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                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549
                                   FORM 10-K

       ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
                             EXCHANGE ACT OF 1934
                  For the fiscal year ended December 31, 1999

                        Commission File Number: 0-12499

                            First Financial Bancorp
            (Exact name of registrant as specified in its charter)

               California                                      94-28222858
    (State or other jurisdiction of                         (I.R.S. Employer
     incorporation or organization)                        Identification No.)

     701 South Ham Lane, Lodi, California                           95242
   (Address of principal executive offices)                      (Zip Code)


                                (209)-367-2000
             (Registrant's telephone number, including area code)

          Securities registered pursuant to Section 12(b) of the Act:
                                     None
          Securities registered pursuant to Section 12(g) of the Act:
                          Common Stock, no par value

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [ X ] Yes [ ] No

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]

     As of March 20, 2000, there were 1,445,034 shares of Common Stock, no par
value, outstanding. The aggregate market value of the Common Stock held by non-
affiliates of the registrant was approximately $15,083,000 (based on the $10.44
average of bid and ask prices per share on March 21, 2000).

     Documents Incorporated by Reference         Part of Form 10-K into which
     -----------------------------------         ----------------------------
                                                 Incorporated
                                                 ------------


   Proxy Statement for the Annual Meeting of
   Shareholders to be held on April 25, 2000.     Part III, Items 10, 11, 12, 13


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                                       1
<PAGE>

                            FIRST FINANCIAL BANCORP
                                1999 FORM 10-K
                               TABLE OF CONTENTS

<TABLE>
PART 1
----
<S>                                                                         <C>
ITEM 1.  BUSINESS.........................................................   3
         General..........................................................   3
         The Bank.........................................................   3
         Bank Services....................................................   3
         Sources of Business..............................................   4
         Competition......................................................   4
         Employees........................................................   4
         Supervision and Regulation.......................................   5
              The Company.................................................   5
              The Bank....................................................   6
              Officers....................................................   6
              Recent Legislation and Regulations Affecting Banking........   7
ITEM 2.  PROPERTIES.......................................................   9
ITEM 3.  LEGAL PROCEEDINGS................................................  11
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..............  11

Part II
-------
ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
           STOCKHOLDER MATTERS............................................  11
ITEM 6.  SELECTED FINANCIAL DATA..........................................  11
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
           AND RESULTS OF OPERATIONS......................................  12
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA......................  29
ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
           ACCOUNTING AND FINANCIAL DISCLOSURE............................  29

PART III
--------
ITEM 10  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT...............  29
ITEM 11  EXECUTIVE COMPENSATION...........................................  29
ITEM 12  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT...  29
ITEM 13  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...................  29

PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K..  30

Signatures................................................................  57
Index to Exhibits.........................................................  58
</TABLE>

                                       2
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                                    PART I

ITEM 1. BUSINESS

General:
-------

First Financial Bancorp (the "Company") was incorporated under the laws of the
State of California on May 13, 1982, and operates principally as a bank holding
company for its wholly owned subsidiary, Bank of Lodi, N.A. (the "Bank").  The
Company is registered under the Bank Holding Company Act of 1956, as amended.
The Bank is the principal source of income for the Company. The Bank owns the
office building where the Bank's Lodi Branch and administrative offices are
located, and the Company owns the land upon which the Bank's Woodbridge Branch
is located. The Company receives income from the Bank under the lease associated
with the Woodbridge property. The Company also holds all of the capital stock of
Western Auxiliary Corporation (WAC), a California Corporation which functions as
trustee on deeds of trust securing mortgage loans originated by the Bank. All
references herein to the "Company" include the Bank and WAC, unless the context
otherwise requires.

The Bank:
--------

The Bank was organized on May 13, 1982 as a national banking association.  The
application to organize the Bank was accepted for filing by the Comptroller of
the Currency (the "OCC") on September 8, 1981, and preliminary approval to
organize was granted on March 27, 1982. On July 18, 1983 the Bank received from
the OCC a Certificate of Authority to Commence the Business of Banking.
Subsequently, the Bank opened branch offices in Woodbridge and Lockeford,
California. Effective February 22, 1997, the Bank acquired the Galt, Plymouth
and San Andreas offices of Wells Fargo Bank. A loan production office in Folsom,
California was opened in January, 1998, and was approved to operate as a full-
service branch in July, 1999. In addition, a full-service branch was opened in
Elk Grove, California in August, 1998.

The Bank's headquarters is located at 701 South Ham Lane, Lodi, California.
Branch offices are located in Woodbridge, Lockeford, Galt, Plymouth, San
Andreas, Elk Grove and Folsom, California. The Bank's primary service area, from
which the Bank attracts 75% of its business, is the city of Lodi and the
surrounding area. This area is estimated to have a population approaching 70,000
persons, with a median annual family income of approximately $30,000. The area
includes residential developments, neighborhood shopping centers, business and
professional offices and manufacturing and agricultural concerns.

Bank Services:
-------------

The Bank offers a wide range of commercial banking services to individuals and
business concerns located in and around its primary service area. These services
include personal and business checking and savings accounts (including interest-
bearing negotiable order of withdrawal ("NOW") accounts and/or accounts
combining checking and savings accounts with automatic transfers), and time
certificates of deposit. The Bank also offers extended banking hours at its
drive-through window, night depository and bank-by-mail services, and travelers'
checks (issued by an independent entity). Each branch location has a 24 hour ATM
machine, and the Bank has 24 hour telephone banking and bill paying services.
The Bank issues MasterCard credit cards and acts as a merchant depository for
cardholder drafts under both VISA and MasterCard. In addition, it provides note
and collection services and direct deposit of social security and other
government checks.

During 1998, the Bank entered into an agreement with Investment Centers of
America to offer stocks, bonds, mutual funds, annuities and insurance products
through offices located on-site at Bank branches. The first Investment Centers
of America office was established at the Lodi branch location, and additional
offices are planned for Elk Grove and Folsom.

The Bank engages in a full complement of lending activities, including
commercial, Small Business Administration (SBA), residential mortgage,
consumer/installment, and short-term real estate loans, with particular emphasis
on short and medium-term obligations. Commercial lending activities are directed
principally toward businesses whose demand for funds falls within the Bank's
lending limit, such as small to medium-sized professional firms, retail and
wholesale outlets and manufacturing and agricultural concerns. Consumer lending
is oriented primarily to the needs of the Bank's customers, with an emphasis on
automobile financing and leasing. Consumer loans also include loans for boats,
home improvements, debt consolidation, and other personal needs. Real estate
loans include short-term "swing" loans and construction loans. Residential
mortgages are generally sold into the secondary market for these loans. SBA
loans are made available to small to medium-sized businesses. The Bank
generates noninterest income through premiums received on the sale of guaranteed
portions of SBA loans and the resulting on-going servicing income on its SBA
portfolio.

                                       3
<PAGE>

Sources of Business:
--------------------

Management seeks to obtain sufficient market penetration through the full range
of services described above and through the personal solicitation of the Bank's
officers, directors and shareholders. All officers are responsible for making
regular calls on potential customers to solicit business and on existing
customers to obtain referrals. Promotional efforts are directed toward
individuals and small to medium-sized businesses. The Bank's customers are able
in their dealings with the Bank to be served by bankers who have commercial loan
experience, lending authority, and the time to serve their banking needs quickly
and competently. Bankers are assigned to customers and not transferred from
office to office as in many major chain or regional banks. In order to expedite
decisions on lending transactions, the Bank's loan committee meets on a regular
basis and is available where immediate authorization is important to the
customer.

The risk of non-payment (or deferred payment) of loans is inherent in commercial
banking. Furthermore, the Bank's marketing focus on small to medium-sized
businesses may involve certain lending risks not inherent in loans to larger
companies. Smaller companies generally have shorter operating histories, less
sophisticated internal record keeping and financial planning capabilities, and
greater debt-to-equity ratios. Management of the Bank carefully evaluates all
loan applicants and attempts to minimize its credit risk through the use of
thorough loan application and approval procedures.

Consistent with the need to maintain liquidity, management of the Bank seeks to
invest the largest portion of the Bank's assets in loans of the types described
above. Loans are generally limited to less than 75% of deposits and capital
funds. The Bank's surplus funds are invested in the investment portfolio, made
up of both taxable and non-taxable debt securities of the U.S. government, U.S.
government agencies, states, and municipalities. On a day to day basis, surplus
funds are invested in federal funds and other short-term money market
instruments.

Competition:
-----------

The banking business in California generally, and in the northern portion of
central California where the Bank is located, is highly competitive with respect
to both loans and deposits and is dominated by a relatively small number of
major banks with branch office networks and other operating affiliations
throughout the State. The Bank competes for deposits and loans with these banks,
as well as with savings and loan associations, thrift and loan associations,
credit unions, mortgage companies, insurance companies and other lending
institutions. Among the advantages certain of these institutions have over the
Bank are their ability (i) to finance extensive advertising campaigns, (ii) to
allocate a substantial portion of their investment assets in securities with
higher yields (not available to the Bank if its investments are to be
diversified) and (iii) to make funds available for loans in geographic regions
with the greatest demand. In competing for deposits, the Bank is subject to the
same regulations with respect to interest rate limitations on time deposits as
other depository institutions. See "Supervision and Regulation" below.

Many of the major commercial banks operating in the Bank's service area offer
certain services, such as international banking and trust services, which are
not offered directly by the Bank, and such banks, by virtue of their greater
capitalization, have substantially higher lending limits than the Bank. In
addition, other entities, both public and private, seeking to raise capital
through the issuance and sale of debt and equity securities compete with the
Bank for the acquisition of funds for deposit.

In order to compete with other financial institutions in its primary service
area, the Bank relies principally on local promotional activities, personal
contacts by its officers, directors, employees and shareholders, extended hours
and specialized services. The Bank's promotional activities emphasize the
advantages of dealing with a locally-owned and headquartered institution
sensitive to the particular needs of the community. The Bank also assists
customers in obtaining loans in excess of the Bank's lending limit or services
not offered by the Bank by arranging such loans or services in participation
with or through its correspondent banks.

The State Bank Parity Act, effective January 1, 1996, eliminated certain
existing disparities between California state chartered banks and national
banking associations, such as the Bank, by authorizing the California
Commissioner of Financial Institutions (the "Commissioner") to address such
disparities through a streamlined rule-making process.

Employees:
---------

As of December 31, 1999, the Company employed 101 full-time equivalent
employees, including four executive officers. Management believes that the
Company's relationship with its employees is good.

                                       4
<PAGE>

Supervision and Regulation

The Company
-----------

The common stock of the Company is subject to the registration requirements of
the Securities Act of 1933, as amended, and the qualification requirements of
the California Corporate Securities Law of 1968, as amended. The Company is also
subject to the periodic reporting requirements of Section 13(d) of the
Securities Exchange Act of 1934, as amended, which include, but are not limited
to, annual, quarterly and other current reports with the Securities and Exchange
Commission.

The Company is a bank holding company registered under the Bank Holding Company
Act of 1956 (the "Act") and is subject to supervision by the Board of Governors
of the Federal Reserve System (the "Board"). As a bank holding company, the
Company must file with the Board quarterly reports, annual reports, and such
other additional information as the Board may require pursuant to the Act. The
Board may also make examinations of the Company and its subsidiaries.

The Act requires prior approval of the Board for, among other things, the
acquisition by a bank holding company of direct or indirect ownership or control
of more than 5% of the voting shares, or substantially all the assets, of any
bank, or for a merger or consolidation by a bank holding company with any other
bank holding company. The Act also prohibits the acquisition by a bank holding
company or any of its subsidiaries of voting shares, or substantially all the
assets, of any bank located in a state other than the state in which the
operations of the bank holding company's banking subsidiaries are principally
conducted, unless the statutes of the state in which the bank to be acquired is
located expressly authorize such acquisition.

With certain limited exceptions, a bank holding company is prohibited from
acquiring direct or indirect ownership or control of more than 5% of the voting
shares of any company that is not a bank or bank holding company and from
engaging directly or indirectly in any activity other than banking or managing
or controlling banks or furnishing services to, or performing services for, its
authorized subsidiaries. A bank holding company may, however, engage in or
acquire an interest in a company that engages in activities that the Board has
determined to be so closely related to banking or to managing or controlling
banks as to be properly incident thereto. In making such a determination, the
Board is required to consider whether the performance of such activities
reasonably can be expected to produce benefits to the public, such as greater
convenience, increased competition, or gains in efficiency, which outweigh
possible adverse effects, such as undue concentration of resources, decreased or
unfair competition, conflicts of interest or unsound banking practices. The
Board is also empowered to differentiate between activities commenced de novo
and activities commenced by the acquisition, in whole or in part, of a going
concern.

Additional statutory provisions prohibit a bank holding company and any
subsidiary banks from engaging in certain tie-in arrangements in connection with
the extension of credit, sale or lease of property or furnishing of services.
Thus, a subsidiary bank may not extend credit, lease or sell property, or
furnish any services, or fix or vary the consideration for any of the foregoing
on the condition that: (i) the customer must obtain or provide some additional
credit, property or service from or to such bank other than a loan, discount,
deposit or trust service; or (ii) the customer must obtain or provide some
additional credit, property or service from or to the company or any other
subsidiary of the company; or (iii) the customer may not obtain some other
credit, property to service from competitors, except reasonable requirements to
assure soundness of the credit extended. These anti-tying restrictions also
apply to bank holding companies and their non-bank subsidiaries as if they were
banks.

The Company's ability to pay cash dividends is subject to restrictions set forth
in the California General Corporation Law.  The Bank is a legal entity separate
and distinct from the Company, and is subject to various statutory and
regulatory restrictions on its ability to pay dividends to the Company.  See
Note 14(c) to the financial statements for further information regarding the
payment of cash dividends by the Company and the Bank.

The Company is a bank holding company within the meaning of Section 3700 of the
California Financial Code.  As such, the Company and its subsidiaries are
subject to examination by, and may be required to file reports with, the
Commissioner. Regulations have not yet been proposed or adopted to implement the
Commissioner's powers under this statute.

The Bank:
--------

The Bank, as a national banking association whose deposit accounts are insured
by the Federal Deposit Insurance Corporation (the "FDIC") up to the maximum
legal limits and the Bank is subject to regulation, supervision, and regular
examination by the OCC. The Bank is a member of the Federal Reserve System, and,
as such, is subject to certain provisions of the Federal Reserve Act and
regulations issued by the Board. The Bank is also subject to applicable
provisions of California law, insofar as they are not in conflict with, or
preempted by, federal law. The regulations of these various agencies govern most
aspects of the Bank's business, including reserves against deposits, interest
rates payable on deposits, loans, investments, mergers and acquisitions,
borrowings, dividends and location of branch offices.

                                       5
<PAGE>

Officers:
--------

Leon Zimmerman, age 57, is President and Chief Executive Officer of the Bank and
of the Company; Robert H. Daneke, age 46, is Executive Vice President and Chief
Credit Officer of the Bank and of the Company; Allen R. Christenson, age 42, is
Senior Vice-President, Chief Financial Officer and Secretary of the Bank and of
the Company and; Lance Gallagher, age 55, is Senior Vice President and
Operations Administrator of the Bank and the Company.

Mr. Zimmerman joined the Company in April, 1990. He was promoted from Executive
Vice President and Chief Credit Officer of Bank of Lodi to President and CEO in
August of 1994. Mr. Zimmerman became President and CEO of the Company effective
August 1995. He lives in Lodi with his wife and has resided and worked in the
San Joaquin-Sacramento Valley since 1960, serving in various banking capacities
since 1962. Mr. Zimmerman serves on many community boards and committees,
including the Lodi Police Chaplaincy Association, San Joaquin County Education
Foundation, Chamber of Commerce - Economic Development Task Force & Agribusiness
Committees, LEED - Sacramento Steering Committee and Lodi Grape Festival and
Harvest Fair. He is an active member of Rotary, Sutter Club, Independent Order
of Odd Fellows and several other community groups.

Mr. Daneke joined the Company in December, 1999 bringing on board 22 years of
banking experience. Prior to joining the Company, Mr. Daneke was employed at
Clovis Community Bank for the past eight years and was promoted to Senior Vice
President/Senior Credit Officer in 1997. In addition, his career has included:
seven years with the Correspondent Bank Division of Community Bank in Redwood
City and seven years with Bank of America Technology Banking Group. Mr. Daneke
holds a B.B.A. Degree in Finance from the University of Iowa. He is also a
graduate of Pacific Coast Banking School at the University of Washington and the
California Intermediate Banking School at the University of San Diego. He has
been President and Chairman of the Board for the Clovis District Chamber of
Commerce and has served on the Board of Directors for both the Clovis Kiwanis
Club and the Sequoia Council of Boy Scouts of America. Mr. Daneke has recently
purchased a home in the Lodi area where he will reside with his wife and two
children.

Mr. Christenson joined the Company in August, 1999.  Prior to joining the
Company, Mr. Christenson was Senior Vice President and Chief Financial Officer
of River City Bank, located in Sacramento, California (1994-1999). Prior to
joining River City Bank, Mr. Christenson was Senior Vice President and Chief
Financial Officer of CapitolBank Sacramento which was acquired by another Bank
(1993-1994). Prior to joining CapitolBank Sacramento, Mr. Christenson was in
public accounting for over eight years, specializing in financial audits and
consulting within the financial services industry. Mr. Christenson is a
Certified Public Accountant and has a Bachelors degree from California State
University, Sacramento. He resides in South Sacramento with his wife and five
children. He is a life-long resident of the greater Sacramento area and
continues to serve in various community and civic organizations.

Mr. Gallagher joined the Bank in February, 1991.  He was promoted from Vice
President of Compliance to Senior Vice President and Operations Administrator in
January, 1997. As a graduate of the American Bankers Associations Graduate
School of Compliance, he is responsible for the Bank's regulatory compliance
program in addition to Bank operations and item processing. Prior to joining the
Company, Mr. Gallagher was with Wells Fargo Bank for 22 years in various
customer service, operations, and human resource capacities of increasing
responsibility. He lives in San Joaquin County with his wife and has four boys
and a grandson. Mr. Gallagher is a banking instructor for The American Institute
of Banking and Delta Community College, serves as a member of the Colleges
Banking Advisory Board, a member of the Heald College Employer Advisory
Committee, and is the Initiation Coaching Program Director with U. S. Hockey
Pacific District.

Recent Legislation and Regulations Affecting Banking:
----------------------------------------------------

From time to time, new laws are enacted which increase the cost of doing
business, limit permissible activities, or affect the competitive balance
between banks and other financial institutions. Proposals to change the laws and
regulations governing the operations and taxation of bank holding companies,
banks and other financial institutions are frequently made in Congress, in the
California legislature and before various bank holding company and bank
regulatory agencies. The likelihood of any major changes and the impact such
changes might have are impossible to predict. Certain significant recently
proposed or enacted laws and regulations are discussed below.

Interstate Banking. Since 1986, California has permitted California banks and
bank holding companies to be acquired by banking organizations based in other
states on a "reciprocal" basis (i.e., provided the other state's laws permit
California banking organizations to acquire banking organizations in that state
on substantially the same terms and conditions applicable to local banking
organizations).  Since October 2, 1995, California law implementing certain
provisions of prior federal law have (1) permitted interstate merger
transactions; (2) prohibited interstate branching through the acquisition of a
branch business unit located in California without acquisition of the whole unit
of the California bank; and (3) prohibited interstate branching through

                                       6
<PAGE>

de novo establishment of California branch offices. Initial entry into
California by an out-of-state institution must be accomplished by acquisition of
or merger with an existing whole bank which has been in existence for at least
five years.

Capital Requirements. Federal regulation imposes upon all FDIC-insured financial
institutions a variable system of risk-based capital guidelines designed to make
capital requirements sensitive to differences in risk profiles among banking
organizations, to take into account off-balance sheet exposures and to aid in
making the definition of bank capital uniform internationally. Under the OCC's
risk-based capital guidelines, the Bank is required to maintain capital equal to
at least 8 percent of its assets, weighted by risk. Assets and off-balance sheet
items are categorized by the guidelines according to risk, and certain assets
considered to present less risk than others permit maintenance of capital below
the 8 percent level. The guidelines established two categories of qualifying
capital: Tier 1 capital comprising core capital elements, and Tier 2 comprising
supplementary capital requirements. At least one-half of the required capital
must be maintained in the form of Tier 1 capital. For the Bank, Tier 1 capital
includes only common stockholders' equity and retained earnings, but qualifying
perpetual preferred stock would also be included without limit if the Bank were
to issue such stock. Tier 2 capital includes, among other items, limited life
(and in the case of banks, cumulative) preferred stock, mandatory convertible
securities, subordinated debt and a limited amount of the allowance for loan and
lease losses.

The guidelines also require all insured institutions to maintain a minimum
leverage ratio of 3 percent Tier 1 capital to total assets (the "leverage
ratio"). The OCC emphasizes that the leverage ratio constitutes a minimum
requirement for the most well-run banking organizations. All other banking
organizations are required to maintain a minimum leverage ratio ranging
generally from 4 to 5 percent. The Bank's required minimum leverage ratio is 4
percent.

The federal banking agencies during 1996 issued a joint agency policy statement
regarding the management of interest-rate risk exposure (interest rate risk is
the risk that changes in market interest rates might adversely affect a bank's
financial condition) with the goal of ensuring that institutions with high
levels of interest-rate risk have sufficient capital to cover their exposures.
This policy statement reflected the agencies' decision at that time not to
promulgate a standardized measure and explicit capital charge for interest rate
risk, in the expectation that industry techniques for measurement of such risk
will evolve.

