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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K


(Mark One)

|    |  |                                                                                     
|--- |  | ------------------------------------------------------------------------------------
|[X] |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|   
|    |  | For the Fiscal Year Ended December 31, 2001                                         

OR

|      |  |                                                                                         
|----- |  | ----------------------------------------------------------------------------------------
|[   ] |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|     
|      |  | For the Transition Period From _________ to _________                                   

COMMISSION FILE No.: 333-43021

VIB CORP

Incorporated Under the Laws of the State of California

I.R.S. EMPLOYER IDENTIFICATION NO.: 33-0780371

1498 MAIN STREET
EL CENTRO, CALIFORNIA 92243
TELEPHONE: (760) 337-3200

|                                                               |  |                                                              
|-------------------------------------------------------------- |  | -------------------------------------------------------------
|                                                              
|Securities registered under Section 12(b) of the Exchange Act: |  | None                                                         
|Securities registered under Section 12(g) of the Exchange Act: |  | Common Stock, No Par Value
   Preferred Share Purchase Rights

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

Indicate by checkmark 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 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. [   ]

Aggregate market value of the voting Common Stock held by non-affiliates
at March 12, 2002: $148,892,580

Number of shares of Common Stock outstanding as of March 12, 2002:
13,118,289

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the following documents are incorporated by reference into the
identified parts of this Form-10-K:

VIB CORPs 2001 Annual Report to Shareholders  Part II, Item 5.

2002 Annual Meeting Proxy Statement  Part III, Items 10, 11, 12 and 13.

|          |  |                                                  
|--------- |  | -------------------------------------------------
|[5666.sl] |  | Total No. of Pages: 100
Exhibit Index at Page: 88

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TABLE OF CONTENTS



|              |                                                                                                |  |  |  |  |  |  | 
|------------- | ---------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I       
|              | ITEM 1  DESCRIPTION OF BUSINESS                                                              
|              | ITEM 2  DESCRIPTION OF PROPERTY                                                              
|              | ITEM 3  LEGAL PROCEEDINGS                                                                    
|              | ITEM 4  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  
|PART II      
|              | ITEM 5  MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS                
|              | ITEM 6  SELECTED FINANCIAL DATA                                                              
|              | ITEM 7  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|              | ITEM 7A  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                          
|              | ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                            
|              | ITEM 9   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|PART III     
|              | ITEM 10  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                  
|              | ITEM 11  EXECUTIVE COMPENSATION                                                              
|              | ITEM 12  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                      
|              | ITEM 13  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                      
|PART IV      
|              | ITEM 14   EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K                   
|SIGNATURES   
|EXHIBIT INDEX
|Exhibit 3.1  
|Exhibit 13   
|Exhibit 21   
|Exhibit 23.1 



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INDEX

|          |                                                                                               |  |     
|--------- | --------------------------------------------------------------------------------------------- |  | ----
|          |                                                                                               |  | Page
|          |                                                                                               |  |     
|PART I   
|          |                                                                                               |  |     
|ITEM 1 -  | DESCRIPTION OF BUSINESS                                                                       |  | 3   
|          |                                                                                               |  |     
|ITEM 2 -  | DESCRIPTION OF PROPERTY                                                                       |  | 28  
|          |                                                                                               |  |     
|ITEM 3 -  | LEGAL PROCEEDINGS                                                                             |  | 28  
|          |                                                                                               |  |     
|ITEM 4 -  | SUBMISSION OF MATTERS TO
        A VOTE OF SECURITY HOLDERS                                   |  | 29  
|          |                                                                                               |  |     
|PART II  
|          |                                                                                               |  |     
|ITEM 5 -  | MARKET FOR REGISTRANTS
        COMMON EQUITY AND RELATED STOCKHOLDER MATTERS                 |  | 29  
|          |                                                                                               |  |     
|ITEM 6 -  | SELECTED FINANCIAL DATA                                                                       |  | 29  
|          |                                                                                               |  |     
|ITEM 7 -  | MANAGEMENTS DISCUSSION
        AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |  | 31  
|          |                                                                                               |  |     
|ITEM 7A - | QUANTITATIVE AND QUALITATIVE
        DISCLOSURES ABOUT MARKET RISK                            |  | 51  
|          |                                                                                               |  |     
|ITEM 8 -  | FINANCIAL STATEMENTS AND
        SUPPLEMENTARY DATA                                           |  | 52  
|          |                                                                                               |  |     
|ITEM 9 -  | CHANGES IN AND DISAGREEMENTS
        WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE  |  | 83  
|          |                                                                                               |  |     
|PART III 
|          |                                                                                               |  |     
|ITEM 10 - | DIRECTORS AND EXECUTIVE
        OFFICERS OF THE REGISTRANT                                    |  | 83  
|          |                                                                                               |  |     
|ITEM 11 - | EXECUTIVE COMPENSATION                                                                        |  | 83  
|          |                                                                                               |  |     
|ITEM 12 - | SECURITY OWNERSHIP OF CERTAIN
        BENEFICIAL OWNERS AND MANAGEMENT                        |  | 83  
|          |                                                                                               |  |     
|ITEM 13 - | CERTAIN RELATIONSHIPS AND
        RELATED TRANSACTIONS                                        |  | 83  
|          |                                                                                               |  |     
|PART IV  
|          |                                                                                               |  |     
|ITEM 14 - | EXHIBITS, FINANCIAL STATEMENT
        SCHEDULES, AND REPORTS ON FORM 8-K                      |  | 83  

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PART I




ITEM 1  DESCRIPTION OF BUSINESS

THE COMPANY

VIB Corp (the Company or the Registrant) was incorporated on November
7, 1997, under the laws of the State of California at the direction of the
Board of Directors of Valley Independent Bank (VIB) for the purpose of
becoming VIBs holding company. The holding company reorganization was
consummated on March 12, 1998, pursuant to a Plan of Reorganization and Merger
Agreement dated November 18, 1997, and each outstanding share of VIBs Common
Stock was converted into one share of the Companys Common Stock and all
outstanding shares of VIBs Common Stock were transferred to the Company in a
transaction accounted for as a pooling of interests. Further, each outstanding
Warrant to purchase VIBs Common Stock, issued in connection with VIBs 1997
Unit Offering, was converted into a Warrant to purchase the Companys Common
Stock. The Warrants remaining unexercised expired on October 29, 1999. (See
THE BANKING SUBSIDIARIES  VIB and SUPERVISION AND REGULATION  The Company
herein.)

On September 15, 1998, the Company entered into an Agreement and Plan of
Reorganization with Bank of Stockdale, F.S.B. (Stockdale), a federal stock
savings bank headquartered in Bakersfield, California, providing for a
stock-for-stock merger transaction whereby Stockdale would become the Companys
wholly-owned subsidiary. The transaction was closed on January 28, 1999, and
was accounted for as a pooling of interests. The Company issued approximately
2,812,392 shares of its Common Stock (as adjusted for stock dividends) in
exchange for all of the issued and outstanding shares of Stockdales common
stock. (See THE BANKING SUBSIDIARIES  Stockdale herein.)

In February, 1999, the Company raised approximately $22.2 million in net
proceeds from the sale of trust preferred securities at 9.00%, due February
5, 2029. The Company formed a wholly-owned business trust subsidiary, Valley
Capital Trust (the Trust), pursuant to the laws of the State of Delaware, to
facilitate the transaction. The offering was conducted as a private placement
to accredited investors within the meaning of Rule 501 of Regulation D of the
Securities Act of 1933. The proceeds to the Company are treated as Tier 1
capital by the Company for regulatory purposes. (See SUPERVISION AND
REGULATION  VIB  Risk-Based Capital Guidelines herein.) The Company used
approximately $8.5 million of the proceeds to increase VIBs regulatory capital
and $10.0 million to fund the Kings River State Bank acquisition. The
remainder was used for general corporate purposes. The interest paid by the
Company is deductible. The Company has the right, assuming that no default has
occurred, to defer interest payments at any time and for a period of up to
twenty consecutive calendar quarters. The trust preferred securities can be
called after February 5, 2009.

On September 7, 1999, the Company entered into an Agreement and Plan of
Reorganization with Kings River Bancorp and Kings River State Bank (Kings
River), a state-chartered bank headquartered in Reedley, California, providing
for a cash acquisition of Kings River. The transaction was closed on January
7, 2000, and was accounted for as a purchase. The aggregate purchase price was
$21,728,277. (See THE BANKING SUBSIDIARIES  Kings River herein.)

In July, 2000, the Company raised approximately $9.6 million in net
proceeds from an offering of trust preferred securities at 11.695%, due July
19, 2030, in a private placement conducted as a part of a pooled offering. The
Company formed a wholly-owned New York common law trust subsidiary, VIBC
Capital Trust I (Trust I), to facilitate the transaction. The proceeds to
the Company are treated as Tier 2 capital for regulatory purposes. The
proceeds were used to

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increase VIBs capital by $8.5 million, with the balance used for general
corporate purposes. The interest will be deductible by the Company. The
Company has the right, assuming that no default has occurred, to defer interest
payments at any time and for a period of up to twenty consecutive calendar
quarters. The trust preferred securities can be called after July 19, 2010.

On December 28, 2000, the Company formed a wholly-owned subsidiary, VIBC
Services Company (VIBC Services), for the purpose of providing centralized
and consolidated support for the Company and its banking subsidiaries. This
support would include but is not limited to: management information services,
retail bank support, facilities and equipment management and courier service.
VIBC Services was initially capitalized with an infusion of $500,000 from the
Company. Subsequent to January 31, 2001, VIBC Services has been inactive.

On May 24, 2001, Stockdale and Kings River merged with and into VIB
pursuant to the terms of Plans of Reorganization and Agreements of Merger dated
March 21 and March 22, 2001, respectively. All of the former offices of
Stockdale and Kings River operate as branches of VIB; however, many continue to
use the Stockdale and Kings River names as DBAs. The mergers are anticipated
to provide significant cost savings and improve operating efficiencies by
removing layers of regulatory reporting and operating expenses.

On August 14, 2001, pursuant to a Preferred Shares Rights Agreement (the
Rights Agreement) between the Company and U. S. Stock Transfer Corporation,
as Rights Agent, the Companys Board of Directors declared a dividend of one
right (a Right) to purchase one-thousandth share of the Companys Series A
Participating Preferred Stock (Series A Preferred) for each outstanding share
of the Companys no par value Common Stock. The dividend was paid on August
31, 2001, to shareholders of record as of the close of business on that date.
Each Right entitles the registered holder to purchase from the Company
one-thousandth of a share of Series A Preferred at an exercise price of $40.00,
subject to adjustment. However, if an acquiring party accumulates 15% or more
of the Companys voting stock without the Boards prior approval, each Right
enables its holder (other than the acquiring party) to purchase the Preferred
interest at 50% of the market price. Further, in the event the Company is
acquired in an unwanted merger or business combination, each Right enables the
holder to purchase shares of the acquiring entity at a similar discount. Under
certain circumstances, the Rights may be exchanged for common stock of the
Company. The Board may, in its sole discretion, redeem the Rights at any time
prior to such acquisitions for $.01 per Right. The Rights will expire on
August 14, 2011.

On September 14, 2001 the Company invested $2,000,000 in the Series A
Convertible Preferred Stock of Lenders Services Acquisition Corp., representing
an 22.5% interest in the total issuance of the Series A Preferred Stock.
Lenders Services Acquisition Corp. is a newly organized Delaware corporation
formed for the purpose of acquiring all of the outstanding stock of Diversified
Capital Holdings, Inc., a California-based insurance holding company whose
principal subsidiaries are Northern Counties Title Insurance Company, a title
insurance underwriter, and South Coast Title Company, a title insurance agency.
The Series A Preferred Stock was issued by Lenders Services Acquisition Corp.
pursuant to a private placement to financial institution holding companies. In
addition to the 811,500 shares of the Series A Preferred Stock outstanding,
Lenders Services Acquisition Corp. has 109,090 shares of Common Stock
outstanding. The Series A Preferred Stock is initially convertible into the
Common on a one-for-one basis. On September 14, 2001, Lenders Services
Acquisition Corp. also consummated its acquisition of Diversified Capital
Holdings, Inc.

In November, 2001, the Company raised approximately $19.1 million in net
proceeds from an offering of floating rate 6% trust preferred securities in a
private placement conducted as a part of a pooled offering. The proceeds were
used to repurchase $19.2 million of the 9% trust preferred securities issued
in February, 1999, in connection with the Companys first trust preferred
offering, with the balance to be used for general corporate purposes. The
Company formed a wholly-owned

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Delaware business trust subsidiary, Valley Capital Trust II (Trust II), to
facilitate the transaction. The proceeds to the Company will be treated as
Tier 1 capital for regulatory purposes. The 9% trust preferred securities
issued in 1999 were repurchased at a discount. They will not be retired;
however, they will be eliminated for consolidated and regulatory accounting
purposes. As trust preferred securities, they were treated as Tier 1 capital.
The interest will be deductible and paid by the Company. The Company has the
right, assuming that no default has occurred, to defer interest payments at
any time and for a period of up to twenty consecutive calendar quarters. These
trust preferred securities will mature concurrently on December 8, 2031; but
can be called after December 8, 2006 or earlier upon the occurrence of certain
defined events.

During 2001 the Company did not conduct any business other than through
VIB, Stockdale, Kings River, and VIBC Services and as described above. At
year-end, the Company had total consolidated assets of $1,168 million. Upon
consummation of the transactions described above, the Company conducts its
banking business only through VIB. Neither the Company nor VIB earns revenues
from sources outside of the United States.

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

THE BANKING SUBSIDIARIES

VIB

VIB was incorporated under the laws of the State of California on March
28, 1980, and commenced operations as a California state-chartered bank on
March 19, 1981. VIBs deposit accounts are insured under the Federal Deposit
Insurance Act, up to the maximum legal limits thereof, and VIB is a member of
the Federal Reserve System. VIBs main office is located in the City of El
Centro and its phone number is (760) 337-3200. VIB has branch offices in
Brawley, Calexico and Holtville, in Imperial County, Blythe, Coachella, Hemet,
Indio, La Quinta, Palm Desert, Thousand Palms and Palm Springs in Riverside
County, Julian and Tecate, in San Diego County, 3 offices in Bakersfield in
Kern County, Reedley, Selma and Fresno, in Fresno County, Hanford in Kings
County, Dinuba and Visalia in Tulare County, California, and an office in Las
Vegas, Nevada. VIB also operates four loan production offices, located in El
Centro, Orange and Rancho Mirage, California and Las Vegas, Nevada. VIB also
operated a loan production office in Yuma, Arizona for part of 2001. A
strategic decision made earlier in the year to close the office culminated in
its closure in the second quarter of 2001. VIB has also made a decision to
close its Las Vegas loan production office and branch office after the first
quarter of 2002.

VIB has grown through de novobranching and acquisitions. On December 31,
1992, VIB consummated its first acquisition, acquiring the Coachella branch
office through the merger of The First National Bank in Coachella. During 1996
VIB consummated two acquisitions. On June 21, 1996, VIB acquired the Calexico
branch office of California Commerce Bank and combined its Calexico branch with
and into the acquired facility. On September 12, 1996, VIB acquired four
branches, Indio, La Quinta, Palm Desert and Thousand Palms, by the merger of
Bank of the Desert, N.A. On February 14, 1997, VIB purchased two branches from
Wells Fargo Bank, N.A., Blythe in Riverside County and Tecate in San Diego
County. On March 27, 1998 VIB acquired the Palm Springs branch office of Palm
Desert National Bank. On January 22, 1999, VIB acquired the Hemet branch
office of Fremont Investment and Loan. VIB assumed approximately $111 million
in deposits, the lease to the premises and $27,000 in other assets associated
with the branch. These acquisitions enhanced VIBs market share in the
Coachella Valley and the City of Calexico and expanded VIBs geographic market
areas.

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VIB offers a full range of commercial banking services, including the
origination of commercial, U.S. Small Business Administration (SBA), accounts
receivable, real estate, construction, home improvement, consumer, and other
installment and term loans; checking, savings, time, NOW, super NOW and
money-market deposit accounts; travelers checks, pre-approved overdraft lines,
and safe deposit; and other customary non-deposit banking services. VIB is a
Preferred Lender of the SBA and, as such, is able to process SBA loans more
quickly than other institutions that do not have such status. VIB is an agent
for VISA® and MasterCard® credit cards and is a merchant depository for
cardholder drafts under both types of credit cards. VIB is also a member of
the Federal Home Loan Bank. VIBs customers include individuals, many of whom
are farmers or ranchers, and small-to-medium sized businesses. Although VIB
does not presently provide trust services, such services are made available to
its customers through correspondent banks. VIBs branches, the majority of
which offer drive-through banking services, also provide 24-hour automated
teller machines which are integrated into multi-state ATM networks.

Stockdale

Stockdale was a federal stock savings bank, chartered by the Office of
Thrift Supervision (the OTS) on June 27, 1991. Stockdale was initially
incorporated on February 26, 1985, as Stockdale Savings and Loan Association, a
California state-chartered savings and loan association, and began operations
on that date. Effective June 27, 1991, Stockdale converted to a federal stock
savings bank
and operated under a federal charter as Bank of Stockdale, F.S.B. Stockdale
was a member of the Federal Home Loan Bank (FHLB) of San Francisco, which is
one of twelve regional banks making up the Federal Home Loan Bank System. On
January 28, 1999, Stockdale became a wholly-owned subsidiary of the Company and
on May 24, 2001, Stockdale merged with and into VIB. Stockdales deposits were
insured up to the applicable limits by the Savings Association Insurance Fund
of the FDIC. Stockdales offices located at 5151 Stockdale Highway,
Bakersfield, California 93309, 3990 Gosford Road, Bakersfield, California
93309, 2700 Mount Vernon Avenue, Bakersfield, California 93306, 7111 North
Fresno Street, Fresno, California 93720, and 9505 Hillwood Drive, Las Vegas,
Nevada 89134 now operate as branches of VIB. A strategic decision has been
made to close the Las Vegas branch after the first quarter of 2002.

Stockdales services included those traditionally offered by community
banks, such as checking and savings accounts and real estate and home
improvement loans. The vast majority of Stockdales loans were direct loans
made to individuals, professionals, and small and medium sized businesses
within Stockdales marketing area.

Stockdales principal sources of income were interest received on real
estate and other loans, and income derived from the sale of loans. To a lesser
extent, Stockdale earned income from investments, from fees received in
connection with the servicing of loans and consumer banking activities. Its
principal expenses were interest paid on deposits and other borrowings, and
administrative and other operating expenses. The sources of funds for lending
activities were deposit acquisitions, borrowings, loan sales and repayments.
Stockdales primary use of funds was the origination of real estate loans and
loans to small businesses.

Stockdales results of operations depended upon the local real estate
market and the interest rate environment, both of which impacted the demand for
loans. Interest rates also impacted the difference between interest earned on
loans and investments, and the interest paid on deposits and borrowings. Other
significant influences on Stockdales operations, and on the operations of
thrifts generally, included general economic conditions, the related monetary
and fiscal policies of the federal government and the policies of the various
regulatory authorities.

Upon consummation of the merger with and into VIB, VIB assumed Stockdales
operations.

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Kings River

Kings River State Bank was incorporated under the laws of the State of
California on November 18, 1977, and commenced operations as a California
state-chartered bank on April 24, 1978. On January 7, 2000, Kings River became
a wholly-owned subsidiary of the Company and on May 24, 2001, Kings River
merged with and into VIB. Kings Rivers deposit accounts were insured under
the Federal Deposit Insurance Act, up to the maximum units thereof. Kings
Rivers offices located at 1003 I Street, Reedley, California 93654, 218
North Douty Street, Hanford, California 93230, 130 East Tulare Street, Dinuba,
California 93618, 2025 High Street, Selma, California 93662, and 618 West Main
Street, Visalia, California 93291, now operate as branches of VIB.

