The following is an analysis of the results of operations and financial condition of the Company for the periods ending September 30, 2008 and 2007. The analysis should be read in connection with the consolidated financial statements and notes thereto appearing elsewhere in this report and in conjunction with "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Form 10-K for the year ended December 31, 2007.

Forward Looking Statements

This Form 10-Q includes forward-looking statements that involve inherent risks and uncertainties. Words such as "expects", "anticipates", "believes", "projects", and "estimates" or variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed, forecast in, or implied by such forward looking statements.

A variety of factors could have a material adverse impact on the Company's financial condition or results of operations, and should be considered when evaluating the potential future financial performance of the Bank. These include, but are not limited to, the possibility of further deterioration in economic conditions in the Coachella Valley the Company's service area; risks associated with fluctuations in interest rates; liquidity risks; asset/liability matching risks; the competitive environment in which the Company operates and its impact upon the Company's net interest margin; increases in non-performing assets and net credit losses that could occur, particularly in times of weak economic conditions or rising interest rates; and risks associated with the many current and future laws and regulations to which the Company is subject.

Overview

The Company is a bank holding company with a single banking subsidiary. The Company was incorporated on January 18, 2006, for the purpose of acquiring Canyon National Bank. Effective June 30, 2006, the Company acquired all of the stock of the Bank pursuant to a Plan of Reorganization, dated February 14, 2006, between the Company and the Bank. Pursuant to the Plan of Reorganization, the shares of the Bank's common stock were exchanged for shares of the common stock of the Company on a share-for-share basis. As a result, upon the consummation of the reorganization on June 30, 2006, the Bank became a wholly-owned subsidiary of the Company and the shareholders of the Bank became the shareholders of the Company. The Bank is a national banking association which was organized on March 6, 1998, and is headquartered in Palm Springs, California. Palm Springs is located in the Coachella Valley, which is located within Riverside County in Southern California. The Bank received its charter to commence the business of banking from the Office of the Comptroller of the Currency ("OCC") on July 10, 1998. Concurrent with OCC approval, FDIC deposit insurance became effective and began insuring depositor's accounts up to $100,000. In July 1998, the Bank opened for business and commenced banking operations at its main office located at 1711 East Palm Canyon Drive, Palm Springs, California. In addition to its main office, the Bank has three branch offices, one in Palm Springs and two in Palm Desert. The Bank's most recently opened branch, located at 77-933 Las Montanas Road, Palm Desert, California, commenced operations on March 23, 2006.

As of November 11, 2008, the Company's 2,511,051 shares of Common Stock are held by 300 shareholders of record. Common Stock of the Company is traded on the OTC Bulletin Board under the symbol "CYBA".

Critical Accounting Policies

The Company's accounting policies are integral to understanding the results reported. Most complex accounting policies require management's judgment to ascertain the valuation of assets, liabilities, commitments and contingencies. The Company has established detailed policies and control procedures that are intended to ensure valuation methods are well controlled and applied consistently from period to period. In addition, the policies and procedures are intended to ensure that the process for changing methodologies occurs in an appropriate manner. The following is a brief description of current accounting policies involving significant management valuation judgments.

Allowance for Loan Losses

The allowance for loan losses represents management's best estimate of losses inherent in the existing loan portfolio. The allowance for loan losses is increased by the provision for loan losses charged to expense and reduced by loans charged-off, net of recoveries.

Management evaluates the allowance for loan losses on a monthly basis. Management believes that the allowance for loan losses is a "critical accounting estimate" because it is based upon management's assessment of various factors affecting the collectability of the loans, including current and projected economic conditions, past credit experience, delinquency status, the value of the underlying collateral, if any, and a continuing review of the portfolio of loans and commitments.

The Company determines the appropriate level of the allowance for loan losses, primarily based on an analysis of the various components of the loan portfolio, including all significant credits on an individual basis. The loan portfolio is segmented into components. Each component would normally have similar characteristics, such as risk classification, type of loan, or collateral. The following components of the portfolio are analyzed and an allowance for loan losses is provided for:

• All significant credits on an individual basis that are classified doubtful or substandard.

• All other significant credits reviewed individually. If no allocation can be determined for such credits on an individual basis, they shall be provided for as part of an appropriate pool.

• All other loans that are not included by the credit grading system in the population of loans reviewed individually, but are delinquent or are classified or designated special mention (e.g., pools of smaller delinquent, special mention and classified commercial and industrial, real estate loans).

• Homogenous loans that have not been reviewed individually, or are not delinquent, classified, or designated as special mention (e.g., pools of real estate mortgages).

• All other loans that have not been considered or provided for elsewhere (e.g., pools of commercial and industrial loans that have not been reviewed, classified, or designated special mention, standby letters of credit, and other off-balance sheet commitments to lend).