However, the Federal Financial Institutions Examination Council ("FFIEC") on
December 13, 1996, approved an updated Uniform Financial Rating System
("UFIRS"). In addition to the five components traditionally included in the so-
called "CAMEL" rating system which has been used by bank examiners for a number
of years to classify and evaluate the soundness of financial institutions
(including capital adequacy, asset quality, management, earnings and liquidity),
UFIRS includes for all bank regulatory examinations conducted on or after
January 1, 1997, a new rating for a sixth category identified as sensitivity to
market risk. Ratings in this category are intended to reflect the degree to
which changes in interest rates, foreign exchange rates, commodity prices or
equity prices may adversely affect an institution's earnings and capital. The
rating system henceforth will be identified as the "CAMELS" system.

As of December 31, 1999, the Bank's total risk-based capital ratio was
approximately 10.51 percent and its leverage ratio was approximately 7.82
percent. The Bank does not presently expect that compliance with the risk-based
capital guidelines or minimum leverage requirements will have a materially
adverse effect on its business in the reasonably foreseeable future. Nor does
the Bank expect that its sensitivity to market risk will adversely affect its
overall CAMELS rating as compared with its previous CAMEL ratings by bank
examiners.

Deposit Insurance Assessments.  In 1995, the FDIC, pursuant to Congressional
mandate, reduced bank deposit insurance assessment rates to a range from $0 to
$.27 per $100 of deposits, dependent upon a bank's risk. The FDIC has continued
these reduced assessment rates through 1999. Based upon the above risk-based
assessment rate schedule, the Bank's current capital ratios, the Bank's current
level of deposits, and assuming no further change in the assessment rate
applicable to the Bank during 1999, the Bank estimates that its annual
noninterest expense attributed to the regular assessment schedule will not
increase during 1999.

Prompt Corrective Action. Prompt Corrective Action Regulations (the "PCA
Regulations") of the federal bank regulatory agencies established five capital
categories in descending order (well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized and critically
undercapitalized), assignment to which depends upon the institution's total
risk-based capital ratio, Tier 1 risk-based capital ratio, and leverage ratio.
Institutions classified in one of the three undercapitalized categories are
subject to certain mandatory and discretionary supervisory actions, which
include increased monitoring and review, implementation of capital restoration
plans, asset growth restrictions, limitations upon expansion and new business
activities, requirements to augment capital, restrictions upon deposit gathering
and interest rates, replacement of senior executive officers and directors, and
requiring divestiture or sale of the institution. The Bank has been classified
as a well-capitalized bank since adoption of the PCA Regulations.

                                       7
<PAGE>

Community Reinvestment Act. Community Reinvestment Act ("CRA") regulations
effective as of July 1, 1995 evaluate banks' lending to low and moderate income
individuals and businesses across a four-point scale from "outstanding" to
"substantial noncompliance," and are a factor in regulatory review of
applications to merge, establish new branches or form bank holding companies. In
addition, any bank rated in "substantial noncompliance" with the CRA regulations
may be subject to enforcement proceedings. The Bank has a current rating of
"satisfactory" CRA compliance.

Safety and Soundness Standards. Federal bank regulatory agency safety and
soundness standards for insured financial institutions establish standards for
(1) internal controls, information systems and internal audit systems; (2) loan
documentation; (3) credit underwriting; (4) interest rate exposure; (5) asset
growth; and (6) compensation, fees and benefits. In addition, the standards
prohibit the payment of compensation which is excessive or which could lead to
material financial loss. If an agency determines that an institution fails to
meet any standard established by the guidelines, the agency may require the
financial institution to submit to the agency an acceptable plan to achieve
compliance with the standard. Agencies may elect to initiate enforcement action
in certain cases where failure to meet one or more of the standards could
threaten the safe and sound operation of the institution. The Bank has not been
and does not expect to be required to submit a safety and soundness compliance
plan because of a failure to meet any of the safety and soundness standards.

Permitted Activities. In recent years, the Federal banking agencies, especially
the OCC and the Board, have taken steps to increase the types of activities in
which national banks and bank holding companies can engage, and to make it
easier to engage in such activities. On November 20, 1996, the OCC issued final
regulations permitting national banks to engage in a wider range of activities
through subsidiaries. "Eligible institutions" (those national banks that are
well capitalized, have a high overall rating and a satisfactory CRA rating, and
are not subject to an enforcement order) may engage in activities related to
banking through operating subsidiaries after going through a new expedited
application process. In addition, the new regulations include a provision
whereby a national bank may apply to the OCC to engage in an activity through a
subsidiary in which the bank itself may not engage. Although the Bank in not
currently intending to enter into any new type of business, this OCC regulation
could be advantageous to the Bank if the Bank determines to expand its
operations in the future, depending on the extent to which the OCC permits
national banks to engage in new lines of business and whether the Bank qualifies
as an "eligible institution" at the time of making application.

Monetary Policies. Banking is a business in which profitability depends on rate
differentials. In general, the differences between the interest rate received by
a bank on loans extended to its customers and securities held in that bank's
investment portfolio and the interest rate paid on its deposits and its other
borrowings constitute the major portion of the bank's earnings. To the extent
that a bank is not able to compensate for increases in the cost of deposits and
other borrowings with greater income from loans, securities and fees, the net
earnings of that bank will be reduced. The interest rates paid and received by
any bank are highly sensitive to many factors which are beyond the control of
that bank, including the influence of domestic and foreign economic conditions.
See Item 7 herein, Management's Discussion and Analysis of Financial Condition
and Results of Operations.

The earnings and growth of a bank are also affected by the monetary and fiscal
policy of the United States Government and its agencies, particularly the Board.
These agencies can and do implement national monetary policy, which is used in
part to curb inflation and combat recession. Among the instruments of monetary
policy used by these agencies are open market transactions in United States
Government securities, changes in the discount rates of member bank borrowings,
and changes in reserve requirements. The actions of the Board have had a
significant effect on banks' lending, investments and deposits, and such actions
are expected to continue to have a substantial effect in the future. However,
the nature and timing of any further changes in such policies and their impact
on banks cannot be predicted.

Financial Services Modernization Legislation. On November 12, 1999 President
Clinton signed into law the Gramm-Leach-Bliley Act of 1999 (the "Modernization
Act"). The Modernization Act repeals the two affiliation provisions of the
Glass-Steagall Act: Section 20, which restricts the affiliation of Federal
Reserve Member banks with firms "engaged principally" in specified securities
activities; and Section 32, which restricts officer, director, or employee
interlocks between a member bank and any company or person "primarily engaged"
in specified securities activities. In addition, the Modernization Act also
expressly preempts any state law restricting the establishment of financial
affiliations, primarily related to insurance. The law establishes a
comprehensive framework to permit affiliations among commercial banks,
insurance companies, securities firms, and other financial service providers by
revising and expanding the BHC Act framework to permit a holding company system
to engage in a full range of financial activities through a new entity known
as a Financial Holding Company. "Financial activitities" is broadly defined to
include not only banking, insurance, and securities activities, but also
merchant banking and additional activities that the nature, incidental to such
financial activities, or complementary activities that do not pose a
substantial risk to the safety and soundness of depository institutions or the
financial system generally.

In order for the Company to take advantage of the ability provided by the
Modernization Act to affiliate with other financial service providers, it must
become a "Financial Holding Company." To do so, the Company would file a
declaration with the Federal Reserve, electing to engage in activities
permissible for Financial Holding Companies and certifying that it is eligible
to do so because its insured depository institution subsidiary (the Bank) is
well-capitalized and well-managed. In addition, the Federal Reserve must also
determine that an insured depository institution subsidiary has at least a
"satisfactory" rating under the Community Reinvestment Act. [The Company
currently meets the requirements for Financial Holding Company status.] The
Company will continue to monitor its strategic business plan to determine
whether, based on market conditions and other factors, the Company wishes to
utilize any of its expanded powers provided in the Modernization Act.

Under the Modernization Act, securities firms and insurance companies that
elect to become Financial Holding Companies may acquire banks and other
financial institutions. The Company does not believe that the Modernization Act
will have a material adverse effect on its operations in the near-term.
However, to the extent that it permits banks, securities firms, and insurance
companies to affiliate, the financial services industry may experience further
consolidation. The Modernization Act is intended to grant to community banks
certain powers as a matter of right that larger institutions have accumulated on
an ad hoc basis. Nevertheless, this act may have the result of increasing the
amount of competition that the Company and the Bank face from larger
institutions and other types of companies offering financial products, many of
which may have substantially more financial resources that the Company and the
Bank.

Proposed Legislation and Regulation. Certain legislative and regulatory
proposals that could affect the Bank and the banking business in general are
pending or may be introduced before the United States Congress, the California
State Legislature and Federal and state government agencies. The United States
Congress is considering numerous bills that could reform banking laws
substantially.

It is not known whether any of these current legislative proposals will be
enacted and what effect such legislation would have on the structure, regulation
and competitive relationships of financial institutions.  It is likely, however,
that many of these proposals would subject the Bank to increased regulation,
disclosure and reporting requirements and would increase competition to the Bank
and its cost of doing business.

                                       8
<PAGE>

In addition to pending legislative changes, the various banking regulatory
agencies frequently propose rules and regulations to implement and enforce
already existing legislation. It cannot be predicted whether or in what form any
such rules or regulations will be enacted or the effect that such rules and
regulations may have on the Bank's business.

The above description of the business of the Bank should be read in conjunction
with Item 7 herein, Management's Discussion and Analysis of Financial Condition
and Results of Operations.


ITEM 2. PROPERTIES

The Bank owns a 0.861 acre lot located at the corner of Ham Lane and Tokay
Street, Lodi, California. A 34,000 square foot, tri-level commercial building
for the main branch and administrative offices of the Company and the Bank was
constructed on the lot. The Company and the Bank use approximately 75% of the
leasable space in the building and the remaining area is either leased or
available for lease as office space to other tenants. The construction of this
building in 1991 has enabled the Bank to better serve its customers with more
teller windows, four drive-through lanes and expanded safe deposit box capacity.

The Company owns a 10,000 square foot lot located on Lower Sacramento Road in
the unincorporated San Joaquin County community of Woodbridge, California.  The
entire parcel has been leased to the Bank on a long term basis at market rates.
The Bank has constructed, furnished and equipped a 1,437 square foot branch
office on the parcel and commenced operations of the Woodbridge Branch on
December 15, 1986.

The Bank assumed a long-term ground lease on 1.7 acres of land at 19000 North
Highway 88, Lockeford, California. The building previously occupying the Lodi
site at 701 South Ham Lane was moved to Lockeford, California, and has become
the permanent branch office of the Bank at that location. A temporary 1,000
square foot office had been used by the Bank at the Lockeford location. The
permanent office was opened on April 1, 1991. The temporary office, along with a
portion of the permanent building, are leased by the Bank to two tenants.

On February 22, 1997, the Bank acquired the Galt, Plymouth and San Andreas
branches of Wells Fargo Bank. The transaction included the assumption of the
6,000 square foot branch building lease in Galt with a remaining term of two
years, and the purchase of the branch building and land for the Plymouth and San
Andreas offices. The Plymouth and San Andreas offices are approximately 1,200
and 5,500 square feet, respectively. In November, 1998, upon expiration of the
Galt lease, the Galt branch was relocated to a new 3,000 square foot leased
facility one block west of the old location. The new Galt location is leased
under a five year lease with three successive five-year renewal options.

In January, 1998, the Bank opened a 1,220 square foot loan production office in
Folsom, California. The office was leased for one year with a one year renewal
option which has been exercised by the Bank. In July, 1999 the Bank received
approval to operate the Folsom office as a full-service branch. In December
1999, the lease was extended for one year to allow the Bank time identify a
permanent location within the Folsom community. In August, 1998, the Bank opened
a 4,830 square foot full service branch in Elk Grove, California. The office is
leased under a three year lease with two successive three-year renewal options.

ITEM 3. LEGAL PROCEEDINGS

     Not Applicable


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

     Not Applicable

                                       9
<PAGE>

                                    PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

There is no established public trading market for the common stock of the
Company.  The Company's common stock is traded in the over-the-counter market
and is not presently listed on a national exchange or reported by the NASDAQ
Stock Market.  Trading of the stock has been limited and has been principally
contained within the Company's general service area. As of March 1, 2000, there
were 1,033 shareholders of record of the Company's common stock.  Set forth
below is the range of high and low bid prices for the common stock during 1999
and 1998.

                                          1999             1998
     Bid Price of Common Shares       High    Low      High    Low

     First Quarter                  $12.25  11.00     13.25  13.00
     Second Quarter                  12.50  11.00     14.50  13.63
     Third Quarter                   12.50  10.63     14.63  13.25
     Fourth Quarter                  11.00   9.12     13.38  12.00


The foregoing prices are based on trades of which Company is aware and reflect
inter-dealer prices, without retail mark-up, mark-down or commissions, and may
not necessarily represent actual transactions.


ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
     (in thousands except per share amounts)
     Consolidated Statement of Income        1999      1998       1997      1996      1995
--------------------------------------------------------------------------------------------------
     <S>                                     <C>       <C>        <C>       <C>       <C>
     Interest Income                        $ 12,526   11,508      10,592     8,045    8,089
     Interest Expense                          3,699    4,028       3,785     3,254    3,138
     Net Interest Income                       8,827    7,480       6,807     4,791    4,951
     Provision for Loan Losses                 1,051      250         (60)      310      115
     Noninterest Income                        2,461    1,878       1,423     1,067      940
     Noninterest Expense                       8,803    7,712       6,796     4,654    4,534
     Net Income                             $  1,159    1,052       1,015       640      843

     Per Share Data
--------------------------------------------------------------------------------------------------
     Basic Earnings                         $    .83      .76         .74       .48      .63
     Diluted Earnings                            .80      .72         .71       .47      .62
     Cash Dividends Declared                $    .20      .20         .20       .20      .15
     Consolidated Balance Sheet Data
--------------------------------------------------------------------------------------------------
     Federal Funds Sold                     $    100    4,800       4,900     1,100    3,300
     Investment Securities                    36,096   45,647      61,917    36,913   36,945
     Loans, net of loss reserve and
        deferred fees                        109,594   91,078      62,228    52,672   50,524
     Total Assets                            176,334  164,400     147,850   104,913  103,972
     Total Deposits                          156,161  149,544     133,891    92,207   89,216
     Other Borrowings                          4,300        -           -         -    2,585
     Total Stockholders' Equity             $ 14,521   13,857      12,861    11,889   11,564
 </TABLE>

                                       10
<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

Certain statements in this Annual Report on Form 10-K include 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; changes in the
interest rate environment; general economic conditions, either nationally or
regionally becoming less favorable than expected and resulting in, among other
things, a deterioration in credit quality and an increase in the provision for
possible loan losses; changes in the regulatory environment; changes in business
conditions; volatility of rate sensitive deposits; operational risks, including
data processing system failures or fraud; asset/liability matching risks and
liquidity risks; and changes in the securities markets.

The following discussion addresses information pertaining to the financial
condition and results of operations of the Company that may not be otherwise
apparent from a review of the consolidated financial statements and related
footnotes.  It should be read in conjunction with those statements and notes
found on pages 33 through 55, as well as other information presented throughout
this report.

Summary of Earnings Performance
--------------------------------------------------------------------------------

                                      For the Year Ended December 31:
                                      ------------------------------------------
                                     1999               1998              1997

Earnings (in thousands)           $ 1,159              1,052             1,015
--------------------------------------------------------------------------------

Basic earnings per share          $   .83                .76               .74
Diluted earnings per share        $   .80                .72              .71
Return on average assets             0.69%              0.68%             0.75%
Return on average equity             8.19%              7.90%             8.18%
Dividend payout ratio               24.19%             26.26%            26.86%
--------------------------------------------------------------------------------

Average equity to average assets     8.40%              8.64%             9.12%
--------------------------------------------------------------------------------

Basic earnings per share in 1999 were $.83, compared to $.76 and $.74 in 1998
and 1997, respectively. During 1999, the Company benefited from a 21.1% increase
in gross loans which resulted in an increase in net interest income.  Net
interest income was also impacted by the shift in earning assets combined with a
general decline in rates.  As a result of the increase in loans, the Company did
increase the provision for loan losses.  Furthermore, the Company experienced a
31% increase in noninterest income and a 14% increase in noninterest expense
during the year.  Included in noninterest income is a $287,000 gain resulting
from stock received from an insurance company which converted from a mutual to a
stock based company during 1999.  The Company purchased a policy from the
insurance company and the stock was received as part of the demutualization.
Earnings of the Company continue to be negatively impacted by the amortization
of the premium associated with the acquisition of three branches from Wells
Fargo Bank on February 22, 1997.  Additionally, the Company incurred $152,000 in
one time expenses during 1999 in preparation for the year 2000 date change.

During 1998, loans and deposits increased 45% and 12%, respectively from 1997.
In addition the company experienced record levels of mortgage loan origination
and sales volumes.  Deposits grew in connection with business development
efforts in both 1998 and 1997 as well as the acquisition of three branches from
Wells Fargo Bank on February 22, 1997.  The acquisition increased deposits by
$34 million as of the closing date of the transaction.

                                       11
<PAGE>

Branch Expansion and Acquisitions

In August, 1998, the Bank opened a full-service branch in the Elk Grove,
California market.  The Elk Grove office is approximately 30 miles North of the
Bank's corporate headquarters in Lodi, California and it effectively expands the
Bank's trade area into South Sacramento County.

In January, 1998, the Bank opened a loan production office in the growing market
of Folsom, California.  The location was converted to a full-service branch in
July, 1999.  The Folsom office is approximately 45 miles Northeast of the Bank's
corporate headquarter's in Lodi, California and effectively expanded the Bank's
trade area into the greater Sacramento area.

On February 22, 1997, the Bank completed the acquisition of the Galt, Plymouth,
and San Andreas, California, branches of Wells Fargo Bank.  The Bank purchased
the premises and equipment of the Plymouth and San Andreas branches and assumed
the building lease for the Galt branch.  The Bank also purchased the furniture
and equipment of all three branches and paid a premium for the deposits of each
branch. The total cost of acquiring the branches, including payments to Wells
Fargo Bank as well as other direct costs associated with the purchase, was $2.86
million.  The transaction was accounted for using the purchase method of
accounting. Accordingly, the purchase price was allocated first to identifiable
tangible assets based upon those assets' fair value and then to identifiable
intangible assets based upon the assets' fair value.  The excess of the purchase
price over identifiable tangible and intangible assets was allocated to
goodwill.  Allocations to identifiable tangible assets, identifiable intangible
assets, and goodwill were $856 thousand, $1.98 million, and $24 thousand,
respectively.  Deposits totaling $34 million were acquired in the transaction.

                                       12
<PAGE>

Net Interest Income

The following table provides a detailed analysis of net interest spread and net
interest margin for the years ended December 31, 1999, 1998, and 1997,
respectively:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                      For the Year Ended                 For the Year Ended                For the Year Ended
                                       December 31, 1999                  December 31, 1998                December 31, 1997
                                        (Dollar amounts                    (Dollar amounts                  (Dollar amounts
                                         in thousands)                      in thousands)                    in thousands)
                             -------------------------------------------------------------------------------------------------------
                                  Average       Income/             Average       Income/            Average     Income/
                                  Balance      Expenses   Yield     Balance      Expenses    Yield   Balance     Expense     Yield
                                  -------      --------   -----     -------      --------    -----   -------     -------     -----
<S>                               <C>          <C>        <C>       <C>          <C>         <C>     <C>         <C>         <C>
Earning Assets:
Investment securities (1)          $ 41,050       2,413    5.88%     53,370         3,431     6.43%   53,580       3,519      6.57%
Federal funds sold                    4,150         202    4.86%      6,780           348     5.13%    8,400         461      5.49%
Loans (2)                           101,120       9,911    9.80%     73,720         7,729    10.48%   58,600       6,612     11.28%
                                   --------      ------    ----     -------        ------    -----   -------     -------     -----
                                   $146,320      12,526    8.56%    133,870        11,508     8.60%  120,580      10,592      8.78%
                                   ========      ======    ====     =======        ======    =====   =======     =======     =====
Liabilities:
Noninterest bearing deposits       $ 19,830           -       -      17,080             -        -    13,470          -          -
Savings, money market, & NOW
 deposits                            82,110       1,358    1.65%     76,600         1,652     2.16%   67,520      1,660       2.46%
Time deposits                        50,690       2,330    4.60%     46,800         2,376     5.08%   41,550      2,125       5.11%
Other borrowings                        170          11    6.25%          -             -        -         -          -          -
                                   --------      ------    ----     -------        ------    -----   -------     ------      -----
Total Liabilities                  $152,800       3,699    2.42%    140,480         4,028     2.87%  122,540      3,785       3.09%
                                   ========      ======    ====     =======        ======    =====   =======     ======      =====
Net Spread                                                 6.14%                              5.73%                           5.69%
                                                           ====                              =====                           =====
</TABLE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                    Earning      Income             Earning        Income              Earning       Income
                                     Assets   (Expense)   Yield      Assets    (Expenses)    Yield      Assets    (Expense)  Yield
                                     ------   ---------   -----      ------    ----------    -----      ------    ---------  -----
<S>                               <C>         <C>        <C>       <C>        <C>            <C>     <C>        <C>          <C>
Yield on average earning
 assets                            $146,320      12,526    8.56%    133,870        11,508     8.60%    120,580       10,592   8.78%
Cost of funds for average
 earning assets                     146,320      (3,699)   2.53%    133,870        (4,028)    3.01%    120,580       (3,785) (3.13%)
                                   --------      ------    ----     -------         -----    -----     -------       ------  -----

Net Interest Margin                $146,320       8,827    6.03%    133,870         7,480     5.59%    120,580        6,807   5.65%
                                   ========      ======    ====     =======         =====    =====     =======       ======  =====
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  Income on tax-exempt securities has not been adjusted to a tax equivalent
basis.
(2)  Nonaccrual loans are included in the loan totals for each year.