Kings River conducted substantially the same business operations as a
typical independent commercial bank, including the acceptance of demand,
savings and time deposits, and the making of real estate mortgage and
construction loans, commercial loans and installment loans (including personal,
home improvement, and automobile loans). Additionally, Kings River offered to
its customers travelers checks, money orders, bank-by-mail, drive-up
facilities and 24-hour automated teller machines, plus other customary banking
services. Kings Rivers deposits were attracted primarily from individuals and
small to medium-sized businesses and professional firms located in and around
the central San Joaquin Valley area. Kings River was not dependent upon a
single customer or group of related customers for a material portion of its
deposits. The general areas in which Kings River had directed its lendable
assets were: (i) real estate mortgage and construction loans; (ii) commercial
loans; and (iii) loans to individuals for household, family and other consumer
expenditures (installment loans). Although not a credit card issuing bank,
Kings River honored merchant drafts of both MasterCard® and Visa®. Kings River
did not operate a trust department or provide trust services.

Upon consummation of the merger with and into VIB, VIB assumed Kings
Riverss operations.

MARKET AREAS

During 2001 the Companys primary market areas included the cities and
surrounding rural communities in the Imperial, Coachella and southern and
central San Joaquin Valleys. Agriculture is the major economic activity within
Imperial County, with year-round harvesting. El Centro is Imperial Countys
largest city and also serves as the countys financial center. Agriculture
also is the most significant economic activity in the Coachella Valley,
although the tourism, retail and service industries are growing.

The Company expanded the geographic scope of its banking franchise into
Californias San Joaquin Valley through the acquisitions of Stockdale in
January, 1999 and Kings River in January, 2000. VIB now operates three
full-service offices in Bakersfield, in the southern San Joaquin Valley, and
six full-service offices in Fresno, Reedley, Hanford, Dinuba, Selma and
Visalia, California, all located in the central San Joaquin Valley counties of
Kings, Fresno and Tulare.

Bakersfield is Kern Countys largest city and also serves as the countys
financial center. The economy in Kern County is focused in three sectors -
petroleum production, agriculture, and government/institutional. Kern County
accounts for one-half of all of the petroleum production in the State of
California and is considered the greatest single oil-producing county in the
nation. Kern Countys farm production placed it among the top agricultural
counties in the United States. The federal, state, county and municipal
governments are also important employers in Kern County, with military one of
the largest components. Thus far, the county has not been impacted by the
reduction of military spending or base closures, with base consolidations
having actually increased military employment in the county.

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The central San Joaquin Valley is also agriculturally oriented. Reedley,
known as the Worlds Fruit Basket, and Selma are primarily agricultural
communities located in the southeast portion of Fresno County. Fresno County
is the leading agricultural county in the nation and is often deemed the
Raisin Capital of the United States.

Hanford is the county seat for Kings County. The economy is well
diversified with a majority of people working in non-agricultural jobs.
Agriculture is the primary business of Kings County, generating over $800
million in gross income per year. Kings County is also home to Lemoore Naval
Air Station, one of the largest naval air stations in the world.

Dinuba and Visalia are both located in Tulare County. Dinuba is located
in the northwestern corner of Tulare County. Visalia is located in the western
end of Tulare County. Tulare County is ranked second as the most productive
agricultural county in the nation, but it has recently shown the largest gain
in employment in the manufacturing industries including the durable goods
segment. Over half of Tulare County is devoted to national parks and forest
including Kings Canyon and Sequoia National Park, Inyo and Sequoia National
Forest.

VIB also operates branches in eastern San Diego and Riverside counties.
The Julian office serves customers in that and neighboring eastern San Diego
County mountain communities and the Tecate office serves customers on both
sides of the international border. The Blythe office extends VIBs service
area to the Palo Verde Valley, along the Colorado River, in eastern Riverside
County. Blythe is the only incorporated city on the eastern side of Riverside
County along Interstate 10 and serves as the major service and retail center
for eastern Riverside County and the Palo Verde Valley, including communities
on the Arizona side of the Colorado River. The Hemet branch serves the San
Jacinto Valley, which is approximately 90 miles east of Los Angeles, 35 miles
southeast of Riverside and 85 miles northeast of San Diego. VIB is in the
process of closing its Las Vegas, Nevada, office.

EMPLOYEES

As of December 31, 2001, the Company, primarily through VIB, employed
approximately 350 full-time and 81 part-time persons. None of the employees
are represented by any union or other collective bargaining agreement and the
Company has not experienced any type of strike or labor dispute. The Company
considers its relationship with its employees to be excellent.

COMPETITION

The banking business in California, generally, and in the service areas
served by VIB specifically, is highly competitive with respect to both loans
and deposits and is dominated by a few major banks which have many offices
operating over wide geographic areas. VIB competes for deposits and loans
principally with these major banks, savings and loan associations, finance
companies, credit unions and other financial institutions located in its market
areas. Among the advantages which the major banks have over VIB are their
ability to finance extensive advertising campaigns and to allocate their
investment assets to regions of highest yield and demand. Many of the major
commercial banks operating in VIBs service areas offer certain services (such
as trust and international banking services) which are not offered directly by
VIB and, by virtue of their greater total capitalization, such banks have
substantially higher lending limits than VIB.

Moreover, banks generally, and VIB in particular, face increasing
competition for loans and deposits from non-bank financial intermediaries such
as savings and loan associations, thrift and loan associations, credit unions,
mortgage companies, insurance companies, and other lending institutions. The
Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDA)
authorized savings and loan associations and credit unions to make certain
consumer loans. The Garn-St. Germain Depository Institutions Act of 1982 (the
Garn-St. Germain Act) and California

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legislation further expanded the power of savings and loan associations to
make consumer and commercial loans in competition with commercial banks.
Further, DIDA and a 1979 amendment to the usury provisions of the California
Constitution have resulted in the inflow of lendable funds from out-of-state
lenders and in increased competition from previously non-exempt in-state
lenders for loans. (See SUPERVISION AND REGULATION  VIB herein.)

Historically, banks were not permitted to pay the same rates of interest
on similar deposit accounts as those offered by savings and loan associations,
credit unions and money-market funds. DIDA began the process of deregulating
interest rate controls and the Garn-St. Germain Act, which authorized banks and
savings and loan associations to pay money-market interest rates on most types
of accounts and eliminated interest rate differentials between banks and
savings and loan associations, and subsequent actions of federal regulatory
agencies have accelerated the deregulation process, enabling banks to compete
more effectively for deposits.

However, banks have faced increasing competition for deposits because
these same legislative and regulatory developments have permitted non-bank
financial intermediaries to offer certain types of deposit accounts not
previously permitted.

Further, the recent trend has been for other institutions, such as
brokerage firms, credit card companies, and even retail establishments, to
offer alternative investment vehicles, such as money market funds, as well as
to offer traditional banking services such as check access to money market
funds and cash advances on credit card accounts. In addition, other entities
(both public and private) seeking to raise capital through the issuance and
sale of debt or equity securities also compete with VIB in the acquisition of
deposits.

In order to compete with the other financial institutions in its market
areas VIB relies principally upon local promotional activity, personal contacts
by its officers, directors, employees and the Companys shareholders, and
specialized services. In conjunction with its business plan to serve the
financial needs of local residents and small-to medium-sized businesses, VIB
also relies on officer calling programs to existing and prospective customers,
focusing its overall marketing efforts towards its local communities. VIBs
promotional activities emphasize the advantages of dealing with an independent
institution sensitive to the particular needs of its local communities. For
customers whose loan demands exceed VIBs lending limit, VIB attempts to
arrange for such loans on a participation basis with other banks. VIB also
assists customers requiring services not offered by it to obtain these services
from correspondent banks.

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OTHER SIGNIFICANT FACTORS RELATING TO THE COMPANY

Certain matters discussed in this Annual Report on Form 10-K may
constitute forward-looking statements, within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act, that involve substantial
risks and uncertainties. When used in this Annual Report on Form 10-K, the
words anticipate, believe, estimate, intend, expect and similar
expressions identify certain of such forward-looking statements. Actual
results, performance or achievements could differ materially from those
contemplated, expressed or implied by the forward-looking statements contained
herein. The considerations listed below represent certain important factors
the Company believes could cause such results to differ. These considerations
are not intended to represent a complete list of the general or specific risks
that may affect the Companys future results of operations or stock price and
should be considered carefully.

Holding Company Structure and Debt Service

As a bank holding company, substantially all of the Companys operating
assets are owned by VIB. The Company, therefore, relies upon receipt of
sufficient funds from VIB, primarily in the form of dividends, to meets its
obligations and corporate expenses. The ability of VIB to pay dividends to the
Company, however, is limited by statutory and regulatory authority, which may
preclude payment of dividends when the Company most needs them. On February 5,
1999, July 26, 2000 and November 28, 2001 the Company issued Debentures which
increased its net interest expense by approximately $2.7 million annually. The
ability of the Company to meet its interest obligations on the Debentures,
therefore, may be impaired should VIB be unable to pay dividends. (See
SUPERVISION AND REGULATION  The Company  Bank Holding Company Liquidity
herein.)

Additionally, pursuant to an Agreement as to Expenses and Liabilities and
two Guarantee Agreements (the Expense Agreements) the Company irrevocably and
unconditionally guaranteed to each person or entity with which the Trust, Trust
I and Trust II become indebted or liable, the full costs of any expenses or
liabilities of the three trusts, other than their obligations to pay holders of
their Capital Securities and Preferred Securities of the amounts due, pursuant
to the terms of the Capital Securities and Preferred Securities. Consequently,
third party creditors of the three trusts may proceed directly against the
Company under the Expense Agreements regardless of whether they have notice of
the Expense Agreements.

Acquisitions

The Companys future results depend, to a significant extent, upon its
ability to successfully manage its recent external growth and internal
restructuring. There can be no assurance that the Company will be able to
adequately and profitably manage its expanded operations. Factors that could
adversely affect the Companys future prospects and financial results include:

Ability to Manage Growth.Taking into consideration the acquisitions of
Stockdale and Kings River, and their subsequent integration into VIB, the
Companys future success is, therefore, dependent, in significant part, upon
its ability to properly manage and effectively integrate these new operations.
Management has devoted substantial time to the Companys growth strategy,
including the above-referenced acquisitions, and anticipates devoting
substantial time to future growth and acquisition opportunities. While the
Company has experience in managing external growth, there can be no assurance
that the Company will be successful in integrating the recent acquisitions or
that they will enhance the Companys profitability.

Ability to Achieve Operating Efficiencies.Because the markets in which
VIB operates are highly competitive and due to the inherent uncertainties
associated with integrating the operations

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of VIB, Stockdale and Kings River, there can be no assurance that VIB will
be able to fully realize the operating efficiencies contemplated by Management.
Such efficiencies include, but are not limited to, centralization of
operational auditing, accounting, data processing, cash clearing, personnel and
executive management functions. Furthermore, should operating efficiencies be
realized, there can be no assurance as to the timing of their realization.

General Business Risks

The business of VIB is subject to various business risks. The volume of
loan originations depends upon demand for loans of the type originated by VIB
and the competition in the marketplace for such loans. The level of consumer
confidence, fluctuations in real estate values, in prevailing interest rates
and in investment returns expected by the financial community could combine to
make loans of the type originated by VIB less attractive. Additionally, the
Company and VIB may be adversely affected by factors that could: (1) increase
the costs to the borrowers of loans originated by VIB; (2) create alternative
lending sources for such borrowers; or (3) increase the cost of funds to VIB at
rates faster than increases in interest income, thereby narrowing interest rate
margins. There can be no assurance, therefore, that there will be sufficient
loan demand or interest margins in the future to keep pace with deposit growth
experienced. Additionally, governmental interventions through elimination of
income tax benefits of home equity loans, increased or the addition of
additional regulations could also adversely affect the business in which VIB is
engaged. (See SUPERVISION AND REGULATION  Impact of Monetary Policies
herein.)

Reserve For Loan Losses

Historical experience indicates that a portion of VIBs loans will become
delinquent and will require either a partial or total charge-off. Regardless
of the underwriting criteria utilized, losses may be experienced by VIB as a
result of various factors beyond its control, including changes in market
conditions affecting the value of collateral and problems affecting a
borrowers continued creditworthiness. The Companys determination of the
adequacy of its reserve for loan losses is based upon various considerations,
including an analysis of risk characteristics of various classifications of
loans, previous loan loss experience, specific loans which have loss potential,
delinquency trends, estimated fair value of underlying collateral, current
economic conditions, results of regulatory examinations (which can mandate
additional loss reserves), geographic and industry concentrations. Such
factors can necessitate a higher provision for loan losses and
higher-charge-offs, thus adversely affecting net income. Some of the more
significant factors affecting the Companys reserve for loan losses are:

Seasonality and Agriculture.VIBs market areas are heavily dependent
upon the success of the seasonal agricultural economies of the Imperial,
Coachella and San Joaquin Valleys. This seasonality impacts evaluation of the
special risks involved in considering the adequacy of loan loss reserves.

Concentration of Operations; Recessionary Environments; Decline in Real
Estate Values.VIBs business activities are currently focused in the
Imperial, Coachella and San Joaquin Valleys, as well as other inland
communities in Southern California. Although VIB has expanded into coastal,
north San Diego County and Orange County, California with loan production
offices, VIBs results of operations are dependent on general economic trends
in Fresno, Kern, Kings, Imperial, Riverside and Tulare Counties. The
concentration of VIBs operations in these counties exposes it to greater risk
than other banks with a wider geographic base in the event of an economic
slow-down or recession affecting certain segments of the economy, especially
agriculture, or in the event of localized catastrophes, such as earthquakes,
fires and floods. Moreover, localized declines in the market values of real
estate of the type that secure loans originated by VIB reducing homeowners
equity and businesses equity in its properties could result in: (1) weakening
of collateral coverage

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on loans previously made and (2) diminish the available market for similar
loan originations in the future.

SUPERVISION AND REGULATION

Introduction

Banking is a complex, highly regulated industry. The primary goals of the
regulatory scheme are to maintain a safe and sound banking system, protect
depositors and the Federal Deposit Insurance Corporations insurance fund, and
facilitate the conduct of sound monetary policy. In furtherance of these
goals, Congress and the states have created several largely autonomous
regulatory agencies and enacted numerous laws that govern banks, bank holding
companies and the financial services industry. Consequently, the growth and
earnings performance of the Company and VIB can be affected not only by
management decisions and general economic conditions, but also by the
requirements of applicable state and federal statutes, regulations and the
policies of various governmental regulatory authorities, including:



| |  |  | the Board of Governors of the Federal Reserve System, or the FRB;
| | - |  | -----------------------------------------------------------------
|
| |  |  | the Federal Deposit Insurance Corporation, or the FDIC; and      
|
| |  |  | the California Department of Financial Institutions, or the DFI. 

The system of supervision and regulation applicable to the Company and VIB governs most aspects of their business, including:



| |  |  | the scope of permissible business;                                    
| | - |  | ----------------------------------------------------------------------
|
| |  |  | investments;                                                          
|
| |  |  | reserves that must be maintained against deposits;                    
|
| |  |  | capital levels that must be maintained;                               
|
| |  |  | the nature and amount of collateral that may be taken to secure loans;
|
| |  |  | the establishment of new branches;                                    
|
| |  |  | mergers and consolidations with other financial institutions; and     
|
| |  |  | the payment of dividends.                                             

The following summarizes the material elements of the regulatory framework
that applies to the Company and VIB. It does not describe all of the
statutes, regulations and regulatory policies that are applicable. Also, it
does not restate all of the requirements of the statutes, regulations and
regulatory policies that are described. Consequently, the following summary is
qualified in its entirety by reference to the applicable statutes, regulations
and regulatory policies discussed in this document. Any change in these
applicable laws, regulations or regulatory policies may have a material effect
on the business of the Company and VIB.

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The Company

General.The Company, as a bank holding company registered under the Bank
Holding Company Act of 1956, as amended, or BHCA, is subject to regulation by
the FRB. According to FRB policy, the Company is expected to act as a source
of financial strength for VIB, to commit resources to support it in
circumstances where the Company might not otherwise do so. Under the BHCA, the
Company, VIB and any banks that the Company may acquire in the future, are
subject to periodic examination by the FRB. The Company is also required to
file periodic reports of its operations and any additional information
regarding its activities and those of its subsidiaries with the FRB, as may be
required.

The Company is also a bank holding company within the meaning of Section
3700 of the California Financial Code. Consequently, the Company and VIB are
subject to examination by, and may be required to file reports with, the DFI.
Regulations have not yet been proposed or adopted or steps otherwise taken to
implement the DFIs powers under this statute.

Bank Holding Company Liquidity.The Company is a legal entity, separate
and distinct from VIB. The Company has the ability to raise capital on its own
behalf or borrow from external sources. The Company may also obtain additional
funds from dividends paid by, and fees charged for services provided to, VIB.
However, regulatory constraints may restrict or totally preclude the Company
from receiving those dividends.

The Company is entitled to receive dividends, when and as declared by
VIBs Board of Directors. Those dividends may come from funds legally
available for those dividends, as specified and limited by the California
Financial Code. Under the California Financial Code, funds available for cash
dividends by a California-chartered bank are restricted to the lesser of:



| |  |  | the banks retained earnings; or                                                                                       
| | - |  | -----------------------------------------------------------------------------------------------------------------------
|
| |  |  | the banks net income for its last three fiscal years (less any distributions to shareholders made during such period).

With the prior approval of the DFI, cash dividends may also be paid out of the greater of:



| |  |  | the banks retained earnings;                           
| | - |  | --------------------------------------------------------
|
| |  |  | net income for the banks last preceding fiscal year; or
|
| |  |  | net income for the banks current fiscal year.          

If the DFI determines that the shareholders equity of the bank paying the
dividend is not adequate or that the payment of the dividend would be unsafe or
unsound for the bank, the DFI may order the bank not to pay the dividend.

Since VIB is an FDIC insured institution, it is also possible, depending
upon its financial condition and other factors, that the FDIC could assert that
the payment of dividends or other payments might, under some circumstances,
constitute an unsafe or unsound practice and thereby prohibit such payments.

Transactions With Affiliates.The Company and any subsidiaries it may
purchase or organize are deemed to be affiliates of VIB within the meaning of
Sections 23A and 23B of the Federal Reserve Act. Under those terms, loans by
VIB to affiliates, investments by them in affiliates stock, and taking
affiliates stock as collateral for loans to any borrower is limited to 10% of
VIBs capital, in the case of any one affiliate, and is limited to 20% of the
VIBs capital, in the case of all affiliates. In addition, such transactions
must be on terms and conditions that are

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consistent with safe and sound banking practices; in particular, a bank and its
subsidiaries generally may not purchase from an affiliate a low-quality asset,
as defined in the Federal Reserve Act. These restrictions also prevent a bank
holding company and its other affiliates from borrowing from a banking
subsidiary of the bank holding company unless the loans are secured by
marketable collateral of designated amounts. The Company and VIB are also
subject to certain restrictions with respect to engaging in the underwriting,
public sale and distribution of securities. (See SUPERVISION AND REGULATION
 VIB  Recent Legislation herein.)

Limitations on Business and Investment Activities.Under the BHCA, a bank
holding company must obtain the FRBs approval before:



| |  |  | directly or indirectly acquiring more than 5% ownership or control of any voting shares of another bank or bank holding company;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | acquiring all or substantially all of the assets of another bank; or                                                            
|
| |  |  | merging or consolidating with another bank holding company.                                                                     

The FRB may allow a bank holding company to acquire banks located in any
state of the United States without regard to whether the acquisition is
prohibited by the law of the state in which the target bank is located. In
approving interstate acquisitions, however, the FRB must give effect to
applicable state laws limiting the aggregate amount of deposits that may be
held by the acquiring bank holding company and its insured depository
institutions in the state in which the target bank is located, provided that
those limits do not discriminate against out-of-state depository institutions
or their holding companies, and state laws which require that the target bank
have been in existence for a minimum period of time, not to exceed five years,
before being acquired by an out-of-state bank holding company.