Although Management believes the level of the allowance at September 30, 2008 is adequate to absorb losses inherent in the loan portfolio, a continued decline in the regional economy may result in increasing losses that cannot reasonably be predicted at this time. For further information regarding the allowance for loan losses, see "Financial Condition-Allowance for Loan Losses."

Available for Sale Securities

SFAS 115 requires that available for sale securities be carried at fair value. The Company believes this is a "critical accounting estimate" in that the fair value of a security is based on quoted market prices or if quoted market prices are not available, fair values are extrapolated from the quoted prices of similar instruments. Adjustments to the fair value of available for sale securities impact the consolidated financial statements by increasing or decreasing assets and stockholders' equity.

Deferred Tax Assets

Deferred income taxes reflect the estimated future tax effects of temporary differences between the reported amount of assets and liabilities for financial reporting purposes and such amounts as measured by tax laws and regulations. The Company uses an estimate of future earnings to support our position that the benefit of our deferred tax assets will be realized. If future income should prove non-existent or less than the amount of the deferred tax assets within the tax years to which they may be applied, the asset may not be realized and net income will be reduced.

Financial Condition

At September 30, 2008, total assets were $295.4 million compared to $289.2 million at December 31, 2007, resulting in a $6.3 million or 2.2% increase in total assets over the nine-month period. Over this same nine-month period, net loans receivable increased $5.1 million or 2.1%, investment securities available for sale decreased by $0.2 million or 1.5% and cash and cash equivalents decreased by $2.1 million or 15.7%. At September 30, 2008 and December 31, 2007, net loans receivable comprised 85.8% and 85.9%, respectively, of total assets and represented 104.6% and 107.7%, respectively, of deposits.

Loan Portfolio

From year-end 2007, gross loans increased $5.2 million to $257.7 million at September 30, 2008. The largest loan category at September 30, 2008 is real estate loans-excluding construction loans-which constitutes 62.6% of gross loans. The next largest loan concentrations are commercial loans (23.6% of gross loans) secured by non-real estate assets or made on an unsecured basis and construction loans (11.7% of gross loans). To mitigate risks associated with construction lending, Management has modified policies and processes which have had the intended effect of reducing the construction loan portfolio from December 31, 2007 to September 30, 2008. Loans to consumers (that are not secured by real estate), including vehicle and unsecured personal loans, make up the smallest category of loans held by the Company (2.1% of gross loans). With the exception of loans to Native American entities, a majority of the Company's loans are made to borrowers residing, or doing business, within the Coachella Valley and surrounding region. Generally, collateral securing real estate loans, with the exception of loans made to Native American entities is located within the Coachella Valley. Loans, and related collateral, if any, to Native American related entities are generally located throughout the State of California and, to a lesser extent, other Western States.

As a market niche, the Company has strategically identified lending to Native American individuals, tribal governments, and tribal related entities. It is the Company's general policy to obtain a limited waiver of sovereign immunity to protect collateral or an income stream when collateral or a business is located on a reservation or the business is operated by a Native American government or related entity. Total loans to Native American individuals, governments and related entities at September 30, 2008 total $16.7 million, or 6.5% of gross loans, many of which are guaranteed by the United States Bureau of Indian Affairs.

The composition of the Company's loan portfolio at September 30, 2008 and December 31, 2007 is set forth below:

                           Loan Portfolio Composition

                             (dollars in thousands)



                                                        September 30,             December 31,
                                                            2008                      2007
                                                     Amount       Percent      Amount       Percent
Real estate:
Construction                                        $  30,171        11.7 %   $  46,182        18.3 %
Other                                                 161,385        62.6 %     148,384        58.8 %
Commercial                                             60,688        23.6 %      53,018        21.0 %
Consumer                                                5,409         2.1 %       4,872         1.9 %

Gross loans                                           257,653       100.0 %     252,456       100.0 %

Deferred loan origination fees and costs                 (739 )                    (941 )
Allowance for loan losses                              (3,339 )                  (3,047 )

Net loans                                           $ 253,575                 $ 248,468

Loans held for sale                                 $      -                  $     123

Principal balance guaranteed by federally insured
programs                                            $   7,767                 $   8,043

Principal balance outstanding to Native American
entities                                            $  16,667                 $  17,516

The weighted average interest rate on the loan portfolio at September 30, 2008, is 6.73%. At September 30, 2008, eighty-seven percent (87%) or $224.3 million of loan principal balances incorporate variable rate terms that reference an interest rate index such as Prime Rate, London Interbank Offered Rate (LIBOR), or a United States Treasury instrument. Seventy-one percent (71%) or $158.6 million of variable rate loans are indexed to Prime Rate. The principal balance outstanding of fixed rate loans with maturity dates five years or more into the future total approximately $12.1 million and $11.0 million at September 30, 2008 and December 31, 2007, respectively.

