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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, 2000

                        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 2, 2001,  there were 1,526,663  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  $14,694,000  (based on the
$9.63 average of bid and ask prices per share on March 2, 2001).


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 24, 2001.                          Part III, Items 10, 11, 12, 13


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                             FIRST FINANCIAL BANCORP
                                 2000 FORM 10-K
                                TABLE OF CONTENTS

PART 1

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 ................................................... 5
                  Officers ................................................... 6
                  Recent Legislation and Regulations Affecting Banking ....... 6
ITEM 2. PROPERTIES ...........................................................10
ITEM 3. LEGAL PROCEEDINGS ....................................................10
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ..................10

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

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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  50% of its  business,  is the  city of Lodi  and the
surrounding area. This area is estimated to have a population approaching 60,000
persons,  with a median annual family income of approximately  $38,000. 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 2000, the Bank introduced  internet banking and bill
payment services which are located at www.bankoflodi.com.

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 the  guaranteed
portions of SBA loans and the  resulting  on-going  servicing  income on its SBA
portfolio.

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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 80% 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,  2000,  the  Company  employed  109  full-time  equivalent
employees,  including  four  executive  officers.  Management  believes that the
Company's relationship with its employees is good.

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


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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.

Officers:

Leon Zimmerman, age 58, is President and Chief Executive Officer of the Bank and
of the Company;  Robert H. Daneke, age 47, is Executive Vice President and Chief
Credit Officer of the Bank and of the Company; Allen R. Christenson,  age 43, is
Senior Vice-President,  Chief Financial Officer and Secretary of the Bank and of
the  Company  and;  Lance  Gallagher,  age 56,  is  Senior  Vice  President  and
Operations Administrator of the Bank and the Company.


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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 - Agribusiness  Committee and LEED - Sacramento
Steering  Committee.  He  is a  member  of  Lodi  Rotary  Club,  Sutter  Club  -
Sacramento, World Trade Club - San Francisco,  Independent Order of Odd Fellows,
Lodi Grape Festival and Harvest Fair and several other community groups.

Mr.  Daneke  joined the Company in December,  1999 bringing on board 23 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  Corporate  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.  He currently is a member
of the Lodi Chapter of  Independent  Order of Odd Fellows,  participates  in the
Leadership  Lodi program and serves on Lodi  Unified  School  District's  Budget
Advisory Committee. Mr. Daneke resides in Lodi 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 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

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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,  2000,  the  Bank's  total  risk-based  capital  ratio  was
approximately  11.27  percent  and its  leverage  ratio was  approximately  7.99
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  CAMELS  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 2000.  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  2000,  the  Bank  estimates  that  its  annual
noninterest  expense  attributed  to the regular  assessment  schedule  will not
increase during 2000.

                                       7

<PAGE>


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.

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.

                                       8

<PAGE>


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 activities" 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 than 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.

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.

                                       9

<PAGE>


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 to identify a
permanent  location in the Folsom  community.  In  December,  2000 the  Landlord
agreed to extend the lease on a month to month  basis  while the Bank  completed
the process of moving into a new full-service branch location.  In January, 2001
the Bank  entered  into a 10 year  lease for a 2,426  square  foot  full-service
branch location in the Folsom area. The Bank is awaiting  regulatory approval to
open the new  full-service  branch and plans on relocating  the existing  Folsom
branch to the new Folsom  site  during the  second  quarter of 2001.  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. In January, 2001, the Bank entered into a three year
lease for a 1,557  square foot Small  Business  Administration  loan  production
office in the Folsom area.


ITEM 3. LEGAL PROCEEDINGS

         Not Applicable


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

         Not Applicable

                                       10

<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 2, 2001, there were 1,005
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 2000 and 1999.


                                         2000                      1999
Bid Price of Common Shares           High         Low         High         Low
First Quarter                    $   12.00        9.50        12.25        11.00
Second Quarter                       10.75        8.00        12.50        11.00
Third Quarter                        10.38        8.50        12.50        10.63
Fourth Quarter                       10.88        9.75        11.00         9.12


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.


<TABLE>
ITEM 6. SELECTED FINANCIAL DATA


<CAPTION>
(in thousands except per share amounts)
Consolidated Statement of Income     2000         1999        1998        1997         1996
--------------------------------------------------------------------------------------------
<S>                               <C>            <C>         <C>         <C>           <C>
Interest Income                   $  13,496      12,526      11,508      10,592        8,045
Interest Expense                      4,613       3,699       4,028       3,785        3,254
Net Interest Income                   8,883       8,827       7,480       6,807        4,791
Provision for Loan Losses               135       1,051         250         (60)         310
Noninterest Income                    2,690       2,461       1,878       1,423        1,067
          Noninterest Expense         9,855       8,803       7,712       6,796        4,654
Net Income                        $   1,283       1,159       1,052       1,015          640

Per Share Data
--------------------------------------------------------------------------------------------
Basic Earnings                    $     .85         .79         .73         .70          .46
Diluted Earnings                        .83         .76         .68         .67          .45
Cash Dividends Declared           $     .05         .20         .20         .20          .20
Consolidated Balance Sheet Data
--------------------------------------------------------------------------------------------

Federal Funds Sold                $  10,115         100       4,800       4,900        1,100
Investment Securities                29,560      36,096      45,647      61,917       36,913
Loans, net of loss reserve and
   deferred fees                    112,085     109,594      91,078      62,228       52,672
Total Assets                        185,064     176,334     164,400     147,850      104,913
Total Deposits                      162,261     156,161     149,544     133,891       92,207
Other Borrowings                      4,588       4,300        --          --           --
Total Stockholders' Equity        $  16,454      14,521      13,857      12,861       11,889
</TABLE>

                                             11

<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.

<TABLE>
Summary of Earnings Performance

<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
                                                                                 For the Year Ended December 31:
                                                                     -------------------------------------------------------

                                                                      2000                     1999                    1998
<S>                                                                  <C>                      <C>                     <C>
Earnings (in thousands)                                              $1,283                   1,159                   1,052
----------------------------------------------------------------------------------------------------------------------------
Basic earnings per share                                             $.85                      .79                      .73
Diluted earnings per share                                           $.83                      .76                      .68
Return on average assets                                             0.71%                    0.69%                    0.68%
Return on average equity                                             8.74%                    8.19%                    7.90%
Dividend payout ratio                                                5.88%                   24.19%                   26.26%
----------------------------------------------------------------------------------------------------------------------------
Average equity to average assets                                     8.10%                    8.40%                   8.64%
----------------------------------------------------------------------------------------------------------------------------
</TABLE>


Basic  earnings  per share in 2000 were $.85,  compared to $.79 and $.73 in 1999
and 1998,  respectively.  During 2000, the Company  experienced  growth rates of
2.1% in gross  loans  and  3.9% in  deposits  resulting  in an  increase  in net
interest income. In addition,  the Provision for Loan Losses for the year ending
December 31, 2000 was $135  thousand,  a decrease of $916  thousand  over 1999's
provision of $1,051  thousand.  Furthermore,  noninterest  income increased 9.3%
during  2000,  primarily  as a result of changes  in the  pricing of some of the
Bank's  deposit  products  (which were  implemented  during the third quarter of
1999)  and  a  $149  thousand  gain  on  the  sale  of  investment   securities.
Additionally,  the Company  experienced a 12.0% increase in noninterest  expense
during the year. The increase in noninterest  expense is attributable to general
overall increases in the cost of operations combined with expenses incurred with
strategic  expansion  projects and expenses  associated  with the  resolution of
nonperforming loans. Additionally, interest forgone on nonaccrual loans amounted
to $542 thousand during 2000 compared to $76 thousand during 1999.

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.

                                       12

<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  headquarters 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.

                                       13

<PAGE>


Net Interest Income
<TABLE>

The following table provides a detailed  analysis of net interest spread and net
interest  margin  for the  years  ended  December  31,  2000,  1999,  and  1998,
respectively:
<CAPTION>
------------------------- ------------------------------- -------------------------------- ---------------------------------
                                For the Year Ended              For the Year Ended                For the Year Ended
                                December 31, 2000                December 31, 1999                December 31, 1998
                          (Dollar amounts in thousands)    (Dollar amounts in thousands)    (Dollar amounts 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>          <C>
Earning Assets:

Investment securities (1)   $ 34,690    2,214     6.38%     41,050      2,413      5.88%     53,370      3,431        6.43%

Federal funds sold             5,090      329     6.46%      4,150        202      4.86%      6,780        348        5.13%

Loans (2)                    114,690   10,953     9.55%    101,120      9,911      9.80%     73,720      7,729       10.48%
                            --------    -----     ----     -------      -----      ----     -------      -----        ----

                            $154,470   13,496     8.74%    146,320     12,526      8.56%    133,870     11,508        8.60%
                            ========    =====     ====     =======      =====      ====     =======      =====        ====

Liabilities:

Noninterest bearing
deposits                    $ 21,240       --       --      19,830         --        --      17,080         --          --

Savings, money market,
& NOW deposits                83,970    1,350     1.61%     82,110      1,358      1.65%     76,600      1,652        2.16%

Time deposits                 53,020    2,801     5.28%     50,690      2,330      4.60%     46,800      2,376        5.08%


Other borrowings               7,000      462     6.60%        170         11      6.25%         --         --          --
                            --------    -----     ----     -------      -----      ----     -------      -----        ----

Total Liabilities           $165,230    4,613     2.79%    152,800      3,699      2.42%    140,480      4,028        2.87%
                            ========    =====     ====     =======      =====      ====     =======      =====        ====

Net Spread                                        5.95%                            6.14%                              5.73%
                                                  ====                             ====                               ====
------------------------- ---------- ----------- -------- ---------- ---------- ---------- ----------- ----------- ---------
                           Earning     Income              Earning    Income                Earning     Income
                           Assets    (Expense)    Yield    Assets    (Expense)    Yield      Assets    (Expense)    Yield

Yield on average
earning assets              $154,470   13,496     8.74%    146,320     12,526      8.56%    133,870     11,508        8.60%

Cost of funds for
average earning assets       154,470   (4,613)   (2.99%)   146,320     (3,699)    (2.53%)   133,870     (4,028)      (3.01%)
                            --------    -----     ----     -------      -----      ----     -------      -----        ----

Net Interest Margin         $154,470    8,883     5.75%    146,320      8,827      6.03%    133,870      7,480        5.59%
                            ========    =====     ====     =======      =====      ====     =======      =====        ====
------------------------- ---------- ----------- -------- ---------- ---------- ---------- ----------- ----------- ---------
<FN>

(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.
</FN>
</TABLE>

Net interest  income  increased  1% in 2000 after  increasing  18% in 1999.  The
increase in 2000 is  attributable to an increase of 6% in average earning assets
combined with a 4% increase in average  deposits.  In addition,  during 2000 the
Company's base lending rate increased 100 basis points. The increase in the base
lending rate was consistent  with the national  increase in Bank's prime lending
rates during 2000,  from 8.5% at December 31, 1999 to 9.5% at December 31, 2000.
Furthermore,  while the Company  recorded  $224  thousand in interest  income on
nonaccrual  loans during the year,  interest forgone on nonaccrual loans totaled
$542 thousand. The increase in net interest income during 1999 was the result of
a 9% increase in average  earning assets combined with an 9% increase in average
deposits in addition to a decrease in overall deposit costs.

Average  earning  assets  increased  6% in 2000  compared to 1999 and 9% in 1999
compared to 1998. The increase in average earning assets was driven by growth in
average  deposits  during  both years.  Average  deposits  increased  4% in 2000
compared to 1999 and 9% in 1999 compared to 1998.

                                       14
<PAGE>

The mix of earning  assets in 2000  changed as a result of  year-over-year  loan
growth  of 2%  compared  to 21% in 1999.  Average  loans in 2000  increased  13%
compared to 1999.  The increase in loans  absorbed the liquidity  created by the
growth in deposits  during 2000 and the proceeds  from  maturities  and sales of
investment   securities.   The  loan   growth   also   increased   the   average
loan-to-deposit  ratio  to  73%  in  2000  compared  to  66%  in  1999.  Average
investments  decreased  16% in 2000 as  compared  to  1999  as a  result  of the
increase  in loans.  Average  investments  decreased  23% in 1999 as compared to
1998.