Net interest income increased by 18% in 1999 after increasing by 10% in 1998.
The increase in 1999 was the result of a 9.3% increase in average earning assets
combined with an 8.6% increase in average deposits in addition to a decrease in
overall deposit costs. The increase in 1998 was also the result of both growth
in earning assets and deposits as well as decreased earning asset yields and
decreased deposit costs.

Average earning assets increased by 9% in 1999 compared to 1998 and 11% in 1998
compared to 1997. The increase in average earning assets was driven by growth in
average deposits during both years. Average deposits increased by 9% in 1999
compared to 1998 and 15% in 1998 compared to 1997.

The mix of earning assets in 1999 changed as a result of year-over-year loan
growth of 21% compared to 45% in 1998. Average loans in 1999 increased 37%
compared to 1998. The increase absorbed the liquidity created by the growth in
deposits during 1999 and offset the impact of falling interest rates in all
asset categories. The loan growth also increased the average loan-to-deposit
ratio to 66% in 1999 compared to 52% in 1998. Average investments decreased 23%
in 1999 as compared to 1998 as a result of the increase in loans. Average
investments were nearly unchanged in 1998 compared to 1997.

                                       13
<PAGE>

Net interest margin increased by 44 basis points in 1999 after declining by 6
basis points in 1998.  This increase in 1999 was the result of several key
items:

     .    The impact on average earning asset yields of declining interest rates
          was overcome by the growth in loans that had higher yields than
          investments and federal funds sold. While the yields on federal funds
          and investments declined by 27 and 55 basis points, respectively,
          earning asset yields decreased by 4 basis points.

     .    The general decline in interest rates helped to bring down the cost of
          average NOW, money market, savings and certificates of deposit by 17,
          90, 60, and 48 basis points, respectively.

     .    The mix of noninterest bearing deposits increased to 13% of average
          deposits in 1999 from 12% in 1998.

Net interest margin declined by 6 basis points in 1998 after increasing by 50
basis points in 1997.  Excluding the impact of interest from the recovery of
loan losses in 1997, net interest margin would have increased by 31 basis points
in 1998.  This adjusted increase in 1998 was the result of several key items:

     .    The impact on average earning asset yields of declining interest rates
          was overcome by the growth in loans that had higher yields than
          investments and federal funds sold. While the yields on federal funds
          and investments declined by 36 and 14 basis points, respectively,
          earning asset yields decreased by 18 basis points.

     .    The general decline in interest rates helped to bring down the cost of
          average NOW, savings and certificates of deposit by 32, 26, and 3
          basis points, respectively.

     .    The mix of noninterest bearing deposits increased to 12% of average
          deposits in 1998 from 11% in 1997.


The following table presents the monetary impact of the aforementioned changes
in earning asset and deposit volumes, yields and mix for the two years ended
December 31, 1999 and 1998.

<TABLE>
<CAPTION>

                                  1999 compared to 1998          1998 compared to 1997
                                     (in thousands)                  (in thousands)

                               Change due to:                   Change due to:

Interest Income:                Volume   Rate    Mix    Total   Volume  Rate    Mix   Total
                               --------  -----  -----  -------  ------  -----  -----  ------
                             ----------------------------------------------------------------
<S>                          <C>         <C>    <C>    <C>      <C>     <C>    <C>    <C>
Investment securities           $ (987)   (43)    12   (1,018)     391   (79)  (400)    (88)
Federal funds sold                (135)   (18)     7     (146)      51   (30)  (134)   (113)
Loans                            2,873   (504)  (187)   2,182      735  (470)   852   1,117
                                ------   ----   ----   ------    -----  ----   ----   -----
Total interest income           $1,751   (565)  (168)   1,018    1,177  (579)   318     916
                                ======   ====   ====   ======    =====  ====   ====   =====
Interest Expense:

Savings, money market, &
 NOW accounts                   $  117   (384)   (27)    (294)     243  (206)   (45)     (8)
Time deposits                      197   (224)   (19)     (46)     311   (15)   (45)    251
Other borrowings                    11      -      -       11        -     -      -       -
                                ------   ----   ----   ------    -----  ----   ----   -----
Total interest expense          $  325   (608)   (46)    (329)     554  (221)   (90)    243
                                ======   ====   ====   ======    =====  ====   ====   =====
Net interest income             $1,426     43   (122)   1,347      623  (358)   408     673
                                ======   ====   ====   ======    =====  ====   ====   =====
---------------------------------------------------------------------------------------------
</TABLE>


The volume, rate, and mix variances for net interest income in 1999 compared to
1998 indicate that the 37% increase in average loans was offset by a negative
mix variance combined with a decrease in rates.  During 1999, average earning
assets increased 9%.  Average loans, the primary component of earning assets,
comprised 69% and 55% of total earning assets during 1999 and 1998,
respectively.  Average investment securities and federal funds sold decreased
23% and 39%, respectively.  While average deposits increased 9% during 1999,
the average rate paid on deposit accounts declined 16% resulting in a reduction
in total interest expense.

The volume, rate, and mix variances for net interest income in 1998 compared to
1997 indicate that a negative rate variance driven by falling interest rates was
offset by a positive mix variance driven by a 26% increase in average loans.
That left the net increase in net interest income approximately equal to the
positive volume variance from the 11% growth in average earning assets.  The net
interest income rate variance is significantly impacted by $445 thousand in 1997
resulting from interest income recognized in connection with the recovery of
loans which had been previously charged off.  Excluding the recovered interest

                                       14
<PAGE>

from 1997, the rate variance would have been a positive $87 thousand despite
falling earning asset yields.  The benefit from declining deposit rates more
than offsets declines in interest income that resulted from falling earning
asset yields.


Allowance for Loan Losses

The following table reconciles the beginning and ending allowance for loan
losses for the previous five years.  Reconciling activity is broken down into
the three principal items that impact the reserve: (1) reductions from charge-
offs; (2) increases from recoveries; and (3) increases or decreases from
positive or negative provisions for loan losses.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
(in thousands)                                        1999          1998         1997         1996        1995
<S>                                                <C>             <C>          <C>          <C>         <C>
Balance at beginning of period                       $1,564        1,313        1,207          959       1,127

Charge-offs:

  Commercial                                             90           67          249          237         357
  Real estate                                             -           25            -            -          30
  Consumer                                               20           40           41           97          95
                                                     ------        -----        -----        -----       -----
  Total Charge-offs                                     110          132          290          334         482

Recoveries:

  Commercial                                             68          112          434          260         174
  Real estate                                             -            -            -            -           -
  Consumer                                                7           21           22           12          25
                                                     ------        -----        -----        -----       -----
  Total Recoveries                                       75          133          456          272         199
                                                     ------        -----        -----        -----       -----
Net charge-offs                                         (35)          (1)        (166)          62         283
Additions charged to operations                       1,051          250         ( 60)         310         115
                                                     ------        -----        -----        -----       -----
Balance at end of period                             $2,580        1,564        1,313        1,207         959
                                                     ======        =====        =====        =====       =====
Ratio of net charge-offs to average loans
 outstanding                                           (.03%)      (.001%)       (.28%)       0.11%       0.50%
                                                     ======        =====        =====        =====       =====
--------------------------------------------------------------------------------------------------------------
</TABLE>

Footnote 1(g) to the consolidated financial statement discusses the factors used
in determining the provision for loan losses and the adequacy of the allowance
for loan losses.

Charge-off activity declined by 17% in 1999 compared to 1998, and 54% in 1998
compared to 1997, while recoveries declined by 44% and 71%, respectively, during
the same period.  The decline in charge-offs is consistent with the asset
quality statistics discussed below in the Asset Quality section.  The Bank has
not modified or significantly excepted its underwriting standards despite
growing competition within the industry.

The loan loss provision for 1999 totaled $1,051,000 and represents an increase
of $801,000 (320%) over 1998.  The reason for the increase is attributable
primarily to two factors; the primary factor being the continued year-over-year
increase in the loan portfolio.  Secondly, during the fourth quarter of 1999,
the Company became aware of the deteriorating condition in the credit quality of
a few specific loans.  As a result, the provision for loan losses totaled
$650,000 during the fourth quarter of 1999.

The loan loss provision for 1998 increased $310,000 relative to 1997.  The
increase was attributable to two factors; loan growth in 1998 and recoveries
during 1997.  With year-over-year increase in the loan portfolio totaling 45%, a
larger provision was deemed necessary as a result of the significant growth in
lending volume and the losses inherent in that volume.  In addition, the 1997
provision was negative as a result of the significant recoveries that
effectively amplified the year-to-year change in the provision with respect to
both 1998 and 1996. The declining charge-offs and larger recoveries during 1997
increased the loan loss reserve by more than management believed was necessary
to provide for loss potential in the loan portfolio.  Accordingly, a negative
provision resulted from the reversal of a portion of the reserve.  The loan loss
provision for 1996 exceeded the provision for 1995 by 170%.  Although net
charge-offs declined from 1995 to 1996, management determined that the loan loss
provision of $310 thousand was necessary to provide for the loss potential with
respect to a specific group of loan relationships that exhibited increased
credit risk at that time.

                                       15
<PAGE>

Noninterest Income

Noninterest income increased by 31% and 32% in 1999 and 1998, respectively.  The
primary components of noninterest income consist of: service charges, SBA and
mortgage income, and other noninterest income.  The following table summarizes
the significant elements of service charge, SBA, mortgage and Farmer Mac revenue
for the three years ending 1999, 1998, and 1997:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
(in thousands)                                                                       1999            1998            1997
-------------------------------------------------------------------------------------------------------------------------
<S>                                                                                 <C>              <C>             <C>
Periodic deposit account charges                                                    $  407            352             307
Returned item charges                                                                  463            344             332
Ancillary services charges                                                              98             82              70
Other service charges                                                                  110             68              57
                                                                                  ---------------------------------------
     Total service charge revenue                                                    1,078            846             766
                                                                                  =======================================

Gain on sale of SBA loans                                                              177            191             217
SBA loan servicing revenue                                                             207            226             199
                                                                                  ---------------------------------------
     Total SBA revenue                                                                 384            417             416

Gain on sale of mortgage loans                                                         133            243              77
Mortgage loan servicing revenue                                                        122             92              53
                                                                                  ---------------------------------------
     Total mortgage revenue                                                            255            335             130

Farmer Mac origination, sale and servicing                                              42             32              29
                                                                                  ---------------------------------------

     Total loan origination, sale and servicing revenue                             $  681            784             575
-------------------------------------------------------------------------------------------------------------------------
</TABLE>

Service charge revenue increased by 27% in 1999 compared to 1998 and 10% in 1998
compared to 1997. The growth in service charge income for 1999 was driven by
deposit growth combined with changes to the fee structure of certain deposit
products. While average deposits grew 9% in 1999, noninterest-bearing demand
deposits and NOW accounts increased 16% and 11%, respectively. The growth in
service charge income for 1998 was driven by average deposit growth of 15%.

SBA and mortgage revenue declined 8% and 24%, respectively, during 1999 and 1998
while Farmer Mac revenue increased 31% during 1999 as compared to 1998.

During 1999, the Company experienced increased competition in the SBA
origination market, the result of which was a decline in production and relating
gains on the sale of SBA loans. Additionally, the mortgage department
experienced a decline in sales volume and the related margins on mortgage loans
sold.

Revenue from SBA loan sales during 1998 was nearly comparable to the record
level set in 1997, when SBA loan sales revenue increased by 33% over 1996. While
SBA loan originations increased in 1998 relative to 1997, the production cycle
for many of these loans extended relative to 1997, and fewer loans were sold.
Partially disbursed SBA loans at December 31, 1998 were $6.4 million compared to
$1.1 million at December 31, 1997. The 33% increase in 1997 was the result of
both increases in the volume of loans originated and sold as well as a general
increase in the loan sale premiums realized in the secondary market for SBA loan
sales. During 1996, a new incentive compensation program was put into place. The
program was designed to provide incentives for increasing levels of production.
As production increased, the SBA servicing portfolio increased and resulted in
the 13% and 9% increases in SBA servicing revenue for 1998 and 1997,
respectively.

Revenue from mortgage loan sales reached a new record in 1998, surpassing the
previous record by 216%. Mortgage operations were reorganized in 1994, and part
of the annual increases since that time are the result of the relationships that
have been developed with builders, realtors, and title companies. In addition to
reorganized operations, housing activity in the Bank's trade area continued to
improve in 1998, building on the improvements in 1997. The Bank continues to
package home construction and mortgage take-out loans in a competitive manner
and has successfully marketed this product in the new trade areas that were
opened as a result of the acquisition of branches from Wells Fargo Bank in early
1997 (see "Branch Acquisition" above). Finally, declining mortgage rates during
1998 and 1997 had a favorable impact on mortgage loan refinance volumes.

The Bank began to participate in the Federal Agricultural Mortgage Corporation
("Farmer Mac") lending program in late 1994, whereby qualifying mortgage loans
on agricultural property are originated and sold.

                                       16
<PAGE>

During 1998, the Company purchased single-premium life insurance policies
written on the lives of certain officers and the directors of the Company and
the Bank.  During 1999, one of the insurance companies converted from a mutual
to a stock based company, which process is referred to as "demutualization."  As
a result of the demutualization, policyholders of the insurance company received
shares of common stock of the insurance company.  The number of shares of stock
received by policyholders was based upon the cash surrender value of the
individual policies.  The Company received and subsequently sold the stock in
December, 1999.  The gain recognized upon the receipt of the stock totaled
$287,000.


Noninterest Expenses

Noninterest expenses increased by 14% in 1999 compared to 1998 and 13% in 1998
compared to 1997.  Several events had a significant impact on year-to-year
comparability.  During 1999, the primary events related to expenses associated
with the year 2000 date change.  In 1998 and 1997, the Company expanded its
branch network, opening two new branches in 1998 and purchasing three branches
from Wells Fargo in 1997.

Noninterest expense is broken down into four primary categories each of which is
discussed in this section.

Salaries and Employee Benefits
------------------------------

The following table provides the detail for each major segment of salaries and
employee benefits together with relevant statistical data:

<TABLE>
<CAPTION>
     ------------------------------------------------------------------------------------------------------------------
     (in thousands except full time equivalents)                                      1999          1998           1997
     ------------------------------------------------------------------------------------------------------------------
     <S>                                                                            <C>           <C>             <C>
     Regular payroll, contract labor, and overtime                                   $2,970        $2,641         2,298
     Incentive compensation and profit sharing                                          407           339           335
     Payroll taxes and employment benefits                                              655           576           459
                                                                                  -------------------------------------
          Total Salaries and Employee Benefits                                       $4,032        $3,556         3,092
                                                                                  =====================================
     Number of full-time equivalent employees                                           104            95            82
                                                                                  -------------------------------------
     Regular payroll per full-time equivalent employee                                28.49         27.80         28.02
                                                                                  -------------------------------------
     Incentive compensation to regular payroll                                         13.7%         12.8%         14.6%
                                                                                  -------------------------------------
     Payroll taxes and benefits per full-time equivalent employee                      6.28          6.06          5.60
     ------------------------------------------------------------------------------------------------------------------
</TABLE>

The number of full-time equivalent employees increased 9% in 1999 compared to
1998 and 16% in 1998 compared to 1997.  Regular payroll, contract labor and
overtime increased 12% in 1999 compared to 1998 and 15% in 1998 compared to
1997.  Total salaries and benefits expense increased by 13% in 1999 compared to
1998 and 15% in 1998 compared to 1997.  The average regular payroll per full-
time equivalent employee increased 2% in 1999 compared to 1998 and decreased 1%
in 1998 compared to 1997.

Incentive compensation includes bonus awards under the Incentive Compensation
Plan, contributions to the Employee Stock Ownership Plan and matching
contributions to the 401(k) Stock Ownership Plan.  The Incentive Compensation
Plan pays bonuses to officers based upon the actual results of departmental and
Bank-wide performance in comparison to predetermined targets.  Contributions to
the Employee Stock Ownership Plan are made at the discretion of the board of
directors based upon profitability.  Matching contributions to the 401(k) Stock
Ownership Plan are made at the rate of 50% of the first 4% of compensation
contributed by employees.

Payroll taxes and employee benefits per full-time equivalent increased 4% in
1999 as compared to 1998 and 8% as compared to 1997.   The increases are related
primarily to a 28% increase in the Company's contribution to the Employee Stock
Ownership Plan combined with general increases in the cost of medical and other
related insurance benefits, education and training expenses and supplemental
compensation accruals made pursuant to the agreements summarized in Footnote 9
to the 1999 Consolidated Financial Statements.  The increase to the Company's
Employee Stock Ownership Plan comes as a result of the increased number of
employees becoming eligible for participation in the plan.

                                       17
<PAGE>

Occupancy Expense
-----------------

The following table provides the detail for each major segment of occupancy
expense:

<TABLE>
<CAPTION>
     -------------------------------------------------------------------------------------------------------------------
     (in thousands except square footage and cost per sq. ft.)                       1999           1998           1997
     -------------------------------------------------------------------------------------------------------------------
     <S>                                                                            <C>            <C>            <C>
     Depreciation                                                                   $   366            289           265
     Property taxes, insurance, and utilities                                           230            220           204
     Property maintenance                                                               124            144           154
     Net rental expense  (income)                                                        90             62           (30)
                                                                                  --------------------------------------
          Total Occupancy                                                           $   810            715           593
                                                                                  ======================================
     Square footage of occupied and unoccupied space                                 42,945         42,945        40,725
                                                                                  --------------------------------------
      Occupancy cost per square foot                                                $ 18.86        $ 16.65         14.56
                                                                                  --------------------------------------
     Locations                                                                            8              8             6
     -------------------------------------------------------------------------------------------------------------------
</TABLE>


Occupancy expenses increased by 13% in 1999 compared to 1998 and  21% in 1998
compared to 1997.

The primary reason for the increases in 1999 and 1998 are the expansion into new
offices opened in 1998.  In January 1998 the Company opened a loan production
office in Folsom, California and the August 1998 opening of a full service
branch in Elk Grove, California.  The Folsom office was converted to a full
service branch in July, 1999.  In addition, the Galt branch was relocated in
November, 1998.  While the new rental expense in Galt is lower than it would
have been absent a relocation, it is higher per month than it was in 1997.  With
respect to the three branches acquired from Wells Fargo Bank in 1997, 1998
includes two additional months of occupancy expenses compared to 1997.


Equipment Expense
-----------------

The following table provides the detail for each major segment of equipment
expense:

<TABLE>
<CAPTION>
     --------------------------------------------------------------------------------------------------------
     (in thousands)                                                                 1999       1998      1997
     --------------------------------------------------------------------------------------------------------
     <S>                                                                            <C>        <C>       <C>
     Depreciation                                                                   $ 488       406       318
     Maintenance                                                                      188       104       136
     Rental expense                                                                    11        26         1
                                                                               ------------------------------
          Total Equipment                                                           $ 687       536       455
     --------------------------------------------------------------------------------------------------------
</TABLE>

Equipment expense increased by 28% in 1999 compared to 1998 and increased by 18%
in 1998 compared to 1997.

The increase in 1999 is primarily attributable to investments made in the
Company's computer hardware and software systems.  Additionally, the 1999
expense reflects an entire year's deprecation expense for equipment placed in
service at the two new branches in 1998.

The increase in 1998 was driven by two additional months of costs in 1998 for
the three branches acquired from Wells Fargo Bank in 1997 and the loan
production office and full service branch opened in the communities of Folsom
and Elk Grove California, respectively, in January and August of 1998,
respectively.  The Galt branch was also relocated in November, 1998, and some
equipment was replaced.

                                       18
<PAGE>

Other Noninterest Expense
-------------------------

Other noninterest expenses increased by 13% in 1999 compared to 1998 and 9% in
1998 compared to 1997.  The following table provides the detail for each major
segment of other noninterest expense:

<TABLE>
<CAPTION>
     ------------------------------------------------------------------------------------------------------
     (in thousands)                                                                   1999     1998   1997
     ------------------------------------------------------------------------------------------------------
     <S>                                                                            <C>       <C>     <C>
     Third party data processing                                                     $  821     719     642
     Professional fees                                                                  554     423     401
     Marketing                                                                          323     213     120
     Intangible amortization                                                            282     372     479
     Telephone and postage                                                              271     217     182
     Office supplies                                                                    193     176     142
     Director fees and retirement                                                       158     223     150
     Printing                                                                           109     145     117
     Other real estate owned losses and holding costs                                    (8)    (12)     94
     Business development                                                                78      57      55
     Regulatory assessments                                                              85      51      53
     Year 2000 date change                                                              152       -       -
     Other                                                                              256     321     221
                                                                               ----------------------------
          Total Other Noninterest Expense                                            $3,274   2,905   2,656
     ------------------------------------------------------------------------------------------------------
</TABLE>

Professional fees increased during 1999 as a result of the Company increasing
its use of third parties in the development and implementation of specific
strategic initiatives.  The two primary initiatives included enhancing the
Company's use of technology and opportunities to increase noninterest income.

During 1998 the Company substantially enhanced its marketing efforts to include
the hiring of a full time marketing director in September, 1998.  As a result of
the increased focus on marketing, marketing expenses increased 52% in 1999 as
compared to 1998.  Furthermore, during 1999 the size of the Board of Directors
was reduced and reduction were made to the number of meetings, the result of
which was to reduce the amount paid to directors for services rendered on behalf
of the Company.  The remainder of the increases are driven primarily by volume
related costs.  Average loans and deposit volumes increased by 37% and 9% during
1999, respectively.

