---

---

UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

|/x/ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|--- | ---------------------------------------------------------------------------------------

For the quarterly period ended June 30, 2001

OR

|/ / | 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 0-265520

California Independent Bancorp(Exact name of registrant as specified in its charter)

California(State or other jurisdiction of
incorporation or organization)

68-0349947(IRS Employer
Identification No.)1227 Bridge St., Suite C, Yuba City, California 95991(Address of principal executive offices)
(Zip Code)(530) 674-6025(Registrant's telephone number, including area code)N/A(Former name, former address and former fiscal year, if changed since last report)


Indicate
by check mark whether the registrant (1) has 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:

Indicate
the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

|Class |                            | Outstanding at
June 30, 2001
|----- | -------------------------- | ----------------------------
|      | Common stock, no par value |                             

This
report contains 25 pages. The Exhibit Index is on page 24.

---

---

---



|PART IFINANCIAL INFORMATION
|----------------------------
|ITEM 1                      
|                            
|                            
|                            
|                            
|                            
|                            
|ITEM 2                      
|                            
|ITEM 3                      
|                            
|PART IIOTHER INFORMATION   
|ITEM 1                      
|                            
|ITEM 2                      
|                            
|ITEM 3                      
|                            
|ITEM 4                      
|                            
|ITEM 5                      
|                            
|ITEM 6                      
|                            
|SIGNATURES                  

2

---



PART IFinancial Information

ITEM 1. FINANCIAL STATEMENTS

CALIFORNIA INDEPENDENT BANCORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of June 30, 2001, December 31, 2000, and June 30, 2000
(dollars in thousands)
(UNAUDITED)

|                                           |                                                                                                                                                                               | June 30,
2001                              |         | December 31,
2000 |         | June 30,
2000 |        
|------------------------------------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------- | ----------------- | ------- | ------------- | -------
|Assets                                     |                                                                                                                                                                               |                                            |         |                   |         |               |        
|Cash and Due From Banks                    |                                                                                                                                                                               | $                                          | 14,818  |                   | $       | 19,359        |        
|Federal Funds Sold                         |                                                                                                                                                                               |                                            | 9,703   |                   |         | 7,700         |        
|                                           |                                                                                                                                                                               |                                            |         |                   |         |               |        
|                                           | Cash and Cash Equivalents                                                                                                                                                     |                                            |         | 24,521            |         |               | 27,059 
|Investment securities:                     |                                                                                                                                                                               |                                            |         |                   |         |               |        
|                                           | Held-to-Maturity Securities, at amortized cost (fair value of $3,975, $5,322 and $7,519 respectively)                                                                         |                                            |         | 3,906             |         |               | 5,317  
|                                           | Available-for-Sale Securities, at fair value                                                                                                                                  |                                            |         | 62,756            |         |               | 76,695 
|                                           |                                                                                                                                                                               |                                            |         |                   |         |               |        
|                                           |                                                                                                                                                                               | Total Investments                          |         |                   | 66,662  |               |        
|Loans and Leases                           |                                                                                                                                                                               |                                            | 166,746 |                   |         | 158,681       |        
|Loans and Leases Held-for-Sale             |                                                                                                                                                                               |                                            | 18,699  |                   |         | 20,334        |        
|                                           |                                                                                                                                                                               |                                            |         |                   |         |               |        
|                                           | Gross Loans and Leases                                                                                                                                                        |                                            |         | 185,445           |         |               | 179,015
|                                           | Less: Allowance for Loan and Lease Losses                                                                                                                                     |                                            |         | (5,023            | )       |               | (5,725 
|                                           |                                                                                                                                                                               |                                            |         |                   |         |               |        
|                                           |                                                                                                                                                                               | Net Loans and Leases                       |         |                   | 180,422 |               |        
|Premises and Equipment, Net                |                                                                                                                                                                               |                                            | 6,900   |                   |         | 6,979         |        
|Interest Receivable                        |                                                                                                                                                                               |                                            | 2,272   |                   |         | 2,840         |        
|Other Real Estate Owned                    |                                                                                                                                                                               |                                            | 580     |                   |         | 405           |        
|Cash Surrender Value of Insurance Policies |                                                                                                                                                                               |                                            | 4,988   |                   |         | 4,870         |        
|Deferred Taxes                             |                                                                                                                                                                               |                                            | 1,577   |                   |         | 2,168         |        
|Income Tax Receivable                      |                                                                                                                                                                               |                                            | 171     |                   |         | 89            |        
|Other Assets                               |                                                                                                                                                                               |                                            | 1,373   |                   |         | 1,509         |        
|Net Assets From Discontinued Operations    |                                                                                                                                                                               |                                            | 188     |                   |         | 226           |        
|                                           |                                                                                                                                                                               |                                            |         |                   |         |               |        
|                                           |                                                                                                                                                                               | Total Assets                               |         | $                 | 289,654 |               | $      
|                                           |                                                                                                                                                                               |                                            |         |                   |         |               |        
|Liabilities and Shareholders' Equity       |                                                                                                                                                                               |                                            |         |                   |         |               |        
|Deposits:                                  |                                                                                                                                                                               |                                            |         |                   |         |               |        
|                                           | Noninterest-Bearing                                                                                                                                                           |                                            | $       | 60,061            |         | $             | 63,996 
|                                           | Interest-Bearing                                                                                                                                                              |                                            |         | 197,679           |         |               | 203,636
|                                           |                                                                                                                                                                               |                                            |         |                   |         |               |        
|                                           | Total Deposits                                                                                                                                                                |                                            |         | 257,740           |         |               | 267,632
|Interest Payable                           |                                                                                                                                                                               |                                            | 1,435   |                   |         | 1,880         |        
|Accrued Compensation Payable               |                                                                                                                                                                               |                                            | 772     |                   |         | 631           |        
|Federal Agency and Other Borrowings        |                                                                                                                                                                               |                                            | 160     |                   |         | 4,160         |        
|Other Liabilities                          |                                                                                                                                                                               |                                            | 2,106   |                   |         | 1,374         |        
|                                           |                                                                                                                                                                               |                                            |         |                   |         |               |        
|                                           | Total Liabilities                                                                                                                                                             |                                            |         | 262,213           |         |               | 275,677
|Shareholders' Equity                       |                                                                                                                                                                               |                                            |         |                   |         |               |        
|                                           | Common stock, no par value-Authorized20,000,000
Issued and outstanding2,008,966 shares June 30, 2001, 2,008,966 shares December 31, 2000 and 1,907,018 shares June 30, 2000 |                                            |         | 19,909            |         |               | 19,909 
|                                           | Retained Earnings                                                                                                                                                             |                                            |         | 7,213             |         |               | 6,264  
|                                           | Debt Guarantee of ESOP                                                                                                                                                        |                                            |         | (160              | )       |               | (160   
|                                           | Accumulated Other Comprehensive Income (Loss)                                                                                                                                 |                                            |         | 479               |         |               | (243   
|                                           |                                                                                                                                                                               |                                            |         |                   |         |               |        
|                                           |                                                                                                                                                                               | Total Shareholders' Equity                 |         |                   | 27,441  |               |        
|                                           |                                                                                                                                                                               |                                            |         |                   |         |               |        
|                                           |                                                                                                                                                                               | Total Liabilities and Shareholders' Equity |         | $                 | 289,654 |               | $      
|                                           |                                                                                                                                                                               |                                            |         |                   |         |               |        

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

3

---



CALIFORNIA INDEPENDENT BANCORP AND SUBSIDIARIES  CONSOLIDATED STATEMENTS OF INCOME  (dollars in thousands except per share amounts)  (UNAUDITED)

