##### Table of Contents



FORM 10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

(Mark One)

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

For the quarterly period ended June 30, 2001.

|      |  |                                                                                          
|----- |  | -----------------------------------------------------------------------------------------
|[   ] |  | 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: 12,624,349 shares as of August 2, 2001.

1



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TABLE OF CONTENTS



|                             |                                                                                              |                                                        |  |  |  |  |  | 
|---------------------------- | -------------------------------------------------------------------------------------------- | ------------------------------------------------------ |  |  |  |  |  | 
|PART I FINANCIAL INFORMATION
|                             | ITEM 1. FINANCIAL STATEMENTS                                                                
|                             |                                                                                              | Consolidated Statements of Financial Condition        
|                             |                                                                                              | Consolidated Statements of Income                     
|                             |                                                                                              | Consolidated Statement of Stockholders Equity        
|                             |                                                                                              | Consolidated Statements of Cash Flows                 
|                             |                                                                                              | 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                  



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##### Table of Contents









PART I
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, 2001 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, 2001 have been made.
The results of operations for the period ended June 30, 2001 are not
necessarily indicative of the results that may be expected for the full year.

2



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##### Table of Contents









VIB CORP AND SUBSIDIARIES
Consolidated Statements of Financial Condition
June 30, 2001 and December 31, 2000
(Unaudited)

|                                                          |                               |                                 |               |             |             |             |               |             |             | 
|--------------------------------------------------------- | ----------------------------- | ------------------------------- | ------------- | ----------- | ----------- | ----------- | ------------- | ----------- | ----------- | 
|                                                          |                               |                                 |               | June 30     |             | December 31
|                                                          |                               |                                 |               | 2001        |             | 2000       
|                                                          |                               |                                 |               |             |             |            
|ASSETS                                                    |                               |                                 |               |             |             |             |               |            
|                                                         
|                                                         
|                                                         
|                                                         
|Cash and due from banks                                   |                               | $                               | 50,590,555    |             |             | $           | 51,604,079    |            
|                                                         
|                                                         
|                                                         
|                                                         
|Federal funds sold                                        |                               |                                 |              |             |             |             |              |            
|                                                          |                               |                                 |               |             |             |             |               |            
|                                                          |                               | Total cash and cash equivalents |               |             | 50,590,555  |             |               |             | 51,604,079  | 
|                                                         
|                                                         
|                                                         
|                                                         
|Interest bearing deposits                                 |                               |                                 | 146,635       |             |             |             | 1,447,888     |            
|                                                         
|                                                         
|                                                         
|                                                         
|Investment Securities: (note B)                           |                               |                                 |               |             |             |             |               |            
|                                                         
|                                                         
|                                                         
|                                                         
|                                                          | Securities available for sale |                                 |               | 127,828,089 |             |             |               | 189,876,563 |            
|                                                         
|                                                         
|                                                         
|                                                         
|                                                          | Securities held to maturity   |                                 |               |            |             |             |               | 2,440,928   |            
|                                                          |                               |                                 |               |             |             |             |               |            
|                                                          |                               | Total investment securities     |               |             | 127,828,089 |             |               |             | 192,317,491 | 
|                                                         
|                                                         
|                                                         
|                                                         
|Federal Home Loan and Federal Reserve Bank stock, at cost |                               |                                 | 5,922,891     |             |             |             | 9,185,249     |            
|                                                         
|                                                         
|                                                         
|                                                         
|Loans: (note C)
Commercial                                |                               |                                 | 86,649,967    |             |             |             | 139,020,547   |            
|                                                         
|                                                         
|                                                         
|                                                         
|                                                          | Agricultural                  |                                 |               | 56,655,394  |             |             |               | 70,217,153  |            
|                                                         
|                                                         
|                                                         
|                                                         
|                                                          | Real
estate  construction    |                                 |               | 146,197,735 |             |             |               | 129,170,418 |            
|                                                         
|                                                         
|                                                         
|                                                         
|                                                          | Real
estate  other           |                                 |               | 509,147,224 |             |             |               | 453,041,114 |            
|                                                         
|                                                         
|                                                         
|                                                         
|                                                          | Consumer                      |                                 |               | 35,768,727  |             |             |               | 36,280,567  |            
|                                                          |                               |                                 |               |             |             |             |               |            
|                                                          |                               | Total Loans                     |               |             | 834,419,047 |             |               |             | 827,729,799 | 
|                                                         
|                                                         
|                                                         
|                                                         
|Net deferred loan fees                                    |                               |                                 | (3,988,297    | )           |             |             | (4,007,270    | )          
|                                                         
|                                                         
|                                                         
|                                                         
|Allowance for credit losses                               |                               |                                 | (9,494,017    | )           |             |             | (8,297,814    | )          
|                                                          |                               |                                 |               |             |             |             |               |            
|                                                          |                               | Net Loans                       |               |             | 820,936,733 |             |               |             | 815,424,715 | 
|                                                         
|                                                         
|                                                         
|                                                         
|Premises and equipment                                    |                               |                                 | 13,472,723    |             |             |             | 13,863,823    |            
|                                                         
|                                                         
|                                                         
|                                                         
|Other real estate owned                                   |                               |                                 | 2,295,568     |             |             |             | 1,359,905     |            
|                                                         
|                                                         
|                                                         
|                                                         
|Cash surrender life insurance                             |                               |                                 | 20,675,523    |             |             |             | 19,990,350    |            
|                                                         
|                                                         
|                                                         
|                                                         
|Deferred tax asset                                        |                               |                                 | 6,358,030     |             |             |             | 6,923,000     |            
|                                                         
|                                                         
|                                                         
|                                                         
|Intangible assets                                         |                               |                                 | 17,792,654    |             |             |             | 18,435,865    |            
|                                                         
|                                                         
|                                                         
|                                                         
|Accrued interest and other assets                         |                               |                                 | 11,538,424    |             |             |             | 12,375,595    |            
|                                                          |                               |                                 |               |             |             |             |               |            
|TOTAL ASSETS                                              |                               | $                               | 1,077,557,825 |             |             | $           | 1,142,927,960 |            

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

3



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##### Table of Contents



VIB CORP AND SUBSIDIARIES
Consolidated Statements of Financial Condition
June 30, 2001 and December 31, 2000
(Unaudited)