In addition to owning or managing banks, bank holding companies may own
subsidiaries engaged in certain businesses that the FRB has determined to be
so closely related to banking as to be a proper incident thereto. The
Company, therefore, is permitted to engage in a variety of banking-related
businesses. Some of the activities that the FRB has determined, pursuant to
its Regulation Y, to be related to banking are:



| |  |  | making or acquiring loans or other extensions of credit for its own account or for the account of others;                                                             
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | servicing loans and other extensions of credit;                                                                                                                       
|
| |  |  | operating a trust company in the manner authorized by federal or state law under certain circumstances;                                                               
|
| |  |  | leasing personal and real property or acting as agent, broker, or adviser in leasing such property in accordance with various restrictions
imposed by FRB regulations;
|
| |  |  | providing financial, banking, or economic data processing and data transmission services;                                                                             
|
| |  |  | owning, controlling, or operating a savings association under certain circumstances;                                                                                  
|
| |  |  | selling money orders, travelers checks and U.S. Savings Bonds;                                                                                                       

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| |  |  | providing securities brokerage services, related securities credit activities pursuant to Regulation T, and other incidental activities; and                                                   
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | underwriting and dealing in obligations of the U.S., general obligations of states and their political subdivisions, and other obligations
authorized for state member banks under federal law.

Under the recently enacted Gramm-Leach-Bliley Act (discussed below in the
section entitled SUPERVISION AND REGULATION  VIB  Recent Legislation)
qualifying bank holding companies making an appropriate election to the FRB may
engage in a full range of financial activities, including insurance, securities
and merchant banking. VIB has not elected to qualify for these financial
activities.

Generally, the BHCA does not place territorial restrictions on the
domestic activities of non-bank subsidiaries of bank holding companies.

Federal law prohibits a bank holding company and any subsidiary banks from
engaging in certain tie-in arrangements in connection with the extension of
credit. Thus, for example, VIB 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:



| |  |  | the customer must obtain or provide some additional credit, property or services from or to VIB other than a loan, discount,
deposit or trust service;      
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the customer must obtain or provide some additional credit, property or service from or to the Company or any subsidiaries; or                              
|
| |  |  | the customer may not obtain some other credit, property or services from competitors, except reasonable requirements to assure
soundness of credit extended.

Capital Adequacy.Bank holding companies must maintain minimum levels of
capital under the FRBs risk-based capital adequacy guidelines. If capital
falls below minimum guideline levels, a bank holding company, among other
things, may be denied approval to acquire or establish additional banks or
non-bank businesses.

The FRBs risk-based capital adequacy guidelines for bank holding
companies and state member banks, discussed in more detail below in the section
entitled SUPERVISION AND REGULATION  VIB  Risk-Based Capital Guidelines,
assign various risk percentages to different categories of assets, and capital
is measured as a percentage of risk assets. Under the terms of the guidelines,
bank holding companies are expected to meet capital adequacy guidelines based
both on total risk assets and on total assets, without regard to risk weights.

The risk-based guidelines are minimum requirements. Higher capital levels
will be required if warranted by the particular circumstances or risk profiles
of individual organizations. For example, the FRBs capital guidelines
contemplate that additional capital may be required to take adequate account
of, among other things, interest rate risk, or the risks posed by
concentrations of credit, nontraditional activities or securities trading
activities. Moreover, any banking organization experiencing or anticipating
significant growth or expansion into new activities, particularly under the
expanded powers under the Gramm-Leach-Bliley Act, would be expected to maintain
capital ratios, including tangible capital positions, well above the minimum
levels.

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Limitations on Dividend Payments.California Corporations Code Section
500 allows the Company to pay a dividend to its shareholders only to the extent
that the Company has retained earnings and, after the dividend, the Companys:



| |  |  | assets (exclusive of goodwill and other intangible assets) would be 1.25
times its liabilities (exclusive of deferred taxes, deferred income and
other deferred credits); and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | current assets would be at least equal to current liabilities.                                                                                                               

Additionally, the FRBs policy regarding dividends provides that a bank
holding company should not pay cash dividends exceeding its net income or which
can only be funded in ways that weaken the bank holding companys financial
health, such as by borrowing. The FRB also possesses enforcement powers over
bank holding companies and their non-bank subsidiaries to prevent or remedy
actions that represent unsafe or unsound practices or violations of applicable
statutes and regulations.

VIB

General.VIB, as a California-chartered bank which is a member of the
Federal Reserve System, is subject to regulation, supervision, and regular
examination by the DFI and the FRB. VIBs deposits are insured by the FDIC up
to the maximum extent provided by law. The regulations of these agencies
govern most aspects of VIBs business and establish a comprehensive framework
governing its operations. California law exempts all banks from usury
limitations on interest rates.

VIB is a member of the Federal Home Loan Bank System. Among other
benefits, each Federal Home Loan Bank serves as a reserve or center bank for
its members within its assigned region. Each Federal Home Loan Bank makes
available to its members loans (i.e., advances) in accordance with the policies
and procedures established by the Board of Directors of the individual Federal
Home Loan Bank.

Recent Legislation.From time to time legislation is enacted which has
the effect of increasing the cost of doing business and changing the
competitive balance between banks and other financial and non-financial
institutions. Various federal laws enacted over the past several years have
provided, among other things, for:



| |  |  | the maintenance of mandatory reserves with the Federal Reserve Bank on deposits by depository institutions;                                                                                                                                                                                                  
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the phasing-out of the restrictions on the amount of interest which financial institutions may pay on certain types of accounts; and                                                                                                                                                                         
|
| |  |  | the authorization of various types of new deposit accounts, such as NOW accounts, Money Market Deposit accounts and Super NOW
accounts, designed to be competitive with money market mutual funds and other types of accounts and services offered by various
financial and non-financial institutions.

The lending authority and permissible activities of certain non-bank financial
institutions such as savings and loan associations and credit unions have been
expanded, and federal regulators have been given increased enforcement
authority. These laws have generally had the effect of altering competitive
relationships existing among financial institutions, reducing the historical
distinctions between the services offered by banks, savings and loan
associations and other financial institutions, and increasing the cost of funds
to banks and other depository institutions.

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In November, 1999, the Gramm-Leach-Bliley Act, or the GLB Act, became law,
significantly changing the regulatory structure and oversight of the financial
services industry. Effective March 11, 2000, the GLB Act repealed the
provisions of the Glass-Steagall Act that restricted banks and securities firms
from affiliating. It also revised the BHCA to permit a qualifying bank
holding company, called a financial holding company, to engage in a full range
of financial activities, including banking, insurance, securities, and merchant
banking activities. It also permits qualifying bank holding companies to
acquire many types of financial firms without the FRBs prior approval.

The GLB Act thus provides expanded financial affiliation opportunities for
existing bank holding companies and permits other financial services providers
to acquire banks and become bank holding companies without ceasing any existing
financial activities. Previously, a bank holding company could only engage in
activities that were closely related to banking. This limitation no longer
applies to bank holding companies that qualify to be treated as financial
holding companies. To qualify as a financial holding company, a bank holding
companys subsidiary depository institutions must be well-capitalized,
well-managed and have at least a satisfactory Community Reinvestment Act
examination rating. Nonqualifying bank holding companies are limited to
activities that were permissible under the Bank Holding Company Act as of
November 11, 1999.

Also effective on March 11, 2000, the GLB Act changed the powers of
national banks and their subsidiaries, and made similar changes in the powers
of state banks and their subsidiaries. National banks may now underwrite, deal
in and purchase state and local revenue bonds. A subsidiary of a national bank
may now engage in financial activities that the bank cannot itself engage in,
except for general insurance underwriting and real estate development and
investment. In order for a subsidiary of a national bank to engage in these
new financial activities, the national bank and its depository institution
affiliates must be well capitalized, have at least satisfactory general,
managerial and Community Reinvestment Act (CRA) examination ratings, and meet
other qualification requirements relating to total assets, subordinated debt,
capital, risk management, and affiliate transactions. Subsidiaries of state
banks can exercise the same powers as national bank subsidiaries if they
satisfy the same qualifying rules that apply to national banks, except that
state-chartered banks do not have to satisfy the statutory managerial and debt
rating-requirements of national banks.

The GLB Act also reformed the overall regulatory framework of the
financial services industry. In order to implement its underlying purposes,
the GLB Act preempted state laws that would restrict the types of financial
affiliations that are authorized or permitted under the GLB Act, subject to
specified exceptions for state insurance laws and regulations. With regard to
securities laws, effective May 12, 2001, the GLB Act removed the blanket
exemption for banks from being considered brokers or dealers under the
Securities Exchange Act of 1934 and replaced it with a number of more limited
exemptions. Thus, previously exempted banks may become subject to the
broker-dealer registration and supervision requirements of the Securities
Exchange Act of 1934. The exemption that prevented bank holding companies and
banks that advise mutual funds from being considered investment advisers under
the Investment Advisers Act of 1940 was also eliminated.

Separately, the GLB Act imposes customer privacy requirements on any
company engaged in financial activities. Under these requirements, a financial
company is required to protect the security and confidentiality of customer
nonpublic personal information. Also, for customers that obtain a financial
product such as a loan for personal, family or household purposes, a financial
company is required to disclose its privacy policy to the customer at the time
the relationship is established and annually thereafter, including its policies
concerning the sharing of the customers nonpublic personal information with
affiliates and third parties. If an exemption is not available, a financial
company must provide consumers with a notice of its information sharing
practices that allows the consumer to reject the disclosure of its nonpublic
personal information to third parties. Third parties that receive such
information are subject to the same restrictions as the financial

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company on the reuse of the information. Finally, a financial company is
prohibited from disclosing an account number or similar item to a third party
for use in telemarketing, direct mail marketing or other marketing through
electronic mail.

Risk-Based Capital Guidelines.

General.The federal banking agencies have established minimum capital
standards known as risk-based capital guidelines. These guidelines are
intended to provide a measure of capital that reflects the degree of risk
associated with a banks operations and also apply to bank holding companies.
The risk-based capital guidelines include both a new definition of capital and
a framework for calculating the amount of capital that must be maintained
against a banks assets and off-balance sheet items. The amount of capital
required to be maintained is based upon the credit risks associated with the
various types of a banks assets and off-balance sheet items. A banks assets
and off-balance sheet items are classified under several risk categories, with
each category assigned a particular risk weighting from 0% to 100%. A banks
risk-based capital ratio is calculated by dividing its qualifying capital,
which is the numerator of the ratio, by the combined risk weights of its assets
and off-balance sheet items, which is the denominator of the ratio.

Qualifying Capital.A banks total qualifying capital consists of two
types of capital components: core capital elements, known as Tier 1 capital,
and supplementary capital elements, known as Tier 2 capital. The Tier 1
component of a banks qualifying capital must represent at least 50% of total
qualifying capital and may consist of the following items that are defined as
core capital elements:



| |  |  | common stockholders equity;                                                       
| | - |  | -----------------------------------------------------------------------------------
|
| |  |  | qualifying noncumulative perpetual preferred stock (including related surplus); and
|
| |  |  | minority interests in the equity accounts of consolidated subsidiaries.            

The Tier 2 component of a banks total qualifying capital may consist of the following items:



| |  |  | a portion of the allowance for loan and lease losses;                                                
| | - |  | -----------------------------------------------------------------------------------------------------
|
| |  |  | certain types of perpetual preferred stock and related surplus;                                      
|
| |  |  | certain types of hybrid capital instruments and mandatory convertible debt securities; and           
|
| |  |  | a portion of term subordinated debt and intermediate-term preferred stock, including related surplus.

Risk Weighted Assets and Off-Balance Sheet Items.Assets and credit
equivalent amounts of off-balance sheet items are assigned to one of several
broad risk classifications, according to the obligor or, if relevant, the
guarantor or the nature of the collateral. The aggregate dollar value of the
amount in each risk classification is then multiplied by the risk weight
associated with that classification. The resulting weighted values from each
of the risk classifications are added together. This total is the banks total
risk weighted assets.

Risk weights for off-balance sheet items, such as unfunded loan
commitments, letters of credit and recourse arrangements, are determined by a
two-step process. First, the credit equivalent amount of the off-balance
sheet items is determined, in most cases by multiplying the off-balance sheet
item by a credit conversion factor. Second, the credit equivalent amount is
treated like any

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balance sheet asset and is assigned to the appropriate risk category according
to the obligor or, if relevant, the guarantor or the nature of the collateral.
This result is added to the banks risk weighted assets and comprises the
denominator of the risk-based capital ratio.

Minimum Capital Standards.The supervisory standards set forth below
specify minimum capital ratios based primarily on broad risk considerations.
The risk-based ratios do not take explicit account of the quality of individual
asset portfolios or the range of other types of risks to which banks may be
exposed, such as interest rate, liquidity, market or operational risks. For
this reason, banks are generally expected to operate with capital positions
above the minimum ratios.

All banks are required to meet a minimum ratio of qualifying total capital
to risk weighted assets of 8%. At least 4% must be in the form of Tier 1
capital, net of goodwill. The maximum amount of supplementary capital elements
that qualifies as Tier 2 capital is limited to 100% of Tier 1 capital, net of
goodwill. In addition, the combined maximum amount of subordinated debt and
intermediate-term preferred stock that qualifies as Tier 2 capital is limited
to 50% of Tier 1 capital. The maximum amount of the allowance for loan and
lease losses that qualifies as Tier 2 capital is limited to 1.25% of gross risk
weighted assets. The allowance for loan and lease losses in excess of this
limit may, of course, be maintained, but would not be included in a banks
risk-based capital calculation.

The federal banking agencies also require all banks to maintain a minimum
amount of Tier 1 capital to total assets, referred to as the leverage ratio.
For a bank rated in the highest of the five categories used by regulators to
rate banks, the minimum leverage ratio of Tier 1 capital to total assets is 3%.
For all banks not rated in the highest category, the minimum leverage ratio
must be at least 4% to 5%. These uniform risk-based capital guidelines and
leverage ratios apply across the industry. Regulators, however, have the
discretion to set minimum capital requirements for individual institutions
which may be significantly above the minimum guidelines and ratios.

Other Factors Affecting Minimum Capital Standards.The federal banking
agencies have established certain benchmark ratios of loan loss reserves to be
held against classified assets. The benchmark by federal banking agencies is
the sum of:



| |  |  | 100% of assets classified loss;                                         
| | - |  | ------------------------------------------------------------------------
|
| |  |  | 50% of assets classified doubtful;                                      
|
| |  |  | 15% of assets classified substandard; and                               
|
| |  |  | estimated credit losses on other assets over the upcoming twelve months.

The federal banking agencies have recently revised their risk-based
capital rules to take account of concentrations of credit and the risks of
engaging in non-traditional activities. Concentrations of credit refers to
situations where a lender has a relatively large proportion of loans involving
a single borrower, industry, geographic location, collateral or loan type.
Non-traditional activities are considered those that have not customarily been
part of the banking business, but are conducted by a bank as a result of
developments in, for example, technology, financial markets or other additional
activities permitted by law or regulation. The regulations require
institutions with high or inordinate levels of risk to operate with higher
minimum capital standards. The federal banking agencies also are authorized to
review an institutions management of concentrations of credit risk for
adequacy and consistency with safety and soundness standards regarding internal
controls, credit underwriting or other operational and managerial areas.

19



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The federal banking agencies also limit the amount of deferred tax assets
that are allowable in computing a banks regulatory capital. Deferred tax
assets that can be realized for taxes paid in prior carryback years and from
future reversals of existing taxable temporary differences are generally not
limited. However, deferred tax assets that can only be realized through future
taxable earnings are limited for regulatory capital purposes to the lessor of:



| |  |  | the amount that can be realized within one year of the quarter-end report date; or
| | - |  | ----------------------------------------------------------------------------------
|
| |  |  | 10% of Tier 1 capital.                                                            

The amount of any deferred tax in excess of this limit would be excluded from
Tier 1 capital, total assets and regulatory capital calculations.

The federal banking agencies have also adopted a joint agency policy
statement which provides that the adequacy and effectiveness of a banks
interest rate risk management process and the level of its interest rate
exposures are critical factors in the evaluation of the banks capital
adequacy. A bank with material weaknesses in its interest rate risk management
process or high levels of interest rate exposure relative to its capital will
be directed by the federal banking agencies to take corrective actions.
Financial institutions which have significant amounts of their assets
concentrated in high risk loans or nontraditional banking activities, and who
fail to adequately manage these risks, may be required to set aside capital in
excess of the regulatory minimums.

Prompt Corrective Action.The federal banking agencies possess broad
powers to take prompt corrective action to resolve the problems of insured
banks. Each federal banking agency has issued regulations defining five
capital categories: well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized, and critically
undercapitalized. Under the regulations, a bank shall be deemed to be:



| |  |  | well capitalized if it has a total risk-based capital ratio of 10.0% or more, has a Tier 1 risk-based capital ratio of 6.0%
or more, has a leverage capital ratio of 5.0% or more, and is not subject to specified requirements to meet and maintain a
specific capital level for any capital measure;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | adequately capitalized if it has a total risk-based capital ratio of 8.0% or more, a Tier 1 risk-based capital ratio of 4.0%
or more, and a leverage capital ratio of 4.0% or more (3.0% under certain circumstances) and does not meet the definition of
well capitalized;                         
|
| |  |  | undercapitalized if it has a total risk-based capital ratio that is less than 8.0%, a Tier 1 risk-based capital ratio that
is less than 4.0%, or a leverage capital ratio that is less than 4.0% (3.0% under certain circumstances);                                                                  
|
| |  |  | significantly undercapitalized if it has a total risk-based capital ratio that is less than 6.0%, a Tier 1 risk-based
capital ratio that is less than 3.0% or a leverage capital ratio that is less than 3.0%; and                                                                                    
|
| |  |  | critically undercapitalized if it has a ratio of tangible equity to total assets that is equal to or less than 2.0%.                                                                                                                                                                                  

Banks are prohibited from paying dividends or management fees to
controlling persons or entities if, after making the payment the bank would be
undercapitalized, that is, the bank fails to meet the required minimum level
for any relevant capital measure. Asset growth and branching restrictions
apply to undercapitalized banks. Banks classified as undercapitalized are
required

20



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##### Table of Contents



to submit acceptable capital plans guaranteed by its holding company, if any.
Broad regulatory authority was granted with respect to significantly
undercapitalized banks, including forced mergers, growth restrictions,
ordering new elections for directors, forcing divestiture by its holding
company, if any, requiring management changes, and prohibiting the payment of
bonuses to senior management. Even more severe restrictions are applicable to
critically undercapitalized banks, those with capital at or less than 2%.
Restrictions for these banks include the appointment of a receiver or
conservator after 90 days, even if the bank is still solvent. All of the
federal banking agencies have promulgated substantially similar regulations to
implement this system of prompt corrective action.

The DFI has the power to close a California-chartered bank if its tangible
shareholders equity falls below the greater of 3% of total assets or
$1,000,000.