|                                         |                                                               | Three months
ended
June 30, 2001           |           | Three months
ended
June 30, 2000
|---------------------------------------- | ------------------------------------------------------------- | ------------------------------------------ | --------- | --------------------------------
|Interest Income:                         |                                                               |                                            |           |                                 
|                                         | Interest and Fees on Loans and Leases                         |                                            | $         | 4,322                           
|                                         | Interest on Investments-                                      |                                            |           |                                 
|                                         |                                                               | Taxable Interest Income                    |           |                                 
|                                         |                                                               | Nontaxable Interest Income                 |           |                                 
|                                         | Interest on Federal Funds Sold and Other Interest Income      |                                            |           | 124                             
|                                         |                                                               |                                            |           |                                 
|                                         |                                                               | Total Interest Income                      |           |                                 
|                                         |                                                               |                                            |           |                                 
|Interest Expense:                        |                                                               |                                            |           |                                 
|                                         | Interest on Deposits                                          |                                            |           | 1,837                           
|                                         | Interest on Other Borrowings                                  |                                            |           | 11                              
|                                         |                                                               |                                            |           |                                 
|                                         |                                                               | Total Interest Expense                     |           |                                 
|                                         |                                                               |                                            |           |                                 
|                                         |                                                               | Net Interest Income                        |           |                                 
|Provision for Loan and Lease Losses      |                                                               |                                            |          |                                 
|                                         |                                                               |                                            |           |                                 
|                                         | Net Interest Income After Provision for Loan and Lease Losses |                                            |           | 3,709                           
|                                         |                                                               |                                            |           |                                 
|Noninterest Income:                      |                                                               |                                            |           |                                 
|                                         | Service Charges on Deposit Accounts                           |                                            |           | 279                             
|                                         | Loan Servicing Fees                                           |                                            |           | 34                              
|                                         | Brokered Loan Fees                                            |                                            |           | 54                              
|                                         | Alternative Investment Fee Income                             |                                            |           | 46                              
|                                         | Cash Surrender Value of Life Insurance Policies               |                                            |           | 71                              
|                                         | Other                                                         |                                            |           | 27                              
|                                         |                                                               |                                            |           |                                 
|                                         |                                                               | Total Noninterest Income                   |           |                                 
|                                         |                                                               |                                            |           |                                 
|Noninterest Expense:                     |                                                               |                                            |           |                                 
|                                         | Salaries and Employee Benefits                                |                                            |           | 1,758                           
|                                         | Occupancy Expense                                             |                                            |           | 204                             
|                                         | Furniture and Equipment Expense                               |                                            |           | 274                             
|                                         | Legal and Professional Fees                                   |                                            |           | 206                             
|                                         | Telephone Expense                                             |                                            |           | 81                              
|                                         | Other Operating and Administrative Expense                    |                                            |           | 566                             
|                                         |                                                               |                                            |           |                                 
|                                         |                                                               | Total Noninterest Expense                  |           |                                 
|                                         |                                                               |                                            |           |                                 
|Income Before Provision for Income Taxes |                                                               |                                            | 1,131     |                                 
|Provision for Income Taxes               |                                                               |                                            | 405       |                                 
|                                         |                                                               |                                            |           |                                 
|                                         | Net Income From Continuing Operations                         |                                            |           | 726                             
|                                         | Income on Discontinued Operations, net of tax effect          |                                            |           | 14                              
|                                         |                                                               |                                            |           |                                 
|                                         | Net Income                                                    |                                            | $         | 740                             
|                                         |                                                               |                                            |           |                                 
|Share Data:                              |                                                               |                                            |           |                                 
|                                         | Earnings Per Share:                                           |                                            |           |                                 
|                                         |                                                               | Basic-From Continuing Operations           |           | $                               
|                                         |                                                               | Basic-After Discontinuance of Subsidiary   |           |                                 
|                                         |                                                               | Diluted-From Continuing Operations         |           |                                 
|                                         |                                                               | Diluted-After Discontinuance of Subsidiary |           |                                 
|Weighted Average Basic Shares            |                                                               |                                            | 2,008,966 |                                 
|Weighted Average Diluted Shares          |                                                               |                                            | 2,047,792 |                                 

Basic and diluted earnings per share, and the weighted average shares, have been adjusted for the three-months ended June 30, 2000 to
reflect the 5% stock dividend distributed on September 15, 2000.

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

4

---

CALIFORNIA INDEPENDENT BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands except per share amounts)
(UNAUDITED)

|                                         |                                                               | Six months
ended
June 30, 2001             |           | Six months
ended
June 30, 2000
|---------------------------------------- | ------------------------------------------------------------- | ------------------------------------------ | --------- | ------------------------------
|Interest Income:                         |                                                               |                                            |           |                               
|                                         | Interest and Fees on Loans and Leases                         |                                            | $         | 8,609                         
|                                         | Interest on Investments-                                      |                                            |           |                               
|                                         |                                                               | Taxable Interest Income                    |           |                               
|                                         |                                                               | Nontaxable Interest Income                 |           |                               
|                                         | Interest on Federal Funds Sold and Other Interest Income      |                                            |           | 290                           
|                                         |                                                               |                                            |           |                               
|                                         |                                                               | Total Interest Income                      |           |                               
|                                         |                                                               |                                            |           |                               
|Interest Expense:                        |                                                               |                                            |           |                               
|                                         | Interest on Deposits                                          |                                            |           | 3,907                         
|                                         | Interest on Other Borrowings                                  |                                            |           | 57                            
|                                         |                                                               |                                            |           |                               
|                                         | Total Interest Expense                                        |                                            |           | 3,964                         
|                                         |                                                               |                                            |           |                               
|                                         | Net Interest Income                                           |                                            |           | 7,299                         
|Provision for Loan and Lease Losses      |                                                               |                                            |          |                               
|                                         |                                                               |                                            |           |                               
|                                         | Net Interest Income After Provision for Loan and Lease Losses |                                            |           | 7,299                         
|                                         |                                                               |                                            |           |                               
|Noninterest Income:                      |                                                               |                                            |           |                               
|                                         | Service Charges on Deposit Accounts                           |                                            |           | 531                           
|                                         | Loan Servicing Fees                                           |                                            |           | 192                           
|                                         | Brokered Loan Fees                                            |                                            |           | 66                            
|                                         | Alternative Investment Fee Income                             |                                            |           | 91                            
|                                         | Cash Surrender Value of Life Insurance Policies               |                                            |           | 139                           
|                                         | Other                                                         |                                            |           | 93                            
|                                         |                                                               |                                            |           |                               
|                                         |                                                               | Total Noninterest Income                   |           |                               
|                                         |                                                               |                                            |           |                               
|Noninterest Expense:                     |                                                               |                                            |           |                               
|                                         | Salaries and Employee Benefits                                |                                            |           | 3,629                         
|                                         | Occupancy Expense                                             |                                            |           | 372                           
|                                         | Furniture and Equipment Expense                               |                                            |           | 556                           
|                                         | Legal and Professional Fees                                   |                                            |           | 396                           
|                                         | Telephone Expense                                             |                                            |           | 173                           
|                                         | Other Operating & Administrative Expense                      |                                            |           | 1,151                         
|                                         |                                                               |                                            |           |                               
|                                         |                                                               | Total Noninterest Expense                  |           |                               
|                                         |                                                               |                                            |           |                               
|Income Before Provision for Income Taxes |                                                               |                                            | 2,134     |                               
|Provision for Income Taxes               |                                                               |                                            | 769       |                               
|                                         |                                                               |                                            |           |                               
|                                         | Net Income From Continuing Operations                         |                                            |           | 1,365                         
|                                         | Income on Discontinued Operations, net of tax effect          |                                            |           | 26                            
|                                         |                                                               |                                            |           |                               
|                                         | Net Income                                                    |                                            | $         | 1,391                         
|                                         |                                                               |                                            |           |                               
|Share Data:                              |                                                               |                                            |           |                               
|                                         | Earnings Per Share:                                           |                                            |           |                               
|                                         |                                                               | BasicFrom Continuing Operations           |           | $                             
|                                         |                                                               | BasicAfter Discontinuance of Subsidiary   |           |                               
|                                         |                                                               | DilutedFrom Continuing Operations         |           |                               
|                                         |                                                               | DilutedAfter Discontinuance of Subsidiary |           |                               
|Weighted Average Basic Shares            |                                                               |                                            | 2,008,966 |                               
|Weighted Average Diluted Shares          |                                                               |                                            | 2,036,787 |                               

Basic and diluted earnings per share, and the weighted average shares, have been adjusted for the six-months ended June 30,
2000 to reflect the 5% stock dividend distributed on September 15, 2000.