|                                                                                                                                       |                                                                                                                             |                            |               |             |               |             |               |             |               | 
|-------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------------- | ----------- | ------------- | ----------- | ------------- | ----------- | ------------- | 
|                                                                                                                                       |                                                                                                                             |                            |               | June 30     |               | December 31
|                                                                                                                                       |                                                                                                                             |                            |               | 2001        |               | 2000       
|                                                                                                                                       |                                                                                                                             |                            |               |             |               |            
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                   |                                                                                                                             |                            |               |             |               |             |               |            
|                                                                                                                                      
|                                                                                                                                      
|                                                                                                                                      
|                                                                                                                                      
|Deposits:                                                                                                                              |                                                                                                                             |                            |               |             |               |             |               |            
|                                                                                                                                      
|                                                                                                                                      
|                                                                                                                                      
|                                                                                                                                      
|                                                                                                                                       | Noninterest-bearing demand                                                                                                  |                            | $             | 221,079,937 |               |             | $             | 211,541,381 |              
|                                                                                                                                      
|                                                                                                                                      
|                                                                                                                                      
|                                                                                                                                      
|                                                                                                                                       | Money Market and NOW                                                                                                        |                            |               | 193,222,941 |               |             |               | 208,177,709 |              
|                                                                                                                                      
|                                                                                                                                      
|                                                                                                                                      
|                                                                                                                                      
|                                                                                                                                       | Savings                                                                                                                     |                            |               | 65,041,148  |               |             |               | 62,657,235  |              
|                                                                                                                                      
|                                                                                                                                      
|                                                                                                                                      
|                                                                                                                                      
|                                                                                                                                       | Time deposits under $100,000                                                                                                |                            |               | 219,200,799 |               |             |               | 220,547,372 |              
|                                                                                                                                      
|                                                                                                                                      
|                                                                                                                                      
|                                                                                                                                      
|                                                                                                                                       | Time deposits $100,000 and over                                                                                             |                            |               | 196,851,121 |               |             |               | 207,314,327 |              
|                                                                                                                                       |                                                                                                                             |                            |               |             |               |             |               |            
|                                                                                                                                       |                                                                                                                             | Total Deposits             |               |             | 895,395,946   |             |               |             | 910,238,024   | 
|                                                                                                                                      
|                                                                                                                                      
|                                                                                                                                      
|                                                                                                                                      
|Fed funds purchased                                                                                                                    |                                                                                                                             |                            |              |             |               |             | 750,000       |            
|                                                                                                                                      
|                                                                                                                                      
|                                                                                                                                      
|                                                                                                                                      
|Federal Home Loan Bank advances                                                                                                        |                                                                                                                             |                            | 63,000,000    |             |               |             | 118,200,000   |            
|                                                                                                                                      
|                                                                                                                                      
|                                                                                                                                      
|                                                                                                                                      
|Capital lease obligations                                                                                                              |                                                                                                                             |                            | 2,968,706     |             |               |             | 2,954,995     |            
|                                                                                                                                      
|                                                                                                                                      
|                                                                                                                                      
|                                                                                                                                      
|Company-obligated mandatorily redeemable
Capital Securities of subsidiary trusts holding
solely Subordinated Debentures of the Company |                                                                                                                             |                            | 32,400,000    |             |               |             | 32,400,000    |            
|                                                                                                                                      
|                                                                                                                                      
|                                                                                                                                      
|                                                                                                                                      
|Accrued interest and other liabilities                                                                                                 |                                                                                                                             |                            | 7,614,080     |             |               |             | 7,534,152     |            
|                                                                                                                                       |                                                                                                                             |                            |               |             |               |             |               |            
|                                                                                                                                       |                                                                                                                             | Total Liabilities          |               |             | 1,001,378,732 |             |               |             | 1,072,077,171 | 
|                                                                                                                                      
|                                                                                                                                      
|                                                                                                                                      
|                                                                                                                                      
|Stockholders Equity:                                                                                                                  |                                                                                                                             |                            |               |             |               |             |               |            
|                                                                                                                                      
|                                                                                                                                      
|                                                                                                                                      
|                                                                                                                                      
|                                                                                                                                       | Preferred shares, no par value;
10,000,000 shares authorized;
issued 0 shares in 2001 and 2000                              |                            |               |            |               |             |               |            |              
|                                                                                                                                      
|                                                                                                                                      
|                                                                                                                                      
|                                                                                                                                      
|                                                                                                                                       | Common shares, no par value, Authorized
25,000,000 in 2001 and 2000,
Outstanding: 12,612,479 in 2001 and
12,541,286 in 2000 |                            |               | 65,639,778  |               |             |               | 62,283,298  |              
|                                                                                                                                      
|                                                                                                                                      
|                                                                                                                                      
|                                                                                                                                      
|                                                                                                                                       | Undivided Profits                                                                                                           |                            |               | 10,553,789  |               |             |               | 9,173,494   |              
|                                                                                                                                      
|                                                                                                                                      
|                                                                                                                                      
|                                                                                                                                      
|                                                                                                                                       | Accumulated other comprehensive
income, net of tax of $(10,059) in
2001 and $(421,122) in 2000                              |                            |               | (14,474     | )             |             |               | (606,003    | )            
|                                                                                                                                       |                                                                                                                             |                            |               |             |               |             |               |            
|                                                                                                                                       |                                                                                                                             | Total Stockholders Equity |               |             | 76,179,093    |             |               |             | 70,850,789    | 
|                                                                                                                                       |                                                                                                                             |                            |               |             |               |             |               |            
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                                                             |                                                                                                                             | $                          | 1,077,557,825 |             |               | $           | 1,142,927,960 |            

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

4



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##### Table of Contents









VIB CORP AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)

|                                                      |                                                |   |                     |            |                   |   |            |            |          |   |            |            |  |   |            |            | 
|----------------------------------------------------- | ---------------------------------------------- | - | ------------------- | ---------- | ----------------- | - | ---------- | ---------- | -------- | - | ---------- | ---------- |  | - | ---------- | ---------- | 
|                                                      |                                                |   | For the Three Month |            | For the Six Month
|                                                      |                                                |   | Periods Ended       |            | Periods Ended    
|                                                      |                                                |   |                     |            |                  
|                                                      |                                                |   | June 30,            |            | June 30,          |   | June 30,   |            | June 30,
|                                                      |                                                |   | 2001                |            | 2000              |   | 2001       |            | 2000    
|                                                      |                                                |   |                     |            |                   |   |            |            |         
|Interest Income:                                      |                                                |   |                     |            |                   |   |            |            |          |   |            |            |  |   |            |           
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Interest and Fees on Loans                     |   | $                   | 19,109,456 |                   |   | $          | 18,332,905 |          |   | $          | 38,736,513 |  |   | $          | 35,738,375 | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Interest on Investment Securities  Taxable    |   |                     | 1,441,601  |                   |   |            | 2,302,771  |          |   |            | 3,575,794  |  |   |            | 4,551,705  | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Interest on Investment Securities  Nontaxable |   |                     | 540,904    |                   |   |            | 682,442    |          |   |            | 1,230,327  |  |   |            | 1,363,981  | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Other Interest Income                          |   |                     | 143,422    |                   |   |            | 19,050     |          |   |            | 176,878    |  |   |            | 65,213     | 
|                                                      |                                                |   |                     |            |                   |   |            |            |          |   |            |            |  |   |            |           
|Total Interest Income                                 |                                                |   | 21,235,383          |            |                   |   | 21,337,168 |            |          |   | 43,719,512 |            |  |   | 41,719,274 |           
|                                                     
|                                                     
|                                                     
|                                                     
|Interest Expense:                                     |                                                |   |                     |            |                   |   |            |            |          |   |            |            |  |   |            |           
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Interest on Money Market and NOW               |   |                     | 1,123,484  |                   |   |            | 1,279,460  |          |   |            | 2,697,324  |  |   |            | 2,442,733  | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Interest on Savings Deposits                   |   |                     | 196,793    |                   |   |            | 296,001    |          |   |            | 434,538    |  |   |            | 604,418    | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Interest on Time Deposits                      |   |                     | 5,956,405  |                   |   |            | 5,828,411  |          |   |            | 12,482,590 |  |   |            | 10,962,387 | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Interest on Other Borrowings                   |   |                     | 1,735,687  |                   |   |            | 2,702,792  |          |   |            | 4,090,972  |  |   |            | 5,171,911  | 
|                                                      |                                                |   |                     |            |                   |   |            |            |          |   |            |            |  |   |            |           
|Total Interest Expense                                |                                                |   | 9,012,369           |            |                   |   | 10,106,664 |            |          |   | 19,705,424 |            |  |   | 19,181,449 |           
|                                                      |                                                |   |                     |            |                   |   |            |            |          |   |            |            |  |   |            |           
|Net Interest Income                                   |                                                |   | 12,223,014          |            |                   |   | 11,230,504 |            |          |   | 24,014,088 |            |  |   | 22,537,825 |           
|                                                     
|                                                     
|                                                     
|                                                     
|Provision for Credit Losses                           |                                                |   | 750,000             |            |                   |   | 700,000    |            |          |   | 1,500,000  |            |  |   | 1,550,000  |           
|                                                      |                                                |   |                     |            |                   |   |            |            |          |   |            |            |  |   |            |           
|Net Interest Income after Provision for Credit Losses |                                                |   | 11,473,014          |            |                   |   | 10,530,504 |            |          |   | 22,514,088 |            |  |   | 20,987,825 |           
|                                                     
|                                                     
|                                                     
|                                                     
|Non-interest Income:                                  |                                                |   |                     |            |                   |   |            |            |          |   |            |            |  |   |            |           
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Service Charges and Fees                       |   |                     | 1,768,432  |                   |   |            | 1,679,246  |          |   |            | 3,334,759  |  |   |            | 3,193,156  | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Gain on Sale of Loans and Servicing Fees       |   |                     | 275,479    |                   |   |            | 341,674    |          |   |            | 585,438    |  |   |            | 623,343    | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Gain on Sale of Securities                     |   |                     | 641,783    |                   |   |            |           |          |   |            | 1,472,678  |  |   |            |           | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Other Income                                   |   |                     | 409,646    |                   |   |            | 447,815    |          |   |            | 689,825    |  |   |            | 666,049    | 
|                                                      |                                                |   |                     |            |                   |   |            |            |          |   |            |            |  |   |            |           
|Total Non-interest Income                             |                                                |   | 3,095,340           |            |                   |   | 2,468,735  |            |          |   | 6,082,700  |            |  |   | 4,482,548  |           
|                                                     
|                                                     
|                                                     
|                                                     
|Non-interest Expense:                                 |                                                |   |                     |            |                   |   |            |            |          |   |            |            |  |   |            |           
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Salaries and Employee Benefits                 |   |                     | 5,551,603  |                   |   |            | 5,076,600  |          |   |            | 10,948,991 |  |   |            | 10,060,664 | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Occupancy Expenses                             |   |                     | 876,343    |                   |   |            | 767,770    |          |   |            | 1,739,617  |  |   |            | 1,501,410  | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Furniture and Equipment                        |   |                     | 910,225    |                   |   |            | 773,556    |          |   |            | 1,756,519  |  |   |            | 1,508,651  | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Other Expenses (note D)                        |   |                     | 3,638,962  |                   |   |            | 3,439,974  |          |   |            | 7,343,502  |  |   |            | 6,746,750  | 
|                                                      |                                                |   |                     |            |                   |   |            |            |          |   |            |            |  |   |            |           
|Total Non-interest Expense                            |                                                |   | 10,977,133          |            |                   |   | 10,057,900 |            |          |   | 21,788,629 |            |  |   | 19,817,475 |           
|                                                      |                                                |   |                     |            |                   |   |            |            |          |   |            |            |  |   |            |           
|Income Before Income Taxes                            |                                                |   | 3,591,221           |            |                   |   | 2,941,339  |            |          |   | 6,808,159  |            |  |   | 5,652,898  |           
|                                                     
|                                                     
|                                                     
|                                                     
|Income Taxes                                          |                                                |   | 1,291,000           |            |                   |   | 962,925    |            |          |   | 2,403,300  |            |  |   | 1,834,250  |           
|                                                      |                                                |   |                     |            |                   |   |            |            |          |   |            |            |  |   |            |           
|Net Income                                            |                                                | $ | 2,300,221           |            |                   | $ | 1,978,414  |            |          | $ | 4,404,859  |            |  | $ | 3,818,648  |           
|                                                     
|                                                     
|                                                     
|                                                     
|Per Share Data: (note E)                              |                                                |   |                     |            |                   |   |            |            |          |   |            |            |  |   |            |           
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Net Income  Basic                             |   | $                   | 0.18       |                   |   | $          | 0.16       |          |   | $          | 0.35       |  |   | $          | 0.30       | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Net Income  Diluted                           |   | $                   | 0.18       |                   |   | $          | 0.16       |          |   | $          | 0.35       |  |   | $          | 0.30       | 

