Exhibit
13    TABLE OF
  CONTENTSCORPORATEPROFILEMESSAGE
  TOSHAREHOLDERSREACHING NEW
  HEIGHTSSEEKING NEW
  HORIZONSSHAREHOLDER &INVESTOR
  INFORMATIONFINANCIALHIGHLIGHTS   
       CORPORATE
PROFILE  California
Independent Bancorp (CIB) and its banking subsidiary, Feather River State
Bank, provide full-service banking and financial services through nine offices,
located in five Northern California counties.  Feather River
State Bank was founded in 1977, and CIB became the Banks holding company in
1995. Feather River State Bank has steadily grown into a leading regional
banking franchise. The Bank enjoys a reputation for efficient and highly
personal service, local decision-making and innovative financial services.
Feather River State Bank celebrated a quarter century of service to a growing
number of customers during 2002.  Customers of
Feather River State Bank have more than 27,000 accounts and enjoy access to a
full range of financial services to meet consumer, commercial, agri-business,
real estate and small business needs. The Bank is a member of the Federal
Deposit Insurance Corporation and each depositors account is insured for up to
$100,000.  Feather River
State Bank also offers noninsured financial services through an affiliation
with London Pacific Advisory Services, Inc., a registered Broker/Dealer, member
NASD/SIPC, and London Pacific Investment Advisory Services, Inc., a Registered
Investment Advisor.  Banking offices of Feather River State Bank are located in Colusa,
Sutter, Placer, Yolo and Yuba Counties.   1 
      MESSAGE TO
SHAREHOLDERS  During 2002,
California Independent Bancorp (CIB) successfully met the challenge of
change, while achieving the best financial performance in the Companys
history. The achievements of 2002 came as we celebrated the 25th anniversary of
our subsidiary, Feather River State Bank.  It was an honor
for us to be named to our present positions of Chairman and President &
CEO, respectively, this year. We would both like to extend our sincere thanks
to David Offutt for his years of service as our Chairman and recognize his
continuing and valued role as a Director. In March of 2002, Kevin Watson was
named Chief Financial Officer of both the Company and the Bank and, later in
the year, he was promoted to Senior Vice President. During the fourth quarter,
Regional Lending Manager Steven Olin received a well-deserved promotion to
Senior Vice President.  Although 2002 was
a year of change, many things remained constant. First is our commitment to a philosophy
of prudent management, along with an emphasis on asset quality. Further, we
remain dedicated to measurably superior service and relationship banking, which
are fundamental to the way we do business. We also continued the policy of
paying cash dividends on the Companys common stock. We have done this in every
year since 1980 and we have paid consecutive quarterly cash dividends since
1991.   2 
   We are pleased to
report record financial results for the year ended December 31, 2002. Net
income was $3,911,000, the highest in the history of the Company, a 177.6%
increase over the $1,409,000 net income reported for 2001. Diluted earnings per
share for 2002 was $1.74 per share, a 180.6% increase over diluted earnings per
share of $0.62 reported in 2001. Total assets increased 19.7% to $367.1
million. Our loans and leases grew $22.1 million to a total of $214.4 million
at December 31, 2002, and our total deposits grew $31.1 million to a total of
$306.7 million at December 31, 2002. As 2002 progressed, we experienced
accelerated performance, which was accomplished by the creation of real
teamwork, resulting in a measurable increase in staff productivity.  After careful
consideration of our long-term business strategy, the Board of Directors
adopted a Shareholder Rights Plan. Under this plan, Rights were distributed as
a dividend at the rate of one Right for each share of CIB common stock held by
shareholders of record on December 2, 2002. Shareholders Rights Plans, like the
plan adopted by your Company, are designed to encourage any groups that may be
interested in acquiring the Company, to negotiate directly with the Board of
Directors, thereby protecting our shareholders from the potential for
inadequate offers and/or abusive tactics. At year-end, the Company successfully
completed a tender offer to purchase 76,292 shares of its common stock at a
purchase price of $25.00 per share. This is part of a longer-term stock
repurchase program that reflects managements continued confidence in the
Companys long-term prospects.  We owe a debt of
gratitude for the achievements of 2002 to both our loyal customers and our
dedicated team of employees. We are excited by the prospects and potential for
the years ahead as we expand our franchise to deliver on our growth strategy.
As always, we will strive to produce greater value for you, our shareholders.   Sincerely,Alfred G. Montna
  
  John I. JelavichChairman of the Board
  
  President & CEO
   3 
   REACHING NEW HEIGHTS
SEEKING NEW HORIZONS  At a time when
many of our competitors have consolidated or compacted their operations,
California Independent Bancorp and its subsidiary, Feather River State Bank, have
reached new heights in customer service, performance, and profitability.  This is a
reflection of the values that have guided our growth for more than a
quarter-century. As we celebrated our 25th anniversary in 2002, this milestone
event reaffirmed the principles upon which our Bank was founded. Our
unmitigated success is directly linked to our relationships with our customers
and the communities we serve. Our long heritage in community banking reflects
this tradition, and we have always been an involved and caring corporate
citizen. This resonates through our community involvement, as well as our
genuine interest in our customers lives, we really get to know the people we
serve.  A
"PEOPLE" BUSINESS Banking is, after all, a people business. And we strive to provide our
customers with an extraordinary experience, whether were serving them
face-to-face, on the phone, through the mail or over the Internet. We go the
extra mile to offer superior service. This is our ultimate goal, and to achieve
it, we take a consultative approach to banking, carefully listening to our
customers, then recommending financial solutions that truly serve the
customers needs.       4 
    As a premier Northern California community
  bank, we are committed to meeting the needs of our customers with
  relationship-oriented products and services, while creating an environment
  for our employees to develop and prosper, resulting in enhanced shareholder
  value.
   We believe that our
employees and the personality of our company set us apart from other banks.
When employees feel good about where they work and what they do, they strive to
create a pleasurable experience for our customers. Over the years, as customers
enjoy a great experience with us, they tell others. We have established
standards of performance and we provide recognition for superior sales and
service. We also encourage successful referrals and proactive management of
customer relationships. From top management to front-line customer service
representatives, our company employees have shown a sincere enthusiasm for
their work and a passion for helping and serving customers.  CAREFULLY
MANAGED GROWTH From the day we
were established in 1977, we have followed a path of expansion that was
carefully managed. Our geographic expansion was matched by a branch system that
allowed us to bring our unique banking style to an increasing number of
customers without compromising the principles of service that are the heart of
our business philosophy. By the time we celebrated our 25th anniversary, we had
grown to nine branches, with over 27,000 accounts, serving customers in five
counties.  Our Company
continually strives to implement new technologies and increase our collective
knowledge to gain a distinct advantage over our competition. By arming our
employees with the right tools and information, they can do their jobs better
and faster. We continuously use technology to enhance the personal quality of
our service and never to replace it. This helps employees serve our customers
more efficiently, bringing them an ever increasing level of personal service.   5 
       LOOKING
AHEAD In the future, we
seek new horizons of growth in the increasingly diverse markets that lie beyond
our current service areas. We will pursue these growth opportunities with the
same concern for sound management and credit quality that have characterized
our Companys expansion in recent years.  We believe that solid,
long term performance is essential to our success. If we consistently perform
at high earnings levels, we can afford to support the expansion of our banking
franchise, while shareholders benefit from excellent returns. For this reason,
we are committed to high performance standards, both now and in the future.  The evolving story of California Independent Bancorp is the
continuation of a journey of more than a quarter-century. On that journey, we
share the promise of the future with a team of talented employees, loyal
customers and dedicated shareholders. We see a future of expanding horizons for
our organization and for the principles we share  community involvement,
quality customer relationships and solid, consistent performance. With a high
measure of confidence, we are ready for the challenges of tomorrow.   6 
   SHAREHOLDER
AND
INVESTOR INFORMATION  PRICE
RANGE OF COMMON STOCK California Independent Bancorps
(CIBs) common stock is traded on the NASDAQ Stock Market under the trading
symbol CIBN. The common stock began trading on the NASDAQ Stock Market on
July 31, 1996. The following table presents the
high and low closing sale prices of CIBs common stock for each quarterly
period for the last two years as reported and as retroactively adjusted for the
effect of applicable stock dividends by the NASDAQ Stock Market:  Range
  of Stock PricesHigh
  
  Low2002 Quarters4th
  
  $
  24.76
  
  $
  18.853rd
  
  20.75
  
  18.212nd
  
  19.48
  
  16.191st
  
  21.57
  
  18.00High
  
  Low2001 Quarters4th
  
  $
  23.14
  
  $
  20.943rd
  
  23.95
  
  20.642nd
  
  25.40
  
  20.861st
  
  20.86
  
  17.23
  CASH
DIVIDEND INFORMATION After adjusting retroactively
for the effect of applicable stock dividends, cash dividends paid on CIBs
common stock were $0.42 per share for the year ended December 31, 2002 and
$0.40 per share for the year ended December 31, 2001. CIB has paid cash dividends on
its common stock since 1980, and has paid consecutive quarterly cash dividends
since 1991. It is currently the intention of the Board of Directors to continue
the payment of cash dividends on a quarterly basis. However, there is no
assurance that cash dividends will be paid in the future, as such dividends are
dependent upon the earnings, financial condition and capital requirements of
CIB and Feather River State Bank, as well as legal and regulatory requirements. The number of shares issued and
outstanding as of December 31,2002, was 2,152,751. Call your stockbroker or one of
our market makers for stock information:  Wachovia
  Securities
  
  (888) 383-3112Hoefer &
  Arnett
  
  (800) 346-5544Sandler ONeill
  & Partners
  
  (800) 635-6851
  Wachovia Securities offers
Dividend Reinvestment Plans. These plans allow conversion of cash dividends
into whole or fractional shares of CIB stock. This service is offered free of
fee or commission charges.  SHAREHOLDER
INFORMATION Shareholders wishing more
detailed information about CIB may obtain a copy of its Form 10-K or Quarterly
Newsletter upon request from:  California Independent Bancorp
Investor Relations Department
Kevin R. Watson
1227 Bridge St., Suite C
Yuba City, CA 95991
(530) 674-6025
(800) 258-4334  STOCKHOLDER
ACCOUNT INFORMATION If you have questions concerning
your stockholder account, please call our transfer agent:  U.S. Stock Transfer Corporation
1745 Gardena Avenue
Glendale, California 91204
(800) 835-8778  ANNUAL
MEETING The annual shareholders meeting
of CIB will be held May 20, 2003, 6:00 P.M., at Feather River State Banks
Colusa Avenue Branch located at 777 Colusa Avenue in Yuba City, California.   7 
   FINANCIAL
HIGHLIGHTS  CALIFORNIA
INDEPENDENT BANCORP & SUBSIDIARIES
FOR THE YEARS ENDED DECEMBER 31, (Dollars
in thousands, except share data and ratios)  2002
  
  2001
  
  2000
  
  1999
  
  1998Interest Income
  
  $
  20,920
  
  $
  21,358
  
  $
  23,126
  
  $
  22,743
  
  $
  24,279Interest Expense
  
  5,156
  
  7,022
  
  9,470
  
  8,573
  
  8,831Net Interest
  Income
  
  15,764
  
  14,336
  
  13,656
  
  14,170
  
  15,448Provision for
  Loan and Lease Losses
  
  550
  
  2,450
  
  200
  
  1,000
  
  2,246Net Interest
  Income After Provision for Loan and Lease Losses
  
  15,214
  
  11,886
  
  13,456
  
  13,170
  
  13,202Noninterest
  Income
  
  2,729
  
  2,304
  
  2,744
  
  2,564
  
  3,454Noninterest
  Expense
  
  11,934
  
  12,194
  
  11,806
  
  13,273
  
  12,330Income Before
  Provision for Income Taxes
  
  6,009
  
  1,996
  
  4,394
  
  2,461
  
  4,326Provision for
  Income Taxes (1)
  
  2,098
  
  587
  
  1,675
  
  752
  
  1,475Net Income From
  Continuing Operations
  
  3,911
  
  1,409
  
  2,719
  
  1,709
  
  2,851Loss on Disposal
  of Subsidiary (2)
  
  
  
  
  
  
  
  (714
  )
  (Loss) Income on
  Discontinued Operations
  
  
  
  
  
  
  
  (278
  )
  158Net Income
  
  $
  3,911
  
  $
  1,409
  
  $
  2,719
  
  $
  717
  
  $
  3,009Per
  Common Share Data (3)Basic Earnings
  Per Share From Continuing Operations
  
  $
  1.76
  
  $
  0.64
  
  $
  1.23
  
  $
  0.81
  
  $
  1.40Cash Dividends
  
  $
  0.42
  
  $
  0.40
  
  $
  0.38
  
  $
  0.36
  
  $
  0.34Book Value
  
  $
  13.50
  
  $
  12.98
  
  $
  12.83
  
  $
  12.20
  
  $
  12.99Dividend Payout
  Ratio
  
  23.86
  %
  62.50
  %
  30.89
  %
  47.37
  %
  25.56
  %Weighted Average
  Common Shares Outstanding  Basic
  
  2,224,285
  
  2,215,532
  
  2,208,675
  
  2,108,669
  
  2,041,282Financial
  Ratios From  Continuing
  OperationsReturn on
  Average Assets
  
  1.18
  %
  0.48
  %
  0.91
  %
  0.54
  %
  0.95
  %Return on
  Average Shareholders Equity
  
  13.67
  %
  5.18
  %
  11.36
  %
  6.70
  %
  11.82
  %Net Interest
  Margin
  
  5.20
  %
  5.31
  %
  5.04
  %
  5.39
  %
  5.99
  %Net Charge-Offs
  to Average Loans and Leases
  
  -0.25
  %
  1.45
  %
  0.74
  %
  0.14
  %
  0.91
  %Allowance for
  Loan and Lease Losses as a Percent of Loans and Leases
  
  3.05
  %
  2.86
  %
  3.20
  %
  4.20
  %
  3.33
  %Efficiency Ratio
  
  64.53
  %
  73.29
  %
  71.99
  %
  79.32
  %
  65.23
  %  
 (1)An
adjustment of $113,000 and $129,000 was made reducing the Provision for Income
Taxes in 1999 and 1998, respectively, relating to the tax treatment of certain
dividends on preferred stocks held in the investment portfolio. (2)The
effect of discontinued operations is not presented in 2000 - 2002 due to
immateriality. (3)All
per share amounts and the weighted average number of common shares outstanding
as shown in the proceeding table have been adjusted retroactively, as
applicable, to reflect the 5% stock dividends distributed in each of the years
presented.   8 
      FINANCIAL
  TABLE OF
  CONTENTSMANAGEMENTSDISCUSSION
  & ANALYSISINDEPENDENTAUDITORS REPORTCONSOLIDATEDFINANCIAL STATEMENTSNOTES TO
  CONSOLIDATED FINANCIAL STATEMENTS   9 
   MANAGEMENT'S DISCUSSION &
ANALYSIS  Managements Discussion and
Analysis of Financial Condition and Results of Operations for the Years Ended
December 31, 2002 and 2001  Certain statements in the annual
report, Form 10-K 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; lending concentration in real estate;
volatility in agricultural lending; asset/liability matching risks and
liquidity risks; changes in the securities markets; and the effects of
terrorism, including the events of September 11, 2001 and thereafter, and the
conduct of the war on terrorism by the United States and its allies.  The following discussion and
analysis is designed to provide a better understanding of the significant
changes and trends related to California Independent Bancorps (CIBs) and
Feather River State Banks (the Banks) (CIB and the Bank are collectively,
the Company) financial condition, operating results, asset and liability
management, and liquidity and capital resources; and should be read in
conjunction with the Consolidated Financial Statements of the Company and its
accompanying notes.  CRITICAL
ACCOUNTING POLICIES  General  California Independent Bancorps
consolidated financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America (GAAP) and
general practices within the banking industry. The financial information
contained within our statements is, to a significant extent, financial
information that is based on measures of the financial effects of transactions
and events that have already occurred. A variety of factors could affect the
ultimate value that is obtained either when earning income, recognizing an
expense, recovering an asset, or relieving a liability. Historical losses are
used as a factor in determining the inherent loss that may exist in the loan
portfolio. Actual losses may vary significantly from the historical factors
being used. Other estimates being used are related to the useful lives of the
depreciable assets.  Allowance for loan and lease
losses The allowance for loan and lease
losses is an estimate of the losses that may be sustained in our loan
portfolio. The allowance is based on two basic principles of accounting: (1)
Statement of Financial Accounting Standards (SFAS) No.5, Accounting for
Contingencies, which requires that losses be accrued when both of the
following conditions are met: the loss is probable and it can be reasonably
estimated; and (2) SFAS No.114, Accounting by Creditors for Impairment of a
Loan, which requires that losses be accrued based on the differences between
the loan balance and the present value of the expected future cash flows, or
the loans observable market price, or the fair value of the collateral.  The allowance for loan and lease
losses consists of three components: the general reserve, the specific reserve,
and the unallocated reserve. The general reserve is calculated based on a
reserve ratio established for each loan type. The reserve ratio is determined
by historical credit loss experience. The reserve ratios are adjusted from time
to time to reflect the most recent loss information coupled with the historical
data. The specific reserve is an estimate for identified credits. This reserve
is calculated based upon quantitative analysis, present knowledge of the
specific loans, and subjective evaluation of the likelihood of future loss. The
unallocated reserve is based upon general economic conditions and industry or
geographic sectors that are not recognized in the first two components.  SUMMARY
OF FINANCIAL RESULTS  CIB, through the Bank, engages
in a broad range of financial service activities. The Bank commenced operations
in 1977. CIB was formed in 1994 and, after receiving regulatory and shareholder
approval, became the holding company for the Bank in May 1995.  In 2002, the Company recognized
a significant increase in total assets over 2001. At December 31, 2002, total
assets were $367,083,000 as compared to $306,642,000 at December 31, 2001. Cash
and cash equivalents increased to $40,046,000 at December 31, 2002 over  $23,047,000 at December 31, 2001, while
total investments increased to $100,239,000 at December 31, 2002 from
$77,996,000 at December 31, 2001. Net loans and leases increased 11.3% to
$207,896,000 at December 31, 2002 over $186,783,000 at December 31, 2001. Total
deposits increased 11.3% to $306,726,000 at year-end 2002 over $275,576,000 at
year-end 2001. The Companys shareholders equity increased $1,601,000, or 5.8%,
to $29,056,000 at December 31, 2002 over $27,455,000 at December 31, 2001.   10 
   During 2002, the Company
recognized record net income of $3,911,000 an increase of $2,502,000, or
177.6%, over $1,409,000 recognized in 2001. The large increase in net income in
2002 over 2001 was principally due to a number of factors including: increased
net interest income as a result of strong loan growth and decreased cost of
funds; an increase in noninterest income; a decrease in noninterest expense;
and the large charge-off in the fourth quarter of 2001 which required a
substantial provision for possible loan and lease losses in 2001. This and
other factors impacting the Companys net income are discussed in detail throughout
this Managements Discussion and Analysis.  Basic earnings per share in 2002
were $1.76, an increase of $1.12, or 175.0%, over  2001 basic earnings per share from continuing operations of
$0.64. Diluted earnings per share were $1.74 in 2002 and $0.62 in 2001. The
Company paid cash dividends of $0.42 per share in 2002, $0.40 per share in
2001, and $0.38 per share in 2000. Additionally, the Company declared and
distributed 5% stock dividends in 2002, 2001, and 2000. Consequently, for all
periods presented, basic and diluted earnings per share, cash dividends paid on
shares of Common Stock, and the weighted-average number of shares, have been
adjusted retroactively to reflect the 5% stock dividends distributed on
September 20, 2002, September 25, 2001, and September 15, 2000, as well as all
other previously declared and distributed stock dividends and splits.  The following table depicts the
Average Daily Balance Sheets for the years ended December 31, 2002, 2001, and
2000. This table shows the composition of average earning assets and average
interest-bearing liabilities, average yields and rates, and the Companys net
interest spread for years 2000 through 2002.  AVERAGE
DAILY BALANCE SHEETS (Dollars
in thousands, except percentages)  2002
  
  2001
  
  2000Average
  Balance
  
  Yield/
  Rate
  
  Interest
  Amount
  
  Average
  Balance
  
  Yield/
  Rate
  
  Interest
  Amount
  
  Average
  Balance
  
  Yield/
  Rate
  
  Interest
  AmountAssetsEarning-Assets:Short-Term
  Investments:Federal Funds
  Sold
  
  $
  5,471
  
  1.43
  %
  $
  78
  
  $
  13,266
  
  3.65
  %
  $
  484
  
  $
  10,812
  
  5.83
  %
  $
  630Investment
  Securities:Taxable
  
  92,581
  
  5.42
  %
  5,022
  
  70,127
  
  6.20
  %
  4,347
  
  88,215
  
  6.59
  %
  5,815Non-Taxable (1)
  
  1,576
  
  4.19
  %
  66
  
  2,258
  
  4.12
  %
  93
  
  2,920
  
  4.08
  %
  119Total
  
  94,157
  
  5.40
  %
  5,088
  
  72,385
  
  6.13
  %
  4,440
  
  91,135
  
  6.51
  %
  5,934Loans and Leases
  (2)
  