The amortization of the core deposit and goodwill intangible assets purchased in
the acquisition of the Wells Fargo Branches in 1997 declined 24% in 1999 as
compared to 1998 and 22% in 1998 as compared to 1997.  The Bank is using an
accelerated method of amortization for these assets over an eight year period.
Accordingly, the amortization expense is expected to continue to decline over
the remaining amortization period.

During 1999 the Company expensed $152,000 in one time costs associated with the
Year 2000 date change.  Additional expense was incurred by the Company as part
of the Year 2000 date change.  Such additional expense relate to the allocation
of human resources and other capital expenditures.

Approximately 3% out of the 9% increase in 1998 compared to 1997 is the result
of the new branches in 1998 and the inclusion of the three branches acquired in
1997 for twelve months in 1998 compared to 10 months for 1997.  The remainder of
the increase is driven primarily by volume related costs.  Average loans and
deposit volumes increased by 26% and 15%, respectively.


Income Taxes

The provision for income taxes as a percentage of pretax income for 1999, 1998,
and 1997 was 19%, 25%, and 32%, respectively.  The effective rate is lower than
the combined marginal rate for state and federal taxes due primarily to the
level of tax exempt income relative to total pre-tax income combined with a
decrease in the tax asset valuation allowance.  Tax exempt income increased in
1999 compared to 1998 and 1998 compared to 1997 due to an investment of $8.7
million and $4.2 million, respectively in the cash surrender value of life
insurance as discussed below under Balance Sheet Review. The tax asset valuation
allowance declined $85,000 and $45,000 in 1999 and 1998, respectively.  Footnote
13 to the Consolidated Financial Statements contains a detailed presentation of
the income tax provision and the related current and deferred tax assets and
liabilities.

                                       19
<PAGE>

Balance Sheet Review

The following table presents average balance sheets for the years ended December
31, 1999, 1998 and 1997.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
                                                        For the Year Ended   For the Year Ended   For the Year Ended
                                                         December 31, 1999    December 31, 1998    December 31, 1997
                                                          (in thousands)       (in thousands)       (in thousands)
                                                      --------------------------------------------------------------
                                                         Amount    Percent    Amount    Percent    Amount    Percent
                                                        ---------  --------  --------  ---------  --------  ---------
--------------------------------------------------------------------------------------------------------------------
  <S>                                                   <C>        <C>       <C>       <C>        <C>       <C>
  Assets:
  Cash & Due from banks                                  $  7,488     4.45%     6,701      4.32%     5,362      3.94%
  Federal funds sold                                        4,150     2.47%     6,780      4.37%     8,400      6.17%
  Investment securities                                    41,050    24.39%    53,370     34.42%    53,580     39.36%
  Loans (net of allowance for loan losses and              98,760    58.69%    71,752     46.29%    56,744     41.68%
   deferred income)
  Premises and equipment, net                               6,863     4.08%     7,188      4.64%     7,227      5.31%
  Other assets                                              9,969     5.92%     9,220      5.96%     4,830      3.54%
                                                         --------   ------    -------    ------    -------    ------
  Total Assets                                           $168,280   100.00%   155,011    100.00%   136,143    100.00%
                                                         ========   ======    =======    ======    =======    ======
  Liabilities & Stockholders' Equity:
  Deposits                                               $152,630    90.70%   140,480     90.63%   122,540     90.00%
  Note payable                                                  -        -          -         -          -         -
  Other liabilities                                         1,507      .90%     1,215       .78%     1,193       .88%
  Stockholders' equity                                     14,143     8.40%    13,316      8.59%    12,410      9.12%
                                                         --------   ------    -------    ------    -------    ------
  Total Liabilities & Stockholders' Equity               $168,280   100.00%   155,011    100.00%   136,143    100.00%
                                                         ========   ======    =======    ======    =======    ======
--------------------------------------------------------------------------------------------------------------------
</TABLE>

Average total assets increased by 9% in 1999 compared to 1998 and 14% in 1998
compared to 1997.  Year-end asset totals at December 31, 1999 reached $176.3
million and represented an increase of 7% over December 31, 1998.  The increase
in 1999 and 1998 is a function of deposit growth throughout the Bank's branch
network, as average deposits increased by 9% and 15%, respectively.

During 1999 average gross loans increased 39%.  This increase was funded by the
growth in deposits combined with a 16% reduction in fed funds sold and
investment securities.  During 1998 average gross loans increased 26% which was
funded by the increase in deposits.

Other assets at December 31, 1999 increased 71% as compared to December 31,
1998. The increase is primarily attributable to an increase in the cash
surrender value of life insurance of $8,674,000 and $4,274,000 at December 31,
1999 and 1998, respectively. The cash surrender value of life insurance consists
primarily of the Bank's contractual rights under single-premium life insurance
policies written on the lives of certain officers and the directors of the
Company and the Bank. The policies were purchased in order to indirectly offset
anticipated costs of certain benefits payable upon the retirement, and the death
or disability of the directors and officers pursuant to deferred compensation
agreements. The cash surrender value accumulates tax-free based upon each
policy's crediting rate which is adjusted by the insurance company on an annual
basis.

                                       20
<PAGE>

Investment Securities

The following table presents the investment portfolio at December 31, 1999, 1998
and 1997 by security type, maturity, and yield:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------------
                                                                              Book Value at December 31 (in thousands):
                                                                           1999                  1998                1997
                                                                   ---------------------  ------------------  ------------------
                                                                     Amount     Yield(a)   Amount   Yield(a)   Amount   Yield(a)
                                                                   ---------  ----------  -------  ---------  -------  ---------
--------------------------------------------------------------------------------------------------------------------------------
<S>                                                                <C>        <C>         <C>      <C>        <C>      <C>
U.S. Treasury Securities:
Within 1 year                                                      $      -         -       1,000    5.87%      2,995    5.94%
After 1 year, within 5 years                                              -         -           -       -       1,000    5.87%
After 5 years, within 10 years                                            -         -           -       -           -       -
After 10 years                                                            -         -           -       -           -       -
                                                                    ------------------------------------------------------------
Total U.S. Treasury                                                       -         -       1,000    5.87%      3,995    5.92%
U.S. Agency Securities:
Within 1 year                                                       $ 1,044      6.67%      1,512    5.68%      2,101    7.06%
After 1 year, within 5 years                                         12,622      6.40%     13,482    6.50%     13,997    6.46%
After 5 years, within 10 years                                        1,500      7.18%      3,000    6.93%      9,986    7.07%
After 10 years                                                        1,500      6.85%      1,500    6.85%      4,993    7.63%
                                                                    ------------------------------------------------------------
Total U.S. Agency                                                   $16,666      6.53%     19,494    6.53%     31,077    6.88%
Collateralized Mortgage Obligations:
Within 1 year                                                       $    57      3.37%          -       -           -       -
After 1 year, within 5 years                                          5,477      6.52%          -       -         225    6.08%
After 5 years, within 10 years                                          961      6.87%        153    5.51%        277    6.27%
After 10 years                                                          132      8.17%        304    8.34%        534    6.57%
                                                                    ------------------------------------------------------------
Total Collateralized Mortgage Obligations                           $ 6,627      6.58%        457    7.39%      1,036    6.38%
Municipal Securities:
Within 1 year                                                       $ 1,053      6.66%      1,196    6.20%        688    6.67%
After 1 year, within 5 years                                          2,445      7.17%      2,439    7.08%      3,118    6.94%
After 5 years, within 10 years                                        2,444      6.08%          -       -         530    7.60%
After 10 years                                                        6,245      5.69%          -       -           -       -
                                                                    ------------------------------------------------------------
Total Municipals                                                    $12,187      6.15%      3,635    6.79%      4,336    6.98%
Other Debt Securities:
Within 1 year                                                       $    10      7.57%         93    8.50%         22    7.86%
After 1 year, within 5 years                                            938      7.32%        113    6.83%      2,748    7.41%
After 5 years, within 10 years                                            -         -           -       -           7    9.73%
After 10 years                                                            -         -       2,509    7.28%        972    7.67%
                                                                    ------------------------------------------------------------
Total Other Debt Securities                                         $   948      7.32%      2,813    7.36%      3,749    7.48%
Money Market Mutual Fund                                                  -         -      17,602    4.83%     17,200    6.12%
Federal Agency Stock                                                    126      6.00%        126    6.00%        126    6.00%
Unrealized Holding (Loss) / Gain                                       (458)        -         520       -         398       -
                                                                    ------------------------------------------------------------
Total                                                               $36,096      6.43%     45,647    5.93%     61,917    6.59%
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(a)  The yields on tax-exempt obligations have not been computed on a tax-
equivalent basis.

The investment portfolio at December 31, 1999 and 1998 declined by 21% and 26%,
respectively, compared to the prior year-end totals.  The decline in the
portfolio during 1999 and 1998 funded increases in loan volume.  With the
exception of the sale of money market mutual fund shares, the decline in the
portfolio during 1999 and 1998 came solely from maturities and calls.  The
general decline in interest rates during 1999 and 1998 led to the call of
several agency securities that were purchased subsequent to the acquisition of
the Wells Fargo Branches in 1997.  Maturities and calls during 1999 and 1998
were approximately $9.2 million and $20.9 million, respectively.

                                       21
<PAGE>

Loans

The following table summarizes gross loans and the components thereof as of
December 31, for each of the last five years:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
                                                Outstanding at December 31 (in thousands):
                                             1999       1998       1997        1996       1995
                                           --------    ------     ------      ------     ------
-----------------------------------------------------------------------------------------------
<S>                                      <C>           <C>        <C>         <C>        <C>
Commercial                                 $ 95,509    77,956     53,684      45,322     41,538
Real estate construction                     13,919    11,743      6,900       5,802      7,549
Installment and other                         3,301     3,463      3,525       3,155      2,757
                                           --------    ------     ------      ------     ------
                                           $112,729    93,162     64,109      54,279     51,844
                                           ========    ======     ======      ======     ======
-----------------------------------------------------------------------------------------------
</TABLE>

Gross loans outstanding as of December 31, 1999 and 1998 exceeded the comparable
prior year-end totals by 21% and 45%, respectively. Improving economic
conditions combined with increased business development efforts were the
foundation for the growth in both years. With the acquisition of the Wells Fargo
Branches in 1997, the Company entered into new market areas which substantially
enhanced their marketing capabilities.

The most significant segment of the loan portfolio is commercial loans, which
represented 85% and 84% of the total portfolio at December 31, 1999 and 1998,
respectively.  Commercial loans include agricultural loans, working capital
loans to businesses in a number of industries, and loans to finance commercial
real estate.  Agricultural loans represented approximately 15% and 14% of the
commercial loan portfolio at December 31, 1999 and 1998, respectively.
Agricultural loans are diversified throughout a number of agricultural business
segments, including dairy, orchards, row crops, vineyards, cattle and contract
harvesting.  Agricultural lending risks are generally related to the potential
for volatility of agricultural commodity prices.  Commodity prices are affected
by government programs to subsidize certain commodities, weather, and overall
supply and demand in wholesale and consumer markets.  Excluding agricultural
loans, the remaining portfolio is principally dependent upon the health of the
local economy and related to the real estate market.

The maturity and repricing characteristics of the loan portfolio at December 31,
1999 are as follows:


<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
Due:  (1)                                        Fixed Rate     Floating Rate        Total
                                                 ----------     -------------       -------
<S>                                              <C>            <C>                 <C>
In 1 year or less                                   $ 8,634            13,350        21,984
After 1 year through 5 years                         12,743             9,537        22,280
After 5 years                                        13,049            55,416        68,465
                                                    -------            ------       -------
Total Loans                                         $34,426            78,303       112,729
                                                    =======            ======       =======
-------------------------------------------------------------------------------------------
</TABLE>

(1) Scheduled repayments are reported in the maturity category in which the
payment is due.

Approximately 36% of the loan portfolio carries a fixed rate of interest as of
December 31, 1999, while approximately 86% of the portfolio matures within five
years.

                                       22
<PAGE>

Deposits

The following table summarizes average deposit balances and rates for the years
ended December 31, 1999, 1998, and 1997:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
(in thousands)                               For the Year Ended          For the Year Ended             For the Year Ended
                                              December 31, 1999           December 31, 1998              December 31, 1997

                                             Average     Average        Average        Average         Average         Average
Type                                         Amount       Rate          Amount          Rate           Amount           Rate
------------------------------------------------------------------------------------------------------------------------------
<S>                                         <C>          <C>            <C>             <C>            <C>             <C>
Demand - non-interest bearing               $  19,830       N/A           17,080           N/A           13,470           N/A
NOW accounts                                   37,985      1.14%          34,311          1.31%          27,520          1.68%
Money market accounts                          17,028      2.23%          16,829          3.13%          17,870          3.09%
Savings                                        27,097      2.06%          25,460          2.66%          22,130          2.92%
Time deposits                                  50,690      4.49%          46,800          5.08%          41,550          5.11%
                                            ---------      ----          -------          ----          -------          ----
Total Deposits                              $ 152,630      2.42%         140,480          2.87%         122,540          3.09%
                                            =========      ====          =======          ====          =======          ====
------------------------------------------------------------------------------------------------------------------------------
</TABLE>


Average deposits increased by approximately 9% and 15% in 1999 and 1998,
respectively.  Due to a declining rate environment, the average rate declined by
45 basis points when comparing 1999 to 1998 and 22 basis points when comparing
1998 to 1997.  The deposit growth in 1999 and 1998 came from account growth at
all branches throughout the Bank's network.  The growth was the result of
business development efforts in the lending area as well as a continued influx
of "large" bank customers that  have grown tired of merger activity among large
institutions.

The reduced rates on the deposit portfolio in 1999 and 1998 are a function of
changes in mix, pricing, and the general level of interest rates.  The mix of
deposits has become more cost efficient over the past three years.  The mix of
noninterest bearing deposits was 13%, 12%, and 11% for 1999, 1998, and 1997,
respectively.

Certificates of deposit contain regular and individual retirement account
balances and deposits received under the State of California Time Certificate of
Deposit Program.  There are no brokered certificates of deposit in the
portfolio.  At December 31, 1999 the Company had $3 million in deposits with the
State of California under the Time Certificate of Deposit Program.  It is the
intent of the Company to increase total deposits under this program to
approximately $7 million.  The Certificates with the State of California have
maturities of one year or less and are collateralized by loans or investment
securities.  The deposit program provides the Company with an additional source
of funds at a relatively low cost.  The deposits are used to fund loans and
investments.

Certificates of $100,000 or more represent approximately 38% of the certificate
of deposit portfolio at December 31, 1999.  Excluding the Certificates of
Deposit with the State of California, certificates of $100,000 or more represent
approximately 34% of the certificate of deposit portfolio at December 31, 1999.
The following table summarizes the maturities of those certificates of $100,000
or more:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------
(in thousands)                                                     1999
                                                        ---------------
<S>                                                     <C>
Three months or less                                            $13,760
Four months to six months                                         2,571
Seven months to twelve months                                     1,952
Over twelve months                                                  725
                                                                -------
Total time deposits of $100,000 or more                         $19,008
                                                                =======
-----------------------------------------------------------------------
</TABLE>


                                       23
<PAGE>

Asset Quality

The following table contains asset quality information with respect to the loan
portfolio and other real estate owned:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
                                                                         Asset Quality Statistics at December 31

(in thousands except multiples and percentages)                   1999         1998        1997        1996        1995
------------------------------------------------------------------------------------------------------------------------
<S>                                                               <C>          <C>         <C>         <C>        <C>

Nonaccrual loans                                                  $2,303         248         340         898        987
Accruing loans past due more than 90 days                            374         191          65          52        118
                                                                  ------       -----       -----       -----      -----
Total nonperforming loans                                         $2,677         439         405         950      1,105
                                                                  ======       =====       =====       =====      =====
Allowance for loan losses                                         $2,580       1,564       1,313       1,207        959
Allowance for loan losses to nonperforming loans                      96%        356%        324%        127%        87%
Total loan portfolio delinquency                                    3.32%       1.40%       1.09%       2.14%      2.57%
Allowance for loan losses to total gross loans                      2.29%       1.69%       2.05%       2.22%      1.85%
Other real estate owned                                           $  129         129         159         400        357
------------------------------------------------------------------------------------------------------------------------
</TABLE>

The Company's nonaccrual policy is discussed in note 1(c) to the consolidated
financial statements.  Interest income recorded on these nonaccrual loans was
approximately $138,000 $2,000, $8,000, $7,000, and $13,000 in 1999, 1998, 1997,
1996, and 1995, respectively.  Interest income foregone or reversed on these
loans was approximately $76,000, $43,000, $45,000, $149,000, and $161,000 in
1999, 1998, 1997, 1996, and 1995, respectively.  At December 31, 1999, there
were no individually material or a material amount of loans in the aggregate for
which management had serious doubts as to the borrower's ability to comply with
present loan repayment terms and which may result in the subsequent reporting of
such loans as nonaccrual.

Nonperforming loans increased by $2.2 million in 1999 after having increased $34
thousand in 1998 which followed declines in 1997 and 1996. Portfolio delinquency
also increased to 3.32% after having increased to 1.40% in 1998 following a
decline in 1997 and 1996. The dollar amount of the allowance for loan losses has
increased in each of the last four years. During 1999, the allowance increased
as a result of three factors; growth, expansion into new market areas and
declining credit quality of a few borrowers. During 1999, average gross loans
increased 37% compared to the prior year. The growth in 1999 included expansion
into markets within Northern and Central California to include commercial,
agricultural and real estate loans. Furthermore, during the fourth quarter of
1999, the Company experienced a decline in the credit quality in loans to four
individual borrowers. The loans to two of the borrowers, which were placed on
nonaccrual during the fourth quarter of 1999, totaled $1.9 million and represent
1.69% of gross loans at December 31, 1999. The loans to the other two borrowers
totaled $2.2 million, represent 1.95% of gross loans and were not delinquent
with regard to principal or interest at December 31, 1999.

The following table summarizes the allocation of the allowance for loan losses
at December 31, for each of the last five years:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
(in thousands         December 31, 1999   December 31, 1998   December 31, 1997   December 31, 1996   December 31, 1995
                      ------------------  ------------------  ------------------  ------------------  -----------------
except percentages

Loan Category          Amount      %       Amount      %       Amount      %       Amount      %       Amount      %
                       ------    Loans     ------    Loans     ------    Loans     ------    Loans     ------    Loans
<S>                             ------              ------               -----               -----               -----
                      <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>
Commercial             $  698     63.37%      240     63.16%      309     60.95%      490     91.42%       295    84.29%
Real estate               402     36.48%      129     33.95%      192     37.87%       45      8.40%        38    10.86%
Consumer                    2      0.15%       11      2.89%        6      1.18%        1      0.19%        17     4.86%
Unallocated             1,478       N/A     1,184       N/A       806       N/A       671       N/A        609      N/A
                       ------    ------     -----    ------     -----    ------     -----    ------        ---   ------
                       $2,580    100.00%    1,564    100.00%    1,313    100.00%    1,207    100.00%       959   100.00%
                       ======    ======     =====    ======     =====    ======     =====    ======        ===   ======
-----------------------------------------------------------------------------------------------------------------------
</TABLE>

Please also see "Allowance for Loan Losses".

                                       24
<PAGE>

Market Risk

While there are several varieties of market risk, the market risk material to
the Company and the Bank is interest rate risk. Within the context of interest
rate risk, market risk is the risk of loss due to changes in market interest
rates that have an adverse effect on net interest income, earnings, capital or
the fair value of financial instruments. Exposure to this type of risk is a
regular part of a financial institution's operations. The fundamental activities
of making loans, purchasing investment securities, and accepting deposits
inherently involve exposure to interest rate risk. As described in "Asset
Liability Management," the Company monitors the repricing differences between
assets and liabilities on a regular basis and estimates exposure to net interest
income, net income, and capital based upon assumed changes in the market yield
curve. The following tables summarize the expected maturity, principal repayment
and fair value of the financial instruments that are sensitive to changes in
interest rates as of December 31, 1999 and 1998. See further discussion
regarding interest rate risk under "Asset Liability Management."