Information concerning VIBs capital adequacy at December 31, 2001 is as
follows:

|                                                  |  |                        |         |             |  |            |      |            |  |            |        |       |  |  |     |        |  |              |        |  |  |  |      |  
|------------------------------------------------- |  | ---------------------- | ------- | ----------- |  | ---------- | ---- | ---------- |  | ---------- | ------ | ----- |  |  | --- | ------ |  | ------------ | ------ |  |  |  | ---- | -
|                                                  |  |                        |         |             |  |            |      |            |  |            |        |       |  |  |     |        |  | Amount to    |        |  |  | 
|                                                  |  |                        |         |             |  |            |      |            |  |            |        |       |  |  |     |        |  | be "Well     |        |  |  | 
|                                                  |  |                        |         |             |  |            |      |            |  |            |        |       |  |  |     |        |  | Capitalized" |        |  |  | 
|                                                  |  |                        |         |             |  |            |      |            |  | Minimum    |        |       |  |  |     | Under  |  |              |        | 
|                                                  |  |                        |         |             |  |            |      |            |  | Amount     |        |       |  |  |     | Prompt |  |              |        | 
|                                                  |  | Actual                 |         | for Capital |  | Minimum    |      | Corrective |  |            |        |      
|                                                  |  |                        |         | Adequacy    |  | Regulatory |      | Action     |  |            |        |      
|                                                  |  | Amount                 |         | Ratio       |  | Purposes   |      | Ratio      |  | Provisions |        | Ratio
|                                                  |  |                        |         |             |  |            |      |            |  |            |        |      
|                                                  |  | (Dollars in thousands)
|Total Capital (To Risk
Weighted Assets)          |  | $                      | 101,606 |             |  |            | 11.4 | %          |  | $          | 71,479 |       |  |  | 8.0 | %      |  | $            | 89,348 |  |  |  | 10.0 | %
|Tier 1 Capital (To Risk
Weighted Assets)         |  |                        | 92,261  |             |  |            | 10.3 |            |  |            | 35,739 |       |  |  | 4.0 |        |  |              | 53,609 |  |  |  | 6.0  |  
|Leverage Ratio (Tier 1 Capital
To Average Assets) |  |                        | 92,261  |             |  |            | 8.1  |            |  |            | 45,599 |       |  |  | 4.0 |        |  |              | 56,999 |  |  |  | 5.0  |  

Information concerning the Companys capital adequacy at December 31, 2001
is as follows:

|                                                  |  |                        |         |          |  |            |      |            |  |            |        |       |  |  |     |        |  |              |        |  |  |  |      |  
|------------------------------------------------- |  | ---------------------- | ------- | -------- |  | ---------- | ---- | ---------- |  | ---------- | ------ | ----- |  |  | --- | ------ |  | ------------ | ------ |  |  |  | ---- | -
|                                                  |  |                        |         |          |  |            |      |            |  |            |        |       |  |  |     |        |  | Amount to    |        |  |  | 
|                                                  |  |                        |         |          |  |            |      |            |  |            |        |       |  |  |     |        |  | be "Well     |        |  |  | 
|                                                  |  |                        |         |          |  |            |      |            |  |            |        |       |  |  |     |        |  | Capitalized" |        |  |  | 
|                                                  |  |                        |         |          |  |            |      |            |  | Minimum    |        |       |  |  |     | Under  |  |              |        | 
|                                                  |  |                        |         |          |  |            |      |            |  | Amount for |        |       |  |  |     | Prompt |  |              |        | 
|                                                  |  | Actual                 |         | Capital  |  | Minimum    |      | Corrective |  |            |        |      
|                                                  |  |                        |         | Adequacy |  | Regulatory |      | Action     |  |            |        |      
|                                                  |  | Amount                 |         | Ratio    |  | Purposes   |      | Ratio      |  | Provisions |        | Ratio
|                                                  |  |                        |         |          |  |            |      |            |  |            |        |      
|                                                  |  | (Dollars in thousands)
|Total Capital (To Risk
Weighted Assets)          |  | $                      | 106,957 |          |  |            | 11.9 | %          |  | $          | 71,912 |       |  |  | 8.0 | %      |  | $            | 89,891 |  |  |  | 10.0 | %
|Tier 1 Capital (To Risk
Weighted Assets)         |  |                        | 91,407  |          |  |            | 10.2 |            |  |            | 35,956 |       |  |  | 4.0 |        |  |              | 53,934 |  |  |  | 6.0  |  
|Leverage Ratio (Tier 1 Capital
To Average Assets) |  |                        | 91,407  |          |  |            | 8.0  |            |  |            | 45,784 |       |  |  | 4.0 |        |  |              | 57,230 |  |  |  | 5.0  |  

A bank, based upon its capital levels, that is classified as well
capitalized, adequately capitalized or undercapitalized may be treated as
though it were in the next lower capital category if the appropriate federal
banking agency, after notice and opportunity for a hearing, determines that an
unsafe or unsound condition, or an unsafe or unsound practice, warrants such
treatment. At each successive lower capital category, an insured bank is
subject to more restrictions. The federal banking agencies, however, may not
treat an institution as critically undercapitalized unless its capital ratios
actually warrant such treatment.

21



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Deposit Insurance Assessments.The FDIC has implemented a risk-based
assessment system in which the deposit insurance premium relates to the
probability that the deposit insurance fund will incur a loss. The FDIC sets
semi-annual assessments in an amount necessary to maintain or increase the
reserve ratio of the insurance fund to at least 1.25% of insured deposits or a
higher percentage as determined to be justified by the FDIC.

Under the risk-based assessment system adopted by the FDIC, banks are
categorized into one of three capital categories (well capitalized,
adequately capitalized, and undercapitalized). Assignment of a bank into a
particular capital category is based on supervisory evaluations by its primary
federal regulator. After being assigned to a particular capital category, a
bank is classified into one of three supervisory categories. The three
supervisory categories are:



| |  |  | Group A  financially sound with only a few minor weaknesses;                        
| | - |  | -------------------------------------------------------------------------------------
|
| |  |  | Group B  demonstrates weaknesses that could result in significant deterioration; and
|
| |  |  | Group C  poses a substantial probability of loss.                                   

The capital ratios used by the FDIC to define well-capitalized, adequately
capitalized and undercapitalized are the same as in the prompt corrective
action regulations.

The assessment rates are summarized below, expressed in terms of cents per
$100 in insured deposits:

Assessment Rates

|                       |  |                   |    |         |  |         |    |  |  |  |    | 
|---------------------- |  | ----------------- | -- | ------- |  | ------- | -- |  |  |  | -- | 
|                       |  | Supervisory Group
|                       |  |                  
|Capital Group          |  | Group A           |    | Group B |  | Group C
|                       |  |                   |    |         |  |        
|Well Capitalized       |  |                   | 0  |         |  |         | 3  |  |  |  | 17 | 
|Adequately Capitalized |  |                   | 3  |         |  |         | 10 |  |  |  | 24 | 
|Undercapitalized       |  |                   | 10 |         |  |         | 24 |  |  |  | 27 | 

Interstate Banking and Branching.Bank holding companies from any state
may generally acquire banks and bank holding companies located in any other
state, subject in some cases to nationwide and state-imposed deposit
concentration limits and limits on the acquisition of recently established
banks. Banks also have the ability, subject to specific restrictions, to
acquire by acquisition or merger branches located outside their home state.
The establishment of new interstate branches is also possible in those states
with laws that expressly permit it. Interstate branches are subject to many of
the laws of the states in which they are located.

California law authorizes out-of-state banks to enter California by the
acquisition of or merger with a California bank that has been in existence for
at least five years, unless the California bank is in danger of failing or in
certain other emergency situations, but limits interstate branching into
California to branching by acquisition of an existing bank.

Enforcement Powers.In addition to measures taken under the prompt
corrective action provisions, insured banks may be subject to potential
enforcement actions by the federal regulators for unsafe or unsound practices
in conducting their businesses, or for violation of any law, rule, regulation,
condition imposed in writing by the regulatory agency, or term of a written
agreement with the regulatory agency. Enforcement actions may include:



| |  |  | the appointment of a conservator or receiver for the bank;
| | - |  | ----------------------------------------------------------

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| |  |  | the issuance of a cease and desist order that can be judicially enforced;                                                                                                                                          
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the termination of the banks deposit insurance;                                                                                                                                                                   
|
| |  |  | the imposition of civil monetary penalties;                                                                                                                                                                        
|
| |  |  | the issuance of directives to increase capital;                                                                                                                                                                    
|
| |  |  | the issuance of formal and informal agreements;                                                                                                                                                                    
|
| |  |  | the issuance of removal and prohibition orders against officers, directors and other institution-affiliated parties; and                                                                                           
|
| |  |  | the enforcement of such actions through injunctions or restraining orders based upon a judicial determination that the deposit
insurance fund or the bank would be harmed if such equitable relief was not granted.

In addition, California law provides the DFI with certain additional
enforcement powers. For example, if it appears to the DFI that a bank is
violating its articles of incorporation or state law, or is engaging in unsafe
or unsound business practices, the DFI can order the bank to comply with the
law or to cease the unsafe or injurious practices or the DFI can close the
bank. The DFI also has the power to suspend or remove the banks officers,
directors and employees who: (i) violate any law, regulation or fiduciary duty
to the bank; (ii) engage in any unsafe or unsound practices related to the
business of the bank; or (iii) are charged with or convicted of a crime
involving dishonesty or breach of trust.

FDIC Receiverships.The FDIC may be appointed conservator or receiver of
any insured bank or savings association. In addition, the FDIC may appoint
itself as sole conservator or receiver of any insured state bank or savings
association for any, among others, of the following reasons:



| |  |  | insolvency;                                                                                                                                                                                                                                                                                          
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | substantial dissipation of assets or earnings due to any violation of law or regulation or any unsafe or unsound practice;                                                                                                                                                                           
|
| |  |  | an unsafe or unsound condition to transact business, including substantially insufficient capital or otherwise;                                                                                                                                                                                      
|
| |  |  | any willful violation of a cease and desist order which has become final;                                                                                                                                                                                                                            
|
| |  |  | any concealment of books, papers, records or assets of the institution;                                                                                                                                                                                                                              
|
| |  |  | the likelihood that the institution will not be able to meet the demands of its depositors or pay its obligations in the normal course of business;                                                                                                                                                  
|
| |  |  | the incurrence or likely incurrence of losses by the institution that will deplete all or substantially all of its capital with no reasonable
prospect for the replenishment of the capital without federal assistance; or                                                                           
|
| |  |  | any violation of any law or regulation, or an unsafe or unsound practice or condition which is likely to cause insolvency or substantial
dissipation of assets or earnings, or is likely to weaken the condition of the institution or otherwise seriously prejudice the interests of its
depositors.

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As a receiver of any insured depository institution, the FDIC may
liquidate such institution in an orderly manner and dispose of any matter
concerning such institution as the FDIC determines is in the best interests of
such institution, its depositors and the FDIC. Further, the FDIC shall, as the
conservator or receiver, by operation of law, succeed to all rights, titles,
powers and privileges of the insured institution, and of any shareholder,
member, account holder, depositor, officer or director of such institution with
respect to the institution and the assets of the institution; may take over the
assets of and operate such institution with all the powers of the members or
shareholders, directors and the officers of the institution and conduct all
business of the institution; collect all obligations and money due to the
institution and preserve and conserve the assets and property of the
institution.

Safety and Soundness Guidelines.The federal banking agencies have
adopted guidelines to assist in identifying and addressing potential safety and
soundness concerns before capital becomes impaired. These guidelines establish
operational and managerial standards relating to:



| |  |  | internal controls, information systems and internal audit systems;
| | - |  | ------------------------------------------------------------------
|
| |  |  | loan documentation;                                               
|
| |  |  | credit underwriting;                                              
|
| |  |  | asset growth; and                                                 
|
| |  |  | compensation, fees and benefits.                                  

Additionally, the federal banking agencies have adopted safety and soundness
guidelines for asset quality and for evaluating and monitoring earnings to
ensure that earnings are sufficient for the maintenance of adequate capital and
reserves. If an institution fails to comply with a safety and soundness
standard, the appropriate federal banking agency may require the institution to
submit a compliance plan. Failure to submit a compliance plan or to implement
an accepted plan may result in enforcement action.

The federal banking agencies have issued regulations prescribing uniform
guidelines for real estate lending. The regulations require insured depository
institutions to adopt written policies establishing standards, consistent with
such guidelines, for extensions of credit secured by real estate. The policies
must address loan portfolio management, underwriting standards and loan to
value limits that do not exceed the supervisory limits prescribed by the
regulations.

Consumer Protection Laws and Regulations.The bank regulatory agencies
are focusing greater attention on compliance with consumer protection laws and
implementing regulations. Examination and enforcement have become more intense
in nature, and insured institutions have been advised to carefully monitor
compliance with various consumer protection laws and implementing regulations.
Banks are subject to many federal consumer protection laws and regulations,
including:



| |  |  | the Community Reinvestment Act, or the CRA;   
| | - |  | ----------------------------------------------
|
| |  |  | the Truth in Lending Act, or the TILA;        
|
| |  |  | the Fair Housing Act, or the FH Act;          
|
| |  |  | the Equal Credit Opportunity Act, or the ECOA;

24



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| |  |  | the Home Mortgage Disclosure Act, or the HMDA; and      
| | - |  | --------------------------------------------------------
|
| |  |  | the Real Estate Settlement Procedures Act, or the RESPA.

The CRA is intended to encourage insured depository institutions, while
operating safely and soundly, to help meet the credit needs of their
communities. The CRA specifically directs the federal bank regulatory
agencies, in examining insured depository institutions, to assess their record
of helping to meet the credit needs of their entire community, including low-
and moderate-income neighborhoods, consistent with safe and sound banking
practices. The CRA further requires the agencies to take a financial
institutions record of meeting its community credit needs into account when
evaluating applications for, among other things, domestic branches,
consummating mergers or acquisitions, or holding company formations.

The federal banking agencies have adopted regulations which measure a
banks compliance with its CRA obligations on a performance-based evaluation
system. This system bases CRA ratings on an institutions actual lending
service and investment performance rather than the extent to which the
institution conducts needs assessments, documents community outreach or
complies with other procedural requirements. The ratings range from
outstanding to a low of substantial noncompliance.

The ECOA prohibits discrimination in any credit transaction, whether for
consumer or business purposes, on the basis of race, color, religion, national
origin, sex, marital status, age (except in limited circumstances), receipt of
income from public assistance programs, or good faith exercise of any rights
under the Consumer Credit Protection Act. In March, 1994, the Federal
Interagency Task Force on Fair Lending issued a policy statement on
discrimination in lending. The policy statement describes the three methods
that federal agencies will use to prove discrimination:



| |  |  | overt evidence of discrimination;   
| | - |  | ------------------------------------
|
| |  |  | evidence of disparate treatment; and
|
| |  |  | evidence of disparate impact.       

This means that if a creditors actions have had the effect of discriminating,
the creditor may be held liable  even when there is no intent to discriminate.

The FH Act regulates many practices, including making it unlawful for any
lender to discriminate against any person in its housing-related lending
activities because of race, color, religion, national origin, sex, handicap, or
familial status. The FH Act is broadly written and has been broadly
interpreted by the courts. A number of lending practices have been found to
be, or may be considered, illegal under the FH Act, including some that are not
specifically mentioned in the FH Act itself. Among those practices that have
been found to be, or may be considered, illegal under the FH Act are:



| |  |  | declining a loan for the purposes of racial discrimination;                                                                        
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | making excessively low appraisals of property based on racial considerations;                                                      
|
| |  |  | pressuring, discouraging, or denying applications for credit on a prohibited basis;                                                
|
| |  |  | using excessively burdensome qualifications standards for the purpose or with the effect of denying housing to minority applicants;

25



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| |  |  | imposing on minority loan applicants more onerous interest rates or other terms, conditions or requirements; and
| | - |  | ----------------------------------------------------------------------------------------------------------------
|
| |  |  | racial steering, or deliberately guiding potential purchasers to or away from certain areas because of race.    

The TILA is designed to ensure that credit terms are disclosed in a
meaningful way so that consumers may compare credit terms more readily and
knowledgeably. As a result of the TILA, all creditors must use the same credit
terminology and expressions of rates, the annual percentage rate, the finance
charge, the amount financed, the total payments and the payment schedule.

HMDA grew out of public concern over credit shortages in certain urban
neighborhoods. One purpose of HMDA is to provide public information that will
help show whether financial institutions are serving the housing credit needs
of the neighborhoods and communities in which they are located. HMDA also
includes a fair lending aspect that requires the collection and disclosure of
data about applicant and borrower characteristics as a way of identifying
possible discriminatory lending patterns and enforcing anti-discrimination
statutes. HMDA requires institutions to report data regarding applications for
one-to-four family real estate loans, home improvement loans, and multifamily
loans, as well as information concerning originations and purchases of those
types of loans. Federal bank regulators rely, in part, upon data provided
under HMDA to determine whether depository institutions engage in
discriminatory lending practices.

RESPA requires lenders to provide borrowers with disclosures regarding the
nature and costs of real estate settlements. Also, RESPA prohibits certain
abusive practices, such as kickbacks, and places limitations on the amount of
escrow accounts.

Violations of these various consumer protection laws and regulations can
result in civil liability to the aggrieved party, regulatory enforcement
including civil money penalties, and even punitive damages.

Other Aspects of Banking Law.VIB will also be subject to federal and
state statutory and regulatory provisions covering, among other things,
security procedures, currency and foreign transactions reporting, insider and
affiliated party transactions, management interlocks, electronic funds
transfers, funds availability, and truth-in-savings. There are also a variety
of federal statutes which regulate acquisitions of control and the formation of
bank holding companies.

Conclusion.As a result of the recent federal and California legislation,
including the GLB Act, there has been a competitive impact on commercial
banking in general and the business of the Company and VIB in particular.
There has been a lessening of the historical distinction between the services
offered by banks, savings associations, credit unions, securities dealers,
insurance companies, and other financial institutions. Banks have also
experienced increased competition for deposits and loans which may result in
increases in their cost of funds, and banks have experienced increased overall
costs. Further, the federal banking agencies have increased enforcement
authority over banks and their directors and officers.

Future legislation is also likely to impact the Companys business.
However, management of the Company and VIB cannot predict what legislation
might be enacted or what regulations might be adopted or the effects thereof.

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Impact of Monetary Policies

Banking is a business which depends on rate differentials. In general,
the difference between the interest rate paid by a bank on its deposits and its
other borrowings and the interest rate earned by a bank on its loans,
securities and other interest-earning assets comprises the major source of the
banks earnings. These rates are highly sensitive to many factors which are
beyond the banks control and, accordingly, the earnings and growth of the bank
are subject to the influence of economic conditions generally, both domestic
and foreign, including inflation, recession, and unemployment; and also to the
influence of monetary and fiscal policies of the United States and its
agencies, particularly the Federal Reserve. The Federal Reserve Board
implements national monetary policy, such as seeking to curb inflation and
combat recession, by:



| |  |  | its open-market dealings in United States government securities;                                                   
| | - |  | -------------------------------------------------------------------------------------------------------------------
|
| |  |  | adjusting the required level of reserves for financial institutions subject to reserve requirements;               
|
| |  |  | placing limitations upon savings and time deposit interest rates; and                                              
|
| |  |  | adjustments to the discount rate applicable to borrowings by banks which are members of the Federal Reserve System.

The actions of the Federal Reserve Board in these areas influence the
growth of bank loans, investments, and deposits and also affect interest rates.
The nature and timing of any future changes in such policies and their impact
on us cannot be predicted; however, depending on the degree to which VIBs
interest-earning assets and interest-bearing liabilities are rate sensitive,
increases in rates would have a temporary effect of increasing VIBs net
interest margin, while decreases in interest rates would have the opposite
effect. In addition, adverse economic conditions, including a downturn in the
local or regional economy and rising energy prices, could make a higher
provision for loan losses a prudent course and could cause higher loan
charge-offs, thus adversely affecting VIBs net income or other operating
costs.