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

5



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##### Table of Contents









VIBCORP AND SUBSIDIARIES
Consolidated Statement of Stockholders Equity

|                                   |                                  |                                                                                              |            |               |  |        |            |         |  |             |            |               |  |   |            |   |           |   |            |           |           |  
|---------------------------------- | -------------------------------- | -------------------------------------------------------------------------------------------- | ---------- | ------------- |  | ------ | ---------- | ------- |  | ----------- | ---------- | ------------- |  | - | ---------- | - | --------- | - | ---------- | --------- | --------- | -
|                                   |                                  |                                                                                              |            | Common Shares |  |        |            |         |  | Accumulated |            |               |  |  
|                                   |                                  |                                                                                              |            |               |  |        |            |         |  | Other       |            |               |  |  
|                                   |                                  |                                                                                              |            | Number of     |  |        |            |         |  | Undivided   |            | Comprehensive |  |   |            |  
|                                   |                                  |                                                                                              |            | Shares        |  | Amount |            | Profits |  | Income      |            | Total        
|                                   |                                  |                                                                                              |            |               |  |        |            |         |  |             |            |              
|Balance January 1,2000             |                                  |                                                                                              | 11,443,037 |               |  | $      | 57,449,500 |         |  | $           | 5,252,469  |               |  | $ | (4,456,609 | ) |           | $ | 58,245,360 |          
|                                  
|                                  
|                                  
|                                  
|Comprehensive Income               |                                  |                                                                                              |            |               |  |        |            |         |  |             |            |               |  |   |            |   |           |   |            |          
|                                  
|                                  
|                                  
|                                  
|                                   | Net income                       |                                                                                              |            |               |  |        |            |         |  |             |            | 8,620,407     |  |   |            |   |           |   |            | 8,620,407 |          
|                                  
|                                  
|                                  
|                                  
|                                   | Other comprehensive income       |                                                                                              |            |               |  |        |            |         |  |             |            |               |  |   |            |   |           |   |            |           |          
|                                  
|                                  
|                                  
|                                  
|                                   |                                  | Unrealized gain on securities, net
of taxes of $2,681,226                                    |            |               |  |        |            |         |  |             |            |               |  |   |            |   | 3,850,606 |   |            |           | 3,850,606 |  
|                                   |                                  |                                                                                              |            |               |  |        |            |         |  |             |            |               |  |   |            |   |           |   |            |          
|Total Comprehensive income         |                                  |                                                                                              |            |               |  |        |            |         |  |             |            |               |  |   |            |   |           |   | 12,471,013 |          
|                                  
|                                  
|                                  
|                                  
|Cash
dividends (fractional shares) |                                  |                                                                                              |            |               |  |        |            |         |  |             | (15,784    | )             |  |   |            |   |           |   | (15,784    | )        
|                                  
|                                  
|                                  
|                                  
|Stock dividend                     |                                  |                                                                                              | 696,289    |               |  |        | 4,683,598  |         |  |             | (4,683,598 | )             |  |   |            |   |           |   |           |          
|                                  
|                                  
|                                  
|                                  
|Exercise of stock options          |                                  |                                                                                              | 29,318     |               |  |        | 150,200    |         |  |             |            |               |  |   |            |   |           |   | 150,200    |          
|                                   |                                  |                                                                                              |            |               |  |        |            |         |  |             |            |               |  |   |            |   |           |   |            |          
|Balance at December 31, 2000       |                                  |                                                                                              | 12,168,644 |               |  |        | 62,283,298 |         |  |             | 9,173,494  |               |  |   | (606,003   | ) |           |   | 70,850,789 |          
|                                  
|                                  
|                                  
|                                  
|Comprehensive Income               |                                  |                                                                                              |            |               |  |        |            |         |  |             |            |               |  |   |            |   |           |   |            |          
|                                  
|                                  
|                                  
|                                  
|                                   | Net income                       |                                                                                              |            |               |  |        |            |         |  |             |            | 4,404,859     |  |   |            |   |           |   |            | 4,404,859 |          
|                                  
|                                  
|                                  
|                                  
|                                   | Other comprehensive income       |                                                                                              |            |               |  |        |            |         |  |             |            |               |  |   |            |   |           |   |            |           |          
|                                  
|                                  
|                                  
|                                  
|                                   |                                  | Unrealized gains on securities, net
of taxes of $1,014,660                                   |            |               |  |        |            |         |  |             |            |               |  |   |            |   | 1,460,409 |   |            |           | 1,460,409 |  
|                                  
|                                  
|                                  
|                                  
|                                   |                                  | Less reclassification adjustments for gains
included in net income, net of taxes of $603,798 |            |               |  |        |            |         |  |             |            |               |  |   |            |   | (868,880  | ) |            |           | (868,880  | )
|                                   |                                  |                                                                                              |            |               |  |        |            |         |  |             |            |               |  |   |            |   |           |   |            |          
|                                   | Total Other comprehensive income |                                                                                              |            |               |  |        |            |         |  |             |            |               |  |   |            |   |           |   |            | 591,529   |          
|                                   |                                  |                                                                                              |            |               |  |        |            |         |  |             |            |               |  |   |            |   |           |   |            |          
|Total Comprehensive income         |                                  |                                                                                              |            |               |  |        |            |         |  |             |            |               |  |   |            |   |           |   | 4,996,388  |          
|                                  
|                                  
|                                  
|                                  
|Cash
dividends (fractional shares) |                                  |                                                                                              |            |               |  |        |            |         |  |             | (10,693    | )             |  |   |            |   |           |   | (10,693    | )        
|                                  
|                                  
|                                  
|                                  
|Stock dividend                     |                                  |                                                                                              | 365,761    |               |  |        | 3,013,871  |         |  |             | (3,013,871 | )             |  |   |            |   |           |   |           |          
|                                  
|                                  
|                                  
|                                  
|Exercise of stock options          |                                  |                                                                                              | 78,074     |               |  |        | 342,609    |         |  |             |            |               |  |   |            |   |           |   | 342,609    |          
|                                   |                                  |                                                                                              |            |               |  |        |            |         |  |             |            |               |  |   |            |   |           |   |            |          
|Balance at June 30, 2001           |                                  |                                                                                              | 12,612,479 |               |  | $      | 65,639,778 |         |  | $           | 10,553,789 |               |  | $ | (14,474    | ) |           | $ | 76,179,093 |          
|                                   |                                  |                                                                                              |            |               |  |        |            |         |  |             |            |               |  |   |            |   |           |   |            |          