Net interest  margin  decreased 28 basis points in 2000 after  increasing  by 44
basis points in 1999. This decrease in 2000 was the result of several key items:

   -   Interest  forgone on nonaccrual  loans during 2000 totaled $542 thousand.
       This  reduced the yield on loans by 47 basis  points and the net interest
       margin by 35 basis points.

   -   Changes in the mix of the investment portfolio during 2000 resulted in an
       increase of 50 basis points in the average  yield  earned on  investments
       securities.

   -   The general  increase in  interest  rates  resulted in an increase of 160
       basis points in the average yield earned on federal funds sold.

   -   The  general  increase in  interest  rates  resulted in an increase of 68
       basis points in the cost of average certificates of deposit.

Net interest margin increased 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 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.


<TABLE>
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, 2000 and 1999.
<CAPTION>
---------------------- -------------------------------------------------- --------------------------------------------------
                                     2000 compared to 1999                              1999 compared to 1998
                                        (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  $     (341)          165         (23)       (199)  $     (987)         (43)           12     (1,018)

Federal funds sold             46            66          15         127         (135)         (18)            7       (146)

Loans                       1,149           (96)        (11)      1,042        2,873         (504)         (187)     2,182
                            -----           ---         ---       -----        -----         ----          ----      -----

Total interest income  $      854           135         (19)        970   $    1,751         (565)         (168)     1,018
                            =====           ===         ===       =====        =====         ====          ====      =====

Interest Expense:

Savings, money
market, & NOW
accounts               $       36           (42)         (2)         (8)  $      117         (384)          (27)      (294)

Time deposits                 107           348          16         471          197         (224)          (19)       (46)

Other borrowings                -            12         439         451           11           -          -             11
                            -----           ---         ---       -----        -----         ----          ----      -----

Total interest
expense                $      143           318         453         914   $      325         (608)          (46)      (329)
                            =====           ===         ===       =====        =====         ====          ====      =====

Net interest income    $      711          (183)       (472)         56   $    1,426           43          (122)     1,347
                            =====           ===         ===       =====        =====         ====          ====      =====
---------------------- ------------ ------------ ------------ ----------- ------------ ------------ ------------ -----------
</TABLE>


The volume,  rate, and mix variances for net interest income in 2000 compared to
1999  indicate  that the 13%  increase  in  average  loans,  the 50 basis  point
increase  in the  yield of the  investment  portfolio  and the 160  basis  point
increase  in the rate  earned  on  federal  funds  sold was  offset  by the $542
thousand  interest  forgone on nonaccrual  loans  combined with a 68 basis point
increase in the average cost of funding  certificates  of deposit.  During 2000,
average  earning assets  increased 6%. Average loans,  the

                                       15
<PAGE>

primary  component of earning  assets,  comprised  74% and 69% of total  earning
assets  during 2000 and 1999,  respectively.  While  average  federal funds sold
increased  23%  during  2000,  average  investment   securities  decreased  16%.
Additionally,  while average deposits increased 4% during 2000, the average rate
paid on  deposit  accounts  increased  15%  resulting  in an  increase  in total
interest expense.

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.

Allowance for Loan Losses

<TABLE>
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.
<CAPTION>
----------------------------------------- ---------------- ---------------- --------------- ---------------- ---------------
(in thousands)                                     2000             1999             1998            1997             1996

<S>                                             <C>                <C>              <C>             <C>                <C>
Balance at beginning of period                  $ 2,580            1,564            1,313           1,207              959

Charge-offs:

  Commercial                                        201               90               67             249              237

  Real estate                                         -                -               25               -                -

  Consumer                                           45               20               40              41               97
                                                 ------          -------          -------         -------          -------

  Total Charge-offs                                 246              110              132             290              334

Recoveries:

  Commercial                                         15               68              112             434              260

  Real estate                                         -                -                -               -                -

  Consumer                                           15                7               21              22               12
                                                 ------          -------          -------         -------          -------

  Total Recoveries                                   30               75              133             456              272
                                                 ------          -------          -------         -------          -------

Net charge-offs                                    (216)             (35)              (1)           (166)              62


Additions charged to operations                     135            1,051              250             (60)             310
                                                 ------          -------          -------         -------          -------


Balance at end of period                        $ 2,499            2,580            1,564           1,313            1,207
                                                 ======          =======          =======         =======          =======


Ratio of net charge-offs to average
loans outstanding                               (0.19%)          (0.03%)          (0.001%)        (0.28%)            0.11%
                                                =======          =======          ========        =======          =======
----------------------------------------- ---------------- ---------------- --------------- ---------------- ---------------
<FN>

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.
</FN>
</TABLE>

Net charge-offs  totaling $216 thousand represents an increase of $181 thousand,
or 517%,  over 1999.  This  activity  was  comprised  of $246  thousand in gross
charge-offs combined with $30 thousand in recoveries representing an increase of
124% in gross charge-offs and a decrease of 60% in recoveries  compared to 1999,
respectively.  The  increase in  charge-offs  during 2000 is related to measures
taken by the Company to reduce the level of nonaccrual  loans.  The Bank has not
modified or significantly  excepted its underwriting  standards  despite growing
competition within the industry.

The loan loss provision for 2000 totaled $135 thousand and represents a decrease
of $916 thousand, or 87%, over 1999. The reason for the decrease is attributable
primarily to three factors.  First,  during 1999, the Company identified certain
loans which had  deteriorating  conditions in their credit quality and, in 1999,
established specific loan loss reserves for those loans. During 2000, management
continued  to  actively  monitor the  nonperforming  loans and  determined  that
reserves previously established in 1999 continued to be adequate at December 31,
2000.  Secondly,  while  nonaccrual loans increased $3,352 thousand during 2000,
the majority of these loans were  identified  as problem  loans during 1999;  at
which time the specific

                                       16
<PAGE>

reserves for potential loan losses were established.  In addition,  the majority
of the  nonaccrual  loans are  secured by  collateral  that,  in the  opinion of
management,  possess adequate value to minimize any potential  losses, in excess
of the specific  loss reserves  previously  established  by the Company.  Third,
while average loans increased 13% during 2000, as compared to 1999,  balances as
of December 31, 2000 increased only 2% compared to December 31, 1999.

Charge-off  activity  declined by 17% in 1999 compared to 1998, while recoveries
declined by 44% during the same period.  The decline in charge-offs  during 1999
is consistent  with the asset quality  statistics  discussed  below in the Asset
Quality section.

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.


Noninterest Income

<TABLE>
Noninterest  income  increased  9% and 31% in 2000 and 1999,  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 2000, 1999, and 1998:
<CAPTION>
         ----------------------------------------------------------- ---------------- ----------------- -----------------
         (in thousands)                                                         2000              1999              1998
         ----------------------------------------------------------- ---------------- ----------------- -----------------
<S>                                                                         <C>                  <C>                 <C>
         Periodic deposit account charges                                   $    477               407               352
         Returned item charges                                                   561               463               344
         Ancillary services charges                                               99                98                82
         Other service charges                                                   124               110                68
                                                                     ---------------- ----------------- -----------------
              Total service charge revenue                                     1,261             1,078               846
                                                                     ================ ================= =================

         Gain on sale of SBA loans                                               114               177               191
         SBA loan servicing revenue                                              224               207               226
                                                                     ---------------- ----------------- -----------------
              Total SBA revenue                                                  338               384               417

         Gain on sale of mortgage loans                                          132               133               243
         Mortgage loan servicing revenue                                         123               122                92
                                                                     ---------------- ----------------- -----------------
              Total mortgage revenue                                             255               255               335

         Farmer Mac origination, sale and servicing                               31                42                32
                                                                     ---------------- ----------------- -----------------

               Total loan origination, sale and servicing revenue           $   624                681               784
         ----------------------------------------------------------- ---------------- ----------------- -----------------
</TABLE>

Service  charge  revenue  increased 17% in 2000 compared to 1999 and 27% in 1999
compared  to 1998.  The growth in service  charge  income for 2000 was driven by
deposit  growth  combined with changes to the fee  structure of certain  deposit
products  implemented  during the third quarter of 1999.  While average deposits
grew 4% in 2000,  average  noninterest-bearing  demand deposits and NOW accounts
increased 7% and 1%, respectively.  The growth in service charge income for 1999
was driven by average  deposit growth of 9% combined with the changes to the fee
structure of the certain deposit products.

SBA revenue declined 12% and 8% during 2000 and 1999.  Mortgage revenue remained
unchanged from 2000 to 1999 after  declining 8% during 1999.  Farmer Mac revenue
declined  26% in 2000 as  compared  to 1999 and  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 during 1999 and 2000. Additionally,  the mortgage
department  experienced  a decline in sales  volume and the  related  margins on
mortgage loans sold during these periods.

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.

                                       17
<PAGE>

During  1998,  the Company  purchased  single-premium  life  insurance  policies
written on the lives of certain  officers  and  directors of the Company and the
Bank. The increase in the cash surrender  value of these policies is included in
other noninterest income and totaled $458 thousand and $206 thousand during 2000
and 1999,  respectively.  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  12% in 2000  compared  to 1999 and 14% in 1999
compared  to 1998.  Several  events  had a  significant  impact on  year-to-year
comparability.  During 2000, the company incurred  expensed  associated with the
resolution of  nonperforming  loans.  During 1999, the primary events related to
expenses associated with the year 2000 date change.

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

Salaries and Employee Benefits

<TABLE>
The following  table  provides the detail for each major segment of salaries and
employee benefits together with relevant statistical data:
<CAPTION>
         ----------------------------------------------------------- ---------------- ----------------- -----------------
         (in thousands except full time equivalents)                            2000              1999              1998
         ----------------------------------------------------------- ---------------- ----------------- -----------------
<S>                                                                          <C>                 <C>               <C>
         Regular payroll, contract labor, and overtime                       $ 3,325             2,970             2,641
         Incentive compensation and profit sharing                               246               407               339
         Payroll taxes and employment benefits                                   935               655               576
                                                                     ---------------- ----------------- -----------------
              Total Salaries and Employee Benefits                           $ 4,506             4,032             3,556
                                                                     ================ ================= =================
         Number of full-time equivalent employees                                109               104                95
                                                                     ---------------- ----------------- -----------------
         Regular payroll per full-time equivalent employee                     30.50             28.49             27.80
                                                                     ---------------- ----------------- -----------------
         Incentive compensation to regular payroll                              7.4%             13.7%             12.8%
                                                                     ---------------- ----------------- -----------------
         Payroll taxes and benefits per full-time equivalent                    8.70              6.28              6.06
         employee
         ----------------------------------------------------------- ---------------- ----------------- -----------------
</TABLE>

The number of full-time  equivalent  employees  increased 4% in 2000 compared to
1999 and 9% in 1999  compared  to 1998.  Regular  payroll,  contract  labor  and
overtime  increased  12% in 2000  compared  to 1999 and 12% in 1999  compared to
1998. Total salaries and benefits expense increased 12% in 2000 compared to 1999
and 13% in 1999  compared to 1998.  The average  regular  payroll per  full-time
equivalent  employee  increased 9% in 2000  compared to 1998 and increased 2% in
1999 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 39% in
2000 as compared to 1999 and 4% in 1999 as compared to 1998.  The  increases are
related primarily to a $293 thousand  increase in the supplemental  compensation
accruals  made pursuant to the  agreements  summarized in Footnote 9 to the 2000
Consolidated  Financial  Statements,  combined  with  increases in the Company's
contribution to the Employee Stock Ownership Plan, general increases in the cost
of medical and other  related  insurance  benefits  and  education  and training
expenses.  The  accruals  for  the  supplemental  compensation  agreements  were
initiated in April, 1999.