  203,391
  
  7.75
  %
  15,754
  
  184,397
  
  8.91
  %
  16,434
  
  169,273
  
  9.78
  %
  16,562Total Earning
  Assets
  
  303,019
  
  6.90
  %
  20,920
  
  270,048
  
  7.91
  %
  21,358
  
  271,220
  
  8.53
  %
  23,126Allowance for
  Possible Loan Losses
  
  (5,797
  )
  
  
  
  
  (5,188
  )
  
  
  
  
  (6,583
  )Non Earning
  Assets:Cash and due from
  banks
  
  14,541
  
  
  
  
  
  13,061
  
  
  
  
  
  12,366Premises and
  Equipment
  
  6,830
  
  
  
  
  
  6,909
  
  
  
  
  
  7,102Other
  
  11,985
  
  
  
  
  
  11,253
  
  
  
  
  
  14,168Total Non-Earning
  Assets
  
  33,356
  
  
  
  
  
  31,223
  
  
  
  
  
  33,636Total Assets
  
  $
  330,578
  
  
  
  
  
  $
  296,083
  
  
  
  
  
  $
  298,273Liabilities and
  Shareholders EquityInterest-Bearing
  Liabilities:Demand, Savings and
  Money Market
  
  $
  118,442
  
  0.95
  %
  $
  1,122
  
  $
  108,286
  
  1.94
  %
  $
  2,098
  
  $
  111,132
  
  3.00
  %
  $
  3,336Time Certificates
  
  99,734
  
  3.34
  %
  3,328
  
  95,684
  
  5.02
  %
  4,804
  
  98,438
  
  5.71
  %
  5,620Other
  InterestBearing Liabilities
  
  17,614
  
  4.01
  %
  706
  
  2,899
  
  4.14
  %
  120
  
  8,099
  
  6.35
  %
  514Total
  InterestBearing Liabilities
  
  235,790
  
  2.19
  %
  5,156
  
  206,869
  
  3.39
  %
  7,022
  
  217,669
  
  4.35
  %
  9,470Noninterest-Bearing
  Liabilities:Demand deposits
  
  60,513
  
  
  
  
  
  58,235
  
  
  
  
  
  53,724Other Liabilities
  
  5,675
  
  
  
  
  
  3,775
  
  
  
  
  
  2,942Total
  Noninterest-Bearing Liabilities
  
  66,188
  
  
  
  
  
  62,010
  
  
  
  
  
  56,666Shareholders
  Equity
  
  28,600
  
  
  
  
  
  27,204
  
  
  
  
  
  23,938Total Liabilities
  and Shareholders Equity
  
  $
  330,578
  
  
  
  
  
  $
  296,083
  
  
  
  
  
  $
  298,273Net Interest
  Income
  
  
  
  
  
  $
  15,764
  
  
  
  
  
  $
  14,336
  
  
  
  
  
  $
  13,656Net Interest
  Spread
  
  
  
  4.71
  %
  
  
  
  
  4.51
  %
  
  
  
  
  4.18
  %  
 (1)The
yield that relates to income on certain securities that are exempt from federal
income taxes has not been adjusted to reflect its tax-equivalized yield.  (2)Loan
interest includes loan fees of $733,000, and $792,000, and $837,000 in 2002,
2001, and 2000, respectively.   11 
   NET
INTEREST INCOME  Net interest income, the
difference in interest earned on assets and interest paid on liabilities,
increased to $15,764,000 for 2002 over a comparable 2001 net interest income
figure of $14,336,000. Interest earning assets consist of overnight federal
funds sold, investment securities, and loans and leases. In total, these assets
averaged $303,019,000, $270,048,000, and $271,220,000 in 2002, 2001, and 2000,
respectively. Average loans and leases were $203,391,000, $184,397,000, and
$169,273,000 in 2002, 2001, and 2000, respectively, representing an increase of
10.3% in 2002 over 2001, and an increase of 8.9% in 2001 over 2000.  Interest income decreased 2.1%
for 2002 to $20,920,000 from $21,358,000 for 2001. Interest income was
$23,126,000 for 2000.  The Companys primary source of
income is interest and fees on loans and leases. For full-year 2002, interest
and fees on loans and leases decreased $680,000 from the comparable 2001
period. The decline in interest and fee income is primarily the result of a
1.16% reduction in portfolio yield which was driven by the Federal Reserve
Banks easing of interest rates throughout 2001 and the further reduction in
November 2002. The impact of the lower portfolio yield on interest and fee
income was significantly offset by an increase of $18,994,000 in average loan
and lease balances outstanding in 2002 over 2001. This increase in average loan
and lease balances outstanding is directly attributable to successful business
development efforts whereby the Company has intensified its focus on real
estate secured and commercial lending in its geographic market segments, as
well as the Company recommiting itself to promoting a productive sales culture
that emphasizes relationship banking.  Interest earned on investment
securities increased $648,000, or 14.6%, for 2002 over 2001. Average investment
securities in 2002, 2001, and 2000 were $94,157,000, $72,385,000, and
$91,135,000, respectively. The principal reason for the increase in interest
earned was due to the large increase of $21,772,000, or 30.1%, in the average
balance of investment securities in 2002 over 2001, which was the result of the
adoption of a leveraged investment strategy whereby qualified securities were
purchased utilizing borrowed funds. The easing interest rate environment
negatively impacted the overall yield of the investment portfolio as it fell to
5.4% in 2002 from 6.1% in 2001. Interest income on investment securities for
the years ended December 31, 2002, 2001, and 2000 was $5,088,000, $4,440,000,
and $5,934,000, respectively. When comparing 2001 with 2000, the decrease in
interest income on investments was $1,494,000, or 25.2%. This was due both to a
decrease in volume and a decrease in the average interest rate earned on the
investment portfolio, which was 6.1% for 2001 versus 6.5% for 2000.  Average federal funds sold were
$5,471,000 for 2002, $13,266,000 for 2001, and $10,812,000 for 2000,
representing a decrease of 58.8% in 2002 from 2001, and an increase of 22.7% in
2001 over 2000. The yield on federal funds sold was 1.4%, 3.6%, and 5.8% for
full-year 2002, 2001, and 2000, respectively, and is reflective of the general
interest rate environment as previously discussed.  After considering the effect of
the preceeding factors that had an impact on the Companys interest income, the
overall yield on average earning assets was 6.9%, 7.9%, and 8.5% for the
full-years ending 2002, 2001, and 2000, respectively.  Average interest-bearing
liabilities increased to $235,790,000 for 2002 as compared to $206,869,000 for
2001 and $217,669,000 for 2000. The primary component of interest-bearing
liabilities is interest-bearing deposits which averaged $218,176,000,
$203,970,000, and $209,570,000 for 2002, 2001, and 2000, respectively. The
Company has experienced a significant decrease in total interest expense on
deposits of $2,452,000, or 35.5%, in 2002 from 2001. This decrease is  due to an overall decrease in the average
cost of deposits from 3.4% for 2001 to 2.0% in 2002. This sharp decline in
average deposit costs was a direct result of the reduced interest rate
environment.  The Company experienced an
increase of $14,715,000 in average other interest-bearing liabilities when
comparing 2002 with 2001. Other interest-bearing liabilities consists primarily
of borrowings from the Federal Home Loan Bank (FHLB) and Federal Reserve
Bank. Historically, during the months of November through May, 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 average balance of other
interest-bearing liabilities was $17,614,000, $2,899,000, and $8,099,000 in
2002, 2001, and 2000, respectively. During 2002, the Company adopted a
leveraged investment strategy whereby investment securities were purchased
utilizing borrowed funds from the FHLB.   12 
   After considering the effect of
the preceding factors that had an impact on the Companys interest expense,
total interest expense decreased 26.6% to $5,156,000 for 2002 from $7,022,000
for 2001 and decreased 25.9% for 2001 from $9,470,000 for 2000. The decline in
2002 from 2001 is the result of the overall reduced interest rate environment
as interest-bearing liabilities increased from the previous year.  The rate paid on total average
interest-bearing liabilities was 2.2%, 3.4%, and 4.4%, for the full-years
ending 2002, 2001, and 2000, respectively. Consequently, the net interest
spreads were 4.71%, 4.51%, and 4.18%, for the full-years ending 2002, 2001, and
2000, respectively.  CHANGES
IN INTEREST RATES AND THE VOLUME OF INTEREST SENSITIVE ASSETS AND LIABILITIES  Changes in the rates earned and
paid and the volume of interest-earning assets and interest-bearing liabilities
affect the Companys net interest margin. The impact of changes in volume and
rate on net interest income in 2002 compared to 2001, and 2001 compared to
2000, is shown in the following table.  CHANGES
IN VOLUME/RATE (Dollars
in thousands)  2002
  Compared to 2001
  
  2001
  Compared to 2000Volume
  
  Rate
  
  Total
  
  Volume
  
  Rate
  
  TotalFederal Funds
  Sold
  
  $
  (285
  )
  $
  (121
  )
  $
  (406
  )
  $
  143
  
  $
  (289
  )
  $
  (146
  )Investment
  Securities:Taxable
  
  1,395
  
  $
  (720
  )
  675
  
  (1,192
  )
  (276
  )
  (1,468
  )Nontaxable
  
  (28
  )
  $
  1
  
  (27
  )
  (27
  )
  1
  
  (26
  )Loans and Leases
  
  1,690
  
  $
  (2,370
  )
  (680
  )
  1,478
  
  (1,606
  )
  (128
  )Total
  
  $
  2,772
  
  $
  (3,210
  )
  $
  (438
  )
  $
  402
  
  $
  (2,170
  )
  $
  (1,768
  )Demand, Savings
  and Money Market
  
  197
  
  $
  (1,173
  )
  (976
  )
  (85
  )
  (1,153
  )
  (1,238
  )Time
  Certificates
  
  202
  
  $
  (1,678
  )
  (1,476
  )
  (157
  )
  (659
  )
  (816
  )Other
  
  609
  
  $
  (23
  )
  586
  
  (330
  )
  (64
  )
  (394
  )Total
  
  $
  1,008
  
  $
  (2,874
  )
  $
  (1,866
  )
  $
  (572
  )
  $
  (1,876
  )
  $
  (2,448
  )Increase
  (Decrease) in Net Interest Income
  
  $
  1,764
  
  $
  (336
  )
  $
  1,428
  
  $
  974
  
  $
  (294
  )
  $
  680   NONINTEREST
INCOME  Noninterest income for 2002 was
$2,729,000, an increase of $425,000, or 18.4%, from 2001, which stood at
$2,304,000. Noninterest income in 2001 was 16.0% less than the 2000 amount of
$2,744,000. The table below sets forth the components of noninterest income for
the years indicated:  NONINTEREST
INCOME (Dollars
in thousands)  2002
  
  2001
  
  2000Service Charges
  and Fees on Deposit Accounts
  
  $
  1,271
  
  $
  1,083
  
  $
  1,009Brokered Loan
  Fees
  
  172
  
  158
  
  112Loan Servicing
  Fees
  
  298
  
  366
  
  489Earnings on Bank
  Owned Life Insurance Policies
  
  295
  
  280
  
  260Other
  
  693
  
  417
  
  874Total
  
  $
  2,729
  
  $
  2,304
  
  $
  2,744  Service charges and fees on
deposit accounts, one of the main components of noninterest income, increased
in 2002 to $1,271,000, or 17.4%, over the 2001 amount of $1,083,000. An
increase in deposits and an increase in the charges administered led to the
increase in service charges and fees from prior years.   13 
   Brokered loan fees, another
primary source of noninterest income, were $172,000 in 2002. This represents an
increase of $14,000, or 8.9%, from 2001, which stood at $158,000. The increase
in brokered loan fee income from 2000 to 2002 is largely attributable to higher
demand in the home refinance market due to the decreased interest rate
environment.  Loan servicing fees, another
major component of noninterest income declined 18.6% to $298,000 in 2002, from
$366,000 in 2001. This decrease is principally due to the lower amount of total
loans serviced which is described in detail in the Loans and Leases section
of this Managements Discussion and Analysis.  Earnings on Bank Owned Life
Insurance Policies were $295,000, 280,000, and 260,000 for 2002, 2001, and
2000, respectively. The earnings represent the increase in the cash surrender
value of the policies that are on certain directors and officers.  All other noninterest income
increased $276,000, or 66.2%, to $693,000 in 2002, from $417,000 during the
comparable 2001 period. The primary reason for this increase was a
non-recurring gain of $143,000 on the sale of other real estate owned during
2002. Increases were also recognized in other charges and fees, and
miscellaneous income items.  NONINTEREST
INCOME  Noninterest expense decreased
$260,000, or 2.1%, in 2002 to $11,934,000 from 2001 results, which stood at
$12,194,000. The 2001 results reflected an increase of 3.3% from 2000 totals of
$11,806,000. The table below sets forth the components of noninterest expense
for the years indicated.  NONINTEREST
EXPENSE (Dollars
in thousands)  2002
  
  2001
  
  2000Salaries and
  Benefits
  
  $
  6,664
  
  $
  6,887
  
  $
  6,133Occupancy
  
  820
  
  822
  
  726Furniture and
  Equipment
  
  1,261
  
  1,171
  
  1,170Other Operating
  and Administrative
  
  3,189
  
  3,314
  
  3,777Total
  
  $
  11,934
  
  $
  12,194
  
  $
  11,806  Salaries and benefits, the
largest component of noninterest expense, was $6,664,000 for 2002, $6,887,000
for 2001, and $6,133,000 for 2000, representing a decrease of 3.2% in 2002 from
2001, and an increase of 12.3% in 2001 over 2000. Although the Bank experienced
increases in its cost of employee benefit plans, primarily medical insurance
and costs associated with the Companys 401K plan, and additional staffing for
the new branch openings in Lincoln and Roseville, California, in 2001, it was
able to reduce salaries and benefits expense by improving efficiencies and
productivity.  Collectively, occupancy and furniture
and equipment expenses increased $88,000, or 4.4%, for 2002 over 2001 and stood
at $2,081,000 and $1,993,000, for the full year periods, respectively. During
2001, the Company recognized an increase of 5.1% from $1,896,000 in 2000. The
increase in 2002 over 2001 was principally driven by the new branches in
Lincoln and Roseville, California as described in the preceding paragraph.  Other operating and
administrative expenses were $3,189,000 for 2002, a decrease of $125,000, or
3.8% from 2001s non-interest operating and administrative expenses of
$3,314,000. This same classification of expenses amounted to $3,777,000 in
2000. The decline in other noninterest operating and administrative expense
during 2000 to 2002 is attributed primarily to a variety of initiatives
implemented by the Company to further streamline workflow processes and improve
its use of technology, thereby achieving greater operational efficiency. For a
breakdown of the other noninterest operating and administrative expenses, please
see footnote 14 in the Notes to Consolidated Financial Statements.  INCOME
TAXES  The provision for income taxes
was $2,098,000 in 2002, $587,000 in 2001, and $1,675,000 in 2000. The Companys
effective tax rate was 34.9%, 29.4%, and 38.1%, for full-years 2002, 2001, and
2000, respectively.   14 
   LOANS
AND LEASES  The Company continues to
emphasize real estate, real estate construction, commercial, agricultural, and
consumer lending activities. During 2002, the Company continued its focus to
improve asset quality, to meet customers needs in its geographic market
segments, and recommit itself to promoting a productive sales culture that
emphasizes relationship banking. All of these factors led to the strong year
over year growth in the loan portfolio. Gross loans and leases increased
$22,147,000, or 11.5%, when comparing December 31, 2002 with December 31, 2001.
The increase in gross loans and leases during 2002 is attributable to the
substantial increase in the commercial real estate mortgage secured loan
portfolio and to the modest increases in the commercial real estate
construction and agricultural loan portfolios. The Company experienced declines
in the commercial, consumer, and lease portfolios.  The Company lends primarily to
small and medium-sized businesses, small to large-sized farms, professionals,
and consumers within its market area, which is principally comprised of Sutter,
Yuba, Colusa, Yolo, and Placer counties, and secondarily, Sacramento, El
Dorado, Butte, and Glenn counties. A significant portion of the Companys loan
portfolio consists of loans secured by commercial, agricultural, and
residential real estate. The following table depicts the composition of the
Banks loan and lease portfolio as of December 31, for each of the last five
years:  COMPOSITION
OF LOAN AND LEASE PORTFOLIO (Dollars
in thousands)  December
  31,2002
  