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

6



---



##### Table of Contents









VIBCORP AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)

|                                                                                  |                            |                                                                       |                                                        |                                                  |             |                   |             |      |             |             |             |  
|--------------------------------------------------------------------------------- | -------------------------- | --------------------------------------------------------------------- | ------------------------------------------------------ | ------------------------------------------------ | ----------- | ----------------- | ----------- | ---- | ----------- | ----------- | ----------- | -
|                                                                                  |                            |                                                                       |                                                        |                                                  |             | For the Six-Month
|                                                                                  |                            |                                                                       |                                                        |                                                  |             | Periods Ended    
|                                                                                  |                            |                                                                       |                                                        |                                                  |             | June 30,         
|                                                                                  |                            |                                                                       |                                                        |                                                  |             |                  
|                                                                                  |                            |                                                                       |                                                        |                                                  |             | 2001              |             | 2000
|                                                                                  |                            |                                                                       |                                                        |                                                  |             |                   |             |     
|Cash flow from operating activities:                                              |                            |                                                                       |                                                        |                                                  |             |                   |             |     
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Net income                                                                        |                            | $                                                                     | 4,404,859                                              |                                                  |             | $                 | 3,818,648   |     
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Adjustments to reconcile net income to net
cash provided by operating activities: |                            |                                                                       |                                                        |                                                  |             |                   |             |     
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                            | Depreciation and amortization                                         |                                                        |                                                  | 2,074,176   |                   |             |      | 1,781,386   |            
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                            | Deferred income taxes                                                 |                                                        |                                                  | (279,390    | )                 |             |      | 216,711     |            
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                            | Provision for credit losses                                           |                                                        |                                                  | 1,500,000   |                   |             |      | 1,550,000   |            
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                            | Originations of loans held for sale                                   |                                                        |                                                  | (31,691,990 | )                 |             |      | (16,291,066 | )          
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                            | Proceeds from sale of loans                                           |                                                        |                                                  | 30,516,917  |                   |             |      | 20,213,062  |            
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                            | Net gain on loan sales                                                |                                                        |                                                  | (402,266    | )                 |             |      | (385,898    | )          
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                            | Loss on sale of other real estate owned                               |                                                        |                                                  | 53,785      |                   |             |      | (73,338     | )          
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                            | Net increase in cash surrender value of life insurance                |                                                        |                                                  | (685,173    | )                 |             |      | (540,267    | )          
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                            | Net realized gains in available for sale securities                   |                                                        |                                                  | (1,472,678  | )                 |             |      |            |            
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                            | Net amortization of premium/discount on available
for sale securities |                                                        |                                                  | 51,718      |                   |             |      | 17,882      |            
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                            | Net change in accrued interest, other assets,
and other liabilities   |                                                        |                                                  | 1,350,397   |                   |             |      | (1,114,521  | )          
|                                                                                  |                            |                                                                       |                                                        |                                                  |             |                   |             |     
|                                                                                  |                            |                                                                       |                                                        | Net cash provided by operating activities        |             |                   | 5,420,355   |      |             |             | 9,192,599   |  
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                            | Cash flow from investing activities:                                  |                                                        |                                                  |             |                   |             |      |             |            
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                            |                                                                       | Purchases of investment securities                     |                                                  |             | (65,630,264       | )           |      |             | (9,569,724  | )          
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                            |                                                                       | Net cash used for purchase of Kings River State Bank  |                                                  |             |                  |             |      |             | (15,596,765 | )          
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                            |                                                                       | Net cash paid for the purchase of life insurance       |                                                  |             |                  |             |      |             | (1,800,000  | )          
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                            |                                                                       | Proceeds from sales of other real estate owned         |                                                  |             | 2,167,995         |             |      |             | 1,472,593   |            
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                            |                                                                       | Proceeds from sales of investment securities           |                                                  |             | 50,966,251        |             |      |             |            |            
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                            |                                                                       | Proceeds from maturities of investment securities      |                                                  |             | 84,839,324        |             |      |             | 10,655,693  |            
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                            |                                                                       | Loans granted net of repayments                        |                                                  |             | (8,592,122        | )           |      |             | (62,333,702 | )          
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                            |                                                                       | Premises and equipment expenditures                    |                                                  |             | (1,039,865        | )           |      |             | (1,489,500  | )          
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                            |                                                                       | Net (increase)/decrease in interest bearing deposits   |                                                  |             | 1,301,253         |             |      |             | (294,773    | )          
|                                                                                  |                            |                                                                       |                                                        |                                                  |             |                   |             |     
|                                                                                  |                            |                                                                       |                                                        | Net cash (used)/provided by investing activities |             |                   | 64,012,572  |      |             |             | (78,956,178 | )
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                            | Cash flow from financing activities:                                  |                                                        |                                                  |             |                   |             |      |             |            
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                            |                                                                       | Net increase/(decrease) in demand deposits and savings |                                                  |             | (3,032,299        | )           |      |             | 16,594,716  |            
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                            |                                                                       | Net increase/(decrease) in time deposits               |                                                  |             | (11,809,779       | )           |      |             | 77,061,324  |            
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                            |                                                                       | Net change in capitalized lease obligations            |                                                  |             | 13,711            |             |      |             | 17,825      |            
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                            |                                                                       | Net change in fed funds purchased                      |                                                  |             | (55,200,000       | )           |      |             | (15,550,000 | )          
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                            |                                                                       | Net change in other borrowings                         |                                                  |             | (750,000          | )           |      |             | (5,850,000  | )          
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                            |                                                                       | Proceeds from Capital Securities                       |                                                  |             |                  |             |      |             |            |            
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                            |                                                                       | Payments for dividends                                 |                                                  |             | (10,693           | )           |      |             | (6,868      | )          
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                            |                                                                       | Proceeds from exercise of stock options and warrants   |                                                  |             | 342,609           |             |      |             | 150,201     |            
|                                                                                  |                            |                                                                       |                                                        |                                                  |             |                   |             |     
|                                                                                  |                            |                                                                       |                                                        | Net cash (used)/provided by financing activities |             |                   | (70,446,451 | )    |             |             | 72,417,198  |  
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                            |                                                                       |                                                        | Net change in cash and cash equivalents          |             |                   | $(1,013,524 | )    |             | $           | 2,653,619   |  
|                                                                                  |                            |                                                                       |                                                        |                                                  |             |                   |             |     
|                                                                                  | Cash and cash equivalents: |                                                                       |                                                        |                                                  |             |                   |             |      |            
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                            |                                                                       |                                                        | Beginning of period                              |             | $                 | 51,604,079  |      |             | $           | 45,758,670  |  
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                            |                                                                       |                                                        | End of period                                    |             | $                 | 50,590,555  |      |             | $           | 48,412,289  |  
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                            | Supplemental disclosure of cash flow information:                     |                                                        |                                                  |             |                   |             |      |             |            
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                            |                                                                       |                                                        | (in
Thousands)                                  
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                            | Cash paid for interest expense                                        |                                                        | $                                                | 19,532      |                   |             | $    | 18,281      |            
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                  |                            | Cash paid (received) for income taxes                                 |                                                        | $                                                | 1,869       |                   |             | $    | 3,583       |            

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 2000 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 2000 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, VIBC Services Company. 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, 2001 had a net
unrealized loss of approximately $ 25,000, as compared with a net unrealized
loss of approximately $1,027,000 at December 31, 2000, an increase during the
six months beginning January 1, 2001 of $1,002,000. The change for the period
is attributable to a declining interest rate environment.

Investment Securities

|                               |                                       |      |              |        |               |        |            |       |            |    |       |    |  |     |         |        |  |       | 
|------------------------------ | ------------------------------------- | ---- | ------------ | ------ | ------------- | ------ | ---------- | ----- | ---------- | -- | ----- | -- |  | --- | ------- | ------ |  | ----- | 
|                               |                                       |      |              |        | June 30, 2001
|                               |                                       |      |              |        |              
|                               |                                       |      |              |        |               |        |            |       | Gross      |    | Gross |    |  |     |        
|                               |                                       |      |              |        | Amortized     |        | Unrealized |       | Unrealized |    | Fair 
|($ In 000's)                   |                                       | Cost |              | Gains  |               | Losses |            | Value
|                               |                                       |      |              |        |               |        |            |      
|Available-for Sale Securities: |                                       |      |              |        |               |        |            |       |            |    |       |    |  |     |         |       
|                              
|                              
|                              
|                              
|                               | U.S. Treasury Securities              |      | $            | 1,231  |               |        | $          |      |            |    | $     |   |  |     | $       | 1,231  | 
|                              
|                              
|                              
|                              
|                               | U.S. Government and
Agency Securities |      |              | 74,337 |               |        |            | 28    |            |    |       |    |  |     |         | 74,365 | 
|                              
|                              
|                              
|                              
|                               | State and Political Subd.             |      |              | 43,068 |               |        |            |      |            |    |       | 94 |  |     |         | 42,974 | 
|                              
|                              
|                              
|                              
|                               | Mortgage-Backed Securities            |      |              | 5,273  |               |        |            | 135   |            |    |       |   |  |     |         | 5,408  | 
|                              
|                              
|                              
|                              
|                               |                                       |      | Other Equity |        |               | 3,944  |            |       |            | 20 |       |    |  | 114 |         |        |  | 3,850 | 
|                               |                                       |      |              |        |               |        |            |       |            |    |       |    |  |     |         |        |  |      
|                              
|                              
|                              
|                              
|                               |                                       | $    | 127,853      |        |               | $      | 183        |       |            | $  | 208   |    |  | $   | 127,828 |       
|                              
|                              
|                              
|                              
|Held-to-Maturity Securities:   |                                       |      |              |        |               |        |            |       |            |    |       |    |  |     |         |       
|                              
|                              
|                              
|                              
|                               | Mortgage-Backed Securities            |      | $            |       |               |        | $          |      |            |    | $     |   |  |     | $       |       | 