As of December 31, 1999:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
                                            Expected Maturity / Principal Repayment                     Total     Fair
In Thousands                            2000      2001      2002      2003     2004     Thereafter     Balance    Value
-------------------------------------------------------------------------------------------------------------------------
<S>                                  <C>         <C>       <C>       <C>      <C>       <C>            <C>        <C>
Interest-Sensitive Assets:
Federal funds sold                   $   100         -         -         -        -              -         100       100
Fixed rate investments (1)             3,818     6,092     5,223     3,889      853         15,389      35,264    35,264
Floating rate investments (1)            136       110        91        76       62            357         832       832
Fixed rate loans (2)                   8,634     2,746     4,478     3,839    1,680         13,049      34,426    34,894
Floating rate loans (2)               13,350       935     1,904     4,188    2,510         55,416      78,303    78,303

Interest-Sensitive Liabilities:
NOW account deposits (3)              15,783     2,631     2,631     2,631    2,631         13,151      39,458    39,458
Money market deposits (3)              6,701     1,117     1,117     1,117    1,117          5,583      16,752    16,752
Savings deposits (3)                  11,623     1,937     1,937     1,937    1,937          9,686      29,057    29,057
Certificates of deposit               46,864       782       363       240       69              -      49,789    49,676
Short term borrowings                  4,300         -         -         -        -              -       4,300     4,300

Interest-Sensitive Off-Balance
Sheet Items:
Loans serviced for others                  -         -         -         -        -              -      95,749       957
Commitments to lend                        -         -         -         -        -              -      24,418       244
Standby letters of credit                  -         -         -         -        -              -         892         1
-------------------------------------------------------------------------------------------------------------------------
</TABLE>

As of December 31, 1998:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
                                            Expected Maturity / Principal Repayment                     Total    Fair
In Thousands                            1999       2000      2001      2002     2003    Thereafter     Balance    Value
-------------------------------------------------------------------------------------------------------------------------
<S>                                  <C>         <C>       <C>       <C>      <C>       <C>            <C>        <C>
Interest-Sensitive Assets:
Federal funds sold                   $ 4,800          -         -         -        -             -       4,800     4,800
Fixed rate investments (1)             3,346      1,982     4,554     5,233    1,585         9,315      26,015    26,015
Floating rate investments (1)         18,102          -         -        91        -         1,439      19,632    19,632
Fixed rate loans (2)                  13,039      3,333     5,066     6,628    5,840         9,705      43,611    44,481
Floating rate loans (2)               18,294      4,862     1,633     3,700    5,721        15,341      49,551    49,551

Interest-Sensitive Liabilities:
NOW account deposits (3)              14,472      2,412     2,412     2,412    2,412        12,061      36,181    36,181
Money market deposits (3)              7,793      1,299     1,299     1,299    1,299         6,493      19,482    19,482
Savings deposits (3)                  10,395      1,732     1,732     1,732    1,732         8,664      25,987    25,987
Certificates of deposit               45,799      2,234       371       615      340             -      49,359    49,447

Interest-Sensitive Off-Balance
Sheet Items:
Loans serviced for others                  -          -         -         -        -             -      66,903       670
Commitments to lend                        -          -         -         -        -             -      21,290       213
Standby letters of credit                  -          -         -         -        -             -         156         2
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1)  Expected maturities for investment securities are based upon anticipated
     prepayments as evidenced by historical prepayment patterns.
(2)  Expected maturities for loans are based upon contractual maturity dates.
(3)  NOW, money market and savings deposits do not carry contractual maturity
     dates; therefore, the expected maturities reflect estimates applied in
     evaluating the Company's interest rate risk.  The actual maturities of
     NOW, money market, and savings deposits could vary substantially if
     future prepayments differ from the Company's historical experience.

The majority of the loan growth during 1999 was in the area of floating rate
commercial loans.  In addition, during 1999, the Company invested a significant
portion of its short term investments (i.e., fed funds and money market mutual
funds) in longer term fixed rate agency and municipal securities with average
maturities in excess of five years.  The purchase of the

                                       25
<PAGE>

longer term investments provided the Company with an increase in interest income
while providing interest rate protection in the event of a declining interest
rate environment.

Asset Liability Management

The primary goal of the Company's asset and liability management system is to
maximize net interest margin within reasonable risk parameters with respect to
the maturity and pricing structure of assets and liabilities.  The Company
monitors the repricing differences between assets and liabilities on a regular
basis and estimates exposure to net interest income, net income, and capital
based upon assumed changes in the market yield curve.  The following tables
summarize the repricing intervals for the balance sheet at December 31, 1999 and
1998:

As of December 31, 1999:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------------
                                                                By Repricing Interval
--------------------------------------------------------------------------------------------------------------------------------
(in thousands)                        Within    After three    After six     After one     After five   Noninterest     Total
                                      three        months,      months,     year, within     years     bearing funds
                                      months    within six    within one     five years
                                                                 year
--------------------------------------------------------------------------------------------------------------------------------
<S>                                 <C>         <C>           <C>           <C>            <C>         <C>              <C>
Assets

Federal funds sold                  $     100          --            --             --          --             --           100

Investment securities                      57         226         9,948         13,622      12,243             --        36,096

Loans                                  52,569       3,319        10,423         30,518      15,900             --       112,729

Noninterest earning assets
and allowance for loan losses              --          --            --             --          --         27,409        27,409
                                   --------------------------------------------------------------------------------------------
Total Assets                        $  52,726       3,545        20,371         44,140      28,143         27,409       176,334
                                   ============================================================================================
Liabilities and
Stockholders' Equity

Savings, money market & NOW
deposits                            $  85,267          --            --             --          --             --        85,267

Time deposits                          30,979       8,606         8,750          1,454          --             --        49,789

Other liabilities and
stockholders' equity                       --          --            --             --          --         41,278        41,278
                                   --------------------------------------------------------------------------------------------
Total Liabilities and
Stockholders' Equity                $ 116,246       8,606         8,750          1,454          --         41,278       176,334
                                   ============================================================================================
Interest Rate Sensitivity Gap       $ (63,520)     (5,061)       11,621         42,686      28,143        (13,869)           --
                                   ============================================================================================
Cumulative Interest Rate
Sensitivity Gap                     $ (63,520)    (68,581)      (56,960)       (14,274)     13,869             --            --
                                   ============================================================================================
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       26
<PAGE>

As of December 31, 1998

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------------
                                                                By Repricing Interval
--------------------------------------------------------------------------------------------------------------------------------
(in thousands)                        Within    After three    After six     After one     After five   Noninterest     Total
                                      three        months,      months,     year, within     years     bearing funds
                                      months    within six    within one     five years
                                                   months        year
--------------------------------------------------------------------------------------------------------------------------------
<S>                                 <C>         <C>           <C>           <C>            <C>         <C>              <C>
Assets

Federal funds sold                  $   4,800          --            --            --            --            --         4,800

Investment securities                  19,225         148         4,126        16,473         5,675            --        45,647

Loans                                  51,324       3,881         3,369        22,285        12,303            --        93,162

Noninterest earning assets
and allowance for loan losses              --          --            --            --            --        20,791        20,791
                                    -------------------------------------------------------------------------------------------
Total Assets                        $  75,349       4,029         7,495        38,758        17,978        20,791       164,400
                                    ===========================================================================================
Liabilities and
Stockholders' Equity

Savings, money market &
NOW deposits                        $  81,650          --            --            --            --            --        81,650

Time deposits                          25,573      10,097        10,129         3,560            --            --        49,359

Other liabilities and
 stockholders' equity                      --          --            --            --            --        33,391        33,391
                                    -------------------------------------------------------------------------------------------
Total Liabilities and
Stockholders' Equity                $ 107,223      10,097        10,129         3,560            --        33,391       164,400
                                    ===========================================================================================
Interest Rate Sensitivity Gap       $ (31,874)     (6,068)       (2,634)       35,198        17,978       (12,600)           --
                                    ===========================================================================================
Cumulative Interest Rate
Sensitivity Gap                     $ (31,874)    (37,942)      (40,576)       (5,378)      (12,600)           --            --
                                    ===========================================================================================
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>

The interest rate gaps reported in the table arise when assets are funded with
liabilities having different repricing intervals.  Since these gaps are actively
managed and change daily as adjustments are made in interest rate forecasts and
market outlook, positions at the end of any period may not be reflective of the
Company's interest rate sensitivity in subsequent periods. Active management
dictates that longer-term economic views are balanced against prospects for
short-term interest rate changes in all repricing intervals.  For purposes of
the above analysis, repricing of fixed-rate instruments is based upon the
contractual maturity of the applicable instruments.  In addition, repricing of
assets and liabilities is assumed in the first available repricing period.
Actual payment patterns may differ from contractual payment patterns, and it has
been management's experience that repricing does not always correlate directly
with market changes in the yield curve.

Fluctuations in interest rates can also impact the market value of assets and
liabilities either favorably or adversely depending upon the nature of the rate
fluctuations as well as the maturity and repricing structure of the underlying
financial instruments.  To the extent that financial instruments are held to
contractual maturity, market value fluctuations related to interest rate changes
are realized only to the extent that future net interest margin is either higher
or lower than comparable market rates for the period.  To the extent that
liquidity management dictates the need to liquidate certain assets prior to
contractual maturity, changes in market value from fluctuating interest rates
will be realized in income to the extent of any gain or loss incurred upon the
liquidation of the related assets.

                                       27
<PAGE>

Liquidity

The Company's primary source of liquidity is dividends from the Bank. The
Company's primary uses of liquidity are associated with dividiend payments made
to shareholders and operating expenses.

Liquidity is managed on a daily basis by maintaining cash, federal funds sold,
and short-term investments at levels commensurate with the estimated
requirements for loan demand and fluctuations in deposits. Loan demand and
deposit fluctuations are affected by a number of factors, including economic
conditions, seasonality of the borrowing and deposit bases, and the general
level of interest rates. The Bank maintains two lines of credit with
correspondent banks as a supplemental source of short-term liquidity in the
event that saleable investment securities and loans or available new deposits
are not adequate to meet liquidity needs. The Bank has also established reverse
repurchase agreements with two brokerage firms which allow for short term
borrowings that are secured by the Bank's investment securities. Furthermore,
the Bank may also borrow on a short-term basis from the Federal Reserve in the
event that other liquidity sources are not adequate.

At December 31, 1999 liquidity was considered adequate, and funds available in
the local deposit market and scheduled maturities of investments are considered
sufficient to meet long-term liquidity needs.  Compared to 1998 liquidity
declined in 1999 as a result of the growth in loans.  The growth was adequately
funded by investment portfolio maturities and deposit portfolio growth.

Capital Resources

Consolidated capital increased by $664 thousand or 5%, during 1999.  The
increase was due primarily to net income of $1.16 million.  Capital was further
increased by $359 thousand as a result of capital paid in upon exercise of stock
options which was offset by $286 thousand in capital used to pay dividends and a
$568 thousand increase in the net unrealized loss on available for sale
securities.  The consolidated capital to assets ratio declined by 20 basis
points, to 8.23% from 8.43%, due to the growth in assets related to the growth
in deposits.

The Bank's total risk-based and leverage capital ratios were 10.51% and 7.82%,
respectively, at December 31, 1999 compared to 11.2% and 7.4%, respectively, at
December 31, 1998.  The decline in the total risk-based ratio reflects the
additional leverage created by the growth in deposits as well as increased
lending which moves assets from lower risk-weight categories to the higher risk-
weight categories of loans.  The total risk-based and leverage capital ratios at
December 31, 1999, are in excess of the required regulatory minimums of 10% and
5%, respectively, for well-capitalized institutions.


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
     See Item 14(a) herein.


ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE
     Not Applicable


                                   PART III
ITEMS 10, 11, 12 and 13.

The information required by these items is contained in the Company's definitive
Proxy Statement for the Annual Meeting of Shareholders to be held on April 25,
2000, and is incorporated herein by reference.  The definitive Proxy Statement
will be filed with the Commission within 120 days after the close of the
Company's fiscal year pursuant to Regulation 14A of the Securities Exchange Act
of 1934.

                                       28
<PAGE>

                                    PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

     (a)  Financial Statements and Schedules                   Page Reference

          Independent Auditors' Report                               33
          Consolidated Balance Sheets as of
           December 31, 1999 and 1998                                34
          Consolidated Statements of Income
           Years Ended 1999, 1998, and 1997                          35
          Consolidated Statements of Changes in
           Stockholders' Equity and Comprehensive Income
           Years Ended 1999, 1998, and 1997                          36
          Consolidated Statements of Cash Flows
           Years Ended 1999, 1998, and 1997                          37
          Notes to Consolidated Financial Statements                 38

     (b)  Reports on Form 8-K

            No reports were filed on Form 8-K during the last quarter of the
period covered by this report.

     (c)  Exhibits

          Exhibit No.    Description
          -----------    -----------

             3(a)        Articles of Incorporation, as amended, filed as Exhibit
                         3.1 to the Company's General Form for Registration of
                         Securities on Form 10, filed on September 21, 1983, is
                         hereby incorporated by reference.

             3(b)        Bylaws, as amended, filed as Exhibit 3(b) to the
                         Company's Annual Report on Form 10-K for the year ended
                         December 31, 1998, is hereby incorporated by reference.

             4           Specimen Common Stock Certificate, filed as Exhibit 4.1
                         to the Company's General Form for Registration of
                         Securities on Form 10, filed on September 21, 1983, is
                         hereby incorporated by reference.

             10(a)*      First Financial Bancorp 1991 Director Stock Option Plan
                         and form of Nonstatutory Stock Option Agreement, filed
                         as Exhibit 4.1 to the Company's Form S-8 Registration
                         Statement (Registration No. 33-40954), filed on May 31,
                         1991, is hereby incorporated by reference.

             10(b)*      Amendment to First Financial Bancorp 1991 Director
                         Stock Option Plan, filed as Exhibit 4.3 to the
                         Company's Post-Effective Amendment No. 1 to Form S-8
                         Registration Statement (Registration No. 33-40954),
                         filed as Exhibit 10 to the Company's Quarterly Report
                         on Form 10-Q for the period ended March 31, 1995, is
                         hereby incorporated by reference.

             10(c)*      First Financial Bancorp 1991 Employee Stock Option Plan
                         and forms of Incentive Stock Option Agreement and
                         Nonstatutory Stock Option Agreement, filed as Exhibit
                         4.2 to the Company's Form S-8 Registration Statement
                         (Registration No. 33-40954), filed on May 31, 1991, is
                         hereby incorporated by reference.

             10(d)*      Bank of Lodi Employee Stock Ownership Plan, filed as
                         Exhibit 10 to the Company's Annual Report on Form 10-K
                         for the year ended December 31, 1992, is hereby
                         incorporated by reference.

                                       29
<PAGE>

             10(e)*      First Financial Bancorp 1997 Stock Option Plan, filed
                         as Exhibit 10 to the Company's Quarterly Report on Form
                         10-Q for the period ended September 30, 1997, is hereby
                         incorporated by reference.

             10(f)*      Bank of Lodi Incentive Compensation Plan, filed as
                         Exhibit 10(f) to the Company's Annual Report on Form
                         10-K for the year ended December 31, 1997, is hereby
                         incorporated by reference.

             10(g)       First Financial Bancorp 401(k) Profit Sharing Plan,
                         filed as Exhibit 10(g) to the Company's Annual Report
                         on Form 10-K for the year ended December 31, 1997, is
                         hereby incorporated by reference.

             10(h)*      Employment Agreement dated as of September 30, 1998,
                         between First Financial Bancorp and Leon J. Zimmerman.,
                         filed as Exhibit 10(h) to the Company's Quarterly
                         Report on Form 10-Q for the quarter ended September 30,
                         1998, is hereby incorporated by reference.

             10(i)*      Employment Agreement dated as of September 30, 1998,
                         between First Financial Bancorp and David M. Philipp,
                         filed as Exhibit 10(i) to the Company's Quarterly
                         Report on Form 10-Q for the quarter ended September 30,
                         1998, is hereby incorporated by reference.

             10(j)*      Executive Supplemental Compensation Agreement effective
                         as of April 3, 1998, between Bank of Lodi, N.A. and
                         Leon J. Zimmerman, filed as Exhibit 10(j) to the
                         Company's Quarterly Report on Form 10-Q for the quarter
                         ended September 30, 1998, is hereby incorporated by
                         reference.

             10(k)*      Executive Supplemental Compensation Agreement effective
                         as of April 3, 1998, between Bank of Lodi, N.A. and
                         David M. Philipp, filed as Exhibit 10(k) to the
                         Company's Quarterly Report on Form 10-Q for the quarter
                         ended September 30, 1998, is hereby incorporated by
                         reference.

             10(l)*      Life Insurance Endorsement Method Split Dollar Plan
                         Agreement effective as of April 3, 1998, between Bank
                         of Lodi, N.A. and Leon J. Zimmerman, filed as Exhibit
                         10(l) to the Company's Quarterly Report on Form 10-Q
                         for the quarter ended September 30, 1998, is hereby
                         incorporated by reference.

             10(m)*      Life Insurance Endorsement Method Split Dollar Plan
                         Agreement effective as of April 3, 1998, between Bank
                         of Lodi, N.A. and David M. Philipp, filed as Exhibit
                         10(m) to the Company's Quarterly Report on Form 10-Q
                         for the quarter ended September 30, 1998, is hereby
                         incorporated by reference.

             10(n)*      Form of Director Supplemental Compensation Agreement,
                         effective as of April 3, 1998, as executed between Bank
                         of Lodi, N.A. and each of Benjamin R. Goehring, Michael
                         D. Ramsey, Weldon D. Schumacher and Dennis R. Swanson,
                         filed as Exhibit 10(n) to the Company's Quarterly
                         Report on Form 10-Q for the quarter ended September 30,
                         1998, is hereby incorporated by reference.

             10(o)*      Form of Life Insurance Endorsement Method Split Dollar
                         Plan Agreement, effective as of April 3, 1998, as
                         executed between Bank of Lodi, N.A. and each of
                         Benjamin R. Goehring, Michael D. Ramsey, Weldon D.
                         Schumacher and Dennis R. Swanson, filed as Exhibit
                         10(o) to the Company's Quarterly Report on Form 10-Q
                         for the quarter ended September 30, 1998, is hereby
                         incorporated by reference.

             10(p)*      Form of Director Supplemental Compensation Agreement,
                         effective as of April 3, 1998, as executed between Bank
                         of Lodi, N.A. and each of Angelo J. Anagnos, Raymond H.
                         Coldani, Bozant Katzakian and Frank M. Sasaki, filed as
                         Exhibit 10(p) to the Company's Quarterly Report on Form
                         10-Q for the quarter ended September 30, 1998, is
                         hereby incorporated by reference.

                                       30
<PAGE>

             10(q)*      Form of Life Insurance Endorsement Method Split Dollar
                         Plan Agreement, effective as of April 3, 1998, as
                         executed between Bank of Lodi, N.A. and each of Angelo
                         J. Anagnos, Raymond H. Coldani, Bozant Katzakian and
                         Frank M. Sasaki, filed as Exhibit 10(q) to the
                         Company's Quarterly Report on Form 10-Q for the quarter
                         ended September 30, 1998, is hereby incorporated by
                         reference.

             11          Statement re computation of earnings per share is
                         incorporated herein by reference to Footnotes 1(j) and
                         14 to the consolidated financial statements included in
                         this report.

             21          Subsidiaries of the Company: The Company owns 100
                         percent of the capital stock of Bank of Lodi, National
                         Association, a national banking association, and 100
                         percent of the capital stock of Western Auxiliary
                         Corporation.

             23          Consent of KPMG LLP, independent auditors.

             27          Financial Data Schedule.

     (d)  Financial Statement Schedules

          No financial statement schedules are included in this report on the
          basis that they are either inapplicable or the information required to
          be set forth therein is contained in the financial statements included
          in this report.


     ______________________________

     * Management contract or compensatory plan or arrangement

                                       31
<PAGE>

      Independent Auditors' Report

The Board of Directors

First Financial Bancorp:

We have audited the accompanying consolidated balance sheets of First Financial
Bancorp and subsidiaries as of December 31, 1999 and 1998, and the related
consolidated statements of income, stockholders' equity and comprehensive income
and cash flows for each of the years in the three-year period ended December 31,
1999. 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 audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the 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 audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of First Financial
Bancorp and subsidiaries as of December 31, 1999 and 1998, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 1999, in conformity with generally accepted accounting
principles.


                                   /s/ KPMG LLP


Sacramento, California

February 23, 2000

                                       32
<PAGE>

                    FIRST FINANCIAL BANCORP AND SUBSIDIARIES
                          Consolidated Balance Sheets
                      (in thousands except share amounts)
                           December 31, 1999 and 1998
<TABLE>
<CAPTION>
     Assets                                                                           1999              1998
----------------------------------------------------------------------------------------------------------------
    <S>                                                                           <C>                <C>
     Cash and due from banks                                                      $  9,309             7,329
     Federal funds sold                                                                100             4,800
     Investment securities available-for-sale, at fair value                        36,096            45,647
     Loans, net of deferred loan fees and allowance for loan losses of
          $3,136 and $2,084 in 1999 and 1998, respectively                         109,594            91,078
     Premises and equipment, net                                                     7,096             7,261
     Accrued interest receivable                                                     1,487             1,353
     Other Assets                                                                   12,652             6,932
----------------------------------------------------------------------------------------------------------------
                                                                                  $176,334           164,400
================================================================================================================

     Liabilities and Stockholders' Equity
----------------------------------------------------------------------------------------------------------------
     Liabilities:
     Deposits:
          Noninterest bearing                                                     $ 21,054            18,535
          Interest bearing                                                         135,107           131,009
----------------------------------------------------------------------------------------------------------------
               Total deposits                                                      156,161           149,544

     Accrued interest payable                                                          304               389
     Short term borrowings                                                           4,300                 -
     Other liabilities                                                               1,048               610
----------------------------------------------------------------------------------------------------------------
               Total liabilities                                                   161,813           150,543

     Stockholders' equity:
     Common stock - no par value; authorized 9,000,000 shares, issued and
     outstanding in 1999, 1,433,734 shares; in 1998, 1,349,292 shares                8,433             7,584
     Retained earnings                                                               6,354             5,971
     Accumulated other comprehensive (loss) income                                    (266)              302
----------------------------------------------------------------------------------------------------------------
               Total stockholders' equity                                           14,521            13,857
----------------------------------------------------------------------------------------------------------------
               Commitments and contingencies
                                                                                  $176,334           164,400
================================================================================================================
</TABLE>

     See accompanying notes to consolidated financial statements.