  2001
  
  2000
  
  1999
  
  1998Commercial
  
  $
  25,428
  
  $
  26,763
  
  $
  20,494
  
  $
  19,076
  
  $
  22,998Agricultural
  
  17,536
  
  13,329
  
  21,197
  
  36,035
  
  49,106Real
  Estate-Construction
  
  35,287
  
  32,268
  
  35,783
  
  30,514
  
  53,968Real
  Estate-Mortgage
  
  123,991
  
  100,685
  
  75,627
  
  46,004
  
  28,930Consumer
  
  4,390
  
  4,827
  
  4,472
  
  2,524
  
  2,443Lease Financing
  
  5,891
  
  11,654
  
  19,609
  
  27,010
  
  23,034Other
  
  1,905
  
  2,755
  
  1,833
  
  158
  
  393Total
  
  $
  214,428
  
  $
  192,281
  
  $
  179,015
  
  $
  161,321
  
  $
  180,872   During 2002, the Bank continued
to realize substantial growth in its real estate mortgage loan portfolio. The
year-end balance of mortgage loans secured by commercial, agriculture, and
residential real estate increased $23,306,000, or 23.1%, at year-end 2002 over
year-end 2001. This increase is attributable to the strategic decision to focus
expansion into Placer county, the Banks newest market, which is one of the
highest growth rate areas in the state. At December 31, 2002, the Banks real
estate mortgage loan portfolio equaled $123,991,000, or 57.8%, of the total
loan and lease portfolio. At December 31, 2001, the real estate mortgage loan
portfolio equaled $100,685,000, or 52.4%, of the total loan and lease
portfolio. These loans are fully secured by real estate collateral and advances
are limited to 65% to 80% of the real estates appraised value depending on the
type of loan. Due to the large make-up of real estate mortgage loans in the
portfolio, the Directors Loan Committee monitors this asset concentration on a
monthly basis. Sub-classifications have been identified within the asset class
and are monitored and analyzed with established limitations. The Banks current
concentration limits requires commercial real estate mortgage, residential real
estate (exclusive of Home Equity Loans and Home Equity Lines of Credit) and
commercial real estate construction to total no more than 75% of total loans. The Bank makes
real estate construction loans, primarily to finance a variety of commercial,
office, and retail projects, as well as for the construction of single-family
homes. At December 31, 2002, these loans increased $3,019,000, or 9.4%,
compared to year-end 2001. The Bank had $35,287,000, or 16.5%, and $32,268,000,
or 16.8%, of its total loan and lease portfolio in real estate construction
loans outstanding at December 31, 2002 and 2001, respectively. The growth was
recognized due to the Companys expansion into Placer county. In all cases,
real estate construction loans are fully secured by the real property being
improved. Advance rates are limited to 70% to 75% of the projects appraised
value at completion depending upon the type of project. Generally, to further
its business development goals, the Bank enters into construction lending
relationships with the commitment, or the intent to commit, to provide term
real estate mortgage financing to its customer upon project completion.   15 
   The Bank makes commercial and
small business loans (including lines of credit) that are secured by the assets
of the business. Commercial loans decreased $1,335,000, or 5.0%, between
December 31, 2001 and December 31, 2002. The decrease is the result of a
softening commercial loan demand and increased competition throughout the
Banks geographically served areas. The Bank had $25,428,000, or 11.9%, and
$26,763,000, or 13.9%, of the total loan and lease portfolio in commercial and
industrial loans outstanding at December 31, 2002 and 2001, respectively.  The Bank provides agricultural
production lines of credit and other agricultural loans that are secured by
crops, crop proceeds, and other collateral. These loans are generally at their
peak in the third quarter of each year. At December 31, 2002, agricultural
loans increased $4,207,000, or 31.6%, in comparison to December 31, 2001.
Although agricultural loans increased from the previous year, they represent a
significantly smaller percentage of the loan and lease portfolio than several
years prior. This trend was the result of the Banks decision to diversify into
real estate secured and commercial lending. Additionally, the decline in
agricultural loans is due to the Banks enhanced credit standards which
resulted in lower agricultural loan production, the economic adversities
affecting certain agricultural commodities produced in the Banks trade area
which have softened new loan demand, and to lending competition in the Banks
core market area which remains competitive. The Bank had $17,536,000, or 8.2%,
and $13,329,000, or 6.9%, of the total loan and lease portfolio in agricultural
loans outstanding at December 31, 2002 and 2001, respectively. Approximately
3.3% of these loans are guaranteed by the Farm Service Agency (FSA, an agency
of the U.S. Department of Agriculture).  The Bank grants consumer loans,
including secured and unsecured loans and lines of credit, to finance a variety
of consumer needs. At December 31, 2002, consumer loans decreased $437,000, or
9.1%, from December 31, 2001. The Bank had $4,390,000, or 2.0%, and $4,827,000,
or 2.5%, of the total loan and lease portfolio in consumer loans at December 31,
2002 and 2001, respectively. The decrease in this loan category is due to
increased competition and special pricing programs for new car financing by
other lenders.  During 2002, the Bank
experienced a significant decline in its lease portfolio. As of December 31,
2002, lease financing receivables declined $5,763,000, or 49.5%, from year-end
2001. The decline is the direct result of the Banks decision in the first
quarter of 2000 to discontinue originating and purchasing leases through its
subsidiary E.P.I Leasing Co., Inc. (EPI). Consequently, the reduction of the
remaining lease portfolio during 2002 was basically due to scheduled lease
portfolio principal reductions. The Bank had $5,891,000, or 2.7%, and
$11,654,000, or 6.1%, of the total loan and lease portfolio in leases at
December 31, 2002 and 2001, respectively.  In conjunction with the Banks
March 21, 2000 decision to discontinue and wind-down the operations of EPI,
servicing of the lease portfolio was outsourced to Bancorp Financial Services,
Inc. (BFS), a third party specializing in the origination, acquisition, and
servicing of small ticket leases. On May 21, 2001, Humboldt Bancorp, BFS
parent company, announced a plan to wind-down the operations of BFS in an
orderly fashion over time. Subsequently, on January 28, 2002, BFS notified the
Bank that it had targeted March 31, 2002 as the completion date for its
wind-down process and furthermore advised the Bank of their intent to resign as
the servicer of the EPI lease portfolio. As a result of these developments, the
Bank entered into a contract on March 20, 2002, effective May 1, 2002, with
Portfolio Financial Servicing Company, Inc. (PFSC) as the successor servicer
of the EPI lease portfolio. PFSC is a third party specializing in the servicing
of lease portfolios.  The Company also originates
certain mortgage loans on residential and agricultural properties, which it
sells into the secondary market to divest itself of the interest rate risk
associated with these mostly fixed-interest rate products. The Company accounts
for these loans in accordance with Statement of Financial Accounting Standards
No. 140 Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities, a replacement of FASB Statement No. 125.  As of December 31, 2002, 2001,
and 2000, total loans serviced by the Company were $32,184,000, $78,062,000,
and $92,741,000. Total loans sold by the Company were $698,000 in 2002,
$1,726,000 in 2001, and $760,000 in 2000. The decreasing trend in loans serviced
over the last three years is the result of the Company changing its focus to
brokered loans rather than serviced loans. The Company expects this trend to
continue due to principal amortization, loan payoffs, and fewer loan
originations.   16 
   QUALITY
OF LOANS AND LEASES  Inherent in the lending function
is the fact that loan and lease losses will be experienced, and the risk of
loss will vary with the type of loan or lease extended, general economic conditions,
and the creditworthiness of the borrower. To reflect the estimated risks of
loss associated with its loan and lease portfolio, provisions are made to the
Companys allowance for loan and lease losses. As an integral part of this
process, the allowance for loan and lease losses is subject to review and
possible adjustment as a result of Managements assessment of risk, third party
reviews, or regulatory examinations conducted by governmental agencies.  ALLOWANCE
FOR LOAN AND LEASES LOSSES  The Company uses the allowance
method in providing for loan and lease losses. Additions to the Allowance for
Loan and Lease Losses (ALLL) are made by provisions for possible losses which
are charged to operating expense and are based upon past loss experience and
estimates of potential losses which, in Managements judgment and in accordance
with generally accepted accounting principles, deserve current recognition.
Loan and lease losses are charged against the ALLL and recoveries are credited
to it. The ALLL at December 31, 2002 was $6,532,000, or 3.0% of total loans and
leases outstanding compared to $5,498,000, or 2.9% of total loans and leases
outstanding at December 31, 2001. The ALLL consists of three components:
general reserve, specific reserve, and unallocated reserve.  The general reserve is
consistent with SFAS No. 5 Accounting for Contingencies and establishes a
reserve for performing loans. A reserve ratio based on historical loss data is
determined for each loan type. The reserve ratios ranging from 0.25% - 3.00%
are applied to the loan type balance, less any loan amounts with a specific
reserve, to calculate the general reserve. Additionally, a 0.10% special
reserve for economic uncertainty is applied to the aggregate performing loan
balance. At December 31, 2002, the general reserve was $2,061,000, or 31.6%, of
the ALLL.  The specific reserve is
consistent with SFAS No.114 Accounting by Creditors for Impairment of a Loan,
and establishes a reserve for impaired loans graded as special mention,
substandard, and doubtful. At December 31, 2002, the specific reserve was
$2,910,000, or 44.5%, of the ALLL.  The unallocated reserve is the
portion of the ALLL not defined in the general or specific reserve. This
reserve is for losses from economic events, industry, or geographic sectors,
and the inherent imprecision in the underlying assumptions used to reserve for
losses in the general and specific reserve calculations. Additionally, it is
the result of past favorable collections of previously charged-off loan
positions and the successful collection of certain loans that held sizable
specific reserves that are no longer required.  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, actual losses may vary from current estimates and future
additions to the ALLL may be necessary.  Provisions to the ALLL totaled
$550,000 and $2,450,000 for the years ended December 31, 2002 and December 31,
2001, respectively. During 2002, provisions to the ALLL were driven by strong
loan growth. Management deemed it prudent to increase the ALLL in conjunction
with the growth of the loan portfolio. Full-year 2001 provisions were caused by
the charge-off during the fourth quarter of the Banks exposure to a large,
long running agribusiness problem credit relationship. Additionally, the Bank
moved aggressively to build loan loss reserves on other agricultural real
estate supported loans and a construction loan relationship.  The Company had loan and lease
charge-offs of $442,000 for 2002, $3,109,000 for 2001, and $1,740,000 for 2000.
Over the same periods, the Company had recoveries of $926,000, $433,000, and
$493,000, respectively. This resulted in the Company experiencing net
recoveries of $484,000 in 2002, net loan and lease charge-offs of $2,676,000 in
2001, and $1,247,000 in 2000. These net charge-offs are equal to (0.2%), 1.5%,
and 0.7%, of average loans and leases for 2002, 2001, and 2000.   17 
   The following table illustrates
the activity in the Banks allowance for loan and lease losses for the years
ending December 31, 1998 through 2002.  ACTIVITY
IN ALLOWANCE FOR LOAN AND LEASE LOSSES (Dollars
in thousands, except percentages)  2002
  
  2001
  
  2000
  
  1999
  
  1998Balance of
  Allowance at January 1
  
  $
  5,498
  
  $
  5,724
  
  $
  6,771
  
  $
  6,024
  
  $
  5,514Charge-Off by
  Loan Category:Commercial
  
  
  
  764
  
  585
  
  25
  
  699Agricultural
  
  
  
  2,063
  
  232
  
  54
  
  775Real
  Estate-Construction
  
  
  
  
  
  247
  
  115
  
  189Real
  Estate-Mortgage
  
  
  
  
  
  
  
  8
  
  Consumer
  
  14
  
  14
  
  19
  
  15
  
  49Lease Financing
  
  408
  
  268
  
  657
  
  930
  
  621Other
  
  20
  
  
  
  
  
  
  
  Total
  
  442
  
  3,109
  
  1,740
  
  1,147
  
  2,333Recoveries by
  Loan Category:Commercial
  
  203
  
  249
  
  59
  
  191
  
  299Agricultural
  
  578
  
  9
  
  81
  
  160
  
  Real
  Estate-Construction
  
  
  
  
  
  180
  
  267
  
  Real
  Estate-Mortgage
  
  
  
  35
  
  
  
  
  
  Consumer
  
  2
  
  2
  
  2
  
  
  
  98Lease Financing
  
  135
  
  138
  
  171
  
  276
  
  200Other
  
  8
  
  
  
  
  
  
  
  Total
  
  926
  
  433
  
  493
  
  894
  
  597Net Charge-offs
  (Recoveries)
  
  (484
  )
  2,676
  
  1,247
  
  253
  
  1,736Provision
  Charged to Expense
  
  550
  
  2,450
  
  200
  
  1,000
  
  2,246Balance,
  December 31
  
  $
  6,532
  
  $
  5,498
  
  $
  5,724
  
  $
  6,771
  
  $
  6,024Total Loans and
  Leases at End of Year
  
  $
  214,428
  
  $
  192,282
  
  $
  179,015
  
  $
  161,321
  
  $
  180,872Average Loans
  and Leases
  
  203,391
  
  184,397
  
  169,273
  
  181,166
  
  189,892Ratios:Net Charge-offs
  (Recoveries) to Average Loans and Leases
  
  -0.24
  %
  1.45
  %
  0.74
  %
  0.14
  %
  0.91
  %Allowance to
  Loans and Leases at End of Year
  
  3.05
  %
  2.86
  %
  3.20
  %
  4.20
  %
  3.33
  %  In the preceding table, loan and
lease losses are divided among the loan types. During 2002, the bulk of the
charge-offs were in the lease portfolio which totaled $408,000, or 92.3%, of
the total charge-offs. Previously, the Company purchased leases from EPI, who
originated the leases. Lease originations were discontinued in March 2000, and
EPIs operations were wound-down. As previously discussed, lease servicing will
continue to be outsourced to a qualified and experienced third party lease
servicing provider. Recognizing the inherent risks associated with lease
activity, the Company continues to maintain higher reserves for this portfolio
than other conventional loan portfolios. Other and consumer categories made up
the rest of the charge-offs with $20,000 and $14,000, respectively.  For 2001, the largest category
of loss was in the agricultural portfolio. The losses were $2,063,000, or 66.4%
of total losses. This entire amount was centered in one large, long running
agribusiness problem credit relationship that experienced a sharp decline in
the real estate collateral value during the fourth-quarter driven principally
by the softening of the overall local agricultural economy.   18 
   The commercial portfolio
experienced losses of $764,000 at December 31, 2001. Approximately 60.2%, or
$460,000, of the loss experienced in commercial loans was centered in the same
agribusiness relationship discussed in the preceding paragraph. The remaining
$304,000 of commercial charge-offs were attributable to two borrowers. The
largest is a contractor who liquidated and filed bankruptcy resulting in a loss
of $162,000. The Company recovered the amount charged-off through the sale of
residential lots that had been pledged as additional security on the loan. The
other commercial loan was a protracted workout, for which the Bank had obtained
real property collateral as additional security. Due to the excessive passage
of time while trying to liquidate the property, the loan was charged-off. The
borrower subsequently sold the property and the Bank recovered its prior
charge-off.  The lease portfolio losses at
December 31, 2001 were $268,000, and the consumer losses were $14,000. The allocation of
the ALLL by loan and lease type as of December 31 for each of the last five
fiscal years is summarized in the following table. Any allocation or breakdown
in the ALLL is provided for informational purposes only and should not be
construed to lend an appearance of exactness that does not exist. Thus, the
following allocation should not be interpreted as an indication of expected
amounts or categories where charge-offs will occur. Management uses available
information to provide for loan and lease loss reserve allocation; however,
future additions to the ALLL may be necessary based upon changes in the
economic conditions and other variables.  ALLOCATION
OF ALLOWANCE (Dollars
in thousands, except percentages)  December
  31, 2002
  
  December
  31, 2001
  
  December
  31, 2000
  
  December
  31, 1999
  
  December
  31, 1998Percent
  of
  
  
  
  Percent
  of
  
  
  
  Percent
  of
  
  
  
  Percent
  of
  
  
  
  Percent
  ofloans
  in each
  
  
  
  loans
  in each
  
  
  
  loans
  in each
  
  
  
  loans
  in each
  
  
  
  loans
  in eachcategory
  to
  
  
  
  category
  to
  
  
  
  category
  to
  
  
  
  category
  to
  
  
  
  category
  toAmount
  
  total
  loans
  
  Amount
  
  total
  loans
  
  Amount
  
  total
  loans
  
  Amount
  
  total
  loans
  
  Amount
  
  total
  loansBalance
  Applicable to:Commercial
  
  $
  575
  
  11.9
  %
  $
  1,072
  
  13.9
  %
  $
  1,165
  
  11.4
  %
  $
  848
  
  11.8
  %
  $
  1,310
  
  12.7
  %Agricultural
  
  738
  
  8.2
  %
  754
  
  6.9
  %
  1,065
  
  11.8
  %
  2,794
  
  22.3
  %
  2,334
  
  27.1
  %Real
  Estate-Construction
  
  1,502
  
  16.5
  %
  1,270
  
  16.8
  %
  399
  
  20.0
  %
  417
  
  18.9
  %
  925
  
  29.8
  %Real
  Estate-Mortgage
  
  1,484
  
  57.8
  %
  1,320
  
  52.4
  %
  578
  
  42.2
  %
  542
  
  28.5
  %
  610
  
  16.0
  %Consumer
  
  85
  
  2.0
  %
  67
  
  2.5
  %
  36
  
  2.5
  %
  48
  
  1.6
  %
  32
  
  1.4
  %Lease Financing
  
  243
  
  2.7
  %
  488
  
  6.1
  %
  832
  
  11.0
  %
  940
  
  16.7
  %
  706
  
  12.7
  %Other
  
  1,905
  
  0.9
  %
  527
  
  1.4
  %
  1,649
  
  1.0
  %
  1,182
  
  0.1
  %
  107
  
  0.2
  %Total
  
  $
  6,532
  
  100.0
  %
  $
  5,498
  
  100.0
  %
  $
  5,724
  
  100.0
  %
  $
  6,771
  
  100.0
  %
  $
  6,024
  
  100.0
  %  Management believes the total
ALLL is adequate as of December 31, 2002. The $1,905,000 amount shown as
Other consisted of $136,000 reserved for undisbursed commitments on the
combined loan and lease portfolios, $2,000 reserved for standby lines of
credit, $206,000 in special reserve (described in the paragraph discussing
the general reserve), and $1,561,000 in unallocated reserves. This unallocated
reserve equals 23.9% of the reserve deemed necessary by Management and provides
an added margin of safety for the overall portfolio.  NONPERFORMING
LOANS  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. Loans or leases that are in the
process of renewal in the normal course of business, or that are well-secured
and in the process of collection, may not be placed on nonaccrual status at the
discretion of Management. 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.   19 
   The following table summarizes
nonperforming assets as of December 31, 2002, 2001, 2000, 1999, and 1998.  NONPERFORMING
ASSETS: (Dollars
in thousands)  2002
  
  2001
  
  2000
  
  1999
  
  1998Loans and Leases
  Accounted for on a Nonaccrual Basis
  
  $
  4,392
  
  $
  3,060
  
  $
  4,926
  
  $
  6,115
  
  $
  5,644Other Loans Contractually
  Past Due 90 Days or More
  
  
  
  
  
  
  
  
  
  854Total
  Nonperforming Loans and Leases
  
  $
  4,392
  
  $
  3,060
  
  $
  4,926
  
  $
  6,115
  
  $
  6,498Other Real
  Estate Owned
  
  $
  
  
  $
  542
  
  $
  405
  
  $
  1,300
  
  $
  101Total
  Nonperforming Assets
  
  $
  4,392
  
  $
  3,602
  
  $
  5,331
  
  $
  7,415
  
  $
  6,599  Nonperforming assets increased
by $790,000 over the past year. The Bank did not experience a widespread
frequency of loans nonperforming but rather it was due to one large real estate
construction loan. This loan has been in the process of foreclosure and the
Bank expects to have clear title of the property during the first quarter of
2003. The Bank intends to sell the property and believes this credit is well
reserved. Nonperforming loans and leases were $4,392,000, or 2.0%, of the
portfolio at December 31, 2002, and $3,060,000, or 1.6%, of the portfolio at
December 31, 2001. The Company continues to successfully implement its
classified asset reduction plan and enhance quality control in the management
of the loan portfolio. Each of the nonperforming relationships is assigned to
the Companys Special Assets Department, which is responsible for and has
developed written work-out arrangements for each of these relationships. The
decreasing number of loans that are nonperforming is indicative of the progress
made in this area.  The amount of nonperforming
loans and leases consists of a small number of credits. As of December 31,
2002, $4,108,000, or 93.5%, of the nonaccrual loans were in three
relationships: a real estate construction loan for $2,443,000; an agricultural
loan for $747,000; and a commercial real estate loan for $918,000.  Similarly, as of December 31,
2001, 95.6% of the Companys total nonaccrual loans and leases were
concentrated in five relationships. Four of the relationships, totaling
$2,664,000, or 87.1%, were real estate loan relationships, while the remainder,
totaling $260,000, or 8.5%, was an agribusiness credit relationship.  There were no loans or leases on
accrual status that were past due 90 days or more at December 31, 2002,
December 31, 2001, or December 31, 2000.  INVESTMENTS  At December 31, 2002, the
Companys investment portfolio was $100,239,000 or 27.3% of total assets, an
increase over $77,996,000, or 25.5% of total assets at December 31, 2001. At
December 31, 2002, and 2001, federal funds sold were $18,245,000, and
$5,300,000, respectively. Federal funds sold are overnight deposits with other
banks.  Under Statement of Financial
Accounting Standard No. 115 Accounting for Certain Investments in Debt and
Equity Securities (SFAS 115), investments in debt and equity securities must
be classified in one of three different categories: Trading,
Available-for-Sale, or Held-to-Maturity, and there are different accounting
methods for each category. The Company has classified all of its investment
securities as either Available-for-Sale or Held-to-Maturity. SFAS 115
requires that any unrealized gain or loss related to the Available-for-Sale
category be reported as an adjustment to the Companys shareholders equity,
even though this gain or loss would only be realized if the investment were
actually sold. If the investment is in the Held-to-Maturitycategory, no
unrealized gains or losses need be reported.  During 2002, the Company adopted
a leveraged investment strategy whereby qualified securities were purchased and
funded with similar term borrowings to net a desired yield. This strategy
coupled with utilizing excess liquidity to purchase short average life
securities led to the large increase over year 2001. Due to the structure of
the Mortgage-Backed securities purchased, the weighted average life is
significantly less than the stated final maturity.   20 
   The following table summarizes
the carrying value of the Companys investment securities as of December 31,
2002, 2001 and 2000.  INVESTMENTS (Dollars
in thousands)  2002
  
  2001
  
  2000Available-for-Sale:Obligations of
  U.S. Government Agencies
  
  $
  34,586
  
  $
  40,085
  
  $
  64,137Mortgage-Backed
  Securities
  
  50,068
  
  19,872
  
  6,404Debt Securities
  
  8,729
  
  8,737Equity
  Securities
  
  4,591
  
  5,698
  
  6,154$
  97,974
  
  $
  74,392
  
  $
  76,695Held-to-Maturity:Obligations of
  States and Political Subdivisions
  
  $
  1,265
  
  $
  1,854
  
  $
  2,568Debt and Other
  Securities
  
  1,000
  
  1,750
  
  2,749$
  2,265
  
  $
  3,604
  
  $
  5,317  The maturity distribution and
yields of the investment portfolios are presented in the table below.  INVESTMENT
MATURITY (Dollars
in thousands)  As of
  December 31, 2002Within One
  Year
  
  After One
  But
  Within Five Years
  
  After Five
  But
  Within Ten Years
  
  After Ten
  Years
  
  TotalAmount
  
  Yield
  
  Amount
  
  Yield
  
  Amount
  
  Yield
  
  Amount
  
  Yield
  
  Amount
  
  YieldAvailable
  for SaleObligations of U.S. Government Agencies
  
  $
  
  
  n/a
  
  $
  13,293
  
  6.45
  %
  $
  10,341
  
  7.22
  %
  $
  10,952
  
  4.70
  %
  $
  34,586
  
  6.13
  %Mortgage-Backed Securities
  
  22
  
  6.50
  %
  
  
  n/a
  
  5,922
  
  5.65
  %
  44,124
  
  5.42
  %
  50,068
  
  5.45
  %Debt Securities
  
  2,077
  
  5.37
  %
  6,652
  
  5.93
  %
  
  
  n/a
  
  
  
  n/a
  
  8,729
  
  5.80
  %Equity Securities (1)
  
  
  
  n/a
  
  
  
  n/a
  
  
  
  n/a
  
  4,591
  
  n/a
  
  4,591
  
  n/aTotal Available-for-Sale
  
  $
  2,099
  
  5.38
  %
  $
  19,945
  
  6.28
  %
  $
  16,263
  
  6.65
  %
  $
  59,667
  
  4.87
  %
  $
  97,974
  
  5.46
  %Held-to-Maturity:Obligations of States and Political Subdivisions (2)
  
  $
  700
  
  4.40
  %
  565
  
  4.70
  %
  
  
  n/a
  
  
  
  n/a
  
  1,265
  
  4.53
  %Debt and Other Securities
  
  1,000
  
  6.17
  %
  
  
  n/a
  
  
  
  n/a
  
  
  
  n/a
  
  1,000
  
  6.17
  %Total Held-to-Maturity
  
  $
  1,700
  
  5.44
  %
  $
  565
  
  4.70
  %
  $
  
  
  $
  
  
  
  
  
  
  $
  2,265
  
  5.26
  %Total Investment Securities
  
  $
  3,799
  
  
  
  $
  20,510
  
  
  
  $
  16,263
  
  
  
  $
  59,667
  
  
  