8



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##### Table of Contents



|                                      |                              |      |                   |       |            |        |            |       |      |   |       |  |  |   |         |  | 
|------------------------------------- | ---------------------------- | ---- | ----------------- | ----- | ---------- | ------ | ---------- | ----- | ---- | - | ----- |  |  | - | ------- |  | 
|                                      |                              |      | December 31, 2000
|                                      |                              |      |                  
|                                      |                              |      | Gross             |       | Gross      |        |            |       |      |   |       |  | 
|                                      |                              |      | Amortized         |       | Unrealized |        | Unrealized |       | Fair
|($ In 000's)                          |                              | Cost |                   | Gains |            | Losses |            | Value
|                                      |                              |      |                   |       |            |        |            |      
|Available-for Sale Securities:        |                              |      |                   |       |            |        |            |       |      |   |       |  |  |   |         | 
|                                     
|                                     
|                                     
|                                     
|U.S. Treasury Securities              |                              | $    | 1,540             |       |            | $      | 29         |       |      |   |      |  |  | $ | 1,569   | 
|                                     
|                                     
|                                     
|                                     
|U.S. Government and
Agency Securities |                              |      | 81,411            |       |            |        | 196        |       |      | $ | 840   |  |  |   | 80,767  | 
|                                     
|                                     
|                                     
|                                     
|State and Political Subd.             |                              |      | 67,709            |       |            |        | 906        |       |      |   | 1,013 |  |  |   | 67,602  | 
|                                     
|                                     
|                                     
|                                     
|Mortgage-Backed Securities            |                              |      | 21,576            |       |            |        | 95         |       |      |   | 217   |  |  |   | 21,454  | 
|                                     
|                                     
|                                     
|                                     
|Other Equity                          |                              |      | 18,668            |       |            |        | 118        |       |      |   | 301   |  |  |   | 18,485  | 
|                                      |                              |      |                   |       |            |        |            |       |      |   |       |  |  |   |         | 
|                                      |                              | $    | 190,904           |       |            | $      | 1,344      |       |      | $ | 2,371 |  |  | $ | 189,877 | 
|                                     
|                                     
|                                     
|                                     
|                                      | Held-to-Maturity Securities: |      |                   |       |            |        |            |       |      |   |       |  |  |   |         |  | 
|                                     
|                                     
|                                     
|                                     
|Mortgage-Backed Securities            |                              | $    | 2,441             |       |            | $      |           |       |      | $ | 16    |  |  | $ | 2,425   | 

Investment securities carried at approximately $81,195,000 and
$166,427,000, at June 30, 2001 and December 31, 2000, 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, Las Vegas, Nevada and Yuma, Arizona.
Although the Company seeks to avoid concentrations of loans to a single
industry or based upon a 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, 2001
and December 31, 2000 the Company was servicing approximately $88,317,000 and
$98,368,000, respectively, in loans previously sold.



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

|                                                    |  |               |       |                   |  |   |       | 
|--------------------------------------------------- |  | ------------- | ----- | ----------------- |  | - | ----- | 
|($ In 000's)                                        |  | June 30, 2001 |       | December
31, 2000
|                                                    |  |               |       |                  
|Balance at beginning of year                        |  | $             | 8,298 |                   |  | $ | 5,696 | 
|                                                   
|                                                   
|                                                   
|                                                   
|Additions to the allowance charged to expense       |  |               | 1,500 |                   |  |   | 2,905 | 
|                                                   
|                                                   
|                                                   
|                                                   
|Additions due to purchase of Kings River
State Bank |  |               |      |                   |  |   | 654   | 
|                                                   
|                                                   
|                                                   
|                                                   
|Recoveries on loans charged off                     |  |               | 45    |                   |  |   | 158   | 
|                                                   
|                                                   
|                                                   
|                                                   
|Loans charged off                                   |  |               | 349   |                   |  |   | 1,115 | 
|                                                    |  |               |       |                   |  |   |       | 
|Balance at end of period                            |  | $             | 9,494 |                   |  | $ | 8,298 | 

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A summary of nonperforming loans and assets follows:

|                                                                |  |                            |       |                   |       |   |        |   |        | 
|--------------------------------------------------------------- |  | -------------------------- | ----- | ----------------- | ----- | - | ------ | - | ------ | 
|($ In 000's)                                                    |  | June 30, 2001              |       | December 31, 2000
|                                                                |  |                            |       |                  
|Non-accrual loans                                               |  | $                          | 5,701 |                   |       | $ | 12,302 |  
|                                                               
|                                                               
|                                                               
|                                                               
|Loans 90 days past due and still accruing                       |  |                            | 146   |                   |       |   | 83     |  
|                                                                |  |                            |       |                   |       |   |        |  
|                                                                |  | Total nonperforming loans  |       |                   | 5,847 |   |        |   | 12,385 | 
|                                                               
|                                                               
|                                                               
|                                                               
|Other Real Estate Owned                                         |  |                            | 2,296 |                   |       |   | 1,360  |  
|                                                                |  |                            |       |                   |       |   |        |  
|                                                                |  | Total nonperforming assets |       | $                 | 8,143 |   |        | $ | 13,745 | 
|                                                               
|                                                               
|                                                               
|                                                               
|Nonperforming loans to total ending loans                       |  |                            | .70   | %                 |       |   | 1.50   | %
|                                                               
|                                                               
|                                                               
|                                                               
|Nonperforming assets to total loans and
Other Real Estate Owned |  |                            | .98   | %                 |       |   | 1.66   | %

(D)  Other Expenses

Other expenses for the periods indicated are as follows:

|                            |  |               |       |               |  |   |       | 
|--------------------------- |  | ------------- | ----- | ------------- |  | - | ----- | 
|($ In 000's)                |  | June 30, 2001 |       | June 30, 2000
|                            |  |               |       |              
|Data Processing             |  | $             | 1,407 |               |  | $ | 1,359 | 
|                           
|                           
|                           
|                           
|Advertising                 |  |               | 232   |               |  |   | 319   | 
|                           
|                           
|                           
|                           
|Legal and Professional      |  |               | 1,749 |               |  |   | 1,393 | 
|                           
|                           
|                           
|                           
|Regulatory Assessments      |  |               | 82    |               |  |   | 85    | 
|                           
|                           
|                           
|                           
|Insurance                   |  |               | 56    |               |  |   | 94    | 
|                           
|                           
|                           
|                           
|Amortization of Intangibles |  |               | 643   |               |  |   | 527   | 
|                           
|                           
|                           
|                           
|Office Expenses             |  |               | 1,239 |               |  |   | 1,152 | 
|                           
|                           
|                           
|                           
|Promotion                   |  |               | 927   |               |  |   | 807   | 
|                           
|                           
|                           
|                           
|Other                       |  |               | 1,009 |               |  |   | 1,011 | 
|                            |  |               |       |               |  |   |       | 
|Total Other Expenses        |  | $             | 7,344 |               |  | $ | 6,747 | 

(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: 12,607,815
for the three months ended June 30, 2001 and 12,542,383 for the three months
ended June 30, 2000; 12,582,906 for the six months ended June 30, 2001 and
12,537,135 for the six months ended June 30, 2000.

Diluted earnings per share for the three and six-month periods ended June
30, 2001 and 2000, are computed by dividing net earnings by the weighted
average common equivalent shares outstanding during the respective periods as
follows: 12,665,013 for the three months ended June 30, 2001 and 12,560,069 for
the three months ended June 30, 2000; 12,635,652 for the six months ended June
30, 2001 and 12,563,812 for the six months ended June 30, 2000. Common share
equivalents include dilutive common stock option share equivalents determined
by using the treasury stock method.

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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, 2000
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) 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 (BOS). 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 BOS merger was accounted for as a pooling of interests. The Company issued
approximately 2,730,589 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.

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.

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It was anticipated that VIB would require additional capitalization in
connection with the branch acquisition. On February 5, 1999, the Company
raised approximately $22.4 million in net proceeds from an offering of up to
23,000 Capital Securities in a private placement. The proceeds were used to
increase VIBs capital by $8.5 million and the balance was used for the
acquisition of Kings River State Bank (KRSB) and general corporate purposes.

The Company formed a wholly-owned business trust subsidiary, Valley Capital
Trust (the Trust), pursuant to the laws of the State of Delaware, for the
specific purpose of (1) investing in the Companys 9.00 % Junior Subordinate
Debentures (the Debentures), due February 5, 2029; (2) selling 9.00%
Cumulative Capital Securities (the Capital Securities), representing a 97%
beneficial interests in the Debentures owned by the Trust; and (3) issuing
beneficial interest in the Debentures owned by the Trust.

