovery of amortized cost basis.  Based on the Bank’s evaluation of the above and other relevant factors, the Bank does not believe the securities that are in an unrealized loss position as of March 31, 2012, are other than temporarily impaired.

No securities were sold in either the first three months of 2012 or 2011.  However, a gain of $1,000 was recognized in the first quarter of 2012 on securities called for redemption.

As of March 31, 2012, investment securities carried at $14,139,000 were pledged to secure public deposits, as required by law.  Investment securities carried at $23,793,000 as of March 31, 2012, were pledged to secure borrowing facilities from the Federal Home Loan Bank of San Francisco.

Page 11 of 50

Note 4 — Loans

The Company’s loan portfolio consists primarily of loans to borrowers within the Central Coast area of California.  Although the Company seeks to avoid concentrations of loans to a single industry or based upon a single class of collateral, real estate and real estate associated businesses are among the principal industries in the Company’s market area and, as a result, the loan and collateral portfolios are concentrated in those industries and in that geographic area.

The following table shows the composition of the Company’s loans by type:

Loan Composition
(Dollars in thousands)
	March 31, 2012					December 31, 2011
Type of Loan	Amount		Percentage			Amount		Percentage
Construction and land development	$	18,087		8.0	%	$	18,022		7.6	%
Commercial real estate - owner-occupied		70,894		31.4	%		70,153		30.0	%
Commercial real estate - non-owner-occupied		60,302		26.7	%		64,382		27.6	%
Residential real estate		33,012		14.6	%		32,609		14.0	%
All other real estate loans		2,014		0.9	%		2,321		1.0	%
Commercial and industrial loans		26,019		11.5	%		30,176		12.9	%
Agricultural loans		9,524		4.2	%		9,272		4.0	%
Municipal loans		2,388		1.1	%		2,393		1.0	%
Leases, net of unearned income		1,835		0.8	%		2,323		1.0	%
Consumer loans		1,895		0.8	%		2,018		0.9	%
Total loans	$	225,970		100.0	%	$	233,669		100.0	%

The table above includes loans held for sale as follows:

Loans Held for Sale*
(Dollars in thousands)
	March 31, 2012					December 31, 2011
Type of Loan	Amount		% of Total Loans			Amount		% of Total Loans
Commercial	$	721		0.3	%	$	115		0.0	%
Real estate		1,974		0.9	%		3,030		1.3	%
Construction and land development		3,179		1.4	%		575		0.2	%
Total loans held for sale	$	5,874		2.6	%	$	3,720		1.6	%

* Consists of all loans held at Mission Asset Management, Inc. and SBA-guaranteed loans held for sale at Mission Community Bank

Loans and leases, other than those held for sale, are carried at the principal amount outstanding, net of any deferred loan origination fee income and deferred direct loan origination costs, and net of any unearned interest on discounted loans.  A separate allowance for loan and lease losses is provided for loans held for investment.  Loans held for sale, including $4,289,000 of impaired loans, are carried at the lower of cost or fair value, with no allowance for loan losses.

Page 12 of 50

As of March 31, 2012, and December 31, 2011, loans totaling $205,900,000 and $98,111,000, respectively, were pledged to secure potential borrowing facilities from the Federal Home Loan Bank of San Francisco.

Note 5 — Credit Quality and the Allowance for Loan and Lease Losses

An allowance for loan and lease losses is provided for loans held for investment (i.e., not held for sale).  Loans held for sale are carried on the consolidated balance sheets at the lower of cost or fair value, therefore no related allowance for loan losses is provided.

Following is a summary of the changes in the allowance for loan and lease losses for the three-month periods ended March 31:

	Three Months Ended
	March 31, 2012			March 31, 2011
Balance at beginning of period	$	3,326		$	3,198
Provision for loan and lease losses charged to expense		225			-
Loans charged off		(1	)		(8	)
Recoveries on loans previously charged off		12			55
Balance at end of period	$	3,562		$	3,245

Page 13 of 50

Changes in the allowance for loan and lease losses for the three months ended March 31, 2012 and 2011, are shown below disaggregated by portfolio segment:

	Three Months Ended March 31, 2012
Loan Portfolio Segment	Balance at Beginning of Period		Provision for Loan Losses Charged (Credited) to Expense			Less Loans Charged Off			Plus Recoveries on Loans Previously Charged Off		Balance at End of Period
Construction and land development	$	157	$	(8	)	$	-		$	-	$	149
Commercial real estate - owner-occupied		253		3			-			-		256
Commercial real estate - non-owner-occupied		675		(136	)		-			-		539
Residential real estate		640		71			-			-		711
All other real estate loans		4		-			-			-		4
Commercial and industrial loans		1,363		189			-			10		1,562
Consumer and all other loans and lease financing		124		60			(1	)		2		185
Unallocated		110		46			-			-		156
Totals	$	3,326	$	225		$	(1	)	$	12	$	3,562

	Three Months Ended March 31, 2011
Loan Portfolio Segment	Balance at Beginning of Year		Provision for Loan Losses Charged (Credited) to Expense			Less Loans Charged Off			Plus Recoveries on Loans Previously Charged Off:		Balance at End of Period
Construction and land development	$	531	$	94		$	-		$	-	$	625
Commercial real estate - owner-occupied		164		136			-			10		310
Commercial real estate - non-owner-occupied		697		(222	)		-			-		475
Residential real estate		501		(83	)		-			14		432
All other real estate loans		4		-			-			-		4
Commercial and industrial loans		1,021		(132	)		-			31		920
Consumer and all other loans and lease financing		124		(6	)		(8	)		-		110
Unallocated		156		213			-			-		369
Totals	$	3,198	$	-		$	(8	)	$	55	$	3,245

Page 14 of 50

The Company assigns a risk rating to all loans except pools of homogeneous loans and those risk ratings are continuously reviewed and updated by management at least quarterly or as conditions dictate.  These risk ratings are also subject to semi-annual examination by independent specialists engaged by the Company, and also by its regulators.  During these internal reviews, management monitors and analyzes the financial condition of borrowers and guarantors, trends in the industries in which borrowers operate and the fair values of collateral securing these loans.  These credit quality indicators are used to assign a risk rating to each individual loan.  The risk ratings can be grouped into five major categories, defined as follows:

Pass – A pass loan meets all of the Company’s underwriting criteria and provides adequate protection for the Bank through the paying capacity of the borrower and/or the value and marketability of the collateral.

Special Mention – A special mention loan has potential weaknesses that deserve management’s close attention.  If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or in the Company’s credit position at some future date.  Special Mention loans are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification.

Substandard – A substandard loan is not adequately protected by the current sound worth and paying capacity of the borrower or the value of the collateral pledged, if any.  Loans classified as substandard have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt.  They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.  Substandard loans have a high probability of payment default, or they have other well defined weaknesses, and are generally characterized by current or expected unprofitable operations, inadequate debt service coverage, inadequate liquidity, or marginal capitalization.

Doubtful – Loans classified doubtful have all the weaknesses inherent in those classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.

 Loss – Loans classified as loss are considered uncollectible and are of such little value that their continuance as bankable assets is not warranted.  Loans classified as loss are charged off immediately.

Page 15 of 50

The following table shows the Company’s loan portfolio (excluding loans held for sale) allocated by management’s internal risk ratings as of the dates indicated:

Loans by Risk Rating (excluding loans held for sale*)	Risk Ratings
(in thousands)			Special						Total
	Pass		Mention		Substandard		Doubtful		Loans
As of March 31, 2012:
Construction and land development	$	13,923	$	148	$	1,034	$	-	$	15,105
Commercial real estate - owner-occupied		64,194		-		5,781		-		69,975
Commercial real estate - non-owner-occupied		49,454		5,129		5,890		-		60,473
Residential real estate		26,788		484		4,606		189		32,067
All other real estate		1,889		-		-		-		1,889
Commercial and industrial		32,263		234		4,375		85		36,957
Consumer and all other loans and lease financing		3,630		-		-		-		3,630
Total loans, net of unearned income	$	192,141	$	5,995	$	21,686	$	274	$	220,096
As of December 31, 2011:
Construction and land development	$	13,931	$	157	$	3,359	$	-	$	17,447
Commercial real estate - owner-occupied		68,899		-		4,566		-		73,465
Commercial real estate - non-owner-occupied		49,139		5,154		5,116		-		59,409
Residential real estate		27,672		491		3,365		-		31,528
All other real estate		1,895		138		-		-		2,033
Commercial and industrial		32,154		250		6,841		88		39,333
Consumer and all other loans and lease financing		6,734		-		-		-		6,734
Total loans, net of unearned income	$	200,424	$	6,190	$	23,247	$	88	$	229,949

* Loans held for sale consists of all loans held at Mission Asset Management, Inc. and SBA-guaranteed loans held for sale at Mission Community Bank

Page 16 of 50

The following table shows an aging analysis of the loan portfolio (excluding loans held for sale) as of the dates indicated.  Also shown are loans on non-accrual, those that are past due and still accruing interest and troubled debt restructurings:

(in thousands)
	Construction and Land Development		Commercial Real Estate										Consumer and All Other Loans and Leases
			Owner-Occupied		Non-Owner-Occupied		Residential Real Estate		All Other Real Estate		Commercial and Industrial				Total Loans
As of March 31, 2012:
Recorded Balance of Loans Past Due:
30-59 Days	$	133	$	977	$	-	$	-	$	-	$	240	$	8	$	1,358
60-89 Days		-		-		-		-		-		112		-		112
90+ Days		-		594		-		459		-		205		-		1,258
Total Past Due		133		1,571		-		459		-		557		8		2,728
Loans in Current Payment Status		14,972		68,404		60,473		31,608		1,889		36,400		3,622		217,368
Total Loans	$	15,105	$	69,975	$	60,473	$	32,067	$	1,889	$	36,957	$	3,630	$	220,096
Loans 90+ Days Past Due and Accruing1	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Accruing troubled debt restructurings		200		-		-		-		-		-		-		200
Loans in Non-accrual Status		279		1,756		108		1,640		-		1,692		-		5,475
As of December 31, 2011:
Recorded Balance of Loans Past Due:
30-59 Days	$	492	$	594	$	-	$	-	$	-	$	549	$	-	$	1,635
60-89 Days		-		-		-		423		-		220		-		643
90+ Days		1,323		1,033		21		147		-		627		-		3,151
Total Past Due		1,815		1,627		21		570		-		1,396		-		5,429
Loans in Current Payment Status		15,632		71,838		59,388		30,958		2,033		37,937		6,734		224,520
Total Loans	$	17,447	$	73,465	$	59,409	$	31,528	$	2,033	$	39,333	$	6,734	$	229,949
Loans 90+ Days Past Due and Accruing1	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Accruing troubled debt restructurings		-		-		-		-		-		-		-		-
Loans in Non-accrual Status		2,031		1,429		122		1,296		-		2,107		-		6,985

1 Includes pooled loans acquired with deteriorated credit quality.  Management evaluates estimated cash flows subsequent to acquisition.  If cash flows have not decreased, the pooled acquired loans remain in performing status.