  $
  100,239  
 (1)           Equity securities have no stated
maturity but have been added to the after ten years, for ease of review. (2)           Yields are not adjusted for the tax
benefits of non-taxable income.  In the normal course of
business, the Bank pledges its investment securities as collateral for certain
deposits (typically deposits of government entities), and for the Banks
borrowing lines. The book value of pledged securities was $53,245,000 and
$50,808,000 at December 31, 2002 and 2001, respectively.  OTHER
ASSETS  During 2002, the Company
recognized an increase in total other assets. These assets consist primarily of
premises and equipment, interest receivable, other real estate owned (OREO),
cash surrender value of life insurance policies associated with certain
executive officers and directors of the Company, net deferred taxes, income tax
receivable, investment in a Community Reinvestment Act (CRA) qualified
California Affordable Housing Project, FHLB stock, and other miscellaneous
assets.  Total other assets increased
$86,000 to $18,902,000 at December 31, 2002 compared to $18,816,000 at December
31, 2001. The increases in other assets were in FHLB stock which increased
$534,000, cash surrender value of life insurance policies by $1,131,000 (the
increase was primarily caused by the purchase of a new life insurance policy,
and secondarily due to the annual earnings produced by the existing policies),
Trust Preferred Securities Placement Fee, and Trust Preferred Securities
Attorney Fees (two new asset accounts as a result of the issuance of
Mandatorily Redeemable Cumulative Trust Preferred Securities of Subsidiary
Grantor Trust which are amortized over five years).   21 
   The biggest decline in other
assets was in income tax receivable due to the application of the balance to
current year tax liability, as well as a refund received. The second biggest
decline in other assets was OREO, which stood at zero at year-end. The Company
was successful in selling the property transferred into OREO and recognized a
gain from sale. Deferred taxes increased from the previous year, which is
attributed to differences in the timing of the recognition of certain income
and expense items for tax and financial accounting purposes.  Premises and equipment also
declined $206,000 from December 31, 2001 to December 31, 2002. During the year
2002, the Company acquired $817,000 of new property, recognized depreciation of
$979,000, and disposed of various equipment with an immaterial book value.  Other assets declining include
an investment made in a California Affordable Housing Project, for which the
Company recognizes recurring pre-tax impairment and equity losses. This
investment contributed toward the Banks achievement of its CRA objectives, and
its economic value is ultimately realized through the tax benefits it
generates.  DEPOSITS  Total deposits at December 31,
2002, 2001, and 2000 were $306,726,000, $275,576,000, and $267,632,000,
respectively. These figures represent an increase of $31,150,000, or 11.3%, at
December 31, 2002 over December 31, 2001, and an increase of $7,944,000, or
3.0%, at December 31, 2001 over December 31, 2000. Average daily total deposits
were $278,689,000 for 2002, $262,205,000 for 2001, and $263,294,000 for 2000.  The primary reason for the large
increase in 2002 was due to an innovative deposit product, developed and
marketed, celebrating the Banks 25th anniversary. This tiered certificate of
deposit product, the Silver CD marking the Banks 25th year in business was a
success in bringing approximately $14,000,000 of new money to the Bank, as well
as increasing the customer base, allowing increased opportunities to cross-sell
the Banks other products.  The Company has been able to
attract and retain deposits by providing superior customer service and offering
interest rates on deposits competitive with other financial institutions in its
market area. Total deposits consist of interest-bearing and noninterest-bearing
deposits. At December 31, 2002, the mix of deposits consists of 24.6%
noninterest-bearing and 75.4% interest-bearing. The mix of interest-bearing
deposits consists of 47.3% in time certificates of deposit, 26.3% in
interest-bearing demand deposits, and 26.4% in savings and money market
accounts. Average time certificates of deposit, the largest portion of
interest-bearing deposit accounts, were $99,734,000 for 2002, $95,684,000 for
2001, and $98,438,000 for 2000, representing an increase of $4,050,000, or
4.2%, in 2002 compared to 2001, and a decrease of $2,754,000, or 2.8%, in 2001
from 2000.  Average daily
noninterest-bearing demand deposits, the majority of which are business
checking accounts, increased $2,278,000 to $60,513,000 in 2002, from
$58,235,000 for 2001, and stood at $53,724,000 for 2000.  The remaining contractual
maturities of the Companys time certificates of deposit, including public time
deposits, as of December 31, 2002 and 2001, are indicated in the following
table. Interest expense on time certificates of deposit totaled $3,328,000 in
2002 and $4,804,000 in 2001. The decrease in interest expense on time
certificates of deposit was due to the reduced interest rate environment that
began in 2001 and includes the most recent rate cut in November 2002. The average
yields paid on time certificates of deposit were 3.34% and 5.02% for the years
ended December 31,2002 and 2001, respectively.  CONTRACTUAL
MATURITY OF CERTIFICATES OF DEPOSITS (Dollars
in thousands)  December
  31, 2002
  
  December
  31, 2001$
  100,000
  and over
  
  Under
  $100,000
  
  $
  100,000
  and over
  
  Under
  $100,000Three Months or
  Less
  
  $
  17,563
  
  $
  35,663
  
  $
  18,430
  
  $
  25,164Over Three
  Months Through Twelve Months
  
  8,914
  
  20,627
  
  12,378
  
  28,231Over One Year
  Through Three Years
  
  9,048
  
  13,165
  
  2,902
  
  4,279Over Three Years
  
  1,849
  
  2,722
  
  1,101
  
  792Total
  
  $
  37,374
  
  $
  72,177
  
  $
  34,811
  
  $
  58,466   22 
   OTHER
LIABIILTIES  Total other liabilities for the
Company increased to $31,301,000 at December 31, 2002 compared to $3,611,000 at
December 31, 2001. Total other liabilities consist of other borrowings,
Mandatorily Redeemable Cumulative Trust Preferred Securities of Subsidiary
Grantor Trust (Trust Preferred Securities), interest payable on
interest-bearing liabilities, deferred compensation payable, and other
miscellaneous liabilities. The increase of $27,690,000 at year-end 2002 from
year-end 2001 in total other liabilities was principally due to $15,000,000 of
borrowings at the FHLB as part of a leveraged investment strategy, and the
issuance of $10,000,000 of Trust Preferred Securities.  INTEREST
RATE SENSITIVITY  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.  The following table depicts the
Companys interest rate sensitivity position as of December 31, 2002.  INTEREST
RATE SENSITIVITY AS OF DECEMBER 31, 2002 (Dollars
in thousands)  Repricing
  OpportunityThree
  months
  or less
  
  Over
  three
  months
  through
  12 months
  
  1 year
  -
  3 years
  
  Over
  3 years
  
  TotalInterest-Earning
  Assets:Federal Funds
  Sold
  
  $
  18,245
  
  $
  
  
  $
  
  
  $
  
  
  $
  18,245Loans
  
  143,583
  
  12,285
  
  7,388
  
  51,172
  
  214,428Investments
  
  5,613
  
  2,777
  
  16,333
  
  75,516
  
  100,239Total
  Interest-Earning Assets
  
  $
  167,441
  
  $
  15,062
  
  $
  23,721
  
  $
  126,688
  
  $
  332,912Interest-Bearing
  Liabilities:Interest-Bearing
  Demand
  
  $
  60,801
  
  $
  
  
  $
  
  
  $
  
  
  $
  60,801Savings and Money
  Market Deposits
  
  60,993
  
  60,993
  
  
  
  
  
  Time
  Certificates
  
  53,225
  
  42,912
  
  8,842
  
  4,572
  
  109,551Other
  Interest-Bearing Liabilities
  
  1,335
  
  40
  
  40
  
  25,000
  
  26,415Total
  Interest-Bearing Liabilities
  
  $
  176,354
  
  $
  42,952
  
  $
  8,882
  
  $
  29,572
  
  $
  257,760Gap
  
  (8,913
  )
  (27,890
  )
  14,839
  
  97,116
  
  75,152Cumulative Gap
  
  (8,913
  )
  (36,803
  )
  (21,964
  )
  75,152  The above table indicates the
time period in which interest-earning assets and interest-bearing liabilities
will mature or may reprice in accordance with their contractual terms. However,
this table does not necessarily indicate the impact of general interest rate
movements on the Banks NII or yield because the repricing of various
categories of assets and liabilities is discretionary and is subject to
competitive and other pressures. As a result, various assets and liabilities
indicated as maturing or repricing within the same period may in fact mature or
reprice at different times and at different rate levels. For example,  although the Banks regular savings accounts
generally are subject to immediate withdrawal, Management considers most of
these accounts to be core deposits having significantly longer effective
maturities based on the Banks experience of retention of such deposits in
changing interest rate environments.  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 Balance Sheet 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 the 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. The ALCO believes
that both individually and in the aggregate its modeling assumptions are
reasonable, but the complexity of the simulation modeling process results in a
sophisticated estimate, not an absolutely precise calculation of exposure.   23 
   MARKET
RISK  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,
which 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 the 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.  INTEREST
RATE RISK  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. The 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
Consolidated Balance Sheet as well as for off balance sheet financial
instruments. This sensitivity analysis is compared to the 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 (due to the reduced interest rate
environment, only a 100 basis point downward shift was modeled for year 2002).
A parallel shift in rate, pro-rated 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 following table reflects the
Companys NII sensitivity analysis as of December 31, 2002.  Rate
  change (bp)
  
  Estimated
  benefit (exposure) as a% of annual projected NII+200
  
  4.14%-100
  
  (1.07)%
  The preceding sensitivity
analysis does not represent a Company forecast and should not be relied upon as
being indicative of future operating results. These hypothetical estimates are
based on numerous assumptions including 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 asset and liability cash flows, and others.
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 and product preference changes, and other internal and
external variables. Furthermore, the sensitivity analysis does not reflect
actions that the ALCO might take in responding to or anticipating changes in
interest rates.   24 
   LIQUIDITY  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
usually 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 FHLB, Federal Reserve Bank, and
with broker-dealers.  The Companys short-term liquid
assets totaled $48,436,000 and $29,685,000 and at December 31, 2002 and 2001,
respectively. Short-term liquid assets as a percentage of total assets were
13.2% and 9.7%, respectively as of those dates.  In order to fund its liquidity
needs, the Bank maintains formal and informal borrowing arrangements with the
Federal Reserve Bank to meet unforeseen deposit outflows or seasonal loan
funding demands. The Bank has 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 December 31, 2002 and December 31, 2001, the Bank
had $15,000,000 and $0 outstanding on these lines, respectively. Liquidity is
also affected by collateral requirements of the Banks public deposit and
certain borrowings. Total pledged securities were $72,244,000 at December 31,
2002 and $50,808,000 at December 31, 2001.  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.  CAPITAL
RESOURCES  The Company and the Bank are
subject to requirements of the Federal Reserve Board (FRB) and FDIC,
respectively,  governing capital
adequacy. These regulations 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,
as defined by the regulations. 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
December 31, 2002, increased by $1,601,000 to $29,056,000 over December 31,
2001 total shareholdersequity of $27,455,000. The increase is attributed to
net income during 2002 of $3,911,000, an increase of $417,000 in the
accumulated other comprehensive income associated with the market value
adjustment on the Banks Available-for-Sale securities, an increase of $234,000
associated with stock options exercised, and a decrease of $40,000 to the
Banks guarantee of its Employee Stock Ownership debt. These increases to
shareholders equity were offset by cash dividends paid in the amount of
$944,000, cash paid in lieu of fractional shares related to the Companys 5%
stock dividend in the amount of $10,000, stock repurchase on the open market in
the amount of $140,000, and a stock tender offer in the amount of $1,907,000.
As can be seen by the following table, the Company and Bank exceeded all
regulatory capital ratios on December 31, 2002.   25 
   RISK
BASED CAPITAL RATIO As
of December 31, 2002 (Dollars
in thousands)  Company
  
  BankAmount
  
  Ratio
  
  Amount
  
  RatioTier
  1 and Total Capital RatiosTier 1 Capital
  
  $
  37,182
  
  14.0
  %
  $
  29,609
  
  11.2
  %Tier 1 Capital
  Minimum Requirement
  
  10,598
  
  4.0
  %
  10,584
  
  4.0
  %Excess
  
  $
  26,584
  
  10.0
  %
  $
  19,025
  
  7.2
  %Total Capital
  
  41,238
  
  15.6
  %
  32,956
  
  12.5
  %Total Capital
  Minimum Requirement
  
  21,196
  
  8.0
  %
  21,169
  
  8.0
  %Excess
  
  $
  20,042
  
  7.6
  %
  $
  11,787
  
  4.5
  %Risk-Adjusted
  Assets
  
  $
  264,950
  
  
  
  $
  264,609Leverage
  Capital RatioTier 1 Capital
  to Quarterly Average Total Assets
  
  $
  37,182
  
  10.5
  %
  $
  29,609
  
  8.4
  %Minimum Leverage
  Requirement
  
  14,162
  
  4.0
  %
  14,145
  
  4.0
  %Excess
  
  $
  23,020
  
  6.5
  %
  $
  15,464
  
  4.4
  %Total Quarterly
  Average Assets
  
  $
  354,057
  
  
  
  $
  353,621  Stock Repurchase Plan  On November 13, 2001, CIBs
Board of Directors approved a plan to repurchase, as conditions warrant, up to
5% of the Companys common stock on the open market. The duration of the plan
is open-ended and the timing of purchases is dependent upon market conditions.
During 2002, CIB purchased 7,419 shares of its own common stock pursuant to the
plan, which are the total shares repurchased since the plans inception. Under
California law, CIB must retire all repurchased shares.  Tender Offer  CIBs Board of Directors
approved a Dutch Auction Tender Offer to purchase up to 200,000 shares of its
outstanding common stock at a price per share of not less than $22.00 nor more
than $25.00 per share. The tender offer commenced on November 27, 2002 and
expired on December 30, 2002. Under this offer, CIB purchased 76,292 shares of
its common stock that were properly tendered at a price of $25.00 per share.
Due to restrictions from our transfer agent regarding 517 lost shares, 75,775
shares were actually retired in 2002, while the 517 shares were retired in
January 2003.  Shareholder Rights Plan  CIBs Board of Directors adopted
a Shareholder Rights Plan after careful consideration of its long-term business
strategy. Under the Rights Plan, Rights were distributed as a dividend at the
rate of one Right for each share of common stock held by shareholders of record
as of the close of business on December 2, 2002.  The Rights were distributed as a
non-taxable dividend on all shares of CIB Common Stock and expire ten years
from the date of adoption of the Rights Plan. The Rights will be exercisable
only if, and only after ten days from when, a person or group acquires 15
percent or more of CIBs Common Stock without direct negotiation with the
Companys Board of Directors who must amend the plan to permit any person or
group to acquire 15 percent or more of CIBs Common Stock.  The Rights will trade with CIBs
Common Stock and will not be exercisable unless and until ten days after a person
or group acquires 15 percent or more of CIBs Common Stock. The Companys Board
of Directors may terminate the Rights Plan and the Rights prior to that time
without the consent of, or compensation to, the holders of the Rights. A copy
of the Rights Plan is filed with the Securities and Exchange Commission.  Mandatorily Redeemable
Cumulative Trust Preferred Securities of Subsidiary Grantor Trust (Trust
Preferred Securities)  On October 29, 2002, the Company
issued $10,000,000 of Trust Preferred Securities. The issuance closed and
funded on that day and the proceeds from the sale of the securities will be
used for general corporate and strategic purposes. $1.9 million of the proceeds
were used to purchase shares from the Companys Dutch auction tender offer. A
complete description of the Trust Preferred Securities is in Note 9 of the
Notes to Consolidated Financial Statements.   26 
   INFLATION  It is Managements opinion that
the effects of inflation on the Companys financial statements for the years
ended December 31, 2002, 2001, and 2000 are not material.  SUPERVISION
AND REGULATION  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 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.  Corporate Reform Legislation  President George W. Bush signed
the Public Company Accounting Reform and Investor Protection Act of 2002 (the
Act) on July 30, 2002, which responds to recent issues in corporate
governance and accountability. Among other matters, key provisions of the Act
provide for:  Expanded
oversight of the accounting profession by creating a new independent oversight
board to be monitored by the SEC.  Revised
rules on auditor independence to restrict the nature of non-audit services
provided to audit clients and to require such services to be pre-approved by
the audit committee.  Improved
corporate responsibility through mandatory listing standards relating to audit
committees, certifications of periodic reports by the CEO and CFO, and makes it
a crime for an issuer to interfere with an audit.  Enhanced
financial disclosures, including periodic reviews for the largest issuers and
real time disclosure of material company information.  Enhanced
criminal penalties for a broad array of white-collar crimes and increases in
the statute of limitations for securities fraud lawsuits.  The effect of the Act upon
corporations is uncertain; however, it is likely that compliance costs may
increase as corporations modify procedures if required to conform to the
provisions of the Act. The Company does not currently anticipate that
compliance with the Act will have a material effect upon its financial position
or results of its operations or its cash flows.  USA Patriot Act of 2001  President Bush signed the USA
Patriot Act of 2001 (Patriot Act) on October 26, 2001. This legislation was
enacted in response to the terrorist attacks in New York, Pennsylvania, and
Washington, D.C. on September 11, 2001. The Patriot Act is intended to
strengthen U.S. law enforcement and the intelligence communities ability to
work together to combat terrorism on a variety of levels. The potential impact
of the Patriot Act on financial institutions is significant and wide ranging.
The Patriot Act contains sweeping anti-money laundering and financial
transparency laws and requires various regulations, including:  1)Due
diligence requirements for financial institutions that administer, maintain, or
manage private bank accounts or correspondent accounts for non-U.S. persons.  2)Standards
for verifying customer identification at account opening.  3)Rules
to promote cooperation among financial institutions, regulators, and law
enforcement entities to assist in the identification of parties that may be
involved in terrorism or money laundering.  4)Reports
to be filed by nonfinancial trades and business with the Treasury Departments
Financial Crimes Enforcement Network for transactions exceeding $10,000.  5)The
filing of suspicious activities reports by securities brokers and dealers if
they believe a customer may be violating U.S. laws and regulations.  Until all new regulations, rules
or standards have been developed, the Company is not able to predict the impact
of the new laws and regulations on its financial condition or results of
operations.   27 
   EFFECTS
OF TERRORISM  The terrorist acts of September
11, 2001, and thereafter, has had significant adverse effects upon the United
States economy. It is uncertain whether and to what extent, if any, future
terrorist activities, and the response of the United States and its allies in
combating terrorism on a worldwide basis will adversely impact the Company.
Such events, however, have had, and may continue to have, an adverse effect on
the economy in the Companys market areas. Such continued economic
deterioration could adversely affect the Companys future results of operations
by, among other matters, reducing the demand for the Banks loans and other
products, increasing nonperforming loans and the amounts reserved for loan
losses, and causing a decline in the Companys stock price.  CHANGES
IN SENIOR MANAGEMENT  On May 9, 2002, President and
Chief Executive Officer Larry D. Hartwig retired from his officer and board of
directors positions with CIB and the Bank, effective May 10, 2002. The Board
of Directors appointed Director John I. Jelavich to serve as interim President
and Chief Executive Officer for CIB and the Bank. On July 16, 2002, Mr.
Jelavich accepted a permanent appointment to these positions.  President and Chief Executive
Officer Jelavich brings more than thirty years of banking experience to his
positions. From 1988 to 1998, Mr. Jelavich served as the Regional Vice
President for Union Bank of Californias Mid Valley Region. From 1999 through
February of 2000, Mr. Jelavich served as a consultant to the president and
chief executive officer of the Bank. He has served on the Boards of Directors
of CIB and the Bank since March of 2000.  On March 11, 2002, Chief
Financial Officer and Corporate Secretary, Robert J. Lampert, submitted his
resignation, effective March 25, 2002, from all positions held with CIB and the
Bank. On March 25, 2002, the Board announced that Kevin R. Watson accepted the
positions of Chief Financial Officer and Corporate Secretary for CIB and the
Bank.  Chief Financial Officer and
Corporate Secretary, Kevin R. Watson, accepted the positions after serving as
the Controller for the Bank. In June of 2002, he was named Senior Vice
President. Mr. Watson came to the Bank in 2001 with more than twelve years of
business experience.  On October 15, 2002, the Board
announced that Steven P. Olin was promoted to Senior Vice President, Regional
Lending Manager. Mr. Olin joined the Bank in 1998 and has twenty-one years of
experience in commercial banking in the Northern Sacramento Valley. Mr. Olins
primary responsibilities include production of loans, deposits, and customer
relationship management for commercial and agricultural clients in Yuba,
Sutter, and Colusa counties.  CHANGE
IN ACCOUNTANTS  On March 28, 2002, the Company
decided not to renew the engagement of Arthur Andersen LLP (Andersen) and
appointed Perry-Smith LLP (Perry-Smith) as its new independent public
accountant, effective on such date. This determination followed the Companys
decision to seek proposals from independent public accountants to audit the
Companys financial statements for the fiscal year ending December 31, 2002.  The decision not to renew the
engagement of Andersen and to retain Perry-Smith was approved by CIBs Board of
Directors upon the recommendation of its Audit Committee. The decision was
based on proposals from national and regional accounting firms and reflected
the Audit Committees judgment as to which firm was best suited to deliver
external audits to the Company in light of relevant factors such as the firms
depth of experience, breadth of resources, commitment to provide exceptional
service, ability to handle transition issues, and location of key personnel.   28 
   INDEPENDENT AUDITOR'S REPORT  The Shareholders
and Board of Directors California
Independent Bancorp and Subsidiaries  We have audited the accompanying
consolidated balance sheet of California Independent Bancorp and Subsidiaries
(the Company) as of December 31, 2002 and the related consolidated statements
of income, changes in shareholders equity and cash flows for the year then
ended. These consolidated financial statements are the responsibility of the
Companys management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit. The consolidated
financial statements of the Company as of December 31, 2001 and for each of the
years in the two-year period then ended were audited by other auditors who have
ceased operations. Those auditors expressed an unqualified opinion, before
restatement, on those financial statements in their report dated February 14,
2002.  We conducted our audit in
accordance with auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.  In our opinion, the consolidated
financial statements referred to above present fairly, in all material
respects, the consolidated financial position of California Independent Bancorp
and Subsidiaries as of December 31, 2002 and the consolidated results of their
operations and their cash flows for the year then ended, in conformity with
accounting principles generally accepted in the United States of America.  As discussed above, the
consolidated financial statements of California Independent Bancorp and
Subsidiaries as of December 31, 2001 and for each of the years in the two-year
period then ended were audited by other auditors who have ceased operations. As
described in Note 18, these consolidated financial statements have been
restated to increase previously reported shareholdersequity. We audited the
adjustment described in Note 18 that was applied to restate the 2001
consolidated financial statements. In our opinion, such adjustment is
appropriate and has been properly applied. However, we were not engaged to
audit, review, or apply any procedures to the 2001 consolidated financial
statements of the Company other than with respect to such adjustment and,
accordingly, we do not express an opinion or any other form of assurance on the
2001 consolidated financial statements taken as a whole.    Sacramento,
California February 14, 2003   29 
   CALIFORNIA
INDEPENDENT BANCORP AND SUBSIDIARIESCONSOLIDATED BALANCE
SHEETSAS OF DECEMBER 31, 2002 AND 2001 (DOLLARS IN THOUSANDS EXCEPT
SHARE DATA)  2002
  
