##### Table of Contents



FORM 10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

(Mark One)

|    |  |                                                                                         
|--- |  | ----------------------------------------------------------------------------------------
|[X] |  | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the quarterly period ended June 30, 2002.

|      |  |                                                                                          
|----- |  | -----------------------------------------------------------------------------------------
|[   ] |  | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the transition period from ____________________________ to ____________________________

Commission File Number: 333-43021

VIB Corp

---

(Exact name of registrant as specified in its charter)


|                                                                          |  |                                             
|------------------------------------------------------------------------- |  | --------------------------------------------
|California
(State or Other Jurisdiction of Incorporation
or Organization) |  | 33-0780371
(IRS Employer Identification No.)

1498 Main Street, El Centro, California 92243

---

(Address of Principal Executive Offices)


(760) 337-3200

---

(Registrants Telephone Number, Including Area Code)




---

(Former Name, Former Address and Former Fiscal Year, it changed since Last Report)


Indicate by check mark whether the registrant (1) filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes [X]         No [   ]

APPLICABLE ONLY TO CORPORATE ISSUERS:

State the number of shares outstanding of each of the issuers classes of
common stock, as of the latest practicable date: 13,587,031 shares as of August 2, 2002.

1



---

TABLE OF CONTENTS



|                             |                                                                                              |                                                           |  |  |  |  |  | 
|---------------------------- | -------------------------------------------------------------------------------------------- | --------------------------------------------------------- |  |  |  |  |  | 
|PART 1 FINANCIAL INFORMATION
|                             | ITEM 1. FINANCIAL STATEMENTS                                                                
|                             |                                                                                              | Consolidated Statements of Financial Condition           
|                             |                                                                                              | Consolidated Statements of Income                        
|                             |                                                                                              | Consolidated Statement of Changes in Shareholders Equity
|                             |                                                                                              | Consolidated Statements of Cash Flows (Unaudited)        
|                             | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)                                      
|                             | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
|                             | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK                           
|PART II OTHER INFORMATION   
|                             | ITEM 1. LEGAL PROCEEDINGS                                                                   
|                             | ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS                                           
|                             | ITEM 3. DEFAULTS UPON SENIOR SECURITIES                                                     
|                             | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                 
|                             | ITEM 5. OTHER INFORMATION                                                                   
|                             | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                    
|SIGNATURES                  
|Exhibit 3.1                 
|Exhibit 10.22               
|Exhibit 10.23               
|Exhibit 10.24               
|Exhibit 10.25               
|Exhibit 10.26               
|Exhibit 10.27               
|Exhibit 10.28               
|Exhibit 10.29               
|Exhibit 10.30               
|Exhibit 10.31               
|Exhibit 10.32               
|Exhibit 10.33               
|Exhibit 10.34               
|Exhibit 10.35               
|Exhibit 10.36               



---



##### Table of Contents






PART 1
FINANCIAL INFORMATION




ITEM 1. FINANCIAL STATEMENTS

The following Consolidated Balance Sheets, Consolidated Statements of Income,
Consolidated Statements of Cash Flows, and Consolidated Statement of
Stockholders Equity for the period ended June 30, 2002 have been prepared by
VIB Corp (the Company) without audit. In the opinion of management, all
adjustments (which include only normal recurring adjustments) necessary to
present fairly the financial position, results of operations and changes in
financial condition at or for the period ended June 30, 2002 have been made.
The results of operations for the period ended June 30, 2002 are not
necessarily indicative of the results that may be expected for the full year.

2



---



##### Table of Contents



VIB CORP AND SUBSIDIARIES




Consolidated Statements of Financial Condition


June 30, 2002 and December 31, 2001
(Unaudited)


|                                                          |                          |                                 |               |             |             |              |               |             |             | 
|--------------------------------------------------------- | ------------------------ | ------------------------------- | ------------- | ----------- | ----------- | ------------ | ------------- | ----------- | ----------- | 
|                                                          |                          |                                 |               | June 30,    |             | December 31,
|                                                          |                          |                                 |               | 2002        |             | 2001        
|                                                          |                          |                                 |               |             |             |             
|ASSETS                                                    |                          |                                 |               |             |             |              |               |            
|Cash and due from banks                                   |                          | $                               | 47,726,877    |             |             | $            | 57,164,524    |            
|Federal funds sold                                        |                          |                                 |              |             |             |              | 1,500,000     |            
|                                                          |                          |                                 |               |             |             |              |               |            
|                                                          |                          | Total cash and cash equivalents |               |             | 47,726,877  |              |               |             | 58,664,524  | 
|Interest bearing deposits                                 |                          |                                 | 64,855        |             |             |              | 648,035       |            
|Securities available for sale (note B)                    |                          |                                 | 334,629,506   |             |             |              | 194,471,496   |            
|Federal Home Loan and Federal Reserve Bank stock, at cost |                          |                                 | 13,727,950    |             |             |              | 11,140,250    |            
|Loans: (note C)                                           |                          |                                 |               |             |             |              |               |            
|                                                          | Commercial               |                                 |               | 78,538,607  |             |              |               | 84,744,363  |            
|                                                          | Agricultural             |                                 |               | 38,976,153  |             |              |               | 53,287,734  |            
|                                                          | Real estate-construction |                                 |               | 187,023,255 |             |              |               | 164,862,160 |            
|                                                          | Real estate-other        |                                 |               | 523,098,697 |             |              |               | 506,505,603 |            
|                                                          | Consumer                 |                                 |               | 28,650,582  |             |              |               | 32,520,842  |            
|                                                          |                          |                                 |               |             |             |              |               |            
|                                                          |                          | Total Loans                     |               |             | 856,287,294 |              |               |             | 841,920,702 | 
|Net deferred loan fees                                    |                          |                                 | (4,248,821    | )           |             |              | (4,146,246    | )          
|Allowance for credit losses                               |                          |                                 | (9,978,599    | )           |             |              | (9,344,248    | )          
|                                                          |                          |                                 |               |             |             |              |               |            
|                                                          |                          | Net Loans                       |               |             | 842,059,874 |              |               |             | 828,430,208 | 
|Premises and equipment                                    |                          |                                 | 11,453,881    |             |             |              | 12,310,908    |            
|Other real estate owned                                   |                          |                                 | 1,631,562     |             |             |              | 3,138,697     |            
|Cash surrender life insurance                             |                          |                                 | 31,301,086    |             |             |              | 22,581,441    |            
|Deferred tax asset                                        |                          |                                 | 6,120,010     |             |             |              | 7,338,000     |            
|Goodwill and intangible assets                            |                          |                                 | 16,842,386    |             |             |              | 17,149,444    |            
|Accrued interest and other assets                         |                          |                                 | 14,180,547    |             |             |              | 12,363,751    |            
|                                                          |                          |                                 |               |             |             |              |               |            
|TOTAL ASSETS                                              |                          | $                               | 1,319,738,534 |             |             | $            | 1,168,236,754 |            

The accompanying notes are an integral part of the consolidated financial statements.

3



---



##### Table of Contents



VIB CORP AND SUBSIDIARIES

Consolidated Statements of Financial Condition


June 30, 2002 and December 31, 2001
(Unaudited)


|                                                                                                                                                |                                                                                                                              |   |                            |             |          |               |               |             |  |               | 
|----------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------- | - | -------------------------- | ----------- | -------- | ------------- | ------------- | ----------- |  | ------------- | 
|                                                                                                                                                |                                                                                                                              |   |                            |             | June 30, |               | December 31, 
|                                                                                                                                                |                                                                                                                              |   |                            |             | 2002     |               | 2001         
|                                                                                                                                                |                                                                                                                              |   |                            |             |          |               |              
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                            |                                                                                                                              |   |                            |             |          |               |               |            
|Deposits                                                                                                                                        |                                                                                                                              |   |                            |             |          |               |               |            
|                                                                                                                                                | Noninterest-bearing demand                                                                                                   |   | $                          | 241,906,879 |          |               | $             | 239,820,321 | 
|                                                                                                                                                | Money Market and NOW                                                                                                         |   |                            | 215,632,866 |          |               |               | 205,078,944 | 
|                                                                                                                                                | Savings                                                                                                                      |   |                            | 73,782,734  |          |               |               | 63,806,829  | 
|                                                                                                                                                | Time deposits under $100,000                                                                                                 |   |                            | 194,967,503 |          |               |               | 182,953,344 | 
|                                                                                                                                                | Time deposits $100,000 and over                                                                                              |   |                            | 242,257,493 |          |               |               | 193,270,400 | 
|                                                                                                                                                |                                                                                                                              |   |                            |             |          |               |               |            
|                                                                                                                                                |                                                                                                                              |   | Total Deposits             |             |          | 968,547,475   |               |             |  | 884,929,838   | 
|Federal Home Loan Bank advances                                                                                                                 |                                                                                                                              |   | 213,323,209                |             |          |               | 156,218,358   |            
|Capital lease obligation                                                                                                                        |                                                                                                                              |   | 2,985,772                  |             |          |               | 2,976,966     |            
|Company-obligated mandatorily redeemable preferred
securities of subsidiary trusts holding solely junior
subordinated debentures of the Company |                                                                                                                              |   | 33,313,824                 |             |          |               | 33,360,672    |            
|Accrued interest and other liabilities                                                                                                          |                                                                                                                              |   | 9,580,996                  |             |          |               | 9,113,431     |            
|                                                                                                                                                |                                                                                                                              |   |                            |             |          |               |               |            
|                                                                                                                                                |                                                                                                                              |   | Total Liabilities          |             |          | 1,227,751,276 |               |             |  | 1,086,599,265 | 
|Shareholders Equity                                                                                                                            |                                                                                                                              |   |                            |             |          |               |               |            
|                                                                                                                                                | Preferred stock, no par value;
10,000,000 shares authorized;
Issued and outstanding: None                                    |   |                            |            |          |               |               |            | 
|                                                                                                                                                | Common stock, no par value,
125,000,000 shares authorized;
Issued and outstanding: 13,573,885 in 2002 and 13,038,488 in 2001 |   |                            | 75,557,161  |          |               |               | 69,655,705  | 
|                                                                                                                                                | Retained Earnings                                                                                                            |   |                            | 13,741,844  |          |               |               | 11,808,477  | 
|                                                                                                                                                | Accumulated other comprehensive
income, net of tax of $1,849,300 in
2002 and $120,433 in 2001                                |   |                            | 2,688,253   |          |               |               | 173,307     | 
|                                                                                                                                                |                                                                                                                              |   |                            |             |          |               |               |            
|                                                                                                                                                |                                                                                                                              |   | Total Stockholders Equity |             |          | 91,987,258    |               |             |  | 81,637,489    | 
|                                                                                                                                                |                                                                                                                              |   |                            |             |          |               |               |            
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                      |                                                                                                                              | $ | 1,319,738,534              |             |          | $             | 1,168,236,754 |            

The accompanying notes are an integral part of the consolidated financial statements.