The Company considers a loan to be impaired when it is probable that the Company will be unable to collect all amounts due (principal and interest) according to the contractual terms of the loan agreement.  Loans for which the terms have been modified, and for which the borrower is experiencing financial difficulties, are considered to be troubled debt restructurings (“TDR’s”). TDR’s typically present an elevated level of credit risk as the borrowers are not able to perform according to the original contractual terms.  Both non-accrual loans and TDR’s are generally considered to be impaired.

Concessions granted in TDR’s typically are intended to reduce the borrower’s cash requirements, such as an extension of the payment terms or a change in the interest rate charged.  TDR’s with extended payment terms are accounted for as impaired until adequate performance is established.  A reduction in the interest rate for a borrower experiencing financial difficulties would result in a change to TDR status if the restructured loan yield is below the yield for a new loan with comparable risk. TDR’s with below-market rates are considered impaired until fully collected.   TDR’s may be reported as non-accrual, rather than TDR, if they are not performing under the restructured terms or if adequate payment performance under the restructured terms has yet to be established.

Page 17 of 50

Included in impaired loans are troubled debt restructurings. A troubled debt restructuring is a formal restructure of a loan where the Bank, for economic reasons related to the borrower’s financial difficulties, grants a concession to the borrower. Such concessions may be granted in various forms, including reduction in the standard interest rate, reduction in the loan balance or accrued interest, and extension of the maturity date.  Four troubled debt restructurings totaling $743,000 were effected in the first quarter of 2012 and none in 2011.  Only one troubled debt restructuring was in accruing status and less than 90 days past due as of March 31, 2012, and none were accruing as of December 31, 2011.  The Bank has no commitments to lend additional funds under loans classified as troubled debt restructurings as of March 31, 2012.

Following are summaries of the investment in impaired loans (excluding loans held for sale) as of the dates indicated, including the related allowance for loan losses and cash-basis income recognized:

(in thousands)
			Commercial Real Estate										Consumer and All
	Construction and Land Development		Owner-Occupied		Non-Owner-Occupied		Residential Real Estate		All Other Real Estate		Commercial and Industrial		Other Loans and Leases		Unallocated		Total Loans
Loans Held for Investment as of March 31, 2012:
Recorded Investment:
Impaired Loans With an Allowance Recorded	$	-	$	-	$	-	$	189	$	-	$	450	$	-			$	639
Impaired Loans With No Allowance Recorded		-		1,571		-		-		-		396		-				1,967
Total Loans Individually Evaluated For Impairment		-		1,571		-		189		-		846		-				2,606
Loans Collectively Evaluated For Impairment		12,224		51,429		48,512		26,516		1,889		33,153		3,444				177,167
Loans Acquired With Deteriorated Credit Quality		2,881		16,975		11,961		5,362		-		2,958		186				40,323
Total Loans Held for Investment	$	15,105	$	69,975	$	60,473	$	32,067	$	1,889	$	36,957	$	3,630			$	220,096
Unpaid Principal Balance:
Impaired Loans With An Allowance Recorded	$	-	$	-	$	-	$	190	$	-	$	483	$	-			$	673
Impaired Loans With No Allowance Recorded		-		1,615		-		-		-		351		-				1,966
Total Loans Individually Evaluated For Impairment		-		1,615		-		190		-		834		-				2,639
Loans Collectively Evaluated For Impairment		12,224		51,429		48,512		26,516		1,889		33,153		3,444				177,167
Loans Acquired With Deteriorated Credit Quality		6,630		18,799		13,792		7,400		-		5,089		190				51,900
Total Loans Held for Investment	$	18,601	$	70,184	$	61,000	$	33,225	$	1,889	$	37,855	$	3,630			$	226,384
Related Allowance for Loan and Lease Losses:
Impaired Loans With An Allowance Recorded	$	-	$	-	$	-	$	128	$	-	$	264	$	-			$	392
Impaired Loans With No Allowance Recorded		-		-		-		-		-		-		-				-
Total Loans Individually Evaluated For Impairment		-		-		-		128		-		264		-				392
Loans Collectively Evaluated For Impairment		149		192		539		583		4		1,132		185	$	156		2,940
Loans Acquired With Deteriorated Credit Quality		-		64		-		-		-		166		-				230
Total Loans Held for Investment	$	149	$	256	$	539	$	711	$	4	$	1,562	$	185	$	156	$	3,562
For the Three Months Ended March 31, 2012:
Average Recorded Investment in Impaired Loans:
Impaired Loans With An Allowance Recorded	$	-	$	-	$	-	$	94	$	-	$	464	$	-			$	558
Impaired Loans With No Allowance Recorded		-		1,606		-		-		-		383		-				1,989
Total Loans Individually Evaluated For Impairment	$	-	$	1,606	$	-	$	94	$	-	$	847	$	-			$	2,547
Interest Income Recognized on Impaired Loans:
Impaired Loans With An Allowance Recorded	$	-	$	-	$	-	$	-	$	-	$	-	$	-			$	-
Impaired Loans With No Allowance Recorded		-		-		-		-		-		-		-				-
Total Loans Individually Evaluated For Impairment	$	-	$	-	$	-	$	-	$	-	$	-	$	-			$	-

Page 18 of 50

(in thousands)
	Construction and Land Development			Commercial Real Estate										Unallocated		Consumer and All
				Owner-Occupied		Non-Owner-Occupied		Residential Real Estate		All Other Real Estate		Commercial and Industrial				Other Loans and Leases			Total Loans
Loans Held for Investment as of December 31, 2011:
Recorded Investment:
Impaired Loans With an Allowance Recorded		$	-	$	-	$	-	$	-	$	-	$	396	$	-				$	396
Impaired Loans With No Allowance Recorded			-		1,028		-		-		-		423		-					1,451
Total Loans Individually Evaluated For Impairment			-		1,028		-		-		-		819		-					1,847
Loans Collectively Evaluated For Impairment			11,617		57,980		42,406		27,103		2,033		34,519		6,547					182,205
Loans Acquired With Deteriorated Credit Quality			5,830		14,457		17,003		4,425		-		3,995		187					45,897
Total Loans Held for Investment		$	17,447	$	73,465	$	59,409	$	31,528	$	2,033	$	39,333	$	6,734				$	229,949
Unpaid Principal Balance:
Impaired Loans With An Allowance Recorded		$	-	$	-	$	-	$	-	$	-	$	443	$	-				$	443
Impaired Loans With No Allowance Recorded			-		1,045		-		-		-		518		-					1,563
Total Loans Individually Evaluated For Impairment			-		1,045		-		-		-		961		-					2,006
Loans Collectively Evaluated For Impairment			11,617		57,980		42,406		27,103		2,033		34,519		6,547					182,205
Loans Acquired With Deteriorated Credit Quality			9,981		16,350		18,954		5,129		-		6,132		191					56,737
Total Loans Held for Investment		$	21,598	$	75,375	$	61,360	$	32,232	$	2,033	$	41,612	$	6,738				$	240,948
Related Allowance for Loan and Lease Losses:
Impaired Loans With An Allowance Recorded		$	-	$	-	$	-	$	-	$	-	$	81	$	-				$	81
Impaired Loans With No Allowance Recorded			-		-		-		-		-		-		-					-
Total Loans Individually Evaluated For Impairment			-		-		-		-		-		81		-					81
Loans Collectively Evaluated For Impairment			157		253		675		640		4		1,282		124		$	110		3,245
Loans Acquired With Deteriorated Credit Quality			-		-		-		-		-		-		-					-
Total Loans Held for Investment		$	157	$	253	$	675	$	640	$	4	$	1,363	$	124		$	110	$	3,326
For the Year Ended December 31, 2011:
Average Recorded Investment in Impaired Loans:
Impaired Loans With An Allowance Recorded		$	-	$	-	$	-	$	-	$	-	$	224	$	-				$	224
Impaired Loans With No Allowance Recorded			-		1,011		-		-		-		341		-					1,352
Total Loans Individually Evaluated For Impairment		$	-	$	1,011	$	-	$	-	$	-	$	565	$	-				$	1,576
Interest Income Recognized on Impaired Loans:
Impaired Loans With An Allowance Recorded		$	-	$	-	$	-	$	-	$	-	$	-	$	-				$	-
Impaired Loans With No Allowance Recorded			-		-		-		-		-		-		-					-
Total Loans Individually Evaluated For Impairment		$	-	$	-	$	-	$	-	$	-	$	-	$	-				$	-

The amount of the allowance for loan losses provided for impaired loans represents the aggregate \amount by which the recorded investment in each impaired loan exceeds its fair value.  Fair value for this purpose is determined by computing either the present value of expected future cash flows discounted at the loan’s effective interest rate or, if repayment is expected solely from the collateral, the fair value of the underlying collateral less estimated costs to sell, based on current appraisals.  In some cases, impaired loans are partially charged off, such that there is no excess of the recorded investment over the fair value of the loan, as determined above.

Changes in the accretable discount for loans purchased with credit quality deterioration follows:

	Three Months Ended
(in thousands)	March 31,
	2012
Balance at beginning of period	$	3,289
Measurement period adjustments to Santa Lucia Bank fair values		(428	)
Accretion to interest income		(260	)
Loans reclassified to held for sale		(355	)
Transfers from non-accretable discount to accretable		-
Balance at end of period	$	2,246

Page 19 of 50

Note 6 — Preferred and Common Stock and Loss per Share

Bancorp-Issued Preferred Stock

As a result of a change in control in 2010, the Company is likely to lose its status as a Community Development Financial Institution (“CDFI”), which may trigger redemption provisions of some or all of the Company’s Series A, B and C preferred.  Therefore, those series of preferred stock are carried at their redemption values in the consolidated balance sheets and are classified as mezzanine financing rather than equity.

On December 28, 2011, after receiving the required regulatory approvals, the Company redeemed 100% of the Series D (TARP) preferred stock.

Common Stock

On April 27, 2010, there was an initial closing (the “Initial Closing”) under the Securities Purchase Agreement dated December 22, 2009, as amended (the “Securities Purchase Agreement”), by and between the Company and Carpenter Fund Manager GP, LLC (the “Manager”) on behalf of and as General Partner of Carpenter Community BancFund, L.P., Carpenter Community BancFund-A, L.P. and Carpenter Community BancFund—CA, L.P.  (the “Investors”).   At the Initial Closing the Investors purchased, for an aggregate purchase price of $10 million, 2,000,000 shares of the common stock of the Company paired with warrants to purchase 2,000,000 shares of the common stock.  On June 15, 2010, the Investors purchased, for an aggregate purchase price of $15 million, 3,000,000 additional shares of common stock and warrants to purchase 3,000,000 shares of common stock in the second closing under the Securities Purchase Agreement (the “Second Closing”).  The warrants issued in the Initial Closing and in the Second Closing, collectively referred to herein as the “Investor Warrants,” were issued for a term of five years from issuance at an exercise price of $5.00 per share and contained customary anti-dilution provisions.