  2001ASSETSCash and Due
  From Banks
  
  $
  21,801
  
  $
  17,747Federal Funds
  Sold
  
  18,245
  
  5,300Cash and Cash
  Equivalents
  
  40,046
  
  23,047Investment
  Securities Held-to-Maturity (Note 2)
  
  2,265
  
  3,604Investment
  Securities Available-for-Sale (Note 2)
  
  97,974
  
  74,392Total
  Investments
  
  100,239
  
  77,996Loans and Leases
  (Notes 3, 10 and 15)
  
  214,428
  
  192,281Less: Allowance
  for Loan and Lease Losses (Note 3)
  
  (6,532
  )
  (5,498
  )Net Loans and
  Leases
  
  207,896
  
  186,783Premises and
  Equipment, Net (Note 4)
  
  6,731
  
  6,937Interest
  Receivable
  
  2,070
  
  2,091Other Real
  Estate Owned
  
  
  
  542Cash Surrender
  Value of Insurance Policies
  
  6,239
  
  5,108Deferred Taxes
  (Note 8)
  
  1,594
  
  1,458Other Assets
  (Note 5)
  
  2,268
  
  2,680Total Assets
  
  $
  367,083
  
  $
  306,642LIABILITIES
  AND SHAREHOLDERS' EQUITYDeposits (Note
  6):Noninterest-Bearing
  
  $
  75,381
  
  $
  69,968Interest-Bearing
  
  231,345
  
  205,608Total Deposits
  
  306,726
  
  275,576Interest Payable
  
  1,407
  
  1,247Federal Home
  Loan Bank Borrowings (Note 7)
  
  15,000
  
  Other Borrowings
  (Note 13)
  
  80
  
  120Mandatorily
  Redeemable Cumulative Trust Preferred Securities of Subsidiary Grantor Trust
  (Note 9)
  
  10,000
  
  Other
  Liabilities
  
  4,814
  
  2,244Total
  Liabilities
  
  338,027
  
  279,187Commitments and
  Contingencies (Note 10)SHAREHOLDERS'
  EQUITY (Notes 11 and 12):Common Stock, No
  Par ValueShares Authorized 20,000,000, Shares Issued and Outstanding
  2,152,751 in 2002 and 2,115,419 in 2001
  
  22,600
  
  22,322Retained
  Earnings
  
  5,589
  
  4,723Debt Guarantee
  of ESOP
  
  (80
  )
  (120
  )Accumulated
  Other Comprehensive Income (Notes 2 and 16)
  
  947
  
  530Total
  Shareholders Equity
  
  29,056
  
  27,455Total
  Liabilities and ShareholdersEquity
  
  $
  367,083
  
  $
  306,642  The accompanying notes are an
integral part of these consolidated financial statements.   30 
   CALIFORNIA INDEPENDENT BANCORP AND
SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONSFOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)  2002
  
  2001
  
  2000INTEREST
  INCOMEInterest and
  Fees on Loans and Leases
  
  $
  15,754
  
  $
  16,434
  
  $
  16,562Interest on
  InvestmentsTaxable Interest
  Income
  
  5,022
  
  4,347
  
  5,815Nontaxable
  Interest Income
  
  66
  
  93
  
  119Interest on
  Federal Funds Sold
  
  78
  
  484
  
  630Total Interest
  Income
  
  20,920
  
  21,358
  
  23,126INTEREST
  EXPENSEInterest on
  Deposits (Note 6)
  
  4,450
  
  6,902
  
  8,956Interest on
  Other Borrowings (Notes 7 and 9)
  
  706
  
  120
  
  514Total Interest
  Expense
  
  5,156
  
  7,022
  
  9,470Net Interest
  Income
  
  15,764
  
  14,336
  
  13,656PROVISION
  FOR LOAN AND LEASE LOSSES(Note 3)
  
  550
  
  2,450
  
  200Net Interest
  Income After Provision for Loan and Lease Losses
  
  15,214
  
  11,886
  
  13,456NONINTEREST
  INCOMEService Charges
  on Deposit Accounts
  
  1,271
  
  1,083
  
  1,009Brokered Loan
  Fees
  
  172
  
  158
  
  112Loan Servicing
  Fees
  
  298
  
  366
  
  489Other (Note 14)
  
  988
  
  697
  
  1,134Total
  Noninterest Income
  
  2,729
  
  2,304
  
  2,744NONINTEREST
  EXPENSESalaries and
  Employee Benefits (Notes 3 and 13)
  
  6,664
  
  6,887
  
  6,133Occupancy
  Expense (Notes 4 and 10)
  
  820
  
  822
  
  726Furniture and
  Equipment Expense (Note 4)
  
  1,261
  
  1,171
  
  1,170Other (Note 14)
  
  3,189
  
  3,314
  
  3,777Total
  Noninterest Expense
  
  11,934
  
  12,194
  
  11,806Income Before
  Provision for Income Taxes
  
  6,009
  
  1,996
  
  4,394PROVISION
  FOR INCOME TAXES (Note 8)
  
  2,098
  
  587
  
  1,675NET
  INCOME
  
  $
  3,911
  
  $
  1,409
  
  $
  2,719PER
  SHARE AMOUNTSBasic Earnings
  Per Share (Note 11)
  
  $
  1.76
  
  $
  0.64
  
  $
  1.23Diluted Earnings
  Per Share (Note 11)
  
  1.74
  
  0.62
  
  1.23Cash Dividends
  Per Common Share
  
  0.42
  
  0.40
  
  0.38  The accompanying notes are an
integral part of these consolidated financial statements.   31 
   CALIFORNIA INDEPENDENT BANCORP AND
SUBSIDIARIESCONSOLIDATED STATEMENTS OF
CHANGES IN SHAREHOLDERS' EQUITYFOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)  Common Stock
  
  Retained
  
  Earnings
  
  Debt
  Guarantee
  of ESOP
  
  Accumulated
  Other
  Comprehensive
  Income (Loss)
  
  TotalShares
  
  AmountBALANCE
  DECEMBER 31, 1999 AS PREVIOUSLY REPORTED
  
  1,904,618
  
  $
  17,951
  
  $
  6,233
  
  $
  
  
  $
  (949
  )
  $
  23,235Prior Period
  Adjustment (Note 18)
  
  
  
  
  
  242
  
  
  
  
  
  242BALANCE
  DECEMBER 31, 1999 RESTATED
  
  1,904,618
  
  $
  17,951
  
  $
  6,475
  
  
  
  $
  (949
  )
  $
  23,477Comprehensive
  Income (Note 16):Net Income
  
  
  
  
  
  2,719
  
  
  
  
  
  2,719Other
  Comprehensive Income, Net of Tax:Net Unrealized
  Investment Gains
  
  
  
  
  
  
  
  
  
  705
  
  705Comprehensive
  Income
  
  
  
  
  
  
  
  
  
  
  
  3,424ESOP Debt
  Guarantee
  
  
  
  
  
  
  
  (200
  )
  
  
  (200
  )Reduction of ESOP
  Debt
  
  
  
  
  
  
  
  40
  
  
  
  405% Stock Dividend
  With Cash Paid in Lieu of Fractional Shares
  
  94,881
  
  1,830
  
  (1,838
  )
  
  
  
  
  (8
  )Options Exercised
  
  14,695
  
  103
  
  
  
  
  
  
  
  103Shares
  Surrendered From Exercise of Options
  
  (5,228
  )
  (33
  )
  
  
  
  
  
  
  (33
  )Tax Benefit
  Arising From Exercise of Nonqualified Stock Options and Disqualifying
  Dispositions
  
  
  
  59
  
  
  
  
  
  
  
  59Cash Dividends
  
  
  
  
  
  (850
  )
  
  
  
  
  (850
  )BALANCE
  DECEMBER 31, 2000, RESTATED
  
  2,008,966
  
  $
  19,910
  
  $
  6,506
  
  $
  (160
  )
  $
  (244
  )
  $
  26,012Comprehensive
  Income (Note 16):Net Income
  
  
  
  
  
  1,409
  
  
  
  
  
  1,409Other
  Comprehensive Income, Net of Tax:Net Unrealized
  Investment Gains
  
  
  
  
  
  
  
  
  
  774
  
  774Comprehensive
  Income
  
  
  
  
  
  
  
  
  
  
  
  2,183Reduction of ESOP
  Debt
  
  
  
  
  
  
  
  40
  
  
  
  405% Stock Dividend
  With Cash Paid in Lieu of Fractional Shares
  
  99,957
  
  2,285
  
  (2,297
  )
  
  
  
  
  (12
  )Options Exercised
  
  6,724
  
  116
  
  
  
  
  
  
  
  116Shares
  Surrendered From Exercise of Options
  
  (228
  )
  (5
  )
  
  
  
  
  
  
  (5
  )Tax Benefit
  Arising From Exercise of Nonqualified Stock Options and Disqualifying
  Dispositions
  
  
  
  16
  
  
  
  
  
  
  
  16Cash Dividends
  
  
  
  
  
  (895
  )
  
  
  
  
  (895
  )BALANCE
  DECEMBER 31, 2001, RESTATED
  
  2,115,419
  
  $
  22,322
  
  $
  4,723
  
  $
  (120
  )
  $
  530
  
  $
  27,455Comprehensive
  Income (Note 16):Net Income
  
  
  
  
  
  3,911
  
  
  
  
  
  3,911Other
  Comprehensive Income, Net of Tax:Net Unrealized
  Investment Gains
  
  
  
  
  
  
  
  
  
  417
  
  417Comprehensive
  Income
  
  
  
  
  
  
  
  
  
  
  
  4,328Reduction of ESOP
  Debt
  
  
  
  
  
  
  
  40
  
  
  
  405% Stock Dividend
  With Cash Paid in Lieu of Fractional Shares
  
  105,405
  
  2,091
  
  (2,101
  )
  
  
  
  
  (10
  )Options Exercised
  
  15,121
  
  189
  
  
  
  
  
  
  
  189Repurchase of
  Common Stock
  
  (7,419
  )
  (140
  )
  
  
  
  
  
  
  (140
  )Shares Retired
  from Tender Offer
  
  (75,775
  )
  (1,907
  )
  
  
  
  
  
  
  (1,907
  )Tax Benefit
  Arising From Exercise of Nonqualified Stock Options and Disqualifying
  Dispositions
  
  
  
  45
  
  
  
  
  
  
  
  45Cash Dividends
  
  
  
  
  
  (944
  )
  
  
  
  
  (944
  )BALANCE
  DECEMBER 31, 2002
  
  2,152,751
  
  $
  22,600
  
  $
  5,589
  
  $
  (80
  )
  $
  947
  
  $
  29,056  The accompanying notes are an
integral part of these consolidated financial statements.   32 
   CALIFORNIA INDEPENDENT BANCORP AND
SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
(DOLLARS IN THOUSANDS)  2002
  
  2001
  
  2000CASH
  FLOWS FROM OPERATING ACTIVITIESNet Income
  
  $
  3,911
  
  $
  1,409
  
  $
  2,719Adjustments to
  Reconcile Net Income to Net CashProvided by
  Operating Activities:Depreciation and
  Amortization
  
  979
  
  920
  
  997Provision for
  Losses on Other Real Estate Owned
  
  
  
  
  
  140Provision for
  Loan and Lease Losses
  
  550
  
  2,450
  
  200Provision for
  Deferred Taxes
  
  
  
  
  
  832Gain on Sale of
  Loans and Leases, Net
  
  (6
  )
  
  
  Loss on Disposal
  of Investment Securities
  
  55
  
  
  
  Gain on Sale of
  Other Real Estate Properties, Net
  
  (143
  )
  (14
  )
  (292
  )(Gain) Loss on
  Sale of Premises and Equipment
  
  (14
  )
  24
  
  (19
  )(Increase)
  Decrease in Assets:Interest
  Receivable
  
  21
  
  748
  
  443Deferred Taxes
  
  (478
  )
  475
  
  761Cash Surrender
  Value of Insurance Policies
  
  (251
  )
  (238
  )
  (222
  )Income Tax
  Receivable
  
  979
  
  (915
  )
  176Net Assets From
  Discontinued Operations
  
  
  
  63
  
  (338
  )Other Assets
  
  (567
  )
  433
  
  (1,229
  )Increase
  (Decrease) in Liabilities:Interest Payable
  
  160
  
  (633
  )
  346Deferred
  Compensation Payable
  
  480
  
  304
  
  178Other
  Liabilities
  
  2,135
  
  (297
  )
  (193
  )Net Cash
  Provided By Operating Activities
  
  $
  7,811
  
  $
  4,729
  
  $
  4,499CASH
  FLOWS FROM INVESTING ACTIVITIESNet Increase in
  Loans and Leases
  
  (21,815
  )
  (16,220
  )
  (18,941
  )Purchase of
  Securities Available-for-Sale
  
  (46,219
  )
  (43,441
  )
  (16,046
  )Proceeds From
  Maturity of Securities Held-to-Maturity
  
  520
  
  1,580
  
  10,712Proceeds From
  Sales, Maturities and Calls of Securities Available-for-Sale
  
  24,160
  
  46,923
  
  11,026Proceeds From
  Sales of Other Real Estate Owned
  
  843
  
  154
  
  1,092Purchases of
  Premises and Equipment, Net
  
  (759
  )
  (901
  )
  (614
  )Purchase of Life
  Insurance Policies
  
  (880
  )
  
  
  Net Cash Used
  for Investing Activities
  
  $
  (44,150
  )
  $
  (11,905
  )
  $
  (12,771
  )CASH
  FLOWS FROM FINANCING ACTIVITIESNet Increase in
  Noninterest-Bearing Deposits
  
  5,413
  
  5,972
  
  3,512Net Increase
  (Decrease) in Interest-Bearing Deposits
  
  25,737
  
  1,972
  
  (9,339
  )Net Increase
  (Decrease) in Borrowed Funds
  
  15,000
  
  (4,000
  )
  4,000Proceeds From
  Mandatorily Redeemable Cumulative Trust Preferred Securities
  
  10,000
  
  
  
  Repurchase of
  Common Stock
  
  (2,047
  )
  
  
  Cash Dividends
  
  (944
  )
  (895
  )
  (850
  )Stock Options
  Exercised
  
  189
  
  127
  
  129Cash Paid in
  Lieu of Fractional Shares
  
  (10
  )
  (12
  )
  (8
  )Net Cash
  Provided by (Used For) Financing Activities
  
  $
  53,338
  
  $
  3,164
  
  $
  (2,556
  )Net Increase
  (Decrease) in Cash and Cash Equivalents
  
  $
  16,999
  
  $
  (4,012
  )
  $
  (10,828
  )Cash and Cash
  Equivalents, Beginning of Year
  
  $
  23,047
  
  $
  27,059
  
  $
  37,887Cash and Cash
  Equivalents, End of Year
  
  $
  40,046
  
  $
  23,047
  
  $
  27,059SUPPLEMENTAL
  DISCLOSURES OF CASH FLOW INFORMATIONCash Paid During
  the Year for:Interest Expense
  
  $
  4,996
  
  $
  7,656
  
  $
  9,124Income Taxes
  
  1,173
  
  730
  
  1,375SUPPLEMENTAL
  DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIESDebt Guarantee
  of ESOP
  
  (40
  )
  (40
  )
  160Net Unrealized
  Gain On Securities Held as Available-for-Sale (Net of Taxes)
  
  417
  
  774
  
  705Tax Benefit
  Arising From Exercise of Nonqualified Stock Options and Disqualifying
  Dispositions
  