4



---



##### Table of Contents



VIB CORP AND SUBSIDIARIES




Consolidated Statements of Income


(Unaudited)


|                                                      |                                                     |   |                     |            |                   |   |            |            |          |   |            |            |  |   |            |            | 
|----------------------------------------------------- | --------------------------------------------------- | - | ------------------- | ---------- | ----------------- | - | ---------- | ---------- | -------- | - | ---------- | ---------- |  | - | ---------- | ---------- | 
|                                                      |                                                     |   | For the Three Month |            | For the Six Month
|                                                      |                                                     |   | Period Ended        |            | Period Ended     
|                                                      |                                                     |   |                     |            |                  
|                                                      |                                                     |   | June 30,            |            | June 30,          |   | June 30,   |            | June 30,
|                                                      |                                                     |   | 2002                |            | 2001              |   | 2002       |            | 2001    
|                                                      |                                                     |   |                     |            |                   |   |            |            |         
|Interest Income:                                      |                                                     |   |                     |            |                   |   |            |            |          |   |            |            |  |   |            |           
|                                                      | Interest and Fees on Loans                          |   | $                   | 16,235,404 |                   |   | $          | 19,109,456 |          |   | $          | 32,179,104 |  |   | $          | 38,736,513 | 
|                                                      | Interest
on Investment Securities  Taxable         |   |                     | 3,325,739  |                   |   |            | 1,441,601  |          |   |            | 5,371,803  |  |   |            | 3,575,794  | 
|                                                      | Interest
on Investment Securities  Nontaxable      |   |                     | 400,098    |                   |   |            | 540,904    |          |   |            | 794,109    |  |   |            | 1,230,327  | 
|                                                      | Other Interest Income                               |   |                     | 891        |                   |   |            | 143,422    |          |   |            | 12,595     |  |   |            | 176,878    | 
|                                                      |                                                     |   |                     |            |                   |   |            |            |          |   |            |            |  |   |            |           
|Total Interest Income                                 |                                                     |   | 19,962,132          |            |                   |   | 21,235,383 |            |          |   | 38,357,611 |            |  |   | 43,719,512 |           
|Interest Expense:                                     |                                                     |   |                     |            |                   |   |            |            |          |   |            |            |  |   |            |           
|                                                      | Interest on Money Market and NOW                    |   |                     | 785,713    |                   |   |            | 1,123,484  |          |   |            | 1,507,184  |  |   |            | 2,697,324  | 
|                                                      | Interest on Savings Deposits                        |   |                     | 149,355    |                   |   |            | 196,793    |          |   |            | 286,973    |  |   |            | 434,538    | 
|                                                      | Interest on Time Deposits                           |   |                     | 3,122,990  |                   |   |            | 5,956,405  |          |   |            | 6,348,457  |  |   |            | 12,482,590 | 
|                                                      | Interest on Trust Preferred Securities              |   |                     | 703,154    |                   |   |            | 810,262    |          |   |            | 1,380,676  |  |   |            | 1,620,865  | 
|                                                      | Interest on Other Borrowings                        |   |                     | 1,797,974  |                   |   |            | 925,425    |          |   |            | 3,305,002  |  |   |            | 2,470,107  | 
|                                                      |                                                     |   |                     |            |                   |   |            |            |          |   |            |            |  |   |            |           
|Total Interest Expense                                |                                                     |   | 6,559,186           |            |                   |   | 9,012,369  |            |          |   | 12,828,292 |            |  |   | 19,705,424 |           
|                                                      |                                                     |   |                     |            |                   |   |            |            |          |   |            |            |  |   |            |           
|Net Interest Income                                   |                                                     |   | 13,402,946          |            |                   |   | 12,223,014 |            |          |   | 25,529,319 |            |  |   | 24,014,088 |           
|Provision for Credit Losses                           |                                                     |   | 624,999             |            |                   |   | 750,000    |            |          |   | 1,249,998  |            |  |   | 1,500,000  |           
|                                                      |                                                     |   |                     |            |                   |   |            |            |          |   |            |            |  |   |            |           
|Net Interest Income after Provision for Credit Losses |                                                     |   | 12,777,947          |            |                   |   | 11,473,014 |            |          |   | 24,279,321 |            |  |   | 22,514,088 |           
|Non-interest Income:                                  |                                                     |   |                     |            |                   |   |            |            |          |   |            |            |  |   |            |           
|                                                      | Service Charges and Fees                            |   |                     | 1,975,580  |                   |   |            | 1,768,432  |          |   |            | 3,816,375  |  |   |            | 3,334,759  | 
|                                                      | Gain on Sale of Loans and Servicing Fees            |   |                     | 84,881     |                   |   |            | 275,479    |          |   |            | 703,697    |  |   |            | 585,438    | 
|                                                      | Gain on Sale of Securities                          |   |                     | (15        | )                 |   |            | 641,783    |          |   |            | 30,077     |  |   |            | 1,472,678  | 
|                                                      | Dividends on Cash Surrender Value
of Life Insurance |   |                     | 340,875    |                   |   |            | 343,668    |          |   |            | 688,384    |  |   |            | 687,336    | 
|                                                      | Other Income                                        |   |                     | 50,130     |                   |   |            | 65,978     |          |   |            | 300,497    |  |   |            | 2,489      | 
|                                                      |                                                     |   |                     |            |                   |   |            |            |          |   |            |            |  |   |            |           
|Total Non-interest Income                             |                                                     |   | 2,451,451           |            |                   |   | 3,095,340  |            |          |   | 5,539,030  |            |  |   | 6,082,700  |           
|Non-interest Expense:                                 |                                                     |   |                     |            |                   |   |            |            |          |   |            |            |  |   |            |           
|                                                      | Salaries and Employee Benefits                      |   |                     | 4,773,341  |                   |   |            | 5,551,603  |          |   |            | 9,656,045  |  |   |            | 10,948,991 | 
|                                                      | Occupancy Expenses                                  |   |                     | 907,524    |                   |   |            | 876,343    |          |   |            | 1,764,247  |  |   |            | 1,739,617  | 
|                                                      | Furniture and Equipment                             |   |                     | 832,959    |                   |   |            | 910,225    |          |   |            | 1,672,101  |  |   |            | 1,756,519  | 
|                                                      | Other Expenses (note D)                             |   |                     | 3,388,215  |                   |   |            | 3,638,962  |          |   |            | 6,614,697  |  |   |            | 7,343,502  | 
|                                                      |                                                     |   |                     |            |                   |   |            |            |          |   |            |            |  |   |            |           
|Total Non-interest Expense                            |                                                     |   | 9,902,039           |            |                   |   | 10,977,133 |            |          |   | 19,707,090 |            |  |   | 21,788,629 |           
|                                                      |                                                     |   |                     |            |                   |   |            |            |          |   |            |            |  |   |            |           
|Income Before Income Taxes                            |                                                     |   | 5,327,359           |            |                   |   | 3,591,221  |            |          |   | 10,111,261 |            |  |   | 6,808,159  |           
|Income Taxes                                          |                                                     |   | 1,707,641           |            |                   |   | 1,291,000  |            |          |   | 3,464,641  |            |  |   | 2,403,300  |           
|                                                      |                                                     |   |                     |            |                   |   |            |            |          |   |            |            |  |   |            |           
|Net Income                                            |                                                     | $ | 3,619,718           |            |                   | $ | 2,300,221  |            |          | $ | 6,646,620  |            |  | $ | 4,404,859  |           
|Per Share Data: (note E)                              |                                                     |   |                     |            |                   |   |            |            |          |   |            |            |  |   |            |           
|                                                      | Net Income  Basic                                  |   | $                   | 0.27       |                   |   | $          | 0.17       |          |   | $          | 0.49       |  |   | $          | 0.33       | 
|                                                      | Net Income  Diluted                                |   | $                   | 0.26       |                   |   | $          | 0.17       |          |   | $          | 0.48       |  |   | $          | 0.33       | 

The accompanying notes are an integral part of the consolidated financial statements.

5



---



##### Table of Contents



VIB CORP AND SUBSIDIARIES




Consolidated Statement of Changes in Shareholders Equity


|                             |                                  |                                                            |                                                                                              |  |               |   |            |  |          |   |             |           |               |   |           |   |           |            |            |           |           |            |  
|---------------------------- | -------------------------------- | ---------------------------------------------------------- | -------------------------------------------------------------------------------------------- |  | ------------- | - | ---------- |  | -------- | - | ----------- | --------- | ------------- | - | --------- | - | --------- | ---------- | ---------- | --------- | --------- | ---------- | -
|                             |                                  |                                                            |                                                                                              |  | Common Shares |   |            |  |          |   | Accumulated |           |               |   |          
|                             |                                  |                                                            |                                                                                              |  |               |   |            |  |          |   | Other       |           |               |   |          
|                             |                                  |                                                            |                                                                                              |  | Number of     |   |            |  |          |   | Retained    |           | Comprehensive |   |           |   |          
|                             |                                  |                                                            |                                                                                              |  | Shares        |   | Amount     |  | Earnings |   | Income      |           | Total        
|                             |                                  |                                                            |                                                                                              |  |               |   |            |  |          |   |             |           |              
|Balance January 1, 2001      |                                  |                                                            | 12,168,644                                                                                   |  |               | $ | 62,283,298 |  |          | $ | 9,173,494   |           |               |   | ($606,003 | ) |           | $          | 70,850,789 |          
|Comprehensive Income         |                                  |                                                            |                                                                                              |  |               |   |            |  |          |   |             |           |               |   |           |   |           |            |            |          
|                             | Net Income                       |                                                            |                                                                                              |  |               |   |            |  |          |   |             | 9,222,088 |               |   |           |   |           |            |            | 9,222,088 |          
|                             | Other comprehensive income       |                                                            |                                                                                              |  |               |   |            |  |          |   |             |           |               |   |           |   |           |            |            |           |          
|                             |                                  | Unrealized gain on securities,
net of taxes of $1,320,756  |                                                                                              |  |               |   |            |  |          |   |             |           |               |   |           |   | 1,900,600 |            |            |           | 1,900,600 |           
|                             |                                  |                                                            | Less
reclassification adjustments
For gains included in net income,
Net of taxes of $779,201 |  |               |   |            |  |          |   |             |           |               |   |           |   |           | (1,121,290 | )          |           |           | (1,121,290 | )
|Total Comprehensive income   |                                  |                                                            |                                                                                              |  |               |   |            |  |          |   |             |           |               |   |           |   |           |            | 10,001,398 |          
|Cash dividends               |                                  |                                                            |                                                                                              |  |               |   |            |  |          |   | (23,589     | )         |               |   |           |   |           |            | (23,589    | )        
|Stock dividends              |                                  |                                                            | 744,188                                                                                      |  |               |   | 6,563,516  |  |          |   | (6,563,516  | )         |               |   |           |   |           |            |           |          
|Exercise of stock options    |                                  |                                                            | 125,656                                                                                      |  |               |   | 808,891    |  |          |   |             |           |               |   |           |   |           |            | 808,891    |          
|                             |                                  |                                                            |                                                                                              |  |               |   |            |  |          |   |             |           |               |   |           |   |           |            |            |          
|Balance at December 31, 2001 |                                  |                                                            | 13,038,488                                                                                   |  |               |   | 69,655,705 |  |          |   | 11,808,477  |           |               |   | 173,307   |   |           |            | 81,637,489 |          
|Comprehensive income         |                                  |                                                            |                                                                                              |  |               |   |            |  |          |   |             |           |               |   |           |   |           |            |            |          
|                             | Net Income                       |                                                            |                                                                                              |  |               |   |            |  |          |   |             | 6,646,620 |               |   |           |   |           |            |            | 6,646,620 |          
|                             | Other comprehensive income       |                                                            |                                                                                              |  |               |   |            |  |          |   |             |           |               |   |           |   |           |            |            |           |          
|                             |                                  | Unrealized gains on securities, net
of taxes of $1,760,001 |                                                                                              |  |               |   |            |  |          |   |             |           |               |   |           |   | 2,532,685 |            |            |           | 2,532,685 |           
|                             |                                  |                                                            | Less reclassification adjustments
for gains included in net income,
net of taxes of $12,338  |  |               |   |            |  |          |   |             |           |               |   |           |   |           | (17,739    | )          |           |           | (17,739    | )
|                             | Total Other comprehensive income |                                                            |                                                                                              |  |               |   |            |  |          |   |             |           |               |   |           |   |           |            |            | 2,514,946 |          
|Total Comprehensive income   |                                  |                                                            |                                                                                              |  |               |   |            |  |          |   |             |           |               |   |           |   |           |            | 9,161,566  |          
|Cash dividends               |                                  |                                                            |                                                                                              |  |               |   |            |  |          |   | (17,268     | )         |               |   |           |   |           |            | (17,268    | )        
|Stock dividends              |                                  |                                                            | 392,838                                                                                      |  |               |   | 4,695,985  |  |          |   | (4,695,985  | )         |               |   |           |   |           |            |           |          
|Exercise of stock options    |                                  |                                                            | 142,559                                                                                      |  |               |   | 1,205,471  |  |          |   |             |           |               |   |           |   |           |            | 1,205,471  |          
|                             |                                  |                                                            |                                                                                              |  |               |   |            |  |          |   |             |           |               |   |           |   |           |            |            |          
|Balance at June 30, 2002     |                                  |                                                            | 13,573,885                                                                                   |  |               | $ | 75,557,161 |  |          | $ | 13,741,844  |           |               | $ | 2,688,253 |   |           | $          | 91,987,258 |          