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

5

---

CALIFORNIA INDEPENDENT BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six-month Periods ended June 30, 2001 and June 30, 2000
(dollars in thousands)
(UNAUDITED)

|                                                                                  |                                                | June 30, 2001                                        |         | June 30, 2000 |       
|--------------------------------------------------------------------------------- | ---------------------------------------------- | ---------------------------------------------------- | ------- | ------------- | ------
|Cash Flows From Operating Activities                                              |                                                |                                                      |         |               |       
|Net Income                                                                        |                                                | $                                                    | 1,391   |               | $     
|Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: |                                                |                                                      |         |               |       
|                                                                                  | Depreciation and Amortization                  |                                                      |         | 433           |       
|                                                                                  | Provision for Loan and Lease Losses            |                                                      |         |              |       
|                                                                                  | Purchases of Loans and Leases Held-for-Sale    |                                                      |         | (327          | )     
|                                                                                  | Originations of Loans and Leases Held-for-Sale |                                                      |         |              |       
|                                                                                  | Proceeds from Loan and Lease Sales             |                                                      |         | 426           |       
|                                                                                  | (Gain) on Sale of Other Real Estate Owned      |                                                      |         | (14           | )     
|                                                                                  | (Gain) loss on Sale of Premises and Equipment  |                                                      |         | 22            |       
|(Increase) Decrease in Assets:                                                    |                                                |                                                      |         |               |       
|                                                                                  | Interest Receivable                            |                                                      |         | 568           |       
|                                                                                  | Deferred Taxes                                 |                                                      |         |              |       
|                                                                                  | Cash Surrender Value of Insurance Policies     |                                                      |         | (118          | )     
|                                                                                  | Income Tax Receivable                          |                                                      |         | (82           | )     
|                                                                                  | Net Assets From Discontinued Operations        |                                                      |         | 38            |       
|                                                                                  | Other Assets                                   |                                                      |         | 136           |       
|Increase (Decrease) in Liabilities:                                               |                                                |                                                      |         |               |       
|                                                                                  | Interest Payable                               |                                                      |         | (445          | )     
|                                                                                  | Deferred Compensation Payable                  |                                                      |         | 141           |       
|                                                                                  | Other Liabilities                              |                                                      |         | (3,268        | )     
|                                                                                  |                                                |                                                      |         |               |       
|                                                                                  |                                                | Net Cash Provided By (Used For) Operating Activities |         |               | (1,099
|Cash Flows From Investing Activities                                              |                                                |                                                      |         |               |       
|Net (Increase) Decrease in Loans and Leases                                       |                                                |                                                      | (7,509  | )             |       
|Purchase of Securities Available-for-Sale                                         |                                                |                                                      | (21,090 | )             |       
|Proceeds From Maturity of Securities Held-to-Maturity                             |                                                |                                                      | 1,345   |               |       
|Proceeds From Sales, Maturities and Calls of Securities Available-for-Sale        |                                                |                                                      | 36,408  |               |       
|Proceeds From Sales of Other Real Estate Owned                                    |                                                |                                                      | 117     |               |       
|Purchases of Premises and Equipment                                               |                                                |                                                      | (376    | )             |       
|                                                                                  |                                                |                                                      |         |               |       
|                                                                                  |                                                | Net Cash Provided By (Used For) Investing Activities |         |               | 8,895 
|Cash Flows From Financing Activities                                              |                                                |                                                      |         |               |       
|Net Increase (Decrease) in Noninterest Bearing Deposits                           |                                                |                                                      | (3,935  | )             |       
|Net Increase (Decrease) in Interest Bearing Deposits                              |                                                |                                                      | (5,957  | )             |       
|Cash Dividends                                                                    |                                                |                                                      | (442    | )             |       
|Stock Options Exercised                                                           |                                                |                                                      |        |               |       
|                                                                                  |                                                |                                                      |         |               |       
|                                                                                  | Net Cash (Used For) Financing Activities       |                                                      |         | (10,334       | )     
|                                                                                  |                                                |                                                      |         |               |       
|Net Increase (Decrease) in Cash and Cash Equivalents                              |                                                |                                                      | (2,538  | )             |       
|                                                                                  |                                                |                                                      |         |               |       
|                                                                                  |                                                |                                                      |         |               |       
|Cash and Cash Equivalents, Beginning of Year                                      |                                                |                                                      | 27,059  |               |       
|                                                                                  |                                                |                                                      |         |               |       
|                                                                                  |                                                |                                                      |         |               |       
|Cash and Cash Equivalents, End of Period                                          |                                                |                                                      | 24,521  |               |       
|                                                                                  |                                                |                                                      |         |               |       

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

6

---

Note 1Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange
Commission ("SEC"). In the opinion of Management, the unaudited consolidated financial statements contain all adjustments that are necessary to present fairly the financial position of California
Independent Bancorp ("CIB") and its subsidiaries (collectively, the "Company") at June 30, 2001, December 31, 2000, and June 30, 2000, and the results of its operations for the
three and six-month periods ended June 30, 2001, and June 30, 2000.

Certain
information and footnote disclosures normally presented in annual financial statements prepared in accordance with generally accepted accounting principles have been omitted
in accordance with SEC rules or regulations. The results of operations for the periods ended June 30, 2001, are not necessarily indicative of the operating results for the full year ending
December 31, 2001. It is suggested that these financial statements be read in conjunction with the financial statements and notes included in the Company's Annual Report and Form 10K for
the year ended December 31, 2000.

Note 2Principles of Consolidation

The accompanying financial statements include the accounts of CIB and its wholly owned subsidiary, Feather River State Bank ("Bank") and its wholly owned
subsidiary, E.P.I. Leasing Co., Inc. ("EPI"), whose operations have been discontinued. Significant intercompany balances and transactions have been eliminated in consolidation.

Note 3Loans to Directors

In the ordinary course of business, the Bank makes loans to directors of the Company. Loans to directors amounted to approximately $2,296,000, $3,165,000, and
$3,342,000 at June 30, 2001, December 31, 2000, and June 30, 2000, respectively.

Note 4Commitments and Contingent Liabilities

In the normal course of business, there are various outstanding commitments and contingent liabilities, such as commitments to extend credit and letters of
credit, which are not reflected in the financial statements. Management does not anticipate any material loss as a result of these transactions.

Note 5Cash and Stock Dividends

In March, June, August, and November of 2000, and February and May of 2001, CIB paid an eleven-cent per share cash dividend.

On
August 15, 2000, CIB's Board of Directors authorized and declared a five-percent (5%) stock dividend for shareholders of record as of August 31, 2000. The
dividend was distributed on September 15, 2000, and resulted in the issuance of 94,881 additional shares of common stock.

Note 6Earnings Per Share

The Company calculates earnings per share ("EPS") in accordance with the Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share." SFAS No. 128 establishes standards for computing and presenting EPS. It replaced the presentation of primary EPS with a presentation of basic EPS. It also required dual presentation of
basic and diluted EPS on the face of the income statement for all entities with complex capital structures and required reconciliation of the numerator and denominator of the basic EPS computation to
the numerator and denominator of the diluted EPS computation.

7

---

Basic EPS excludes dilution and is computed by dividing income available to the common shareholders by the weighted-average number of common shares outstanding for the period. Diluted
EPS reflects the potential dilution that could occur if options or other contracts to issue common stock were exercised or converted into common stock, or resulted in the issuance of common stock that
then shared in the earnings of the Company.

Note 7Comprehensive Income

For the Company, comprehensive income includes net income and changes in the fair value of its available-for-sale investment
securities. Total comprehensive income for the six months ended June 30, 2001 and June 30, 2000 was $1,870,000 and ($263,000), respectively.

Note 8Financial Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities." SFAS No. 133 establishes accounting and reporting standards for derivative instruments and for hedging activities. It requires recognition of all derivatives as either assets or
liabilities in the statement of financial condition and the measurement of those instruments at fair value. Recognition of changes in fair value will be recognized as income or as a component of other
comprehensive income depending upon the type of the derivative and its related hedge, if any. As issued, SFAS No. 133 was to be effective for the Company beginning January 1, 2000.
However, in July 2000, the FASB issued Statement No. 137, "Accounting for Derivative Instruments and Hedging Activities-Deferral of the Effective Date of FASB Statement No. 133,"
extending the effective date to fiscal years beginning after June 15, 2000. In June 2000, the FASB issued SFAS No. 138 "Accounting for Certain Derivative Instruments and Certain
Hedging Activities," to provide guidance in the implementation of certain issues related to SFAS No. 133. Upon implementation at January 1, 2001, there was no material impact on the
Company's financial statements.

In
September of 2000, the FASB issued SFAS No. 140 "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities" ("SFAS No. 140"), a
replacement of FASB Statement No. 125 "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." SFAS No. 140 revises the standard for accounting
for securitizations and other transfers of financial assets and collateral and requires certain disclosures, but it carries over most of SFAS No. 125's provisions without reconsideration. The
Company has adopted the disclosure provisions related to the securitization of financial assets. All transactions entered into after the first quarter of 2001 will be accounted for in accordance with
SFAS No. 140. This adoption does not have a material impact on the Company.

In
July 2001, the FASB issued SFAS No. 141, "Business Combinations" ("SFAS No. 141"),and SFAS No. 142,
"Goodwill and Other Intangible Assets" ("SFAS No. 142"). These Statements change the method of accounting for business combinations and goodwill in two significant ways. First, SFAS
No. 141 prohibits the use of the pooling of interests method and requires the purchase method of accounting to be used for all business combinations initiated after June 30, 2001.
Second, SFAS No. 142 changes the accounting method for goodwill from an amortization method to an impairment-only approach. As a result, goodwill will be accounted for as an asset
unless it declines in value. Companies will be required to test their goodwill valuation periodically for "impairment" or loss and to recognize any change on their books. The amortization of goodwill,
including goodwill recorded in past business combinations, will cease upon adoption of SFAS No. 142, which for companies with calendar year ends, will be January 1, 2002. Management does
not believe that the adoption of these Statements will have a material impact on the Company.