  45
  
  16
  
  59Stock Dividends
  
  2,091
  
  2,285
  
  1,830Increase in
  Other Real Estate Owned as a Result of Foreclosure
  
  158
  
  278
  
    The accompanying notes are an
integral part of these consolidated financial statements.   33 
  CALIFORNIA
INDEPENDENT BANCORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  1SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES  The accounting and reporting
policies of California Independent Bancorp and its Subsidiaries (the Company)
conform with accounting principles generally accepted in the United States of
America and general practice within the banking industry. The more significant
of these policies applied in the preparation of the accompanying financial
statements are discussed below.  General  California Independent Bancorp
(CIB) is a California corporation and the holding company for Feather River
State Bank (the Bank), located in Yuba City, California. The Bank was
incorporated as a California state banking corporation on December 1, 1976, and
commenced operations on April 6, 1977. CIB was incorporated on October 28, 1994,
and became the holding company for the Bank on May 2, 1995. The Bank engages in
a broad range of financial services activities, and its primary market is
located in the Sacramento Valley, with a total of nine branches. The main
source of income for the Bank is from lending activities, including commercial,
agricultural, real estate, consumer, and installment loans and leases. CIB
formed a nonbank subsidiary, CIB Capital Trust, for the sole purpose of issuing
trust preferred securities on October 2, 2002.  Principles of Consolidation  The consolidated financial
statements include the accounts of CIB and its wholly-owned subsidiaries,
Feather River State Bank, E.P.I. Leasing Company, Inc. (EPI) and CIB Capital
Trust. Significant intercompany transactions and balances have been eliminated
in consolidation.  Use of Estimates  The preparation of consolidated
financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates
and assumptions. These estimates and assumptions affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the consolidated financial statements and the reported amounts of
income and expenses during the reporting period. Actual results could differ
from those estimates.  Material estimates that are
particularly susceptible to significant changes in the near-term relate to the
determination of the allowance for loan and lease losses and the valuation of
real estate acquired in connection with foreclosures or in satisfaction of
loans. In connection with the determination of the allowance for loan and lease
losses and other real estate, management obtains independent appraisals for
significant properties, evaluates the overall loan and lease portfolio
characteristics and delinquencies and monitors economic conditions.  Cash and Cash Equivalents  For the purpose of reporting the
statement of cash flows, cash and cash equivalents include cash on hand,
amounts due from banks, and Federal funds sold. Generally, Federal funds are
sold for one-day periods.  Investment Securities  Investments are classified into
the following categories:  Available-for-sale
securities, reported at fair value, with unrealized gains and losses excluded
from earnings and reported,  net of
taxes, as accumulated other comprehensive income within shareholders equity.  Held-to-maturity
securities, which management has the positive intent and ability to hold to
maturity, are reported at amortized cost, adjusted for the accretion of
discounts and amortization of premiums.  Management determines the
appropriate classification of its investments at the time of purchase and may
only change the classification in certain limited circumstances. All transfers
between categories are accounted for at fair value.  Gains or losses on the sale of
investment securities are computed on the specific identification method.
Interest earned on investment securities is reported in interest income, net of
applicable adjustments for accretion of discounts and amortization of premiums.
In addition, unrealized losses that are other than temporary are recognized in
earnings for all investments.  Loans and Leases  Loans and leases are stated at the
principal amount outstanding less applicable unearned interest income. Interest
is accrued daily based upon outstanding loan and lease balances. However, when,
in the opinion of management, loans and leases are considered to be impaired
and the future collectibility of interest and principal is unlikely, loans and
leases are placed on nonaccrual status and the accrual of interest income is
suspended. Any interest accrued but unpaid is charged against income. Payments
received are applied to reduce the principal balance until collectibility of
the remaining principal and interest can be reasonably assured. Subsequent
payments on these loans and leases, or payments received on nonaccrual loans or
leases for which the ultimate collectibility of principal is not in doubt, are
applied first to earned but unpaid interest and then to principal.  A loan or lease is considered
impaired when, based on current information and events, it is probable that the
Company will be unable to collect all amounts due (including both principal and
interest) in accordance with the contractual terms of the loan or lease
agreement. An impaired loan or lease is measured based on the present value of
expected future cash flows discounted at the loan or leases effective interest
rate or, as a practical matter, at the loan or leases observable market price
or the fair value of collateral if the loan or lease is collateral dependent.  34 
   Interest and Fees on Loans and
Leases  Origination fees and commitment
fees, offset by certain direct loan and lease origination costs, are deferred
and recognized over the contractual life of the loan as a yield adjustment.
Interest income on loans and direct lease financing is accrued monthly as earned
on all credits not classified as nonaccrual. Unearned income on loans or
leases, where applicable, is recognized as income using the effective interest
method over the term of the loan or lease.  Loans and leases are generally
placed on nonaccrual status when the timely collection of future interest or
principal becomes uncertain, when they are 90 days past due as to either
interest or principal, or are otherwise determined to be impaired. At that
time, any accrued but uncollected interest is reversed, and additional income
is recorded on a cash basis as payments are received. However, loans and leases
that are well-secured and in the process of collection may not be placed on
nonaccrual status, at the discretion of Management. A nonaccrual loan or lease
may be restored to an accrual basis when interest and principal payments are
current and prospects for future payments are no longer in doubt.  Allowance for Loan and Lease
Losses  The allowance for loan and lease
losses (ALLL) is maintained to cover probable credit losses related to
specifically identified loans as well as probable credit losses inherent in the
remainder of the loan portfolio that have been incurred as of the balance sheet
date. The provision for loan and lease losses is charged to operating income in
sufficient amounts to maintain the allowance for loan and lease losses at an
adequate level at the balance sheet date. Actual credit losses for loans and
leases, which may be for all or part of a particular loan or lease, are
deducted from the allowance and the related loan or lease balances are
charged-off in the period in which the balances are deemed uncollectible.
Recoveries of loans previously charged-off are added to the allowance when
received.  Management employs a methodology
for estimating the allowance for loan and lease losses that is consistent with
recognition principles related to loss contingencies and the measurement of
loan impairment as well as regulatory guidance promulgated by the FDIC.
Managements methodology considers a number of quantitative and qualitative
factors that may influence the Companys ultimate loan and lease losses.
Significant quantitative factors include the amount and type of loans and
leases outstanding, the level of classified loans, historical loss rates and
the level of impaired loans. Significant qualitative factors include recent
examination findings by regulators and internal credit examiners, trends in
loan concentrations,  delinquencies,
local economic conditions and the relative strengths or weaknesses of the
credit management function.  Management believes the
allowance for loan and lease losses is adequate at December 31, 2002; however,
ultimate losses may vary from their estimates. These estimates are reviewed
periodically, and as adjustments become necessary, they are reported in
earnings during the periods they become known. In addition, the FDIC and the
California Department of Financial Institutions, as an integral part of their
examination process, review the allowance for loan and lease losses. These
agencies may require additions to the allowance for loan and lease losses based
on their judgment about information available at the time of their
examinations.  Sales and Servicing of SBA Loans  The Bank originates loans to
customers under the Small Business Administration (SBA) program that
generally provides for SBA guarantees of 70% to 90% of each loan. The Bank
usually maintains these loans in its portfolio, but occasionally sells the
guaranteed portion of each loan to a third party and retains the unguaranteed
portion in its own portfolio. The Bank may be required to refund a portion of
the sales premium received, if the borrower defaults or the loan prepays within
90 days of the settlement date. At December 31, 2002, the Bank had received no
premiums subject to such recourse. A gain is recognized on the sale of SBA
loans through collection on sale of a premium over the adjusted carrying value,
through retention of an ongoing rate differential (less adequate compensation
for servicing the loan) between the rate paid by the borrower to the buyer and
the rate paid by the Bank to the purchaser, or both.  Servicing rights acquired
through 1) a purchase or 2) the origination of loans which are sold or
securitized with servicing rights retained are recognized as separate assets or
liabilities. Servicing assets or liabilities are recorded at the difference
between the contractual servicing fees and adequate compensation for performing
the servicing, and are subsequently amortized in proportion to and over the
period of the related net servicing income or expense. Servicing assets are
periodically evaluated for impairment. Servicing assets were not considered
material for disclosure purposes.  Bank Premises and Equipment  Bank premises and equipment are
stated at cost, less accumulated depreciation. Depreciation on premises,
furniture, fixtures, and equipment is calculated using the straight-line method
over the estimated useful lives of the assets, which range from 3 to 31.5
years. Leasehold improvements are amortized using the straight-line method over
the assets useful life or the term of the lease, whichever is shorter. When
assets are sold or otherwise disposed of, the cost and related accumulated
depreciation are removed from the accounts, and any resulting gain or loss is
recognized in income for the period. Expenditures for major renewals and
improvements of bank premises and equipment are capitalized, and those for
maintenance and repairs are charged to expense as incurred.   35 
   Other Real Estate Owned  Other real estate owned (OREO)
represents properties acquired by the Bank in full or partial payment
settlement of loan obligations. At the time the property is acquired, if the estimated
fair value is less than the amount outstanding on the loan,  the difference is charged against the
allowance for loan and lease losses. Subsequent declines in estimated fair
value, if any,  are charged to expense.
At December 31, 2002, no other real estate owned was held. At December 31,
2001, $542, 000 was held as other real estate owned.  Salary Continuation Plans  The Company negotiated salary
continuation agreements with five key executives (including former executives),
or their designated beneficiaries, with annual benefits for a specified number
of years after retirement or death. These benefits are substantially equivalent
to those available under insurance policies purchased by the Company on the
lives of the executives. The Company accounts for these future benefits as
deferred compensation agreements. The cost of these benefits is accrued over
the period of the employees service in a systematic and rational manner. At
the balance sheet date, the amount of accrued benefits equals the then present
value of the benefits expected to be provided to the employee, any
beneficiaries, and covered dependents in exchange for the employees service to
that date.  Income Taxes  The Company files its income
taxes on a consolidated basis with its subsidiary. The allocation of income tax
expense (benefit) represents each entitys proportionate share of the
consolidated provision for income taxes.  Deferred tax assets and
liabilities are recognized for the tax consequences of temporary differences
between the reported amounts of assets and liabilities and their tax basis.
Deferred tax assets and liabilities are adjusted for the effects of changes in
tax laws and rates on the date of enactment.  Stock-Based Compensation  At December 31, 2002, the Company
has three stock-based employee compensation plans, the Feather River State Bank
1989 Amended and Restated Stock Option Plan, the California Independent Bancorp
1996 Stock Option Plan, and the California Independent Bancorp 2000 Stock
Option Plan (the Plans) which are described more fully in Note 11. The
Company accounts for the Plans under the recognition and measurement principles
of APB Opinion No.25, Accounting for Stock Issued to Employees, and related
Interpretations. No stock-based employee compensation cost is reflected in net
income, as all options granted under the Plans had an exercise price equal to
the market value of the underlying common stock on the date of grant.  For purposes of pro forma
disclosures, the estimated fair value of stock-based compensation plans and
other options is amortized to expense primarily over the vesting period. The
following table illustrates the effect on net income and earnings per share if
the Company had applied the fair value recognition provisions of FASB Statement
No.123, Accounting for Stock-Based Compensation, to stock-based employee
compensation.  (Dollars
  in thousands, except share data)
  
  2002
  
  2001
  
  2000Net Income, As
  Reported
  
  $
  3,911
  
  $
  1,409
  
  $
  2,719Deduct Total
  Stock-Based Employee Compensation Expense Determined Under the Fair Value
  Based Method for all Awards, Net of Related Tax Effects
  
  (334
  )
  (75
  )
  (51
  )Pro Forma Net
  Income
  
  $
  3,577
  
  $
  1,334
  
  $
  2,668Basic Earnings
  Per Share:As Reported
  
  $
  1.76
  
  $
  0.64
  
  $
  1.23Pro Forma
  
  $
  1.61
  
  $
  0.60
  
  $
  1.21Diluted Earnings
  Per Share:As Reported
  
  $
  1.74
  
  $
  0.62
  
  $
  1.23Pro Forma
  
  $
  1.59
  
  $
  0.59
  
  $
  1.21  As required, the pro forma
disclosures above include options granted since January 1, 1995. Consequently,
the effects of applying FASB Statement No.123 for providing pro forma
disclosures may not be representative of the effects on reported net income for
future years until all options outstanding are included in the pro forma
disclosures.   36 
   The fair value of each option is
estimated on the date of grant using an option-pricing model with the following
assumptions:  2002
  
  2001
  
  2000Weighted Average
  Fair Value of Options Granted
  
  $
  5.93
  
  $
  8.88
  
  $
  7.70Dividend Yield
  
  2.24
  %
  1.78
  %
  2.13
  %Expected
  Volatility
  
  30.24
  %
  30.77
  %
  30.77
  %Risk-Free
  Interest Rate
  
  3.61
  %
  4.96
  %
  6.08
  %Expected Option
  Life
  
  7.50 Years
  
  7.50 Years
  
  7.50 Years  Earnings Per Share  Basic earnings per share (EPS),
which excludes dilution, is computed by dividing income available to common
shareholders by the weighted-average number of common shares outstanding for
the period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock, such as stock options,
result in the issuance of common stock which shares in the earnings of the
Company. All data with respect to computing earnings per share is retroactively
adjusted to reflect stock dividends and the treasury stock method is applied to
determine the dilutive effect of stock options in computing diluted EPS.  Comprehensive Income  Comprehensive income is reported
in addition to net income for all periods presented. Comprehensive income is a
more inclusive financial reporting methodology that includes disclosure of
other comprehensive income or loss that historically has not been recognized in
the calculation of net income. Unrealized gains and losses on the Companys
available-for-sale investment securities are included in other comprehensive
income or loss. Total comprehensive income or loss and the components of
accumulated other comprehensive income or loss are presented in the Consolidated
Statements of Changes in Shareholders Equity.  Reclassifications  Certain reclassifications have
been made to amounts previously reported to conform with current presentation
methods. Such reclassifications have no effect on net income or shareholdersequity
previously reported.  Financial Accounting
Pronouncements  In July 2001, the Financial
Accounting Standards Board (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. On January 1, 2002, the
Company adopted SFAS No. 141 and SFAS No. 142. Management does not believe that
these Statements had a material impact on the Companys consolidated financial
position or results of operations.  In October 2002, the FASB issued
SFAS No. 147, Acquisitions of Certain Financial Institutions(SFAS No. 147).
This Statement, which addresses financial accounting and reporting matters for
the acquisition of all or part of a financial institution, applies to all such
transactions except those between two or more mutual enterprises. This
statement removes acquisitions of financial institutions, other than
transactions between two or more mutual enterprises, from the scope of SFAS No.
72, Accounting for Certain Acquisitions of Banking or Thrift Institutions,
and related interpretations. This Statement requires a financial institution to
apply SFAS No. 144 and evaluate long-term customer relationship intangible
assets (core deposit intangible) for impairment. Under SFAS No. 72, a financial
institution may have recorded an unidentifiable intangible asset arising from a
business combination. If certain criteria in SFAS No. 147 are met, the amount
of the unidentifiable intangible asset will be reclassified to goodwill upon
adoption of this Statement and any amortization amounts that were incurred
after the adoption of SFAS No. 142 must be reversed. Reclassified goodwill
would then be measured for impairment under the provisions of SFAS No. 142.
Provisions of this Statement are applicable on or after October 1, 2002. In
Managements opinion, the adoption of this Statement did not have a material
effect on the Companys consolidated financial position or results of
operations.  In December 2002, the FASB issued
SFAS No. 148, Accounting for Stock-Based Compensation-Transition and
Disclosure-an amendment of FASB Statement No. 123(SFAS No. 148). This
Statement amends SFAS No. 123, 
Accounting for Stock-Based Compensation(SFAS No. 123), to provide
alternative methods of transition for a voluntary change to the fair value
based method of accounting for stock-based employee compensation. In addition,
this statement amends the disclosure requirements of SFAS No. 123 to require
prominent disclosures in both annual and interim financial statements about the
method of accounting for stock-based employee compensation and the effect of
the method used on reported results. The transition guidance and annual
disclosure provisions of SFAS No. 148 are effective for fiscal years ending
after December 15, 2002. The interim disclosure provisions are effective for
financial reporting containing financial statements for interim periods
beginning after December 15, 2002. Because the Company accounts for the
compensation   37 
   cost associated
with its stock option plans under the intrinsic value method, the alternative
methods of transition will not apply to the Company. The additional disclosure
requirements of the statement are included in these financial statements. In
Managements opinion, the adoption of this Statement did not have a material
impact on the Companys consolidated financial position or results of
operations.  2          INVESTMENT
SECURITIES  The amortized cost and approximate
fair value of investments in debt securities, mortgage backed securities, and
other investments at December 31, 2002 and 2001 were as follows:   (Dollars
  in thousands)
  
  
  
  Gross
  
  GrossAmortized
  
  Unrealized
  
  Unrealized
  
  FairCost
  
  Gains
  
  Losses
  
  ValueDecember
  31, 2002Available-for-Sale:Obligations of
  U.S. Government Agencies
  
  $
  34,061
  
  $
  527
  
  $
  (2
  )
  $
  34,586Mortgage-Backed
  Securities
  
  48,688
  
  1,380
  
  
  
  50,068Debt Securities
  
  8,508
  
  221
  
  
  
  8,729Equity
  Securities
  
  4,994
  
  47
  
  (450
  )
  4,591$
  96,251
  
  $
  2,175
  
  $
  (452
  )
  $
  97,974Held-to-Maturity:Obligations of
  States and Political Subdivisions
  
  $
  1,265
  
  $
  62
  
  $
  
  
  $
  1,327Debt and Other
  Securities
  
  1,000
  
  4
  
  
  
  1,004$
  2,265
  
  $
  66
  
  $
  
  
  $
  2,331December
  31,2001Available-for-Sale:Obligations of
  U.S. Government Agencies
  
  $
  39,184
  
  $
  1,028
  
  $
  (127
  )
  $
  40,085Mortgage-Backed
  Securities
  
  19,588
  
  386
  
  (102
  )
  19,872Debt Securities
  
  8,606
  
  132
  
  (1
  )
  8,737Equity
  Securities
  
  6,049
  
  69
  
  (420
  )
  5,698$
  73,427
  
  $
  1,615
  
  $
  (650
  )
  $
  74,392Held-to-Maturity:Obligations of
  States and Political Subdivisions
  
  $
  1,854
  
  $
  57
  
  $
  
  
  $
  1,911Debt and Other
  Securities
  
  1,750
  
  37
  
  
  
  1,787$
  3,604
  
  $
  94
  
  $
  
  
  $
  3,698  As of December 31, 2002 and
2001, the Banks equity capital reflected a net unrealized gain on the Banks
Available-for-Sale investment securities, net of applicable taxes, of
$947,000 and $530,000, respectively.  The following table shows the
amortized cost and estimated fair value of investment securities by contractual
maturity at December 31, 2002 and 2001. Actual maturities may differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.  (Dollars
  in thousands)
  
  Held-to-Maturity
  
  Available-for-SaleAmortized
  
  Fair
  
  Amortized
  
  FairCosts
  
  Value
  
  Costs
  
  ValueDecember
  31, 2002No Stated
  Contractual Maturity
  
  $
  
  
  $
  
  
  $
  4,994
  
  $
  4,591Within One Year
  
  1,700
  
  1,725
  
  2,056
  
  2,099After One But
  Within Five Years
  
  565
  
  606
  
  19,474
  
  19,945After Five But
  Within Ten Years
  
  
  
  
  
  15,840
  
  16,263After 10 Years
  
  
  
  
  
  53,887
  
  55,076Total
  
  $
  2,265
  
  $
  2,331
  
  $
  96,251
  
  $
  97,974December
  31, 2001No Stated
  Contractual Maturity
  
  $
  
  
  $
  
  
  $
  6,049
  
  $
  5,698Within One Year
  
  589
  
  593
  
  6,032
  
  6,225After One But
  Within Five Years
  
  2,870
  
  2,952
  
  25,046
  
  23,776After Five But
  Within Ten Years
  
  145
  
  153
  
  10,283
  
  15,063After 10 Years
  
  
  
  
  
  26,017
  
  23,630Total
  
  $
  3,604
  
  $
  3,698
  
  $
  73,427
  
  $
  74,392  There were no sales of
Available-for-Saleinvestment securities in 2002, 2001, or 2000.   38 
   Investment securities with
amortized costs totaling $72,242,000 and $50,808,000 and market values totaling
$74,079,000 and $51,648,000 were pledged as collateral for certain lines of
credit and deposits at December 31, 2002 and 2001, respectively.  3              LOANS Loans outstanding are summarized
as follows:  (Dollars
  in thousands)
  
  December
  312002
  
  2001Commercial
  
  $
  25,375
  
  $
  26,691Agricultural
  
  17,536
  
  13,329Real
  Estate-Construction
  
  35,287
  
  32,268Real
  Estate-Mortgage
  
  125,094
  
  101,536Consumer
  
  4,391
  
  4,827Lease Financing
  
  5,891
  
  11,654Other
  
  1,905
  
  2,755215,479
  
  193,060Deferred Loan
  Fees, Net
  
  (1,051
  )
  (779
  )Allowance for
  Loan and Lease Losses
  
  (6,532
  )
  (5,498
  )$
  207,896
  
  $
  186,783  The recorded investment in loans
and leases that were considered to be impaired totaled $4,392,000 and
$3,060,000 at December 31, 2002 and 2001, respectively. The related allowance
for loan and lease losses on these impaired loans at December 31, 2002 and 2001
were $1,641,000 and $1,080,000, respectively. The average recorded investment
in impaired loans during 2002, 2001 and 2000 was $4,964,000, $4,444,000 and
$7,438,000, respectively. Interest income on impaired loans is recognized on a
cash basis and totaled $274,000, $291,000 and $270,000 for the years ended
December 31, 2002, 2001 and 2000, respectively.  Interest foregone on nonaccrual
loans totaled $424,000, $597,000 and $744,000 for the years ended December 31,
2002, 2001 and 2000, respectively.  Salaries and employee benefits
totaling $355,000, $373,000 and $409,000 have been deferred as loan origination
costs for the years ended December 31, 2002, 2001 and 2000, respectively.  Changes in the allowance for
loan and lease losses are summarized as follows:   (Dollars
  in thousands)
  
  Years
  Ended December 31,2002
  
  2001
  
  2000Balance,
  Beginning of Year
  
  $
  5,498
  
  $
  5,724
  
  $
  6,770Provision
  
  550
  
  2,450
  
  200Loans
  Charged-Off
  
  (442
  )
  (3,109
  )
  (1,740
  )Recoveries on
  Loans Previously Charged-Off
  
  926
  
  433
  
  494Balance, End of
  Year
  
  $
  6,532
  
  $
  5,498
  
  $
  5,724  4              PREMISES AND EQUIPMENT A summary of premises and
equipment follows:  (Dollars
  in thousands)
  
  December
  31,2002
  
  2001Land
  
  $
  1,316
  
  $
  1,316Bank Premises
  and Improvements
  
  6,031
  
  5,963Furniture,
  Fixtures and Equipment
  
  5,554
  
  5,44712,901
  
  12,726Less Accumulated
  Depreciation and Amortization
  
  (6,170
  )
  (5,789
  )Total Premises
  and Equipment
  
  $
  6,731
  
  $
  6,937  Depreciation and amortization
charged to expense was $979,000, $920,000, and $967,000 in 2002, 2001, and
2000, respectively.   39 
   5          OTHER
ASSETS  Other assets consisted of the
following:  (Dollars
  in thousands)
  
  December
  31,2002
  
  2001Prepaid expenses
  
  $
  344
  
  $
  501FHLB Stock
  
  895
  
  361Investment in
  Affordable Housing
  
  749
  
  775Other
  
  280
  
  1,043Total Other
  Assets
  
  $
  2,268
  
  $
  2,680  The Bank invested in a limited
partnership that operates qualified affordable housing projects to receive tax
benefits in the form of tax deductions from operating losses and tax credits.
The Bank accounts for the investment under the equity method and management
analyzes the investment annually for potential impairment.  6          DEPOSITS  A summary of deposit balances
follows:  (Dollars
  in thousands)
  
  December
  31,2002
  
  2001Demand
  
  $
  75,381
  
  $
  69,968Interest-Bearing
  Transaction Accounts
  
  77,080
  
  70,628Savings Deposits
  
  44,714
  
  41,703Time Certificate
  of Deposits
  
  109,551
  
  93,277Total Deposits
  
  $
  306,726
  
  $
  275,576  Interest expense recognized on
interest-bearing deposits consisted of the following:  (Dollars
  in thousands)
  
  Years
  Ended December 31,2002
  
  2001
  
  2000Interest-Bearing
  Transaction Accounts
  
  717
  
  1,363
  
  2,340Savings Deposits
  
  405
  
  735
  
  996Time Certificate
  of Deposits
  
  3,328
  
  4,804
  
  5,620Total Interest
  Expense on Deposits
  
  $
  4,450
  
  $
  6,902
  
  $
  8,956  At December 31, 2002, the
scheduled contractual maturities of all time certificates of deposit were as
follows:  (Dollars
  in thousands)
  
  December
  31, 2002Three Months or
  Less
  
  $
  53,226Over Three
  Through Twelve Months
  
  42,911Over One Through
  Three Years
  
  8,842Over Three Years
  
  4,572Total
  
  $
  109,551  7              LONG TERM DEBT AND OTHER BORROWING
ARRANGEMENTS  The Bank maintains secured lines
of credit with the Federal Home Loan Bank (FHLB) and the Federal Reserve
Bank, against which the Bank may take advances. The terms of these credit
facilities require the Bank to maintain in safekeeping with the FHLB or Federal
Reserve Bank, as applicable, eligible collateral of at least 100% of outstanding
advances. To provide borrowing capacity for short-term liquidity needs, as of
December 31, 2002 and 2001, the Company had $53,245,000 and $37,632,000 in
loans and investment securities in safekeeping and pledged to the FHLB,
respectively, and $7,000,000 and $8,000,000 in safekeeping and pledged to the
Federal Reserve Bank, respectively. At December 31, 2001, there were no amounts
outstanding on the FHLB line of credit. At December 31, 2002 and 2001, there
were no amounts outstanding on the Federal Reserve Bank line of credit.  The interest rates on FHLB and
Federal Reserve Bank credit advances vary dependent on the term of the advance
and the nature of the collateral supporting the advance. Interest is paid at
maturity for overnight advances and monthly for other advances. Principal is
due at maturity. The interest expense on all FHLB and Federal Reserve Bank
advances was $596,000, $84,000, and $461,000 for the years ended December 31,
2002, 2001, and 2000, respectively.   40 
   Advances from the Federal Home
Loan Bank at December 31, 2002 consisted of:  (Dollars
  in thousands)
  