The accompanying notes are an integral part of the consolidated financial statements.

6



---



##### Table of Contents



VIB CORP AND SUBSIDIARIES




Consolidated Statements of Cash Flows (Unaudited)


|                                                                                  |                                                                                                 |                                                                       |                                                        |                                                  |             |                                          |              |        |             |             |             |  
|--------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------- | --------------------------------------------------------------------- | ------------------------------------------------------ | ------------------------------------------------ | ----------- | ---------------------------------------- | ------------ | ------ | ----------- | ----------- | ----------- | -
|                                                                                  |                                                                                                 |                                                                       |                                                        |                                                  |             | For the Six-Month Periods Ended June 30,
|                                                                                  |                                                                                                 |                                                                       |                                                        |                                                  |             |                                         
|                                                                                  |                                                                                                 |                                                                       |                                                        |                                                  |             | 2002                                     |              | 2001  
|                                                                                  |                                                                                                 |                                                                       |                                                        |                                                  |             |                                          |              |       
|Cash flow from operating activities:                                              |                                                                                                 |                                                                       |                                                        |                                                  |             |                                          |              |       
|Net income                                                                        |                                                                                                 | $                                                                     | 6,646,620                                              |                                                  |             | $                                        | 4,404,859    |       
|Adjustments to reconcile net income to net
cash provided by operating activities: |                                                                                                 |                                                                       |                                                        |                                                  |             |                                          |              |       
|                                                                                  |                                                                                                 | Depreciation and amortization                                         |                                                        |                                                  | 1,722,230   |                                          |              |        | 2,074,176   |            
|                                                                                  |                                                                                                 | Deferred income taxes                                                 |                                                        |                                                  | (510,877    | )                                        |              |        | (279,390    | )          
|                                                                                  |                                                                                                 | Provision for credit losses                                           |                                                        |                                                  | 1,249,998   |                                          |              |        | 1,500,000   |            
|                                                                                  |                                                                                                 | Originations of loans held for sale                                   |                                                        |                                                  | (10,287,748 | )                                        |              |        | (31,691,990 | )          
|                                                                                  |                                                                                                 | Proceeds from sale of loans                                           |                                                        |                                                  | 6,816,822   |                                          |              |        | 30,516,917  |            
|                                                                                  |                                                                                                 | Net gain on loan sales                                                |                                                        |                                                  | (572,552    | )                                        |              |        | (402,266    | )          
|                                                                                  |                                                                                                 | Loss on sale of other real estate owned                               |                                                        |                                                  | 36,444      |                                          |              |        | 53,785      |            
|                                                                                  |                                                                                                 | Net increase in cash surrender value of life insurance                |                                                        |                                                  | (719,645    | )                                        |              |        | (685,173    | )          
|                                                                                  |                                                                                                 | Net realized gains on available for sale securities                   |                                                        |                                                  | (30,077     | )                                        |              |        | (1,472,678  | )          
|                                                                                  |                                                                                                 | Net amortization of premium/discount on available
for sale securities |                                                        |                                                  | 665,694     |                                          |              |        | 51,718      |            
|                                                                                  |                                                                                                 | Net change in accrued interest, other assets,
and other liabilities   |                                                        |                                                  | (1,349,231  | )                                        |              |        | 1,350,397   |            
|                                                                                  |                                                                                                 |                                                                       |                                                        |                                                  |             |                                          |              |       
|                                                                                  |                                                                                                 |                                                                       |                                                        | Net cash provided by operating activities        |             |                                          | 3,667,678    |        |             |             | 5,420,355   |  
|                                                                                  |                                                                                                 | Cash flow from investing activities                                   |                                                        |                                                  |             |                                          |              |        |             |            
|                                                                                  |                                                                                                 |                                                                       | Purchase of investment securities                      |                                                  |             | (202,664,910                             | )            |        |             | (65,630,264 | )          
|                                                                                  |                                                                                                 |                                                                       | Proceeds from sales of other real estate owned         |                                                  |             | 1,770,448                                |              |        |             | 2,167,995   |            
|                                                                                  |                                                                                                 |                                                                       | Proceeds from sales of investment securities           |                                                  |             | 6,441,531                                |              |        |             | 50,966,251  |            
|                                                                                  |                                                                                                 |                                                                       | Proceeds from maturities of investment securities      |                                                  |             | 57,085,865                               |              |        |             | 84,839,324  |            
|                                                                                  |                                                                                                 |                                                                       | Purchase of Cash Surrender Value Life Insurance        |                                                  |             | (8,000,000                               | )            |        |             |            |            
|                                                                                  |                                                                                                 |                                                                       | Net change in loans                                    |                                                  |             | (11,135,943                              | )            |        |             | (8,592,122  | )          
|                                                                                  |                                                                                                 |                                                                       | Premises and equipment expenditures                    |                                                  |             | (558,145                                 | )            |        |             | (1,039,865  | )          
|                                                                                  |                                                                                                 |                                                                       | Net (increase)/decrease in interest bearing deposits   |                                                  |             | 583,180                                  |              |        |             | 1,301,253   |            
|                                                                                  |                                                                                                 |                                                                       |                                                        |                                                  |             |                                          |              |       
|                                                                                  |                                                                                                 |                                                                       |                                                        | Net cash (used)/provided by investing activities |             |                                          | (156,477,974 | )      |             |             | 64,012,572  |  
|                                                                                  |                                                                                                 | Cash flow from financing activities                                   |                                                        |                                                  |             |                                          |              |        |             |            
|                                                                                  |                                                                                                 |                                                                       | Net increase/(decrease) in demand deposits and savings |                                                  |             | 22,616,385                               |              |        |             | (3,032,299  | )          
|                                                                                  |                                                                                                 |                                                                       | Net increase/(decrease) in time deposits               |                                                  |             | 61,001,252                               |              |        |             | (11,809,779 | )          
|                                                                                  |                                                                                                 |                                                                       | Net change in capitalized lease obligations            |                                                  |             | 8,806                                    |              |        |             | 13,711      |            
|                                                                                  |                                                                                                 |                                                                       | Net change in fed funds purchased                      |                                                  |             |                                         |              |        |             | (55,200,000 | )          
|                                                                                  |                                                                                                 |                                                                       | Net change in other borrowings                         |                                                  |             | 57,058,003                               |              |        |             | (750,000    | )          
|                                                                                  |                                                                                                 |                                                                       | Payments for dividends                                 |                                                  |             | (17,268                                  | )            |        |             | (10,693     | )          
|                                                                                  |                                                                                                 |                                                                       | Proceeds from exercise of stock options                |                                                  |             | 1,205,471                                |              |        |             | 342,609     |            
|                                                                                  |                                                                                                 |                                                                       |                                                        |                                                  |             |                                          |              |       
|                                                                                  |                                                                                                 |                                                                       |                                                        | Net cash (used)/provided by financing activities |             |                                          | 141,872,649  |        |             |             | (70,446,451 | )
|                                                                                  |                                                                                                 |                                                                       |                                                        | Net change in cash and cash equivalents          |             | $                                        | (10,937,647  | )      |             | $           | (1,013,524  | )
|                                                                                  |                                                                                                 |                                                                       |                                                        |                                                  |             |                                          |              |       
|                                                                                  | Cash and cash equivalents                                                                       |                                                                       |                                                        |                                                  |             |                                          |              |        |            
|                                                                                  |                                                                                                 |                                                                       | Beginning of period                                    |                                                  | $           | 58,664,524                               |              |        | $           | 51,604,079  |            
|                                                                                  |                                                                                                 |                                                                       | End of period                                          |                                                  | $           | 47,726,877                               |              |        | $           | 50,590,555  |            
|                                                                                  | Supplemental disclosure of cash flow information: (in thousands)
Cash paid for interest expense |                                                                       | $                                                      | 12,133                                           |             |                                          | $            | 19,532 |            
|                                                                                  | Cash paid (received) for income taxes                                                           |                                                                       | $                                                      | 4,932                                            |             |                                          | $            | 1,869  |            

The accompanying notes are an integral part of the consolidated financial statements.

7



---



##### Table of Contents






VIB CORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(A) General

See Note A of Notes to Financial Statements incorporated by reference in
the Companys 2001 Annual Report on Form 10-K for a summary of significant
accounting policies.