SELECTED STATISTICAL DISCLOSURES

The following table presents certain ratios for the periods indicated:

|                                              |  |                                 |       |      |  |      |       |      |  |      |       |   |  |  |       |   |  |  |       |  
|--------------------------------------------- |  | ------------------------------- | ----- | ---- |  | ---- | ----- | ---- |  | ---- | ----- | - |  |  | ----- | - |  |  | ----- | -
|                                              |  | For the Year Ended December 31,
|                                              |  |                                
|                                              |  | 2001                            |       | 2000 |  | 1999 |       | 1998 |  | 1997
|                                              |  |                                 |       |      |  |      |       |      |  |     
|Net Income to Average(1) Shareholders
Equity |  |                                 | 11.96 | %    |  |      | 13.65 | %    |  |      | 10.40 | % |  |  | 10.54 | % |  |  | 11.56 | %
|Net Income to Average Assets                  |  |                                 | 0.82  |      |  |      | 0.80  |      |  |      | 0.71  |   |  |  | 0.91  |   |  |  | 0.79  |  
|Average Net Loans to Average Deposits         |  |                                 | 92.56 |      |  |      | 90.74 |      |  |      | 83.14 |   |  |  | 79.21 |   |  |  | 76.16 |  



---

|(1) |  | Averages used herein, unless indicated otherwise, are based on daily
averages.
|--- |  | ------------------------------------------------------------------------------

Additional statistical disclosures relating to the Companys business and
operations are included in ITEM 7  MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

27



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##### Table of Contents






ITEM 2  DESCRIPTION OF PROPERTY

VIB leased property located adjacent to its main office, at 1498 Main
Street, El Centro, California 92243, which houses its corporate and El Centro
loan production office. The Company maintains its offices at this facility.
The lease has a twenty-year term and two five-year renewal options. The
construction cost on the new facility was approximately $2.9 million and was
completed in June, 1997. The term of the lease commenced upon completion of
the construction. The rent for each year of the term is $318,972, plus
cost-of-living adjustments of not less than 3.5% and not more than 5.5% each
year after the initial year.

VIB owns its main office and its branches at 2700 Mount Vernon Avenue,
Bakersfield, and in Brawley, Calexico, Coachella, Dinuba, La Quinta and
Thousand Palms. VIB owns the building housing its branch office at 1003 I
Street, Reedley, and leases the property pursuant to a written ground lease
which expires on March 31, 2003, but which can be extended for three additional
five-year terms.

VIB leases its remaining branches as well as an operations center at 2415
La Brucherie Road, Imperial, space at 5555 California Avenue, Bakersfield, and
200 Stine Road, Ste 229, Bakersfield, for loan servicing staff and training,
respectively, and its loan production offices in El Centro, Orange and Rancho
Mirage, California and Las Vegas, Nevada. VIB also leases property located at
1613 12th Street, Reedley, for administrative staff. All of VIBs leases
expire in 2002 or beyond and/or have extension options. VIB plans to extend
all leases expiring in 2002 except for the Las Vegas office. VIB has made a
strategic decision to close the Las Vegas office early in the second quarter of
2002.

VIB purchased a parcel of vacant land at 81-710 Highway 111, Indio, with
the original intention of constructing a permanent Indio branch office. The
purchase price was $310,000. The purchase preceded the acquisition of Bank of
the Desert, N.A. VIB sold the property during 2001 at a gain of $70,000 and
has exercised an additional 28-month extension option on the branch lease at
81-790 Highway 111, which became effective in February, 2000. VIB has also
purchased a parcel of vacant land adjacent to its La Quinta office, at a cost
of $23,100, to be used as additional parking for that branch.

The Companys aggregate lease expense in 2001 was $1,718,000. During 2000
the Companys aggregate lease expense was $1,548,000.

VIBs premises are deemed to be adequate for its present and anticipated
needs and no material capital expenditures are contemplated. In Managements
opinion, the Company and VIB have sufficient insurance to cover their interests
in their premises.




ITEM 3  LEGAL PROCEEDINGS

To the best of the Companys knowledge, there are no pending legal
proceedings to which the Company or VIB are a party and which may have a
materially adverse effect upon the Companys or VIBs property, business or
results of operations.

On January 8, 2001, VIB entered into a Written Agreement with the Federal
Reserve Bank of San Francisco which imposes a number of conditions and
reporting obligations designed to enhance VIBs compliance with currency and
suspicious activity reporting requirements and controls. During 2001 VIB
revised its policies and procedures to comply with the agreement.

28



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##### Table of Contents






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

No matters were submitted to the Companys shareholders during the fourth
quarter of 2001.




PART II




ITEM 5  MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The information required by this Item regarding the market for the
Companys Common Stock, the number of holders, and the payment of dividends is
incorporated by reference from Page 14 of the Companys Annual Report to
Shareholders for the year ended December 31, 2001.

During 1999, 2000 and 2001 the Company issued 438,392 shares (as adjusted
for stock dividends and splits) of its Common Stock without registration under
the Securities Act of 1933 upon exercise of stock options pursuant to VIBs
1989 Stock Option Plan, pursuant to VIBs 1997 Unit Offering, and pursuant to
the exercise of Warrants issued in VIBs 1997 Unit Offering. The aggregate
proceeds were $2,322,946. The issuances of Common Stock were exempt from the
registration requirements of the Securities Act of 1933 pursuant to Section
3(a)(2) thereof.

For information concerning the Companys issuance of trust preferred
securities through its trust subsidiaries, please refer to Item 1  DESCRIPTION
OF BUSINESS  The Company.




ITEM 6  SELECTED FINANCIAL DATA

The following table presents a summary of selected financial information
for the five years ended December 31, 2001. This financial information should
be read in conjunction with the Financial Statement and Notes thereto, included
in Item 8  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA herein. See also
Item 7  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS herein.

29



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##### Table of Contents



|                                                         |                                                       |   |                                 |        |      |   |            |        |      |   |            |        |  |   |            |        |  |   |            |        | 
|-------------------------------------------------------- | ----------------------------------------------------- | - | ------------------------------- | ------ | ---- | - | ---------- | ------ | ---- | - | ---------- | ------ |  | - | ---------- | ------ |  | - | ---------- | ------ | 
|                                                         |                                                       |   | For the Year Ended December 31,
|                                                         |                                                       |   |                                
|                                                         |                                                       |   | 2001                            |        | 2000 |   | 1999       |        | 1998 |   | 1997      
|                                                         |                                                       |   |                                 |        |      |   |            |        |      |   |           
|STATEMENTS OF INCOME (000s)                             |                                                       |   |                                 |        |      |   |            |        |      |   |            |        |  |   |            |        |  |   |            |       
|Total Interest Income                                    |                                                       | $ | 83,682                          |        |      | $ | 87,899     |        |      | $ | 63,857     |        |  | $ | 50,883     |        |  | $ | 42,261     |       
|Total Interest Expense                                   |                                                       |   | 35,224                          |        |      |   | 41,607     |        |      |   | 26,226     |        |  |   | 17,499     |        |  |   | 15,811     |       
|                                                         |                                                       |   |                                 |        |      |   |            |        |      |   |            |        |  |   |            |        |  |   |            |       
|                                                         | Net Interest Income                                   |   |                                 | 48,458 |      |   |            | 46,292 |      |   |            | 37,631 |  |   |            | 33,384 |  |   |            | 26,450 | 
|Provision for Credit Losses                              |                                                       |   | 3,000                           |        |      |   | 2,905      |        |      |   | 2,593      |        |  |   | 2,581      |        |  |   | 2,265      |       
|                                                         |                                                       |   |                                 |        |      |   |            |        |      |   |            |        |  |   |            |        |  |   |            |       
|                                                         | Net Interest Income After Provision
for Credit Losses |   |                                 | 45,458 |      |   |            | 43,386 |      |   |            | 35,038 |  |   |            | 30,803 |  |   |            | 24,185 | 
|Non-Interest Income                                      |                                                       |   | 11,440                          |        |      |   | 9,062      |        |      |   | 7,008      |        |  |   | 7,201      |        |  |   | 7,224      |       
|Non-Interest Expense                                     |                                                       |   | 42,742                          |        |      |   | 39,663     |        |      |   | 32,866     |        |  |   | 29,267     |        |  |   | 25,407     |       
|                                                         |                                                       |   |                                 |        |      |   |            |        |      |   |            |        |  |   |            |        |  |   |            |       
|Income Before Tax Expense and Merger
and Related Costs   |                                                       |   | 14,156                          |        |      |   | 12,785     |        |      |   | 9,180      |        |  |   | 8,737      |        |  |   | 6,002      |       
|Income Tax Expense                                       |                                                       |   | 4,677                           |        |      |   | 4,166      |        |      |   | 2,653      |        |  |   | 2,938      |        |  |   | 1,899      |       
|                                                         |                                                       |   |                                 |        |      |   |            |        |      |   |            |        |  |   |            |        |  |   |            |       
|                                                         | Income Before Merger and Related Costs                |   |                                 | 9,479  |      |   |            | 8,620  |      |   |            | 6,527  |  |   |            | 5,799  |  |   |            | 4,103  | 
|Merger and Related Costs, net of tax                     |                                                       |   | 257                             |        |      |   |           |        |      |   | 661        |        |  |   | 223        |        |  |   |           |       
|                                                         |                                                       |   |                                 |        |      |   |            |        |      |   |            |        |  |   |            |        |  |   |            |       
|                                                         | Net Income                                            |   | $                               | 9,222  |      |   | $          | 8,620  |      |   | $          | 5,866  |  |   | $          | 5,576  |  |   | $          | 4,103  | 
|                                                         |                                                       |   |                                 |        |      |   |            |        |      |   |            |        |  |   |            |        |  |   |            |       
|PER SHARE DATA(1)                                        |                                                       |   |                                 |        |      |   |            |        |      |   |            |        |  |   |            |        |  |   |            |       
|Net Income Basic Before Merger and
Related Costs         |                                                       | $ | 0.73                            |        |      | $ | 0.67       |        |      | $ | 0.52       |        |  | $ | 0.47       |        |  | $ | 0.39       |       
|Net Income Diluted(2) Before Merger
and Related Costs    |                                                       | $ | 0.73                            |        |      | $ | 0.67       |        |      | $ | 0.51       |        |  | $ | 0.45       |        |  | $ | 0.38       |       
|Net Income Basic                                         |                                                       | $ | 0.71                            |        |      | $ | 0.67       |        |      | $ | 0.47       |        |  | $ | 0.45       |        |  | $ | 0.39       |       
|Net Income Diluted(2)                                    |                                                       | $ | 0.71                            |        |      | $ | 0.67       |        |      | $ | 0.46       |        |  | $ | 0.43       |        |  | $ | 0.38       |       
|Cash Dividends                                           |                                                       |   | N/A                             |        |      |   | N/A        |        |      |   | N/A        |        |  |   | N/A        |        |  |   | N/A        |       
|Book Value Per Share(1)(3)                               |                                                       | $ | 6.26                            |        |      | $ | 5.49       |        |      | $ | 4.52       |        |  | $ | 4.45       |        |  | $ | 4.00       |       
|Number of Shares Used in Income Calculations             |                                                       |   | 13,072,788                      |        |      |   | 12,929,726 |        |      |   | 12,727,308 |        |  |   | 12,846,821 |        |  |   | 11,034,823 |       
|STATEMENTS OF FINANCIAL CONDITION                        |                                                       |   |                                 |        |      |   |            |        |      |   |            |        |  |   |            |        |  |   |            |       
|                                                         | (at End of Period)(000s)                             |   |                                 |        |      |   |            |        |      |   |            |        |  |   |            |        |  |   |            |        | 
|Total Assets                                             |                                                       | $ | 1,168,237                       |        |      | $ | 1,142,928  |        |      | $ | 918,128    |        |  | $ | 691,467    |        |  | $ | 574,741    |       
|Total Net Loans(4)                                       |                                                       |   | 828,430                         |        |      |   | 815,425    |        |      |   | 647,759    |        |  |   | 494,028    |        |  |   | 401,714    |       
|Allowance for Credit Losses                              |                                                       |   | 9,344                           |        |      |   | 8,298      |        |      |   | 5,696      |        |  |   | 4,296      |        |  |   | 3,145      |       
|Total Investments                                        |                                                       |   | 194,471                         |        |      |   | 192,317    |        |      |   | 162,009    |        |  |   | 119,798    |        |  |   | 94,124     |       
|Total Deposits                                           |                                                       |   | 884,930                         |        |      |   | 910,238    |        |      |   | 701,333    |        |  |   | 600,103    |        |  |   | 519,855    |       
|Borrowed Funds                                           |                                                       |   | 159,195                         |        |      |   | 121,905    |        |      |   | 130,674    |        |  |   | 31,886     |        |  |   | 2,842      |       
|Trust Preferred Securities                               |                                                       |   | 33,361                          |        |      |   | 32,400     |        |      |   | 22,400     |        |  |   |           |        |  |   |           |       
|Shareholders Equity                                     |                                                       |   | 81,637                          |        |      |   | 70,851     |        |      |   | 58,245     |        |  |   | 55,602     |        |  |   | 49,279     |       
|OPERATING RATIOS                                         |                                                       |   |                                 |        |      |   |            |        |      |   |            |        |  |   |            |        |  |   |            |       
|Total Net Loans to Total Deposits                        |                                                       |   | 93.62                           | %      |      |   | 89.58      | %      |      |   | 92.36      | %      |  |   | 82.32      | %      |  |   | 77.27      | %     
|Total Equity to Total Assets                             |                                                       |   | 6.99                            |        |      |   | 6.20       |        |      |   | 6.34       |        |  |   | 8.04       |        |  |   | 8.57       |       
|Average Equity to Average Assets                         |                                                       |   | 6.88                            |        |      |   | 6.09       |        |      |   | 6.79       |        |  |   | 8.66       |        |  |   | 6.87       |       
|Tier 1 Capital to Risk Weighted Assets(5)                |                                                       |   | 10.18                           |        |      |   | 8.73       |        |      |   | 10.93      |        |  |   | 9.27       |        |  |   | 10.21      |       
|Total Capital to Risk Weighted Assets(5)                 |                                                       |   | 11.91                           |        |      |   | 10.64      |        |      |   | 11.94      |        |  |   | 10.01      |        |  |   | 10.90      |       
|Income Before Merger and Related Costs
on Average Equity |                                                       |   | 12.30                           |        |      |   | 13.65      |        |      |   | 11.61      |        |  |   | 11.00      |        |  |   | 11.56      |       
|Income Before Merger and Related Costs
on Average Assets |                                                       |   | 0.85                            |        |      |   | 0.80       |        |      |   | 0.79       |        |  |   | 0.95       |        |  |   | 0.79       |       
|Income on Average Equity                                 |                                                       |   | 11.96                           |        |      |   | 13.65      |        |      |   | 10.40      |        |  |   | 10.54      |        |  |   | 11.56      |       
|Income on Average Total Assets                           |                                                       |   | 0.82                            |        |      |   | 0.80       |        |      |   | 0.71       |        |  |   | 0.91       |        |  |   | 0.79       |       
|Net Interest Margin                                      |                                                       |   | 4.78                            |        |      |   | 4.79       |        |      |   | 4.98       |        |  |   | 6.10       |        |  |   | 5.72       |       
|Total Interest Expense to Total Interest Income          |                                                       |   | 42.09                           |        |      |   | 47.34      |        |      |   | 41.07      |        |  |   | 34.39      |        |  |   | 37.41      |       
|Allowance for Credit Losses to Total Loans               |                                                       |   | 1.12                            |        |      |   | 1.01       |        |      |   | 0.87       |        |  |   | 0.86       |        |  |   | 0.78       |       
|Dividend Payment Ratio                                   |                                                       |   | N/A                             |        |      |   | N/A        |        |      |   | N/A        |        |  |   | N/A        |        |  |   | N/A        |       



---

|(1) |  | These figures have been adjusted retroactively to reflect previous stock
dividends and the 1997 and 1998 stock splits.                                                                                                                                                        
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Diluted net income per share reflects the potential dilution that could
occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of
common stock that then shared in the earnings of the entity.
|   
|   
|   
|   
|(3) |  | Book value per share is defined as total capital divided by the number
of shares outstanding at the end of the period.                                                                                                                                                      
|   
|   
|   
|   
|(4) |  | Total net loans is defined as total loans net of unearned discount, net
of deferred fees and the allowance for credit losses.                                                                                                                                               
|   
|   
|   
|   
|(5) |  | As defined under regulatory guidelines.                                                                                                                                                                                                                                       

N/A  Not Applicable

30



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##### Table of Contents






|         |  |                                                                                      
|-------- |  | -------------------------------------------------------------------------------------
|ITEM 7 - |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Managements discussion, which incorporates an analysis of financial
condition and results of operations, is designed to provide a more
comprehensive understanding of the significant changes and trends related to
the Companys financial condition, results of operations, liquidity and capital
resources. The discussion should be read in conjunction with the Financial
Statements of the Company and Notes thereto and the Selected Financial Data
included elsewhere herein.

The following table sets forth, for the periods indicated, the increase or
decrease of certain items in the Statement of Income as compared to the prior
comparable period:

|                                                      |  |                                 |         |                  |  |            |        |            |  |   |        |  |  |  |       |  
|----------------------------------------------------- |  | ------------------------------- | ------- | ---------------- |  | ---------- | ------ | ---------- |  | - | ------ |  |  |  | ----- | -
|                                                      |  | For the Year Ended December 31,
|                                                      |  |                                
|                                                      |  | 2001 Versus 2000                |         | 2000 Versus 1999
|                                                      |  |                                 |         |                 
|                                                      |  | Amount of                       |         |                  |  |            |        | Amount of  |  |   |        | 
|                                                      |  | Increase                        |         | Percent of       |  | Increase   |        | Percent of
|                                                      |  | (Decrease)                      |         | Increase         |  | (Decrease) |        | Increase  
|                                                      |  | (000's)                         |         | (Decrease)       |  | (000's)    |        | (Decrease)
|                                                      |  |                                 |         |                  |  |            |        |           
|Total Interest Income                                 |  |                                 | ($4,217 | )                |  |            | (4.80  | %)         |  | $ | 24,042 |  |  |  | 37.65 | %
|Total Interest Expense                                |  |                                 | (6,384  | )                |  |            | (15.34 | )          |  |   | 15,381 |  |  |  | 58.65 |  
|                                                      |  |                                 |         |                  |  |            |        |            |  |   |        |  |  |  |       |  
|Net Interest Income                                   |  |                                 | 2,167   |                  |  |            | 4.68   |            |  |   | 8,661  |  |  |  | 23.02 |  
|Provision for Credit Losses                           |  |                                 | 95      |                  |  |            | 3.27   |            |  |   | 313    |  |  |  | 12.08 |  
|                                                      |  |                                 |         |                  |  |            |        |            |  |   |        |  |  |  |       |  
|Net Interest Income After
Provision for Credit Losses |  |                                 | 2,072   |                  |  |            | 4.78   |            |  |   | 8,348  |  |  |  | 23.83 |  
|Non-Interest Income                                   |  |                                 | 2,378   |                  |  |            | 26.24  |            |  |   | 2,054  |  |  |  | 29.31 |  
|Non-Interest Expense                                  |  |                                 | 3,336   |                  |  |            | 8.41   |            |  |   | 6,136  |  |  |  | 18.30 |  
|                                                      |  |                                 |         |                  |  |            |        |            |  |   |        |  |  |  |       |  
|Income Before Taxes                                   |  |                                 | 1,114   |                  |  |            | 12.92  |            |  |   | 4,267  |  |  |  | 50.09 |  
|Income Taxes                                          |  |                                 | 512     |                  |  |            | 12.29  |            |  |   | 1,512  |  |  |  | 56.99 |  
|                                                      |  |                                 |         |                  |  |            |        |            |  |   |        |  |  |  |       |  
|Net Income                                            |  | $                               | 602     |                  |  |            | 6.99   |            |  | $ | 2,755  |  |  |  | 46.97 |  
|                                                      |  |                                 |         |                  |  |            |        |            |  |   |        |  |  |  |       |  

GENERAL

VIB Corps financial performance for the year concluded December 31, 2001
was highlighted with record earnings, the merger of the Bank of Stockdale and
Kings River State Bank with and into Valley Independent Bank, and the issuance
of $19.7 million in trust preferred securities through Valley Capital Trust II,
a wholly-owned business trust subsidiary.