                                       18
<PAGE>

Occupancy Expense

<TABLE>
The  following  table  provides  the detail for each major  segment of occupancy
expense:
<CAPTION>
         ----------------------------------------------------------- ---------------- ----------------- -----------------
         (in thousands except square footage and cost per sq. ft.)              2000              1999              1998
         ----------------------------------------------------------- ---------------- ----------------- -----------------
<S>                                                                         <C>                    <C>               <C>
         Depreciation                                                       $    335               366               289
         Property taxes, insurance, and utilities                                213               230               220
         Property maintenance                                                    184               124               144
         Net rental expense  (income)                                             93                90                62
                                                                     ---------------- ----------------- -----------------
              Total Occupancy                                               $    825               810               715
                                                                     ================ ================= =================
         Square footage of occupied and unoccupied space                      42,945            42,945            42,945
                                                                     ---------------- ----------------- -----------------
          Occupancy cost per square foot                                    $  19.21             18.86            $16.65
                                                                     ---------------- ----------------- -----------------
         Locations                                                                 8                 8                 8
         ----------------------------------------------------------- ---------------- ----------------- -----------------
</TABLE>

Occupancy  expenses  increased  2% in  2000  compared  to  1999  and 13% in 1999
compared to 1998.

The primary reason for the increases in 2000 and 1999 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.


Equipment Expense

<TABLE>
The  following  table  provides  the detail for each major  segment of equipment
expense:
<CAPTION>
         ----------------------------------------------------------- ---------------- ----------------- -----------------
         (in thousands)                                                         2000              1999              1998
         ----------------------------------------------------------- ---------------- ----------------- -----------------
<S>                                                                         <C>                    <C>               <C>
         Depreciation                                                       $    506               488               406
         Maintenance                                                             259               188               104
         Rental expense                                                           16                11                26
                                                                     ---------------- ----------------- -----------------
              Total Equipment                                               $    781               687               536
         ----------------------------------------------------------- ---------------- ----------------- -----------------
</TABLE>

Equipment  expense  increased  14% in 2000 compared to 1999 and increased 28% in
1999 compared to 1998.

The increases in 2000 and 1999 are 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.

                                       19
<PAGE>

Other Noninterest Expense

<TABLE>
Other  noninterest  expenses  increased  14% in 2000 compared to 1999 and 13% in
1999 compared to 1998.  The following  table  provides the detail for each major
segment of other noninterest expense:
<CAPTION>
         ----------------------------------------------------------- ---------------- ----------------- -----------------
         (in  thousands)                                                       2000             1999              1998
         ----------------------------------------------------------- ---------------- ----------------- -----------------
<S>                                                                     <C>                      <C>               <C>
         Third party data processing                                    $       869              821               719
         Professional fees                                                      771              554               423
         Marketing                                                              422              323               213
         Nonperforming loan costs                                               246               25                 -
         Telephone and postage                                                  232              271               217
         Intangible amortization                                                215              282               372
         Director fees and retirement                                           193              158               223
         Office supplies                                                        189              193               176
         Printing                                                               105              109               145
         Other real estate owned losses and holding costs                        94               (8)              (12)
         Regulatory assessments                                                  87               85                51
         Business development                                                    82               78                57
         Year 2000 date change                                                    4              152                 -
         Other                                                                  234              231               321
                                                                     ---------------- ----------------- -----------------
              Total Other Noninterest Expense                           $     3,743            3,274             2,905
         ----------------------------------------------------------- ---------------- ----------------- -----------------
</TABLE>

Professional  fees  increased  during  2000 and 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.

The amortization of the core deposit and goodwill intangible assets purchased in
the  acquisition  of the Wells Fargo  Branches in 1997  declined  24% in 2000 as
compared  to 1999  and 24% in 1999 as  compared  to  1998.  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 2000 the Company  expensed  $246  thousand in costs  associated  with the
resolution of nonpeforming  loans.  Included in these costs are amounts paid for
legal  representation,  past due rent of borrowers,  security and other property
maintenance expenses. The past due rent, security and other property maintenance
expenses  were  incurred  by the Company in order to protect  and  preserve  the
quality of assets pledged as collateral for the nonperforming loans.

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


Income Taxes

The provision for income taxes as a percentage of pretax income for 2000,  1999,
and 1998 was 19%, 19%, and 25%,  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 any
decreases in the tax asset valuation  allowance.  Tax exempt income increased in
2000 and 1999 as compared to 1999 and 1998, respectively, as a result of changes
in tax exempt investment securities and increases in the cash surrender value of
life insurance.  Interest income on tax exempt investment  securities  increased
$260  thousand  in 2000 and $28  thousand  in 1999 as a result of  increases  in
average tax exempt securities  totaling $5,440 thousand in 2000 and $108 in 1999
as compared to 1999 and 1998, respectively.  Tax exempt income also increased in
2000  compared to 1999 and 1999 compared to 1998 due to an investment of $10,032
thousand and $8,674  thousand,  respectively in the cash surrender value of life
insurance as discussed below under Balance Sheet Review. The tax asset valuation
allowance  declined $85,000 in 1999.  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.

                                       20
<PAGE>

Balance Sheet Review

<TABLE>
The following table presents average balance sheets for the years ended December
31, 2000, 1999 and 1998.

---------------------------------------------- -------------------------- -------------------------- -----------------------
                                                  For the Year Ended         For the Year Ended        For the Year Ended
                                                   December 31, 2000          December 31, 1999        December 31, 1998
                                                    (in thousands)             (in thousands)            (in thousands)
                                               -------------------------- -------------------------- -----------------------
                                                    Amount       Percent        Amount      Percent      Amount     Percent
---------------------------------------------- ------------ ------------- ------------- ------------ ----------- -----------
<S>                                            <C>              <C>            <C>          <C>         <C>         <C>
Assets:

Cash & Due from banks                          $     8,150        4.50%          7,488        4.45%       6,701       4.32%

Federal funds sold                                   5,090        2.81%          4,150        2.47%       6,780       4.37%

Investment securities                               34,690       19.16%         41,050       24.39%      53,370      34.42%
Loans (net of allowance for loan losses and
  deferred income)                                 111,490       61.57%         98,760       58.69%      71,752      46.29%

Premises and equipment, net                          6,860        3.78%          6,863        4.08%       7,188       4.64%

Other assets                                        14,810        8.18%          9,969        5.92%       9,220       5.96%
                                                 ---------      -------          -----        -----       -----       -----

Total Assets                                   $   181,090      100.00%        168,280      100.00%     155,011     100.00%
                                                 =========      =======        =======      =======     =======     =======

Liabilities & Stockholders' Equity:

Deposits                                       $   158,230       87.37%        152,630       90.70%     140,480      90.63%

Short term borrowings                                7,000        3.87%              -            -           -           -

Other liabilities                                    1,190        0.66%          1,507        0.90%       1,215       0.78%

Stockholders' equity                                14,670        8.10%         14,143        8.40%      13,316       8.59%
                                                 ---------      -------         ------        -----      ------       -----

Total Liabilities & Stockholders' Equity       $   181,090      100.00%        168,280      100.00%     155,011     100.00%
                                                 =========      =======        =======      =======     =======     =======
---------------------------------------------- ------------ ------------- ------------- ------------ ----------- -----------
</TABLE>

Average  total  assets  increased  8% in 2000  compared  to 1999  and 9% in 1999
compared to 1998.  Year-end  asset totals at December 31, 2000 reached  $185,064
thousand and  represented an increase of 5% over December 31, 1999. The increase
in 2000 and 1999 is a function of deposit  growth  throughout  the Bank's branch
network, as average deposits increased 4% and 9%, respectively.

During 2000 average gross loans  increased  13%. This increase was funded by the
growth in deposits  combined with a 12% reduction in average  federal funds sold
and investment securities.  During 1999 average gross loans increased 39%, which
was funded by the growth in deposits  combined with a 16% reduction in fed funds
sold and investment securities.

Other assets at December 31, 2000 and 1999  increased 10% and 71% as compared to
December  31,  1999  and  1998,   respectively.   The  increases  are  primarily
attributable  to an increase in the cash  surrender  value of life  insurance of
$10,032   thousand   and  $8,674   thousand  at  December  31,  2000  and  1999,
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.

                                       21
<PAGE>

Investment Securities

<TABLE>
The following table presents the investment portfolio at December 31, 2000, 1999
and 1998 by security type, maturity, and yield:

--------------------------------------------------- -------- -------------------------------------------------------------------
                                                                         Book Value at December 31 (in thousands):
                                                                     2000                 1999                   1998
                                                                     ----                 ----                   ----
                                                               Amount    Yield(a)    Amount    Yield(a)    Amount      Yield(a)
------------------------------------------------------------ --------- ----------- --------- ---------- ---------- -------------
<S>    <C>                                                   <C>            <C>       <C>        <C>        <C>           <C>
U.S. Treasury Securities:

Within 1 year                                                $      -           -         -          -      1,000         5.87%

Ater 1 year, within 5 years                                         -           -         -          -          -             -

After 5 years, within 10 years                                      -           -         -          -          -             -

After 10 years                                                      -           -         -          -          -             -
                                                             --------- ----------- --------- ---------- ---------- -------------

Total U.S. Treasury                                          $      -           -         -          -      1,000         5.87%

U.S. Agency Securities:

Within 1 year                                                $  3,520       6.34%     1,044      6.67%      1,512         5.68%

After 1 year, within 5 years                                    8,018       6.26%    12,622      6.40%     13,482         6.50%

After 5 years, within 10 years                                    932       7.71%     1,500      7.18%      3,000         6.93%

After 10 years                                                  1,500       6.85%     1,500      6.85%      1,500         6.85%
                                                             --------- ----------- --------- ---------- ---------- -------------

Total U.S. Agency                                            $ 13,970       6.46%    16,666      6.53%     19,494         6.53%


Collateralized Mortgage Obligations:

Within 1 year                                                $  4,121       6.09%        57      3.37%          -             -


After 1 year, within 5 years                                    1,975       7.09%     5,477      6.52%          -             -

After 5 years, within 10 years                                      -           -       961      6.87%        153         5.51%

After 10 years                                                    131       8.31%       132      8.17%        304         8.34%
                                                             --------- ----------- --------- ---------- ---------- -------------

Total Collateralized Mortgage Obligations                    $  6,227       6.46%     6,627      6.58%        457         7.39%


Municipal Securities:

Within 1 year                                                $  1,048       5.28%     1,053      6.66%      1,196         6.20%


After 1 year, within 5 years                                    1,630       7.42%     2,445      7.17%      2,439         7.08%

After 5 years, within 10 years                                  1,564       7.40%     2,444      6.08%          -             -

After 10 years                                                  3,750       8.42%     6,245      5.69%          -             -
                                                             --------- ----------- --------- ---------- ---------- -------------

Total Municipals                                             $  7,992       7.60%    12,187      6.15%       3,635        6.79%


Other Debt Securities:

Within 1 year                                                $    116      14.24%        10      7.57%         93         8.50%


After 1 year, within 5 years                                      338       9.41%       938      7.32%        113         6.83%

After 5 years, within 10 years                                    300           -         -          -          -             -

After 10 years                                                      -           -         -          -      2,509         7.28%
                                                             --------- ----------- --------- ---------- ---------- -------------

Total Other Debt Securities                                  $    754       8.15%       948      7.32%      2,813         7.36%


Money Market Mutual Fund                                            -           -         -          -     17,602         4.83%

Federal Agency Stock                                              126        6.0%       126      6.00%        126         6.00%

Unrealized Holding (Loss) / Gain                                  491           -      (458)         -        520             -
                                                             --------- ----------- --------- ---------- ---------- -------------

Total                                                        $ 29,560       6.66%  $ 36,096      6.43%     45,647         5.93%
------------------------------------------------------------ --------- ----------- --------- ---------- ---------- -------------
<FN>
(a) The yields on tax-exempt obligations have not been computed on a tax-equivalent basis.
</FN>
</TABLE>

                                       22
<PAGE>

The  investment  portfolio at December  31, 2000 and 1999  declined 18% and 21%,
respectively,  compared  to  the  prior  year-end  totals.  The  decline  in the
portfolio during 2000 and 1999 funded increases in loan volume.  During 2000 and
1999,  investment securities totaling $4,375 thousand and $9,180 matured or were
called prior to maturity during the year,  respectively.  During 2000,  proceeds
from the sale of investment  securities  totaled $4,391 thousand and resulted in
gains totaling $149 thousand. There were no sales of investment securities prior
to maturity during 1999.
Loans

<TABLE>
The following  table  summarizes  gross loans and the  components  thereof as of
December 31, for each of the last five years:
<CAPTION>
---------------------------------- -----------------------------------------------------------------------------------------
                                                          Outstanding at December 31 (in thousands):

                                              2000             1999                1998              1997               1996
---------------------------------- ---------------- ----------------- ----------------- ----------------- ------------------
<S>                                <C>                       <C>                 <C>               <C>                <C>
Commercial and other real estate   $        99,377           95,509              77,956            53,684             45,322


Real estate construction                    12,124           13,919              11,743             6,900              5,802


Installment and other                        3,605            3,301               3,463             3,525              3,155
                                            -------         -------              ------            ------             ------

                                   $        115,106         112,729              93,162            64,109             54,279
                                            =======         =======              ======            ======             ======
---------------------------------- ---------------- ----------------- ----------------- ----------------- ------------------
</TABLE>


Gross loans outstanding as of December 31, 2000 and 1999 exceeded the comparable
prior year-end totals by 2% and 21%, 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
combined with the entry into the Folsom and Elk Grove Areas in 1998, the Company
entered  into new  market  areas  which  substantially  enhanced  its  marketing
capabilities.