The unaudited financial statements included herein were prepared from the
books of the Company in accordance with generally accepted accounting
principles and reflect all adjustments which are, in the opinion of management,
necessary to provide a fair statement of the results of operations and
financial position for the interim periods. Such financial statements generally
conform to the presentation reflected in the Companys 2001 Annual Report on
Form 10-K, and reflect adjustments that are solely of a normal, recurring
nature. The current interim periods reported herein are included in the fiscal
year subject to independent audit at the end of the year. The unaudited
financial statements of VIB Corp include the accounts of the Company and its
wholly owned subsidiaries, Valley Independent Bank, Valley Capital Trust, VIBC
Capital Trust I, Valley Capital Trust II, VIBC Services Company and Valley
Independent Banks wholly owned subsidiary, VIB Investment Trust. All
significant intercompany accounts and transactions have been eliminated in the
consolidated financial statements. Certain items previously reported have been
reclassified to conform to the current periods classifications.

(B) Investment Securities

The Companys investment securities portfolio at June 30, 2002 had a net
unrealized gain of approximately $4,538,000, as compared with a net unrealized
gain of approximately $294,000 at December 31, 2001, an increase during the six
months beginning January 1, 2002 of $4,244,000. The change for the period is
attributable to the recomposition of the portfolio using a leveraging strategy
to enhance earnings.

Investment Securities

|                               |                                       |                      |               |         |  |        |                  |            |                  |   |     |     |  |   |         |         | 
|------------------------------ | ------------------------------------- | -------------------- | ------------- | ------- |  | ------ | ---------------- | ---------- | ---------------- | - | --- | --- |  | - | ------- | ------- | 
|                               |                                       |                      | June 30, 2002
|                               |                                       |                      |              
|                               |                                       |                      |               |         |  |        | Gross Unrealized |            | Gross Unrealized |   |     |     | 
|($ in 000's)                   |                                       | Gross Amortized Cost |               | Gains   |  | Losses |                  | Fair Value
|                               |                                       |                      |               |         |  |        |                  |           
|Available-for Sale Securities: |                                       |                      |               |         |  |        |                  |            |                  |   |     |     |  |   |         |        
|                               | U.S. Treasury Securities              |                      | $             | 499     |  |        | $                | 1          |                  |   | $   |    |  |   | $       | 500     | 
|                               | U.S. Government and Agency Securities |                      |               | 50,439  |  |        |                  | 494        |                  |   |     | 5   |  |   |         | 50,928  | 
|                               | State and Political Subdivisions      |                      |               | 38,150  |  |        |                  | 536        |                  |   |     |    |  |   |         | 38,686  | 
|                               | Mortgage-Backed Securities            |                      |               | 235,488 |  |        |                  | 3,559      |                  |   |     |    |  |   |         | 239,046 | 
|                               | Other Equity                          |                      |               | 5,516   |  |        |                  | 67         |                  |   |     | 114 |  |   |         | 5,470   | 
|                               |                                       |                      |               |         |  |        |                  |            |                  |   |     |     |  |   |         |        
|                               |                                       | $                    | 330,092       |         |  | $      | 4,657            |            |                  | $ | 119 |     |  | $ | 334,630 |        

8



---



##### Table of Contents



|                               |                                       |                      |                   |        |  |        |                  |            |                  |   |     |     |  |   |         |        | 
|------------------------------ | ------------------------------------- | -------------------- | ----------------- | ------ |  | ------ | ---------------- | ---------- | ---------------- | - | --- | --- |  | - | ------- | ------ | 
|                               |                                       |                      | December 31, 2001
|                               |                                       |                      |                  
|                               |                                       |                      |                   |        |  |        | Gross Unrealized |            | Gross Unrealized |   |     |     | 
|($ in 000's)                   |                                       | Gross Amortized Cost |                   | Gains  |  | Losses |                  | Fair Value
|                               |                                       |                      |                   |        |  |        |                  |           
|Available-for Sale Securities: |                                       |                      |                   |        |  |        |                  |            |                  |   |     |     |  |   |         |       
|                               | U.S. Treasury Securities              |                      | $                 | 22,252 |  |        | $                | 2          |                  |   | $   | 13  |  |   | $       | 22,241 | 
|                               | U.S. Government and Agency Securities |                      |                   | 30,482 |  |        |                  | 96         |                  |   |     | 8   |  |   |         | 30,570 | 
|                               | State and Political Subdivisions      |                      |                   | 39,471 |  |        |                  | 308        |                  |   |     | 663 |  |   |         | 39,116 | 
|                               | Mortgage-Backed Securities            |                      |                   | 96,571 |  |        |                  | 721        |                  |   |     | 71  |  |   |         | 97,221 | 
|                               | Other Equity                          |                      |                   | 5,402  |  |        |                  | 55         |                  |   |     | 134 |  |   |         | 5,323  | 
|                               |                                       |                      |                   |        |  |        |                  |            |                  |   |     |     |  |   |         |       
|                               |                                       | $                    | 194,178           |        |  | $      | 1,182            |            |                  | $ | 889 |     |  | $ | 194,471 |       

Investment securities carried at approximately $319,299,000 and
$186,576,000, at June 30, 2002 and December 31,2001, respectively, were pledged
to secure public deposits, bank advances and other purposes as required by law.

(C) Loans

The Companys loan portfolio consists primarily of loans to borrowers
within southern and central California. Although the Company seeks to avoid
concentrations of loans to a single industry or based upon single class of
collateral, real estate and agricultural associated businesses are among the
principal industries in the Companys market area. As a result, the Companys
loan and collateral portfolio are, to some degree, concentrated in those
industries.

The Company also originates real estate related and farmland loans for
sale to governmental agencies and institutional investors. At June 30, 2002
and December 31, 2001 the Company was servicing approximately $78,690,000 and
$80,028,000, respectively, in loans previously sold.

A summary of the changes in the allowance for credit losses follows:

|                                              |  |                  |       |                     |  |   |       | 
|--------------------------------------------- |  | ---------------- | ----- | ------------------- |  | - | ----- | 
|                                              |  | Six months ended |       | Twelve months ended
|($ In 000's)                                  |  | June 30, 2002    |       | December 31,2001   
|                                              |  |                  |       |                    
|Balance at beginning of year                  |  | $                | 9,344 |                     |  | $ | 8,298 | 
|Additions to the allowance charged to expense |  |                  | 1,250 |                     |  |   | 3,000 | 
|Recoveries on loans charged off               |  |                  | 77    |                     |  |   | 224   | 
|Loans charged off                             |  |                  | 692   |                     |  |   | 2,178 | 
|                                              |  |                  |       |                     |  |   |       | 
|Balance at end of period                      |  | $                | 9,979 |                     |  | $ | 9,344 | 

9



---



##### Table of Contents



A summary of nonperforming loans and assets follows:

|                                                                |                            |               |        |                  |  |   |        |        | 
|--------------------------------------------------------------- | -------------------------- | ------------- | ------ | ---------------- |  | - | ------ | ------ | 
|($ in 000's)                                                    |                            | June 30, 2002 |        | December 31,2001
|                                                                |                            |               |        |                 
|Non-accrual loans                                               |                            | $             | 15,088 |                  |  | $ | 14,095 |       
|Loans 90 days past due and still accruing                       |                            |               | 61     |                  |  |   |       |       
|                                                                |                            |               |        |                  |  |   |        |       
|                                                                | Total nonperforming loans  |               |        | 15,149           |  |   |        | 14,095 | 
|Other Real Estate Owned                                         |                            |               | 1,632  |                  |  |   | 3,139  |       
|                                                                |                            |               |        |                  |  |   |        |       
|                                                                | Total nonperforming assets |               | $      | 16,781           |  |   | $      | 17,234 | 
|Nonperforming loans to total ending loans                       |                            |               | 1.80   | %                |  |   | 1.70   | %     
|Nonperforming assets to total loans and
Other Real Estate Owned |                            |               | 1.99   | %                |  |   | 2.07   | %     

(D) Other Expenses

Other expenses for the periods indicated are as follows:

|                            |                      |               |       |               |  |   |       |       | 
|--------------------------- | -------------------- | ------------- | ----- | ------------- |  | - | ----- | ----- | 
|($ in 000's)                |                      | June 30, 2002 |       | June 30, 2001
|                            |                      |               |       |              
|Data Processing             |                      | $             | 1,514 |               |  | $ | 1,407 |      
|Advertising                 |                      |               | 324   |               |  |   | 232   |      
|Legal and Professional      |                      |               | 1,459 |               |  |   | 1,749 |      
|Regulatory Assessments      |                      |               | 77    |               |  |   | 82    |      
|Insurance                   |                      |               | 65    |               |  |   | 56    |      
|Amortization of Intangibles |                      |               | 307   |               |  |   | 643   |      
|Office Expenses             |                      |               | 1,137 |               |  |   | 1,239 |      
|Promotion                   |                      |               | 676   |               |  |   | 927   |      
|Other                       |                      |               | 1,056 |               |  |   | 1,009 |      
|                            |                      |               |       |               |  |   |       |      
|                            | Total Other Expenses |               | $     | 6,615         |  |   | $     | 7,344 | 

(E) Earnings Per Share

Basic earnings per share are calculated based on the weighted average
number of common shares outstanding during each period as follows: 13,539,991
for the three months ended June 30, 2002 and 13,367,586 for the three months
ended June 30, 2001; 13,511,083 for the six months ended June 30, 2002 and
13,341,160 for the six months ended June 30, 2001.

Diluted earnings per share for the three and six-month periods ended June
30, 2002 and 2001, are computed by dividing net earnings by the weighted
average common equivalent shares outstanding during the respective periods as
follows: 13,935,997 for the three months ended June 30, 2002 and 13,428,267 for
the three
months ended June 30, 2001; 13,842,186 for the six months ended June 30,
2002 and 13,397,118 for the six months ended June 30, 2001. Common share
equivalents include dilutive common stock option share equivalents determined
by using the treasury stock method.

10



---



##### Table of Contents



(F) Commitments and Contingencies

The Company is a party to financial instruments in the normal course of
business to meet financing needs of its customers and to reduce its own
exposure to fluctuating interest rates. These financial instruments include
commitments to make loans and standby letters of credit.

Exposure to credit loss in the event of nonperformance by the other party
to the financial instrument for commitments to make loans and standby letters
of credit is represented by the contractual amount of those instruments. The
Company uses the same credit policies in making commitments as it does for
loans reflected in the financial statements.

At June 30, 2002 and December 31, 2001, commitments to make loans totaled
$274.9 million and $288.7 million, and standby letters of credit totaled $4.4
million and $1.6 million, respectively.

Since commitments to make loans may expire without being used, this amount
does not necessarily represent future cash commitments. Collateral obtained
upon exercise of the commitment is determined using managements credit
evaluation of the borrower and may include accounts receivable, inventory,
property, land and other items.