  December
  31, 2002Amount
  
  Rate
  
  Maturity
  Date$
  2,500
  
  4.05
  %
  01/25/052,500
  
  4.24
  %
  01/31/052,500
  
  4.90
  %
  01/25/072,500
  
  5.11
  %
  01/29/075,000
  
  3.64
  %
  04/16/12$
  15,000
  8              INCOME TAXES The expense for income taxes for
the years ended December 31, 2002, 2001 and 2000 consisted of the following:  (Dollars
  in thousands)
  
  Years
  Ended December 31,2002
  
  2001
  
  2000CurrentFederal
  
  $
  2,491
  
  $
  73
  
  $
  798State
  
  85
  
  39
  
  1162,576
  
  112
  
  914DeferredFederal
  
  (341
  )
  357
  
  560State
  
  (137
  )
  118
  
  201(478
  )
  475
  
  761$
  2,098
  
  $
  587
  
  $
  1,675  The effective tax rate and
statutory federal income tax rate are reconciled as follows:  Years
  Ended December 31,2002
  
  2001
  
  2000Federal
  Statutory Income Tax Rate
  
  34.0
  %
  34.0
  %
  34.0
  %State Franchise
  Taxes, Net of FederalIncome Tax
  Benefit
  
  7.0
  
  7.2
  
  7.2Tax-Exempt
  Interest
  
  (0.5
  )
  (7.9
  )
  (4.9
  )Income Tax
  Credits
  
  (7.1
  )
  (5.1
  )
  Other
  
  1.5
  
  1.2
  
  1.834.9
  %
  29.4
  %
  38.1
  %  The components of the net
deferred tax asset of the Company, recorded in other assets, as of December 31,
2002 and 2001, were as follows:  (Dollars
  in thousands)
  
  2002
  
  2001Deferred Tax
  AssetsLoan and Lease
  Losses
  
  $
  1,654
  
  $
  1,431California
  Franchise Tax
  
  15
  
  13Other Real
  Estate Owned
  
  
  
  27Nonaccrual Loans
  
  169
  
  202Deferred
  Compensation
  
  635
  
  371Other
  
  192
  
  24Total Deferred
  Tax Assets
  
  $
  2,665
  
  $
  2,068Deferred Tax
  LiabilitiesDepreciation
  
  242
  
  136Stock Dividends
  
  53
  
  40Unrealized Gain
  on Securities Available-for-Sale
  
  776
  
  434Other
  
  
  
  Total Deferred
  Tax Liabilities
  
  $
  1,071
  
  $
  610Net Deferred Tax
  Assets
  
  $
  1,594
  
  $
  1,458   41 
   9MANDATORILY REDEEMABLE
CUMULATIVE TRUST PREFERRED SECURITIES OF SUBSIDIARY GRANTOR TRUST ("TRUST
PREFERRED SECURITIES")  The Company formed CIB Capital
Trust as a special purpose entity, which is consolidated into the Companys
financial statements. CIB Capital Trust is a Delaware business trust and was
formed for the sole purpose of issuing Company obligated mandatorily redeemable
cumulative trust preferred securities of Subsidiary Grantor Trust holding
solely junior subordinated debentures.  During the fourth quarter of
2002, CIB Capital Trust issued 10,000 of its Floating Rate Trust Preferred Securities
with a liquidation amount of $1,000 per security for gross proceeds of
$10,000,000. The entire proceeds of the issuance were invested by CIB Capital
Trust in $10,000,000 of Floating Rate Junior Subordinated Deferrable Interest
Debentures of the Company, with identical maturity, repricing, and payment
terms as the Trust Preferred Securities. The subordinated debentures represent
the sole assets of CIB Capital Trust. The subordinated debentures mature on
November 7, 2032, bear an initial interest rate of 5.27% (3.45% plus 3-month
LIBOR), with repricing and interest payments due quarterly. The subordinated
debentures are redeemable by the Company, subject to receipt by the Company of
prior approval from the Federal Reserve Bank on November 7, 2007, and each
quarter thereafter. The redemption price is par plus accrued and unpaid
interest to the redemption date. The Trust Preferred Securities are subject to
mandatory redemption to the extent of any early redemption of the subordinated
debentures and upon maturity of the subordinated debentures in 2032.  Holders of the Trust Preferred
Securities are entitled to a cumulative cash distribution on the liquidation
amount of $1,000 per security at an initial rate per annum of 5.27%. This rate
adjusts quarterly two business days prior to each February 15th,  May 15th, August 15th, and November 15th, to
3-month LIBOR plus 3.45%, provided, that the applicable interest rate may not
exceed 12.5% through the interest payment date in November 2007. The
distributions on the Trust Preferred Securities are treated as interest expense
in the consolidated statement of income. The Company has the option to defer
payment of the distributions for a period of up to five years, as long as the
Company is not in default on the payment of interest on the Subordinated
Debentures. The Trust Preferred Securities issued in the offering were sold in
private transactions pursuant to an exemption from registration under the
Securities Act of 1933, as amended. The Company has guaranteed, on a
subordinated basis, distributions and other payments due on the Trust Preferred
Securities.  For financial reporting
purposes, the subordinated debentures and related trust investments in the
subordinated debentures have been eliminated in consolidation and the trust
preferred securities are included in the consolidated balance sheet. Under
applicable regulatory guidance, the amount of trust preferred securities that
is eligible as Tier I capital is limited to twenty-five percent of the
Companys Tier I capital on a pro forma basis. At December 31, 2002, $9,165,000
of the Trust Preferred Securities qualified as Tier I Capital, and the
remaining $835,000 as Tier II capital.  Deferred costs related to the
issuance of the Trust Preferred Securities, which are included in other assets
in the accompanying consolidated balance sheet, at December 31, 2002 were
$328,000 and the amortization of the deferred costs was $11,000 during 2002.  10           COMMITMENTS AND CONTINGENCIES  Leases  The Bank is obligated under a number
of noncancellable operating leases for premises and equipment used for banking
purposes. Minimum future rental commitments under noncancellable operating
leases as of December 31, 2002 were as follows:  (Dollars
in thousands)   Lease
  Commitments2003
  
  1842004
  
  1892005
  
  1982006
  
  592007
  
  43Thereafter
  
  30$
  703
  Rent under operating leases was
approximately $178,000, $143,000, and $53,000 in 2002, 2001, and 2000,
respectively. Three of the Banks branch facilities are leased with two having
renewal options, with 5-year terms.   42 
   Financial Instruments with
Off-Balance-Sheet Risk  The Bank is a party to financial
instruments with off-balance-sheet risk in the normal course of business in order to meet
the financing needs of its customers and to reduce its own exposure to
fluctuations in interest rates. These financial instruments consist of
commitments to extend credit and letters of credit. These instruments involve,
to varying degrees,  elements of credit
and interest rate risk in excess of the amount recognized on the balance sheet.  The Banks exposure to credit
loss in the event of nonperformance by the other party for commitments to
extend credit and letters of credit is represented by the contractual amount of
those instruments. The Bank uses the same credit policies in making commitments
and letters of credit as it does for loans included on the balance sheet.  Commitments to extend credit
consist primarily of unfunded single-family residential and commercial real
estate construction loans and commercial revolving lines of credit.
Construction loans are established under standard underwriting guidelines and
policies and are secured by deeds of trust, with disbursements made over the
course of construction. Commercial revolving lines of credit have a high degree
of industry diversification. Commitments generally have fixed expiration dates
or other termination clauses and may require payment of a fee. Since many of the
commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash requirements.
Standby letters of credit are generally secured and are issued by the Bank to
guarantee the performance of a customer to a third party. The credit risk
involved in issuing letters of credit is essentially the same as that involved
in extending loans to customers.  At December 31, 2002, commercial
loan commitments represent approximately 43% of total commitments and are
generally secured. Real estate loan commitments represent 52% of total
commitments and are generally secured by property with a loan-to-value ratio
not to exceed 80%. Consumer loan commitments represent the remaining 5% of
total commitments and are generally unsecured. In addition, the majority of the
Banks loan commitments have variable interest rates.  The following financial
instruments represent off-balance-sheet credit risk:  (Dollars
  in thousands)
  
  December
  31,2002
  
  2001Loan Commitments
  
  $
  56, 428
  
  $
  40, 832Standby Letters
  of Credit
  
  572
  
  520  Correspondent Banking Agreements  The Company maintains funds on
deposit with other federally insured financial institutions under correspondent
banking agreements. Uninsured deposits totaled $17,462,000 at December 31,
2002.  Concentrations of Credit Risk  As of December 31, 2002, in
managements judgment, a concentration of loans existed in real estate-related
loans. At that date, approximately 72% of the Companys loans were real
estate-related.  Although management believes the
loans within this concentration have no more that the normal risk of
collectibility, a substantial decline in the performance of the economy in
general or a decline in real estate values in the Companys primary market
area, in particular, could have an adverse impact on collectibility, increase
the level of real estate-related nonperforming loans, or have other adverse
effects which alone or in the aggregate could have a material adverse effect on
the financial condition of the Company.  Contingencies  The Company is subject to legal
proceedings and claims, which arise in the ordinary course of business. In the
opinion of management, the amount of ultimate liability with respect to such
actions will not materially affect the consolidated financial position or
consolidated results of operations of the Company.  11           SHAREHOLDERS' EQUITY  At December 31, 2002, the
Company was authorized to issue 20,000,000 shares of no par common stock. Of
this amount,  2,152,751, and 2,115,419
shares of common stock were issued and outstanding at December 31, 2002 and
2001, respectively.  The Companys Board of Directors
approved a Dutch Auction Tender Offer to purchase up to 200,000 shares of its
outstanding common stock at a price per share of not less than $22.00 nor more
than $25.00 per share. The tender offer commenced on November 27, 2002 and
expired on December 30, 2002. Under this offer, CIB purchased 76,292 shares of
its common stock that were properly tendered at a price of $25.00 per share.
Due to restrictions from our transfer agent regarding 517 lost shares, 75,775
shares were actually retired in 2002, while the 517 shares will be retired in
2003.   43 
   Earnings Per Share  A reconciliation of the
numerators and denominators of the basic and diluted earnings per share
computations:  (Dollars
in thousands, except share data)  Weighted
  AverageNet
  
  Shares
  
  Per
  ShareYear
  Ended December 31,
  
  Income
  
  (Denominator)
  
  AmountBasic
  Earnings Per Share2002
  
  $
  3,911
  
  2,224,000
  
  $
  1.762001
  
  1,409
  
  2,216,000
  
  0.642000
  
  2,719
  
  2,209,000
  
  1.23Effect
  of Dilutive Securities-Employee Stock Options2002
  
  $
  
  
  20,000
  
  2001
  
  
  
  42,000
  
  2000
  
  
  
  3,000
  
  Diluted
  Earnings Per Shares2002
  
  $
  3,911
  
  2,244,000
  
  $
  1.742001
  
  1,409
  
  2,258,000
  
  0.622000
  
  2,719
  
  2,212,000
  
  1.23  
 All per share
amounts and the weighted average number of common shares outstanding as shown
in the preceeding table have been adjusted retroactively, as applicable, to
reflect the 5% stock dividends distributed in each of the years presented.  Dividends  In August of 2002, 2001, and
2000, the Board of Directors authorized a 5% stock dividend that was
distributed in September 2002, 2001, and 2000, respectively. All common stock
and per share amounts have been retroactively adjusted to reflect the stock
dividend.  The Companys primary source of
income with which to pay cash dividends is dividends from the Bank. The
California Financial Code restricts the total dividend payment of any bank in
any calendar year to the lesser of (1) the banks retained earnings or (2) the
banks net income for its last three fiscal years, less distributions made to
shareholders during the same three-year period. At December 31, 2002, retained
earnings of $6,202,000 were free of such restrictions.  Share Repurchase Plan  On November 13, 2001, the Companys
Board of Directors approved a plan to repurchase, as conditions warrant, up to
5% of the Companys common stock on the open market. The duration of the plan
is open-ended and the timing of purchases is dependent upon market conditions.
During 2002, the Company repurchased 7,419 shares of its common stock pursuant
to the plan.  Stock Options  During 1989, the Bank adopted
the Feather River State Bank 1989 Amended and Restated Stock Option Plan. The
plan is nonqualified and provides that nonemployee directors and key employees
may be granted options to purchase the Companys stock at the fair market value
of the shares as determined by the Board of Directors. As of May 1995, all
previously granted options to purchase the Banks stock had been retired and
exchanged for options to purchase the CIBs stock, on a one-for-one option
basis. All granted options must be exercised within the earlier of ten years of
the date of grant, or no later than three (3) months and one (1) day after any
termination of employment, or status as a director. Vesting is determined at
the time of grant by the Board of Directors.  During 1996, the Company adopted
the California Independent Bancorp 1996 Stock Option Plan (1996 Plan), which
as of December 31, 2002, after adjustment for all subsequently distributed
stock dividends and splits, sets aside 199,797 shares of no par value common
stock of the Company for which options may be granted to key, full-time
salaried employees and officers of the Company, as well as nonemployee
directors of the Company. The exercise price of all options to be granted under
the 1996 Plan must be at least 100% of the fair market value of the Companys
common stock on the granting date. Additionally, the options must be paid in
full at the time the option is exercised in cash, shares of the Companys
common stock with a fair value equal to the purchase price, or a combination
thereof. Under the 1996 Plan, all options expire no more than ten years after
the date of grant.   44 
   During 2000, the Company adopted
the California Independent Bancorp 2000 Stock Option Plan (2000 Plan), which
as of December 31, 2002, after adjustment for all subsequently distributed
stock dividends and splits, sets aside 115,762 shares of no par value common
stock of CIB. The 2000 Plan provides for the grant of Incentive Stock Options
(ISO) and Non-qualified Stock Options (NQSO), within the meaning of the
Internal Revenue Code of 1986, as amended, to employees,  including directors and officers who are
also employees of the Company. The 2000 Plan also provides for other types of
stock and option awards which may be granted to employees, officers and
directors of the Company and its subsidiaries. Awards may also be granted to
the Companys consultants, independent contractors, and advisors, provided they
render bona fide services that are not in connection with the offer and sale of
securities in a capital-raising transaction. Options granted may be exercised
within the times or upon the events determined by the Stock Option Committee
(the Committee) as set forth in the Award Agreement governing such option.
However, no option will be exercisable after the expiration of one hundred
twenty (120) months from the date the option is granted.  The vesting of any option
granted under the 2000 Plan will be determined by the Committee at its sole
discretion. The exercise price of each NQSO granted pursuant to the 2000 Plan
will be determined by the Committee, but may not be less than eighty five
percent (85%) of the fair market value of the stock subject to the option on
the date the option is granted. The exercise price of each ISO granted pursuant
to the 2000 Plan will also be determined by the Committee, but may not be less
than one hundred percent (100%) of the fair market value of shares on the grant
date, unless the optionee owns 10% or more of the combined voting power of the
Company. In such event, the purchase price of the stock subject to the ISO may
not be less than one hundred ten percent (110%) of the fair market value of
shares on the grant date.  A summary of the status of the
Companys three stock option plans, after adjustment for all subsequently
distributed stock dividends and splits at December 31, 2002, 2001, and 2000,
and changes during the years then ended is presented in the table and narrative
below.  2002
  
  2001
  
  2000Weighted
  
  
  
  Weighted
  
  
  
  WeightedAverage
  
  
  
  Average
  
  
  
  AverageExercise
  
  
  
  Exercise
  
  
  
  ExerciseShares
  
  Price
  
  Shares
  
  Price
  
  Shares
  
  PriceOutstanding at
  Beginning of Year
  
  407,705
  
  $
  18.69
  
  397,887
  
  $
  19.24
  
  344,235
  
  $
  19.47Granted
  
  124,447
  
  19.68
  
  41,529
  
  24.80
  
  110,002
  
  20.76Exercised
  
  (15,121
  )
  13.00
  
  (6,724
  )
  17.28
  
  (14,694
  )
  12.62Expired
  
  
  
  
  
  
  
  
  
  (1,044
  )
  6.56Forfeited
  
  (153,146
  )
  19.16
  
  (24,987
  )
  19.23
  
  (40,612
  )
  20.25Outstanding at
  End of Year
  
  363,885
  
  18.33
  
  407,705
  
  18.69
  
  397,887
  
  19.24Exercisable at
  End of Year
  
  266,000
  
  17.68
  
  313,847
  
  18.02
  
  309,551
  
  18.87  
 *Grants
include net effect of additional options resulting from the 5% stock dividend
distributed on September 20, 2002.  The options outstanding at
December 31, 2002 are illustrated in the following table.  Number
  of
  
  Weighted
  
  Number
  ofOptions
  
  Average
  
  OptionsOutstanding
  
  Remaining
  
  ExercisableDecember
  31,
  
  Contractual
  
  December
  31,Range of Exercise Prices
  
  2002
  
  Life
  (years)
  
  2002$10.08  $10.29
  
  8,284
  
  1.1
  
  8,284$13.77  $14.93
  
  26,790
  
  3.9
  
  26,790$16.46  $17.28
  
  58,849
  
  6.3
  
  58,849$17.90  $18.10
  
  63,767
  
  5.7
  
  63,767$18.47  $19.00
  
  121,835
  
  8.7
  
  83,532$19.89  $21.77
  
  77,351
  
  8.4
  
  23,676$22.71  $24.57
  
  7,009
  
  8.8
  
  1,102363,885
  
  
  
  266,000
   45 
   12           REGULATORY MATTERS  The Company and the Bank are
subject to certain regulatory requirements administered by the Board of
Governors of the Federal Reserve System and the Federal Deposit Insurance
Corporation (FDIC). Failure to meet these minimum capital requirements can
initiate certain mandatory, and possibly additional discretionary, actions by
regulators that, if undertaken,  could
have a direct material effect on the Companys consolidated financial
statements. Under capital adequacy guidelines and the regulatory framework for
prompt corrective action, the Bank must meet specific capital guidelines that
involve quantitative measures of the Banks assets, liabilities and certain
off-balance-sheet items as calculated under regulatory accounting practices.
The Companys and the Banks capital amounts and classification are also
subject to qualitative judgments by the regulators about components, risk
weightings, and other factors.  Quantitative measures
established by regulation to ensure capital adequacy require the Company and
the Bank to maintain minimum amounts and ratios of total and Tier 1 capital to
risk-weighted assets and of Tier 1 capital to average assets. Each of these
components is defined in the regulations. Management believes, as of December
31, 2002, the Company and the Bank met all capital adequacy requirements to
which they are subject.  In addition, the most recent
notification from the FDIC categorized the Bank as well capitalized under the
regulatory framework for prompt corrective action. To be categorized as well
capitalized the Bank must maintain minimum Total Risk-Based, Tier 1 Risk-Based,
and Tier 1 Leverage Ratios as set forth in the table. There are no conditions or
events since that notification that Management believes have changed the
institutions category.  The Company and the Banks
actual capital amounts and ratios are also presented in the table:  2002
  
  2001Amount
  
  Ratio
  
  Amount
  
  RatioTier
  I Leverage Ratio:California
  Independent Bancorp and Subsidiary
  
  $
  37,182
  
  10.5
  %
  $
  26,490
  
  8.6
  %Minimum
  regulatory requirement
  
  $
  14,162
  
  4.0
  %
  $
  12,379
  
  4.0
  %Feather River
  State Bank
  
  $
  29,609
  
  8.4
  %
  $
  26,177
  
  8.5
  %Minimum
  requirement for Well Capitalized institution
  
  $
  17,681
  
  5.0
  %
  $
  15,461
  
  5.0
  %Minimum
  regulatory requirement
  
  $
  14,145
  
  4.0
  %
  $
  12,369
  
  4.0
  %Tier
  I Risked Based Capital:California Independent
  Bancorp and Subsidiary
  
  $
  37,182
  
  14.0
  %
  $
  26,490
  
  11.2
  %Minimum
  regulatory requirement
  
  $
  10,598
  
  4.0
  %
  $
  9,434
  
  4.0
  %Feather River
  State Bank
  
  $
  29,609
  
  11.2
  %
  $
  26,177
  
  11.1
  %Minimum
  requirement for Well Capitalized institution
  
  $
  15,877
  
  6.0
  %
  $
  14,163
  
  6.0
  %Minimum
  regulatory requirement
  
  $
  10,584
  
  4.0
  %
  $
  9,442
  
  4.0
  %Total
  Risk-Based Capital:California
  Independent Bancorp and Subsidiary
  