Commercial Real Estate Loans

In December 2006, the OCC, Board of Governors of the Federal Reserve System and FDIC (the "Agencies") issued final joint Guidance on Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices (the "Guidance"). This Guidance applies to national banks and state chartered banks and was developed to reinforce sound risk management practices for institutions with high and increasing concentrations of commercial real estate loans on their balance sheets.

For purposes of this Guidance, commercial real estate (CRE) loans are exposures secured by raw land, land development and construction (including 1-4 family residential construction, multi-family property, and nonresidential property) where the primary or significant source of repayment is derived from rental income associated with the property or the proceeds of the sale, refinancing, or permanent financing of the property.

The Guidance sets forth the following criteria to determine whether a concentration in CRE lending warrants the use of heightened risk management practices: (i) total loans for construction, land development, and other land represent one hundred percent (100%) or more of the Bank's total capital; or
(ii) total loan secured by multifamily proprieties, nonresidential properties, construction, land development, and other land represents three hundred percent (300%) or more of total capital.

Banks exceeding the threshold would be deemed to have a concentration in CRE loans and should have heightened risk management practices appropriate to the degree of CRE concentration risk of these loans in their portfolios and consistent with the Guidance. The Agencies have excluded loans secured by owner-occupied properties from the CRE definition because their risk profiles are less influenced by the condition of the general CRE market.

At September 30, 2008, the Company exceeded the Guidance threshold for construction and land loans with these loan balances comprising 165% of total capital. The Company's ratio of total CRE loans to total capital was 293% at September 30, 2008 and was within the Guidance threshold at that date. The Company believes it has adequate risk management practices in place in that it:

a) has secured United States Government guarantees on certain loans to mitigate potential losses, and

b) has instituted an extensive funds control process to disburse construction loan proceeds, and

c) has capital levels in excess of the well-capitalized amounts required by federal banking authorities to support possible future losses, and

d) has modified its minimum underwriting standards in response to changes in real estate values and a general slowing in the local and national economies, and

e) has instituted a reporting process to the Board of Directors to monitor concentrations.

To mitigate risks associated with construction lending, Management has modified policies and processes which have had the intended effect of reducing the construction loan portfolio.

The table on the following page sets forth the amount of total loans outstanding as of September 30, 2008 for real estate loans by sub category and occupancy type.

                       Commercial Real Estate (CRE) Loans

                             (dollars in thousands)



                                               As of September 30, 2008
                                            Owner     Non Owner
                                          Occupied     Occupied      Total
            Real Estate Loans
            Construction
            1 to 4 family residential     $   2,119   $   11,336   $  13,455
            Multifamily                          -            -           -
            Commercial                        3,548        6,662      10,210
            Land improvements                    -         6,506       6,506
            Other
            1 to 4 family residential        16,349       16,113      32,462
            Home equity lines of credit       6,748        1,500       8,248
            Multifamily                          -         2,559       2,559
            Commercial                       57,883       39,699      97,582
            Unimproved land                      -        20,534      20,534

            Total Real Estate Loans       $  86,647   $  104,909   $ 191,556

Off-Balance Sheet Arrangements

During the ordinary course of business, the Company provides various forms of credit facilities to meet the future financing needs of its clients. These commitments to provide credit represent an obligation of the Company to borrowers, which is not represented within the Company's balance sheets. At September 30, 2008 and December 31, 2007, the Company had $46.3 million and $56.6 million, respectively, of off-balance sheet commitments to fund certain loans. The composition of unfunded off-balance sheet loan commitments at September 30, 2008 is 17.5% undisbursed construction loans funds, 63.2% unused commercial lines of credit, 5.9% unused home equity lines of credit, and 13.4% obligations under letters of credit. These commitments represent a credit risk and potential future obligation of the Company.

The effect on the Company's revenues, expenses, cash flows and liquidity from the unused portion of loan commitments to provide credit cannot be reasonably predicted because there is no assurance that the lines of credit or other commitments will ever be used. However, unfunded commitments related to undisbursed construction loans are generally predictable in that disbursements on these loan types are used to facilitate the completion of construction of residential or commercial properties.

Non-performing Assets

Non-performing assets are comprised of loans on non-accrual status, loans restructured where the terms of repayment have been renegotiated resulting in a reduction or deferral of interest or principal, and other real estate owned ("OREO"). Loans are generally placed on non-accrual status when they become 90 days past due unless Management believes the loan is adequately collateralized and is in the process of collection. Loans may be restructured by Management when a borrower has experienced some change in financial status, causing an inability to meet the original repayment terms, and where the Company believes the borrower will eventually overcome those circumstances and repay the loan in full. OREO consists of properties acquired by foreclosure or similar means that Management intends to offer for sale.