(G) Goodwill and Other Intangible Assets

In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 142, Goodwill and Other
Intangible Assets (SFAS 142). Under the new rules, goodwill and intangible
assets deemed to have indefinite lives will no longer be amortized but will be
subject to annual impairment tests in accordance with the new statement. Other
identifiable intangible assets, which include deposit-based intangibles, will
continue to be amortized over their useful lives and reviewed for impairment in
accordance with SFAS No. 144, Accounting for the Impairment or Disposal of
long-Lived Assets. Useful lives of amortizable intangible assets are
required to be reevaluated each reporting period with any changes in estimated
useful lives being accounted for prospectively over the revised remaining
useful life.

The Company adopted SFAS 142 on January 1, 2002. Upon adoption, the
Company no longer amortizes goodwill. The following table presents the effect
the adoption of SFAS 142 would have had on the period ended June 30, 2001 had
SFAS 142 been applied retroactively:

|                                       |                       |               |                    |               |                  |               |       |               |  |   |       |     |  |   |       |     | 
|-------------------------------------- | --------------------- | ------------- | ------------------ | ------------- | ---------------- | ------------- | ----- | ------------- |  | - | ----- | --- |  | - | ----- | --- | 
|                                       |                       |               | Three Months ended |               | Six months ended
|                                       |                       |               |                    |               |                 
|($000's except for earnings per share) |                       | June 30, 2002 |                    | June 30, 2001 |                  | June 30, 2002 |       | June 30, 2001
|                                       |                       |               |                    |               |                  |               |       |              
|Net income                             |                       | $             | 3,620              |               |                  | $             | 2,300 |               |  | $ | 6,647 |     |  | $ | 4,405 |    
|Addback: Goodwill amortization         |                       |               |                   |               |                  |               | 202   |               |  |   |      |     |  |   | 404   |    
|                                       |                       |               |                    |               |                  |               |       |               |  |   |       |     |  |   |       |    
|Adjusted net income                    |                       | $             | 3,620              |               |                  | $             | 2,502 |               |  | $ | 6,647 |     |  | $ | 4,809 |    
|Basic earnings per share:              |                       |               |                    |               |                  |               |       |               |  |   |       |     |  |   |       |    
|                                       | Net income            |               | $                  | .27           |                  |               | $     | .17           |  |   | $     | .49 |  |   | $     | .33 | 
|                                       | Goodwill amortization |               |                    |              |                  |               |       | .01           |  |   |       |    |  |   |       | .03 | 
|                                       |                       |               |                    |               |                  |               |       |               |  |   |       |     |  |   |       |    
|                                       | Adjusted net income   |               | $                  | .27           |                  |               | $     | .18           |  |   | $     | .49 |  |   | $     | .36 | 
|Diluted earnings per share:            |                       |               |                    |               |                  |               |       |               |  |   |       |     |  |   |       |    
|                                       | Net income            |               | $                  | .26           |                  |               | $     | .17           |  |   | $     | .48 |  |   | $     | .33 | 
|                                       | Goodwill amortization |               |                    |              |                  |               |       | .01           |  |   |       |    |  |   |       | .03 | 
|                                       |                       |               |                    |               |                  |               |       |               |  |   |       |     |  |   |       |    
|                                       | Adjusted net income   |               | $                  | .26           |                  |               | $     | .18           |  |   | $     | .48 |  |   | $     | .36 | 

11



---



##### Table of Contents



The Companys initial test for impairment of goodwill as of December 31,
2001 has been performed utilizing both the market and cost approach and both
methods indicated no impairment of goodwill.

Amortizable intangible assets are to be reviewed for impairment in
accordance with SFAS No. 144. That is, if a triggering event occurs, the
recoverability of the intangible assets cost must be evaluated. Where the
carrying amount is not recoverable, the Company must test the carrying amount
of the intangible asset for impairment. Examples of triggering events are:

1. The asset market value decreases significantly.

2. The use of the asset is significantly changed in extent or manner.

3. Legal factors or business climate changes adversely affect asset value.

4. Regulators adverse assessment or action.

5. Original expected costs are significantly exceeded.

6. A history of cash flow losses and continued asset losses are forecasted.

As of June 30, 2002, there has been no triggering event that would cause
the Company to reevaluate the recoverability of its intangible assets. During
the quarter ending March 31, 2002, the Company reevaluated the remaining useful
lives of all previously recognized intangible assets and adjusted those lives
prospectively, where appropriate.

Other intangible assets at June 30, 2002 consisted of core deposit
intangibles with a net carrying value of $3,355,715. Accumulated amortization
through June 30, 2002 was $1,809,773. Amortization expense for the periods
ended June 30, 2002, and June 30, 2001 was $307,058 and $239,046, respectively.

12



---



##### Table of Contents






ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION

This analysis is designed to provide a more complete understanding of the
material changes and trends related to the Companys financial condition,
results of operations, cash flow and capital resources. This discussion should
be read in conjunction with the attached Financial Statements included in Item
1, and the Companys Annual Report on Form 10-K. This document may contain
forward-looking statements that are subject to risks and uncertainties that
could cause actual results to differ materially from those projected. For a
discussion of factors that could cause actual results to differ, please see the
Companys publicly available Securities and Exchange Commission filings,
including its Annual Report on Form 10-K for the year ended December 31, 2001
and particularly the discussion of Other Significant Factors within that
document.

GENERAL

VIB Corp was incorporated in California on November 7, 1997 under the laws
of the State of California at the direction of the Board of Directors of Valley
Independent Bank (VIB or the Bank) for the purpose of becoming a bank
holding company. The holding company organization was consummated on March 12,
1998, pursuant to a Plan of Reorganization and Merger Agreement dated November
18, 1997, and each outstanding share of VIBs Common Stock was converted into
one share of the Companys Common Stock and all outstanding shares of VIBs
Common Stock were transferred to the Company in a transaction accounted for as
a pooling of interests. Further, each outstanding warrant to purchase VIBs
Common Stock, issued in connection with VIBs 1997 unit offering, was converted
into a warrant to purchase the Companys Common Stock. The conversion period
for these warrants expired on October 29, 1999.

On January 28, 1999, VIB Corp acquired Bank of Stockdale, F.S.B.,
Bakersfield, California (Stockdale). As a result of the merger, the Company
acquired total assets of $144.4 million, comprising $9.1 million in cash and
due from banks, $23.5 million in securities and investments, $102.4 million in
net loans and $9.4 million in other assets. Total liabilities assumed amounted
to $134.6 million, of which $128.9 million comprised deposits. The remainder
represented other borrowed funds and other liabilities.

The Stockdale merger was accounted for as a pooling of interests. The
Company issued 2,896,764 shares of its Common Stock (adjusted for subsequent
stock dividends) in exchange for all 1,212,265 shares of Stockdales issued and
outstanding common stock.

Stockdale continued to operate under its federal stock savings bank
charter until May 24, 2001 at which time it was merged with and into VIB
pursuant to a Plan of Reorganization and Agreement of Merger entered into on
March 21, 2001.

On January 22, 1999, VIB acquired Fremont Investment & Loans Hemet branch
office, including substantially all the deposits of the branch. VIB assumed
approximately $112 million in deposits and the lease on the branch premises,
and acquired approximately $27,000 in loans as well as cash on hand and
fixtures and equipment associated with the branch. The
consideration paid amounted to approximately $1.12 million. Goodwill
arising from the transaction totaled approximately $1.14 million.

13



---



##### Table of Contents



In connection with the branch acquisition by Valley Independent Bank it
was anticipated that VIB would require additional capitalization. On February
5, 1999, the Company raised approximately $22.2 million in net proceeds from a
trust preferred securities offering in a private placement. The proceeds
were used to increase Valley Independent Banks capital by $8.5 million and the
balance was used for the acquisition of Kings River State Bank and general
corporate purposes. The proceeds to the Company are treated as Tier 1 capital
by the Company for regulatory purposes. The interest paid by the Company is
deductible. The Company has the right, assuming that no default has occurred,
to defer interest payments at any time and for a period of up to twenty
consecutive calendar quarters. The trust preferred securities can be called
after February 5, 2009.

On September 7, 1999, VIB Corp, Kings River State Bank and Kings River
Bancorp, headquartered in Reedley, California, entered into an Agreement and
Plan of Reorganization pursuant to which Kings River State Bank would become a
wholly-owned subsidiary of VIB Corp and would continue to operate under its
separate California commercial bank charter. Upon consummation of the merger
on January 7, 2000, Kings River Bancorps shareholders received approximately
$21.7 million in exchange for their stock.

For the year ended December 31, 1999, Kings River Bancorp had total assets
of $87.2 million, interest and non-interest income of $8.0 million and pretax
income of $1.9 million. The acquisition was accounted for using the purchase
method of accounting in accordance with Accounting Principals Board Opinion No.
16, Business Combinations. Under this method of accounting, the purchase
price is allocated to the assets acquired and deposits and liabilities assumed
based on their fair values as of the acquisition date. Goodwill arising from
this transaction totaled $13.6 million. The results of Kings River Bancorps
operations were included in those reported by the Company beginning January 10,
2000.

Kings River continued to operate under its California commercial bank
charter until May 24, 2001, at which time it was merged with and into VIB
pursuant to a Plan of Reorganization and Agreement of Merger entered into on
March 22, 2001.

In July, 2000, the Company raised approximately $9.6 million in net
proceeds from an offering of trust preferred securities at 11.695%, due July
19, 2030, in a private placement conducted as a part of a pooled offering. The
Company formed a wholly-owned New York common law trust subsidiary, VIBC
Capital Trust I (Trust I), to facilitate the transaction. The proceeds to
the Company are treated as Tier 2 capital for regulatory purposes. The
proceeds were used to increase VIBs capital by $8.5 million, with the balance
used for general corporate purposes. The interest will be deductible by the
Company. The Company has the right, assuming that no default has occurred, to
defer interest payments at any time and for a period of up to twenty
consecutive calendar quarters. The trust preferred securities can be called
after July 19, 2010.

On December 28, 2000, the Company formed a wholly-owned subsidiary, VIBC
Services Company (VIBC Services), for the purpose of providing centralized
and consolidated support for the Company and its subsidiaries. This support
would include but is not limited to, management information services, retail
bank support, facilities and equipment management
and courier service. VIBC Services was initially capitalized with an
infusion of $500,000 from the Company. VIBC Services has been inactive since
January 31, 2001.

On May 24, 2001 Stockdale and Kings River merged with and into VIB
pursuant to the terms of Plans of Reorganization and Agreements of Merger
dated March 21 and March 22,

14



---



##### Table of Contents



2001. All of the former offices of Stockdale and
Kings River operate as branches of VIB; however, some continue to use the
Stockdale and Kings River names as DBAs. The merger is anticipated to provide
significant cost savings and improve operating efficiencies by removing layers
of regulatory reporting and operating expenses.