The Company used a substantial majority of the proceeds from the First and Second Closings to enable a newly-formed wholly-owned subsidiary of the Company, Mission Asset Management, Inc., to purchase from the Bank certain non-performing loans and other real estate owned assets.

The Securities Purchase Agreement further provided that the Company would conduct a rights offering to its existing shareholders, pursuant to which each shareholder was offered the right to purchase 15 additional shares of common stock, paired with a warrant, for each share held, at a price of $5.00 per unit of common stock and warrant (five-year term and $5.00 exercise price).  The rights offering closed on December 15, 2010, with 748,672 shares being issued. Net proceeds from the rights offering totaled $3,527,000.

Mission Asset Management, Inc. Preferred Stock and Company Warrants

 On October 21, 2011, for an aggregate purchase price of $10 million, Mission Asset Management, Inc. issued 10,000 shares of its newly authorized Series A Non-Cumulative Perpetual Preferred Stock (“MAM Preferred Stock”) and the Company issued warrants to purchase an aggregate of 2,202,641 shares of the Company’s common stock (the “Company Warrants”).  The Company Warrants were issued for a term of 10 years from issuance at an exercise price of $4.54 per share.  In December 2011, a total of 660,792 Company Warrants were exercised and $3,000,000 of the MAM Preferred Stock was liquidated.  These preferred shares include redemption provisions that are outside the control of the Company.  Accordingly, these preferred shares are presented as mezzanine financing at their redemption value of $7,000,000.

Page 20 of 50

In addition to customary anti-dilution provisions, the Investor Warrants and the Company Warrants referred to above contain certain anti-dilution features that have caused these warrants to be reflected as derivative liabilities pursuant to ASC 815—at their fair values—in the consolidated balance sheets rather than as components of equity.  Subsequent changes in their fair values are recognized as gains or losses through non-interest income, which impacts net loss and loss per share in the consolidated statement of operations.  In March 2012 all Investor Warrants and substantially all of the Company Warrants (i.e., those issued to the Investors) were cancelled and replaced with 6,487,800 warrants having approximately the equivalent aggregate fair value as the cancelled warrants but without the anti-dilution features that call for derivative accounting treatment.  Accordingly, $4,955,000 (the fair value of the cancelled warrants immediately prior to cancellation) was transferred from warrant liability to additional paid-in capital in March 2012.

Activity in the Company’s outstanding warrants follows:

				Weighted
				Average
				Exercise
	Shares			Price
Outstanding  January 1, 2011		5,748,672			5.00
Warrants granted in 2011		2,202,641		$	4.54
Warrants exercised in 2011		(660,792	)		4.54
Outstanding December 31, 2011		7,290,521		$	4.90
Warrants granted in 1st qtr. 2012		6,487,800		$	5.00
Warrants cancelled in 1st qtr. 2012		(6,387,973	)		4.90
Outstanding March 31, 2012		7,390,348		$	4.99

Prior to the Initial Closing, the Manager was the largest shareholder of the Company, beneficially owning 333,334 shares of the common stock of the Company or 24.7% of the issued and outstanding shares.  Following the Second Closing, the rights offering, and the 2011 warrants exercise, the Manager was the beneficial owner of 5,333,334 shares of the common stock of the Company (not including warrants), or 76.4% of the issued and outstanding shares.

Page 21 of 50

Loss per Share

The following table shows the calculation of earnings (loss) per common share and the allocation of the Company’s net loss among common stock and the various classes of preferred stock:

(in thousands, except per share data)	Three Months Ended
	March 31, 2012			March 31, 2011
Net income (loss)	$	(831	)	$	85
Less dividends on preferred stock:
Non-convertible subsidiary-issued preferred stock		175			-
TARP preferred stock (Series D)		-			64
Net income allocated to all classes of preferred stock		175			64
Net income (loss) attributable to common stock	$	(1,006	)	$	21
Average common shares outstanding		7,755,066			7,094,274
Basic and diluted loss per common share	$	(0.13	)	$	-

No presentation of diluted earnings (loss) per common share has been presented because the result would be anti-dilutive.

Note 7 —Income taxes

Due to a limitation on the Company’s ability to recognize deferred tax assets, no federal income tax expense or benefit was recognized for the three-month periods ended March 31, 2012 and 2011 due to the deferred tax asset limitation.

Note 8 — Fair Value Measurement

The following tables present information about the Company’s assets and liabilities measured at fair value on a recurring and non-recurring basis as of March 31, 2012 and December 31, 2011, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value:

· Level 1—Quoted prices in active markets for identical assets or liabilities

· Level 2—Estimates based on significant other observable inputs that market participants would use in pricing the asset or liability

· Level 3—Estimates based on significant unobservable inputs that reflect the entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability.  Valuation techniques include management’s judgment, which may be a significant factor.

For some assets or liabilities, the inputs used to measure fair value may fall into more than one level of the fair value hierarchy.  In such cases, the asset or liability is identified based on the lowest level input that is significant to the fair value measurement.  The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and considers factors specific to the asset or liability.

Page 22 of 50

The following assumptions were used in the Black-Scholes simulation model to determine the fair value of the warrant liability for the 2011 warrants as of March 31, 2012 and for the 2011 and 2010 warrants as of December 31, 2011:

	As of March 31, 2012	As of December 31, 2011
	2011	2011	June 2010	April 2010
	Warrants	Warrants	Warrants	Warrants
Warrant exercise price	$4.54	$4.54	$5.00	$5.00
Market price of common stock	$3.40	$3.35	$3.35	$3.35
Average risk-free interest rate	2.23%	1.89%	0.36%	0.36%
Average expected volatility	34.27%	33.57%	44.01%	45.07%
Average expected life (in years)	9.56	9.81	3.46	3.32
Expected dividend yield	0.00%	0.00%	0.00%	0.00%

Assets and liabilities measured at fair value on a recurring basis are summarized below:

(in thousands)	Fair Value Measurements Using
March 31, 2012	Level 1		Level 2		Level 3			Total
Available for sale securities:
U.S. Government agencies	$	-	$	26,998	$	-		$	26,998
Mortgage-backed securities		-		86,878		-			86,878
Municipal securities		-		4,813		-			4,813
Corporate debt securities		-		3,039		-			3,039
Asset-backed securities		-		6,894		-			6,894
Total available-for-sale securities		-		128,622		-			128,622
Loans held for sale		-		-		5,874			5,874
Warrant liability		-		-		(199	)		(199	)
Total assets measured at fair value on a recurring basis	$	-	$	128,622	$	5,675		$	134,297
December 31, 2011
Available for sale securities:
U.S. Government agencies	$	-	$	26,417	$	-		$	26,417
Mortgage-backed securities		-		89,293		-			89,293
Municipal securities		-		5,057		-			5,057
Corporate debt securities		-		2,055		-			2,055
Asset-backed securities		-		5,488		-			5,488
Total available-for-sale securities		-		128,310		-			128,310
Loans held for sale		-		-		3,720			3,720
Warrant liability		-		-		(5,184	)		(5,184	)
Total assets measured at fair value on a recurring basis	$	-	$	128,310	$	(1,464	)	$	126,846

The fair value of securities available for sale equals quoted market prices, if available.  If quoted market prices are not available, fair value is determined using quoted market prices for similar securities.  There were no changes in the valuation techniques used during 2012 or 2011 and there were no transfers into or out of Levels 1, 2 or 3 of the fair value hierarchy during the three months ended March 31, 2012.

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Loans held for sale that are measured at fair value on a recurring basis consist of all loans held by the company’s MAM subsidiary.  Those loans are carried at the lower of cost or fair value and, accordingly, have been subject to recurring fair value adjustments.  Fair value for those loans is determined by assessing the probability of borrower default using historical payment performance and available cash flows to the borrower, then projecting the amount and timing of cash flows to MAM, including collateral liquidation if repayment weaknesses exist.

Management monitors the availability of observable market data to assess the appropriate classifications of financial instruments within the fair value hierarchy.  Changes in economic conditions or model-based valuation techniques may require the transfer of financial instruments from one fair value level to another.  In such instances, the transfer is reported at the beginning of the reporting period.

Management evaluates the significance of transfers between levels based upon the nature of the financial instrument and size of the transfer relative to total assets, total liabilities or total earnings.

Assets and liabilities measured at fair value on a non-recurring basis are summarized below:

(in thousands)									Current
									Period
	Fair Value Measurements Using								Gains
March 31, 2012	Level 1		Level 2		Level 3		Total		(Losses)
Financial assets measured at fair value on a non-recurring basis:
Impaired loans, net of specific reserves--
Construction and land development	$	-	$	-	$	-	$	-	$	-
Commercial real estate - owner-occupied		-		-		1,571		1,571		-
Commercial real estate - non-owner-occupied		-		-		-		-		-
Residential real estate		-		-		61		61		(128	)
All other real estate		-		-		-		-		-
Commercial and industrial		-		-		582		582		(190	)
Consumer and all other loans and lease financing		-		-		-		-		-
Total impaired loans, net of charge-offs and specific reserves	$	-	$	-	$	2,214	$	2,214	$	(318	)
Non-financial assets measured at fair value on a non-recurring basis:
Other real estate owned	$	-	$	-	$	2,031	$	2,031	$	(358	)

The following methods were used to estimate the fair value of each class of assets above.  The fair value of impaired loans is based on the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the underlying collateral less estimated costs to sell if repayment is expected solely from the collateral.  Collateral values are estimated using Level 2 inputs based on observable market data or Level 3 inputs based on customized discounting criteria.  Collateral-dependent impaired loans are categorized as Level 3 due to ongoing real estate conditions resulting in inactive market data which, in turn, required the use of unobservable inputs and assumptions in fair value measurements.  Impaired loans were measured and reported at fair value through specific valuation allocations of the allowance for loan and lease losses and/or partial charge-offs of the impaired loans.

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The fair value of other real estate owned is based on the values obtained through property appraisals, which can include observable and unobservable inputs.  Other real estate owned fair values are categorized as Level 3 due to ongoing real estate conditions resulting in inactive market data which required the use of unobservable inputs and assumptions in fair value measurements.