On February 5, 1999, the Company issued $23.093 million in Debentures to the
Trust. Concurrently, the Trust issued $22.4 million of the Capital Securities
to the accredited investors and $693,000 of Common Securities to the Company.
The Debentures were purchased by the Trust concurrently with the Trusts
issuance of the Capital Securities and Common Securities. The proceeds to the
Company, net of the Placement Agents fees and other offering expenses, was
approximately $22.4 million which is treated as Tier 1 capital for regulatory
purposes.

The interest on the Capital Securities 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
Capital Securities will mature on February 5, 2029, but can be called after
February 5, 2009.

On January 7, 2000, VIB Corp merged with Kings River Bancorp, Reedley,
California, and acquired Kings River State Bank as a wholly-owned subsidiary.
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 and is being amortized over twenty years
on a straight-line basis. The results of Kings River Bancorps operations were
included in those reported by the Company beginning January 10, 2000.

In July 2000, the Company raised approximately $10.0 million in net proceeds
from an offering of trust preferred securities in a private placement
conducted as a part of a pooled offering sponsored by First Union Securities,
Inc. (First Union) acting as the placement agent. On July 12, 2000, the
Company entered into a Placement Agent Agreement (the Placement Agent
Agreement) with First Union. Concurrently, the Company formed a wholly-owned
New York common law trust subsidiary, VIBC Capital Trust I, for the specific
purpose of: (1) investing in the Companys 11.695% Junior Subordinated Notes
(the Notes), due July 19, 2030; (2) selling 11.695% Preferred Securities (the
Preferred Securities), representing a 97% beneficial interest in the Notes
owned by VIBC Capital Trust I; and (3) issuing Common Securities to the

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Company, representing a 3% beneficial interest in the Notes owned by VIBC
Capital Trust I.

On July 26, 2000, the Company issued $10.309 million in Notes to VIBC Capital
Trust I, which, in turn, issued $10.0 million of the Preferred Securities to
First Union and $309,000 of the Common Securities to the Company. The proceeds
to the Company, net of First Unions fees and other offering expenses, was
approximately $9.6 million, of which $1.4 million is treated as Tier I capital
for regulatory purposes with the remainder being treated as Tier II capital.
The proceeds were used to increase VIBs capital by $8.5 million, with the
balance used for general corporate purposes.

The interest on the Notes will be deductible and paid by the Company and
represents the sole source of VIBC Capital Trust Is revenue available for
distributions to the holders of the Preferred Securities. The Company has the
right, assuming that no default has occurred regarding the Notes, to defer
interest payments on the Notes, at any time and for a period of up to twenty
consecutive calendar quarters. The Preferred Securities will mature
concurrently with the Notes on July 19, 2030; but can be called after July 19,
2010.

During 2000 and 2001 the Company did not conduct any business other than
through VIB, BOS and KRSB. At year-end, the Company had total consolidated
assets of $1,143 million. Upon consummation of the transactions described
above, the Company conducts its banking business only through VIB, BOS and KRSB
(collectively, the Banking Subsidiaries). Neither the Company nor the
Banking Subsidiaries earn revenues from sources outside of the United States.

During the first quarter of 2001, the Companys board of directors made a
strategic decision to merge BOS and KRSB into VIB. Effective May 24, 2001, BOS
and KRSB were merged into VIB, which continues to operate under its state
charter as a member bank. All of the former offices of BOS and KRSB operate as
branches of VIB; however, many continue to use the BOS and KRSB names as DBAs.
The consolidation is anticipated to provide significant cost savings and
improve operating efficiencies by removing layers of regulatory reporting and
operating expenses. The Company expensed approximately $435,000 in
restructuring charges related to the consolidation during the first quarter and
$90,000 in the second quarter.

Due to the reduction in interest rates by the Federal Reserve Bank, the Company
had $59.3 million in securities called from subsidiary portfolios. These calls
changed the structure of the balance sheet and its interest rate risk
characteristics. Additionally, security sales were performed to offset
restructuring and one-time costs incurred in the first and second quarter as
well as to mitigate the interest rate risk incurred by the unexpected
shortening of the securities portfolio duration.

On April 24, 2001, the Board of Directors approved a 3% stock dividend for
shareholders of record on May 25, 2001. The dividend was paid on June 15,
2001. All per share figures have been adjusted for this and previous stock
dividends.

During the second quarter of 2001, the Company made a strategic decision to
invest in an offering of preferred stock of Lenders Services Acquisition
Corporation (LSAC). LSAC is a newly organized Delaware corporation that was
formed for the purpose of acquiring all of the outstanding stock of Diversified
Capital Holdings, Inc. (Diversified). Diversified is a California based
insurance holding company whose principal subsidiaries are Northern
Counties Title Insurance Company and South Coast Title Company. Through its
subsidiaries, Diversified provides real estate title insurance

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agency and
underwriting services, trustee sale guarantees and services related to tax
deferred real property exchanges. The closing of the private placement is
expected to occur before September 30, 2001. The Company is proposing to
invest up to $2.0 million.

Consolidated net income for the three months ended June 30, 2001 was $2.3
million or $.18 per share diluted based upon average shares outstanding of
12,607,815. This compares with net income of $2.0 million or $.16 per share
fully diluted based upon the average shares outstanding of 12,542,383 for the
same period in 2000. Consolidated net income for the six months ended June 30,
2001, was $4.4 million or $.35 per share diluted based upon average shares
outstanding of 12,635,652. This compares with net income of $3.8 million or
$.30 per share fully diluted based upon the average shares outstanding of
12,563,812 for the same period in 2000.

Total gross loans at June 30, 2001 were $830.4 million, which represented an
increase of $6.7 million or 0.8% from December 31, 2000. Since June 30, 2000,
total gross loans have increased $65.5 million or 8.56%. During the recent
period, the Company undertook a systematic review of its loan portfolio,
resulting in several reclassifications to conform to regulatory call report
categories. The loan balances for prior periods have not been reclassified.

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

NET INTEREST INCOME

Average interest earning assets totaled $995.0 million during the six months
ended June 30, 2001, an increase of $57.4 million or 6.2% compared to the same
period last year. This growth was highlighted by an increase in average total
loans of $80.7 million or 11.0% to $815.6 million. Growth in average total
loans was somewhat offset by a decrease in average securities from $202.7
million for the six months ended June 30, 2000 to $179.4 million for the same
period in 2001 representing a decrease of $23.3 million, or 11.5%. Average
interest bearing liabilities in the first six months of 2001 increased $22.3
million or 2.8% to average $816.9 million as compared to the same period last
year. During this comparative period average interest bearing deposit
categories increased $61.4 million or 9.6% to $700.6 million. Average borrowed
funds decreased $39.1 million or 25.2% to $116.3 million during the same time
frame.

Interest income for the six-month period ending June 30, 2001 was $43.7
million, an increase of $2.0 million or 4.8% compared to the first six months
in 2000. The increase in interest income was primarily the result of loan
volume increases previously discussed. The yield on interest earning assets
decreased 9 basis points to 8.86% for the six-month period ended June 30, 2001
from 8.95% for the comparative period last year. Although a declining interest
rate environment characterized the first six months of 2001, the decreased
yield would have been lower if not for the relatively larger growth in the loan
portfolio which carries a higher yield than other investments.

Interest expense increased $.5 million or 2.7% during the six months ended June
30, 2001 as compared to the same period last year. The increase in interest
expense was
principally the result of volume increases in interest-bearing deposits
partially offset by a decrease in the volume of borrowed funds. The cost of
interest bearing funds increased 1 basis point from 4.85% for the six-months
ended June 30, 2000 to 4.86% for the six

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months ended June 30, 2001. This
increase in a declining rate environment is partially due to interest expense
incurred on notes issued to VIBC Capital Trust I discussed previously.

Net interest income was $24.0 million for the six months ending June 30, 2001,
representing an increase of $1.5 million or 6.6% from the same period ended
June 30, 2000. 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, decreased to 4.00% for the period ending
June 30, 2001, compared to 4.09% for the same period in 2000. Net interest
income as a percentage of average interest earning assets, or the net interest
margin, increased to 4.87% for the period ending June 30, 2001, compared to
4.83% for the period ending June 30, 2000. The decrease in net interest
spread was due primarily to the faster repricing of the Companys earning
assets as compared to interest bearing liabilities in a period of declining
interest rates. The increase in net interest margin was partially due to the
collection of $469,0000 in interest on loans previously on a non-accrual basis.
This collection of interest represented 10 basis points of net interest
margin.