On August 14, 2001, pursuant to a Preferred Shares Rights Agreement (the
Rights Agreement) between the Company and U. S. Stock Transfer Corporation,
as Rights Agent, the Companys Board of Directors declared a dividend of one
right (a Right) to purchase one-thousandth share of the Companys Series A
Participating Preferred Stock (Series A Preferred) for each outstanding share
of the Companys no par value Common Stock. The dividend was paid on August
31, 2001, to shareholders of record as of the close of business on that date.
Each Right entitles the registered holder to purchase from the Company
one-thousandth of a share of Series A Preferred at an exercise price of $40.00,
subject to adjustment. However, if an acquiring party accumulates 15% or more
of the Companys voting stock without the Boards prior approval, each Right
enables its holder (other than the acquiring party) to purchase the Preferred
interest at 50% of the market price. Further, in the event the Company is
acquired in an unwanted merger or business combination, each Right enables the
holder to purchase shares of the acquiring entity at a similar discount. Under
certain circumstances, the Rights may be exchanged for common stock of the
Company. The Board may, in its sole discretion, redeem the Rights at any time
prior to such acquisitions for $.01 per Right. The Rights will expire on
August 14, 2011.

On September 14, 2001 the Company invested $2,000,000 in the Series A
Convertible Preferred Stock of Lenders Services Acquisition Corp. (LSAC),
representing an 22.5% interest in the total issuance of the Series A Preferred
Stock. LSAC is a newly organized Delaware corporation formed for the purpose
of acquiring all of the outstanding stock of Diversified Capital Holdings,
Inc., a California-based insurance holding company whose principal subsidiaries
are Northern Counties Title Insurance Company, a title insurance underwriter,
and South Coast Title Company, a title insurance agency. The Companys
decision to invest in LSAC was made to maintain and diversify sources of
non-interest income. The Series A Preferred Stock was issued by LSAC pursuant
to a private placement to financial institution holding companies. In addition
to the 811,500 shares of the Series A Preferred Stock outstanding, LSAC has
109,090 shares of Common Stock outstanding. The Series A Preferred Stock is
initially convertible into the Common on a one-for-one basis. On September 14,
2001, LSAC also consummated its acquisition of Diversified Capital Holdings,
Inc. LSAC has since changed its name to Diversified Holding Corporation and
formed AT Services, LLC to manage its trust deposits and the trust deposits of
its subsidiaries.

In November, 2001, the Company raised approximately $19.1 million in net
proceeds from an offering of floating rate 6% trust preferred securities in a
private placement conducted as a part of a pooled offering. The proceeds were
used to repurchase $19.2 million of the 9% trust preferred securities issued
in February, 1999, in connection with the Companys first trust preferred
offering, with the balance to be used for general corporate purposes. The
Company formed a wholly-owned Delaware business trust subsidiary, Valley
Capital Trust II (Trust II), to facilitate the transaction. The proceeds to
the Company will be treated as Tier 1 capital for
regulatory purposes. The 9% trust preferred securities issued in 1999
were repurchased at a discount. They will not be retired; however, they will be
eliminated for consolidated and regulatory accounting purposes. As trust
preferred securities, they were treated as Tier 1 capital. The interest will
be deductible and paid by the Company. The Company has the right, assuming
that no default has occurred, to defer interest payments at any time and for a
period of up to twenty consecutive calendar

15



---



##### Table of Contents



quarters. These trust preferred
securities will mature concurrently on December 8, 2031; but can be called
after December 8, 2006 or earlier upon the occurrence of certain defined
events.

During April, 2002, VIB formed a Maryland real estate investment trust
(VIB Investment Trust) by contributing certain qualifying real estate assets
in exchange for one thousand (1,000) common and one thousand (1,000) preferred
shares of beneficial interest in VIB Investment Trust. The amount of
investment in VIB Investment Trust is dictated by the size of VIBs current
mortgage loan, mortgage-backed and mortgage related securities portfolios. VIB
Investment Trusts overriding objective will be to acquire, hold, finance, and
manage assets consisting of participation interests in residential mortgage
loans, commercial real estate loans, construction loans, and possible
mortgage-related securities.

The purpose for establishing VIB Investment Trust is to enable VIB to
readily gain access to capital markets and to reduce the expenses associated
with holding the assets contributed to VIB Investment Trust.

On July 30, 2002, Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A.,
Rabobank Nederland (Rabobank), a Netherlands based cooperative bank, and VIB
Corp entered into a definitive agreement pursuant to which the Company will
merge with and become a wholly-owned subsidiary of Rabobank. After the merger,
the Company will continue to operate under its current name and will retain its
subsidiaries.

Under the terms of the agreement, Rabobank will acquire 100% of VIB Corps
issued and outstanding shares of no par value Common Stock at $15.10 per share
in a cash transaction. The aggregate amount to be paid to VIB Corps
shareholders is estimated to amount to approximately $212.5 million and will be
funded from Rabobanks existing cash resources.

Subject to obtaining applicable regulatory and VIB Corp shareholder
approvals, the transaction is expected to be completed in the fourth quarter
2002 or early first quarter 2003.

During 2001 and 2002 the Company did not conduct any business other than
through VIB, Stockdale, Kings River and VIBC Services and as described above.
At year-end, the Company had total consolidated assets of $1,168 million. Upon
consummation of the transactions described above, the Company will conduct its
banking business only through VIB. Neither the Company nor VIB earn revenues
from sources outside of the United States.

Consolidated net income for the three months ended June 30, 2002 was $3.6
million or $.26 per share diluted based upon average shares outstanding of
13,935,997. This compares with net income of $2.3 million or $.17 per share
fully diluted based upon the average shares outstanding of 13,428,267 for the
same period in 2001. Consolidated net income for the six months ended June 30,
2002, was $6.6 million or $.48 per share diluted based upon average shares
outstanding of 13,842,186. This compares with net income of $4.4 million or
$.33 per share fully diluted based upon the average shares outstanding of
13,397,118 for the same
period in 2001.

Total gross loans at June 30, 2002 were $852.0 million, which represented
an increase of $14.3 million or 1.7% from December 31, 2001. Since June 30,
2001, total gross loans have increased $21.6 million or 2.6%.

On March 13, 2002, the Board of Directors approved a 3% stock dividend for

16



---



##### Table of Contents



shareholders of record on May 24, 2002. The dividend was paid on June 14,
2002. All per share figures have been adjusted for this and previous stock
dividends.

The Companys Internet home page on the World Wide Web is:
www.vibcorp.com. VIB has a home page, located at: www.vibank.com.

NET INTEREST INCOME

Average interest-earning assets totaled $1,086.3 million during the six
months ended June 30, 2002, an increase of $91.3 million or 9.18% compared to
the same period last year. This growth was highlighted by an increase in
average total loans of $20.3 million, or 2.5%, to $836.0 million and an
increase in average investments of $76.3 million, or 44.2%, to $248.8 million.
Average interest-bearing liabilities in the first six months of 2002 increased
$52.8 million, or 6.5%, to average $869.7 million as compared to the same
period last year. During the first six months of 2002, average
interest-bearing deposit categories decreased $18.5 million, or 2.6%, to $682.1
million. Average borrowed funds increased $71.4 million, or 61.4%, to $187.6
million during the same time frame.

Interest income for the six-month period ending June 30, 2002 was $38.4
million, a decrease of $5.3 million or 12.3% compared to the first six months
in 2001. The decrease in interest income was primarily the result of a
declining interest rate environment during the year 2001. The yield on
interest-earning assets decreased 174 basis points to 7.12% for the six-month
period ended June 30, 2002 from 8.86% for the comparative period last year.

Interest expense decreased $6.9 million or 34.9% during the six months
ended June 30, 2002 as compared to the same period last year. The decrease in
interest expense was principally the result of the declining interest rate
environment and a shift in deposit mix from interest-bearing deposits to non
interest-bearing deposits. The cost of interest-bearing funds decreased 189
basis points from 4.86% for the six months ended June 30, 2001 to 2.97% for the
six months ended June 30, 2002. The cost of funds decrease was also primarily
the result of the declining interest rate environment.

Net interest income was $25.5 million for the six months ending June 30, 2002,
representing an increase of $1.5 million or 6.3% from the six month period
ended June 30, 2001. The net interest spread, which represents the difference
between the rate earned on average interest earning assets and the rate paid on
average interest-bearing liabilities, increased to 4.15% for the period ending
June 30, 2002, compared to 4.00% for the same period in 2001. The increase in
net interest spread was due primarily to a lower cost mix of interest-bearing
liabilities. Net interest income as a percentage of average interest-earning
assets, or the net interest margin, decreased to 4.74% for the period ending
June 30, 2002, compared to 4.87% for the period ending June 30, 2001. The
decrease in net interest margin was due to the greater proportionate growth in
the higher yielding interest-earning asset categories along with a lower cost
mix of interest-bearing liabilities offset to a greater degree by
the faster repricing of the Companys earning assets as compared to
interest-bearing liabilities in a period of declining interest rates.

For the quarter ended June 30, 2002, net interest income was $13.4
million, which was an increase of $1.2 million, or 9.7%, from the same period
in 2001. The net interest spread increased 2 basis points to 4.18% for the
three months ended June 30, 2002 from 4.16% for the three months ended June 30,
2001. The net interest margin decreased from 5.01% for the quarter ended June
30, 2001 to 4.73% for the same period in 2002. The increase in net interest
spread and decrease in net interest margin are attributable to the

17



---



##### Table of Contents



same things as previously discussed.

The year 2001 was characterized by a declining rate environment. Interest
rates began a steady decline during the first quarter of 2001 and continued
their decline throughout the rest of the year. The yield on earning assets for
the year 2001 was 8.25% as compared to 8.86% for the six months ended June 30,
2001 and 7.12% for the six months ended June 30, 2002. The cost of
interest-bearing liabilities for the year 2001 was 4.27% as compared to 4.86%
for the six months ended June 30, 2001 and 2.97% for the six months ended June
30, 2002.

During the three months ended June 30, 2002, yield on earning assets
decreased 166 basis points to 7.05% as compared to 8.71% for the three months
ended June 30, 2001. The cost of interest-bearing liabilities for the quarter
ended June 30, 2002, also decreased 220 basis points to 2.35% from 4.55% for
the quarter ended June 30, 2001.

PROVISION FOR CREDIT LOSSES

The allowance for credit losses at June 30, 2002 was $10.0 million,
compared to $9.5 million at June 30, 2001, an increase of $.5 million or 5.1%.
As a percent of total loans, the allowance was 1.17% at June 30, 2002, compared
to 1.14% at June 30, 2001 and 1.12% at December 31, 2001. Due to the
California energy issue, and its possible effect on the Companys portfolio, an
additional allocation was added to the allowance in the first quarter of 2001.
As the Company gathered more information regarding the possible effect of the
California energy issue on its loan customers, the Company removed this
allocation later in the year. In the future the Company may again add to the
allowance due to the risk of energy-related defaults but at the current time it
has not perceived an increased level of risk due to this issue.

The provision for credit losses was $1,250,000 for the first six months of
2002, compared with $1,500,000 provided for the six months ended June 30, 2001,
a decrease of 16.67%. The provision was $625,000 for the second quarter of
2002, compared to $750,000 for the second quarter of 2001, a decrease of
$125,000 or 16.7%.