8

---



ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

California Independent Bancorp ("CIB"), through its wholly owned subsidiary Feather River State Bank ("Bank"), engages in a broad range of financial service
activities. The Bank commenced operations in 1977 as a California state chartered commercial bank. CIB was formed in 1994 and became the holding company for the Bank in May 1995 after receiving
regulatory and shareholder approval. In October 1996, the Bank acquired E.P.I. Leasing Co. ("EPI") and has operated it as a subsidiary. Consistent with the Bank's decision in the first quarter
of 2000 to discontinue originating and purchasing leases through EPI, it is anticipated that the business affairs of EPI will be dissolved following the orderly wind-down of the remaining
lease portfolio.

Certain
statements in this Form 10Q quarterly report, and in Management's Discussion and Analysis of Financial Condition and Results of Operations (excluding statements of fact
or historical financial information) involve forward-looking information within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, and are subject to the "safe harbor" created by those sections. These forward-looking statements involve certain risks and uncertainties that could cause actual
results to differ materially from those in the forward-looking statements. Such risks and uncertainties include, but are not limited to, the following factors: competitive pressure in the banking
industry increases significantly; changes in the interest rate environment reduce margins; general economic conditions, either nationally or regionally, are less favorable than expected, resulting in,
among other things, a deterioration in credit quality and an increase in the provision for possible loan and lease losses; the loss of key personnel; change in the regulatory environment; changes in
business conditions; volatility of rate sensitive deposits; operational risks including data processing system failures or fraud; asset and liability matching risks and liquidity risks; changes in the
securities markets; and the impact of the California energy shortage and significantly higher energy costs.

The
following discussion and analysis are designed to provide a better understanding of the significant changes and trends related to the financial condition, operating results, asset
and liability management, liquidity, and capital resources of CIB and the Bank (collectively, the "Company"). The discussion and analysis should be read in conjunction with the Company's Consolidated
Financial Statements and its accompanying notes.

OVERVIEW OF CHANGES IN THE FINANCIAL STATEMENTS

Total
assets at June 30, 2001 were $289,654,000. This figure represents a decrease from $301,447,000 at December 31, 2000, and $292,186,000 at June 30, 2000.

Gross
loans and leases were $185,445,000 at June 30, 2001, an increase of 3.6% from $179,015,000 at December 31, 2000, and a 9.3% increase from $169,622,000 at
June 30, 2000. The increase in loans over the past twelve-month period is attributable to successful business development efforts and the Bank's strategic decision to further diversify its
overall loan portfolio via growth primarily in the commercial and real estate portfolios.

The
Company's investment portfolio at June 30, 2001 was $66,662,000, compared to $82,012,000 at December 31, 2000, and $91,893,000 at June 30, 2000. Decreases in
the Company's investment portfolio during the first six-months of 2001 were primarily the result of bond calls driven by the Federal Reserve Bank's continued easing of interest rates. Cash
and cash equivalents, which consisted of cash and due from banks and federal funds sold, were $24,521,000 at June 30, 2001, $27,059,000 at December 31, 2000, and $16,136,000 at
June 30, 2000.

Total
deposits of the Company remain strong at $257,740,000, $267,632,000, and $259,955,000 at June 30, 2001, December 31, 2000, and June 30, 2000, respectively.
The increase at December 31, 2000, compared to the other two periods, is indicative of normal seasonal fluctuations in deposits.

9

---

The ratio of gross loans to deposits was 72.0%, 66.9%, and 65.3% at June 30, 2001, December 31, 2000, and June 30, 2000, respectively.



The Company continues to emphasize real estate, commercial, agricultural, and consumer lending. Beginning in 2000 and continuing into 2001, the Company
proactively intensified its focus on real estate secured lending to further diversify the loan portfolio, improve asset quality, and meet customer needs in its geographic market segments. The Company
lends primarily to small and medium sized businesses, small to large sized farms, and consumers. The Company's market area is comprised principally of Sutter, Yuba, Colusa, Yolo, and Placer counties;
and, secondarily, Sacramento, El Dorado, Butte, and Glenn counties.

Due
to the loan and lease portfolio's composition, the Company sustains moderate variations in outstanding loan totals. More specifically, certain seasonal variations are expected to
occur in the agricultural and construction loan portfolios. The table below sets forth the composition of the Company's loan and lease portfolio as of June 30, 2001, December 31, 2000,
and June 30, 2000.

COMPOSITION OF LOAN AND LEASE PORTFOLIO
(dollars in thousands)

|Loan Category            |       | June 30, 2001 |        | December 31, 2000 |   | June 30, 2000
|------------------------ | ----- | ------------- | ------ | ----------------- | - | -------------
|Commercial               |       | $             | 25,402 |                   | $ | 21,043       
|Agricultural             |       |               | 26,703 |                   |   | 20,648       
|Real Estate-Construction |       |               | 33,437 |                   |   | 35,783       
|Real Estate-Mortgage     |       |               | 78,276 |                   |   | 75,627       
|Leases                   |       |               | 15,479 |                   |   | 19,609       
|Consumer                 |       |               | 4,727  |                   |   | 4,472        
|Other                    |       |               | 1,421  |                   |   | 1,833        
|                         |       |               |        |                   |   |              
|                         | Total |               | $      | 185,445           |   | $            
|                         |       |               |        |                   |   |              

The
principal changes in the loan and lease portfolio between June 30, 2000, December 31, 2000, and June 30, 2001 are discussed below:



10

---





During
the first and second quarter of 2001, there were no significant changes in the Bank's loan management, lending philosophy, or credit delivery procedures. The Company continues
to emphasize high credit quality and superior customer service as two key components of its strategic direction.



The Company places loans and leases on nonaccrual status when either principal or interest has been past due for 90 days or more. Exceptions to this
policy can be made if the loan or lease is well secured and in the process of collection. The Company also places loans and leases on nonaccrual when payment in full of principal or interest is not
expected, or the financial condition of the borrower has significantly deteriorated. At the time that a loan or lease is placed on nonaccrual, any accrued but uncollected interest is reversed and
additional income is recorded on a cash basis as payments are received. In the normal course of business, at the discretion of Management, loans and leases that are in the process of renewal or are
well secured and in the process of collection may not be placed on nonaccrual status. A nonaccrual loan or lease may be restored to an accrual basis when interest and principal payments are current
and the prospects for future payments are no longer in doubt.

Nonperforming
loans and leases consist of "Accruing Loans and Leases Past Due 90 Days or More" and "Nonaccrual Loans and Leases." The table below summarizes the composition of
nonperforming loans and leases as of June 30, 2001, December 31, 2000, and June 30, 2000, as well as the changes between the periods.

11

---

Composition of Nonperforming Loans and Leases(dollars in thousands)

|                                                   |              | June 30, 2001 |       | % Change From
June 30, 2000 To
June 30, 2001 |       | December 31, 2000 |        | % Change From
June 30, 2000 To
December 31, 2000 |       | June 30, 2000
|-------------------------------------------------- | ------------ | ------------- | ----- | -------------------------------------------- | ----- | ----------------- | ------ | ------------------------------------------------ | ----- | -------------
|Accruing loans and leases past due 90 days or more |              |               |       |                                              |       |                   |        |                                                  |       |              
|                                                   | Commercial   |               | $     |                                             |       |                  |        | $                                                |      |              
|                                                   | Agricultural |               |       |                                             |       | (100.0            | )%     |                                                  |      |              
|                                                   | Real Estate  |               |       |                                             |       | (100.0            | )%     |                                                  |      |              
|                                                   | Leases       |               |       |                                             |       |                  |        |                                                  |      |              
|                                                   | Consumer     |               |       |                                             |       |                  |        |                                                  |      |              
|                                                   |              |               |       |                                              |       |                   |        |                                                  |       |              
|                                                   |              | Total         |       | $                                            |      |                   | (100.0 | )%                                               | $     |             
|                                                   |              |               |       |                                              |       |                   |        |                                                  |       |              
|Nonaccrual Loans and Leases                        |              |               |       |                                              |       |                   |        |                                                  |       |              
|                                                   | Commercial   |               | $     | 575                                          |       | (69.6             | )%     | $                                                | 2,059 |              
|                                                   | Agricultural |               |       | 1,836                                        |       | (60.8             | )%     |                                                  | 2,613 |              
|                                                   | Real Estate  |               |       | 1,681                                        |       | 54.4              | %      |                                                  | 253   |              
|                                                   | Leases       |               |       |                                             |       | (100.0            | )%     |                                                  |      |              
|                                                   | Consumer     |               |       | 9                                            |       | 28.6              | %      |                                                  |      |              
|                                                   |              |               |       |                                              |       |                   |        |                                                  |       |              
|                                                   |              | Total         |       | $                                            | 4,101 |                   | (46.8  | )%                                               | $     | 4,925        
|                                                   |              |               |       |                                              |       |                   |        |                                                  |       |              
|Total Nonperforming Loans and Leases               |              | $             | 4,101 |                                              | (53.0 | )%                | $      | 4,925                                            |       | (43.5        
|                                                   |              |               |       |                                              |       |                   |        |                                                  |       |              

The
trend in nonperforming loans and leases has improved over the past year, decreasing from $8,718,000, or 5.1% of gross loans and leases, at June 30, 2000 to $4,101,000, or
2.2% of gross loans and leases, at June 30, 2001. During the first half of 2001, the Company continued to successfully implement its classified asset reduction plan and enhance quality control
in the management of the loan and lease portfolios.