VIB Corp was incorporated in California on November 7, 1997 under the laws
of the State of California at the direction of the Board of Directors of VIB
for the purpose of becoming a bank holding company. The holding company
organization was consummated on March 12, 1998, pursuant to a Plan of
Reorganization and Merger Agreement dated November 18, 1997, and each
outstanding share of VIBs Common Stock was converted into one share of the
Companys Common Stock and all outstanding shares of VIBs Common Stock were
transferred to the Company in a transaction accounted for as a pooling of
interests. Further, each outstanding warrant to purchase VIBs Common Stock,
issued in connection with VIBs 1997 unit offering, was converted into a
warrant to purchase the Companys Common Stock. The conversion period for
these warrants expired on October 29, 1999.

On January 28, 1999, VIB Corp acquired Bank of Stockdale, F.S.B.,
Bakersfield, California (Stockdale). As a result of the merger, the Company
acquired total assets of $144.4 million, comprising $9.1 million in cash and
due from banks, $23.5 million in securities and investments, $102.4 million in
net loans and $9.4 million in other assets. Total liabilities assumed amounted
to $134.6 million, of which $128.9 million comprised deposits. The remainder
represented other borrowed funds and other liabilities.

31



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##### Table of Contents



The Stockdale merger was accounted for as a pooling of interests. The
Company issued 2,812,392 shares of its Common Stock (adjusted for subsequent
stock dividends) in exchange for all 1,212,265 shares of Stockdales issued and
outstanding common stock.

Stockdale continued to operate under its federal stock savings bank
charter until May 24, 2001 at which time it was merged with and into VIB
pursuant to a Plan of Reorganization and Agreement of Merger entered into on
March 21, 2001.

On January 22, 1999, VIB acquired Fremont Investment & Loans Hemet branch
office, including substantially all the deposits of the branch. VIB assumed
approximately $112 million in deposits and the lease on the branch premises,
and acquired approximately $27,000 in loans as well as cash on hand and
fixtures and equipment associated with the branch. The consideration paid
amounted to approximately $1.12 million. Goodwill arising from the transaction
totaled approximately $1.14 million.

In connection with the branch acquisition by Valley Independent Bank it
was anticipated that VIB would require additional capitalization. On February
5, 1999, the Company raised approximately $22.2 million in net proceeds from a
trust preferred securities offering in a private placement. The proceeds
were used to increase Valley Independent Banks capital by $8.5 million and the
balance was used for the acquisition of Kings River State Bank and general
corporate purposes. The proceeds to the Company are treated as Tier 1 capital
by the Company for regulatory purposes. (See SUPERVISION AND REGULATION  VIB
 Risk-Based Capital Guidelines herein.) The interest paid by the Company is
deductible. The Company has the right, assuming that no default has occurred,
to defer interest payments at any time and for a period of up to twenty
consecutive calendar quarters. The trust preferred securities can be called
after February 5, 2009.

On September 7, 1999, VIB Corp, Kings River State Bank and Kings River
Bancorp, headquartered in Reedley, California, entered into an Agreement and
Plan of Reorganization pursuant to which Kings River State Bank would become a
wholly-owned subsidiary of VIB Corp and would continue to operate under its
separate California commercial bank charter. Upon consummation of the merger
on January 7, 2000, Kings River Bancorps shareholders received approximately
$21.7 million in exchange for their stock.

For the year ended December 31, 1999, Kings River had total assets of
$87.2 million, interest and non-interest income of $8.0 million and pretax
income of $1.9 million. The acquisition was accounted for using the purchase
method of accounting in accordance with Accounting Principals Board Opinion No.
16, Business Combinations. Under this method of accounting, the purchase
price is allocated to the assets acquired and deposits and liabilities assumed
based on their fair values as of the acquisition date. Goodwill arising from
this transaction totaled $13.6 million and is being amortized over fifteen
years on a straight-line basis. The results of Kings Rivers operations were
included in those reported by the Company beginning January 10, 2000.

Kings River continued to operate under its California commercial bank
charter until May 24, 2001, at which time it was merged with and into VIB
pursuant to a Plan of Reorganization and Agreement of Merger entered into on
March 22, 2001.

In July, 2000, the Company raised approximately $9.6 million in net
proceeds from an offering of trust preferred securities at 11.695%, due July
19, 2030, in a private placement conducted as a part of a pooled offering. The
Company formed a wholly-owned New York common law trust subsidiary, VIBC
Capital Trust I (Trust I), to facilitate the transaction. The proceeds to
the Company are treated as Tier 2 capital for regulatory purposes. The
proceeds were used to increase VIBs capital by $8.5 million, with the balance
used for general corporate purposes. The interest will be deductible by the
Company. The Company has the right, assuming that no default has occurred, to
defer interest

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payments at any time and for a period of up to twenty consecutive calendar
quarters. The trust preferred securities can be called after July 19, 2010.

On December 28, 2000, the Company formed a wholly-owned subsidiary, VIBC
Services Company (VIBC Services), for the purpose of providing centralized
and consolidated support for the Company and its subsidiaries. This support
would include but is not limited to, management information services, retail
bank support, facilities and equipment management and courier service. VIBC
Services was initially capitalized with an infusion of $500,000 from the
Company. VIBC Services has been inactive since January 31, 2001.

On May 24, 2001 Stockdale and Kings River merged with and into VIB
pursuant to the terms of Plans of Reorganization and Agreements of Merger
dated March 21 and March 22, 2001. All of the former offices of Stockdale and
Kings River operate as branches of VIB; however, may continue to use the
Stockdale and Kings River names as DBAs. The merger is anticipated to provide
significant cost savings and improve operating efficiencies by removing layers
of regulatory reporting and operating expenses.

On August 14, 2001, pursuant to a Preferred Shares Rights Agreement (the
Rights Agreement) between the Company and U. S. Stock Transfer Corporation,
as Rights Agent, the Companys Board of Directors declared a dividend of one
right (a Right) to purchase one-thousandth share of the Companys Series A
Participating Preferred Stock (Series A Preferred) for each outstanding share
of the Companys no par value Common Stock. The dividend was paid on August
31, 2001, to shareholders of record as of the close of business on that date.
Each Right entitles the registered holder to purchase from the Company
one-thousandth of a share of Series A Preferred at an exercise price of $40.00,
subject to adjustment. However, if an acquiring party accumulates 15% or more
of the Companys voting stock without the Boards prior approval, each Right
enables its holder (other than the acquiring party) to purchase the Preferred
interest at 50% of the market price. Further, in the event the Company is
acquired in an unwanted merger or business combination, each Right enables the
holder to purchase shares of the acquiring entity at a similar discount. Under
certain circumstances, the Rights may be exchanged for common stock of the
Company. The Board may, in its sole discretion, redeem the Rights at any time
prior to such acquisitions for $.01 per Right. The Rights will expire on
August 14, 2011.

On September 14, 2001 the Company invested $2,000,000 in the Series A
Convertible Preferred Stock of Lenders Services Acquisition Corp. (LSAC),
representing an 22.5% interest in the total issuance of the Series A Preferred
Stock. LSAC is a newly organized Delaware corporation formed for the purpose
of acquiring all of the outstanding stock of Diversified Capital Holdings,
Inc., a California-based insurance holding company whose principal subsidiaries
are Northern Counties Title Insurance Company, a title insurance underwriter,
and South Coast Title Company, a title insurance agency. The Companys
decision to invest in LSAC was made to maintain and diversify sources of
non-interest income. The Series A Preferred Stock was issued by LSAC pursuant
to a private placement to financial institution holding companies. In addition
to the 811,500 shares of the Series A Preferred Stock outstanding, LSAC has
109,090 shares of Common Stock outstanding. The Series A Preferred Stock is
initially convertible into the Common on a one-for-one basis. On September 14,
2001, LSAC also consummated its acquisition of Diversified Capital Holdings,
Inc.

In November, 2001, the Company raised approximately $19.1 million in net
proceeds from an offering of floating rate 6% trust preferred securities in a
private placement conducted as a part of a pooled offering. The proceeds were
used to repurchase $19.2 million of the 9% trust preferred securities issued
in February, 1999, in connection with the Companys first trust preferred
offering, with the balance to be used for general corporate purposes. The
Company formed a wholly-owned Delaware business trust subsidiary, Valley
Capital Trust II (Trust II), to facilitate the transaction. The proceeds to
the Company will be treated as Tier 1 capital for regulatory purposes. The 9%
trust

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preferred securities issued in 1999 were repurchased at a discount. They will
not be retired; however, they will be eliminated for consolidated and
regulatory accounting purposes. As trust preferred securities, they were
treated as Tier 1 capital. The interest will be deductible and paid by the
Company. The Company has the right, assuming that no default has occurred, to
defer interest payments at any time and for a period of up to twenty
consecutive calendar quarters. These trust preferred securities will mature
concurrently on December 8, 2031; but can be called after December 8, 2006 or
earlier upon the occurrence of certain defined events.

The Board of Directors approved 3% stock dividends for shareholders of
record on May 25, 2001 and December 26, 2001. The dividends were paid on June
15, 2001 and January 14, 2002, respectively. Consequently, all per share
information has been restated to reflect the effect of the stock dividends.

Consolidated net income for the year ended December 31, 2001 was $9.2
million or $.71 per share fully diluted based upon average shares outstanding
of 13,072,788. This compares with net income of $8.6 million or $.67 per share
fully diluted based upon the average shares outstanding of 12,929,726 for the
year ended December 31, 2000.

Increases in net interest income and non-interest income partially offset
by increases in non-interest expenses were the primary elements effecting the
increased financial performance in 2001. Net income of $8.6 million in 2000
represented an increase of $2.8 million, or 45.9%, from the $5.9 million net
income earned in 1999. The Companys return on average assets ratio was .82%
in 2001 compared to .80% and .71% in 2000 and 1999, respectively. The return
on average equity ratio in 2001 was 11.96% compared to 13.65% and 10.40%,
respectively, in the two previous years.

Total assets at December 31, 2001 were $1,168.2 million, an increase of
$25.3 million, or 2.2%, compared to December 31, 2000. Total deposits
decreased $25.3 million, or 2.8%, from December 31, 2000, to $884.9 million at
December 31, 2001. During 2001, total loans increased $14.1 million, or 1.7%,
to $837.8 million at December 31, 2001. During 2000 total assets increased
$224.8 million, or 24.5%, from $918.1 million at year-end 1999. Total deposits
increased $208.9 million, or 29.8%, from year-end 1999 to $910.2 million at
December 31, 2000. This increase includes the assumption of deposits acquired
through the purchase of Kings River State Bank. During 2000, total loans
increased $170.3 million, or 26.1%, from December 31, 1999.

At December 31, 2001, the Companys Tier 1 and total capital to risk
weighted assets ratios increased to 10.18% and 11.91%, respectively, when
compared to 8.73% and 10.64%, respectively, at December 31, 2000. At December
31, 1999 the Tier I capital ratio was 10.93% and the total capital ratio was
11.94%. These ratios exceed regulatory requirements.

DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS EQUITY

The following table presents the average amounts outstanding for the major
categories of the Companys assets, liabilities and equity accounts, the amount
and average rate of interest income earned or interest expense paid for each
category of interest-earning asset and interest-bearing liability, and net
interest margin for the periods indicated. Tax-exempt interest income from
investment securities has not been adjusted to a tax-equivalent basis.

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|                                                            |                                 |   |                   |         |                                 |         |           |        |         |  |         |      |          |   |           |         |   |         |        |        |  |  |      |      |   |  | 
|----------------------------------------------------------- | ------------------------------- | - | ----------------- | ------- | ------------------------------- | ------- | --------- | ------ | ------- |  | ------- | ---- | -------- | - | --------- | ------- | - | ------- | ------ | ------ |  |  | ---- | ---- | - |  | 
|                                                            |                                 |   |                   |         | For the Year Ended December 31,
|                                                            |                                 |   |                   |         |                                
|                                                            |                                 |   |                   |         | 2001                            |         | 2000     
|                                                            |                                 |   |                   |         |                                 |         |          
|                                                            |                                 |   |                   |         | Average                         |         | Amount of |        |         |  |         |      | Average  |   | Amount of |         |   |         |       
|                                                            |                                 |   |                   |         | Balance                         |         | Interest  |        | Average |  | Balance |      | Interest |   | Average  
|                                                            |                                 |   |                   |         | (000s)                         |         | (000s)   |        | Rate    |  | (000s) |      | (000s)  |   | Rate     
|                                                            |                                 |   |                   |         |                                 |         |           |        |         |  |         |      |          |   |          
|ASSETS                                                      |                                 |   |                   |         |                                 |         |           |        |         |  |         |      |          |   |           |         |   |         |        |        |  |  |      |     
|Interest-Earning Assets                                     |                                 |   |                   |         |                                 |         |           |        |         |  |         |      |          |   |           |         |   |         |        |        |  |  |      |     
|                                                            | Interest-Earning Deposits       |   | $                 | 612     |                                 |         | $         | 32     |         |  |         | 5.24 | %        |   | $         | 1,540   |   |         | $      | 94     |  |  |      | 6.10 | %
|                                                            | Investment Securities           |   |                   | 182,774 |                                 |         |           | 9,757  |         |  |         | 5.34 |          |   |           | 200,482 |   |         |        | 11,968 |  |  |      | 5.97 |  
|                                                            | Federal Funds Sold              |   |                   | 3,722   |                                 |         |           | 163    |         |  |         | 4.38 |          |   |           | 121     |   |         |        | 8      |  |  |      | 6.61 |  
|                                                            | Net Loans(1)                    |   |                   | 827,459 |                                 |         |           | 73,730 |         |  |         | 8.91 |          |   |           | 763,401 |   |         |        | 75,829 |  |  |      | 9.93 |  
|                                                            |                                 |   |                   |         |                                 |         |           |        |         |  |         |      |          |   |           |         |   |         |        |        |  |  |      |     
|Total Interest-Earning Assets                               |                                 |   | 1,014,568         |         |                                 |         | 83,682    |        |         |  | 8.25    |      |          |   | 965,544   |         |   |         | 87,899 |        |  |  | 9.10 |     
|Non Interest-Earning Assets                                 |                                 |   |                   |         |                                 |         |           |        |         |  |         |      |          |   |           |         |   |         |        |        |  |  |      |     
|                                                            | Cash and Due from Banks         |   |                   | 42,302  |                                 |         |           |        |         |  |         |      |          |   |           | 44,357  |   |         |        |        |  |  |      |      |  
|                                                            | Allowance for Credit Losses     |   |                   | (9,391  | )                               |         |           |        |         |  |         |      |          |   |           | (7,496  | ) |         |        |        |  |  |      |      |  
|                                                            | Premises and Equipment          |   |                   | 13,231  |                                 |         |           |        |         |  |         |      |          |   |           | 13,374  |   |         |        |        |  |  |      |      |  
|                                                            | Other Assets                    |   |                   | 59,572  |                                 |         |           |        |         |  |         |      |          |   |           | 55,478  |   |         |        |        |  |  |      |      |  
|                                                            |                                 |   |                   |         |                                 |         |           |        |         |  |         |      |          |   |           |         |   |         |        |        |  |  |      |     
|Total Non Interest-Earning Assets                           |                                 |   | 105,714           |         |                                 |         |           |        |         |  |         |      |          |   | 105,713   |         |   |         |        |        |  |  |      |     
|                                                            |                                 |   |                   |         |                                 |         |           |        |         |  |         |      |          |   |           |         |   |         |        |        |  |  |      |     
|TOTAL ASSETS                                                |                                 | $ | 1,120,282         |         |                                 |         |           |        |         |  |         |      |          | $ | 1,071,257 |         |   |         |        |        |  |  |      |     
|                                                            |                                 |   |                   |         |                                 |         |           |        |         |  |         |      |          |   |           |         |   |         |        |        |  |  |      |     
|LIABILITIES AND EQUITY                                      |                                 |   |                   |         |                                 |         |           |        |         |  |         |      |          |   |           |         |   |         |        |        |  |  |      |     
|Interest-Bearing Liabilities                                |                                 |   |                   |         |                                 |         |           |        |         |  |         |      |          |   |           |         |   |         |        |        |  |  |      |     
|                                                            | Money Market and Now Accounts   |   | $                 | 202,627 |                                 |         |           | 4,503  |         |  |         | 2.22 |          |   | $         | 178,134 |   |         |        | 5,618  |  |  |      | 3.15 |  
|                                                            | Time and Savings Deposits       |   |                   | 286,153 |                                 |         |           | 12,195 |         |  |         | 4.26 |          |   |           | 303,641 |   |         |        | 14,511 |  |  |      | 4.78 |  
|                                                            | Time Deposits Over $100,000     |   |                   | 195,642 |                                 |         |           | 9,928  |         |  |         | 5.07 |          |   |           | 172,158 |   |         |        | 10,259 |  |  |      | 5.96 |  
|                                                            |                                 |   |                   |         |                                 |         |           |        |         |  |         |      |          |   |           |         |   |         |        |        |  |  |      |     
|                                                            | Total Interest-Bearing Deposits |   |                   | 684,422 |                                 |         |           | 26,626 |         |  |         | 3.89 |          |   |           | 653,933 |   |         |        | 30,388 |  |  |      | 4.65 |  
|                                                            | Borrowed Funds                  |   |                   | 140,581 |                                 |         |           | 8,598  |         |  |         | 6.12 |          |   |           | 159,482 |   |         |        | 11,219 |  |  |      | 7.03 |  
|                                                            |                                 |   |                   |         |                                 |         |           |        |         |  |         |      |          |   |           |         |   |         |        |        |  |  |      |     
|Total Interest-Bearing Liabilities                          |                                 |   | 825,003           |         |                                 |         | 35,224    |        |         |  | 4.27    |      |          |   | 813,415   |         |   |         | 41,607 |        |  |  | 5.11 |     
|                                                            |                                 |   |                   |         |                                 |         |           |        |         |  |         |      |          |   |           |         |   |         |        |        |  |  |      |     
|Non Interest-Bearing Liabilities                            |                                 |   |                   |         |                                 |         |           |        |         |  |         |      |          |   |           |         |   |         |        |        |  |  |      |     
|                                                            |                                 |   | Demand Deposits   |         |                                 | 209,596 |           |        |         |  |         |      |          |   |           |         |   | 187,349 |        |        |  |  |      |      |   |  | 
|                                                            |                                 |   | Other Liabilities |         |                                 | 8,589   |           |        |         |  |         |      |          |   |           |         |   | 7,362   |        |        |  |  |      |      |   |  | 
|                                                            |                                 |   |                   |         |                                 |         |           |        |         |  |         |      |          |   |           |         |   |         |        |        |  |  |      |     
|Total Non Interest-Bearing Liabilities                      |                                 |   | 218,185           |         |                                 |         |           |        |         |  |         |      |          |   | 194,711   |         |   |         |        |        |  |  |      |     
|Shareholders Equity                                        |                                 |   | 77,094            |         |                                 |         |           |        |         |  |         |      |          |   | 63,131    |         |   |         |        |        |  |  |      |     
|                                                            |                                 |   |                   |         |                                 |         |           |        |         |  |         |      |          |   |           |         |   |         |        |        |  |  |      |     
|TOTAL LIABILITIES AND
SHAREHOLDERS EQUITY                  |                                 | $ | 1,120,282         |         |                                 |         |           |        |         |  |         |      |          | $ | 1,071,257 |         |   |         |        |        |  |  |      |     
|                                                            |                                 |   |                   |         |                                 |         |           |        |         |  |         |      |          |   |           |         |   |         |        |        |  |  |      |     
|Net Interest Income                                         |                                 |   |                   |         |                                 | $       | 48,458    |        |         |  |         |      |          |   |           |         |   | $       | 46,292 |        |  |  |      |     
|                                                            |                                 |   |                   |         |                                 |         |           |        |         |  |         |      |          |   |           |         |   |         |        |        |  |  |      |     
|Net Interest Spread                                         |                                 |   |                   |         |                                 |         |           |        |         |  | 3.98    | %    |          |   |           |         |   |         |        |        |  |  | 3.99 | %   
|Net Interest Income as a Percent
of Interest-Earning Assets |                                 |   |                   |         |                                 |         |           |        |         |  | 4.78    | %    |          |   |           |         |   |         |        |        |  |  | 4.79 | %   