The following table presents a reconciliation of assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the first three months of 2012 and 2011:

(in thousands)	Level 3 Securities Available for Sale, Loans Held for Sale and Warrant Liability
	Three Months Ended March 31
	2012			2011
Balance at beginning of year	$	(1,464	)	$	10,086
Net increase (decrease) in SBA loans held for sale		61			223
Loans held for sale transfered into Level 3		4,282			-
Settlements - principal reductions in loans held for sale		(21	)		(1,810	)
Loan participations sold to related party		(2,168	)		-
Loans held for sale transferred to other real estate owned		-			(1,070	)
Loans held for sale valuation reserve		-			(1	)
Cancellation of warrants accounted for as liabilities		4,955			-
Changes in fair value of warrant liability		30			552
Balance at end of period	$	5,675		$	7,980

“Settlements” in the above table relate to actual cash payments received from borrowers on loans held for sale and do not represent refinancings or write-downs to fair value.  The following methods and assumptions were used to estimate the fair value of significant financial instruments that are not carried at fair value in the consolidated balance sheet:

Financial Assets.  The carrying amounts of cash and short-term investments are considered to approximate fair value.  Short-term investments include federal funds sold and interest bearing deposits with other banks.  For investment securities, fair values are based on quoted market prices, where available.  If quoted market prices are not available, fair values are estimated using other observable data, which may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other factors.  The fair value of loans (including loans held for sale) are estimated using a combination of techniques, including discounting estimated future cash flows and quoted market prices of similar instruments, where available.  Loans are within Level 3 of the fair value hierarchy.  The carrying value of accrued interest receivable approximates fair value.  The carrying amount of FHLB and FRB stock approximate their fair value.

Financial Liabilities.  The carrying amounts of deposit liabilities payable on demand and short-term borrowed funds are considered to approximate fair value.  For fixed maturity (i.e., time) deposits, which are within Level 3 of the fair value hierarchy, fair value is estimated by discounting estimated future contractual cash flows using currently offered rates for deposits of similar remaining maturities.  The fair value of junior subordinated debt securities (Level 2) is based on rates currently available to the Bank for debt with similar terms and remaining maturities.

Off-Balance Sheet Financial Instruments.  The fair value of commitments to extend credit and standby letters of credit is estimated using the fees currently charged to enter into similar agreements.  The fair value of these financial instruments is not material.

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The estimated fair value of financial instruments is summarized as follows:

(in thousands)	March 31, 2012				December 31, 2011
	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial Assets:
Cash and due from banks	$	67,093	$	67,093	$	61,621	$	61,621
Interest-bearing deposits in other banks		3,492		3,492		3,592		3,592
Investment securities		128,622		128,622		128,310		128,310
Loans held for sale		5,874		5,874		3,720		3,720
Loans, net of allowance for loan and lease losses		216,534		215,233		226,623		224,721
Federal Home Loan Bank and other stocks		3,801		3,801		3,926		3,926
Accrued interest receivable		1,277		1,277		1,450		1,450
Financial Liabilities:
Deposits		405,280		405,582		410,574		411,323
Junior subordinated debt securities		5,519		4,612		5,491		4,527
Accrued interest payable		205		205		330		330
Warrant liability		199		199		5,184		5,184

Note 9 — Business Combination

On October 21, 2011, Santa Lucia Bank, Atascadero, California (“SL Bank”), was merged with and into the Bank under an Agreement and Plan of Merger by and among Bancorp, the Bank, Carpenter Fund Manager GP, LLC (“Carpenter”), as General Partner of Carpenter Community BancFund L.P. and Carpenter Community BancFund-A., L.P. (the “Funds”), Santa Lucia Bancorp (“SL Bancorp”) and SL Bank).  For Bancorp and the Bank, this transaction is accounted for based on transactions between entities under common control, as our largest shareholder contributed Santa Lucia Bank to the Company.

The Bank Merger was undertaken to increase the Company’s market share in its primary market—San Luis Obispo County and northern Santa Barbara County.  The combined bank had approximately $450 million in assets and $410 million in deposits immediately following the Bank Merger and continues to operate under the Mission Community Bank name, with full-service branch offices in San Luis Obispo and Santa Barbara counties in the cities of San Luis Obispo, Paso Robles, Atascadero, Arroyo Grande and Santa Maria.  With the acquisition, the Company has initiated a strategic plan to build the premier California Central Coast banking franchise.  This initiative is designed to capitalize on the distinctive characteristics of the Central Coast banking markets in San Luis Obispo, Santa Barbara, Ventura, and Monterey counties.

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SL Bank’s results of operations have been included in the Company’s results beginning October 22, 2011.  The excess of the fair value of net assets of $906,000 arising from the acquisition was recognized in additional paid-in capital in the fourth quarter of 2011.  The fair values of assets acquired and liabilities assumed are subject to adjustment during the first twelve months after the acquisition date if additional information becomes available to indicate a more accurate or appropriate value for an asset or liability.  Assets that are particularly susceptible to adjustment include certain loans, other real estate owned and certain premises and equipment.  During the first quarter of 2012, management recorded a $428,000 increase in loans, based on the estimated fair value of certain loans.  This measurement period adjustment has been presented on a retrospective basis, consistent with applicable accounting guidance.  Other real estate owned and premises and equipment remain preliminary.  Management expects such accounting to be finalized in the second quarter of 2012 and adjustments are not expected to have a significant impact on the Company’s financial statements.  The following table summarizes the adjusted estimated fair value of assets acquired and liabilities assumed recognized as of the acquisition date (in thousands):

Recognized amounts of identifiable assets acquired and liabilities assumed:
Financial assets--
Cash and cash equivalents	$	53,998
Investment securities		21,487
Loans		122,374
Federal Home Loan Bank and other stocks		1,574
Company-owned life insurance		4,690
Other financial assets		1,085
Total financial assets		205,208
Premises and equipment		13,021
Other real estate owned		2,548
Identifiable intangible assets		3,237
Other assets		289
Financial liabilities:
Deposits		(220,102	)
Junior subordinated debt securities		(2,380	)
Other financial liabilities		(162	)
Total financial liabilities		(222,644	)
Other liabilities		(325	)
Identifiable net assets acquired / net contribution from shareholder	$	1,334

The following table presents pro forma information as if the acquisition had occurred on January 1, 2011.  The pro forma information includes adjustments for interest income on loans and securities acquired, amortization of intangibles arising from the transaction, depreciation expense on property acquired, and interest expense on deposits acquired.  The pro forma financial information is not necessarily indicative of the results of operations as they would have been had the transactions been effected on the assumed date.

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	Three Months Ended
	March 31,
(in thousands)	2011
Interest income	$	5,837
Non-interest income		982
Net income		273
Basic and diluted earnings per share	$	-

 Note 10 — Recent Accounting Pronouncements

Fair Value Measurement

In May 2011, FASB issued Accounting Standards Update (“ASU”) ASU 2011-04, Fair Value Measurement (Topic 820) – Amendments to Achieve Common Fair Value Measurements and Disclosure Requirements in U.S. GAAP and IFRS.  ASU 2011-04 amends Topic 820, Fair Value Measurements and Disclosures, to converge the fair value measurement guidance under U.S. generally accepted accounting principles and International Financial Reporting Standards.  ASU 2011-04 clarifies the application of existing fair value measurement requirements, changes certain principles in Topic 820 and requires additional fair value disclosures.  ASU 2011-04 is effective for interim and annual periods beginning after December 15, 2011.  Adoption of ASU 2011-04 in the quarter ended March 31, 2012, did not have a significant on the Company’s consolidated financial statements.

Comprehensive Income

In June 2011, FASB issued ASU 2011-05, Comprehensive Income (Topic 220) – Presentation of Comprehensive Income.  ASU 2011-05 amends Topic 220, Comprehensive Income, to require that all nonowner changes in shareholders’ equity be presented in either a single continuous statement of comprehensive income or in two separate but consecutive statements.  Additionally, ASU 2011-05 requires entities to present, on the face of the financial statements, reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statement or statements where the components of net income and the components of other comprehensive income are presented.  The option to present components of other comprehensive income as part of the statement of changes in shareholders’ equity was eliminated.  ASU 2011-05 is effective for interim and annual periods beginning after December 15, 2011.  Additionally, in December 2011, FASB issued ASU 2011-12, Deferral of the Effective Date for Amendments to the Reclassification of Items Out of Accumulated Other Comprehensive Income in ASU 2011-05.  ASU 2011-12 defers the effective date for the changes in ASU 2011-05 that specifically refer to the presentation of the effects of reclassification adjustments out of accumulated other comprehensive income on the components of net income and other comprehensive income on the face of the financial statements for all periods presented.  ASU 2011-12 reinstates the requirements of the presentation of reclassifications out of accumulated other comprehensive income that were in place before the issuance of ASU 2011-05.  The Company will continue to disclose the effects of reclassifications in the footnotes to the financial statements.  No such reclassifications were made during the three-month periods ended March 31, 2012 or 2011.  The effective date for ASU 2011-12 is the same as for ASU 2011-05.  Neither ASU 2011-05 nor ASU 2011-12 had a significant impact on the consolidated financial statements.

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

Forward-Looking Statements

Some matters discussed in this Form 10-Q may be “forward-looking statements” within the meaning of the Private Litigation Reform Act of 1995 and therefore may involve risks, uncertainties and other factors which may cause our actual results to be materially different from the results expressed or implied by our forward-looking statements.  These statements generally appear with words such as “anticipate,” “believe,” “estimate,” “may,” “intend,” and “expect.”  Although management believes that the assumptions and expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct.  Factors that could cause actual results to differ from results discussed in forward-looking statements include, but are not limited to: economic conditions (both generally and in the markets where the Bank operates); competition from other providers of financial services offered by the Bank; government regulation and legislation; changes in interest rates; material unforeseen changes in the financial stability and liquidity of the Bank’s credit customers; and other risks detailed in the Company’s filings with the Securities and Exchange Commission, all of which are difficult to predict and which may be beyond the control of the Company or the Bank.  The Company undertakes no obligation to revise forward-looking statements to reflect events or changes after the date of this discussion or to reflect the occurrence of unanticipated events.

Overview of Results of Operations and Financial Condition

· The Company incurred a net loss of $(831) thousand for the first quarter of 2012, as compared with net income of $85 thousand for the first quarter of 2011.  Net loss applicable to common stock was $(1.006) million in the most recent quarter, as compared to net income of $21 thousand for the same period in 2011.

· A $225 thousand provision for loan losses was recorded in the first quarter of 2012.  No loan loss provision was recognized in the first three months of 2011.

· Net interest income for the three-month period ended March 31, 2012, was $4.565 million, an increase of $2.514 million from the same period in 2011.  The increase in net interest income was primarily due to the acquisition of Santa Lucia Bank in the fourth quarter of 2011.

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· The net interest margin (net interest income as a percentage of average interest earning assets) increased by 81 basis points, to 4.33%, for the three-month period ended March 31, 2012, as compared to the same period in 2011.

· For the three months ended March 31, 2012, non-interest income decreased by $786 thousand from the same period in 2011.  The decrease was primarily due write-downs on the value of other real estate owned and decreased income from changes if the fair value of warrant liability.