For the quarter ended June 30, 2001, net interest income was $12.2 million,
which was an increase of $1.0 million, or 8.8%, from the same period in 2000.
The net interest spread increased 16 basis points to 4.16% for the three months
ended June 30, 2001 from 4.00% for the three months ended June 30, 2000.
Similarly, the net interest margin also increased from 4.75% for the quarter
ended June 30, 2000 to 5.01% for the same period in 2001. The increase in net
interest spread and net interest margin are mostly attributable to the
collection of interest on loans previously classified as non-accrual as
previously discussed.

The year 2000 was characterized by a rising rate environment. Interest rates
began a steady decline during the first six months of 2001. The yield on
earning assets for the year 2000 was 9.10% as compared to 8.95% for the six
months ended June 30, 2000 and was 8.86% for the six months ended June 30,
2001. The cost of interest bearing liabilities for the year 2000 was 5.11% as
compared to 4.85% for the six months ended June 30, 2000 and was 4.86% for the
six months ended June 30, 2001.

During the three months ended June 30, 2001, yield on earning assets decreased
28 basis points to 8.71% as compared to 8.99% for the three months ended June
30, 2000. The cost of interest bearing liabilities for the quarter ended June
30, 2001, also decreased 44 basis points to 4.55% from 4.99% for the quarter
ended June 30, 2000.

PROVISION FOR CREDIT LOSSES

The allowance for credit losses at June 30, 2001 was $9.5 million, compared to
$7.6 million at June 30, 2000, an increase of $1.9 million or 25.3%. As a
percent of total loans, the allowance was 1.14% at June 30, 2001, compared to
 .99% at June 30, 2000 and 1.01% at December 31, 2000. Due to the California
energy issue, and its possible effect
on the Companys loan portfolio, an additional allocation was added to the
allowance in the first quarter of 2001. During the second quarter, as the
Company gathered more information regarding the possible effect of the
California energy issue on its loan customers, the Company removed this
allocation. In the future the Company may again add to the allowance due to
the risk of energy-related defaults but at the

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current time it has not
perceived an increased level of risk due to this specific issue.

The provision for credit losses was $1,500,000 for the first six months of
2001, compared with $1,550,000 provided for the six months ended June 30, 2000,
a decrease of 3.2%. The provision was $750,000 for the second quarter of 2001
compared to $700,000 for the second quarter of 2000, an increase of $50,000 or
7.1%.

Total non-performing loans as of June 30, 2001 were $5.8 million as compared to
$3.8 million at June 30, 2000 and $12.4 million at December 31, 2000.
Non-performing loans decreased $6.6 million during the six months ended June,
2001. The increase from June 30, 2000 to December 31, 2000 is primarily
attributed to two unrelated loans moving into non-accrual status. One of the
loans was transferred to Other Real Estate Owned during the first quarter of
2001 and partially sold. The remaining loan was assumed by a new borrower with
added capital as collateral during the second quarter. By continuing to build
the loan loss reserve, combined with the resolution of the two problem loans,
the Company anticipates continued improvement in its coverage and reserve
ratios.

Net charge-offs were $304,000 for the six months ended June 30, 2001. This
represents a decrease of $18,000 when compared to $322,000 in net charge offs
for the same period in 2000. During the second quarter ending June 30, 2001,
$60,000 was recorded in net charge-offs compared to $200,000 net charge-offs in
the second quarter of 2000.

VIB (previously the Banking Subsidiaries) has an established standard process
for assessing the adequacy of the allowance for credit losses. In addition to
reviewing the inherent risks of the loan portfolio, consideration is given to
exposures such as economic conditions, credit concentrations, 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
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, 2001, was adequate
based on present economic conditions and its ongoing evaluation of the risks
inherent in the loan portfolio.

NON-INTEREST INCOME

Total non-interest income amounted to $6.1 million for the six months ended
June 30, 2001 representing an increase of $1.6 million or 35.7% compared with
the same period in the prior year. The primary reason for the increase in
non-interest income was $1.5 million in gains on the sale of investment
securities. Another significant item was an increase of $142,000 in service
charges and fee income, which was primarily attributable to increases in loan
funding fees charged to 3rd parties and ATM charges.

Non-interest income for the quarter ended June 30, 2001 increased $626,000 to
$3.1 million from $2.5 million for the same period in 2000. This increase is
largely due to security sales totaling $641,000 in the second quarter of 2001.

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NON-INTEREST EXPENSE

Total non-interest expense for the six months ended June 30, 2001 was $21.8
million, an increase of $2.0 million or 9.9% as compared to the same period in
2000. During the first quarter, the Company incurred approximately $435,000 in
non-recurring restructuring costs associated with the planned consolidation of
its three subsidiary banks.

Salary expense during the six months ended June 30, 2001 was $8.2 million, an
increase of $661,000 or 8.8% over the comparable period in 2000. The growth in
salary expense is attributable to $200,000 in severance related to the
restructuring charges discussed above and normal annual merit increases.
Employee benefits expense was $2.8 million for the period ending June 30, 2001,
an increase of $227,000 or 8.8% from the same period in the prior year. This
increase is mostly due to a one time supplemental executive retirement plan
accrual for $237,000, a $112,000 increase in workmen's compensation insurance
and an increase in payroll taxes of $84,000 partially offset by the companys
planned reduction in contribution to the Employee Stock Ownership Plan of
$208,000.

Occupancy expense was $1,740,000 for the six-month period ended June 30, 2001,
an increase of $238,000 or 15.9% as compared to the first six months in 2000.
Furniture and equipment expense was $1,757,000 for the six-month period ended
June, 2001, an increase of $248,000 or 16.4% from the same period in 2000.
These increases were primarily the result of the Companys expansion of its
geographic market area through the addition of full service branches in Fresno,
Selma and Visalia, California and Las Vegas, Nevada along with increased
depreciation expense on planned additions to computer hardware and software
expenditures.

Other operating expense amounted to $7.3 million during the six-month period
ended June 30, 2001, an increase of $597,000 or 8.8% from the same period in
the prior year. The increase was largely attributable to increases in legal and
other professional fees.

For the three months ended June 30, 2001, non-interest expense was $11.0
million. This was an increase of $919,000 or 9.1% for the same period in 2000.
This was due mainly to increases in salaries and employee benefits of
$475,000, other professional fees of $142,000, and occupancy and equipment
increases of $246,000.

INCOME TAXES

Income tax expense for the six months ending June 30, 2001 was $2,403,000 as
compared with $1,834,000 for the same period in 2000. The increase in expense
was primarily attributable to a $3.3 million increase in taxable operating
income, partially offset by a $2.0 million increase in non-interest expense.
The Companys effective tax rate was 35.3% for the six months ended June 30,
2001 as compared to 32.4% for the same period in the prior year.

Income taxes for the second quarter were $1,291,000, an increase of $329,000 or
34.1% from the second quarter of 2000. The increase in expense was primarily
related to a $1,711,000 increase in the Companys taxable operating income
offset by a $919,000 increase in non-interest expense. The Companys effective
tax rate was

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35.9% for the three months ended June 30, 2001 as compared to
32.7% for the same period in the prior year.

CAPITAL RESOURCES

Total stockholders equity as of June 30, 2001 was $76.2 million, which
represented an increase of $5.3 million from December 31, 2000, and $14.3
million from June 30, 2000. The increase since December 31, 2000 included $4.4
million in net income and a $.6 million decrease in the cumulative unrealized
loss on securities classified as available for sale. The increase since June
30, 2000 included $9.2 million in net income and a $4.8 million decrease in the
cumulative unrealized loss 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, 2001 the Tier 1 and total risk based capital ratios were 9.69% and 11.60%,
respectively, compared to 8.54% and 9.48%, respectively, at June 30, 2000. 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 7.85% at June 30, 2001,
compared to 6.78% at June 30, 2000. 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.

LIQUIDITY AND ASSET/LIABILITY MANAGEMENT

The Companys consolidated liquidity position remained adequate to meet future
contingencies. At June 30, 2001, the Company had $63.0 million in net Federal
funds purchased and FHLB advances outstanding. This compared to $113.9 million
in net Federal funds outstanding at June 30, 2000. Since December 31, 2000,
net Federal funds purchased and FHLB advances have decreased $56.0 million.
This reduction in borrowed funds is due primarily to the reduction in interest
rates since the beginning of 2001, resulting in $59.3 million in securities
called from VIBs (previously the Banking Subsidiaries) investment portfolio.

The Companys consolidated liquidity ratio at June 30, 2001 was 13.9%. This
represented a decrease from 19.4% at June 30, 2000 and a decrease from 20.0% at
December 31, 2000. This decrease has been the result of an increase in loan
growth that has exceeded the growth in the deposit base as well as a result of
investment maturities,
calls and paydowns which have offset the reduction in borrowings as the balance
sheet has contracted. While the 13.9% consolidated liquidity ratio is below
stated Company policy, adequate sources of liquidity are available for the
Company to meet existing and future funding commitments. Steps have been
implemented to increase the ratio to accepted policy levels.