Management's classification of a loan as non-accrual is an indication that there is reasonable doubt as to the full collectability of principal or interest on the loan; at this point, the Company stops recognizing income from the interest on the loan and may provide an allowance for uncollected interest that had been accrued but unpaid if it is determined uncollectible or the collateral is inadequate to support such accrued interest amount. These loans may or may not be collateralized, but collection efforts are pursued.

The allowance for loan losses as a percentage of gross loans was 1.30% at September 30, 2008 and 1.21% at December 31, 2007.

At September 30, 2008, the outstanding principal balance of nonperforming assets totaled $16.3 million and included $5.7 million in foreclosed assets and $10.6 million in nonaccrual loans. Nonperforming assets have increased during the first nine months of 2008 due to the deterioration of real estate values throughout Southern California which includes the Company's primary lending area. Loan balances are reported net of participation interests sold to others and are all sold without recourse. A majority of the nonperforming assets are construction loans located in the Company's primary lending area. Loan balances are also reported net of charged-off amounts.

Foreclosed assets at September 30, 2008 consisted of twenty-eight residential real properties and one personal property. Nonaccrual loans consisted primarily of construction and land loans. During the third quarter 2008, the Company repossessed nine real estate properties which were collateral for nonperforming loans and sold nine real estate properties that had been repossessed.

The increase in non-performing construction loans and repossessed properties stem primarily from the borrowers inability to dispose of properties at current market price. The Company has initiated foreclosure procedures on the properties where borrowers have been unable to repay their loans in accordance with the contractual terms of the loan. The Company is in varying stages of working with borrowers in order to resolve deficiencies, and completing foreclosure actions where efforts working with the borrowers have been unsuccessful. When efforts to resolve problem loans with borrowers are unsuccessful and collateral secures the loan, foreclosure or repossession efforts are initiated.

Management has determined the fair value of the collateral securing these loans and has charged off the amount, if any, in which the recorded book value exceeds the fair value of the collateral less sales costs. Should further deterioration in collateral values occur, additional charge-offs or write-downs would be recorded. Generally, reductions in fair value of loans are recorded as charge-offs from the allowance for loan losses and reductions of fair value for repossessed assets are charged against earnings. During the first nine months of 2008, $285,000 was recorded as reductions in fair value for foreclosed assets.

The table below sets forth non-performing assets as of September 30, 2008 and 2007, and December 31, 2007, as well as adversely classified loans as of these dates. Loans classified as nonperforming may also be adversely classified, resulting in the principal balance reported in both categories.

                             Non-performing Assets

                             (dollars in thousands)



                                                          September 30,           December 31
                                                        2008         2007            2007
Non-Performing assets
Foreclosed assets                                     $  5,683      $    -       $       3,073
Nonaccrual loans 1
Real Estate:
Construction                                             4,988          676                562
Other                                                    4,809          773                561
Commercial                                                 789           -                  -
Consumer                                                     4           -                  -
Loans 90 days or more past due & still accruing             -            -                  -

Total Nonperforming assets: 2                         $ 16,273      $ 1,449      $       4,196

Adversely classified loans: 1
Substandard
Real estate
Construction                                            10,314          238                249
Other                                                    5,253        2,122              1,836
Commercial                                                 970          550                250
Consumer                                                     4           -                   2

Total substandard                                       16,541        2,910              2,337

Doubtful
Real estate
Construction                                                -            -                  -
Other                                                       -            -                  -
Commercial                                                  -            -                  -
Consumer                                                    -            -                  -

Total doubtful                                              -            -                  -

Total adversely classified loans                      $ 16,541      $ 2,910      $       2,337

Ratio of adversely classified loans to gross loans
at period end                                              6.4 %        1.2 %              0.9 %
Ratio of nonaccrual loans to gross loans at period         4.1 %        0.6 %              0.4 %
Ratio of allowance for loan losses to
nonperforming assets 2                                    20.5 %      238.2 %             72.6 %
Ratio of allowance for loan losses to adversely
classified assets                                         20.2 %      118.6 %            130.4 %

1 Nonaccrual loan balances are generally included with adversely classified assets.

2 Nonperforming assets is defined as foreclosed assets, nonaccrual loans and loans 90 days or more past due and still accruing.

Allowance for Loan Losses

The Company maintains an allowance for loan losses at a level it considers adequate to cover the inherent risk of loss associated with its loan portfolio under prevailing economic conditions. In determining the adequacy of the allowance for loan losses, Management takes into consideration growth trends in the portfolio, examination by financial institution supervisory authorities, prior loan charge-offs, net of recoveries, experience of the Company's lending staff, concentrations of credit risk, delinquency trends, general economic conditions, the interest rate environment, and internal and external credit reviews.

The Company assesses the adequacy of the allowance on a monthly basis. This assessment is comprised of: (i) reviewing the adversely classified loans;
(ii) estimating the loss potential for adversely classified loans; and
(iii) applying a risk factor to segregate loan portfolios that have similar risk characteristics.

. . .