· Non-interest expense increased by $2.644 million for the first quarter of 2012, as compared to the same quarter in 2011.  Principal factors relating to the increase were salaries and benefits for Santa Lucia Bank personnel and recently-hired officers, increased professional and data processing fees related to the Santa Lucia Bank acquisition ($112 thousand and $272 thousand, respectively), and amortization of the core deposit intangible asset ($101 thousand).

· Total assets decreased by $5.1 million (1.1 %) from December 31, 2011 to March 31, 2012, primarily attributable to a $7.3 million decrease in loans.

· Non-performing assets decreased from $13.6 million as of December 31, 2011 to $10.5 million on March 31, 2012.

Income Summary

For the three months ended March 31, 2012, the Company incurred a net loss of $(831) thousand, as compared with net income of $85 thousand for same period in 2011.  Net loss applicable to common stock was $(1.006) million in the most recent quarter, as compared to net income of $21 thousand for the first quarter of 2011.  The increased quarterly net loss was the result of increased hiring since mid-year 2010 in preparation for planned growth, professional fees and data processing costs related to the Santa Lucia Bank acquisition, and a $522 decrease in non-interest income from the change in the fair value of warrants accounted for as liabilities.

Loss on average assets (annualized) was (0.73)% for the first quarter of 2012, as compared with a return on average assets of 0.16% for the first quarter of 2011.  Annualized loss on average equity was (8.84)% for the first quarter of 2012 as compared with a return on average equity of 1.05% for the comparable 2011 period.

Net Interest Income

Net interest income is the largest source of the Bank’s operating income.  For the three-month period ended March 31, 2012, net interest income was $4.565 million, an increase of $2.739 million from the same period in 2011, primarily due to the Santa Lucia Bank acquisition.  In addition to the increase in net interest income due to the higher volume of assets and liabilities from that acquisition, the net interest margin for the first three months of 2012 includes $758 thousand of discount accretion on the assets acquired and liabilities assumed.

The net interest margin (net interest income as a percentage of average interest earning assets) was 4.33% for the three-month period ended March 31, 2012, an increase of 81 basis points as compared to the same period in 2011.  Discount accretion mentioned in the previous paragraph accounts for 72 basis points of the increase in net interest margin.

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The following table shows the relative impact of changes in average balances of interest earning assets and interest bearing liabilities, and interest rates earned and paid by the Company and the Bank on those assets and liabilities for the three-month periods ended March 31, 2012 and 2011:

Consolidated Net Interest Analysis
(Dollars in thousands)
	For the Three Months Ended
	March 31, 2012								March 31, 2011
	Average					Average			Average					Average
	Balance			Interest		Rate			Balance			Interest		Rate
ASSETS
Interest-earning assets:
Loans, net of unearned income*	$	234,570		$	4,299		7.37	% *	$	119,612		$	1,789		6.06	% *
Investment securities*		126,551			632		2.01	% *		75,267			419		2.26	% *
Other interest income		62,580			44		0.28	%		15,339			10		0.26	%
Total interest-earning assets / interest income		423,701			4,975		4.72	%		210,218			2,218		4.28	%
Non-interest-earning assets:
Allowance for loan losses		(3,415	)							(3,227	)
Cash and due from banks		2,155								1,426
Premises and equipment		15,787								3,208
Other assets		18,605								7,599
Total assets	$	456,833							$	219,224
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Interest-bearing deposits:
Interest-bearing demand accounts	$	27,177		$	11		0.16	%	$	11,211		$	20		0.73	%
Savings and Money Market deposit accounts		129,545			61		0.19	%		51,976			95		0.74	%
Certificates of deposit		141,666			256		0.73	%		86,389			247		1.16	%
Total interest-bearing deposits		298,388			328		0.44	%		149,576			362		0.98	%
Other short-tems borrowings		-			-		-			385			5		4.75	%
Trust preferred securities		5,503			82		6.02	%		3,093			25		3.30	%
Total borrowed funds		5,503			82		6.02	%		3,478			30		3.46	%
Total interest-bearing liabilities / interest expense		303,891			410		0.54	%		153,054			392		1.04	%
Non-interest-bearing liabilities:
Non-interest-bearing deposits		107,889								26,604
Other liabilities		7,294								6,741
Total liabilities		419,074								186,399
Shareholders' equity		37,759								32,825
Total liabilities and shareholders' equity	$	456,833							$	219,224
Net interest-rate spread							4.18	%							3.24	%
Impact of non-interest-bearing
sources and other changes in
balance sheet composition							0.15	%							0.28	%
Net interest income / margin on earning assets				$	4,565		4.33	% **				$	1,826		3.52	% **

*No taxable-equivalent adjustment has been made on municipal securities and loans because no tax benefits are currently being recognized by the Company. Loan accretion and loan fees (net of loan origination costs) included in loan interest income for the three-month periods ended March 31, 2012 and 2011, were $756 thousand and $1 thousand, respectively.

** Net interest income as a % of earning assets

Excluding the merger-related discount accretion from the above table, the average rates for the first three months of 2012 would have been as follows: loans 6.08%; total interest-earning assets 4.01%; certificates of deposit 0.82%; total interest-bearing deposits 0.49%; trust preferred securities 3.97%; total interest-bearing liabilities 0.55%; and net interest margin 3.61%.

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Shown in the following table are the relative impacts on net interest income of changes in the average outstanding balances (volume) of earning assets and interest bearing liabilities, together with changes in the rates earned and paid by the Bank and the Company on those assets and liabilities, for the three-month periods ended March 31, 2012 and 2011.  Changes in interest income and expense that are not attributable specifically to either rate or volume are allocated proportionately among both variances.

Consolidated Rate / Volume Variance Analysis
(In thousands)	Three Months Ended March 31, 2012
	Compared to 2011
	Increase (Decrease)
	in interest income and expense
	due to changes in:
	Volume			Rate			Total
Interest-earning assets:
Loans, net of unearned income	$	2,033		$	477		$	2,510
Investment securities		260			(47	)		213
Other interest income		33			1			34
Total increase in interest income		2,326			431			2,757
Interest-bearing liabilities:
Transaction accounts		14			(23	)		(9	)
Savings deposits		72			(106	)		(34	)
Certificates of deposit		121			(112	)		9
Total interest-bearing deposits		207			(241	)		(34	)
Other short-term borrowings		(5	)		-			(5	)
Trust preferred securities		27			30			57
Total borrowed funds		22			30			52
Total increase (decrease) in interest expense		229			(211	)		18
Increase in net interest income	$	2,097		$	642		$	2,739

The tables above show the effect of the significantly higher volume of assets and liabilities from the acquisition, as well as the impact of lower rates paid on deposit accounts.

Based on current economic forecasts, the Bank anticipates that short-term interest rates will remain at a very low level throughout 2012 and 2013.  If so, we expect to see certificate of deposit rates continue to decline, although the pace of that decline is expected to slow.  With loan rates remaining relatively stable, this decrease in deposit rates should result in a slight improvement in our net interest margin.  In the early stage of the next cycle of rising interest rates we would expect to see deposits reprice somewhat faster than loans, as “floors” (minimum rates) have been implemented on approximately 60% of the variable rate loan portfolio, or approximately $140 million in loans.  Many of those floor rates are currently higher than the rate would be without the imposition of the floor.  As a result, that portion of the variable rate loan portfolio will not generate a material increase in interest income until the prime rate increases by at least two percentage points from its current level.  The remaining 40% of variable rate loans will respond to rising rates much more quickly, however.  A potential risk to the net interest margin would be any additional loans that might be placed in non-accrual status in the coming months.  Additional non-accrual loans would put downward pressure on the net interest margin.

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Provision for Loan Losses

The Bank recorded a $225 thousand provision for loan losses for the three months ended March 31, 2012, as compared with no loan loss provision for the first three months of 2011.

Loan charge-offs totaled $1 thousand (with $12 thousand in recoveries) for the first quarter of 2012, as compared with $8 thousand of charge-offs and $55 thousand of recoveries for the same period in 2011.  The ratio of allowance for loan losses to total loans was 1.58% at March 31, 2012, as compared with 1.43% as of December 31, 2011.

The Bank makes provisions for loan losses when required to bring the total allowance for loan losses to a level deemed appropriate for the risk in the loan portfolio. The determination of the appropriate level for the allowance is based on such factors as historical loss experience, the volume and type of lending conducted, the amount of nonperforming loans, regulatory standards, general economic conditions, and other factors related to the collectability of loans in the portfolio.

The provision for loan losses and allowance for loan losses reflect management’s consideration of the various risks in the loan portfolio.  Additional discussion of loan quality and the allowance for loan losses is provided in the Asset Quality, Potential Problem Loans and Allowance for Loan and Lease Losses sections of this report.

Non-Interest Income

Non-interest income represents service charges on deposit accounts and other non-interest related charges and fees, including gains and servicing fees from the sale of loans and gains or losses on sales of securities and other real estate owned.  For the three-month period ended March 31, 2012, non-interest income was $38 thousand, a decrease of $786 thousand from the same period in 2011.

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The following table shows the major components of non-interest income:

Non-Interest Income
(In thousands)	For the Three Months Ended March 31,
	$ Amount						Change
	2012			2011			$			%
Service charges on deposit accounts	$	207		$	77		$	130			169	%
Gain on sale of loans		8			106			(98	)		-92	%
Loan servicing fees, net of amortization		38			24			14			58	%
Gain on sale or call of available-for-sale securities		1			-			1		nm
Net gains(losses) or writedowns of fixed assets or other real estate		(358	)		(47	)		(311	)	nm
Change in fair value of warrant liability		30			552			(522	)		-95	%
Other income and fees		112			112			-			0	%
Total non-interest income	$	38		$	824		$	(786	)		-95	%

 nm - not meaningful

The decrease in non-interest income was primarily due write-downs on the value of other real estate owned and decreased income from changes if the fair value of warrant liability.

Non-Interest Expense

Non-interest expense represents salaries and benefits, occupancy expenses, professional fees, outside services, and other miscellaneous expenses necessary to conduct business.  Non-interest expenses increased by $2.644 million, or 103%, for the three months ended March 31, 2012, as compared to the first quarter of 2011.