The most significant  segment of the loan portfolio is commercial  loans,  which
represented  86% and 85% of the total  portfolio  at December 31, 2000 and 1999,
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  17%  and  15%  of  the
commercial  loan  portfolio  at  December  31,  2000  and  1999,   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.
<TABLE>
The maturity and repricing characteristics of the loan portfolio at December 31,
2000 are as follows:

<CAPTION>
------------------------------------------------ ------------------------ ------------------------- ------------------------
Due:  (1)                                                     Fixed Rate             Floating Rate                    Total
                                                              ----------             -------------                    -----
<S>                                                             <C>                         <C>                      <C>
In 1 year or less                                               $ 13,936                    16,883                   30,819

After 1 year through 5 years                                      19,832                    10,924                   30,756

After 5 years                                                      9,155                    44,376                   53,531
                                                                  ------                    ------                   ------

Total Loans                                                     $ 42,923                    72,183                  115,106
                                                                 =======                    ======                  =======
------------------------------------------------ ------------------------ ------------------------- ------------------------
<FN>
(1) Scheduled repayments are reported in the maturity category in which the payment is due.
</FN>
</TABLE>

Approximately  37% of the loan portfolio  carries a fixed rate of interest as of
December 31, 2000, while  approximately 53% of the portfolio matures within five
years.

                                       23
<PAGE>

Deposits

<TABLE>
The following table summarizes  average deposit balances and rates for the years
ended December 31, 2000, 1999, and 1998:
<CAPTION>
-------------------------------------- --------------------------- ---------------------------- ----------------------------
(in thousands)                                 For the Year Ended     For the Year Ended          For the Year Ended
                                                December 31, 2000      December 31, 1999           December 31, 1998

         Type                                Average      Average         Average      Average         Average      Average
                                              Amount         Rate          Amount         Rate          Amount         Rate
-------------------------------------- -------------- ------------ --------------- ------------ --------------- ------------
<S>                                        <C>                            <C>                          <C>
Demand - non-interest bearing              $  21,240          N/A         19,830           N/A         17,080           N/A

NOW accounts                                  41,267        1.13%         37,985         1.14%         34,311         1.31%

Money market accounts                         14,194        2.25%         17,028         2.23%         16,829         3.13%

Savings                                       28,509        1.97%         27,097         2.06%         25,460         2.66%

Time deposits                                 53,020        5.28%         50,690         4.60%         46,800         5.08%
                                            --------        ----         -------         ----         -------         ----

Total Deposits                             $ 158,230        2.62%        152,630         2.42%        140,480         2.87%
                                            ========       ======        =======         ====         =======         ====
-------------------------------------- -------------- ------------ --------------- ------------ --------------- ------------
</TABLE>


Average  deposits   increased   approximately  4%  and  9%  in  2000  and  1999,
respectively.  Due to an increasing  rate  environment  during 2000, the average
rate  increased 20 basis points when  comparing 2000 to 1999. Due to a declining
rate  environment  during 1999,  the average rate decreased 45 basis points when
comparing  1999 to 1998.  The deposit  growth in 2000 and 1999 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.

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, 2000 and 1999 the Company had $0 and $3,000 thousand in deposits
with the State of  California  under the Time  Certificate  of Deposit  Program,
respectively.  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.

During 2000 the Company was informed by the State of California that as a result
of the Bank's  declining  credit  rating,  which  resulted  from the increase in
nonperforming  loans,  the State would suspend the Bank's  participation  in the
Time Certificate of Program until such a time as the credit rating improved to a
level acceptable by the State of California. Accordingly, as the Certificates of
Deposit matured, the funds were returned to the State of California.

Certificates  of $100,000  or more  represent  approximately  29% and 38% of the
certificate  of deposit  portfolio at December 31, 2000 and 1999,  respectively.
Excluding the Certificates of Deposit with the State of California, certificates
of $100,000 or more represent  approximately  29% and 34% of the  certificate of
deposit  portfolio at December 31, 2000 and 1999,  respectively.  The  following
table summarizes the maturities of those certificates of $100,000 or more:

---------------------------------------------------------------------

(in thousands)                                                2000
                                                              ----

Three months or less                                       $ 5,347

Four months to six months                                    4,845

Seven months to twelve months                                3,056

Over twelve months                                           1,535
                                                            ------

Total time deposits of $100,000 or more                    $14,783
                                                            ======
---------------------------------------------------------------------

                                       24
<PAGE>


Asset Quality
<TABLE>

The following table contains asset quality  information with respect to the loan
portfolio and other real estate owned:
<CAPTION>
---------------------------------------------------- -----------------------------------------------------------------------
                                                                    Asset Quality Statistics at December 31

(in thousands except multiples and percentages)             2000          1999            1998           1997          1996
---------------------------------------------------- ------------ -------------- -------------- -------------- -------------
<S>                                                       <C>            <C>               <C>            <C>           <C>
Nonaccrual loans                                          $5,655         2,303             248            340           898

Accruing loans past due more than 90 days                      -           374             191             65            52
                                                           -----         -----             ---            ---           ---

Total nonperforming loans                                 $5,655         2,677             439            405           950
                                                           =====         =====             ===            ===           ===

Allowance for loan losses                                 $2,499         2,580           1,564          1,313         1,207

Allowance for loan losses to nonperforming loans             44%           96%            356%           324%          127%

Total loan portfolio delinquency                           5.14%         3.32%           1.40%          1.09%         2.14%

Allowance for loan losses to total gross loans             2.17%         2.29%           1.69%          2.05%         2.22%

Other real estate owned                                   $  405           129             129            159           400
---------------------------------------------------- ------------ -------------- -------------- -------------- -------------
</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 $224 thousand,  $138 thousand,  $2 thousand,  $8 thousand,  and $7
thousand in 2000,  1999,  1998,  1997, and 1996,  respectively.  Interest income
foregone  or  reversed  on these  loans was  approximately  $542  thousand,  $76
thousand,  $43 thousand,  $45 thousand,  and $149 thousand in 2000,  1999, 1998,
1997, and 1996,  respectively.  At December 31, 2000, 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 $2,978 thousand, $2,238 thousand, and $34 thousand
in 2000, 1999 and 1998, respectively,  which followed a decline of $545 thousand
in 1997. Portfolio delinquency also increased to 5.14%, 3.32% and 1.40% in 2000,
1999 and 1998, respectively, after having declined in 1997. The dollar amount of
the  allowance for loan losses  decreased $81 thousand  during 2000 after having
increased in each of the prior three years.  The reasons for the decrease in the
allowance  for loan  losses  in 2000 as  compared  to 1999 is  explained  in the
"Allowance for Loan Losses" section above.

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

<CAPTION>
---------------------- ------------------ -------------------- ------------------- -------------------- --------------------
(dollars in            December 31, 2000   December 31, 1999   December 31, 1998    December 31, 1997    December 31, 1996
thousands)            -----------------   -----------------   -----------------    -----------------    -----------------
                                   %                    %                   %                    %                    %
Loan Category           Amount   Loans      Amount    Loans     Amount    Loans       Amount   Loans       Amount   Loans
                        ------   -----      ------    -----     ------    -----       ------   -----       ------   -----
<S>                    <C>        <C>          <C>     <C>          <C>    <C>           <C>    <C>           <C>    <C>
Commercial and
other real estate      $   879    86.46%       698     84.72%       240    83.68%        309    83.74%        490    83.50%

Real estate
construction               594    10.41%       402     12.35%       129    12.60%        192    10.76%         45    10.69%

Installment and
other                        1     3.13%         2      2.93%        11     3.72%          6     5.50%          1     5.81%

General                  1,025       N/A     1,478        N/A     1,184       N/A        806       N/A        671       N/A
                       -------   ------      -----    ------      -----   ------       -----   ------       -----   ------

                       $ 2,499   100.00%     2,580    100.00%     1,564   100.00%      1,313   100.00%      1,207   100.00%
                       =======   ======      =====    ======      =====   ======       =====   ======       =====   ======
--------------------- --------- --------- --------- ---------- --------- --------- ---------- --------- ---------- ---------
</TABLE>

Please also see "Allowance for Loan Losses."

                                       25

<PAGE>

Market Risk

Market risk is the risk to a company's financial position resulting from adverse
changes in market  rates or prices,  such as interest  rates,  foreign  exchange
rates or equity prices. The Company has no exposure to foreign currency exchange
risk or any specific  exposure to commodity price risk. The Company's major area
of market risk exposure is interest rate risk ("IRR"). The Company's exposure to
IRR can be explained as the potential for change in its reported earnings and/or
the market value of the Company's net worth. Variations in interest rates affect
earnings   by   changing   net   interest   income   and  the   level  of  other
interest-sensitive  income and  operating  expenses.  Interest rate changes also
affect the underlying  economic value of the Company's  assets,  liabilities and
off-balance sheet items. These changes arise because the present value of future
cash flows, and often the cash flows themselves, change with the interest rates.
The effects of the  changes in these  present  values  reflect the change in the
Company's  underlying economic value and provide a basis for the expected change
in future earnings  related to the interest rate. IRR is inherent in the role of
banks as  financial  intermediaries,  however  a bank  with a high IRR level may
experience lower earnings,  impaired liquidity and capital  positions,  and most
likely,  a greater  risk of  insolvency.  Therefore,  the  Company and bank must
carefully evaluate IRR to promote safety and soundness in their activities.

The responsibility for the Company's market risk sensitivity management has been
delegated to the Asset/Liability Committee ("ALCO"). Specifically, ALCO utilizes
computerized modeling techniques to monitor and attempt to control the influence
that market  changes have on rate  sensitive  assets  ("RSA") and rate sensitive
liabilities ("RSL").

Market  risk  continues  to be a major focal point of  regulatory  emphasis.  In
accordance  with  regulation,  each  Company is  required to develop its own IRR
management  program depending on its structure,  including  certain  fundamental
components  which are mandatory to ensure sound IRR  management.  These elements
include  appropriate  board and management  oversight as well as a comprehensive
risk management  process that  effectively  identifies,  measures,  monitors and
controls risk. Should a company have material  weaknesses in its risk management
process or high exposure relative to its capital,  the regulatory  agencies will
take action to remedy these shortcomings. Moreover, the level of a company's IRR
exposure and the quality of its risk management  process is a determining factor
when evaluating a company's capital adequacy.