                                       33
<PAGE>

                    FIRST FINANCIAL BANCORP AND SUBSIDIARIES

                       Consolidated Statements of Income
                    (in thousands except per share amounts)
                  Years Ended December 31, 1999, 1998 and 1997

<TABLE>
<CAPTION>

                                                                1999          1998          1997
-----------------------------------------------------------------------------------------------------
     <S>                                                       <C>           <C>           <C>
     Interest income:
          Loans, including fees                                $ 9,911        7,729         6,612
          Interest on investment securities available
          for sale:
               Taxable                                           2,145        3,191         3,252
               Exempt from Federal taxes                           268          240           150
          Interest on investment securities held
          to maturity:
               Exempt from Federal taxes                             -            -           117
          Federal funds sold                                       202          348           461
-----------------------------------------------------------------------------------------------------
               Total interest income                            12,526       11,508        10,592

     Interest expense:
          Deposit accounts                                       3,688        4,028         3,785
          Other borrowings                                          11            -             -
-----------------------------------------------------------------------------------------------------
               Total interest expense                            3,699        4,028         3,785

                    Net interest income                          8,827        7,480         6,807

     Provision for loan losses                                   1,051          250           (60)
-----------------------------------------------------------------------------------------------------
               Net interest income after provision
                    for loan losses                              7,776        7,230         6,867

     Noninterest income:
          Service charges                                        1,078          846           766
          Gain on stock issued in insurance
                    company demutualization                        287            -             -
          Gain on sale of loans                                    310          434           294
          Premiums and fees from SBA and
                    mortgage operations                            371          350           281
          Other                                                    415          248            82
-----------------------------------------------------------------------------------------------------
               Total noninterest income                          2,461        1,878         1,423

     Noninterest expense:
          Salaries and employee benefits                         4,032        3,556         3,092
          Occupancy                                                810          715           593
          Equipment                                                687          536           455
          Other                                                  3,274        2,905         2,656
-----------------------------------------------------------------------------------------------------
               Total noninterest expense                         8,803        7,712         6,796
-----------------------------------------------------------------------------------------------------
     Income before provision for income taxes                    1,434        1,396         1,494

     Provision for income taxes                                    275          344           479
-----------------------------------------------------------------------------------------------------
               Net income                                      $ 1,159        1,052         1,015
=====================================================================================================

     Earnings per share:
-----------------------------------------------------------------------------------------------------
          Basic                                                $   .83          .76           .74
=====================================================================================================
          Diluted                                              $   .80          .72           .71
=====================================================================================================

     Dividends per share                                       $   .20          .20           .20
=====================================================================================================
</TABLE>

      See accompanying notes to consolidated financial statements.

                                       34
<PAGE>

                   FIRST FINANCIAL BANCORP AND SUBSIDIARIES

          Statements of Stockholders' Equity and Comprehensive Income
                      (in thousands except share amounts)
                 Years Ended December 31, 1999, 1998 and 1997

<TABLE>
<CAPTION>
                                                                                            Accumulated
                                             Common     Common                                 Other
                                              Stock      Stock   Comprehensive   Retained   Comprehensive
               Description                    Shares    Amounts      Income      Earnings   (Loss) Income    Total
------------------------------------------------------------------------------------------------------------------
<S>                                         <C>         <C>      <C>             <C>        <C>             <C>
Balance at December 31, 1996                1,308,950   $7,324                     4,438             127   11,889

Comprehensive income:

  Net income                                                          $1,015       1,015                    1,015
                                                                      ------
  Other comprehensive income:
   Unrealized holding gains arising
   during the current period, net of tax                                  91
   effect of $92
                                                                      ------
      Total other comprehensive income                                    91                          91       91
                                                                      ------
  Comprehensive income                                                $1,106
                                                                      ======
Options exercised                              23,892      131                                                131

Cash dividend declared                                                              (265)                    (265)
                                          --------------------                   --------------------------------
Balance at December 31, 1997                1,332,842    7,455                     5,188             218   12,861

Comprehensive income:

   Net income                                                         $1,052       1,052                    1,052
                                                                      ------
   Other comprehensive income:
      Unrealized holding gains arising
      during the current period, net of tax
      effect of $39                                                       84
                                                                      ------
          Total other comprehensive income                                84                          84       84
                                                                      ------
   Comprehensive income                                               $1,136
                                                                      ======
Options exercised                              16,450      129                                                129

Cash dividend declared                                                              (269)                    (269)
                                          --------------------                   --------------------------------
Balance at December 31, 1998                1,349,292    7,584                     5,971             302   13,857

Comprehensive income:

   Net income                                                         $1,159       1,159                    1,159
                                                                      ------
   Other comprehensive loss:
      Unrealized holding loss arising
      during the current period, net of tax
      benefit of $410                                                   (568)
                                                                      ------
          Total other comprehensive loss                                (568)                       (568)    (568)
                                                                      ------
   Comprehensive income                                               $  640
                                                                      ======
Options exercised                              43,582      359                                                359

Stock dividend                                 40,860      490                      (490)

Cash issued in lieu of stock dividend                                                 (7)                      (7)

Cash dividend                                                                       (279)                    (279)
                                          --------------------                   --------------------------------
Balance at December 31, 1999                1,433,734   $8,433                     6,354            (266)  14,521
                                          ====================                   ================================
</TABLE>

See accompanying notes to consolidated financial statements.

                                       35
<PAGE>

                   FIRST FINANCIAL BANCORP AND SUBSIDIARIES
                     Consolidated Statements of Cash Flows
                                (in thousands)
                 Years Ended December 31, 1999, 1998, and 1997

<TABLE>
<CAPTION>
                                                                                         1999      1998      1997
-----------------------------------------------------------------------------------------------------------------
<S>                                                                                  <C>          <C>       <C>
Cash flows from operating activities:
     Net income                                                                      $  1,159     1,052     1,015
     Adjustments to reconcile net income to net cash flows
     provided by operating activities:
          Decrease (increase) in loans held for resale                                  1,712      (377)   (1,024)
          Gain on sale of loans                                                          (310)     (434)     (294)
          Increase (decrease) in deferred loan income                                      36       (49)      168
          Provision for other real estate owned losses                                      -       (16)       60
          Depreciation and amortization                                                 1,126     1,071     1,066
          Provision for loan losses                                                     1,051       250       (60)
          Provision for deferred taxes                                                   (689)      (52)      (28)
          (Increase) decrease in accrued interest receivable                             (134)      120      (413)
          (Decrease) increase in accrued interest payable                                 (85)      (40)      105
          Increase in cash surrender value of life insurance                             (206)     (149)        -
          Increase in other assets                                                       (503)     (145)     (492)
          Increase (decrease) in other liabilities                                        438       (59)      176
-----------------------------------------------------------------------------------------------------------------
          Net cash provided by operating activities                                     3,595     1,172       279

Cash flows from investing activities:
     Proceeds from maturity of held-to-maturity securities                                  -       540        70
     Proceeds from maturity of available-for-sale securities                            9,180    20,317    19,230
     Proceeds from sale of available-for-sale securities                               43,054     8,500    28,077
     Purchases of available-for-sale securities                                       (43,666)  (12,964)  (72,201)
     Increase in loans made to customers                                              (21,006)  (28,240)   (7,928)
     Proceeds from the sale of other real estate                                           11        45       285
     Purchases of bank premises, equipment and intangible assets                         (684)     (712)    3,127)
     Purchase of cash surrender value life insurance                                   (4,194)   (4,125)        -
-----------------------------------------------------------------------------------------------------------------
     Net cash used in investing activities                                            (17,305)  (16,639)  (35,594)

Cash flows from financing activities:
     Net increase in deposits                                                           6,617    15,653    41,684
     Increase in other borrowings                                                       4,300         -         -
     Proceeds received upon exercise of stock options                                     359       129       131
     Dividends paid                                                                      (286)     (269)     (265)
-----------------------------------------------------------------------------------------------------------------
           Net cash provided by financing activities                                   10,990    15,513    41,550
-----------------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents                                   (2,720)       46     6,235
Cash and cash equivalents at beginning of year                                         12,129    12,083     5,848
-----------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year                                             $  9,409    12,129    12,083
=================================================================================================================
Supplemental Disclosures of Cash Flow Information:
     Cash paid during the year for:
           Interest                                                                  $  3,784     4,068     3,680
           Income taxes                                                              $    663       677       476
</TABLE>

     See accompanying notes to consolidated financial statements.

                                       36
<PAGE>

                   FIRST FINANCIAL BANCORP AND SUBSIDIARIES
                  Notes to Consolidated Financial Statements
                       December 31, 1999, 1998 and 1997

(1)  Summary of Significant Accounting Policies

     The accounting and reporting policies of First Financial Bancorp (the
     Company) and its subsidiaries, Bank of Lodi, N.A., (the Bank) and Western
     Auxiliary Corporation (WAC) conform with generally accepted accounting
     principles and prevailing practices within the banking industry. In
     preparing the consolidated financial statements, management is required to
     make estimates and assumptions that affect the reported amounts of assets
     and liabilities as of the date of the balance sheet and revenue and expense
     for the period. Actual results could differ from those estimates applied in
     the preparation of the consolidated financial statements. The following are
     descriptions of the significant accounting and reporting policies:

     (a)  Principles of Consolidation

     The consolidated financial statements include the accounts of the Company
     and its subsidiaries for all periods presented. All material intercompany
     accounts and transactions have been eliminated in consolidation.

     (b)  Investment Securities

     The Company designates a security as held-to-maturity or available-for-sale
     when a security is purchased. The selected designation is based upon
     investment objectives, operational needs, intent and ability to hold. The
     Company does not engage in trading activity.

     Held-to-maturity securities are carried at cost, adjusted for accretion of
     discounts and amortization of premiums. Available-for-sale securities
     are recorded at fair value with unrealized holding gains and losses, net of
     the related tax effect reported as a separate component of stockholders'
     equity until realized. Effective October 1, 1998, all held-to-maturity
     securities with an amortized cost of $1,174,000, were transferred to the
     available-for-sale category when Statement of Financial Accounting
     Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging
     Activities was adopted. For the year ended December 31, 1997, there were no
     transfers between classifications.

     To the extent that the fair value of a security is below cost and the
     decline is other than temporary, a new cost basis is established using the
     current market value, and the resulting loss is charged to earnings.
     Premiums and discounts are amortized or accreted over the life of the
     related held-to-maturity or available-for-sale security as an adjustment
     to yield using the effective interest method.

     Gains and losses realized upon disposition of securities are recorded as a
     component of noninterest income on the trade date, based upon the net
     proceeds and the adjusted carrying value of the securities using the
     specific identification method.

     (c)  Loans

     Loans are stated at principal balances outstanding, net of deferred
     origination fees, costs and loan sale premiums. A loan is considered
     impaired when based on current information and events, it is probable that
     the Company will be unable to collect all amounts due according to the
     "contractual terms" of the loan agreement, including scheduled interest
     payments. For a loan that has been restructured, the contractual terms of
     the loan agreement refer to the contractual terms specified by the original
     loan agreement, not the contractual terms specified by the restructuring
     agreement. An impaired loan is measured based upon the present value of
     future cash flows discounted at the loan's effective rate, the loan's
     observable market price, or the fair value of collateral if the loan is
     collateral dependent. Interest on impaired loans is recognized on a cash
     basis. Large groups of small balance, homogenous loans are collectively
     evaluated for impairment. If the measurement of the impaired loan is less
     than the recorded investment in the loan, an impairment is recognized by
     increasing the allowance for loan losses. Loans held for sale are carried
     at the lower of aggregate cost or market.

     Interest on loans is accrued daily. Nonaccrual loans are loans on which the
     accrual of interest ceases when the collection of principal or interest is
     determined to be doubtful by management. It is the general policy of the
     Bank to discontinue the accrual of interest when principal or interest
     payments are delinquent 90 days or more unless the loan is well secured and
     in the process of collection. When a loan is placed on non-accrual status,
     accrued and unpaid interest is reversed against current period interest
     income. Interest accruals are resumed when such loans are

                                       37
<PAGE>

     brought fully current with respect to interest and principal and when, in
     the judgment of management, the loans are estimated to be fully collectible
     as to both principal and interest.

     (d)       Loan Origination Fees and Costs

     Loan origination fees, net of certain direct origination costs, are
     deferred and amortized as a yield adjustment over the life of the related
     loans using the interest method, which results in a constant rate of
     return. Loan commitment fees are also deferred. Commitment fees are
     recognized over the life of the resulting loans if the commitments are
     funded or at the expiration of the commitments if the commitments expire
     unexercised. Origination fees and costs related to loans held for sale are
     deferred and recognized as a component of gain or loss when the related
     loans are sold.

     (e)       Gain or Loss on Sale of Loans and Servicing Rights

     Transfers and servicing of financial assets and extinguishments of
     liabilities are accounted for and reported based on consistent application
     of a financial-components approach that focuses on control.  Transfers of
     financial assets that are sales are distinguished from transfers that are
     secured borrowings.  Servicing assets and other retained interests in
     transferred assets are measured by allocating the previous carrying amount
     of the transferred assets between the assets sold, if any and retained
     interests, if any, based on their relative fair value at the date of
     transfer. Liabilities and derivatives incurred or obtained by transferors
     as part of a transfer of financial assets are to be initially measured at
     fair value.  Servicing assets and liabilities are to be subsequently
     amortized in proportion to and over the period of estimated net servicing
     income or loss and assessed for asset impairment or increased obligation
     based on fair value.

     The Bank recognizes a gain and a related asset for the fair value of the
     rights to service loans for others when loans are sold.  The fair value of
     the servicing assets is estimated based upon the present value of the
     estimated expected future cash flows.  The Bank measures the impairment of
     the servicing asset based on the difference between the carrying amount of
     the servicing asset and its current fair value.  As of December 31, 1999
     and 1998, there was no impairment in mortgage servicing asset.

     A sale is recognized when the transaction closes and the proceeds are other
     than beneficial interest in the assets sold. A gain or loss is recognized
     to the extent that the sales proceeds and the fair value of the servicing
     asset exceed or are less than the book value of the loan.  Additionally,
     the fair value of servicing rights is considered in the determination of
     the gain or loss.

     When servicing rights are sold, a gain or loss is recognized at the closing
     date to the extent that the sales proceeds, less costs to complete the
     sale, exceed or are less than the carrying value of the servicing rights
     held.

     (f)       Allowance for Loan Losses

     The allowance for loan losses is established through a provision charged to
     expense. Loans are charged off against the allowance for loan losses when
     management believes that the collectibility of the principal is unlikely.
     Recoveries of amounts previously charged off are added back to the
     allowance. The allowance is an amount that management believes will be
     adequate to absorb losses inherent in existing loans, standby letters of
     credit, overdrafts and commitments to extend credit based on evaluations of
     collectibility and prior loss experience. The evaluations take into
     consideration such factors as changes in the nature and volume of the
     portfolio, overall portfolio quality, loan concentrations, specific problem
     loans, commitments, and current and anticipated economic conditions that
     may affect the borrowers' ability to pay. While management uses these
     evaluations to recognize the provision for loan losses, future provisions
     may be necessary based on changes in the factors used in the evaluations.
     The allowance for loan losses is also subject to review by the Comptroller
     of the Currency, the Bank's principal regulator.

     (g)       Premises and Equipment

     Premises and equipment are carried at cost less accumulated depreciation
     and amortization. Depreciation and amortization is calculated using the
     straight-line method over the estimated useful lives of the related
     assets. Estimated useful lives are as follows:

            Building                                     35 years
            Improvements, furniture, and equipment       3 to 10 years

     Expenditures for repairs and maintenance are charged to operations as
     incurred; significant betterments are capitalized. Interest expense
     attributable to construction-in-progress is capitalized.

                                       38
<PAGE>

     (h)       Intangible Assets

     Goodwill, representing the excess of purchase price over the fair value of
     net assets acquired, results from branch acquisitions made by the Bank.
     Goodwill is being amortized on an accelerated basis over eight years.  Core
     deposit intangibles are amortized on an accelerated basis over eight years.
     Intangible assets are reviewed on a periodic basis for other than temporary
     impairment.  If such impairment is indicated, recoverability of the asset
     is assessed based upon expected undiscounted net cash flows. Intangible
     assets totaled $900,000 and $1,182,000 at December 31, 1999 and 1998,
     respectively and are included in Other Assets.

     (i)       Other Real Estate Owned

     Other real estate owned (OREO) consists of property acquired through
     foreclosure and is recorded at the time of foreclosure at its fair market
     value. Thereafter, it is carried at the lower of cost or fair market value
     less estimated completion and selling costs. If at foreclosure, the loan
     balance is greater than the fair market value of the property acquired, the
     excess is charged against the allowance for loan losses. Subsequent
     operating expenses or income, changes in carrying value, and gains or
     losses on disposition of OREO are reflected in other noninterest expense.
     Fair market value is generally determined based upon independent
     appraisals.

     Revenue recognition on the disposition of OREO is dependent upon the
     transaction meeting certain criteria relating to the nature of the property
     sold and the terms of the sale.  Under certain circumstances, revenue
     recognition may be deferred until these criteria are met.

     (j)       Earnings Per Share

     Basic earnings per share (EPS) includes no dilution and is computed by
     dividing income available to common stockholders by the weighted-average
     number of common shares outstanding for the period.  Diluted EPS reflects
     the potential dilution of securities that could share in the earnings of an
     entity.

     On June 18, 1999, the Company effected a three percent stock dividend
     payable to stockholders of record as of June 4, 1999. All share, per share,
     Common Stock and stock option amounts herein have been restated to reflect
     the effects of the stock dividend.

     (k)       Income Taxes

     Deferred tax assets and liabilities are recognized for the future tax
     consequences attributable to differences between the financial statement
     carrying amounts of existing assets and liabilities and their respective
     tax bases and operating loss and tax credit carryforwards. Deferred tax
     assets and liabilities are measured using enacted tax rates expected to
     apply to taxable income in the years in which those temporary differences
     are expected to be recovered or settled. The effect on deferred tax assets
     and liabilities of a change in tax rates is recognized in income in the
     period that includes the enactment date.

     Income tax expense is allocated to each entity of the Company based upon
     analyses of the tax consequences of each company on a stand alone basis.

     (l)       Statements of Cash Flows

     For purposes of the statements of cash flows, cash, non-interest bearing
     deposits in other banks and federal funds sold, which generally have
     maturities of one day, are considered to be cash equivalents.

     (m)       Impairment of Long-Lived Assets and Long-Lived Assets to Be
               Disposed Of

     Long-lived assets and certain identifiable intangibles are reviewed for
     impairment whenever events or changes in circumstances indicate that the
     carrying amount of an asset may not be recoverable.  Recoverability of
     assets to be held and used is measured by a comparison of the carrying
     amount of an asset to future net cash flows expected to be generated by the
     asset.  If such assets are considered to be impaired, the impairment to be
     recognized is measured by the amount by which the carrying amount of the
     assets exceed the fair value of the assets.  Assets to be disposed of are
     reported at the lower of the carrying amount or fair value less costs to
     sell.

     (n)       Stock Based Compensation

     The Company accounts for its stock option plan using the intrinsic value
     method. Compensation expense is recorded on the date of grant only if the
     current market price of the underlying stock exceeds the exercise price.

     (o)       Reclassifications

     Certain amounts in prior years' presentations have been reclassified to
     conform with the current presentation. These reclassifications have no
     effect on previously reported income.




                                       39
<PAGE>

(2)  Restricted Cash Balances

     The Bank is required to maintain certain daily reserve balances in
     accordance with Federal Reserve Board requirements. Aggregate reserves of
     $2,340,000 and $1,855,000 were maintained to satisfy these requirements at
     December 31, 1999 and 1998, respectively.


(3)  Investment Securities

     Investment securities at December 31, 1999 and 1998 consisted of the
     following:

<TABLE>
<CAPTION>
                                                            December 31, 1999
                                                                    Gross                Gross              Estimated
                                              Amortized            Unrealized          Unrealized            Market
                                                Cost                 Gains              Losses               Value
     ------------------------------------------------------------------------------------------------------------------
       <S>                                   <C>            <C>                        <C>                  <C>
       Available for Sale
       ------------------
       U.S. Agency securities                $16,666,000             17,000             239,000              16,442,000
       Municipal securities                   12,187,000             52,000             229,000              12,010,000
       Collateralized mortgage obligations     6,627,000              5,000              62,000               6,570,000
       Other debt securities                     948,000                  -                   -                 948,000
       Investment in Federal Agency stock        126,000                  -                   -                 126,000
     ------------------------------------------------------------------------------------------------------------------
       Total                                 $36,554,000             74,000             532,000              36,096,000
     ==================================================================================================================
</TABLE>

<TABLE>
<CAPTION>
                                                            December 31, 1999
                                                                    Gross                Gross              Estimated
                                              Amortized            Unrealized          Unrealized            Market
                                                Cost                 Gains              Losses               Value
     ------------------------------------------------------------------------------------------------------------------
     <S>                                     <C>            <C>                        <C>                  <C>
       Available for Sale
       ------------------
       U.S. Treasury securities              $ 1,000,000              3,000                  -                1,003,000
       U.S. Agency securities                 19,494,000            311,000              7,000               19,798,000
       Municipal securities                    3,635,000            175,000                  -                3,810,000
       Collateralized mortgage obligations       457,000              5,000              4,000                  458,000
       Other debt securities                   2,813,000             37,000                  -                2,850,000
       Money market mutual fund               17,602,000                  -                  -               17,602,000
       Investment in Federal Agency stock        126,000                  -                  -                  126,000
     ------------------------------------------------------------------------------------------------------------------
       Total                                 $45,127,000            531,000             11,000               45,647,000
     ==================================================================================================================
</TABLE>

       Investment securities totaling $8,555,000 and $4,559,000 were pledged as
       collateral to secure Local Agency Deposits as well as treasury, tax and
       loan accounts with the Federal Reserve at December 31, 1999 and 1998,
       respectively. In addition, investment securities totaling $5,942,000 were
       pledged to secure deposits with the California State Treasurer at
       December 31, 1999.

       Proceeds from the sale of Available for Sale securities during 1999, 1998
       and 1997 were $43,054,000, $8,500,000 and $28,077,000 respectively, and
       represented the sale of money market mutual fund shares at book value.
       Accordingly, no gain or loss was realized.

       Federal Agency stock dividends paid to the Company were $7,000, in 1999,
       1998 and 1997.

                                       40
<PAGE>

       The amortized cost and estimated fair value of debt securities at
       December 31, 1999, by contractual maturity, or expected maturity where
       applicable, are shown below. Expected maturities will differ from
       contractual maturities because certain securities provide the issuer with
       the right to call or prepay obligations with or without call or
       prepayment penalties.