The
composition of the Company's nonaccrual loans and leases remain limited primarily to a few large agribusiness, commercial, and agricultural real estate relationships. At
June 30, 2001, 94.2% of the Company's total nonaccrual loans and leases were concentrated in three relationships. One of the relationships, totaling $2,183,000, or 53.2%, is agribusiness in
nature, and two relationships equaling $1,681,000, or 41.0%, are agricultural real estate. Each of these nonaccrual loan relationships are in the process of collection and are believed to be
adequately supported by collateral.

Similarly,
as of December 31, 2000, 94.9% of the Company's total nonaccrual loans and leases were concentrated in ten relationships. Three of the relationships, totaling
$2,650,000, or 53.2% were agribusiness in nature, while the remaining seven relationships, equaling $2,080,000, or 41.7%, were commercial.

Loans
and leases on accrual status that were past due 90 days or more as to principal and interest continue to be held at zero for June 30, 2001, as was
December 31, 2000. At June 30, 2000, this amount totaled $1,012,000.

The
Company's allowance for loan and lease losses ("ALLL") totaled $5,023,000, or 2.7% of gross loans and leases, as of June 30, 2001. This amount compares to
$5,725,000, or 3.2%, of gross loans and
leases as of December 31, 2000, and $6,792,000, or 4.0%, of gross loans and leases as of June 30, 2000. The Company uses the allowance method in providing for possible loan and lease
losses. Loan and

12

---

lease losses are charged against the ALLL and recoveries are credited to it. Management believes that the total ALLL is adequate to cover potential losses in the loan and lease portfolios. While
Management uses all available information to provide for loan and lease losses, future additions to the ALLL may be necessary based on changes in economic conditions and other factors.

Additions
to the ALLL are made by provisions for possible losses. The provision for possible loan and lease losses is charged to operating expense and is based upon past loss
experience and estimates of potential losses which, in Management's judgment and in accordance with generally accepted accounting principles, deserves current recognition. Other factors considered by
Management include growth, composition, and overall quality of the loan and lease portfolio; specific problem loans and leases; and current economic conditions that may affect the customer's ability
to repay the obligation. Actual losses may vary from current estimates. The estimates are reviewed regularly and adjustments, as necessary, are charged to operations in the period in which they become
known. The Company has no foreign loans and therefore none of the allowance is for foreign loans.

Provisions
to the ALLL totaled $0 and $200,000 for the six-month periods ending June 30, 2001 and June 30, 2000, respectively; and $0 and $50,000 for the
three-month periods ending June 30, 2001 and June 30, 2000, respectively. Total provisions to the ALLL for the year ended December 31, 2000 equaled $200,000. Loan and lease
charge-offs for the six-months ended June 30, 2001 totaled $986,000, as compared to $542,000 for the six-months ended June 30, 2000. Loan and lease
recoveries were $285,000 for the six-months ended June 30, 2001, compared to $363,000 for the six-months ended June 30, 2000. The following table illustrates the
activity in the Bank's allowance for loan and lease losses for the six-months ended June 30, 2001 and June 30, 2000.

Activity in Allowance for Loan and Lease Losses(dollars in thousands)

|                                  |              | For the Six-months
ended June 30,
|--------------------------------- | ------------ | ---------------------------------
|
|Balance of Allowance at January 1 |              | $                                
|Charge-off by Loan Category:      |              |                                  
|                                  | Commercial   |                                  
|                                  | Agricultural |                                  
|                                  | Real Estate  |                                  
|                                  | Leases       |                                  
|                                  | Consumer     |                                  
|                                  |              |                                  
|                                  | Total        |                                  
|                                  |              |                                  
|Recoveries by Loan Category:      |              |                                  
|                                  | Commercial   |                                  
|                                  | Agricultural |                                  
|                                  | Real Estate  |                                  
|                                  | Leases       |                                  
|                                  | Consumer     |                                  
|                                  |              |                                  
|                                  | Total        |                                  
|                                  |              |                                  
|Net Charge-offs                   |              |                                  
|Provision Charged to Expense      |              |                                  
|                                  |              |                                  
|Balance, June 30                  |              | $                                
|                                  |              |                                  

13

---



The Company's investment portfolio was $66,662,000 at June 30, 2001, compared to $82,012,000 at December 31, 2000, and $91,893,000 at
June 30, 2000. The decrease of $25,231,000, or 27.5%, from June 30, 2000 to June 30, 2001, is primarily the result of bond calls due to the downward movement in interest rates
experienced during the first and second quarters of 2001 and, to a lesser extent, normal bond maturities. The proceeds from securities liquidations were primarily used to fund loan growth, with the
excess being reinvested into qualifying replacement securities and federal funds sold.

As
of June 30, 2001, the Company's "available-for-sale" category adjustment reflected a net unrealized gain of $479,000, net of taxes. The approximate
market value of the Company's investment portfolio at June 30, 2001 was $66,731,000. As of June 30, 2000, the Company's "available-for-sale" category adjustment
reflected a net unrealized loss of $1,649,000, net of taxes, and the approximate market value of the Company's investment portfolio was $91,801,000. The $2,128,000 change in the unrealized gain/loss
between the two periods is primarily the result of decreasing interest rates.

RESULTS OF OPERATIONS

Three
and Six-Months Ended June 30, 2001
Compared with
Three and Six-Months Ended June 30, 2000

The
Company recognized net income of $1,391,000 for the first half of 2001, resulting in diluted earnings per share of $0.68. Net income for the three-month period ending
June 30, 2001 was $740,000, resulting in diluted earnings of $0.36 per share. The net income for the three and six-month periods ending June 30, 2001 was slightly higher than
the 2000 comparable periods. The Company reported net income of $706,000, or $0.35 per share on a diluted basis, for the same three-month period of 2000, and $1,386,000, or $0.69 per share on a
diluted basis, for the same six-month period of 2000, respectively (after retroactively adjusting the first and second quarters of 2000 for the effect of the Company's 5% stock dividend
distributed on September 15, 2000).

Net
interest income rose for the six-months ending June 30, 2001 to $7,299,000 from $6,998,000 for the same six-month period in 2000, an increase of
$301,000, or 4.3%. Net interest income also increased for the three-months ending June 30, 2001 to $3,709,000 from $3,556,000 for the same three-month period in 2000, an increase of $153,000,
or 4.3%. These increases reflect the combined effect of a variety of factors affecting interest income and interest expense as described below. Net interest income after provision for loan and lease
losses for the six-months ending June 30, 2001 increased $501,000, or 7.4%, over the same six-month period in 2000. Net interest income after provision for loan and
lease losses for the three-months ending June 30, 2001 increased $203,000, or 5.8%, over the same three-month period in 2000. The decline in the provision for loan and lease losses was
primarily due to the overall improvement in asset quality that has occurred since June 30, 2000. More specifically, the combined effect of lower than anticipated charge-offs, higher
than anticipated recoveries on previously charged-off loans and leases, and the successful resolution of certain problem credits mitigated the need to further build reserves via provisions
charged to income.

14

---

The Company's primary source of income is interest and fees on loans and leases. The table below depicts average loans and leases and yields for the three and six-month
periods ending June 30, 2001 and 2000.

|Loans and Leases
(dollars in thousands) |  | Three-months
ended
June 30, 2001 |         | Three-months
ended
June 30, 2000 |   | Six-months
ended
June 30, 2001 |   | Six-months
ended
June 30, 2000 |        
|--------------------------------------- |  | -------------------------------- | ------- | -------------------------------- | - | ------------------------------ | - | ------------------------------ | -------
|Average loans and leases outstanding    |  | $                                | 180,139 |                                  | $ | 161,216                        |   | $                              | 178,113
|Average yields                          |  |                                  | 9.60    | %                                |   | 10.23                          | % |                                | 9.67   
|Interest and fees earned                |  | $                                | 4,322   |                                  | $ | 4,122                          |   | $                              | 8,609  
|Average prime rate                      |  |                                  | 7.34    | %                                |   | 9.25                           | % |                                | 7.98   

The three and six-month average outstanding loans and leases at June 30, 2001, were up $18,923,000, or 11.7%, and $19,551,000, or 12.3%, respectively, over the same
three and six-month comparable periods in 2000. The increase in average outstanding loans and leases is reflective of the Bank's aggressive marketing efforts and the Bank's intensified
expansion into Placer County. Both the volume and rate are primarily impacted as a result of the declining interest rate environment experienced during the first six months of 2001 and competitive
pressure to acquire and retain quality customers for the Company. Additionally, the decline in average yields is in part the result of obtaining business under a more stringent credit underwriting
process. This has a direct tradeoff in risk that is not reflected in the yield calculation.