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VIBs (previously the Banking Subsidiaries) Asset/Liability Committee (ALCO)
functions to manage the maintenance of liquidity and the preservation of 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 needed 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 interest rate risk to minimize the impact of fluctuating
interest rates on earnings. Simulation techniques are used that attempt to
measure the volatility of changes in the level of interest rates, basic banking
interest rate spreads, and the shape of the yield curve. The primary method of
measuring the sensitivity of earnings of changing market interest rates is to
simulate expected cash flows using varying assumed interest rates while also
adjusting the timing and magnitude of non-contractual deposit repricing to more
accurately reflect anticipated pricing behavior. These simulations include
adjustments for the lag in loan repricing and the spread and volume elasticity
of interest-bearing deposit accounts, regular savings, and money market deposit
accounts.

The principal function of interest rate risk management is to maintain an
appropriate relationship between those assets and liabilities that are
sensitive to changing market interest rates. VIB closely monitors the
sensitivity of its assets and liabilities on an ongoing basis and projects the
effect of various interest rate changes on its net interest margin. Interest
sensitive assets and liabilities are defined as those assets or liabilities
that mature or reprice within a designated time-frame. The difference between
rate sensitive assets and rate sensitive liabilities for a specified period of
time is known as gap.

Management believes VIBs current mix of assets and liabilities provides a
reasonable level of risk related to significant fluctuations in net interest
income and the resulting volatility of VIBs earning base. ALCO and the Board
of Directors reviews interest rate risk in relation to its effect on net
interest income, net interest margin, and the net portfolio value (NPV) of
the Company.

NPV represents the market value of the portfolio equity and is equal to the
market value of assets minus the market value of liabilities. VIBs Board of
Directors has adopted interest rate risk policies, 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, 2001:

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VIB CORP
Change in Net Portfolio Value
at June 30, 2001

|                         |  |               |         |        |  |            |         |   |  |  |       |  
|------------------------ |  | ------------- | ------- | ------ |  | ---------- | ------- | - |  |  | ----- | -
|Change In Interest Rates |  | Net Portfolio |         | Actual |  | Percentage
|                         |  | Value         |         | Change |  | Change    
|                         |  |               |         |        |  |           
|(Dollars in Thousands)   |  |               |         |        |  |           
|300 basis point rise     |  | $             | 179,389 |        |  |            | $(9,650 | ) |  |  | -5.1  | %
|                        
|                        
|                        
|                        
|200 basis point rise     |  |               | 185,367 |        |  |            | (3,673  | ) |  |  | -1.9  | %
|                        
|                        
|                        
|                        
|100 basis point rise     |  |               | 192,095 |        |  |            | 3,056   |   |  |  | 1.6   | %
|                        
|                        
|                        
|                        
|Base Rate Scenario       |  |               | 189,039 |        |  |            |        |   |  |  |      |  
|                        
|                        
|                        
|                        
|100 basis point decline  |  |               | 179,789 |        |  |            | (9,251  | ) |  |  | -4.9  | %
|                        
|                        
|                        
|                        
|200 basis point decline  |  |               | 164,539 |        |  |            | (24,500 | ) |  |  | -13.0 | %
|                        
|                        
|                        
|                        
|300 basis point decline  |  |               | 146,155 |        |  |            | (42,885 | ) |  |  | -22.7 | %

Change in Net Interest Income
at June 30, 2001

|                         |  |              |        |        |  |            |        |   |  |  |       |  
|------------------------ |  | ------------ | ------ | ------ |  | ---------- | ------ | - |  |  | ----- | -
|Change In Interest Rates |  | Net Interest |        | Actual |  | Percentage
|                         |  | Income       |        | Change |  | Change    
|                         |  |              |        |        |  |           
|(Dollars in Thousands)   |  |              |        |        |  |           
|300 basis point rise     |  | $            | 47,780 |        |  | $          | 2,482  |   |  |  | 5.5   | %
|                        
|                        
|                        
|                        
|200 basis point rise     |  |              | 47,275 |        |  |            | 1,977  |   |  |  | 4.4   | %
|                        
|                        
|                        
|                        
|100 basis point rise     |  |              | 46,606 |        |  |            | 1,308  |   |  |  | 2.9   | %
|                        
|                        
|                        
|                        
|Base Rate Scenario       |  |              | 45,298 |        |  |            |       |   |  |  |      |  
|                        
|                        
|                        
|                        
|100 basis point decline  |  |              | 43,681 |        |  |            | (1,617 | ) |  |  | -3.6  | %
|                        
|                        
|                        
|                        
|200 basis point decline  |  |              | 41,482 |        |  |            | (3,816 | ) |  |  | -8.4  | %
|                        
|                        
|                        
|                        
|300 basis point decline  |  |              | 39,677 |        |  |            | (5,621 | ) |  |  | -12.4 | %

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.

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
Capital Securities) or borrow from external sources, the Company may

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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 Capital Securities, or to maintain its separate
liquidity. Under such circumstances, the Company would be forced to seek other
means to raise capital.

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

At June 30, 2001 the Company had adequate liquidity to meet its anticipated
funding needs.

In regards to the potential California energy crisis, the Company maintains
contingency plans in the normal course of business designed to be deployed in
the event of various potential business interruptions such as power and
telecommunications. The Company has an established Business Resumption Plan in
coordination with its Disaster Recovery Plan which addresses any potential
failures due to energy interruptions. The Company has approximately 40% of its
market area within the Imperial Irrigation District, which will not be subject
to rolling blackouts, and anticipates that any energy shortages in other areas
will have a minimal effect on the operations of its branches.

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 1.25% at June 30, 2000 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.

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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 25, 2001, the shareholders of the Company held their 2001 Annual
Meeting. At the Annual Meeting the following directors were elected to
two-year terms:

|                |  |           |           |                |  |  |         | 
|--------------- |  | --------- | --------- | -------------- |  |  | ------- | 
|                |  | Votes For |           | Votes Withheld
|                |  |           |           |               
|Thomas S. Kelly |  |           | 9,797,431 |                |  |  | 305,220 | 
|               
|               
|               
|               
|Dennis L. Kern  |  |           | 9,800,948 |                |  |  | 301,703 | 
|               
|               
|               
|               
|Edward McGrew   |  |           | 9,798,393 |                |  |  | 304,258 | 
|               
|               
|               
|               
|Pete J. Penner  |  |           | 9,796,455 |                |  |  | 306,196 | 

The following directors terms continued after the Annual Meeting and
expire in 2002:

|                               | 
|------------------------------ | 
|R. Stephen Ellison             | 
|                              
|                              
|                              
|                              
|Richard D. Foss                | 
|                              
|                              
|                              
|                              
|Ronald A. (Rusty) Pederson     | 
|                              
|                              
|                              
|                              
|Alice Helen Lowery Westerfield | 

The shareholders also voted to readopt Article VII of the Companys
Articles of Incorporation, which provides for fair price protection of
shareholders.

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The Annual Meeting was adjourned and reconvened on June 7, 2001. At the
reconvened Annual Meeting the shareholders voted to reapprove Article V(b),
dealing with the range of directors, and Article VII(h), dealing with the
classification of the board of directors. The votes on these three proposals
were as follows:

|                                    |  |     |           |         |  |         |         |           |  |  |         |  |  |        |           | 
|----------------------------------- |  | --- | --------- | ------- |  | ------- | ------- | --------- |  |  | ------- |  |  | ------ | --------- | 
|                                    |  |     |           |         |  |         |         |           |  |  |         |  |  | Broker
|                                    |  | For |           | Against |  | Abstain |         | Non Votes
|                                    |  |     |           |         |  |         |         |          
|Article V(b)  Range of Directors   |  |     | 7,793,474 |         |  |         | 572,072 |           |  |  | 161,220 |  |  |        | 2,143,023 | 
|                                   
|                                   
|                                   
|                                   
|Article VII  Fair Price Protection |  |     | 9,402,880 |         |  |         | 583,315 |           |  |  | 116,456 |  |  |        |          | 
|                                   
|                                   
|                                   
|                                   
|Article VIII(h)  Classified Board  |  |     | 7,498,589 |         |  |         | 870,070 |           |  |  | 158,107 |  |  |        | 2,143,023 | 







ITEM 5. OTHER INFORMATION

Not Applicable.







ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits:

Not Applicable.

(a)  Current Reports on Form 8-K:



| |                                                                                                   
| | --------------------------------------------------------------------------------------------------
| | During the quarter ended June 30, 2001 the Company filed the following
Current Report on Form 8-K:

|                                      |  |               
|------------------------------------- |  | --------------
|Description                           |  | Date of Report
|                                     
|                                     
|                                     
|                                     
|Consolidation of Banking Subsidiaries |  | May 24, 2001  

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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 3, 2001 |  |          |  |                                                                            
|                    
|                    
|                    
|                    
|                     |  | /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

24