                                                        December 31, 1999
                                                 Amortized              Market
                                                    Cost                 Value
     -------------------------------------------------------------------------
       Due in one year or less                  $ 2,164,000          2,184,000
       Due after one year through five years     21,482,000         21,333,000
       Due after five years through 10 years      4,905,000          4,797,000
       Due after 10 years                         7,877,000          7,656,000
     -------------------------------------------------------------------------
                                                $36,428,000         35,970,000
     =========================================================================

(4)    Loans

       The Bank grants commercial, installment, real estate construction and
       other real estate loans to customers primarily in the trade areas served
       by its branches. Generally, the loans are secured by real estate or other
       assets. Although the Bank has a diversified loan portfolio, a significant
       portion of its debtors' ability to honor their contract is dependent upon
       the condition of the local real estate markets in which the loans are
       made.

       Outstanding loans consisted of the following at December 31:

                                                            1999           1998
     --------------------------------------------------------------------------
       Commercial                                   $ 89,089,000     73,195,000
       Real estate construction                       13,919,000     11,743,000
       Other real estate                               6,420,000      4,761,000
       Installment and other                           3,301,000      3,463,000
     --------------------------------------------------------------------------
                                                     112,729,000     93,162,000

       Deferred loan fees and loan sale premiums        (556,000)      (520,000)
       Allowance for loan losses                      (2,580,000)    (1,564,000)
     --------------------------------------------------------------------------
                                                    $109,594,000     91,078,000
     ==========================================================================

       Included in total loans are loans held for sale of $1,217,000 and
       $2,619,000 for 1999 and 1998, respectively.  SBA and mortgage loans
       serviced by the Bank totaled $95,749,000, $66,903,000 and $45,939,000 in
       1999, 1998, and 1997, respectively.

       Changes in the allowance for loan losses were as follows:

                                                1999         1998         1997
     -------------------------------------------------------------------------
       Balance, beginning of year         $1,564,000    1,313,000    1,207,000
       Loans charged off                    (110,000)    (132,000)    (290,000)
       Recoveries                             75,000      133,000      456,000
       Provision charged to operations     1,051,000      250,000      (60,000)
     -------------------------------------------------------------------------
       Balance, end of year               $2,580,000    1,564,000    1,313,000
     =========================================================================

       Nonaccrual loans totaled $2,303,000, $248,000, and $340,000 at December
       31, 1999, 1998 and 1997, respectively. Interest income which would have
       been recorded on nonaccrual loans was $76,000, $43,000 and $45,000, in
       1999, 1998, and 1997, respectively.

       Impaired loans are loans for which it is probable that the Bank will not
       be able to collect all amounts due. At December 31, 1999 and 1998, the
       Bank had outstanding balances of $2,303,000 and $248,000 in impaired
       loans which had valuation allowances of $327,000 in 1999 and $32,000 in
       1998. The average outstanding balances of impaired loans for the years
       ended December 31, 1999, 1998 and 1997 were $805,000, $535,000 and
       $1,150,000 respectively, on which $76,000, $40,000 and $47,000,
       respectively, was recognized as interest income.

       At December 31, 1999 and 1998, the collateral value method was used to
       measure impairment for all loans classified as impaired. Impaired loans
       at December 31, 1999 and 1998 consisted solely of commercial loans.

                                       41
<PAGE>

 (5) Premises and Equipment

     Premises and equipment consisted of the following at December 31:

                                                        1999              1998
     -------------------------------------------------------------------------
     Land                                        $   874,000           874,000
     Building                                      5,705,000         5,705,000
     Leasehold improvements                        1,613,000         1,477,000
     Furniture and equipment                       3,618,000         3,069,000
     -------------------------------------------------------------------------
                                                  11,809,000        11,125,000
     -------------------------------------------------------------------------
     Accumulated depreciation and amortization    (4,713,000)       (3,864,000)
     -------------------------------------------------------------------------
                                                 $ 7,096,000         7,261,000
     =========================================================================

     The Bank leases a portion of its building to unrelated parties under
     operating leases which expire in various years.

     The minimum future rentals to be received on noncancelable leases as of
     December 31, 1999 are summarized as follows:

                     Year Ending December 31,
     -------------------------------------------------------------------------
                     2000                                  $    48,000
                     2001                                        1,000
     -------------------------------------------------------------------------
                     Total minimum future rentals          $    49,000
     =========================================================================

(6)  Other Assets

     Other assets includes the cash surrender value of life insurance totaling
     $8,674,000 and $4,274,000 at December 31, 1999 and 1998, respectively.  The
     cash surrender value of life insurance consists primarily of the Bank's
     contractual rights under single-premium life insurance policies written on
     the lives of certain officers and the directors of the Company and the
     Bank.  The policies, for which the Bank is the beneficiary, were purchased
     in order to indirectly offset anticipated costs of certain benefits
     payable upon the retirement, and the death or disability of the directors
     and officers pursuant to deferred compensation agreements.  The cash
     surrender value accumulates tax-free based upon each policy's crediting
     rate which is adjusted by the insurance company on an annual basis.

     Other real estate owned is also included in other assets and was $129,000
     at December 31, 1999 and 1998.  During 1997, other real estate owned of
     $170,000 was acquired through foreclosure as settlement for loans. There
     were no such acquisitions during 1999 or 1998.  These amounts represent
     noncash transactions, and accordingly, have been excluded from the
     Consolidated Statements of Cash Flows.

 (7) Deposits

     The following is a summary of deposits at December 31:

                                                1999               1998
     --------------------------------------------------------------------------
     Demand                             $ 21,105,000         18,535,000
     NOW and Super NOW Accounts           39,458,000         36,181,000
     Money Market                         16,752,000         19,482,000
     Savings                              29,057,000         25,987,000
     Time, $100,000 and over              19,008,000         14,965,000
     Other  Time                          30,781,000         34,394,000
     --------------------------------------------------------------------------
                                        $156,161,000        149,544,000
     ==========================================================================

     Interest paid on time deposits in denominations of $100,000 or more was
     $765,000, $737,000 and $620,000 in 1999, 1998 and 1997, respectively.

                                       42
<PAGE>

     At December 31, 1999, the aggregate maturities for time deposits is as
     follows:

     --------------------------------------------------------------------------
     2000                                 $48,335,000
     2001                                     782,000
     2002                                     363,000
     2003                                     240,000
     2004                                      69,000
     --------------------------------------------------------------------------
     Total                                $49,789,000
     ==========================================================================

(8)  Operating Leases

     The Bank has noncancelable operating leases with unrelated parties for
     office space and equipment. The lease payments for future years are as
     follows:

     Year Ending December 31,             Lease Payments
     --------------------------------------------------------------------------
     2000                                    $108,000
     2001                                      67,000
     2002                                      52,000
     2003                                      52,000
     2004                                      44,000
     --------------------------------------------------------------------------
                                             $323,000
     ==========================================================================

     Total rental expense for operating leases was $101,000, $114,000 and
     $32,000 in 1999, 1998 and 1997 respectively.


(9)  Supplemental Compensation Agreements

     Effective April 3, 1999 the Company and the Bank entered into nonqualified
     supplemental compensation agreements with all of the directors and certain
     executive officers for the provision of death, disability and post-
     employment/retirement benefits.  The agreement with directors includes
     elective provisions for service as a director emeritus following
     termination of service as a member of the Bank's Board of Directors.
     Directors who elect to serve as a director emeritus receive certain
     benefits during such period of service in addition to benefits applicable
     to all directors which commence upon expiration of the three year emeritus
     period.  The Company will accrue for the compensation based on anticipated
     years of service and the vesting schedule provided in the agreements.  The
     executive officer agreements are defined contribution agreements whereby
     the benefit accruals under the plan are the amount by which, if any, the
     increase in cash surrender value of the related insurance policies exceeds
     a predetermined profitability index.  At December 31, 1999 and 1998,
     accrued compensation under both plans was $160,000 and $72,000,
     respectively.  The Company adopted SFAS No. 132, "Employers' Disclosures
     about Pensions and Other Post Retirement Benefits."  SFAS No. 132 does not
     change the measurement or recognition of expenses under the supplemental
     compensation agreements.


(10) Financial Instruments with Off-Balance Sheet Risk

     In the normal course of business, the Company is a party to financial
     instruments with off-balance sheet risk. These financial instruments
     include commitments to extend credit and standby letters of credit.

     The Company's exposure to credit loss in the event of nonperformance by the
     other party to the financial instrument for commitments to extend credit
     and standby letters of credit is represented by the contractual notional
     amount of those instruments. The Company uses the same credit policies in
     making commitments and conditional obligations as it does for on-balance
     sheet instruments.

                                       43
<PAGE>

       At December 31, 1999 and 1998, financial instruments whose contract
       amounts represent credit risk are as follows:

                                              1999            1998
       -------------------------------------------------------------------------
       Commitments to extend credit    $24,418,000      21,290,000
       =========================================================================
       Standby letters of credit       $   892,000         156,000
       =========================================================================
       Commitments to extend credit are agreements to lend to a customer as long
       as there is no violation of any condition established in the contract.
       Commitments generally have fixed expiration dates, other termination
       clauses and may require payment of a fee. Many of the commitments are
       expected to expire without being drawn upon and accordingly, the total
       commitment amounts do not necessarily represent future cash requirements.
       The Company evaluates each customer's creditworthiness on a case-by-case
       basis. Upon extension of credit, the amount of collateral obtained, if
       any, is based on management's credit evaluation of the counter-party.
       Collateral varies but may include accounts receivable, inventory,
       property, plant and equipment, and income-producing or other real estate.

       Standby letters of credit are conditional commitments issued by the
       Company to guarantee the performance of a customer to a third party.
       These guarantees are primarily issued to support private borrowing
       arrangements. The credit risk involved in issuing letters of credit is
       essentially the same as that involved in extending loan facilities to
       customers. Collateral obtained, if any, is varied.


(11)   Other Noninterest Income

       During 1998, the Company purchased single-premium life insurance policies
       written on the lives of certain officers and the directors of the Company
       and the Bank. During 1999, one of the insurance companies converted from
       a mutual to a stock based company, which process is referred to as
       "demutualization." As a result of the demutualization, policyholders of
       the insurance company received shares of common stock of the insurance
       company. The number of shares of stock received by policyholders was
       based upon the cash surrender value of the individual policies. The
       Company received and subsequently sold the shares in December, 1999. The
       gain recognized upon the receipt of the stock totaled $287,000.

(12)   Other Noninterest Expense

       Other noninterest expense for the years 1999, 1998 and 1997 included the
       following significant items:

                                                   1999       1998        1997
       -------------------------------------------------------------------------
       Third party data processing expense   $  821,000    719,000     642,000
       Professional fees                        554,000    423,000     401,000
       Marketing                                323,000    213,000     120,000
       Intangible amortization                  282,000    372,000     479,000
       Telephone and postage                    271,000    217,000     182,000
       Supplies                                 193,000    176,000     142,000
       Directors' fees and retirement           158,000    223,000     150,000
       Printing                                 109,000    145,000     117,000
       Other                                    563,000    417,000     423,000
       -------------------------------------------------------------------------
         Total                               $3,274,000  2,905,000   2,656,000
       =========================================================================

                                      44
<PAGE>

(13)   Income Taxes

       The provision for income taxes for the years 1999, 1998 and 1997
       consisted of the following:

<TABLE>
<CAPTION>
       1999                                                                     Federal             State           Total
       --------------------------------------------------------------------------------------------------------------------
       <S>                                                                   <C>
       Current                                                               $    716,000           232,000         948,000
       Deferred, net                                                             (608,000)          (65,000)       (673,000)
       --------------------------------------------------------------------------------------------------------------------
         Income tax expense                                                  $    108,000           167,000         275,000
       ====================================================================================================================

       1998
       --------------------------------------------------------------------------------------------------------------------
       Current                                                               $    252,000           144,000         396,000
       Deferred, net                                                              (12,000)          (40,000)        (52,000)
       --------------------------------------------------------------------------------------------------------------------
         Income tax expense                                                  $    240,000           104,000         344,000
       ====================================================================================================================

       1997
       --------------------------------------------------------------------------------------------------------------------
       Current                                                               $    312,000           195,000         507,000
       Deferred, net                                                               16,000           (44,000)        (28,000)
       --------------------------------------------------------------------------------------------------------------------
         Income tax expense                                                  $    328,000           151,000         479,000
       ====================================================================================================================
</TABLE>

       Income taxes payable of $51,000 are included in other liabilities at
       December 31, 1999. Income taxes receivable of $117,000 are included in
       other assets at December 31, 1998.

       The provision for income taxes differs from amounts computed by applying
       the statutory Federal income tax rate to operating income before income
       taxes. The reasons for these differences are as follows:

<TABLE>
<CAPTION>
                                                             1999               1998             1997
                                                       Amount    Rate     Amount    Rate   Amount     Rate
       ----------------------------------------------------------------------------------------------------
       <S>                                          <C>          <C>    <C>         <C>    <C>         <C>
       Federal income tax expense, at statutory
         income tax rates                           $ 488,000     34%    475,000     34%    508,000     34%
       State franchise tax expense, net of federal
         income tax benefits                          103,000      7%    100,000      7%    107,000      7%
       Tax-free interest income                      (157,000)   (11%)  (136,000)   (10%)  (147,000)   (10%)
       Change in the beginning of the year deferred
          tax asset valuation allowance               (85,000)    (6%)   (45,000)    (3%)    32,000      2%
       Other                                          (74,000)    (5%)   (50,000)    (3%)   (21,000)    (1%)
       ----------------------------------------------------------------------------------------------------
                                                    $ 275,000     19%    344,000     25%    479,000     32%
       ====================================================================================================
</TABLE>

                                      45
<PAGE>

       The tax effects of temporary differences that give rise to significant
       portions of the deferred tax assets and deferred tax liabilities at
       December 31, 1998 and 1998 are presented below.

<TABLE>
<CAPTION>
         Deferred tax assets:                                           1999                  1998
       -------------------------------------------------------------------------------------------
       <S>                                                        <C>                    <C>
         Allowance for loan losses                                $  946,000               553,000
         Allowance for losses on other real estate owned              14,000                14,000
         Interest on nonaccrual loans                                121,000                60,000
         Deferred loan income                                        169,000               145,000
         Accumulated Amortization                                    326,000               260,000
         Unrealized loss on available-for-sale securities, net       192,000                     -
         Deferred compensation                                       107,000                74,000
         Alternative minimum tax credit carryforwards                      -                 2,000
         Other                                                       110,000                26,000
       -------------------------------------------------------------------------------------------
            Total gross deferred tax assets                        1,985,000             1,134,000
            Less valuation allowance                                 (35,000)             (120,000)
       -------------------------------------------------------------------------------------------

            Deferred tax assets, net of allowance                  1,950,000             1,014,000
       -------------------------------------------------------------------------------------------
         Deferred tax liabilities:
         Accumulated depreciation                                    (59,000)             (103,000)
         Deferred loan origination costs                            (267,000)             (173,000)
         Unrealized gain on available-for-sale securities, net             -              (218,000)
         Other                                                      (122,000)             (101,000)
       -------------------------------------------------------------------------------------------
            Total gross deferred tax liabilities                    (448,000)             (595,000)
       -------------------------------------------------------------------------------------------
            Net deferred tax asset                                $1,502,000               419,000
       ===========================================================================================
</TABLE>

       The valuation allowance for deferred tax assets decreased by $85,000 and
       $45,000 for the years ended December 31, 1999 and 1998, respectively. In
       assessing the realizability of deferred tax assets, management considers
       whether it is more likely than not that some portion or all of the
       deferred tax assets will not be realized. The ultimate realization of
       deferred tax assets is dependent upon the generation of future taxable
       income during the periods in which those temporary differences become
       deductible. Management considers the scheduled reversal of deferred tax
       liabilities, projected future taxable income, and tax planning strategies
       in making this assessment. Based upon the level of historical taxable
       income and projections for future taxable income over the periods which
       the deferred tax assets are deductible, management believes it is more
       likely than not the Company will realize the benefits of these deductible
       differences, net of the existing valuation allowances at December 31,
       1999 and 1998.

                                      46
<PAGE>

(14) Stockholders' Equity

     (a)  Stock Options

     In December 1982, the Board of Directors adopted the First Financial
     Bancorp 1982 Stock Incentive Plan. A total of 257,500 shares of the
     Company's common stock were reserved for issuance under the Plan. Options
     were granted at an exercise price not less than the fair market value of
     the stock at the date of grant and became exercisable over varying periods
     of time and expired 10 years from such date.

     In February 1991, the Board of Directors adopted the First Financial
     Bancorp 1991 Employee Stock Option Plan and Director Stock Option Plan. The
     maximum number of shares issuable under the Employee Stock Option Plan is
     183,855. The maximum number of shares issuable under the Director Stock
     Option Plan was 56,650. Options are granted at an exercise price of at
     least 100% and 85% of the fair market value of the stock on the date of
     grant for the Employee Stock Option Plan and the Director Stock Option
     Plan, respectively. The 1991 Plans replaced the 1982 Plan; however, this
     does not adversely affect any stock options outstanding under the 1982
     Plan.

     In February 1997, the Board of Directors adopted the First Financial
     Bancorp 1997 Stock Option Plan. The maximum number of shares issuable under
     the Plan is 405,003 less any shares reserved for issuance pursuant to the
     1991 Plans. Options are granted at an exercise price of at least 100% and
     85% of the fair market value of the stock on the date of grant for employee
     stock options and director stock options, respectively. The options issued
     in 1999 and 1997 were not issued at less than 100% of market value. The
     1997 Plan replaces the 1991 Plans; however, this does not adversely affect
     any stock options outstanding under the 1991 Plans.

     Stock option plan activities are summarized as follows:

                                               Options Outstanding
                                                  Exercise Price
                                    Options         Per Share
     -------------------------------------------------------------


     Balance, December 31, 1996    201,545       $5.58  -   8.32

     =============================================================
       Options granted              78,795       $9.71  -  12.14
     =============================================================
       Options exercised           (24,609)      $5.58  -   8.32
     =============================================================
       Options expired             (32,659)      $6.60  -   9.71
     =============================================================

     Balance, December 31, 1997    223,072       $5.58  -  12.14
     =============================================================
       Options exercised           (16,944)      $5.58  -   6.60
     =============================================================
       Options expired             (18,051)      $6.55  -  12.14
     =============================================================

     Balance, December 31, 1998    188,077       $5.58  -  12.14
     =============================================================
       Options granted              33,900       $9.94  -  12.00
     =============================================================
       Options exercised           (44,562)      $5.58  -   8.33
     =============================================================
       Options expired             (24,013)      $5.58  -  12.14
     =============================================================

     Balance, December 31, 1999    153,402       $5.58  -  12.00
     =============================================================


     At December 31, 1999 and 1998, the weighted-average remaining contractual
     life of all outstanding options was 5.50 years and 5.16 years,
     respectively. The number of options exercisable was 117,424, 142,700 and
     123,775 and the weighted-average exercise price of those options was $7.11,
     $7.20 and $7.22 at December 31, 1999, 1998 and 1997, respectively.

     There were no stock options granted during 1998. The per share weighted-
     average fair value of stock options granted during 1999 and 1997 was $3.12
     and $3.03, respectively. The fair value of each option grant is estimated
     on the date of grant using the Black-Sholes option-pricing model with the
     following weighted-average assumptions used for grants as of December 31,
     1999 and 1997, respectively: dividend yield of 0.00% and 2.18%; expected
     volatility of 18.4% and 18.4%; risk-free interest rate of 6.19% and 6.20%;
     and an expected life of five years in each of the years.

                                       47
<PAGE>

     No compensation cost has been recognized for its stock options in the
     accompanying consolidated financial statements. Had the Company determined
     compensation cost based on the fair value at the grant date for its stock
     options, the Company's net income would have been reduced to the pro forma
     amounts indicated below for the period ended December 31:


                                             1999       1998        1997
     ----------------------------------------------------------------------
     Net Income
            As reported                   $1,159,000  1,052,000  $1,015,000
            Pro forma                      1,138,000  1,022,000     985,000

     Basic Net Income Per Share
            As reported                          .83        .76         .74
            Pro forma                            .81        .74         .72

     Diluted Net Income Per Share
            As reported                          .80        .72         .71
            Pro forma                            .78        .70         .69

     Pro forma net income reflects only options granted after 1994. Therefore,
     the full impact of calculating compensation cost for stock options using
     the fair value method is not reflected in the pro forma net income amounts
     presented above because compensation cost is reflected over the options'
     vesting period of five years and compensation cost for options granted
     prior to January 1, 1995 is not considered.


     (b)  Employee Stock Ownership Plan

     Effective January 1, 1992, the Bank established the Bank of Lodi Employee
     Stock Ownership Plan. The plan covers all employees, age 21 or older,
     beginning with the first plan year in which the employee completes at least
     1,000 hours of service. The Bank's annual contributions to the plan are
     made in cash and are at the discretion of the Board of Directors based upon
     a review of the Bank's profitability. Contributions for 1999, 1998 and 1997
     totaled approximately $149,000, $116,000 and $98,000, respectively.

     Contributions to the plan are invested primarily in the Common Stock of
     First Financial Bancorp and are allocated to participants on the basis of
     salary in the year of allocation. Benefits become 20% vested after the
     third year of credited service, with an additional 20% vesting each year
     thereafter until 100% vested after seven years. As of December 31, 1999,
     the plan owned 48,000 shares of Company Common Stock. Of that amount, 3,500
     shares were unallocated to participants at December 31, 1999.