Total non-performing loans as of June 30, 2002 were $15.1 million as
compared to $5.8 million at June 30, 2001 and $14.1 million at December 31,
2001. Non-performing loans increased $1.1 million during the six months ended
June 30, 2002. The increase over the second quarter of 2001 is mainly
attributable to two related loans on a hotel placed in non-accrual status. The
loans are fully secured and the Company continues to aggressively work to
resolve the lending relationship. By continuing to build the loan loss reserve
combined with the resolution of the two problem hotel loans the Company
anticipates seeing an improvement in its coverage and reserve ratios.

Net charge-offs were $616,000 for the six months ended June 30, 2002.
This represents an increase of $312,000 when compared to $304,000 in net charge
offs for the same period in 2001. During the second quarter ending June 30,
2002, $568,000 was recorded in net charge-offs compared to $60,000 net
charge-offs in the second quarter of 2001.

The Bank has an established standard process for assessing the adequacy of
the allowance for credit losses. In addition to reviewing the inherent risks
of its loan portfolio, consideration is given to exposures such as economic
conditions, credit concentrations,

18



---



##### Table of Contents



collateral coverage, the composition of the
loan portfolio and trends in delinquencies. Specific allocations are
identified by individual loans with general allocations assigned to the various
loan categories. Loans classified by VIBs internal review or by the
regulatory authorities are included in the process of assessing the adequacy of
the allowance for credit losses. This process seeks to maintain an allowance
level adequate to provide for potential losses.

Management of the Company believes the allowance at June 30, 2002, was
adequate based on present economic conditions and its ongoing evaluation of the
risks inherent in the Banks loan portfolio.

NON-INTEREST INCOME

Total non-interest income amounted to $5.5 million for the six months
ended June 30, 2002 representing a decrease of $.5 million or 8.9% compared
with the same period in the prior year. The primary reasons for the decrease
in non-interest income were a decrease of $1.4 million in gain on the sale of
securities offset to some extent by an increase in service charges and fees of
$482,000, an increase in gain on the sale of loans of $170,000, and an increase
in other income of $298,000.

The increase in service charges and fees is related to the Companys
consolidation of its product line, the establishment of new products, and
growth in its core deposit base. The major component of the increase in other
income was dividend income from AT Services of $140,000.

Non-interest income for the quarter ended June 30, 2002 decreased $644,000
to $2.5 million from $3.1 million for the same period in 2001. This decrease
is mostly due to decreases in gains on the sale of loans and securities,
offset slightly by an increase in service charges and fees.

NON-INTEREST EXPENSE

Total non-interest expense for the six months ended June 30, 2002 was
$19.7 million, a decrease of $2.1 million or 9.6% as compared to the same
period in 2001.

Salary expense during the six months ended June 30, 2002 was $7.1 million,
a decrease of $1.1 million or 13.1% under the comparable period in 2001. The
reduction in salary expense is partially attributable to $200,000 in severance
being paid in the period ended March 31, 2001 and the Companys concentrated
effort to reduce overhead by taking a number of actions to improve efficiencies
and provide cost savings. These actions included the dissolution of its
mortgage-banking business, consolidation of its three subsidiary banks into
one, and simplification of its product line. It is anticipated that the full
effect of these changes will be
reflected in the financial performance of the Company for the full year
2002. Employee benefits expense was $2.6 million for the period ending June
30, 2002, a decrease of $227,000 or 8.1% from the same period in the prior
year.

Occupancy expense was $1,764,000 for the six-month period ended June 30,
2002, an increase of $25,000 or 1.4% as compared to the first six months in
2001. Furniture and equipment expense was $1,672,000 for the six-month period
ended June 30, 2002, a decrease of $84,000 or 4.8% from the same period in
2001. This decrease was primarily the

19



---



##### Table of Contents



result of the Companys decreased
depreciation expense on the planned obsolescence of furniture and equipment.

Other operating expense amounted to $6.6 million during the six-month
period ended June 30, 2002, a decrease of $729,000 or 9.9% from the same period
in the prior year. The decrease was attributable to decreases in legal and
other professional fees, amortization of intangibles, and promotional expenses.

For the three months ended June 30, 2002, non-interest expense was $9.9
million. This was a decrease of $1,075,000 or 9.8% from the same period in
2001. This was due mainly to decreases in salaries and employee benefits of
$778,000.

INCOME TAXES

Income tax expense for the six months ending June 30, 2002 was $3,465,000
as compared with $2,403,000 for the same period in 2001. The increase in
expense was primarily attributable to a $3.7 million increase in taxable
income. The Companys effective tax rate was 34.3% for the six months ended
June 30, 2002 as compared to 35.3% for the same period in the prior year due
primarily to a decrease of $.4 million in nontaxable interest income.

Income taxes for the second quarter were $1,708,000, an increase of
$417,000 or 32.3% from the second quarter of 2001. The increase in expense was
primarily related to a $1,877,000 increase in the Companys taxable income.
The Companys effective tax rate was 32.1% for the three months ended June 30,
2002 as compared to 35.9% for the same period in the prior year.

CAPITAL RESOURCES

Total stockholders equity as of June 30, 2002 was $92.0 million, which
represented an increase of $10.3 million from December 31, 2001, and $15.8
million from June 30, 2001. The increase since December 31, 2001 included
$6.6 million in net income, $1.2 million from the exercising of stock options,
and a $2.5 million increase in the cumulative unrealized gain on securities
classified as available for sale. The increase since June 30 2001 included
$11.5 million in net income, $1.7 million from the exercising of stock options,
and a $2.7 million increase in the cumulative unrealized gain on securities
classified as available for sale.

Under regulatory guidelines, capital adequacy is measured as a percentage
of risk-adjusted assets in which risk percentages are applied to assets on as
well as off the balance sheet. Tier 1 capital consists of common stock, a
qualifying percentage of the Capital Securities, and retained earnings and
total capital includes a portion of the allowance for credit losses. At June
30, 2002 the Tier 1 and total risk based capital ratios were 10.89% and
12.34%, respectively, compared to 9.69% and 11.60%, respectively, at June
30, 2001. The current minimum regulatory guidelines for Tier 1 and total
risk-based capital ratios are 4.0% and 8.0%, respectively. The leverage ratio,
which is a measure of Tier 1 capital to adjusted average assets, was 8.31% at
June 30, 2002, compared to 7.85% at June 30, 2001. The Companys leverage
ratio also exceeds the current regulatory minimum of 3.0%. Accordingly, the
Companys capital ratios exceed all regulatory minimums and support future
planned growth, but may not be adequate to support additional acquisitions.

20



---



##### Table of Contents



LIQUIDITY AND ASSET/LIABILITY MANAGEMENT

VIBs liquidity position remains adequate to meet future contingencies.
At June 30, 2002 VIB had $213.3 million in net Federal funds purchased and FHLB
advances outstanding. This compared to $63.0 million in net Federal funds
outstanding at June 30, 2001. Since December 31, 2001, net Federal funds
purchased and FHLB advances have increased $58.6 million. The increases are
attributable to the Companys use of leveraging strategies to enhance earnings.
These strategies, which involve borrowing at a fixed cost and reinvesting at a
higher fixed rate, hold limited interest rate risk and provide similar positive
earnings in both increasing and decreasing interest rate environments. As a
result, there has been an increase in outstanding balances of FHLB advances.
VIBs liquidity ratio at June 30, 2002 was 28.1%. This ratio represented an
increase from 14.4% at June 30, 2001 and an increase from 21.4% at December 31,
2001.

The Companys Asset/Liability Committee (ALCO) functions to oversee the
maintenance of liquidity and to preserve net interest income when subjected to
fluctuations in market interest rates. The ability to meet existing and future
funding commitments is the measure of liquidity. Liquidity is also required to
meet borrowing needs, deposit withdrawals and asset growth. VIB develops
liquidity through deposit growth, maturities and repayments of loans and
investments, net interest income, fee income and access to purchase funds
through correspondent banks or other entities.

The ALCO manages the interest rate sensitivity or repricing
characteristics of VIBs assets and liabilities. The primary source of
earnings for VIB is net interest income, which is subject to movements in
interest rates. To minimize the effect of changes in rates, the balance sheet
requires structuring in order that the repricing opportunities for both assets
and liabilities exist in nearly equivalent amounts and at approximately similar
time intervals. Interval differences may exist at times creating interest
sensitivity gaps, which represent the difference between interest sensitive
assets and interest sensitive liabilities. These gaps are static in nature and
do not consider future activity. As such, these gap measurements serve best as
an indicator for potential interest rate exposure.

The sensitivity to interest rate fluctuations is measured in several time
frames. Various strategies such as liability cost administration and
redeployment of asset maturities are utilized to preserve interest income from
the effect of changes in interest rates. The gap positions are monitored as a
function of the asset and liability management process. The monitoring process
includes the use of periodic simulated business forecasts, which incorporate
various interest rate environments. Financial modeling is utilized to assist
management in maintaining consistent earnings in an environment of changing
interest rates.

VIB does not maintain trading accounts for any class of financial
instrument nor does it engage in hedging activities or purchase high-risk
derivative instruments. Furthermore, VIB is not subject to foreign currency
exchange rate risk or commodity price risk.

In addition to gap measurement, the ALCO is further responsible for the
measurement of interest rate risk, i.e., the risk of loss in value due to
changes in interest rates. The ALCO monitors and considers methods of managing
interest rate risk by monitoring changes in net portfolio value (NPV) and net
interest income under various interest rate scenarios. The ALCO attempts to
manage the various components of the balance sheet to minimize the impact of
sudden and sustained changes in interest rates on NPV and net interest income.

21



---



##### Table of Contents



VIBs exposure to interest rate risk is reviewed on a periodic basis by
the Board of Directors and ALCO. If potential changes to NPV and net interest
income resulting from hypothetical interest rate swings are not within the
limits established by the Board, the Board may direct management to adjust its
assets and liability mix to bring interest rate risk within Board-approved
limits.

VIB utilizes interest rate sensitivity analysis to measure interest rate
risk by computing estimated changes in NPV of cash flows from assets and
liabilities within a range of assumed changes in market interest rates. NPV
represents the market value of portfolio equity and is equal to the market
value of assets minus the market value of liabilities. This analysis assesses
the risk of loss in market rate sensitive instruments in the event of sudden
and sustained increases and decreases in market interest rates ranging from one
hundred to three hundred basis points. The Board of Directors has adopted an
interest rate risk policy, which establishes a maximum limit of decrease in the
NPV in the event of sudden and sustained increases, and decreases in market
interest rates.

The following tables present the Companys projected changes in NPV and
net interest income for the various rate shock levels as of June 30, 2002.
Although the majority of the assets and liabilities are at the bank level, the
table does include the effect of the Companys trust preferred obligations.