  $
  41,238
  
  15.6
  %
  $
  29,470
  
  12.5
  %Minimum
  regulatory requirement
  
  $
  21,196
  
  8.0
  %
  $
  18,868
  
  8.0
  %Feather River
  State Bank
  
  $
  32,956
  
  12.5
  %
  $
  29,159
  
  12.4
  %Minimum
  requirement for Well Capitalized institution
  
  $
  26,461
  
  10.0
  %
  $
  23,604
  
  10.0
  %Minimum
  regulatory requirement
  
  $
  21,169
  
  8.0
  %
  $
  18,884
  
  8.0
  %  13           EMPLOYEE BENEFITS  401(k) Profit Sharing Plans  The Bank formed a 401(k)
Qualified Savings Plan (the Plan) effective August 1, 1993. All full-time
employees who have reached the age of 21 are eligible to participate following
90 days of employment. All eligible employees are 100% vested in their own
contributions, which may be any whole percentage of pay between 2% and 15%,
inclusive. Beginning January 1, 1995, the Bank made annual matching
contributions, which were equal to 20% of each employees elective
contributions not exceeding 6% of pay. Contributions are invested under
employee directed investment options.  Beginning January 2000, the Bank
made annual matching contributions equal to 50% of each employees elective
contributions not exceeding 6% of pay. Of the matching contributions, 50% is
applied to an employer directed fund and 50% of the funds are applied to the
purchase of CIB common stock. For the years ended December 31, 2002, 2001 and
2000, the Bank made matching contributions totaling $112,000, $115,000 and
$127,000, respectively.   46 
   Employee Stock Ownership Plan  The Bank formed an Employee
Stock Ownership Plan (the ESOP) effective January 1, 1988. Effective January
1, 1995,  the ESOP was amended to
recognize CIB and all of its employees as participants. All employees who have
completed 90 days of service and have reached the age of 21 are eligible to
participate in the ESOP. The ESOP provides for annual contributions at the
discretion of the Board of Directors. The contributions are allocated based on
the participants compensation for the year. Employees vest ratably in the ESOP
over six years. The ESOP borrowed $200,000 from a nonprofit corporation to
acquire 8,125 shares of CIB common stock in June 2000. The borrowing is payable
in five equal annual installments with interest at prime minus 1/2%, which rate
was 3.75% at December 31, 2002. At December 31, 2002 and 2001 the amount
outstanding was $80,000 and $120,000, respectively. The Bank made contributions
to the ESOP of approximately $40,000 in each of the years 2002, 2001, and 2000.  Deferred Compensation Plan  The Bank has a nonqualified
Deferred Compensation Plan, which provides directors and a former key executive
with an unfunded, deferred compensation program. Under the plan, eligible
participants may elect to defer some or all of their current compensation.
Deferred amounts earn interest at an annual rate, ranging from 4.25% to 8.50%
at December 31, 2002, determined by the Board of Directors.  Salary Continuation Plans  The Company entered into salary
continuation agreements to provide five key executives (including former
executives),  or their designated beneficiaries,
with annual benefits for a specified number of years after retirement or death.
The expense recognized under these plans for the years ended December 31, 2002,
2001, and 2000 totaled $184,000, $218,000, and $154,000, respectively.  14           OTHER NONINTEREST INCOME AND EXPENSE  The components of other
noninterest income and expense were as follows:  (Dollars
  in thousands)
  
  Years
  Ended December 31,2002
  
  2001
  
  2000Non-Insured
  Deposit Income
  
  $
  145
  
  $
  174
  
  $
  222Gains on Sale of
  OREO
  
  143
  
  14
  
  292Earnings on Bank
  Owned Life Insurance Policies
  
  295
  
  280
  
  260Other
  
  405
  
  229
  
  360Total Other
  Noninterest Income
  
  $
  988
  
  $
  697
  
  $
  1,134Stationary &
  Supplies
  
  249
  
  214
  
  184Telephone
  Expense
  
  266
  
  333
  
  297Insurance
  
  235
  
  197
  
  187Attorney Fees
  
  179
  
  166
  
  225Directors Fees
  
  238
  
  258
  
  258Courier Expense
  
  190
  
  158
  
  123Other
  
  1,832
  
  1,988
  
  2,503Total Other
  Noninterest Expense
  
  $
  3,189
  
  $
  3,314
  
  $
  3,777  15           RELATED PARTY TRANSACTIONS  During the normal course of
business, the Bank enters into loans with related parties, including executive
officers and directors. These loans are made with substantially the same terms,
including rates and collateral, as loans to unrelated parties. The following is
a summary of the aggregate activity involving related party borrowers:  (Dollars
  in thousands)
  
  Year
  Ended December 31,2002
  
  2001Loan Balances 
  Beginning of Year
  
  $
  1,822
  
  $
  3,177Disbursements
  
  2,421
  
  741Collections
  
  (560
  )
  (2,096
  )Loan Balances 
  End of Year
  
  $
  3,683
  
  $
  1,822Undisbursed
  Commitments
  
  $
  377
  
  $
  618   47 
   16           COMPREHENSIVE INCOME  Comprehensive income is a more
inclusive financial reporting methodology that includes disclosure of other
comprehensive income that historically has not been recognized in the
calculation of net income. Unrealized gains and losses on the Companys
available-for-sale investment securities are included in other comprehensive
income. Total comprehensive income and the components of accumulated other
comprehensive income are presented in the Consolidated Statements of Changes in
Shareholders Equity.  The Company held securities
classified as available-for-sale which had unrealized gains or losses as
follows:  (Dollars
in thousands)  Before
  Tax
  
  Tax
  (Expense)
  Benefit
  
  After
  TaxFor the Year
  Ended December 31, 2002Other
  comprehensive income:Unrealized
  holding gains
  
  $
  703
  
  $
  (317
  )
  $
  386Less:
  reclassification adjustment for net losses included in net income
  
  (55
  )
  24
  
  (31
  )Total other
  comprehensive income
  
  $
  758
  
  $
  (341
  )
  $
  417For the Year
  Ended December 31, 2001Other
  comprehensive income:Unrealized
  holding gains
  
  $
  1,408
  
  $
  (634
  )
  $
  774Total other
  comprehensive income
  
  $
  1,408
  
  $
  (634
  )
  $
  774For the Year
  Ended December 31, 2000Other
  comprehensive income:Unrealized
  holding gains
  
  $
  1,282
  
  $
  (577
  )
  $
  705Total other
  comprehensive income
  
  $
  1,282
  
  $
  (577
  )
  $
  705  17           DISCLOSURE OF FAIR VALUE OF FINANCIAL
INSTRUMENTS  Disclosures include estimated
fair values for financial instruments for which it is practicable to estimate
fair value. These estimates are made at a specific point in time based on
relevant market data and information about the financial instruments. These
estimates do not reflect any premium or discount that could result from
offering the Companys entire holdings of a particular financial instrument for
sale at one time, nor do they attempt to estimate the value of anticipated
future business related to the instruments. In addition, the tax ramifications
related to the realization of unrealized gains and losses can have a
significant effect on fair value estimates and have not been considered in any
of these estimates.  Because no market exists for a
significant portion of the Companys financial instruments, fair value
estimates are based on judgments regarding current economic conditions, risk
characteristics of various financial instruments, and other factors. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgment and therefore cannot be determined with precision. Changes
in assumptions could significantly affect the fair values presented.  Cash and Cash Equivalents  For these short-term
instruments, the carrying value approximates fair value.  Investments - Securities  For securities
held-for-investment purposes, fair values are based on quoted market prices or
dealer quotes. If quoted market prices are not available, fair values are
estimated using quoted market prices for similar securities and indications of
value provided by brokers.   48 
   Loans and Leases  The fair value of loans and
leases is estimated by discounting the future cash flows using current rates at
which similar loans would be made to borrowers with similar credit ratings for
the same remaining maturities. The fair value of nonperforming loans and leases
is estimated based on allocating specific and general reserves to the various
nonperforming loan and lease classifications.  Cash Surrender Value of Life
Insurance Policies  The fair value of life insurance
policies are based on current cash surrender values at each reporting date
provided by insurers.  Deposits  The fair value of demand
deposits, savings accounts, and certain money market deposits is the amount
payable on demand at the reporting date. The fair value of fixed maturity
certificates of deposit is estimated using the rates currently offered for
deposits of similar remaining maturities.  Other Liabilities  Other liabilities represent
short-term instruments. The carrying amount approximates fair value.  Commitments to Extend Credit and
Letters of Credit  The fair value of amounts for
fees arising from commitments to extend credit, standby letters of credit, and
financial guarantees written are not material.  The estimated fair values of the
Banks financial instruments at December 31, 2002 and 2001 were as follows:  December
  31, 2002
  
  December
  31, 2001(Dollars
  in thousands)
  
  Carrying
  Amount
  
  Fair
  Value
  
  Carrying
  Amount
  
  Fair
  ValueFinancial
  Assets:Cash and Cash
  Equivalents
  
  $
  40,046
  
  $
  40,046
  
  $
  23,047
  
  $
  23,047Investments
  
  100,239
  
  100,305
  
  77,996
  
  78,090Loans and Leases
  (Net)
  
  207,896
  
  211,016
  
  186,783
  
  190,538Cash Surrender
  Value of Life Insurance Policies
  
  6,239
  
  6,239
  
  5,108
  
  5,108Interest
  Receivable
  
  2,070
  
  2,070
  
  2,091
  
  2,091Financial
  Liabilities:Deposits
  
  $
  306,726
  
  $
  310,253
  
  $
  275,576
  
  $
  276,264Federal Home
  Loan Bank Advances
  
  15,000
  
  15,616
  
  
  
  Other Borrowings
  
  80
  
  80
  
  120
  
  120Trust Preferred
  Securities
  
  10,000
  
  10,000
  
  
  
  Interest Payable
  
  1,407
  
  1,407
  
  1,247
  
  1,247Off-Balance
  Sheet Financial Instruments:Commitments to
  Extend Credit
  
  $
  56,428
  
  $
  56,428
  
  $
  40,832
  
  $
  40,832Standby Letters
  of Credit
  
  572
  
  572
  
  520
  
  520  18           PRIOR PERIOD ADJUSTMENT  The Company discovered an error
that occurred in 1999 and 1998 related to the tax treatment of certain
dividends on preferred stocks held in its investment portfolio. This adjustment
had no effect on previously reported net income in 2001 and 2000. This prior
period adjustment is reflected on the balance sheet as an increase in retained
earnings and an increase in other assets of $242,000.   49 
   19           PARENT ONLY CONDENSED FINANCIAL
STATEMENTS  December
  31,(Dollars
  in thousands)
  
  2002
  
  2001BALANCE
  SHEET Assets:Cash and Due
  From Banks
  
  $
  7,764
  
  $
  57Investment in
  Subsidiaries
  
  31,088
  
  27,142Other Assets
  
  608
  
  448Total Assets
  
  $
  39,460
  
  $
  27,647Liabilities and
  Shareholders EquityOther
  Liabilities
  
  $
  94
  
  $
  192Subordinated
  Debentures
  
  10,310
  
  ShareholdersEquity
  
  29,056
  
  27,455Total
  Liabilities and ShareholdersEquity
  
  $
  39,460
  
  $
  27,647Year
  Ended December 31,2002
  
  2001
  
  2000STATEMENT
  OF INCOME Other Expense
  
  $
  (659
  )
  $
  (401
  )
  $
  (216
  )Loss Before
  Equity in Net Income of Subsidiaries
  
  $
  (659
  )
  $
  (401
  )
  $
  (216
  )Equity in Net
  Income of SubsidiariesDistributed
  
  1,145
  
  1,307
  
  1,010Undistributed
  
  3,154
  
  338
  
  1,837Income Tax
  Benefit
  
  271
  
  165
  
  90Net Income
  
  $
  3,911
  
  $
  1,409
  
  $
  2,719Year
  Ended December 31,2002
  
  2001
  
  2000STATEMENTS
  OF CASH FLOWS Operating
  Activities:Net Income
  
  $
  3,911
  
  $
  1,409
  
  $
  2,719Adjustments to
  Reconcile Net Income to Net Cash Provided by Operating Activities:Undistributed
  Earnings of Subsidiaries
  
  (3,154
  )
  (338
  )
  (1,836
  )Depreciation and
  Amortization
  
  11
  
  
  
  Decrease in
  Other Operating Assets
  
  (148
  )
  (480
  )
  (121
  )(Decrease)
  Increase in Other Operating Liabilities
  
  (98
  )
  190
  
  2Net Cash Used
  for Operating Activities
  
  522
  
  781
  
  764Investing
  Activities:Investment in
  subsidiaries
  
  (310
  )
  
  
  Purchases of
  Premises and Equipment
  
  (3
  )
  
  
  Net Cash Used
  for Investing Activities
  
  (313
  )
  
  
  Financing
  Activities:Issuance of
  Subordinated Debentures
  
  10,310
  
  
  
  Stock Options
  Exercised
  
  189
  
  127
  
  129Repurchase of Common
  Stock
  
  (2,047
  )
  
  
  Cash Dividends
  
  (944
  )
  (895
  )
  (850
  )Cash Paid in
  Lieu of Fractional Shares
  
  (10
  )
  (12
  )
  (8
  )Net Cash
  Provided by (Used in) Financing Activities
  
  7,498
  
  (780
  )
  (729
  )Increase in Cash
  and Cash Equivalents
  
  7,707
  
  1
  
  35Cash and Cash
  Equivalents, Beginning of Year
  
  57
  
  56
  
  21Cash and Cash
  Equivalents, End of Year
  
  $
  7,764
  
  $
  57
  
  $
  56Supplemental
  Disclosures of Noncash Investing and Financing ActivitiesNet Unrealized
  Gain On Securities Held as Available-for-Sale (Net of Taxes)
  
  $
  417
  
  $
  774
  
  $
  705Tax Benefit
  Arising From Exercise of Nonqualified Stock Options and Disqualifying
  Dispositions
  
  $
  45
  
  $
  16
  
  $
  59Stock Dividends
  
  $
  2, 091
  
  $
  2, 285
  
  $
  1, 830   50 
   20           QUARTERLY STATEMENTS OF OPERATIONS
(UNAUDITED)  The following information is
unaudited. However, in the opinion of Management, all adjustments, which
include only normal recurring adjustments necessary to present fairly the
results of operations for such periods, are reflected. Reference is made to
Managements Discussion and Analysis of Financial Condition and Results of
Operations for further explanation of results of operations.  Quarterly
Statements of Operations 2002
  Quarter Ended (Unaudited)March
  31
  
  June 30
  
  September
  30
  
  December
  31(Dollars
  in thousands, except per share data)Interest Income
  
  $
  4,824
  
  $
  5,123
  
  $
  5,300
  
  $
  5,673Interest Expense
  
  1,165
  
  1,173
  
  1,390
  
  1,428Net Interest
  Income
  
  3,659
  
  3,950
  
  3,910
  
  4,245Provision for
  Loan and Lease Losses
  
  150
  
  150
  
  150
  
  100Net Interest
  Income After Provision for Loan and Lease Losses
  
  3,509
  
  3,800
  
  3,760
  
  4,145Noninterest
  Income
  
  599
  
  620
  
  744
  
  766Noninterest
  Expense
  
  2,934
  
  3,137
  
  2,930
  
  2,933Income Before
  Income Taxes
  
  1,174
  
  1,283
  
  1,574
  
  1,978Provision for
  Income Taxes
  
  428
  
  471
  
  593
  
  606Net Income
  
  $
  746
  
  $
  812
  
  $
  981
  
  $
  1,372Basic Earnings
  Per Share
  
  $
  0.34
  
  $
  0.37
  
  $
  0.44
  
  $
  0.62Diluted Earnings
  Per Share
  
  $
  0.33
  
  $
  0.36
  
  $
  0.44
  
  $
  0.60Weighted Average
  Shares Outstanding
  
  2,221,189
  
  2,224,353
  
  2,225,211
  
  2,226,3222001
  Quarter Ended (Unaudited)March 31
  
  June 30
  
  September
  30
  
  December
  31(Dollars
  in thousands, except per share data)Interest Income
  
  $
  5,603
  
  $
  5,468
  
  $
  5,150
  
  $
  5,137Interest Expense
  
  2,116
  
  1,848
  
  1,673
  
  1,385Net Interest
  Income
  
  3,487
  
  3,620
  
  3,477
  
  3,752Provision for
  Loan and Lease Losses
  
  
  
  
  
  
  
  2,450Net Interest
  Income After Provision for Loan and Lease Losses
  
  3,487
  
  3,620
  
  3,477
  
  1,302Noninterest
  Income
  
  622
  
  534
  
  634
  
  514Noninterest
  Expense
  
  3,085
  
  3,000
  
  3,035
  
  3,075Income Before
  Income Taxes
  
  1,024
  
  1,154
  
  1,076
  
  (1,259
  )Provision
  (Benefit) for Income Taxes
  
  373
  
  414
  
  389
  
  (590
  )Net Income
  (Loss)
  
  $
  651
  
  $
  740
  
  $
  687
  
  $
  (669
  )Basic Earnings
  (Loss) Per Share
  
  $
  0.29
  
  $
  0.33
  
  $
  0.31
  
  $
  (0.30
  )Diluted Earnings
  (Loss) Per Share
  
  $
  0.29
  
  $
  0.33
  
  $
  0.30
  
  $
  (0.30
  )Weighted Average
  Shares Outstanding
  
  2,214,884
  
  2,214,884
  
  2,215,227
  
  2,217,112   51 
   DIRECTORS AND MANAGEMENT TEAM CALIFORNIA INDEPENDENT BANCORP AND
FEATHER RIVER STATE BANK  CALIFORNIA
  INDEPENDENT BANCORP AND FEATHER RIVER STATE BANK DIRECTORS
  
  CALIFORNIA
  INDEPENDENT BANCORP MANAGEMENTAlfred G. Montna
  
  John I. JelavichChairman
  of the Board
  
  President/Chief
  Executive OfficerOwner,
  Montna FarmsKevin R. WatsonJohn L. Dowdell
  
  Chief
  Financial Officer/Corporate SecretaryPresident/CEO,
  Dowdell Financial ServicesDouglas R. MarrHarold M.
  Eastridge
  
  Assistant
  Corporate SecretaryPresident,
  Trident Investment CorporationReal
  Estate DevelopmentFEATHER
  RIVER STATE BANK MANAGING COMMITTEEWilliam H.
  GilbertPartner,
  Gilbert Orchards, Walnut Grower
  
  John I. JelavichPresident/Chief
  Executive OfficerJohn I. JelavichPresident/Chief
  Executive Officer
  
  Kevin R. WatsonCalifornia
  Independent Bancorp
  
  Senior
  Vice President/Chief Financial OfficerPresident/Chief
  Executive OfficerFeather
  River State Bank
  
  Kenneth M.
  AndersonSenior
  Vice President/Chief Banking Services OfficerDonald H.
  LivingstoneTeaching
  Professor, Brigham Young University
  
  Blaine C. LauhonMarriott
  School of Business
  
  Senior
  Vice President/Regional Lending ManagerDavid A. Offutt
  
  Douglas R. MarrPresident,
  Offutt, Shephard & Haven
  
  Senior
  Vice President/Chief Credit OfficerAttorneys-at-LawSteven P. OlinWilliam K.
  Retzer
  
  Senior
  Vice President/Regional Lending ManagerChairman/CEO,
  Examen, Inc.Financial
  Information And Media ContactMichael C.
  Wheeler
  
  Analysts,
  stockholders and other investors seekingPresident
  and General Manager,
  
  financialinformation about California
  IndependentWheeler
  Chevrolet-Oldsmobile-Cadillac
  
  Bancorp or any
  of its subsidiaries, or news mediaseeking general
  information, should contact:DIRECTORS
  EMERITUSInvestor
  Relations DepartmentDale L. Green
  
  1227 Bridge St.,
  Suite CChief
  Financial Officer, Dale L. Green, Inc.
  
  Yuba City, CA,
  95991Contractor
  
  (530) 674-6025
  or(800) 258-4334Lawrence HarrisWalnut
  Grower, Consulting Civil EngineerCertified
  Public Accountants/AuditorsRoss D. Scott
  
  Perry-Smith LLPOwner,
  Scott Center, Physical TherapistLouis F. Tarke
  
  Legal
  CounselPartner,
  Tarke Brothers & Anderson
  
  Bartel, Eng
  & SchroderWalnut
  and Rice Grower
  
  Sacramento, CA     52 
   BRANCHES AND OFFICES FOR INFORMATION CALL (530) 674-6000
OR (800) 258-4334   YUBA CITY,  CA 1.Bridge
Street Branch & Loan Center                1221 Bridge Street 2.Colusa
Avenue Branch & Loan Center                777 Colusa Avenue 3.Loan
Operations Center                995 Tharp Road 4.Administrative
Office                CIB/FRSB Corporate
Headquarters                1227 Bridge Street, Suite
C  ARBUCKLE,  CA 5.Arbuckle
Branch                 540 Amanda Street  COLUSA,  CA 6.Colusa
Branch                655 Fremont Street  MARYSVILLE,  CA 7.Marysville
Branch                700 E Street  ROSEVILLE,  CA 8.Roseville
Branch & Loan Center                1552 Eureka Road, Suite
101  WHEATLAND,  CA 9.Wheatland
Branch                114 D Street  WOODLAND,  CA 10.Woodland
Branch & Loan Center                203 Main Street  LINCOLN,  CA 11.Lincoln
Branch                435 S. Highway 65, Suite A     53