Rates
and amounts paid on average deposits, including noninterest-bearing deposits, for the three and six-month periods ended June 30, 2001, compared to the same
periods in 2000, are set forth in the following table:

|Deposits
(dollars in thousands) |  | Three-months
ended
June 30, 2001 |         | Three-months
ended
June 30, 2000 |   | Six-months
ended
June 30, 2001 |   | Six-months
ended
June 30, 2000 |        
|------------------------------- |  | -------------------------------- | ------- | -------------------------------- | - | ------------------------------ | - | ------------------------------ | -------
|Average deposits outstanding    |  | $                                | 255,557 |                                  | $ | 263,750                        |   | $                              | 257,801
|Average rates paid              |  |                                  | 2.88    | %                                |   | 3.40                           | % |                                | 3.03   
|Interest expense                |  | $                                | 1,837   |                                  | $ | 2,241                          |   | $                              | 3,907  

The Company experienced a decrease in total interest expense of 18.2%, or $412,000, for the three-month period ending June 30, 2001, in comparison to the same three-month
period of 2000. Total interest expense decreased 12.0%, or $538,000, for the six-month period ending June 30, 2001, in comparison to the same six-month period of 2000.
This is primarily attributed to a decrease in interest rates and a change in the mix of deposits. Average rates paid on deposits decreased from 3.4% for the three-month period ending June 30,
2000 to 2.9% for the three-month period ending June 30, 2001. Average rates paid on deposits decreased from 3.3% for the six-month period ending June 30, 2000 to 3.0% in the
six-month period ending June 30, 2001. Interest-bearing deposits comprised 76.7% of total deposits at June 30, 2001, as compared to 79.3% at June 30, 2000.

The
Company recognized a decrease in total noninterest income of $34,000, or 6.2%, for the three-month period ending June 30, 2001 versus the same period in 2000. Total
noninterest income decreased $123,000, or 10.0%, for the six-month period ending June 30, 2001 versus the same period in 2000. Total noninterest income consists of service charges
on deposit accounts, loan servicing fees, brokered loan fees, and other noninterest income.

Service
charge income on deposit accounts, one of the primary components of noninterest income, showed an increase of $26,000, or 10.3%, for the three-month period ending
June 30, 2001 over the

15

---

three-month period ending June 30, 2000, and an increase of $28,000, or 5.6%, for the six-month period ending June 30, 2001 over the same six-month period in
2000. Income derived from service charges on deposit accounts was $531,000 and $503,000 for the six-month periods ending June 30, 2001 and June 30, 2000, respectively.

Loan
service fee income for the three-month period ending June 30, 2001 increased $7,000 in comparison to the three-month period ending June 30, 2000, and decreased by
$26,000, or 11.9%, for the six-month period ending June 30, 2001 compared to the six-month period ending June 30, 2000. The decrease is attributable to normal
principal amortization on serviced loans and the Bank's loss of servicing rights on a pool of agricultural mortgage loans. One of the insurance companies that had previously purchased agricultural
mortgage loans from the Bank elected to take back the loan servicing rights pursuant to the servicing contract, thereby reducing the principal balance of mortgage loans serviced.

Income
from brokered loan fees for the three-months ended June 30, 2001 increased $35,000, or 184.2%, in comparison to the three-month period ended June 30, 2000, and
increased $19,000, or 40.4%, for the six-months ended June 30, 2001, compared to the six-month period ended June 30, 2000. This increase is primarily due to
favorable pricing variances on the brokering of non-conforming residential real estate loans.

All
other noninterest income, which consists of alternative investment fee income, cash surrender value of life insurance policies, and other noninterest income, decreased by $102,000
for the three-month period ended June 30, 2001 in comparison to the three-month period ended June 30, 2000, and decreased by $144,000 for the six-month period ended
June 30, 2001 compared to the six-month period ended June 30, 2000. These decreases include recurring operating and impairment losses on an investment made in a Community
Reinvestment Act qualified California Affordable Housing Project, the economic value of which is ultimately realized through the tax benefit it generates.

During
the three-month period ended June 30, 2001, the Company experienced an increase of $152,000, or 5.2%, in total noninterest expense over the three-month period ended
June 30, 2000. Total noninterest expense increased $432,000, or 7.4%, for the six-month period ended June 30, 2001 compared to the six-month period ended
June 30, 2000. Total noninterest expense stood at $6,277,000 and $5,845,000 for the six-month periods ending June 30, 2001 and June 30, 2000, respectively. Noninterest
expenses consist of salaries and employee benefits, occupancy and furniture and equipment expense, legal and professional fees, telephone expense, and other general and administrative operating
expenses.

Salaries
and employee benefits increased $134,000, or 8.3%, and $469,000, or 14.8%, for the three and six-month periods ending June 30, 2001, over the same periods
in 2000. These net increases are primarily due to three factors. First, the cost of employee benefit plans, primarily medical insurance, and to a
lesser extent, expenses associated with the Company's 401K plan, rose significantly over the last year. Second, higher incentive accruals resulted from the Company's strategic goal to further
strengthen its sales and service culture. And third, the Bank recognized a one-time restructuring charge related to the reorganization and streamlining of its loan origination delivery
system.

Collectively,
occupancy and furniture and equipment expenses increased $24,000, or 5.3%, and $3,000, or 0.3%, for the three and six-month periods ending June 30,
2001, over the same periods in 2000, respectively. These two categories stood jointly at $928,000 and $925,000 for the six-month periods ending June 30, 2001 and June 30,
2000, respectively.

Legal
and professional fees, consisting primarily of outside legal counsel, independent accountants, and consultants, were relatively the same for the three-month periods ending
June 30, 2001, and June 30, 2000. Alternatively, legal and professional fees increased $78,000, or 24.5%, for the six-month period ended June 30, 2001 over the same
six-month period in 2000. This increase was primarily due to

16

---

consulting costs related to the Bank's process improvement initiatives and, to a lesser extent, compliance with certain privacy provisions of the Grahm-Leach-Bliley Act.

Telephone
expenses, which include data line transmissions, increased $21,000, or 35.0%, and $32,000, or 22.7%, for the three and six-month periods ended June 30,
2001 versus the same periods in 2000, respectively.

All
other operating and administrative expenses in the aggregate decreased $26,000, or 4.4%, and $150,000, or 11.5% for the three and six-month periods ended
June 30, 2001 versus the same periods in 2000. The Company continued to recognize operating efficiencies which contributed to the overall decline in this category.

Applicable
income taxes from continuing operations for the three and six-month periods ended June 30, 2001, were $405,000 and $769,000, respectively. This compares
to $425,000 and $822,000 for the three and six-month periods, respectively, ended June 30, 2000. The Company's effective tax rate was 35.8% and 36.0% for the three and
six-month periods ended June 30, 2001, and 38.2% and 37.6% for the three and six-month periods, respectively, ended June 30, 2000.



Interest rate sensitivity is the relationship between market interest rates and net interest income ("NII") due to the repricing characteristics of assets and
liabilities. As interest rates change, interest income and expense also change, thereby changing NII. If more liabilities reprice than assets in a given period, a liability sensitive position is
created. If interest rates decline, a liability sensitive position will benefit NII. Alternatively, where assets reprice more quickly than liabilities in a given period (an asset sensitive position),
a decline in market rates will have an adverse effect on NII.

Asset
and liability management encompasses an analysis of market risk, the control of interest rate risk (interest sensitivity management), and the ongoing maintenance and planning of
liquidity and capital. The composition of the Company's statement of condition is planned and monitored by the Asset and Liability Committee ("ALCO"), a committee comprised of the Bank's executive
management. The primary tool used by ALCO to measure and manage interest rate exposure is a simulation model. Use of the model to perform simulations reflecting changes in interest rates over one and
two-year time horizons has enabled Management to develop and initiate strategies for managing exposure to interest rate risks. ALCO believes that, individually and in the aggregate, these
assumptions are reasonable, but the complexity of the simulation modeling process results in a sophisticated estimate, not an absolutely precise calculation of exposure.