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The following table shows the major components of non-interest expenses:

Non-Interest Expense
(In thousands)	For the Three Months Ended March 31,
	$ Amount				Change
	2012		2011		$			%
Salaries and employee benefits	$	2,483	$	1,315	$	1,168			89	%
Occupancy expenses		455		321		134			42	%
Furniture and equipment		179		114		65			57	%
Data processing		792		201		591			294	%
Professional fees		409		130		279			215	%
Marketing and business development		125		37		88			238	%
Office supplies and expenses		210		59		151			256	%
Insurance and regulatory assessments		153		145		8			6	%
Loan and lease expenses		64		37		27			73	%
Other real estate expenses		46		56		(10	)		-18	%
Amortization of core deposit intangible asset		101		-		101		nm
Other		192		150		42			28	%
Total non-interest expense	$	5,209	$	2,565	$	2,644			103	%

 nm = not meaningful

The increase in non-interest expense was principally from:

· An increase in salaries and benefits due to employees added with the Santa Lucia acquisition, as well as additional officers hired over the past year in preparation for planned growth,

· Increased software and network management costs due to the integration of Santa Lucia Bank, including necessary system upgrades (included in data processing expenses in the table above),

· Professional fees related to the Santa Lucia Bank acquisition, which totaled $112 thousand for the first quarter of 2012.

Insurance and regulatory assessments were virtually flat despite a more than doubling of deposit balances as a result of the merger.  FDIC deposit insurance assessments decreased by $39 thousand from the first quarter of 2011 to the first quarter of 2012.  These decreased assessments were the result of improvement in the Bank’s deposit insurance risk category based on its most recent regulatory examination, and also to the change in the FDIC assessment formula as mandated by the Dodd-Frank Act.  All other insurance premiums (property/casualty, fidelity bond, liability, etc.) increased by $31 thousand.

Page 35 of 50

Income Taxes

Due to a limitation on the Company’s ability to recognize deferred tax assets, no federal income tax expense or benefit was recognized for the three-month periods ended March 31, 2012.

Balance Sheet Analysis

At March 31, 2012, consolidated assets totaled $457.1 million, as compared with $462.2 million at December 31, 2011.  This represents a decrease of $5.1 million (1.1%) over the past three months.  Total loans decreased $7.3 million (3.1%) over that period, while securities and cash equivalents increased $5.7 million (2.2%), deposits decreased $5.3 million (1.3%) and shareholders’ equity increased $4.7 million (16.5%).  The increase in shareholders’ equity was primarily due to additional paid-in capital transferred from the warrant liability for warrants cancelled during the quarter.  See also the Capital section of this report.

The following table shows balance sheet growth trends over the past five quarters:

Balance Sheet Growth
(dollars in thousands)	Increase(Decrease) From Previous Quarter End
	March 31, 2012						December 31, 2011						September 30, 2011						June 30, 2011						March 31, 2011
	$			%			$			%			$			%			$			%			$			%
Total Assets	$	(5,110	)		-1.1	%	$	227,535			97.0	%	$	9,378			4.2	%	$	7,650			3.5	%	$	(182	)		-0.1	%
Earning Assets		(1,782	)		-0.4	%		200,180			89.2	%		9,092			4.2	%		10,711			5.2	%		(1,384	)		-0.7	%
Loans		(7,271	)		-3.1	%		114,015			95.6	%		2,991			2.6	%		(1,516	)		-1.3	%		(2,474	)		-2.1	%
Deposits		(5,294	)		-1.3	%		219,028			114.3	%		9,266			5.1	%		7,622			4.4	%		1,418			0.8	%
Shareholders' Equity		4,701			16.5	%		(4,573	)		-13.8	%		(223	)		-0.7	%		512			1.6	%		(169	)		-0.5	%

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Loans

The following table shows the composition of our loans by type of loan (including loans held for sale):

Loan Composition
(Dollars in thousands)
	March 31, 2012					December 31, 2011
Type of Loan	Amount		Percentage			Amount		Percentage
Construction and land development	$	18,087		8.0	%	$	18,022		7.6	%
Commercial real estate - owner-occupied		70,894		31.4	%		70,153		30.0	%
Commercial real estate - non-owner-occupied		60,302		26.7	%		64,382		27.6	%
Residential real estate		33,012		14.6	%		32,609		14.0	%
All other real estate loans		2,014		0.9	%		2,321		1.0	%
Commercial and industrial loans		26,019		11.5	%		30,176		12.9	%
Agricultural loans		9,524		4.2	%		9,272		4.0	%
Municipal loans		2,388		1.1	%		2,393		1.0	%
Leases, net of unearned income		1,835		0.8	%		2,323		1.0	%
Consumer loans		1,895		0.8	%		2,018		0.9	%
Total loans	$	225,970		100.0	%	$	233,669		100.0	%

The table shows a $7.7 million decrease in loans outstanding since December 31, 2011—primarily due to loan pay-downs, but also due to $2.2 million of loan participations sold to an affiliated organization.

Asset Quality

Non-accrual loans (including loans held for sale) totaled $8.2 million at March 31, 2012, as compared to $8.6 million at December 31, 2011 and $8.5 million at March 31, 2011.

Management classifies loans as non-accrual when principal or interest is past due 90 days or more based on the contractual terms of the loan, unless the loan is well-secured and in the process of collection.  Loans that are not past-due 90 days or more will also be classified as non-accrual when, in the opinion of management, there exists a reasonable doubt as to the full and timely collection of either principal or interest.  Once a loan is classified as non-accrual, it may not be reclassified as an accruing loan until all principal and interest payments are brought current and the loan is considered to be collectible as to both principal and interest.

Restructured loans are those loans with concessions in interest rates or repayment terms due to financial difficulties of the borrower.  Foreclosed real estate represents real estate acquired in satisfaction of loans through foreclosure or other means and is carried on an individual asset basis at the lower of the recorded investment in the related loan or the estimated fair value of the property, less selling expenses.

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The following table presents information about the Company’s non-performing loans, including quality ratios as of March 31, 2012, December 31, 2011 and March 31, 2011:

Non-Performing Assets*
(in thousands)	March 31			December 31			March 31
	2012			2011			2011
Loans in nonaccrual status:
Nonaccrual loans held for investment	$	5,475		$	6,557		$	1,362
Nonaccrual loans held for sale**		2,774			1,997			7,151
Loans past due 90 days or more and accruing		-			-			-
Restructured loans in accruing status		200			-			8
Total nonperforming loans		8,449			8,554			8,521
Foreclosed real estate		1,631			4,626			3,487
Total nonperforming assets	$	10,080		$	13,180		$	12,008
Real estate held for possible future branch office		400			400			565
Total nonperforming loans and other real estate owned	$	10,480		$	13,580		$	12,573
Allowance for loan and lease losses allocated to impaired loans	$	392		$	81		$	35
Allowance for loan and lease losses allocated to loans held for sale**		-			-			-
Allowance for loan and lease losses allocated to all other loans		3,170			3,245			3,210
Total allowance for loan and lease losses	$	3,562		$	3,326		$	3,245
Asset quality ratios:
Non-performing assets to total assets		2.21	%		2.85	%		5.52	%
Excluding loans held for sale**		1.62	%		2.44	%		2.37	%
Non-performing loans to total loans		3.74	%		3.67	%		7.24	%
Excluding loans held for sale**		2.58	%		2.86	%		1.30	%
Allowance for loan and lease losses to total loans		1.58	%		1.43	%		2.76	%
Excluding loans held for sale**		1.62	%		1.45	%		3.08	%
Allowance for loan and lease losses to total non-performing loans		42	%		39	%		38	%
Excluding non-performing loans held for sale**		63	%		51	%		237	%

 *  Table combines bank and non-bank subsidiaries

** Loans held for sale consists of all loans held at Mission Asset Management, Inc. and SBA-guaranteed loans held for sale at Mission Community Bank. Loans held for sale are carried at fair value.

For comparison, ratios in the table above are presented both with and without loans held for sale.  Although declining, the level of non-performing loans continues to be high by historical standards, due to the significant downturn in the economy and reduction in real estate collateral values over the past three years.  The $8.4 million of non-performing loans as of March 31, 2012, includes $903 thousand of SBA-guaranteed loans, which are supported by $772 thousand of SBA loan guarantees.  The remaining $7.5 million of non-performing loans are loans which management has determined to be impaired.  A determination of impairment is one of expected payment nonperformance, but not necessarily probability of loss.  Based on a loan-by-loan analysis of collateral values or the present value of estimated cash flows, the extent of the impairment of those impaired loans in excess of amounts already charged off is estimated to be $392 thousand, and has been provided in the allowance for loan and lease losses.

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Nonperforming assets (which are comprised of nonperforming loans and foreclosed real estate) at March 31, 2012 were $10.5 million, a decrease of $3.1 million from the $13.6 million balance at December 31, 2011.  Foreclosed real estate represents real property taken by the Bank from the borrower either through foreclosure or through a deed in lieu of foreclosure, and is carried at the lesser of cost or fair market value, less estimated selling costs.

The following table provides a summary of the change in the balance of other real estate owned for the three months ended March 31, 2012:

Other Real Estate Owned
(dollars in thousands)	Three Months Ended
	March 31, 2012
Balance of foreclosed real estate at beginning of year	$	4,626
Real estate held for possible future branch office		400
Total other real estate owned at beginning of year	$	5,026
Foreclosures during the period		-
Additional investments in other real estate		-
Sales of other real estate to related party		(2,637	)
Writedowns on other real estate, net of gains on sale		(358	)
Balance of other real estate owned at end of period	$	2,031

Potential Problem Loans

At March 31, 2012, the Company had approximately $16.3 million of loans that were not categorized as non-performing but for which known information about the borrower’s financial condition caused management to have concern about the ability of the borrower to comply with the repayment terms of the loan.  The $16.3 million of potential problem loans are supported by $613 thousand of SBA loan guarantees.

Potential problem loans were identified through the ongoing loan review process and are subject to continuing management attention.  Management has provided in the allowance for loan and lease losses for potential losses related to these loans, based on an evaluation of current market conditions, loan collateral, other secondary sources of repayment and cash flow generation.

While credit quality, as measured by loan delinquencies and by the Company’s internal risk rating system, appears to be manageable as of March 31, 2012, there can be no assurances that new problem loans will not develop in future periods.  A further decline in economic conditions in the Company’s market area or other factors could adversely impact individual borrowers or the loan portfolio in general.  The Company has well defined underwriting standards and expects to continue with prompt collection efforts, but economic uncertainties or changes may cause one or more borrowers to experience problems in the coming months.

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Allowance for Loan and Lease Losses

The allowance for loan and lease losses (“ALLL”) at March 31, 2012 totaled $3.6 million, an increase of $11 thousand from December 31, 2011.  The ratio of ALLL to total loans at March 31, 2012, was 1.58%, as compared with 1.43% at December 31, 2011.  At March 31, 2012 and 2011, the ratio of ALLL to total non-performing loans was 42% and 38%, respectively.