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|                                                            |                                 |   |                                 |         |           |   |         |        |  |  |      |      |  
|----------------------------------------------------------- | ------------------------------- | - | ------------------------------- | ------- | --------- | - | ------- | ------ |  |  | ---- | ---- | -
|                                                            |                                 |   | For the Year Ended December 31,
|                                                            |                                 |   | 1999                           
|                                                            |                                 |   |                                
|                                                            |                                 |   | Average                         |         | Amount of |   |         |        | 
|                                                            |                                 |   | Balance                         |         | Interest  |   | Average
|                                                            |                                 |   | (000's)                         |         | (000's)   |   | Rate   
|                                                            |                                 |   |                                 |         |           |   |        
|ASSETS                                                      |                                 |   |                                 |         |           |   |         |        |  |  |      |     
|Interest-Earning Assets                                     |                                 |   |                                 |         |           |   |         |        |  |  |      |     
|                                                            | Interest-Earning Deposits       |   | $                               | 775     |           |   | $       | 40     |  |  |      | 5.16 | %
|                                                            | Investment Securities           |   |                                 | 176,159 |           |   |         | 9,693  |  |  |      | 5.50 |  
|                                                            | Federal Funds Sold              |   |                                 | 9,939   |           |   |         | 534    |  |  |      | 5.37 |  
|                                                            | Net Loans(1)                    |   |                                 | 569,471 |           |   |         | 53,590 |  |  |      | 9.41 |  
|                                                            |                                 |   |                                 |         |           |   |         |        |  |  |      |     
|Total Interest-Earning Assets                               |                                 |   | 756,344                         |         |           |   | 63,857  |        |  |  | 8.44 |     
|Non Interest-Earning Assets                                 |                                 |   |                                 |         |           |   |         |        |  |  |      |     
|                                                            | Cash and Due from Banks         |   |                                 | 37,510  |           |   |         |        |  |  |      |      |  
|                                                            | Allowance for Credit Losses     |   |                                 | (5,169  | )         |   |         |        |  |  |      |      |  
|                                                            | Premises and Equipment          |   |                                 | 12,395  |           |   |         |        |  |  |      |      |  
|                                                            | Other Assets                    |   |                                 | 29,142  |           |   |         |        |  |  |      |      |  
|                                                            |                                 |   |                                 |         |           |   |         |        |  |  |      |     
|Total Non Interest-Earning Assets                           |                                 |   | 73,878                          |         |           |   |         |        |  |  |      |     
|                                                            |                                 |   |                                 |         |           |   |         |        |  |  |      |     
|TOTAL ASSETS                                                |                                 | $ | 830,222                         |         |           |   |         |        |  |  |      |     
|                                                            |                                 |   |                                 |         |           |   |         |        |  |  |      |     
|LIABILITIES AND EQUITY                                      |                                 |   |                                 |         |           |   |         |        |  |  |      |     
|Interest-Bearing Liabilities                                |                                 |   |                                 |         |           |   |         |        |  |  |      |     
|                                                            | Money Market and Now Accounts   |   | $                               | 140,425 |           |   |         | 3,363  |  |  |      | 2.39 |  
|                                                            | Time and Savings Deposits       |   |                                 | 267,559 |           |   |         | 11,011 |  |  |      | 4.12 |  
|                                                            | Time Deposits Over $100,000     |   |                                 | 123,974 |           |   |         | 6,366  |  |  |      | 5.13 |  
|                                                            |                                 |   |                                 |         |           |   |         |        |  |  |      |     
|                                                            | Total Interest-Bearing Deposits |   |                                 | 531,958 |           |   |         | 20,740 |  |  |      | 3.90 |  
|                                                            | Borrowed Funds                  |   |                                 | 83,950  |           |   |         | 5,486  |  |  |      | 6.53 |  
|                                                            |                                 |   |                                 |         |           |   |         |        |  |  |      |     
|Total Interest-Bearing Liabilities                          |                                 |   | 615,908                         |         |           |   | 26,226  |        |  |  | 4.26 |     
|                                                            |                                 |   |                                 |         |           |   |         |        |  |  |      |     
|Non Interest-Bearing Liabilities                            |                                 |   |                                 |         |           |   |         |        |  |  |      |     
|                                                            | Demand Deposits                 |   |                                 | 153,027 |           |   |         |        |  |  |      |      |  
|                                                            | Other Liabilities               |   |                                 | 4,903   |           |   |         |        |  |  |      |      |  
|                                                            |                                 |   |                                 |         |           |   |         |        |  |  |      |     
|Total Non Interest-Bearing Liabilities                      |                                 |   | 157,930                         |         |           |   |         |        |  |  |      |     
|Shareholders Equity                                        |                                 |   | 56,384                          |         |           |   |         |        |  |  |      |     
|                                                            |                                 |   |                                 |         |           |   |         |        |  |  |      |     
|TOTAL LIABILITIES AND
SHAREHOLDERS EQUITY                  |                                 | $ | 830,222                         |         |           |   |         |        |  |  |      |     
|                                                            |                                 |   |                                 |         |           |   |         |        |  |  |      |     
|Net Interest Income                                         |                                 |   |                                 |         |           | $ | 37,631  |        |  |  |      |     
|                                                            |                                 |   |                                 |         |           |   |         |        |  |  |      |     
|Net Interest Spread                                         |                                 |   |                                 |         |           |   |         |        |  |  | 4.18 | %   
|Net Interest Income as a Percent
of Interest-Earning Assets |                                 |   |                                 |         |           |   |         |        |  |  | 4.98 | %   



---

|(1) |  | Yields and amounts include loan fees and late charges of $3,983,160,
$3,891,020, and $3,368,923, for the years ended December 31, 2001, 2000
and 1999, respectively.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------

NET INTEREST INCOME AND NET INTEREST MARGIN

Average interest-earning assets totaled $1,014.6 million in 2001, an
increase of $49.0 million, or 5.1%, compared to 2000. This growth was
highlighted by an increase in average total loans of $64.1 million, or 8.4%, to
$827.5 million as compared to $763.4 million for the previous year. Investment
securities decreased by $17.7 million, or 8.8%, from $200.5 million in 2000 to
$182.8 million in 2001. In 2000 average interest-earning assets increased
$209.2 million, or 27.7%, from the 1999 average of $756.3 million, fueled by a
$193.9 million, or 34.1%, growth in average total loans..

Average interest-bearing liabilities grew $11.6 million, or 1.4%, from
$813.4 million for 2000 to $825.0 million for 2001. During 2001 average
interest-bearing deposit categories increased $30.5 million, or 4.7%, to $684.4
million. Average borrowed funds decreased $18.9 million, or 11.9%, to

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$140.6 million. These changes were the result of efforts, made in late
2000, to reduce VIBs dependency on borrowed funds. In 2000, average
interest-bearing liabilities increased $197.5 million, or 32.1%, from $615.9
million for 1999. Average borrowed funds increased $75.5 million, or 90.0%
from $84.0 million for 1999. The changes in 2000 in average deposits and
borrowed funds reflect the effects of the merger with Kings River.

Interest income in 2001 was $83.7 million, a decrease of $4.2 million, or
4.8%, compared to 2000. The decrease in interest income was primarily the
result of a decreased rate environment. Although loan volumes increased by
over $64 million on average, it was not enough to overcome the result of 11
interest rate reductions by the Federal Reserve. The yield on interest-earning
assets decreased 85 basis points to 8.25% in 2001 from 9.10% in 2000. The
yield on the loan portfolio, the largest portion of the Companys
interest-earning assets, decreased 102 basis points, from 9.93% in 2000 to
8.91% in 2001.

Interest expense decreased $6.4 million, or 15.3%, to $35.2 million during
2001. The decrease in interest expense was also primarily the result of a
decreased rate environment. The cost of interest-bearing liabilities decreased
84 basis points from 5.11% in 2000 to 4.27% in 2001.

Net interest income was $48.5 million for 2001, which represented an
increase from the prior year of $2.2 million, or 4.7%. The net interest spread
percentage, which represents the difference between the rate earned on average
interest-earning assets and the rate paid on average interest-bearing
liabilities, decreased to 3.98% for the year-ending December 31, 2001, compared
to 3.99% in 2000. During 2001, a period of historic rate reductions, the
Company was able to maintain its spread by working diligently on the repricing
of its interest-bearing liabilities as yields on its assets declined. Net
interest income as a percentage of average interest-earning assets, or the net
interest margin, decreased to 4.78% in 2001 compared to 4.79% in 2000. The
Company was able to virtually maintain its net interest spread and net interest
margin percentages in spite of the repricing effect of interest-earning assets
and interest-bearing liabilities in a lower rate environment due to the greater
proportionate growth in the higher yielding interest-earning asset categories,
and a lower cost mix of interest-bearing liabilities.

Net interest income, which amounted to $46.3 million in 2000, represented
an increase of $8.7 million, or 23.0%, compared to 1999. Interest income was
$87.9 million, an increase of $24.0 million, or 37.6%, compared to 1999. The
increase in interest income was the result of volume increases in investment
securities and loans partially as a result of the Kings River acquisition and
an increased rate environment. The yield on interest-earning assets increased
66 basis points to 9.10% in 2000 from 8.44% in 1999. Interest expense
increased $15.4 million, or 58.6%, to $41.6 million during 2000. The increase
in interest expense was primarily the result of volume increases in all
interest-bearing categories partially due to the acquisition of Kings River
with a proportionally greater increase in higher costing certificates of
deposit and borrowed funds as well as the addition of the trust preferred debt
in the third quarter. The increase was partially caused by a higher rate
environment and the addition of interest expense from Kings River. The cost of
total interest-bearing liabilities increased 85 basis points from 4.26% in 1999
to 5.11% in 2000. Net interest income, as a percent of average
interest-earning assets, fell from 4.98% in 1999 to 4.79% in 2000. The
decrease in net interest margin was primarily attributable to a shift to higher
cost liabilities.

The following table sets forth the dollar amount of changes in interest
earned and paid for each major category of interest-earning assets and
interest-bearing liabilities and the amount of changes attributable to changes
in average balances (volume) or changes in average interest rates. The
variances attributable to both balance and rate changes have been allocated to
volume and rate changes in proportion to the relationship of the absolute
dollar amounts of the changes in each category. Tax-exempt interest income
from investment securities has not been adjusted to a tax-equivalent basis
since the effect of such an adjustment would not be material.

37



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|                             |                                              |  |                              |        |                              |  |        |        |        |  |      |        |        |  |   |        |   |  |   |       |     |  |   |        |  
|---------------------------- | -------------------------------------------- |  | ---------------------------- | ------ | ---------------------------- |  | ------ | ------ | ------ |  | ---- | ------ | ------ |  | - | ------ | - |  | - | ----- | --- |  | - | ------ | -
|                             |                                              |  | Year Ended December 31, 2001 |        | Year Ended December 31, 2000
|                             |                                              |  | over                         |        | over                        
|                             |                                              |  | Year Ended December 31, 2000 |        | Year Ended December 31, 1999
|                             |                                              |  | Increase/Decrease Due        |        | Increase/Decrease Due       
|                             |                                              |  | To Change in (000's)         |        | To Change in (000's)        
|                             |                                              |  |                              |        |                             
|                             |                                              |  |                              |        |                              |  |        |        |        |  | Net  |        |        |  |   |        |   |  |   |       | Net
|                             |                                              |  | Volume                       |        | Rate                         |  | Change |        | Volume |  | Rate |        | Change
|                             |                                              |  |                              |        |                              |  |        |        |        |  |      |        |       
|Interest-Earning Assets      |                                              |  |                              |        |                              |  |        |        |        |  |      |        |        |  |   |        |   |  |   |       |     |  |   |       
|                             | Interest-Earning Deposits                    |  | $                            | (57    | )                            |  | $      | (5     | )      |  | $    | (62    | )      |  | $ | 39     |   |  | $ | 15    |     |  | $ | 54     |  
|                             | Investment Securities                        |  |                              | (1,057 | )                            |  |        | (1,154 | )      |  |      | (2,211 | )      |  |   | 1,338  |   |  |   | 937   |     |  |   | 2,275  |  
|                             | Federal Funds Sold                           |  |                              | 238    |                              |  |        | (83    | )      |  |      | 155    |        |  |   | (527   | ) |  |   | 1     |     |  |   | (526   | )
|                             | Net Loans(1)(2)                              |  |                              | 6,363  |                              |  |        | (8,462 | )      |  |      | (2,099 | )      |  |   | 18,250 |   |  |   | 3,989 |     |  |   | 22,239 |  
|                             |                                              |  |                              |        |                              |  |        |        |        |  |      |        |        |  |   |        |   |  |   |       |     |  |   |       
|                             | Total Interest Income                        |  | $                            | 5,487  |                              |  | $      | (9,704 | )      |  | $    | (4,217 | )      |  | $ | 19,100 |   |  | $ | 4,942 |     |  | $ | 24,042 |  
|                             |                                              |  |                              |        |                              |  |        |        |        |  |      |        |        |  |   |        |   |  |   |       |     |  |   |       
|Interest-Bearing Liabilities |                                              |  |                              |        |                              |  |        |        |        |  |      |        |        |  |   |        |   |  |   |       |     |  |   |       
|                             | Money Market and NOW                         |  | $                            | 772    |                              |  | $      | (1,888 | )      |  | $    | (1,115 | )      |  | $ | 903    |   |  | $ | 1,352 |     |  | $ | 2,255  |  
|                             | Time and Savings                             |  |                              | (836   | )                            |  |        | (1,480 | )      |  |      | (2,316 | )      |  |   | 1,485  |   |  |   | 2,015 |     |  |   | 3,500  |  
|                             | Time Deposits Over $100,000                  |  |                              | 1,399  |                              |  |        | (1,730 | )      |  |      | (331   | )      |  |   | 2,474  |   |  |   | 1,419 |     |  |   | 3,893  |  
|                             | Borrowed Funds                               |  |                              | (1,330 | )                            |  |        | (1,291 | )      |  |      | (2,621 | )      |  |   | 4,936  |   |  |   | 797   |     |  |   | 5,733  |  
|                             |                                              |  |                              |        |                              |  |        |        |        |  |      |        |        |  |   |        |   |  |   |       |     |  |   |       
|                             | Total Interest Expense                       |  |                              | 6      |                              |  |        | (6,389 | )      |  |      | (6,383 | )      |  |   | 9,798  |   |  |   | 5,583 |     |  |   | 15,381 |  
|                             |                                              |  |                              |        |                              |  |        |        |        |  |      |        |        |  |   |        |   |  |   |       |     |  |   |       
|                             | Interest Differential or
Net Interest Income |  | $                            | 5,481  |                              |  | $      | (3,315 | )      |  | $    | 2,166  |        |  | $ | 9,302  |   |  | $ | (641  | )   |  | $ | 8,661  |  
|                             |                                              |  |                              |        |                              |  |        |        |        |  |      |        |        |  |   |        |   |  |   |       |     |  |   |       



---

|(1) |  | The average balance of non-accruing loans is immaterial as a percentage
of total loans and as such have been included in net loans.                                                          
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Loan fees and late charges of $3,983,160, $3,891,020 and $3,368,923 for
the years ended December 31,2001, 2000 and 1999, respectively, have been
included in the interest income computation.

LOANS

Total loans averaged $827.5 million in 2001, an increase of $64.1 million,
or 8.4%, compared to 2000. The average loan growth is reflective of an overall
strong lending economic environment. At December 31, 2001 total loans were
$837.8 million, representing an increase of $14.1 million, or 1.7%, over
December 31, 2000. The yield on the total portfolio decreased 102 basis
points to 8.91% in 2001, from 9.93% in 2000. This decrease in yield was the
result of repricing of variable-rate loans and the addition of new volume in an
overall lower interest rate environment.

In 2000 total loans averaged $763.4 million, which represented an increase
of $193.9 million, or 34.1%, compared to 1999. At December 31, 2000, total
loans were $823.7 million, which represented an increase of $170.3 million, or
26.1%, over December 31, 1999. The yield on the total portfolio increased 52
basis points to 9.93% in 2000 from 9.41% in 1999. This increase was the result
of repricing of variable-rate loans in an overall higher interest rate
environment.

The Companys loan portfolio represents the diversification of the markets
served. Although the Company seeks to avoid concentrations of loans to a
single industry or based upon a single class of collateral, real estate and
agricultural associated businesses are among the principal industries in the
Companys market areas. As a result, the Companys loan and collateral
portfolios are, to some degree, concentrated in those industries.

The following table sets forth the amount of the Companys total
outstanding loans, net of participations sold, in each category. The retained
portions of SBA loans, as well as the guaranteed portion of such loans held for
sale, are included primarily within the commercial and real estate construction
loan totals. During the year 2001, the Company undertook a systematic review
of its loan portfolio, resulting in several reclassifications to conform to
regulatory call report categories. The loan balances for prior periods have
not been reclassified.

38



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|                            |  |              |         |          |  |         |       |          |  |         |         |          |  |  |       |   |  |   |         |  |  |  |        |  
|--------------------------- |  | ------------ | ------- | -------- |  | ------- | ----- | -------- |  | ------- | ------- | -------- |  |  | ----- | - |  | - | ------- |  |  |  | ------ | -
|                            |  | December 31,
|                            |  |             
|                            |  | 2001         |         | 2000     |  | 1999   
|                            |  |              |         |          |  |        
|                            |  | Amount       |         | Percent  |  | Amount  |       | Percent  |  | Amount  |         | Percent 
|                            |  | (000's)      |         | of Total |  | (000's) |       | of Total |  | (000's) |         | of Total
|                            |  |              |         |          |  |         |       |          |  |         |         |         
|Commercial and Agricultural |  | $            | 138,032 |          |  |         | 16.4  | %        |  | $       | 209,238 |          |  |  | 25.3  | % |  | $ | 180,129 |  |  |  | 27.4   | %
|Real Estate  Construction  |  |              | 164,862 |          |  |         | 19.6  |          |  |         | 129,170 |          |  |  | 15.6  |   |  |   | 89,168  |  |  |  | 13.3   |  
|Real Estate  Other         |  |              | 506,506 |          |  |         | 60.1  |          |  |         | 453,041 |          |  |  | 54.7  |   |  |   | 344,379 |  |  |  | 52.4   |  
|Installment                 |  |              | 32,521  |          |  |         | 3.9   |          |  |         | 36,281  |          |  |  | 4.4   |   |  |   | 43,083  |  |  |  | 6.6    |  
|                            |  |              |         |          |  |         |       |          |  |         |         |          |  |  |       |   |  |   |         |  |  |  |        |  
|Total Loans                 |  | $            | 841,921 |          |  |         | 100.0 | %        |  | $       | 827,730 |          |  |  | 100.0 | % |  | $ | 656,759 |  |  |  | 100.00 | %
|                            |  |              |         |          |  |         |       |          |  |         |         |          |  |  |       |   |  |   |         |  |  |  |        |  

|                            |  |              |         |          |  |         |        |          |  |   |         |  |  |  |       |  
|--------------------------- |  | ------------ | ------- | -------- |  | ------- | ------ | -------- |  | - | ------- |  |  |  | ----- | -
|                            |  | December 31,
|                            |  |             
|                            |  | 1998         |         | 1997    
|                            |  |              |         |         
|                            |  | Amount       |         | Percent  |  | Amount  |        | Percent 
|                            |  | (000's)      |         | of Total |  | (000's) |        | of Total
|                            |  |              |         |          |  |         |        |         
|Commercial and Agricultural |  | $            | 116,634 |          |  |         | 23.2   | %        |  | $ | 102,150 |  |  |  | 25.1  | %
|Real Estate  Construction  |  |              | 61,680  |          |  |         | 12.3   |          |  |   | 43,674  |  |  |  | 10.8  |  
|Real Estate  Other         |  |              | 276,809 |          |  |         | 55.2   |          |  |   | 220,174 |  |  |  | 54.1  |  
|Installment                 |  |              | 46,719  |          |  |         | 9.3    |          |  |   | 40,653  |  |  |  | 10.0  |  
|                            |  |              |         |          |  |         |        |          |  |   |         |  |  |  |       |  
|Total Loans                 |  | $            | 501,482 |          |  |         | 100.00 | %        |  | $ | 406,651 |  |  |  | 100.0 | %
|                            |  |              |         |          |  |         |        |          |  |   |         |  |  |  |       |  

NON-PERFORMING ASSETS

Non-performing assets consist of non-accrual loans, certain past due loans
not on non-accrual, and properties taken in foreclosure. Non-accrual loans
include loans that are past due 90 days or more as to principal or interest, or
where reasonable doubt exists as to timely collectibility. At the time a loan
is placed on non-accrual status, previously accrued and uncollected interest is
reversed against interest income in the current period. Interest collections
on non-accrual loans are generally credited to interest income when received.
However, if ultimate collectibility of principal is in doubt, interest
collections are applied as principal reductions.