Market risk is the risk of loss in a financial instrument arising from adverse changes in market rates and prices such as interest rates, foreign currency
exchange rates, commodity prices, and equity prices. The Company's primary market risk exposure is interest rate risk. The continuous monitoring and management of this risk is an important component
of the Company's asset and liability management process, and is governed by policies established by its board of directors which are reviewed and approved annually. The Board of Directors delegates
responsibility for carrying out the asset and liability management policies to ALCO. In this capacity, Management develops guidelines and strategies impacting the Company's asset and liability
management related activities based upon estimated market risk sensitivity, policy limits, and overall market interest rate levels and trends.

17

---





Interest rate risk represents the sensitivity of earnings to changes in market interest rates. As interest rates change, the interest income and expense
streams associated with the Company's financial instruments also change, thereby impacting NII, the primary component of the Company's earnings. ALCO utilizes the results of the detailed and dynamic
simulation model to quantify the estimated exposure of NII to sustained interest rate changes.

The
simulation model captures the impact of changing interest rates on the interest income received and interest expense paid on all assets and liabilities reflected on the Company's
balance sheet as well as for off balance sheet financial instruments. This sensitivity analysis is compared to ALCO policy limits that specify a maximum tolerance level for NII exposure over a
one-year horizon, assuming no balance sheet growth, given both a 200 basis point ("bp") upward and downward shift in interest rates. A parallel and pro rata shift in rate over a
12-month period is assumed. The Bank's policy limit threshold is that NII exposure shall not exceed 10% of estimated NII over the next 12 months.

The
simulation modeling process requires the use of hypothetical estimates based on numerous assumptions including, but not limited to, the nature and timing of interest rate levels
including yield curve shape, repayments on loans, leases and securities, deposit rates, pricing decisions on loans and deposits, reinvestment and replacement of assets, and liability cash flows. While
assumptions are developed based upon current economic and local market conditions, the Company cannot make any assurances as to the predictive nature of these assumptions, including how customer
preferences or competitor influences might change. Also, as market conditions vary from those assumed in the sensitivity analysis, actual results will also differ due to prepayment and refinancing
levels deviating from those assumed, the varying impact of interest rate change caps or floors on adjustable rate assets, the potential effect of changing debt service levels on customers with
adjustable rate loans, depositor early withdrawals, customer product preference changes, and other internal and external variables. Furthermore, the sensitivity analysis does not reflect actions that
ALCO might take in responding to or anticipating changes in interest rates.



The need for liquidity in a banking institution arises principally to provide for deposit withdrawals, the credit needs of its customers, and to take advantage
of investment opportunities. A banking institution may achieve desired liquidity from both assets and liabilities. The Company considers cash and deposits
held in other banks, federal funds sold, other short-term investments, maturing loans and investments, receipts of principal and interest on loans, investments available for sale, and
potential loan sales as sources of asset liquidity. Deposit growth and access to credit lines established with correspondent banks and market sources of funds are considered by the Company as sources
of liability liquidity.

Historically,
during the first half of each year the Bank experiences excess liquidity. The Bank's seasonal agricultural and construction loan demand, which typically occurs each year
from early June through late October, tends to absorb excess liquidity and frequently results in a net borrowed position during that time frame.

The
Bank's short-term liquid assets consist of cash and due from banks, federal funds sold, and investment securities with maturities of one year or less (exclusive of
pledged securities). Irrespective of maturity, U.S. Government and Agency securities qualify as collateral for borrowings at the Federal Home Loan Bank ("FHLB"), Federal Reserve Bank ("FRB"), and with
broker-dealers.

In
order to fund its liquidity needs, the Bank has formal and informal borrowing arrangements with the FRB to meet unforeseen deposit outflows or seasonal loan funding demands. The
Bank has

18

---

also entered an agreement to borrow funds from the FHLB secured by U.S. Government and Agency obligations in the Bank's investment portfolio. As of June 30, 2001 and June 30, 2000, the
Bank had $0 and $5,373,000, respectively, outstanding on these lines.

The
Bank monitors its credit facility availability and unencumbered qualifying collateral in conjunction with its asset and liability management process. Policy limits are established
and monitored for maximum borrowings and minimum contingency liquidity levels.

Management
believes the Company maintains adequate amounts of liquidity to meet its needs.



CIB and the Bank are subject to requirements of the FRB and Federal Deposit Insurance Corporation ("FDIC"), respectively, governing capital adequacy. These
guidelines are intended to reflect the degree of risk associated with both on and off balance sheet items. Financial institutions are expected to comply with a minimum ratio of qualifying total
capital to risk-weighted assets of 8.0%, at least half of
which must be in Tier 1 Capital. Federal regulatory agencies have also adopted a minimum leverage ratio of 4.0%, which is intended to supplement the risk-based capital requirements and to
ensure that all financial institutions continue to maintain a minimum level of core capital.

Total
shareholders' equity on June 30, 2001 increased by $1,671,000 to $27,441,000 over December 31, 2000 total shareholders' equity of $25,770,000. The increase is
attributed to net income of $1,391,000 during the first six months of 2001, and an increase in other comprehensive income, net of tax, of $722,000 associated with the market value adjustment on the
Bank's Available-for-Sale securities. These increases to shareholder equity were offset by cash dividends paid in the amount of $442,000. As can be seen by the following
tables, the Company and Bank exceeded all regulatory capital ratios on June 30, 2001 and December 31, 2000.

Risk Based Capital Ratio
As of June 30, 2001

|                                   |  | Company |         | Bank |      
|---------------------------------- |  | ------- | ------- | ---- | -----
|
|
|Tier 1 Risk-Based Capital          |  | $       | 26,829  |      | 12.28
|Tier 1 Capital Minimum Requirement |  |         | 8,739   |      | 4.00 
|                                   |  |         |         |      |      
|Excess                             |  | $       | 18,090  |      | 8.28 
|                                   |  |         |         |      |      
|Total Risk-Based Capital           |  |         | 29,588  |      | 13.54
|Total Capital Minimum Requirement  |  |         | 17,479  |      | 8.00 
|                                   |  |         |         |      |      
|Excess                             |  | $       | 12,109  |      | 5.54 
|                                   |  |         |         |      |      
|Net Risk-Weighted Assets           |  | $       | 218,487 |      |      
|                                   |  |         |         |      |      
|Leverage Capital Ratio             |  |         |         |      |      
|Tier 1 Capital to average assets   |  | $       | 26,829  |      | 9.36 
|Minimum leverage requirement       |  |         | 11,467  |      | 4.00 
|                                   |  |         |         |      |      
|Excess                             |  | $       | 15,362  |      | 5.36 
|                                   |  |         |         |      |      
|Average total assets               |  | $       | 286,669 |      |      
|                                   |  |         |         |      |      

19

---

Risk Based Capital Ratio
As of December 31, 2000

|                                   |  | Company |         | Bank |      
|---------------------------------- |  | ------- | ------- | ---- | -----
|
|
|Tier 1 Risk-Based Capital          |  | $       | 25,683  |      | 11.51
|Tier 1 Capital Minimum Requirement |  |         | 8,928   |      | 4.00 
|                                   |  |         |         |      |      
|Excess                             |  | $       | 16,755  |      | 7.51 
|                                   |  |         |         |      |      
|Total Risk-Based Capital           |  |         | 28,509  |      | 12.77
|Total Capital Minimum Requirement  |  |         | 17,856  |      | 8.00 
|                                   |  |         |         |      |      
|Excess                             |  | $       | 10,653  |      | 4.77 
|                                   |  |         |         |      |      
|Net Risk-Weighted Assets           |  | $       | 223,196 |      |      
|                                   |  |         |         |      |      
|Leverage Capital Ratio             |  |         |         |      |      
|Tier 1 Capital to average assets   |  | $       | 25,683  |      | 8.49 
|Minimum leverage requirement       |  |         | 12,093  |      | 4.00 
|                                   |  |         |         |      |      
|Excess                             |  | $       | 13,590  |      | 4.49 
|                                   |  |         |         |      |      
|Average total assets               |  | $       | 302,336 |      |      
|                                   |  |         |         |      |      



CIB and the Bank operate in a highly regulated environment and are subject to supervision and examination by various federal and state regulatory agencies.
CIB, as a bank holding company, is subject to regulation and supervision by primarily the FRB, and the Bank, as a California-chartered commercial bank, is subject to supervision and regulation by
primarily the FDIC and the California State Department of Financial Institutions ("DFI"). Federal and California state laws and regulations govern numerous matters involving both entities, including
maintenance of adequate capital and financial condition, permissible types, amounts and terms of extensions of credit and investments, permissible non-banking activities, the level of
reserves against deposits, and restrictions on dividend payments. The federal and state regulatory agencies possess extensive discretion and powers to prevent or remedy unsafe or unsound practices or
violations of law by banks and bank holding companies. CIB and the Bank also undergo periodic examinations by one or more of these regulatory agencies, which may subject them to changes in asset
valuations, in amounts of required loss allowances, and in operating restrictions resulting from the regulators' judgments based on information available to them at the time of their examination. The
Bank's operations are also subject to a wide variety of state and federal consumer protection and similar statutes and regulations. Those and other restrictions limit the manner in which CIB and the
Bank may conduct business and obtain financing. The laws and regulations to which CIB and the Bank are subject can and do change significantly from time to time, and such changes could materially
affect the Company's business, financial condition, and operating results.