The Company  utilizes the tabular  presentation  alternative  in complying  with
quantitative  and qualitative  disclosure  rules. The following tables summarize
the expected maturities,  principal repayment and fair values of other financial
instruments that are sensitive to changes in interest rates at December 31, 2000
and 1999.
<TABLE>

As of December 31, 2000:
<CAPTION>
------------------------------- ----------------------------------------------------------------------- ----------- ------------
                                               Expected Maturity / Principal Repayment                    Total        Fair
In Thousands                       2001        2002        2003        2004        2005     Thereafter   Balance       Value
------------------------------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ------------
<S>                    <C>           <C>         <C>         <C>           <C>       <C>         <C>        <C>          <C>
Interest-Sensitive Assets:
Federal funds sold                 $10,115           -           -           -           -           -      10,115       10,115
Fixed rate investments (1)           8,227       6,074       4,423         992       1,048       8,008      28,772       28,772
Floating rate investments (1)          120          99          83          68          55         363         788          788
Fixed rate loans (2)                 1,489      12,446       5,681       5,769       2,447      15,091      42,923       46,090
Floating rate loans (2)              2,581      14,302       2,674       4,527       2,694      45,405      72,183       77,509

Interest-Sensitive
Liabilities:
NOW account deposits (3)            17,726       2,954       2,954       2,954       2,954      14,774      44,316       44,316
Money market deposits (3)            6,144       1,024       1,024       1,024       1,024       5,121      15,361       15,361
Savings deposits (3)                10,656       1,776       1,776       1,776       1,776       8,880      26,640       26,640
Certificates of deposit             46,313       4,517         528         111         252           -      51,721       52,491
Short term borrowings                4,588           -           -           -           -           -       4,588        4,588

Interest-Sensitive
Off-Balance Sheet Items:
Loans serviced for others                -           -           -           -           -           -      73,607          736
Commitments to lend                      -           -           -           -           -           -      25,306          253
Standby letters of credit                -           -           -           -           -           -       1,034            1
------------------------------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ------------
</TABLE>

                                       26
<PAGE>

<TABLE>
As of December 31, 1999:
<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>          <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       33,611
Floating rate loans (2)             13,350         935       1,904       4,188       2,510      55,416      78,303       76,450

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             48,335         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                -           -           -           -           -           -      73,154          732
Commitments to lend                      -           -           -           -           -           -      24,418          244
Standby letters of credit                -           -           -           -           -           -         892            1
------------------------------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ------------
<FN>
(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.
</FN>
</TABLE>

At December 31, 2000,  federal  funds sold of $10,115  thousand  with a yield of
5.96%   and   investment    securities   totaling   $8,347   thousand   with   a
weighted-average,  tax-equivalent yield of 6.58% were scheduled to mature within
one  year.  In  addition,   gross  loans   totaling   $4,070   thousand  with  a
weighted-average  yield of 10.55% were  scheduled to mature within the same time
frame.  Overall,  interest-earning  assets  scheduled to mature  within one year
totaled $22,532 thousand with a weighted-average,  tax-equivalent yield of 7.02%
at December 31, 2000.  With respect to  interest-bearing  liabilities,  based on
historical withdrawal patterns, NOW accounts,  money market and savings deposits
of $34,526  thousand  with a  weighted-average  cost of 1.58% were  scheduled to
mature within one year. Certificates of deposit totaling $46,313 thousand with a
weighted-average  cost of 5.61% were scheduled to mature in the same time frame.
In addition,  short term borrowings totaling $4,588 with a weighted-average cost
of 6.74%  were  scheduled  to mature  within  one year.  Total  interest-bearing
liabilities  scheduled to mature within one year totaled $85,427 thousand with a
weighted-average rate of 4.04%.

Historical   withdrawal   patterns   with   respect  to   interest-bearing   and
noninterest-bearing  transaction  accounts  are not  necessarily  indicative  of
future  performance  as the volume of cash flows may increase or decrease.  Loan
information is presented based on payment due dates, which may materially differ
from actual  results  due to  prepayments  caused by changes in interest  rates,
sociological conditions, demographics, and the economic climate.

Models  that  consider  repricing  frequencies  of RSA  and RSL in  addition  to
maturity distributions are also used to monitor IRR. One such technique utilizes
a static gap  report,  which  attempts to measure the  Company's  interest  rate
exposure  by  calculating  the net  amount  of RSA and RSL that  reprice  within
specific time intervals.

                                       27
<PAGE>

The Company's  interest rate sensitivity gap position,  illustrating RSA and RSL
at their  related  carrying  values,  is  summarized  in the  table  below.  The
distributions  in the table  are  based on a  combination  of  maturities,  call
provisions,  repricing  frequencies  and  prepayment  patterns.  Adjustable-rate
assets are distributed based on the repricing frequency of the instrument.

<TABLE>
As of December 31, 2000:
<CAPTION>
-------------------------- -------------------------------------------------------------------------------------------------
                                                                By Repricing Interval
-------------------------- -------------------------------------------------------------------------------------------------
(in thousands)                 Within      After three    After six    After one     After five    Noninterest     Total
                                three        months,       months,       year,         years      bearing funds
                               months      within six    within one   within five
                                             months         year         years
---------------------------- ------------ -------------- ------------ ------------- ------------- -------------- -----------
<S>                              <C>           <C>          <C>           <C>             <C>                       <C>
Assets

Federal funds sold         $    10,115            --           --             --             --            --       10,115

Investment securities            4,754         1,781        1,812         12,032          9,181            --       29,560

Loans                           27,780         4,292       11,553         55,528         15,953            --      115,106

Noninterest earning
assets and allowance for
loan losses                         --            --           --             --             --        30,283       30,283
                           ------------ -------------- ------------- ------------- ------------- ------------- -------------

Total Assets               $    42,649         6,073       13,365         67,560         25,134        30,283      185,064
                           ============ ============== ============= ============= ============= ============= =============

Liabilities and
Stockholders' Equity

Savings, money market &
NOW deposits               $    86,317            --           --             --             --            --       86,317

Time deposits                   17,884        15,266       14,133          4,438             --            --       51,721
                                                  --           --             --             --            --
Short term borrowings            4,588                                                                               4,588

Other liabilities and
stockholders' equity                --            --           --             --             --        42,438       42,438
                           ------------ -------------- ------------- ------------- ------------- ------------- -------------

Total Liabilities and
Stockholders' Equity       $   108,789        15,266       14,133          4,438             --        42,438      185,064
                           ============ ============== ============= ============= ============= ============= =============

Interest Rate
Sensitivity Gap            $   (66,140)       (9,193)        (768)        63,122         25,134       (12,155)          --
                           ============ ============== ============= ============= ============= ============= =============

Cumulative Interest Rate
Sensitivity Gap            $   (66,140)      (75,333)     (76,101)       (12,979)       (12,155)           --           --
                           ============ ============== ============= ============= ============= ============= =============
</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.

                                       28
<PAGE>

Liquidity

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

The Bank's  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, 2000 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  1999  liquidity
increased  in 2000 as a result of the growth in deposit  portfolio  combined the
sales and maturities of available-for-sale investment securities.

Capital Resources

Consolidated  capital  increased  $1,933  thousand,  or 13.3%,  during 2000. The
increase was due primarily to net income of $1,283 thousand. Capital was further
increased  by $551  thousand as a result of an  increase  in the net  unrealized
holding gain on  available-for-sale  securities and $173 thousand as a result of
capital paid in upon the exercise of stock options.  The consolidated capital to
assets  ratio  increased 66 basis  points (or 8.0%),  to 8.89% from 8.23%.  This
increase is primarily  due to the combined  effect of the 10.7%  increase in net
income during 2000 with the $551  thousand  increase in the  unrealized  holding
gain on available-for-sale securities outpacing the 5% growth in total assets.

The Bank's total  risk-based and leverage  capital ratios were 11.27% and 7.99%,
respectively,  at December 31, 2000 compared to 10.51% and 7.82%,  respectively,
at December 31, 1999. The increase in the total risk-based ratio resulted as the
increase in net income combined with the increase in the net unrealized  holding
gain on  available-for-sale  securities  outpaced  the  growth  in  risk-weighed
assets.  The total  risk-based and leverage capital ratios at December 31, 2000,
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 24,
2001, 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.


                                       29
<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, 2000 and 1999                              34
                  Consolidated Statements of Income
                    Years Ended 2000, 1999, and 1998                        35
                  Consolidated Statements of Stockholders' Equity
                    and Comprehensive Income
                    Years Ended 2000, 1999, and 1998                        36
                  Consolidated Statements of Cash Flows
                    Years Ended 2000, 1999, and 1998                        37
                  Notes to Consolidated Financial Statements                38


          (b)        Reports on Form 8-K

                  On November  13, 2000 the  Company  filed a Current  Report on
                  Form 8-K  regarding  its press  release of  November  1, 2000,
                  reporting  the Company's  results of operations  for the three
                  and nine month periods ending September 30, 2000.

                  On February  12, 2001 the  Company  filed a Current  Report on
                  Form 8-K  regarding  its press  release of  February  9, 2001,
                  reporting  the Company's  results of operations  for the three
                  and twelve month periods ending December 31, 2000.

          (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

                                       30
<PAGE>

                                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.

                  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.

                                       31
<PAGE>

                  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.

                  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

                                       32
<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,  2000 and 1999,  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,
2000. 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 auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the 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, 2000 and 1999,  and the results of
their  operations  and their cash flows for each of the years in the  three-year
period  ended  December 31,  2000,  in  conformity  with  accounting  principles
generally accepted in the United States of America.



                                                     /s/ KPMG LLP



Sacramento, California

February 23, 2001

                                       33
<PAGE>

<TABLE>

                    FIRST FINANCIAL BANCORP AND SUBSIDIARIES
                           Consolidated Balance Sheets
                      (in thousands, except share amounts)
                           December 31, 2000 and 1999

<CAPTION>
         Assets                                                                       2000                1999
-----------------------------------------------------------------------------------------------------------------
<S>                                                                            <C>                       <C>
         Cash and due from banks                                               $    10,909               9,309
         Federal funds sold                                                         10,115                 100
         Investment securities available-for-sale, at fair value
              (includes securities pledged to creditors with the right
              to sell or pledge of  $4,588 and $0, respectively)                    29,560              36,096
         Loans, net of deferred loan fees and allowance for loan losses of
              $3,021 and $3,136 in 2000 and 1999, respectively                     112,085             109,594
         Premises and equipment, net                                                 7,002               7,096
         Accrued interest receivable                                                 1,447               1,487
         Other Assets                                                               13,946              12,652
-----------------------------------------------------------------------------------------------------------------
                                                                               $   185,064             176,334
=================================================================================================================

         Liabilities and Stockholders' Equity
-----------------------------------------------------------------------------------------------------------------

         Liabilities:
         Deposits:
              Noninterest bearing                                              $    24,223              21,054
              Interest bearing                                                     138,038             135,107
-----------------------------------------------------------------------------------------------------------------
                  Total deposits                                                   162,261             156,161


         Accrued interest payable                                                      316                 304
         Short term borrowings                                                       4,588               4,300
         Other liabilities                                                           1,445               1,048
-----------------------------------------------------------------------------------------------------------------
                  Total liabilities                                                168,610             161,813

         Stockholders' equity:
         Common stock - no par value; authorized 9,000,000 shares, issued and
         outstanding in 2000, 1,526,063 shares; in 1999, 1,433,734 shares            9,338               8,433
         Retained earnings                                                           6,831               6,354
         Accumulated other comprehensive income (loss)                                 285                (266)
-----------------------------------------------------------------------------------------------------------------
                  Total stockholders' equity                                        16,454              14,521
-----------------------------------------------------------------------------------------------------------------
                  Commitments and contingencies
                                                                               $   185,064             176,334
=================================================================================================================
<FN>
           See accompanying notes to consolidated financial statements.
</FN>
</TABLE>


                                       34
<PAGE>
<TABLE>

                    FIRST FINANCIAL BANCORP AND SUBSIDIARIES
                        Consolidated Statements of Income
                     (in thousands except per share amounts)
                  Years Ended December 31, 2000, 1999 and 1998

<CAPTION>
                                                                   2000               1999                1998
-----------------------------------------------------------------------------------------------------------------
<S>                                                      <C>                         <C>                 <C>
         Interest income:
              Loans, including fees                      $       10,953              9,911               7,729
              Interest on investment securities
                  available for sale:
                  Taxable                                         1,686              2,145               3,191
                  Exempt from Federal taxes                         528                268                 240
              Federal funds sold                                    329                202                 348
-----------------------------------------------------------------------------------------------------------------
                  Total interest income                          13,496             12,526              11,508