22



---



##### Table of Contents



VIB CORP
Change in Net Portfolio Value
at June 30, 2002

|                         |  |                 |         |        |  |                   |         |   |  |  |       |   
|------------------------ |  | --------------- | ------- | ------ |  | ----------------- | ------- | - |  |  | ----- | --
|                         |  | Net             |         | Actual |  |                   |         |  
|Change in Interest Rates |  | Portfolio Value |         | Change |  | Percentage Change
|                         |  |                 |         |        |  |                  
|(Dollars in Thousands)   |  |                 |         |        |  |                   |         |   |  |  |       |   
|300 basis point rise     |  | $               | 153,796 |        |  | $                 | 17,056  |   |  |  | 12.5  | % 
|200 basis point rise     |  |                 | 154,539 |        |  |                   | 17,799  |   |  |  | 13.0  | % 
|100 basis point rise     |  |                 | 149,051 |        |  |                   | 12,311  |   |  |  | 9.0   | % 
|Base Rate Scenario       |  |                 | 136,740 |        |  |                   |        |   |  |  |      |   
|100 basis point decline  |  |                 | 112,136 |        |  |                   | (24,604 | ) |  |  | (18.0 | )%
|200 basis point decline  |  |                 | 93,101  |        |  |                   | (43,639 | ) |  |  | (31.9 | )%
|300 basis point decline  |  |                 | 89,959  |        |  |                   | (46,781 | ) |  |  | (34.2 | )%

VIB CORP
Change in Net interest Income
at June 30, 2002

|                         |  |                 |        |        |  |                   |        |   |  |  |       |   
|------------------------ |  | --------------- | ------ | ------ |  | ----------------- | ------ | - |  |  | ----- | --
|                         |  | Net             |        | Actual |  |                   |        |  
|Change in Interest Rates |  | Interest Income |        | Change |  | Percentage Change
|                         |  |                 |        |        |  |                  
|(Dollars in Thousands)   |  |                 |        |        |  |                   |        |   |  |  |       |   
|300 basis point rise     |  | $               | 51,403 |        |  | $                 | 661    |   |  |  | 1.3   | % 
|200 basis point rise     |  |                 | 51,718 |        |  |                   | 976    |   |  |  | 1.9   | % 
|100 basis point rise     |  |                 | 51,381 |        |  |                   | 639    |   |  |  | 1.3   | % 
|Base Rate Scenario       |  |                 | 50,742 |        |  |                   |       |   |  |  |      |   
|100 basis point decline  |  |                 | 48,587 |        |  |                   | (2,155 | ) |  |  | (4.2  | %)
|200 basis point decline  |  |                 | 45,807 |        |  |                   | (4,935 | ) |  |  | (9.7  | %)
|300 basis point decline  |  |                 | 41,004 |        |  |                   | (9,738 | ) |  |  | (19.2 | %)

Certain shortcomings are inherent in the method of analysis presented in the
computation of NPV. Although certain assets and liabilities may have similar
maturities or periods within which they will reprice, they may react
differently to changes in market interest rates. The interest rates on certain
types of assets and liabilities may fluctuate in advance of changes in market
interest rates, while interest rates on other types may lag behind changes in
market
rates. There may also be repayment risk if interest rates rise on loans.

23



---



##### Table of Contents



Computation of forecasted effects of hypothetical interest rate changes
should not be relied upon as indicative of actual future results. Further, the
computations do not contemplate any actions the ALCO could undertake in
response to change in interest rates.

The Company is a legal entity, separate and distinct from its
subsidiaries. Although there exists the ability to raise capital on its own
behalf (such as the recent private placement of trust preferred securities)
or borrow from external sources, the Company may obtain additional funds
through dividends paid by, and fees for services provided to, its subsidiaries.
Regulations limit the amount of dividends as well as service fees paid by
subsidiaries. The Companys expenses have been primarily covered by fees
charged to and dividends received from VIB and it is anticipated that the
Company will be able to continue to rely on dividends from VIB to fund its
separate operations and obligations. The Company may not always be able to
rely solely on its current or future subsidiaries to meet its obligations,
including obligations under the trust preferred securities, or to maintain
its separate liquidity. Under such circumstances, the Company would be forced
to seek other means to raise capital. At June 30, 2002 the Company had
adequate liquidity to meet its anticipated funding needs.

INFLATION

The impact of inflation on a financial institution differs significantly
from that exerted on an industrial company, primarily because its assets and
liabilities consist largely of monetary items. The relatively low ratio of
fixed assets to total assets of .9% at June 30, 2002 reduces the potential for
inflated earnings resulting from understated depreciation changes. However,
financial institutions are affected by inflations impact on non-interest
expenses, such as salaries and occupancy expense, and to some extent, by the
inflative impact on interest rates.




ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Information in response to this item is included in ITEM 2  MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

24



---



##### Table of Contents






PART II
OTHER INFORMATION




ITEM 1. LEGAL PROCEEDINGS

| |                                                                                                                                                                                                       
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | To the best of the Companys knowledge, there are no pending
legal proceedings to which the Company is a party and which may have a
materially adverse effect upon the Companys property or business.




ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

| |                
| | ---------------
| | Not applicable.




ITEM 3. DEFAULTS UPON SENIOR SECURITIES

| |                
| | ---------------
| | Not applicable.




ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

| |                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
| | On April 24,2002, the shareholders of the Company held their 2002
Annual Meeting. At the Annual Meeting the following directors were
elected to two-year terms:

|                               |  |           |           |                |  |  |         | 
|------------------------------ |  | --------- | --------- | -------------- |  |  | ------- | 
|                               |  | Votes For |           | Votes Withheld
|                               |  |           |           |               
|R. Stephen Ellison             |  |           | 9,386,938 |                |  |  | 263,943 | 
|Richard D. Foss                |  |           | 9,382,557 |                |  |  | 268,324 | 
|Ronald A. (Rusty) Pedersen     |  |           | 9,385,527 |                |  |  | 265,354 | 
|Alice Helen Lowery Westerfield |  |           | 9,577,085 |                |  |  | 73,796  | 

| |                                                                                      
| | -------------------------------------------------------------------------------------
| | The following directors terms continued after the Annual Meeting
and expire in 2003:

| |                                                            
| | -----------------------------------------------------------
| | Thomas S. Kelly
Dennis L. Kern
Edward McGrew
Pete J. Penner

| |                                                                                                                                                                                                                                                         
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The shareholders also voted to amend Article IV(a) of the
Companys Articles of Incorporation to increase the authorized number
of shares of the Companys Common Stock from 25,000,000 shares to
125,000,000. The vote on this proposal was as follows:

|                    |  |     |           |         |  |         |         |           |  |  |        |  |  |        |           | 
|------------------- |  | --- | --------- | ------- |  | ------- | ------- | --------- |  |  | ------ |  |  | ------ | --------- | 
|                    |  |     |           |         |  |         |         |           |  |  |        |  |  | Broker
|                    |  | For |           | Against |  | Abstain |         | Non Votes
|                    |  |     |           |         |  |         |         |          
|Amend Article IV(a) |  |     | 8,825,951 |         |  |         | 741,693 |           |  |  | 83,237 |  |  |        | 9,650,881 | 

25



---



##### Table of Contents






ITEM 5. OTHER INFORMATION

| |                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------
| | On May 14, 2002, Director Alice Helen Lowery Westerfield passed away.
The Company has no current plans to replace her.




ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(h) Exhibits:

| |                                                           
| | ----------------------------------------------------------
| | The following exhibits are filed as a part of this report:

|               |  |                                                                                                                 |  |      |    | 
|-------------- |  | --------------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|Regulation S-K |  |                                                                                                                 |  |      |    | 
|Exhibit No.    |  | Description                                                                                                     |  | Page
|               |  |                                                                                                                 |  |     
|3.1            |  | Articles of Incorporation of VIB Corp
as amended May 1,2002                                                     |  |      | 29 | 
|10.22          |  | First Amendment of Valley
Independent Bank Executive
Supplemental Compensation
Agreement  Dennis Kern          |  |      | 37 | 
|10.23          |  | First Amendment of Valley
Independent Bank Executive
Supplemental Compensation
Agreement  Harry Gooding        |  |      | 49 | 
|10.24          |  | Second Amendment of Valley
Independent Bank Executive
Supplemental Compensation
Agreement  Jack Brittain       |  |      | 61 | 
|10.25          |  | First Amendment of Valley
Independent Bank Executive
Supplemental Compensation
Agreement  William F. Henle     |  |      | 73 | 
|10.26          |  | First Amendment of Valley
Independent Bank Executive
Supplemental Compensation
Agreement  Janice Stewart Grady |  |      | 85 | 
|10.27          |  | Employment Agreement                                                                                           |  |      | 97 | 

26



---



##### Table of Contents



|               |  |                                                                                                                  |  |      |     | 
|-------------- |  | ---------------------------------------------------------------------------------------------------------------- |  | ---- | --- | 
|Regulation S-K |  |                                                                                                                  |  |      |     | 
|Exhibit No.    |  | Description                                                                                                      |  | Page
|               |  |                                                                                                                  |  |     
|               |  | Dennis Kern                                                                                                      |  |      |     | 
|10.28          |  | Employment Agreement 
Harry Gooding                                                                             |  |      | 110 | 
|10.29          |  | Employment Agreement 
Jack Brittain                                                                             |  |      | 121 | 
|10.30          |  | Employment Agreement 
William Henle                                                                             |  |      | 132 | 
|10.31          |  | Employment Agreement 
Janice Stewart Grady                                                                      |  |      | 143 | 
|10.32          |  | Second Amendment of Valley
Independent Bank Executive
Supplemental Compensation
Agreement  Dennis Kern          |  |      | 154 | 
|10.33          |  | Second Amendment of Valley
Independent Bank Executive
Supplemental Compensation
Agreement  Harry G. Gooding     |  |      | 156 | 
|10.34          |  | Third Amendment of Valley
Independent Bank Executive
Supplemental Compensation
Agreement  Jack Brittain         |  |      | 158 | 
|10.35          |  | Second Amendment of Valley
Independent Bank Executive
Supplemental Compensation
Agreement  William Henle        |  |      | 160 | 
|10.36          |  | Second Amendment of Valley
Independent Bank Executive
Supplemental Compensation
Agreement  Janice Stewart Grady |  |      | 162 | 

(i) Current Reports on Form 8-K:

| |                                                                                                 
| | ------------------------------------------------------------------------------------------------
| | During the quarter ended June 30, 2002 the Company did not file any
Current Reports on Form 8-K.

27



---



##### Table of Contents






SIGNATURES

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

VIB CORP

|                     |  |                                                                            
|-------------------- |  | ---------------------------------------------------------------------------
|Date: August 9, 2002 |  |                                                                            
|                     |  | /s/ Dennis L. Kern                                                         
|                     |  |                                                                            
|                     |  | Dennis L. Kern,
President and Chief Executive Officer                      
|                    
|                    
|                     |  | /s/ Harry G. Gooding, III                                                  
|                     |  |                                                                            
|                     |  | Harry G. Gooding, III,
Executive Vice President and Chief Financial
Officer

28