On May 31, 2001, the Bank opened a branch in Lincoln, California. Approval from the FDIC was received on July 21, 2000. Approval was also granted
by the DFI on July 3, 2000. Additionally the Bank received approval from the DFI on June 20, 2001 for a full service branch in Roseville, California. The Bank currently operates a loan
production office at the Roseville site and it is anticipated that the branch will open during the third quarter of 2001.

20

---



Federal and California banking and corporate laws could limit the Bank's ability to pay dividends to CIB. Additionally, the Federal Reserve Board has issued a
policy statement that a bank holding company should not declare or pay a cash dividend to its shareholders if the dividend would place undue pressure on the capital of its subsidiary banks or if the
dividend could be funded only through additional borrowings or other arrangements that may adversely affect the financial position of the holding company. Furthermore, a bank holding company may not
continue its existing rate of cash dividends on its common stock unless its net income is sufficient to fully fund each dividend and its prospective rate of earnings retention is sufficient to fully
fund each dividend and appears consistent with its capital needs, asset quality, and overall financial condition.



On January 1, 1998, the Company adopted Financial Accounting Standards Board ("FASB") Statement of Financial Accounting Standards No. 131 ("SFAS
No. 131"), "Disclosures about Segments of an Enterprise and Related Information." SFAS No. 131 establishes standards for public business enterprises' reporting of information about its
operating segments in its annual financial statements. The Statement requires that the enterprises report selected information concerning operating segments in interim financial reports issued to
shareholders. Additionally, the Statement establishes requirements for related disclosures about products, services, geographic areas, and major customers.

SFAS
No. 131 requires public business enterprises to report a measure of segment profit or loss, certain specific revenue and expense items, and segment assets. The Statement
further requires reconciliation of total segment revenues, total segment profit or loss, total segment assets, and other amounts disclosed for segments to corresponding amounts in the enterprise's
general purpose financial statements. It requires that all public business enterprises report information about the revenues derived from the enterprise's products or services (or groups of similar
products and services), about the countries in which the enterprise earns revenues and holds assets, and about major customers regardless of whether that information is used in making operating
decisions. However, SFAS No. 131 does not require an enterprise to report information that is not prepared for internal use if reporting it would be impracticable. SFAS No. 131 is
effective for financial statements for periods beginning after December 15, 1997.

The
adoption of the applicable provisions of SFAS No. 131 did not have a material effect on the Company, as Management believes that it operates only in one segment, the
commercial banking segment.



In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 establishes
accounting and reporting standards for derivative instruments and for hedging activities. It requires recognition of all derivatives as either assets or liabilities in the statement of financial
condition and the measurement of those instruments at fair value. Recognition of changes in fair value will be recognized into income or as a component of other comprehensive income depending upon the
type of the derivative and its related hedge, if any. As issued, SFAS No. 133 was to be effective for the Company beginning January 1, 2000. However, in July 1999, the FASB issued
Statement No. 137, "Accounting for Derivative Instruments and Hedging Activities-Deferral of the Effective Date of FASB Statement No. 133," extending the effective date to fiscal years
beginning after June 15, 2000. In June 2000, the FASB issued SFAS No. 138 "Accounting for Certain Derivative Instruments and Certain Hedging Activities," to provide guidance in
the implementation of certain

21

---

issues related to SFAS No. 133. Upon implementation at January 1, 2001, there was no material impact on the Company's financial statements.



In September of 2000, the FASB issued SFAS No. 140 "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, a
replacement of FASB Statement No. 125" ("SFAS No. 140"). This Statement replaces SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities." SFAS No. 140 revises the standard for accounting for securitizations and other transfers of financial assets and collateral and requires certain disclosures, but it carries over
most of SFAS No. 125's provisions without reconsideration. The Company has adopted the disclosure provisions related to the securitization of financial assets. All transactions entered into
after the first quarter of 2001 will be accounted for in accordance with SFAS No. 140. This adoption does not have a material impact on the Company.



In
July 2001, the FASB issued SFAS No. 141, "Business Combinations" ("SFAS No. 141"),and SFAS No. 142,
"Goodwill and Other Intangible Assets" ("SFAS No. 142"). These Statements change the method of accounting for business combinations and goodwill in two significant ways. First, SFAS
No. 141 prohibits the use of the pooling of interests method and requires the purchase method of accounting to be used for all business combinations initiated after June 30, 2001.
Second, SFAS No. 142 changes the accounting method for goodwill from an amortization method to an impairment-only approach. As a result, goodwill will be accounted for as an asset
unless it declines in value. Companies will be required to test their goodwill valuation periodically for "impairment" or loss and to recognize any change on their books. The amortization of goodwill,
including goodwill recorded in past business combinations, will cease upon adoption of SFAS No. 142, which for companies with calendar year ends, will be January 1, 2002. Management does
not believe that the adoption of these Statements will have a material impact on the Company or its ability to accomplish certain business strategies.



CALIFORNIA ELECTRICITY SHORTAGE. Over the past several months, California has been experiencing a shortage in the supply of electricity to the state. There has
been, and it is anticipated that there will be, limited rolling power outages or "blackouts" throughout the state. Power outages could disrupt the Company's operations, increase operating costs, and
impact its borrowers' ability to repay their debts. Contingency plans to deal with power outages have been developed; however, the frequency or duration of the power outages cannot be predicted. As a
result, such outages could adversely affect the Company's future operating results.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In Management's opinion, the Company's market risk and interest rate risk profiles are within reasonable tolerances at this time. (See Item 2. Management
Discussion and Analysis of Financial Condition and Results of Operations, sections discussing "Market Risk", "Interest Rate Risk" and "Liquidity" at pages 17-19.) No significant changes to
the market risk or interest rate risk positions of the Company have occurred since December 31, 2000.

22

---



PART IIOTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

None reported

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.

No changes.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

Not applicable.

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



For

Against

AbstainJohn L. Dowdell

1,520,609

0

30,814Harold M. Eastridge

1,518,203

0

33,220William H. Gilbert

1,520,609

0

30,814Larry D. Hartwig

1,470,060

0

81,363John L. Jelavich

1,520,609

0

30,814Donald L. Livingstone

1,471,561

0

79,862Alfred G. Montna

1,520,609

0

30,814David A. Offutt

1,520,501

0

30,922William K. Retzer

1,520,609

0

30,814Michael C. Wheeler

1,536,016

0

15,407




Vote

For

1,524,866Against

10,156Abstained

16,401


ITEM 5. OTHER INFORMATION.

None reported.

23

---

ITEM 6. EXHIBITS AND REPORTS ON FORM 8K.

|(a)         |  | Exhibits.                                                                                                                                                                                                                                                                            
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No.
|2.1         |  | Plan of Reorganization and Merger Agreement dated January 30, 1995 by and between Feather River State Bank, FRSB Merger Company and California Independent Bancorp. Filed as Exhibit 2.1 to the Company's General Form for Registration of
Securities on Form 10 (File No. 0-26552).*
|3.1         |  | Secretary's Compiled, Amended and Restated Articles of Incorporation for California Independent Bancorp as of April 26, 2000. Filed as Exhibit 3.1 to the Company's Quarterly Report filed on Form 10Q for the period ended March 31,
2000.*                                         
|3.2         |  | Secretary's Compiled, Amended and Restated Bylaws California Independent Bancorp as of March 31, 2000. Filed as Exhibit 3.2 to the Company's Quarterly Report filed on Form 10Q for the period ended March 31, 2000.*                                                                
|(b)         |  | Reports on Form 8K.                                                                                                                                                                                                                                                                  
|            |  | No reports on Form 8K were filed during the period.                                                                                                                                                                                                                                  

24

---



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.

|      |  |                |  | California Independent Bancorp                                                                                                      
|----- |  | -------------- |  | ------------------------------------------------------------------------------------------------------------------------------------
|Date: |  | August 8, 2001 |  | /s/ Larry D. HartwigLarry D. Hartwig
President/Chief Executive Officer                                                              
|Date: |  | August 8, 2001 |  | /s/ Robert J. LampertRobert J. Lampert
Executive Vice President/Chief Operating Officer
(Principal Financial and Accounting Officer)

25

---

QuickLinks