         Interest expense:
              Deposit accounts                                    4,151              3,688               4,028
              Other borrowings                                      462                 11                   -
-----------------------------------------------------------------------------------------------------------------
                  Total interest expense                          4,613              3,699               4,028

                      Net interest income                         8,883              8,827               7,480

         Provision for loan losses                                  135              1,051                 250
-----------------------------------------------------------------------------------------------------------------
                  Net interest income after provision
                               for loan losses                    8,748              7,776               7,230

         Noninterest income:
              Service charges                                     1,261              1,078                 846
              Gain on sale of investment securities
                      available-for-sale                            149                  -                   -
              Gain on stock issued in insurance
                      company demutualization                         -                287                   -
              Gain on sale of loans                                 246                310                 434
              Premiums and fees from SBA and
                      mortgage operations                           378                371                 350
              Other                                                 656                415                 248
-----------------------------------------------------------------------------------------------------------------
                  Total noninterest income                        2,690              2,461               1,878

         Noninterest expense:
              Salaries and employee benefits                      4,506              4,032               3,556
              Occupancy                                             825                810                 715
              Equipment                                             781                687                 536
              Other                                               3,743              3,274               2,905
-----------------------------------------------------------------------------------------------------------------
                  Total noninterest expense                       9,855              8,803               7,712
-----------------------------------------------------------------------------------------------------------------
         Income before provision for income taxes                 1,583              1,434               1,396

         Provision for income taxes                                 300                275                 344
-----------------------------------------------------------------------------------------------------------------
                  Net income                             $        1,283              1,159               1,052
=================================================================================================================

         Earnings per share:
-----------------------------------------------------------------------------------------------------------------
              Basic                                      $          .85                .79                 .73
=================================================================================================================
              Diluted                                    $          .83                .76                 .68

         Dividends per share                             $          .05                .20                 .20
=================================================================================================================
<FN>

                See accompanying notes to consolidated financial statements.
</FN>
</TABLE>

                                       35
<PAGE>

<TABLE>
                    FIRST FINANCIAL BANCORP AND SUBSIDIARIES
           Statements of Stockholders' Equity and Comprehensive Income
                       (in thousands except share amounts)
                  Years Ended December 31, 2000, 1999 and 1998
<CAPTION>
                                                                                           Accumulated
                                        Common       Common                                   Other
                                         Stock        Stock     Comprehensive Retained    Comprehensive
            Description                 Shares       Amounts       Income     Earnings    Income (Loss)      Total
------------------------------------- ------------ ------------ ------------- ---------- ---------------- ------------
<S>                                     <C>           <C>                        <C>               <C>        <C>
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                                                                     (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
Comprehensive income:
   Net income                                                      $   1,283     1,283                         1,283
                                                                -------------
Other comprehensive income:
      Unrealized holding gain
      arising during the
      current period,
      net of tax
      effect of $398                                                     551                       551           551
                                                                -------------
     Total other comprehensive
     income                                                              551
                                                                -------------
   Comprehensive income                                              $ 1,834
                                                                =============
Options exercised                          20,565         173                                                    173

Stock dividend                             71,764         732                     (732)

Cash dividend                                                                      (74)                          (74)
                                      ------------ ------------               ---------- ---------------- ------------
Balance at December 31, 2000            1,526,063      $9,338                    6,831             285        16,454
                                      ============ ============               ========== ================ ============
<FN>

See accompanying notes to consolidated financial statements.
</FN>
</TABLE>


                                       36
<PAGE>

<TABLE>
                    FIRST FINANCIAL BANCORP AND SUBSIDIARIES
                      Consolidated Statements of Cash Flows
                                 (in thousands)
                  Years Ended December 31, 2000, 1999 and 1998
<CAPTION>
                                                                            2000      1999       1998
----------------------------------------------------------------------------------------------------------
<S>                                                                  <C>             <C>        <C>
         Cash flows from operating activities:
              Net income                                             $     1,283     1,159      1,052
              Adjustments to reconcile net income to net cash flows
              provided by operating activities:
                  (Increase) decrease in loans held for resale               (75)    1,712       (377)
                  Gain on sale of loans                                     (246)     (310)      (434)
                  (Decrease) increase in deferred loan income                (34)       36        (49)
                  Provision for other real estate owned losses                 -         -        (16)
                  Depreciation and amortization                              826     1,126      1,071
                  Provision for loan losses                                  135     1,051        250
                  Gain on sale of available-for-sale securities             (149)        -          -
                  Provision for deferred taxes                               (46)     (673)       (52)
                  Decrease (increase) in accrued interest receivable          40      (134)       120
                  Increase (decrease) in accrued interest payable             12       (85)       (40)
                  Increase in cash surrender value of life insurance        (458)     (206)      (149)
                  Increase in other assets                                  (258)     (519)      (145)
                  Increase (decrease) in other liabilities                   397       438        (59)
----------------------------------------------------------------------------------------------------------
                  Net cash provided by operating activities                1,427     3,595      1,172

         Cash flows from investing activities:
              Proceeds from maturity of held-to-maturity securities            -         -        540
              Proceeds from maturity of available-for-sale securities      4,375     9,180     20,317
              Proceeds from sale of available-for-sale securities          4,391    43,054      8,500
              Purchases of available-for-sale securities                    (906)  (43,666)   (12,964)
              Increase in loans made to customers                         (2,676)  (21,006)   (28,240)
              Proceeds from the sale of other real estate                    160        11         45
              Purchases of bank premises, equipment and intangible assets   (743)     (684)      (712)
              Purchase of cash surrender value life insurance               (900)   (4,194)    (4,125)
----------------------------------------------------------------------------------------------------------
              Net cash provided by (used in) investing activities          3,701    (17,305)  (16,639)

         Cash flows from financing activities:
              Net increase in deposits                                     6,100     6,617     15,653
              Increase in short term borrowings                              288     4,300          -
              Proceeds received upon exercise of stock options               173       359        129
              Dividends paid                                                 (74)     (286)      (269)
----------------------------------------------------------------------------------------------------------
              Net cash provided by financing activities                    6,487    10,990     15,513
----------------------------------------------------------------------------------------------------------
         Net increase (decrease) in cash and cash equivalents             11,615    (2,270)        46
         Cash and cash equivalents at beginning of year                    9,409    12,129     12,083
----------------------------------------------------------------------------------------------------------
         Cash and cash equivalents at end of year                    $    21,024     9,409     12,129
==========================================================================================================

         Supplemental Disclosures of Cash Flow Information:
              Cash paid during the year for:
                  Interest                                           $     4,601     3,784      4,068
                  Income taxes                                       $       586       663        677
<FN>

         See accompanying notes to consolidated financial statements.
</FN>
</TABLE>

                                       37
<PAGE>

                    FIRST FINANCIAL BANCORP AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                        December 31, 2000, 1999 and 1998


(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 accounting principles
         generally  accepted  in the  United  States of America  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 thousand,
         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.

         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

                                       38
<PAGE>

         unpaid interest is reversed  against  current period  interest  income.
         Interest accruals are resumed when such loans are 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,  2000 and 1999,  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

                                       39
<PAGE>

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

         (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 $685 thousand
         and $900 thousand at December 31, 2000 and 1999, 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 May 9, 2000,  the Company  effected a five  percent  stock  dividend
         payable to  stockholders  of record as of May 23, 2000. 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.

                                       40
<PAGE>

         (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 of the stock options.

          (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.


 (2)     Restricted Cash Balances

         The Bank is required  to maintain  certain  daily  reserve  balances in
         accordance with Federal Reserve Board requirements.  Aggregate reserves
         of $2,956  thousand and $2,340 thousand were necessary to satisfy these
         requirements at December 31, 2000 and 1999,  respectively.  As a result
         of  revisions  made  to  the  December  31,  2000  calculation,  it was
         determined  that the Bank did not satisfy the December 31, 2000 minimum
         reserve requirement.



(3)      Investment Securities

<TABLE>
         Investment securities at December 31, 2000 and 1999 consisted of the following:
<CAPTION>
                                                                       December 31, 2000
                                                                              Gross                 Gross        Estimated
                                                         Amortized          Unrealized           Unrealized        Market
          (in thousands)                                   Cost                Gains               Losses           Value
------------------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>                            <C>                 <C>          <C>
         Available for Sale
         U.S. Agency securities                     $      13,970                  46                  59           13,957
         Municipal securities                               7,992                 450                   -            8,442
         Collateralized mortgage obligations                6,227                  48                   4            6,271
         Other debt securities                                754                  10                   -              764
         Investment in Federal Agency stock                   126                   -                   -              126
------------------------------------------------------------------------------------------------------------------------------
         Total                                      $      29,069                 554                  63           29,560
==============================================================================================================================

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

         Investment securities totaling $7,719 thousand and $8,555 thousand were
         pledged  as  collateral  to secure  Local  Agency  Deposits  as well as
         treasury,  tax and loan accounts  with the Federal  Reserve at December
         31, 2000 and 1999,  respectively.  In addition,  investment  securities
         totaling  $5,942  thousand  were  pledged to secure  deposits  with the
         California State Treasurer at December 31, 1999.

         Proceeds  from the sale of Available for Sale  securities  during 2000,
         1999 and  1998  were  $4,391  thousand,  $43,054  thousand  and  $8,500
         thousand.

         Federal Agency stock  dividends paid to the Company were $7 thousand in
         2000, 1999 and 1998.

         The  amortized  cost and  estimated  fair value of debt  securities  at
         December 31, 2000, by contractual  maturity, or

                                       41
<PAGE>

         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, 2000
                                                        Amortized        Market
         (in thousands)                                   Cost           Value
--------------------------------------------------------------------------------
         Due in one year or less                     $     8,805          8,819
         Due after one year through five years            11,961         12,032
         Due after five years through 10 years             2,796          2,901
         Due after 10 years                                5,381          5,682
--------------------------------------------------------------------------------
                                                     $    28,943         29,434
================================================================================

(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 contracts 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:

         (in thousands)                                     2000          1999
--------------------------------------------------------------------------------
         Commercial                                  $    92,734        89,089
         Real estate construction                         12,124        13,919
         Other real estate                                 6,643         6,420
         Installment and other                             3,605         3,301
--------------------------------------------------------------------------------
                                                         115,106       112,729

         Deferred loan fees and loan sale premiums          (522)         (556)
         Allowance for loan losses                        (2,499)       (2,580)
--------------------------------------------------------------------------------
                                                     $   112,085       109,594
================================================================================


         Included in total loans are loans held for sale of $1,292  thousand and
         $1,217 thousand for 2000 and 1999, respectively. SBA and mortgage loans
         serviced by the Bank totaled  $73,607  thousand,  $73,154  thousand and
         $66,903 thousand in 2000, 1999 and 1998, respectively.

         Changes in the allowance for loan losses were as follows:

         (in thousands)                        2000         1999      1998
--------------------------------------------------------------------------------
         Balance, beginning of year      $    2,580        1,564     1,313
         Loans charged off                     (246)        (110)     (132)
         Recoveries                              30           75       133
         Provision charged to operations        135        1,051       250
--------------------------------------------------------------------------------
         Balance, end of year            $    2,499        2,580     1,564
================================================================================


         Nonaccrual  loans totaled  $5,655  thousand,  $2,303  thousand and $248
         thousand at December 31, 2000,  1999 and 1998,  respectively.  Interest
         income  which  would have been  recorded on  nonaccrual  loans was $542
         thousand,  $76  thousand and $43  thousand,  in 2000,  1999,  and 1998,
         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, 2000 and 1999,
         the Bank  had  outstanding  balances  of  $5,655  thousand  and  $2,303
         thousand  in  impaired  loans which had  valuation  allowances  of $744
         thousand  in 2000 and $327  thousand in 1999.  The average  outstanding
         balances of impaired loans for the years ended December 31, 2000,  1999
         and  1998  were  $5,847  thousand,  $805  thousand  and  $535  thousand
         respectively,  on which $224  thousand,  $76 thousand and $40 thousand,
         respectively, was recognized as interest income.

         At December 31, 2000 and 1999, the collateral  value method was used to
         measure impairment for all loans classified as impaired. Impaired loans
         at December 31, 2000 and 1999 consisted solely of commercial loans.