The following table provides an analysis of the changes in the ALLL for the three-month periods ended March 31, 2012 and 2011:

Allowance for Loan and Lease Losses
(dollars in thousands)	Three Months Ended
	March 31,
	2012			2011
Balance at beginning of period	$	3,326		$	3,198
Provision for loan losses		225			-
Loans charged off		(1	)		(8	)
Recoveries of previous charge-offs		12			55
Net (charge-offs) recoveries		11			47
Balance at end of period	$	3,562		$	3,245
Allowance for loan losses as a percentage of:
Period end loans, including loan held for sale		1.58	%		2.76	%
Period end loans, excluding loans held for sale*		1.67	%		3.08	%
Total non-performing loans, including loans held for sale		42	%		38	%
Non-performing loans, excluding loans held for sale*		63	%		237	%
As a percentage of average loans (annualized):
Net charge-offs (recoveries)		-0.02	%		-0.16	%
Provision for loan losses		0.39	%		0.00	%
Total loans, including loans held for sale	$	225,970		$	117,751
Loans excluding loans held for sale		213,513			105,294

* Loans held for sale consists of all loans held at Mission Asset Management, Inc. and SBA-guaranteed loans held for sale at Mission Community Bank. Loans held for sale are carried at fair value.

The Bank makes provisions for loan losses when required to bring the total allowance for loan and lease losses to a level deemed appropriate for the level of risk in the loan portfolio.  At least quarterly, management conducts an assessment of the overall quality of the loan portfolio and general economic trends in the local market.  The determination of the appropriate level for the allowance is based on that review, considering such factors as historical loss experience for each type of loan, the volume and type of lending conducted, the amount of identified potential loss associated with specific nonperforming loans, collateral values, regulatory policies, general economic conditions, and other factors related to the collectability of loans in the portfolio.

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Based on its quarterly review, management believes that the allowance for loan losses at March 31, 2012, is sufficient to absorb losses inherent in the loan portfolio.  This assessment is based upon the best available information and does involve uncertainty and matters of judgment.   Accordingly, the adequacy of the allowance cannot be determined with precision and could be susceptible to significant change in future periods.

In addition, management has established a reserve for undisbursed loan commitments.  As of March 31, 2012 and December 31, 2011, this reserve totaled $381 thousand, and is included in other liabilities in the consolidated balance sheet.

Investments

All securities in the Bank’s investment portfolio are considered to be investment grade.  The portfolio consists of a mixture of fixed-rate US agency securities (21%), fixed-rate mortgage-backed securities (36%), floating-rate mortgage-backed securities (30%), fixed-rate tax-exempt municipal securities (4%), and other fixed-rate securities (9%).  The Bank has no investments in FannieMae or FreddieMac equity securities (common or preferred) and none of the mortgage-backed securities are backed by “sub-prime” mortgages.  The weighted average life of the portfolio is 3.6 years, with a projected duration of 3.3 years.

Deposits

Deposits are the primary source of funding for lending and investing needs.  Total deposits were $405.3 million as of March 31, 2012, as compared with $410.6 million at December 31, 2011, and $174.7 million at March 31, 2011.

The Bank generally prices interest-bearing deposits at or above the median rate by classification based on periodic interest rate surveys in the local market.  Deposit rates are then adjusted, using a deposit pricing model, to balance the cost of funds, funding needs and other asset and liability considerations.  The Net Interest Analysis and Rate/Volume Analysis earlier in this Discussion contain information regarding the average rates paid on deposits for the first three months of 2012 and 2011.

The Bank participates in the Certificate of Deposit Account Registry Service (“CDARS”) program.  This program permits the Bank’s customers to place their certificates of deposit at one institution—Mission Community Bank—and have those deposits fully-insured by the FDIC.  The CDARS program acts as a clearinghouse, matching deposits from one institution in the CDARS network of more than 3,000 banks with other network banks (in increments of less than the per-depositor FDIC insurance limit), so funds that a customer places with the Bank essentially remain on the Bank’s balance sheet.  The CDARS program has become very attractive since mid-year 2008 as local depositors sought out safety, with yield often a secondary concern.  As of March 31, 2012, the Bank had issued $42.4 million of certificates of deposit to local customers through the CDARS program, as compared with $41.9 million as of March 31, 2011.

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Borrowings

In addition to the Company’s junior subordinated debt securities, the Bank has a secured borrowing facility through the Federal Home Loan Bank of San Francisco (“FHLB”).  As of March 31, 2012 and December 31, 2011, the Bank had no outstanding borrowings from the FHLB.

Capital

Total shareholders’ equity has increased $4.701 million or 16.5%, from December 31, 2011, to March 31, 2012.  The increase was primarily due to additional paid-in capital transferred from the warrant liability for warrants cancelled during the quarter.

The following table shows the Bank’s capital ratios, as calculated under regulatory guidelines, compared to the regulatory minimum capital ratios and the regulatory minimum capital ratios needed to qualify as a “well-capitalized” institution at March 31, 2012, and December 31, 2011:

Mission Community Bank
Capital Ratios						Amount of Capital Required
(dollars in thousands)						To Be					To Be Adequately
	Actual					Well-Capitalized					Capitalized
	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of March 31, 2012:
Total Capital (to Risk-Weighted Assets)	$	37,053		13.78	%	$	26,887		10.0	%	$	21,510		8.0	%
Tier 1 Capital (to Risk-Weighted Assets)	$	33,685		12.53	%	$	16,132		6.0	%	$	10,755		4.0	%
Tier 1 Capital (to Average Assets)	$	33,685		7.56	%	$	22,284		5.0	%	$	17,827		4.0	%
As of December 31, 2011:
Total Capital (to Risk-Weighted Assets)	$	36,437		13.25	%	$	27,491		10.0	%	$	21,992		8.0	%
Tier 1 Capital (to Risk-Weighted Assets)	$	32,997		12.00	%	$	16,494		6.0	%	$	10,996		4.0	%
Tier 1 Capital (to Average Assets)	$	32,997		8.19	%	$	20,145		5.0	%	$	16,116		4.0	%

See also Effects of Inflation and Economic Issues below, for a discussion of EESA and its impact on the Company.

Liquidity

The Bank’s liquidity, which primarily represents the ability to meet fluctuations in deposit levels and provide for customers’ credit needs, is managed through various funding strategies that reflect the maturity structures of the sources of funds and the assets being funded.  The Bank’s liquidity is further augmented by payments of principal and interest on loans and increases in short-term liabilities such as demand deposits and short-term certificates of deposit.  Cash and cash equivalents (primarily federal funds sold) are the primary means for providing immediate liquidity.  The Company had $67.1 million in cash and cash equivalents on March 31, 2012, as compared with $61.6 million as of December 31, 2011.

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In order to meet the Bank’s liquidity requirements, the Bank endeavors to maintain an appropriate ratio of loans to deposits, and to maintain sufficient off-balance-sheet sources of funds which may be drawn upon when needed.  As of March 31, 2012, the Company’s loans-to-deposits ratio was 54%, as compared with 56% as of December 31, 2011.  This ratio has been declining over the past several quarters, as demand for quality credits has been weak through the economic downturn, while deposits have grown during this period. A low loan-to-deposit ratio indicates that the Bank has liquidity in place to meet potential needs for loan funding or deposit withdrawals.  The Bank’s sources of funding ratio, which measures available off-balance-sheet sources of funds as a percentage of total on-balance-sheet assets, was 46.7% as of March 31, 2012, as compared with 33.8% as of December 31, 2011.

One of the off-balance-sheet sources of funds is potential borrowing capacity through the FHLB.  FHLB borrowings are collateralized by loans and/or investments and can be structured over various terms ranging from overnight to ten years.  As of March 31, 2012, the Bank had no outstanding borrowings from the FHLB.  Interest rates and terms for FHLB borrowings are generally more favorable than the rates for similar term brokered certificates of deposit or for federal funds purchased.  The Bank has the potential (on a secured basis) to borrow from the FHLB up to approximately 25 percent of its total assets.  Based on this limitation and loans and securities pledged as of March 31, 2012, up to $113.7 million could be borrowed from the FHLB if needed.  FHLB borrowings may be used from time to time when needed as part of the Bank’s normal liquidity management to fund asset growth on a cost-effective basis.  The Bank has adequate loans and securities to pledge as collateral should it need additional liquidity that cannot be funded by deposits.

The Bank also has the ability to access the Federal Reserve Board’s “Discount Window” for additional secured borrowing should the need arise.

Off-Balance-Sheet Arrangements

In the normal course of business, the Bank enters into financial commitments to meet the financing needs of its customers, including commitments to extend credit and standby letters of credit.  Those instruments involve, to varying degrees, elements of credit and interest rate risk not recognized in the consolidated balance sheets.

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As of the dates indicated, the Bank had the following outstanding financial commitments whose contractual amount represents credit risk:

Loan Commitments
(in thousands)	March 31,		December 31,		March 31,
	2012		2011		2011
Commitments to Extend Credit	$	38,193	$	38,702	$	18,761
Standby Letters of Credit		1,836		2,444		861
	$	40,029	$	41,146	$	19,622

The Bank’s exposure to credit loss in the event of nonperformance on commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments.  Management has established a reserve for undisbursed loan commitments.  As of March 31, 2012, and December 31, 2011, this reserve totaled $381 thousand and is included in other liabilities in the consolidated balance sheets.

The Bank uses the same credit policies in making commitments as it does for loans reflected in the financial statements.  The effect on the Bank’s revenues, expenses, cash flows and liquidity from the unused portion of commitments to provide credit cannot be reasonably predicted, as there is no guarantee the lines of credit will ever be used.

Effects of Inflation and Economic Issues

A financial institution’s asset and liability structure is substantially different from that of an industrial firm in that primarily all assets and liabilities of a bank are monetary in nature, with relatively little investment in fixed assets or inventories.  Inflation has an important impact on the growth of total assets and the resulting need to increase equity capital at higher than normal levels in order to maintain an appropriate equity to assets ratio.  Management believes that the impact of inflation on financial results depends on the Company’s ability to react to changes in interest rates and, by such reaction, reduce the inflationary impact on performance.  Management has attempted to structure the mix of financial instruments and manage interest rate sensitivity in order to minimize the potential adverse effects of inflation or other market forces on net interest income and, therefore, earnings and capital.

San Luis Obispo and Santa Barbara Counties continue to have unemployment rates (8.8% and 8.9%, respectively, as of March 2012), that are slightly above the nationwide rate of 8.2%, yet significantly below the California statewide seasonally-adjusted rate of 11.0%.  San Luis Obispo County’s rate is down from a high of 10.6% early in 2010, while Santa Barbara County’s rate peaked at 10.1%.  As unemployment increased during the Great Recession, real estate values declined significantly and, after several years of strong appreciation, residential and commercial sale activity—and especially construction activity—slowed dramatically.  Although the economy appears to be improving, there can be no assurance that the local economy will rebound quickly or that real estate values will return to pre-2006 levels in the near term.

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Item 3.                      Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 4.                      Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.  Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files under the Exchange Act is accumulated and communicated to management, including the principal executive officer and the principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Management had previously determined that the Company’s internal control over financial reporting as of December 31, 2011 was ineffective, resulting in the restatement of certain consolidated financial statements included in previous 1934 Act filings.  The restated financial statements were filed on March 30, 2012.  Specifically, management determined that the Company did not maintain effective control over the financial reporting process utilized to interpret applicable accounting literature for certain warrants and preferred stock, which resulted in a misstatement of shareholders’ equity and loss per share.