     (c)  Dividends and Dividend Restrictions

     On January 20, 2000, the Company's Board of Directors declared a cash
     dividend of five cents per share payable on February 25, 2000, to
     shareholders of record on February 11, 2000.

     The Company's principal source of funds for dividend payments is dividends
     received from the Bank. Under applicable Federal laws, permission to pay a
     dividend must be granted to a bank by the Comptroller of the Currency if
     the total dividend payment of any national banking association in any
     calendar year exceeds the net profits of that year, as defined, combined
     with net profits for the two preceding years. At December 31, 1999, there
     were Bank retained earnings of $2,739,000 free of this condition.

                                       48
<PAGE>

(d)  Weighted Average Shares Outstanding

     Basic and diluted earnings per share for the years ended December 31, 1999,
     1998, and 1997 were computed as follows:

<TABLE>
<CAPTION>
                                                                 Income        Shares       Per-Share
     1999                                                     (numerator)   (denominator)    Amount
     -------------------------------------------------------------------------------------------------
     <S>                                                      <C>           <C>             <C>
     Basic earnings per share                                 $1,159,000      1,401,670        $.83
     Effect of dilutive securities                                     -         50,732           -
                                                              -------------------------
     Diluted earnings per share                               $1,159,000      1,452,402        $.80
                                                              =========================

<CAPTION>
                                                                 Income         Shares      Per-Share
     1998                                                      (numerator)  (denominator)    Amount
     -------------------------------------------------------------------------------------------------
     <S>                                                      <C>           <C>             <C>
     Basic earnings per share                                 $1,052,000      1,381,428        $.76
     Effect of dilutive securities                                     -         86,761           -
                                                              -------------------------
     Diluted earnings per share                               $1,052,000      1,468,189        $.72
                                                              =========================

<CAPTION>
                                                                Income          Shares       Per-Share
     1997                                                    (numerator)     (denominator)     Amount
     -------------------------------------------------------------------------------------------------
     <S>                                                      <C>           <C>             <C>
     Basic earnings per share                                 $1,015,000       1,363,100       $.74
     Effect of dilutive securities                                     -          70,738          -
                                                              --------------------------
     Diluted earnings per share                               $1,015,000       1,433,838       $.71
                                                              ==========================
</TABLE>

(15) Related Party Transactions

     During the normal course of business, the Bank enters into transactions
     with related parties, including directors, officers, and affiliates. These
     transactions include borrowings from the Bank with substantially the same
     terms, including rates and collateral, as loans to unrelated parties. At
     December 31, 1999 and 1998, respectively, such borrowings totaled
     $1,177,000 and $1,018,000, respectively. Deposits of related parties held
     by the Bank totaled $363,000 and $671,000 at December 31, 1999 and 1998,
     respectively.

     The following is an analysis of activity with respect to the aggregate
     dollar amount of loans made by the Bank to directors, officers and
     affiliates for the years ended December 31:

                                       1999         1998
     ---------------------------------------------------------------------------
     Balance, beginning of year    $ 1,018,000     922,000
     Loans funded                    1,232,000     738,000
     Principal repayments           (1,073,000)   (642,000)
     ---------------------------------------------------------------------------
     Balance, end of year          $ 1,177,000   1,018,000
     ===========================================================================

                                       49
<PAGE>

(16) Parent Company Financial Information

     This information should be read in conjunction with the other notes to the
     consolidated financial statements. The following presents summary balance
     sheets as of December 31, 1999 and 1998, and statements of income, and cash
     flows information for the years ended December 31, 1999, 1998, and 1997.

<TABLE>
<CAPTION>
     Balance Sheets:
-------------------------------------------------------------------------------------------------------
     Assets                                                                       1999          1998
-------------------------------------------------------------------------------------------------------
<S>                                                                           <C>            <C>
     Cash in bank                                                             $    76,000       121,000
     Investment securities available-for-sale, at fair value                        6,000         5,000
     Premises and equipment, net                                                   63,000        64,000
     Investment in wholly-owned subsidiaries                                   14,005,000    13,521,000
     Other assets                                                                 371,000       146,000
-------------------------------------------------------------------------------------------------------
                                                                              $14,521,000    13,857,000
=======================================================================================================

     Liabilities and Stockholders' Equity
-------------------------------------------------------------------------------------------------------
     Stockholders' equity
     Common stock                                                               8,433,000     7,584,000
     Retained earnings                                                          6,354,000     5,971,000
     Accumulated other comprehensive (loss) income                               (266,000)      302,000
-------------------------------------------------------------------------------------------------------
         Total stockholders' equity                                            14,521,000    13,857,000
-------------------------------------------------------------------------------------------------------
                                                                              $14,521,000    13,857,000
=======================================================================================================
</TABLE>

<TABLE>
<CAPTION>
     Statements of Income:                                             1999         1998        1997
------------------------------------------------------------------------------------------------------
<S>                                                               <C>            <C>         <C>
     Rent from subsidiary                                         $      6,000       5,000       6,000
     Interest from unrelated parties                                         -           -       2,000
     Other expenses                                                   (218,000)   (316,000)   (215,000)
     Equity in income of subsidiaries                                1,252,000   1,154,000   1,100,000
     Income tax benefit                                                119,000     209,000     122,000
------------------------------------------------------------------------------------------------------
         Net income                                               $  1,159,000   1,052,000   1,015,000
======================================================================================================
</TABLE>

<TABLE>
<CAPTION>
     Statements of Cash Flows:                                        1999         1998        1997
------------------------------------------------------------------------------------------------------
     <S>                                                          <C>           <C>          <C>
     Net Income                                                   $1,159,000    1,052,000    1,015,000
     Adjustments to reconcile net income to net cash
         flows provided by (used in) operating activities:
               Depreciation and amortization                           1,000        2,000        2,000
               Provision for deferred taxes                          (29,000)      27,000      (36,000)
               Decrease in other liabilities                               -       (4,000)     (23,000)
               (Increase) decrease in other assets                  (196,000)     (66,000)     (15,000)
               Increase in equity of subsidiaries                 (1,052,000)    (879,000)    (774,000)
------------------------------------------------------------------------------------------------------

     Net cash (used in) provided by operating activities            (117,000)     132,000      169,000

     Cash flows from investing activities:
          Purchases of available-for-sale securities                  (1,000)           -            -
          Proceeds from sale of available-for-sale securities              -            -       75,000
          Investment in subsidiary                                         -      (10,000)           -
------------------------------------------------------------------------------------------------------
     Net cash (used in) provided by investing activities              (1,000)     (10,000)      75,000

     Cash flows from financing activities:
         Proceeds received upon exercise of stock options            359,000      129,000      131,000
         Dividends paid                                             (286,000)    (269,000)    (265,000)
------------------------------------------------------------------------------------------------------
     Net cash used by financing activities                            73,000     (140,000)    (134,000)
------------------------------------------------------------------------------------------------------
     Net  (decrease) increase in cash                                (45,000)     (18,000)     110,000
------------------------------------------------------------------------------------------------------
     Cash at beginning of year                                       121,000      139,000       29,000
------------------------------------------------------------------------------------------------------
     Cash at end of year                                          $   76,000      121,000      139,000
======================================================================================================
</TABLE>

                                       50
<PAGE>

(17) Lines of Credit

     The Bank has two unsecured lines of credit with correspondent banks
     totaling $7,000,000 which renew annually. At December 31, 1999 the Bank had
     outstanding borrowings under these lines totaling $4,300,000. During 1999,
     the maximum amount outstanding was $4,300,000, the average balance
     outstanding was $176,000 and the weighted average interest rate was 6.25%.
     At December 31, 1998 no amounts were outstanding under these lines of
     credit.


(18) Regulatory Matters

     The Bank is subject to various regulatory capital requirements administered
     by the federal banking agencies. Failure to meet minimum capital
     requirements can initiate mandatory and possibly additional discretionary
     actions by regulators, that, if undertaken, could have a direct material
     effect on the Bank's financial statements. Under capital adequacy
     guidelines and the regulatory framework for prompt corrective action, the
     Bank must meet specific capital guidelines that involve quantitative
     measure of the Bank's assets, liabilities, and certain off-balance-sheet
     items as calculated under regulatory accounting practices. 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 Bank to maintain minimum amounts and ratios (set forth in the
     table below).

     First, a bank must meet a minimum Total Risk-Based Capital to risk-weighted
     assets ratio of 8%. Risk-based capital and asset guidelines vary from Tier
     I capital guidelines by redefining the components of capital, categorizing
     assets into different classes, and including certain off-balance sheet
     items in the calculation of the capital ratio. The effect of the risk-based
     capital guidelines is that banks with high exposure will be required to
     raise additional capital while institutions with low risk exposure could,
     with the concurrency of regulatory authorities, be permitted to operate
     with lower capital ratios. In addition, a bank must meet minimum Tier I
     Capital to average assets ratio.

     Management believes, as of December 31, 1999, that the Bank meets all
     capital adequacy requirements to which it is subject. As of December 31,
     1999, the most recent notification, the Federal Deposit Insurance
     Corporation (FDIC) categorized the Bank as well capitalized under the
     regulatory framework for prompt corrective action. To be categorized as
     adequately capitalized, the Bank must meet the minimum ratios as set forth
     below. There are no conditions or events since that notification that
     management believes have changed the Bank's category.

                                       51
<PAGE>

     The Bank's actual capital amounts and ratios as of December 31, 1999 are as
     follows:

<TABLE>
<CAPTION>
                                                                                               To Be Well Capitalized
                                                                          For Capital          Under Prompt Corrective
                                                   Actual               Adequacy Purposes        Action Provisions
                                                   Amount     Ratio      Amount     Ratio        Amount        Ratio
-----------------------------------------------------------------------------------------------------------------------
<S>                                              <C>          <C>     <C>           <C>        <C>             <C>
     Total Risk-based capital
     (to Risk weighted assets)                   $14,937,000  10.51%  *$11,366,000   *8.0%       *$14,208,000  *10.0%

     Tier I Capital (to Risk Weighted assets)    $13,161,000   9.26%  *$ 5,683,000   *4.0%       *$ 8,525,000  * 6.0%

     Tier I Capital (to Average Assets)          $13,161,000   7.82%  *$ 6,731,000   *4.0%       *$ 8,414,000  * 5.0%
 </TABLE>

     The Bank's actual capital amounts and ratios as of December 31, 1998 are as
     follows:

<TABLE>
<CAPTION>
                                                                                               To Be Well Capitalized
                                                                          For Capital          Under Prompt Corrective
                                                   Actual               Adequacy Purposes        Action Provisions
                                                   Amount     Ratio      Amount     Ratio        Amount        Ratio
-----------------------------------------------------------------------------------------------------------------------
<S>                                              <C>          <C>     <C>           <C>        <C>             <C>
     Total Risk-based capital
     (to Risk weighted assets)                   $13,084,000  11.17%  *$9,371,000   *8.0%       *$11,714,000  *10.0%

     Tier I Capital (to Risk Weighted assets)    $11,620,000   9.92%  *$4,685,000   *4.0%       *$ 7,028,000  * 6.0%

     Tier I Capital (to Average Assets)          $11,620,000   7.35%  *$6,324,000   *4.0%       *$ 7,905,000  * 5.0%
</TABLE>

(19) Fair Values of Financial Instruments

     The following methods and assumptions were used by the Company in
     estimating its fair value disclosures for financial instruments:

     Cash and cash equivalents: The carrying amounts reported in the balance
     --------------------------
     sheet for cash and due from banks and federal funds sold are a reasonable
     estimate of fair value.

     Investment securities: Fair values for investment securities are based on
     ----------------------
     quoted market prices, where available. If quoted market prices are not
     available, fair values are based on quoted market prices of comparable
     instruments. (See note 3).

     Loans: For variable-rate loans that reprice frequently and with no
     ------
     significant change in credit risk, fair values are based on carrying
     values. The fair values for fixed-rate loans are estimated using discounted
     cash flow analyses, using interest rates currently being offered for loans
     with similar terms to borrowers of similar credit quality.

     Commitments to extend credit and standby letters of credit: The fair value
     -----------------------------------------------------------
     of commitments is estimated using the fees currently charged to enter into
     similar agreements, taking into account the remaining terms of the
     agreement and the present creditworthiness of the counter parties.  For
     fixed-rate loan commitments, fair value also considers the difference
     between current levels of interest rates and the committed rates.  The fair
     value of letters of credit is based upon fees currently charged for similar
     agreements or on the estimated cost to terminate them or otherwise settle
     the obligation with the counter parties at the reporting date.

     Deposit liabilities: The fair values disclosed for demand deposits (e.g.,
     --------------------
     interest and non-interest checking, savings, and money market accounts)
     are, by definition, equal to the amount payable on demand at the reporting
     date (i.e., their carrying amounts). The fair values for fixed-rate time
     deposits are estimated using a discounted cash flow calculation that
     applies interest rates currently being offered on time deposits to a
     schedule of aggregated expected monthly maturities on time deposits.

* = Greater than

                                       52
<PAGE>
     Short term borrowings: The discounted value of contractual cash flows
     ----------------------
     at market interest rates for short term borrowings with similar terms and
     remaining maturities are used to estimate the fair value of existing
     short term borrowings.

     Limitations: Fair value estimates are made at a specific point in time,
     ------------
     based on relevant market information and information about the financial
     instrument. These estimates do not reflect any premium or discount that
     could result from offering for sale at one time the Company's entire
     holdings of a particular financial instrument. Because no market exists for
     a significant portion of the Company's financial instruments, fair value
     estimates are based on judgments regarding future expected loss experience,
     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 estimates.

     Fair value estimates are based on existing on and off balance sheet
     financial instruments without attempting to estimate the value of
     anticipated future business and the value of assets and liabilities that
     are not considered financial instruments. Other significant assets and
     liabilities that are not considered financial assets or liabilities include
     deferred tax assets, premises, and equipment. In addition, the tax
     ramifications related to the realization of the unrealized gains and losses
     can have a significant effect on fair value estimates and have not been
     considered in many of the estimates.

     The estimated fair values of the Company's financial instruments at
     December 31, are approximately as follows:

<TABLE>
<CAPTION>
                                                                        1999
                                                               Carrying         Fair
                                                                Amount         Value
     ---------------------------------------------------------------------------------------
<S>                                                           <C>            <C>
         Financial assets:
          Cash and due from banks and federal funds sold    $  9,409,000        9,409,000
          Investment securities                               36,096,000       36,096,000
          Loans, net                                        $109,594,000      110,061,000

         Financial liabilities:
          Deposits:
           Demand                                           $ 21,105,000       21,105,000
           Now and Super Now accounts                         39,458,000       39,458,000
           Money Market                                       16,752,000       16,752,000
           Savings                                            29,057,000       29,057,000
           Time                                               49,789,000       49,676,000
                                                            ------------     ------------
           Total deposits                                   $156,161,000      156,048,000
           Short term borrowings                            $  4,300,000        4,300,000
</TABLE>

<TABLE>
<CAPTION>
                                                     Contract         Carrying      Fair
                                                      Amount           Amount       Value
     -------------------------------------------------------------------------------------------
<S>                                             <C>                <C>            <C>
       Unrecognized financial instruments:
        Commitments to extend credit             $ 24,418,000            -         244,180
        Standby letters of credit                     892,000            -           1,000
</TABLE>

                                       53
<PAGE>

<TABLE>
<CAPTION>
                                                                            1998
                                                                 Carrying           Fair
                                                                  Amount           Value
     -------------------------------------------------------------------------------------------
<S>                                                              <C>            <C>
       Financial assets:
        Cash and due from banks and federal funds sold             $ 12,129,000    12,129,000
        Investment securities                                        45,647,000    45,647,000
        Loans, net                                                 $ 91,078,000    91,948,000

       Financial liabilities:
        Deposits:
         Demand                                                    $ 18,535,000    18,535,000
         Now and Super Now accounts                                  36,181,000    36,181,000
         Money Market                                                19,482,000    19,482,000
         Savings                                                     25,987,000    25,987,000
         Time                                                        49,359,000    49,447,000
                                                                   ------------   -----------
         Total deposits                                            $149,544,000   149,632,000
</TABLE>

<TABLE>
<CAPTION>
                                                          Contract        Carrying      Fair
                                                           Amount           Amount      Value
     -------------------------------------------------------------------------------------------
<S>                                                   <C>             <C>           <C>
       Unrecognized financial instruments:
        Commitments to extend credit                  $  21,290,000            -      213,000
        Standby letters of credit                           156,000            -        2,000
</TABLE>

(20) Legal Proceedings

     The bank is involved in various legal actions arising in the ordinary
     course of business. In the opinion of management, after consulting with
     legal counsel, the ultimate disposition of these matters will not have a
     material effect on the Bank's financial condition, results of operations,
     or liquidity.


(21) Derivative Financial Instruments

     As of December 31, 1999 and 1998, the Company has no off-balance sheet
     derivatives. The Company held $6,627,000 and $457,000 in collateralized
     mortgage obligations and $0 and $500,000 in structured notes as of December
     31, 1999 and 1998 respectively. These investments are held in the available
     for sale portfolio.


(22) Western Auxiliary Corporation

     On June 9, 1998 the Company incorporated Western Auxiliary Corporation
     (WAC). The Company capitalized WAC as a wholly-owned subsidiary during the
     quarter ended September 30, 1998 with an initial capitalization of $10,000.
     WAC earns fee income by acting as trustee on the Bank's trust deed
     transactions and receives the necessary operational resources under an
     intercompany services agreement between WAC and the Bank.

                                       54
<PAGE>

(23) Quarterly Financial Information (Unaudited)

<TABLE>
<CAPTION>
     -------------------------------------------------------------------------------------------------------------------------------
     (in thousands, except per share data and price range of common stock)     March 31,     June 30,    September 30,  December 31,
     -------------------------------------------------------------------------------------------------------------------------------
<S>                                                                      <C>           <C>          <C>            <C>
     1999
     ----
     Interest income                                                     $      2,958        2,976          3,226         3,366
     Net interest income                                                        2,020        2,065          2,322         2,420
     Provision for loan losses                                                    100          101            200           650
     Noninterest income                                                           485          480            563           933
     Noninterest expense                                                        1,989        2,188          2,274         2,352
     Income before taxes                                                          416          256            411           351
     Net income                                                                   273          178            335           373
     Basic earnings per share                                                     .18          .13            .24           .28
     Diluted earnings per share                                                   .17          .12            .22           .29
     Dividends paid per share                                                     .05          .05            .05           .05
     Price range, common stock                                            12.25-11.00  12.50-11.00    12.50-10.63    11.00-9.12
     -------------------------------------------------------------------------------------------------------------------------------
     1998
     ----
     Interest income                                                     $      2,749        2,739          2,914         3,106
     Net interest income                                                        1,784        1,678          1,865         2,153
     Provision for loan losses                                                     30           30             60           130
     Noninterest income                                                           416          439            490           533
     Noninterest expense                                                        1,834        1,851          1,909         2,118
     Income before taxes                                                          336          236            386           438
     Net income                                                                   230          181            300           341
     Basic earnings per share                                                     .15          .13            .22           .26
     Diluted earnings per share                                                   .14          .12            .20           .26
     Dividends paid per share                                                     .05          .05            .05           .05
     Price range, common stock                                            13.25-13.00  14.50-13.63    14.63-13.25   13.38-12.00
     -------------------------------------------------------------------------------------------------------------------------------
</TABLE>

The loan loss provision for 1999 totaled $1,051,000 and represents an increase
of $801,000 (320%) over 1998. The reason for the increase is attributable
primarily to two factors; the primary factor being the continued
year-over-year increase in the loan portfolio. Secondly, during the fourth
quarter of 1999, the Company became aware of the deteriorating condition in the
credit quality of a few specific loans. As a result, the provision for loan
losses totaled $650,000 during the fourth quarter of 1999.

See Note 11 for information regarding the increase in noninterest income during
the fourth quarter of 1999.










                                       55
<PAGE>

                                  SIGNATURES

Pursuant to the requirements of Section 13 of 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on the 30th day of March,
2000.

                                         FIRST FINANCIAL BANCORP

                                           /s/ LEON J. ZIMMERMAN
                                         -----------------------
                                         Leon J. Zimmerman
                                         President and Chief Executive Officer

Pursuant to the requirements of the Securities and Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
                                                 Capacity                           Date
                                                 --------                           ----
<S>                              <C>                                          <C>
   /s/ BENJAMIN R. GOEHRING       Director and Chairman of the Board           March 30, 2000
-------------------------------
Benjamin R. Goehring

   /s/ WELDON D. SCHUMACHER       Director and Vice Chairman of the Board      March 30, 2000
-------------------------------
Weldon D. Schumacher

   /s/ BOZANT KATZAKIAN           Director                                     March 30, 2000
-------------------------------
Bozant Katzakian

   /s/ ANGELO J. ANAGNOS          Director                                     March 30, 2000
-------------------------------
Angelo J. Anagnos

   /s/ STEVE M. COLDANI           Director                                     March 30, 2000
-------------------------------
Steve M. Coldani

   /s/ DAVID M. PHILIPP           Director                                     March 30, 2000
-------------------------------
Michael D. Ramsey

   /s/ LEON J. ZIMMERMAN          Director, President and                      March 30, 2000
-------------------------------
Leon J. Zimmerman                 Chief Executive Officer
                                  (Principal Executive Officer)

   /s/ ALLEN R. CHRISTENSON       Senior Vice President,                       March 30, 2000
-------------------------------
Allen R. Christenson              Chief Financial Officer and Secretary
                                  (Principal Financial and Accounting Officer)
</TABLE>

                                       56
<PAGE>

                               INDEX TO EXHIBITS

     Exhibit                                                               Page
     -------                                                               ----


       23                Consent of Expert                                   59

       27      Financial Data Schedule (electronic submission only)

                                       57