                                       42
<PAGE>

(5)         Premises and Equipment

         Premises and equipment consisted of the following at December 31:

         (in thousands)                                     2000         1999
--------------------------------------------------------------------------------

         Land                                        $       874          874
         Building                                          5,725        5,705
         Leasehold improvements                            1,874        1,613
         Furniture and equipment                           4,089        3,618
--------------------------------------------------------------------------------
                                                          12,562       11,809
--------------------------------------------------------------------------------
         Accumulated depreciation and amortization        (5,560)      (4,713)
--------------------------------------------------------------------------------
                                                     $     7,002        7,096
================================================================================


         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, 2000 are summarized as follows:

         (in thousands)             Year Ending December 31,
--------------------------------------------------------------------------------

                                     2001                             $   68
                                     2002                                 42
                                     2003                                 39
                                     2004                                 23
                                     2005                                 19
--------------------------------------------------------------------------------
                                     Total minimum future rentals     $  191
================================================================================


 (6)     Other Assets

         Other  assets  includes  the cash  surrender  value  of life  insurance
         totaling  $10,032 thousand and $8,674 thousand at December 31, 2000 and
         1999 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 $405
         thousand and $129 thousand at December 31, 2000 and 1999, respectively.
         During  2000,  other real estate  owned of $405  thousand  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.

                                       43
<PAGE>


 (7)     Deposits

         The following is a summary of deposits at December 31:

         (in thousands)                              2000                1999
--------------------------------------------------------------------------------

         Demand                             $      24,223              21,054
--------------------------------------------------------------------------------
         NOW and Super NOW Accounts                44,316              39,458
         Money Market                              15,361              16,803
         Savings                                   26,640              29,057
         Time, $100,000 and over                   14,783              19,008
         Other Time                                36,938              30,781
--------------------------------------------------------------------------------
                                            $     162,261             156,161
================================================================================


         Interest  paid on time  deposits in  denominations  of $100 thousand or
         more was $943 thousand,  $765 thousand and $737 thousand in 2000,  1999
         and 1998, respectively.

         At December 31, 2000, the aggregate  maturities for time deposits is as
         follows:

         (in thousands)
--------------------------------------------------------------------------------
         2001                                        $        46,313
         2002                                                  4,517
         2003                                                    528
         2004                                                    111
         2005                                                    252
--------------------------------------------------------------------------------
         Total                                       $        51,721
--------------------------------------------------------------------------------



 (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, (in thousands)             Lease Payments
--------------------------------------------------------------------------------
         2001                                               $           218
         2002                                                           221
         2003                                                           193
         2004                                                           106
         2005                                                            84
--------------------------------------------------------------------------------
                                                            $           822
================================================================================


         Total  rental  expense for  operating  leases was $158  thousand,  $101
         thousand and $114 thousand in 2000, 1999 and 1998 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.

         During  2000,   the  Company   converted   its  existing   nonqualified
         supplemental   compensation  agreements  from  a  defined  contribution
         retirement and death benefit plan to a defined benefit plan (Plan). The
         Plan is  unsecured  and  unfunded  and  there are no Plan  assets.  The
         Company  has  purchased  insurance  on the lives of the  directors  and
         executive  officers  in the Plan and  intends to use the cash values of
         these policies as a funding source to pay the supplemental compensation
         obligations.  (See Note 6 for information  regarding the cash values of
         the life insurance). The accrued pension obligation was

                                       44
<PAGE>

         $456  thousand  and $170  thousand  as of  December  31, 2000 and 1999,
         respectively. The Company did not recognize any additional expense as a
         result of the conversion. The Company recognized expense related to the
         Plan during 2000 and 1999  totaling  $286  thousand  and $98  thousand,
         respectively.  The net periodic  benefits cost of $265 thousand was all
         related to service cost. The net periodic cost was  determined  using a
         discount rate of 8.00%.



(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.

         At December 31, 2000 and 1999,  financial  instruments  whose  contract
         amounts represent credit risk are as follows:

         (in thousands)                                    2000           1999
--------------------------------------------------------------------------------
              Commitments to extend credit         $     25,306         24,418
================================================================================
              Standby letters of credit            $      1,034            892
================================================================================


         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)     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 thousand.
                                       45
<PAGE>


(12)     Other Noninterest Expense

         Other  noninterest  expense for the years 2000,  1999 and 1998 included
the following significant items:

         (in thousands)                              2000      1999       1998
--------------------------------------------------------------------------------
         Third party data processing expense   $      869       821        719
         Professional fees                            771       554        423
         Marketing                                    422       323        213
         Nonperforming loan costs                     246        25          -
         Telephone and postage                        232       271        217
         Intangible amortization                      215       282        372
         Directors' fees and retirement               193       158        223
         Supplies                                     189       193        176
         Printing                                     105       109        145
--------------------------------------------------------------------------------
         Other                                        501       538        417
              Total                             $   3,743     3,274      2,905
================================================================================


(13)     Income Taxes

         The  provision  for  income  taxes  for the years  2000,  1999 and 1998
         consisted of the following:


         2000 (in thousands)               Federal         State         Total
--------------------------------------------------------------------------------
         Current                        $       204           142           346
         Deferred, net                          (29)          (17)          (46)
--------------------------------------------------------------------------------
              Income tax expense        $       175           125           300
================================================================================

         1999 (in thousands)
--------------------------------------------------------------------------------
         Current                        $       716           232           948
         Deferred, net                         (608)          (65)         (673)
--------------------------------------------------------------------------------
              Income tax expense        $       108           167           275
================================================================================

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


         Income taxes  receivable  of $251 thousand are included in other assets
         at December 31, 2000. Income taxes payable of $51 thousand are included
         in other liabilities at December 31, 1999.

         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>

                                                      2000                1999               1998
(dollar in thousands)                          Amount      Rate    Amount      Rate    Amount     Rate
---------------------------------------------------------------------------------------------------------
<S>                                            <C>          <C>      <C>        <C>      <C>        <C>
Federal income tax expense, at statutory
  income tax rates                             $ 538        34%      488        34%      475        34%
State franchise tax expense, net of federal
  income tax benefits                             98         7%      103         7%      100         7%
Tax-free interest income                        (319)      (20%)    (157)      (11%)    (136)      (10%)
Change in the beginning of the year deferred
  tax asset valuation allowance                   --        --       (85)       (6%)     (45)       (3%)
Other                                            (17)       (2%)     (74)       (5%)     (50)       (3%)
---------------------------------------------------------------------------------------------------------
                                               $ 300        19%      275        19%      344        25%
=========================================================================================================
</TABLE>

                                       46
<PAGE>


<TABLE>
         The tax effects of temporary  differences that give rise to significant
         portions of the deferred tax assets and  deferred  tax  liabilities  at
         December 31, 2000 and 1999 are presented below.
<CAPTION>

              Deferred tax assets: (in thousands)                            2000               1999
--------------------------------------------------------------------------------------------------------
<S>                                                                   <C>                        <C>
              Allowance for loan losses                               $       853                946
              Allowance for losses on other real estate owned                   -                 14
              Interest on nonaccrual loans                                    115                121
              Deferred loan income                                            162                169
              Accumulated Amortization                                        361                326
              Unrealized loss on available-for-sale securities, net             -                192
              Deferred compensation                                           225                107
              Other                                                            77                110
--------------------------------------------------------------------------------------------------------
                  Total gross deferred tax assets                           1,793              1,985
                  Less valuation allowance                                    (35)               (35)
--------------------------------------------------------------------------------------------------------

                  Deferred tax assets, net of allowance                     1,758              1,950
--------------------------------------------------------------------------------------------------------

              Deferred tax liabilities:
              Accumulated depreciation                                         (9)               (59)
              Deferred loan origination costs                                (272)              (267)
              Unrealized gain on available-for-sale securities, net          (206)                 -
              Other                                                          (121)              (122)
--------------------------------------------------------------------------------------------------------
                  Total gross deferred tax liabilities                       (608)              (448)
--------------------------------------------------------------------------------------------------------
                  Net deferred tax asset                              $     1,150              1,502
========================================================================================================
</TABLE>


         The valuation  allowance for deferred tax assets decreased $85 thousand
         during the year ended December 31, 1999. 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, 2000 and 1999.


                                       47
<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 270,375  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  193,048.  The  maximum  number  of shares  issuable  under the
         Director  Stock  Option  Plan was  59,483.  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  425,253  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 2000 and 1999 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, 1997           234,226        $  5.31 -11.56
================================================================================
              Options exercised               (17,791)       $  5.31-  6.29
================================================================================
              Options expired                 (18,954)       $  6.24 -12.75
================================================================================
         Balance, December 31, 1998           197,481        $  5.31 -11.56
================================================================================
              Options granted                  35,595        $  9.47 -11.43
================================================================================
              Options exercised               (46,790)       $  5.31 - 7.93
================================================================================
              Options expired                 (25,214)       $  5.31 -11.56
================================================================================
         Balance, December 31, 1999           161,072        $  5.31 -11.43
================================================================================
              Options granted                  65,500        $  8.92 - 9.41
================================================================================
              Options exercised               (21,130)       $  5.10 - 9.34
================================================================================
              Options expired                 (13,119)       $  9.25 -11.43
================================================================================
         Balance, December 31,  2000          192,323        $  5.31 -11.43
================================================================================

         At  December  31,  2000  and  1999,  the   weighted-average   remaining
         contractual  life of all  outstanding  options  was 5.50 years and 5.50
         years,  respectively.  The number of options  exercisable  was 122,928,
         117,424 and 142,700 and the  weighted-average  exercise  price of those
         options was $7.64, $7.11 and $7.20 at December 31, 2000, 1999 and 1998,
         respectively.

         There  were no  stock  options  granted  during  1998.  The  per  share
         weighted-average  fair value of stock options  granted  during 2000 and
         1999 was $2.12 and $3.12,  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,  2000 and  1999,  respectively:
         dividend  yield of 0.00% and 0.00%;  expected  volatility  of 18.4% and
         18.4%; risk-free interest rate of 5.17% and 6.19%; and an expected life
         of five years in each of the years.

                                       48
<PAGE>

         No  compensation  cost has been  recognized  for 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:

                                                    2000        1999       1998
--------------------------------------------------------------------------------
         Net Income (in thousands)
              As reported                       $  1,283       1,159     $1,052
              Pro forma                            1,258       1,138      1,022

         Basic Net Income Per Share
              As reported                           0.85        0.79       0.73
              Pro forma                             0.83        0.77       0.70

         Diluted Net Income Per Share
              As reported                           0.83        0.76       0.68
              Pro forma                             0.81        0.75       0.66


         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  2000,  1999 and  1998  totaled  approximately  $156
         thousand, $149 thousand and $116 thousand, 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,
         2000, the plan owned 164,187  shares of Company  Common Stock.  Of that
         amount, 113,032 shares were unallocated to participants at December 31,
         2000.



         (c)      Dividends and Dividend Restrictions

         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,  2000,  there  were Bank  retained
         earnings of $3,330 thousand free of this condition.