Remediation Efforts

The Company has been actively remediating this material weakness, focusing remediation efforts on establishing additional accounting and financial reporting processes when events or transactions occur outside of the Company’s usual and routine course of business.  While we had processes in place to identify and apply changes in accounting standards, we enhanced these processes to better research and evaluate the nuances of complex accounting standards and their application to non-routine transactions.  Additionally, we have improved training and communication among our accounting staff, our legal team, our consultants and our internal and external auditors.  Management will continue to review and make necessary changes to the overall design of our internal control environment.

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Under the supervision of our management, including our principal executive officer and principal financial officer, the Company conducted, as of March 31, 2012, an assessment of the effectiveness of the design and operation of our disclosure controls and procedures.  Based on that evaluation, our principal executive officer and the principal financial officer have concluded that our disclosure controls and procedures, as remediated, were effective as of March 31, 2012.

Changes in Internal Control Over Financial Reporting

Other than as mentioned above, there were no changes in our internal control over financial reporting during the quarter ended March 31, 2012, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

There are no material legal proceedings to which the Company is a party or to which any of its property is subject.

Item 1A. Risk Factors

Not applicable.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Page 46 of 50

Item 6. Exhibits

Exhibit Index:

Exhibit #
2.1	Plan of Reorganization and Agreement of Merger dated as of October 4, 2000 (A)
3.1	Restated Articles of Incorporation  (I)
3.2	Certificate of Amendment to Articles of Incorporation (L)
3.3	Certificate of Amendment to Articles of Incorporation (Y)
3.4	Amended and Restated Bylaws  (DD)
4.1	Certificate of Determination for Series A Non-Voting Preferred Stock (B)
4.2	Certificate of Determination for Series B Non-Voting Preferred Stock (B)
4.3	Certificate of Determination for Series C Non-Voting Preferred Stock (D)
4.4	Indenture dated as of October 14, 2003 by and between Registrant and Wells Fargo Bank, National Association, as trustee (E)
4.5	Declaration of Trust of Mission Community Capital Trust I dated  October 10, 2003 (E)
4.6	Amended and Restated Declaration of Trust of Mission Community Capital Trust I dated October 14, 2003 by and among the Registrant, Wells Fargo Delaware Trust Company, as Trustee, and Anita M. Robinson and William C. Demmin, as Administrators (E)
4.7	Guarantee Agreement dated October 14, 2003 between Registrant, as Guarantor, and Wells Fargo Bank, National Association, as Guarantee Trustee (E)
4.8	Certificate of Determination for Series D Preferred Stock (R)
4.9	Form of Common Stock Purchase Warrant (Z)
4.10	Form of Warrant Agreement for warrants issued pursuant to subscription rights (AA)
4.11	Form of Warrant Issued to Replace Warrants Issued in 2010 Private Placement (EE)
4.12	Form of Warrant Issued to Replace Warrants Issued in 2011 Private Placement (EE)
4.13	Amended and Restated Declaration of Trust, dated as of April 28, 2006, of Santa Lucia Bancorp (CA) Capital Trust (FF)
4.14	Indenture dated as of April 28, 2006, between Wells Fargo Bank, National Association, as Trustee, and Santa Lucia Bancorp (FF)
4.15	First Supplemental Indenture dated as of October 21, 2011 between Wells Fargo Bank, National Association, as trustee, and Mission Community Bancorp (FF)
10.1	Purchase and Sale Agreement and Lease dated January, 1997, as amended (B)
10.2	Intentionally omitted
10.3	Lease Agreement – Paso Robles (B)
10.4	Lease Agreement – Arroyo Grande (B)
10.5	1998 Stock Option Plan, as amended (B)
10.6	Lease Agreement – 569 Higuera, San Luis Obispo (D)
10.7	Intentionally omitted
10.8	Lease Agreement – 3480  S. Higuera, San Luis Obispo (F)
10.9	Salary Protection Agreement — Mr. Pigeon (G)
10.10	Intentionally omitted

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Exhibit #
10.11	Employment Agreement dated June 3, 2007 between Brooks Wise and Mission Community Bank (J)
10.12	Financial Advisory Services Agreement dated January 4, 2007 between the Company and Seapower Carpenter Capital, Inc. (K)
10.13	Build-to-Suit Lease Agreement between Walter Bros. Construction Co., Inc. and Mission Community Bank for property at South Higuera Street and Prado Road in San Luis Obispo, California (N)
10.14	Lease Agreement – 1670 South Broadway, Santa Maria (O)
10.15	Mission Community Bancorp 2008 Stock Incentive Plan (P)
10.16	Amendment No. 1 to Second Amended and Restated Employment Agreement dated December 29, 2008 by and among Mission Community Bancorp, Mission Community Bank, and Anita M. Robinson (Q)
10.17	Amendment No. 1 to Employment Agreement dated December 29, 2008 by and among Mission Community Bancorp, Mission Community Bank, and Brooks W. Wise (Q)
10.18	Amended and Restated Salary Protection Agreement dated December 29, 2008 by and between Mission Community Bank and Ronald B. Pigeon (Q)
10.19	Letter Agreement dated January 9, 2009 between Mission Community Bancorp and the United States Department of Treasury, which includes the Securities Purchase Agreement—Standard Terms attached thereto, with respect to the issuance and sale of the Series D Preferred Stock (R)
10.20	Side Letter Agreement dated January 9, 2009 amending the Stock Purchase Agreement between Mission Community Bancorp and the Department of the Treasury (R)
10.21	Side Letter Agreement dated January 9, 2009 between Mission Community Bancorp and The Department of the Treasury regarding maintenance of two open seats on the Board of Directors (R)
10.22	Side Letter Agreement dated January 9, 2009 between Mission Community Bancorp and The Department of the Treasury regarding CDFI status (R)
10.23	Securities Purchase Agreement dated December 22, 2009 between the Company and Carpenter Fund Manager GP, LLC (“Securities Purchase Agreement”) (U)
10.24	Amendment No. 1 to Securities Purchase Agreement dated March 17, 2010 (V)
10.25	Amendment No. 2 to Employment Agreement of Brooks Wise dated March 22, 2010 (W)
10.26	Amendment No. 2 to Securities Purchase Agreement dated March 17, 2010 (X)
10.27	Employment Agreement dated July 1, 2010 between James W. Lokey and Mission Community Bancorp (Y)
10.28	Agreement and Plan of Merger dated as of June 24, 2011 by and among Carpenter Fund Manager GP, LLC; Mission Community Bancorp; Mission Community Bank; Santa Lucia Bancorp and Santa Lucia Bank (BB)
10.29	2011 Equity Incentive Plan (CC)
31.1	Certification of CEO pursuant to Section 302 of Sarbanes Oxley Act
31.2	Certification of CFO pursuant to Section 302 of Sarbanes Oxley Act
32.1	Certification of CEO pursuant to Section 906 of Sarbanes Oxley Act
32.2	Certification of CFO pursuant to Section 906 of Sarbanes Oxley Act
101	Interactive Data Files

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(A) Included in the Company’s Form 8-K filed on December 18, 2000, and incorporated by reference herein.

(B) Included in the Company’s Form 10-KSB filed on April 2, 2001, and incorporated by reference herein.

(C) Included in the Company’s Form 10-QSB filed August 12, 2002, and incorporated by reference herein.

(D) Included in the Company’s Form 10-QSB filed on November 12, 2002, and incorporated by reference herein.

(E) Included in the Company’s Form 8-K filed on October 21, 2003, and incorporated by reference herein.

(F) Included in the Company’s Form 10-QSB filed on August 10, 2004, and incorporated by reference herein.

(G) Included in the Company’s Form 8-K filed on January 19, 2005, and incorporated by reference herein.

(H) Intentionally omitted

(I) Included in the Company’s Form 10-QSB filed on August 14, 2006, and incorporated by reference herein.

(J) Included in the Company’s Form 8-K filed on June 13, 2007, and incorporated by reference herein.

(K) Included in the Form SB-2 Registration Statement of the Company filed on June 13, 2007, and incorporated by reference herein.

(L) Included in Pre-Effective Amendment No. 1 to the Form SB-2 Registration Statement of the Company filed on July 24, 2007, and incorporated by reference herein.

(M) Included in the Company’s Form 8-K filed on August 14, 2007, and incorporated by reference herein.

(N) Included in the Company’s Form 8-K filed on October 23, 2007, and incorporated by reference herein.

(O) Included in the Company’s Form 10-KSB filed on March 28, 2008, and incorporated by reference herein.

(P) Included in the Company’s Form 10-Q filed on May 15, 2008, and incorporated by reference herein.

(Q) Included in the Company’s Form 8-K filed on December 30, 2008, and incorporated by reference herein.

(R) Included in the Company’s Form 8-K filed on January 14, 2009, and incorporated by reference herein.

(S) Included in the Company’s Form 10-Q filed on August 14, 2009, and incorporated by reference herein.

(T) Included in the Company’s Form 10-K filed on March 16, 2009, and incorporated by reference herein.

(U) Included in the Company’s From 8-K filed on December 24, 2009, and incorporated by reference herein.

(V) Included in the Company’s Form 8-K filed on March 22, 2010, and incorporated by reference herein.

(W) Included in the Company’s Form 8-K filed on March 26, 2010, and incorporated by reference herein.

(X) Included in the Company’s Form 8-K filed on June 1, 2010, and incorporated by reference herein.

(Y) Included in the Company’s Form 8-K filed on August 2, 2010, and incorporated by reference herein.

(Z) Included in the Company’s Form S-1 Registration Statement filed on August 31, 2010, and incorporated by reference herein.

(AA) Included in Amendment No. 1 to the Company’s Form S-1 Registration Statement filed on October 1, 2010, and incorporated by reference herein.

(BB) Included in the Company’s Form 8-K filed on June 27, 2011, and incorporated by reference herein.

(CC) Included in the Company’s Form 8-K filed on September 30, 2011, and incorporated by reference herein.

(DD) Included in the Company's Form 8-K filed on March 29, 2012, and incorporated herein by reference.

(EE) Included in the Company's Form 8-K on filed on March 26, 2012, and incorporated herein by reference.

(FF) Included in the Company's Form 8-K filed on October 27, 2012, and incorporated herein by reference.

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Signatures

Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

MISSION COMMUNITY BANCORP

By:  /s/ James W. Lokey

JAMES W. LOKEY

Chairman and Chief Executive Officer

Dated:  May 9, 2012

By:  /s/ Mark R. Ruh

MARK R. RUH

Executive Vice President and Chief Financial Officer

Dated:  May 9, 2012

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