                                       49
<PAGE>

         (d)      Weighted Average Shares Outstanding

<TABLE>
         Basic and diluted  earnings per share for the years ended  December 31,
         2000, 1999, and 1998 were computed as follows:
<CAPTION>
                                                      Income              Shares        Per-Share
         2000                                       (numerator)       (denominator)       Amount
                                                  (in thousands)
         ---------------------------------------------------------- ------------------- ----------
<S>                                                         <C>              <C>            <C>
         Basic earnings per share                           $1,283           1,515,578      $0.85
         Effect of dilutive securities                           -              37,339          -
                                                 ------------------ -------------------
         Diluted earnings per share                         $1,283           1,552,917      $0.83
                                                 ================== ===================


                                                      Income              Shares        Per-Share
         1999                                       (numerator)       (denominator)       Amount
                                                  (in thousands)
         ---------------------------------------------------------- ------------------- ----------
         Basic earnings per share                          $ 1,159           1,471,754      $0.79
         Effect of dilutive securities                           -              53,269          -
                                                 ------------------ -------------------
         Diluted earnings per share                        $ 1,159           1,525,023     $ 0.76
                                                 ================== ===================


                                                      Income              Shares        Per-Share
         1998                                       (numerator)       (denominator)       Amount
                                                  (in thousands)
         ---------------------------------------------------------- ------------------- ----------
         Basic earnings per share                          $ 1,052           1,450,499      $0.73
         Effect of dilutive securities                           -              91,099          -
                                                 ------------------ -------------------
         Diluted earnings per share                        $ 1,052           1,541,598      $0.68
                                                 ================== ===================

</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, 2000 and 1999,  respectively,  such borrowings
         totaled $1,366 thousand and $1,177 thousand, respectively.  Deposits of
         related  parties  held by the  Bank  totaled  $324  thousand  and  $363
         thousand at December 31, 2000 and 1999, 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:

         (in thousands)                           2000                  1999
--------------------------------------------------------------------------------
         Balance, beginning of year       $      1,177                 1,018
         Loans funded                              550                 1,232
         Principal repayments                     (361)               (1,073)
--------------------------------------------------------------------------------
         Balance, end of year             $      1,366                 1,177
================================================================================


                                       50
<PAGE>


(16)     Parent Company Financial Information
<TABLE>

         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, 2000 and 1999,  and  statements  of
         income,  and cash flows  information  for the years ended  December 31,
         2000, 1999, and 1998.
<CAPTION>
         Balance Sheets: (in thousands)
----------------------------------------------------------------------------------------------------------------
         Assets                                                             2000                      1999
----------------------------------------------------------------------------------------------------------------
<S>                                                                 <C>                                 <C>
         Cash in bank                                               $        206                        76
         Investment securities available-for-sale, at fair value               6                         6
         Premises and equipment, net                                          60                        63
         Investment in wholly-owned subsidiaries                          15,923                    14,005
         Other assets                                                        259                       371
----------------------------------------------------------------------------------------------------------------
                                                                    $     16,454                    14,521
================================================================================================================

         Liabilities and Stockholders' Equity
----------------------------------------------------------------------------------------------------------------
         Stockholders' equity
         Common stock                                               $      9,338                     8,433
         Retained earnings                                                 6,831                     6,354
         Accumulated other comprehensive income (loss)                       285                      (266)
----------------------------------------------------------------------------------------------------------------
              Total stockholders' equity                                  16,454                    14,521
----------------------------------------------------------------------------------------------------------------
                                                                    $     16,454                    14,521
================================================================================================================


         Statements of Income: (in thousands)                               2000         1999         1998
----------------------------------------------------------------------------------------------------------------
         Rent from subsidiary                                       $          6            6            5
         Other expenses                                                     (150)        (218)        (316)
         Equity in income of subsidiaries                                  1,360        1,252        1,154
         Income tax benefit                                                   67          119          209
----------------------------------------------------------------------------------------------------------------
              Net income                                            $      1,283        1,159        1,052
================================================================================================================

         Statements of Cash Flows: (in thousands)                           2000         1999         1998
----------------------------------------------------------------------------------------------------------------
         Net Income                                                 $      1,283        1,159        1,052
         Adjustments to reconcile net income to net cash
              flows provided by (used in) operating activities:
                  Depreciation and amortization                                3            1            2
                  Provision for deferred taxes                               (10)         (29)          27
                  Decrease in other liabilities                                             -           (4)
                  Decrease (increase) in other assets                        122         (196)         (66)
                  Increase in equity of subsidiaries                      (1,367)      (1,052)        (879)
----------------------------------------------------------------------------------------------------------------
                  Net cash provided by (used in) operating activities         31         (117)         132

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

         Cash flows from financing activities:
              Proceeds received upon exercise of stock options               173          359          129
              Dividends paid                                                 (74)        (286)        (269)
----------------------------------------------------------------------------------------------------------------
              Net cash provided by (used in) financing activities             99           73         (140)
----------------------------------------------------------------------------------------------------------------
         Net  increase (decrease)  in cash                                   130          (45)         (18)
----------------------------------------------------------------------------------------------------------------
         Cash at beginning of year                                            76          121          139
----------------------------------------------------------------------------------------------------------------
         Cash at end of year                                        $        206           76          121
================================================================================================================
</TABLE>

                                       51
<PAGE>

 (17)    Short Term Borrowings

         The Bank has one line of  credit  with a  correspondent  bank  totaling
         $4,000  thousand at December 31, 2000.  At December 31, 1999,  the Bank
         had two  lines of  credit  with  correspondent  banks  totaling  $7,000
         thousand.  The lines of credit are  unsecured  and renew  annually.  At
         December 31, 2000 and 1999 the Bank had  outstanding  borrowings  under
         these lines totaling $0 thousand and $4,300 thousand, respectively. The
         maximum amount outstanding was $7,000 thousand and $4,300 thousand, the
         average balance outstanding was $485 thousand and $176 thousand and the
         weighted average interest rate was 5.57% and 6.25% for the years ending
         December 31, 2000 and 1999, respectively.

         At  December  31, 2000 and 1999  securities  sold under  agreements  to
         repurchase  totaled $4,588 thousand and $0,  respectively.  The maximum
         amount  outstanding was $9,835 thousand and $600 thousand,  the average
         balance  outstanding  was  $6,523  thousand  and $89  thousand  and the
         weighted average interest rate was 6.62% and 5.43% for the years ending
         December 31, 2000 and 1999,  respectively.  These agreements  generally
         mature within 30 days.


 (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, 2000, 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.


                                       52
<PAGE>

<TABLE>
         The Bank's  actual  capital  amounts and ratios as of December 31, 2000
         are as follows:
<CAPTION>
                                                                                                       To Be Well Capitalized
                                                                                  For Capital          Under Prompt Corrective
                                                     Actual                     Adequacy Purposes         Action Provisions
         (dollars in thousands)                      Amount         Ratio       Amount      Ratio        Amount      Ratio
----------------------------------------------------------------------------------------------------------------------------------
<S>                                                <C>             <C>            <C>        <C>            <C>        <C>
         Total Risk-based Capital
         (to Risk Weighted Assets)                 $    16,560     11.27%         11,698    >8.0%           14,622    >10.0%

         Tier I Capital (to Risk Weighted Assets)  $    14,724     10.02%          5,849    >4.0%            8,773     >6.0%

         Tier I Capital  (to Average Assets)       $    14,724      7.99%          7,374    >4.0%            9,218     >5.0%



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

                                                                                                       To Be Well Capitalized
                                                                                  For Capital          Under Prompt Corrective
                                                     Actual                     Adequacy Purposes         Action Provisions
         (dollars in thousands)                      Amount         Ratio       Amount      Ratio        Amount      Ratio
----------------------------------------------------------------------------------------------------------------------------------
         Total Risk-based Capital
         (to Risk Weighted Assets)                 $    14,937     10.51%       >$11,366    >8.0%         >$14,208    >10.0%

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

         Tier I Capital  (to Average Assets)       $    13,161      7.82%        >$6,731    >4.0%          >$8,414     >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.

                                       53
<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.

<TABLE>
         The estimated  fair values of the Company's  financial  instruments  at
         December 31, are approximately as follows:
<CAPTION>
                                                                                           2000
                                                                                  Carrying        Fair
         (in thousands)                                                            Amount         Value
------------------------------------------------------------------------------------------------------------------
<S>                                                        <C>             <C>                    <C>
              Financial assets:
                  Cash and due from banks and federal funds sold           $        21,024        21,024
                  Investment securities                                             29,560        29,560
                  Loans, net                                               $       112,085       112,100
              Financial liabilities:
                  Deposits:
                      Demand                                               $        24,223        24,223
                      Now and Super Now accounts                                    44,316        44,316
                      Money Market                                                  15,361        15,361
                      Savings                                                       26,640        26,640
                      Time                                                          51,721        52,491
                      ----------------------------------------------------------------------------------
                      Total deposits                                       $       162,261       163,031
                  Short term borrowings                                    $         4,588         4,601


                                                               Contract           Carrying        Fair
         (in thousands)                                         Amount             Amount         Value
------------------------------------------------------------------------------------------------------------------
              Unrecognized financial instruments:
                  Commitments to extend credit             $      25,306                 -           253
                  Standby letters of credit                        1,034                 -             1

</TABLE>

                                       54
<PAGE>

<TABLE>
<CAPTION>
                                                                                         1999
                                                                                   Carrying       Fair
         (in thousands)                                                             Amount        Value
------------------------------------------------------------------------------------------------------------------
<S>                                                        <C>             <C>                     <C>
              Financial assets:
                  Cash and due from banks and federal funds sold           $         9,409         9,409
                  Investment securities                                             36,096        36,096
                  Loans, net                                               $       109,594       110,061
              Financial liabilities:
                  Deposits:
                      Demand                                               $        21,105        21,105
                      Now and Super Now accounts                                    39,458        39,458
                      Money Market                                                  16,752        16,752
                      Savings                                                       29,057        29,057
                      Time                                                          49,789        49,676
                      ----------------------------------------------------------------------------------
                      Total deposits                                       $       156,161       156,048
                  Short term borrowings                                    $         4,300         4,300


                                                               Contract            Carrying       Fair
         (in thousands)                                         Amount              Amount        Value
------------------------------------------------------------------------------------------------------------------
              Unrecognized financial instruments:
                  Commitments to extend credit             $      24,418                 -           244
                  Standby letters of credit                          892                 -             1

</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, 2000 and 1999, the Company has no off-balance  sheet
         derivatives.  The Company held $6,271  thousand and $6,570  thousand in
         collateralized  mortgage  obligations as of December 31, 2000 and 1999,
         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  thousand.  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.

                                       55
<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>
         2000
         ----
         Interest income                                             $             3,196         3,278         3,370         3,652
         Net interest income                                                       2,161         2,123         2,145         2,454
         Provision for loan losses                                                    35            65            35             -
         Noninterest income                                                          662           629           638           761
         Noninterest expense                                                       2,339         2,519         2,471         2,526
         Income before taxes                                                         449           168           277           689
         Net income                                                                  346           196           247           494
         Basic earnings per share                                                    .23           .13           .16           .33
         Diluted earnings per share                                                  .22           .13           .16           .32
         Dividends paid per share                                                    .05             -             -             -
         Price range, common stock                                          12.00 - 9.50  10.75 - 8.00  10.38 - 8.50  10.88 - 9.75
------------------------------------------------------------------------------------------------------------------------------------
         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                                                    .17           .12           .23           .27
         Diluted earnings per share                                                  .16           .11           .21           .28
         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
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>


         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 thousand during
         the fourth quarter of 1999.

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

                                       56
<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 22th day of March,
2001.

                                        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 22, 2001
------------------------------------------
Benjamin R. Goehring


    /s/ WELDON D. SCHUMACHER                 Director and Vice Chairman of the Board        March 22, 2001
------------------------------------------
Weldon D. Schumacher


     /s/ BOZANT KATZAKIAN                    Director                                       March 22, 2001
------------------------------------------
Bozant Katzakian


     /s/ ANGELO J. ANAGNOS                   Director                                       March 22, 2001
------------------------------------------
Angelo J. Anagnos


     /s/ STEVE M. COLDANI                    Director                                       March 22, 2001
------------------------------------------
Steve M. Coldani


     /s/ DAVID M. PHILIPP                    Director                                       March 22, 2001
------------------------------------------
David M. Philipp


    /s/ LEON J. ZIMMERMAN                    Director, President and                        March 22, 2001
------------------------------------------   Chief Executive Officer
Leon J. Zimmerman                            (Principal Executive Officer)


    /s/ ROBERT H. DANEKE                     Director, Executive Vice President and         March 22, 2001
------------------------------------------   Chief Credit Officer
Robert H. Daneke


     /s/ ALLEN R. CHRISTENSON                Senior Vice President,                         March 22, 2001
------------------------------------------   Chief Financial Officer and Secretary
Allen R. Christenson                         (Principal Financial and Accounting Officer)

</TABLE>

                                       57
<PAGE>


                                INDEX TO EXHIBITS

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

     23           Consent of Independent Auditors                          59

     27           Financial Data Schedule (electronic submission only)



                                       58