Interest accruals cease on commercial, mortgage and consumer loans,
excluding home equity loans, when they are 90 days past due. At that time,
previously accrued and uncollected interest is reversed against income. For
home equity loans, accruals cease at 180 days and uncollected interest is
reversed against interest income. Thereafter, these loans are continually
reviewed and charged off when deemed uncollectible.

The following table provides information with respect to components of the
Companys non-performing loans. The Company had $6.1 million and $4.2 million
in restructured loans outstanding as of December 31, 2001 and 2000,
respectively. There were $3.9 million in restructured loans outstanding at
December 31, 1999.

|                               |                              |   |              |     |         |   |         |    |         |   |         |    |  |   |       |     |  |   |        |     | 
|------------------------------ | ---------------------------- | - | ------------ | --- | ------- | - | ------- | -- | ------- | - | ------- | -- |  | - | ----- | --- |  | - | ------ | --- | 
|                               |                              |   | December 31,
|                               |                              |   |             
|                               |                              |   | 2001         |     | 2000    |   | 1999    |    | 1998    |   | 1997   
|                               |                              |   | (000's)      |     | (000's) |   | (000's) |    | (000's) |   | (000's)
|                               |                              |   |              |     |         |   |         |    |         |   |        
|Non-Accrual Loans              |                              | $ | 14,095       |     |         | $ | 12,302  |    |         | $ | 6,185   |    |  | $ | 4,315 |     |  | $ | 5,194  |    
|Loans Past Due 90 Days or More |                              |   |              |     |         |   |         |    |         |   |         |    |  |   |       |     |  |   |        |    
|                               | But Not on Non-Accrual Basis |   |              | -0- |         |   |         | 83 |         |   |         | 16 |  |   |       | 567 |  |   |        | 525 | 
|Restructured Loans             |                              |   | 6,072        |     |         |   | 3,327   |    |         |   | 2,779   |    |  |   | 4,819 |     |  |   | 4,371  |    
|                               |                              |   |              |     |         |   |         |    |         |   |         |    |  |   |       |     |  |   |        |    
|Total                          |                              | $ | 20,167       |     |         | $ | 15,712  |    |         | $ | 8,980   |    |  | $ | 9,701 |     |  | $ | 10,090 |    
|                               |                              |   |              |     |         |   |         |    |         |   |         |    |  |   |       |     |  |   |        |    

During the third quarter of 2001, a large hotel loan representing
approximately $9.4 million, was placed on non-accrual status. Recovery,
including interest, is in process for the fully secured loan and it is expected
to be brought current by the end of the first quarter of 2002.

39



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##### Table of Contents



The following table sets forth the gross interest income that would have
been recorded for the period indicated if the non-accrual loans had been
current in accordance with their terms and the amount of interest income
recognized on these loans:

|                                 |  |                              |         | 
|-------------------------------- |  | ---------------------------- | ------- | 
|                                 |  | Year Ended December 31, 2001
|                                 |  |                             
|Interest Income  Original Terms |  | $                            | 732,398 | 
|Interest Income  Recorded       |  |                              | 169,032 | 
|                                 |  |                              |         | 
|Forgiven Interest Income         |  | $                            | 563,366 | 
|                                 |  |                              |         | 

Properties taken in foreclosure, or other real estate owned, constitute
another category of non-performing assets. Other real estate owned, consisting
of 15 properties at year end December 31, 2001, increased from $1,359,905 at
December 31, 2000 to $3,138,697 at December 31, 2001. The properties combined
appraised value is approximately $5,285,000 and the Company is actively
marketing them for sale.

In addition to the nonperforming and restructured loans discussed
previously, the Company has identified approximately $40 million in loans that
have a higher than normal risk of loss. These loans have been placed on an
internal watch list for special attention and are closely monitored for any
changes in risk or deterioration of repayment ability. As of December 31,
2001, approximately $8.5 million were commercial loans, and approximately $31.5
million were real estate loans. Some of these loans are in various stages of
collection; however, no assurance can be given that the loans will be
successfully collected or that adequate loan loss reserves have been
established for these loans.

INVESTMENTS

Total investments averaged $182.8 million in 2001, representing a decrease
of $17.7 million from 2000. At December 31, 2001, the investment portfolio
amounted to $194.5 million, an increase of $2.2 million compared to December
31, 2000. At December 31, 2001, the yield of the available-for- sale portfolio
on a tax-equivalent basis decreased 161 basis points to 5.85%. This decrease
was the result of the recomposition of the portfolio due to the overall lower
interest rate environment and leveraging strategies employed to enhance
earnings.

The main investment strategy for 2001 was to utilize proceeds from
prepayments and maturing securities to fund loan demand and provide liquidity.
The portfolio maintains securities whose characteristics provide additional
liquidity to fund future loan growth. Additionally, portions of the investment
portfolio were allocated to community development investing in the service area
of Valley Independent Bank. Another strategy used during 2001 was to borrow
funds at a fixed cost and reinvest those funds in investment securities at a
higher yield. This strategy holds limited interest rate risk and can provide
similar positive earnings in both increasing and decreasing rate environments.

U.S. Government and federal agencies averaged $102.3 million during 2001,
a decrease of $14.0 million, or 12.0%. This decrease reflected the strategy to
provide liquidity for anticipated loan growth. The yield on the portfolio
decreased 40 basis points to 5.84% at December 31, 2001, compared to 6.24% at
December 31, 2000.

State and municipal securities decreased on average $15.7 million to $52.2
million. The tax-equivalent yield on this portfolio decreased 296 basis points
to 6.44% at December 31, 2001, compared with 9.40% at December 31, 2000.

Federal funds sold averaged $3.7 million in 2001, an increase of $3.6 million,
or 2,976.0%, compared to 2000. At December 31, 2001, there was $1.5 million in
Federal funds sold outstandings. These funds represent excess funds
temporarily invested. The yield on Federal funds decreased 223

40



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##### Table of Contents



basis points to 4.38% in 2001. The decrease in yield was reflective of
the lower overnight investment interest rate environment.

The investment portfolio averaged $200.5 million during 2000, representing
an increase of $24.3 million from 1999. At December 31, 2000, total
investments amounted to $192.3 million, an increase of $30.3 million compared
to December 31, 1999. The available for sale portfolio yield on a
tax-equivalent basis increased 136 basis points in 2000 to 7.46% as a result of
the higher interest rate environment during 2000, as well as the recomposition
of the portfolio due to the acquisition of Kings River State Bank.

Securities are pledged to meet security requirements imposed as a
condition to receipt of public fund deposits. At December 31, 2001 and
December 31, 2000, the market value of securities pledged to secure public
deposits was approximately $29.6 million and $24.2 million, respectively.

The following tables summarize the amounts and distribution of the
Companys investment securities held as of the dates indicated, and the
weighted tax-equivalent average yield.

|                                          |                   |                   |         |              |        |        |         |          |        |           |      |        |      |          |         |        |        |   |         |        |        |  |      |      |       | 
|----------------------------------------- | ----------------- | ----------------- | ------- | ------------ | ------ | ------ | ------- | -------- | ------ | --------- | ---- | ------ | ---- | -------- | ------- | ------ | ------ | - | ------- | ------ | ------ |  | ---- | ---- | ----- | 
|                                          |                   |                   |         | December 31,
|                                          |                   |                   |         |             
|                                          |                   |                   |         | 2001         |        | 2000  
|                                          |                   |                   |         |              |        |       
|                                          |                   |                   |         | Amortized    |        | Market |         | Weighted |        | Amortized |      | Market |      | Weighted
|                                          |                   |                   |         | Cost         |        | Value  |         | Average  |        | Cost      |      | Value  |      | Average 
|Maturity                                  |                   | (000's)           |         | (000's)      |        | Yield  |         | (000's)  |        | (000's)   |      | Yield 
|                                          |                   |                   |         |              |        |        |         |          |        |           |      |       
|U.S. Treasury & Government Agencies:      |                   |                   |         |              |        |        |         |          |        |           |      |        |      |          |         |        |        |   |         |        |        |  |      |     
|                                          | Within One Year   |                   | $       | 22,523       |        |        | $       | 22,518   |        |           |      | 7.13   | %    |          | $       | 3,034  |        |   | $       | 3,026  |        |  |      | 5.95 | %    
|                                          | One to Five Years |                   |         | 27,459       |        |        |         | 27,585   |        |           |      | 4.92   |      |          |         | 68,707 |        |   |         | 68,183 |        |  |      | 5.91 |      
|                                          | Over Five Years   |                   |         | 72,561       |        |        |         | 72,778   |        |           |      | 5.80   |      |          |         | 38,422 |        |   |         | 38,255 |        |  |      | 6.84 |      
|                                          |                   |                   |         |              |        |        |         |          |        |           |      |        |      |          |         |        |        |   |         |        |        |  |      |     
|Total U.S. Treasury & Government Agencies |                   |                   | 122,543 |              |        |        | 122,881 |          |        |           | 5.84 |        |      |          | 110,163 |        |        |   | 109,464 |        |        |  | 6.24 |     
|State and Political Subdivisions:         |                   |                   |         |              |        |        |         |          |        |           |      |        |      |          |         |        |        |   |         |        |        |  |      |     
|                                          |                   | Within One Year   |         |              | 3,190  |        |         |          | 3,220  |           |      |        | 5.46 |          |         |        | 2,829  |   |         |        | 2,814  |  |      |      | 6.81  | 
|                                          |                   | One to Five Years |         |              | 5,389  |        |         |          | 5,481  |           |      |        | 5.84 |          |         |        | 15,621 |   |         |        | 15,474 |  |      |      | 7.64  | 
|                                          |                   | Over Five Years   |         |              | 30,892 |        |         |          | 30,415 |           |      |        | 6.65 |          |         |        | 49,259 |   |         |        | 49,314 |  |      |      | 10.09 | 
|                                          |                   |                   |         |              |        |        |         |          |        |           |      |        |      |          |         |        |        |   |         |        |        |  |      |     
|Total State and Political Subdivisions    |                   |                   | 39,471  |              |        |        | 39,116  |          |        |           | 6.44 |        |      |          | 67,709  |        |        |   | 67,602  |        |        |  | 9.40 |     
|Total Other Securities                    |                   |                   | 32,164  |              |        |        | 32,474  |          |        |           | 5.16 |        |      |          | 13,032  |        |        |   | 12,811  |        |        |  | 7.69 |     
|                                          |                   |                   |         |              |        |        |         |          |        |           |      |        |      |          |         |        |        |   |         |        |        |  |      |     
|Total Available-for-Sale Securities       |                   | $                 | 194,178 |              |        | $      | 194,471 |          |        |           | 5.85 |        |      | $        | 190,904 |        |        | $ | 189,877 |        |        |  | 7.46 |     
|                                          |                   |                   |         |              |        |        |         |          |        |           |      |        |      |          |         |        |        |   |         |        |        |  |      |     

|                                          |                   |         |                   |         |        |       |          |        |  |  |      |      |  
|----------------------------------------- | ----------------- | ------- | ----------------- | ------- | ------ | ----- | -------- | ------ |  |  | ---- | ---- | -
|                                          |                   |         | December 31, 1999
|                                          |                   |         |                  
|                                          |                   |         | Amortized         |         | Market |       | Weighted
|                                          |                   |         | Cost              |         | Value  |       | Average 
|Maturity                                  |                   | (000's) |                   | (000's) |        | Yield
|                                          |                   |         |                   |         |        |      
|U.S. Treasury & Government Agencies:      |                   |         |                   |         |        |       |          |        |  |  |      |     
|                                          | Within One Year   |         | $                 | 597     |        |       | $        | 607    |  |  |      | 8.22 | %
|                                          | One to Five Years |         |                   | 63,661  |        |       |          | 61,580 |  |  |      | 5.76 |  
|                                          | Over Five Years   |         |                   | 38,120  |        |       |          | 36,693 |  |  |      | 6.24 |  
|                                          |                   |         |                   |         |        |       |          |        |  |  |      |     
|Total U.S. Treasury & Government Agencies |                   |         | 102,378           |         |        |       | 98,880   |        |  |  | 5.95 |     
|State and Political Subdivisions:         |                   |         |                   |         |        |       |          |        |  |  |      |     
|                                          | Within One Year   |         |                   | 340     |        |       |          | 342    |  |  |      | 7.78 |  
|                                          | One to Five Years |         |                   | 17,998  |        |       |          | 17,522 |  |  |      | 5.94 |  
|                                          | Over Five Years   |         |                   | 38,661  |        |       |          | 35,871 |  |  |      | 6.44 |  
|                                          |                   |         |                   |         |        |       |          |        |  |  |      |     
|Total State and Political Subdivisions    |                   |         | 56,999            |         |        |       | 53,735   |        |  |  | 6.29 |     
|Total Other Securities                    |                   |         | 7,269             |         |        |       | 6,472    |        |  |  | 6.76 |     
|                                          |                   |         |                   |         |        |       |          |        |  |  |      |     
|Total Available-for-Sale Securities       |                   | $       | 166,646           |         |        | $     | 159,087  |        |  |  | 6.10 |     
|                                          |                   |         |                   |         |        |       |          |        |  |  |      |     

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DEPOSITS

Total deposits averaged $894.0 million during 2001, an increase of $52.7
million, or 6.3%, compared with 2000. At December 31, 2001 total deposits were
$884.9 million, representing a decrease of $25.3 million, or 2.8%, from
December 31, 2000. The reduction in outstanding balances is mostly
attributable to the Companys planned pricing strategy to preserve net interest
spread and net interest margin and to allow runoff of non-core deposits. The
cost of deposits in 2001 was 2.98%, a decrease of 63 basis points from 3.61% in
2000. This decrease is attributable to the lower overall interest rate
environment in 2001 and a shift in mix to the lower costing demand deposits.

During 2001 demand deposits averaged $209.6 million, an increase of $22.3
million, or 11.9%, from the average $187.3 million for 2000. Demand deposits
amounted to $239.8 million at year-end 2001, representing an increase of $28.3
million, or 13.4%, compared to the prior year end.

Money market and NOW accounts averaged $202.6 million in 2001, an increase
of $24.5 million, or 13.7%, from 2000. These accounts totaled $205.1 million
at year end, a decrease of $3.1 million, or 1.5%, from year end 2000. Regular
savings deposits decreased $2.6 million, or 3.9%, from 2000 to average $64.8
million in 2001. At year end these deposits amounted to $63.8 million, an
increase of $1.2 million, or 1.8%, compared to the prior year end. Total time
deposits averaged $417.0 million in 2001, an increase of $8.6 million, or 2.1%,
compared with 2000. At December 31, 2001 these balances totaled $376.2
million, a decrease of $51.6 million, or 12.1%, from the prior year end. The
cost of total interest-bearing deposits decreased to 3.89% in 2001 from 4.65%
in 2000, or 76 basis points. This decrease in overall cost was primarily the
result of a lower interest rate environment.

In 2000 total deposits averaged $841.3 million, representing an increase
of $156.7 million, or 22.8%, compared to 1999. At December 31, 2000 total
deposits amounted to $910.2 million, an increase of $208.9 million, or 29.8%,
from the prior year end. The cost of deposits was 3.61% in 2000 and
represented an increase of 55 basis points from 3.06% in 1999. The cost of
total interest-bearing deposits increased to 4.65% in 2000 from 3.90% in 1999,
or 75 basis points. This increase in overall cost was primarily the result of
a higher interest rate environment and a shift in mix toward higher cost time
deposits.

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The following schedules reflect the Companys deposits, based upon average
balances, for the periods indicated:

|               |                      |   |                                 |         |         |  |         |      |         |  |         |      |         |   |         |         |  |  |       |      |   |  |      |      |  
|-------------- | -------------------- | - | ------------------------------- | ------- | ------- |  | ------- | ---- | ------- |  | ------- | ---- | ------- | - | ------- | ------- |  |  | ----- | ---- | - |  | ---- | ---- | -
|               |                      |   | For the Year Ended December 31,
|               |                      |   |                                
|               |                      |   | 2001                            |         | 2000   
|               |                      |   |                                 |         |        
|               |                      |   | Average                         |         | Percent |  | Average |      | Average |  | Percent |      | Average
|               |                      |   | Balance                         |         | of      |  | Rate    |      | Balance |  | of      |      | Rate   
|               |                      |   | (000's)                         |         | Total   |  | Paid    |      | (000's) |  | Total   |      | Paid   
|               |                      |   |                                 |         |         |  |         |      |         |  |         |      |        
|Demand:        |                      |   |                                 |         |         |  |         |      |         |  |         |      |         |   |         |         |  |  |       |      |   |  |      |     
|               | Non-Interest Bearing |   | $                               | 209,596 |         |  |         | 23.4 | %       |  |         | N/A  |         |   | $       | 187,349 |  |  |       | 22.3 | % |  |      | N/A  |  
|               | Money Market and NOW |   |                                 | 202,627 |         |  |         | 22.7 |         |  |         | 2.22 | %       |   |         | 178,134 |  |  |       | 21.2 |   |  |      | 3.15 | %
|Savings:       |                      |   | 64,812                          |         |         |  | 7.2     |      |         |  | 1.16    |      |         |   | 67,448  |         |  |  | 8.0   |      |   |  | 1.68 |     
|Time:          |                      |   |                                 |         |         |  |         |      |         |  |         |      |         |   |         |         |  |  |       |      |   |  |      |     
|               | Under $100,000       |   |                                 | 221,341 |         |  |         | 24.8 |         |  |         | 5.17 |         |   |         | 236,193 |  |  |       | 28.0 |   |  |      | 5.66 |  
|               | $100,000 or More     |   |                                 | 195,642 |         |  |         | 21.9 |         |  |         | 5.07 |         |   |         | 172,158 |  |  |       | 20.5 |   |  |      | 5.96 |  
|               |                      |   |                                 |         |         |  |         |      |         |  |         |      |         |   |         |         |  |  |       |      |   |  |      |     
|Total Deposits |                      | $ | 894,018                         |         |         |  | 100.0   | %    |         |  | 2.98    |      |         | $ | 841,282 |         |  |  | 100.0 | %    |   |  | 3.61 |     
|               |                      |   |                                 |         |         |  |         |      |         |  |         |      |         |   |         |         |  |  |       |      |   |  |      |     

|               |                      |   |                                 |         |         |  |         |      |   |  |      |      |  
|-------------- | -------------------- | - | ------------------------------- | ------- | ------- |  | ------- | ---- | - |  | ---- | ---- | -
|               |                      |   | For the Year Ended December 31,
|               |                      |   |                                
|               |                      |   | 1999                           
|               |                      |   |                                
|               |                      |   | Average                         |         | Percent |  | Average
|               |                      |   | Balance                         |         | Of      |  | Rate   
|               |                      |   | (000's)                         |         | Total   |  | Paid   
|               |                      |   |                                 |         |         |  |        
|Demand:        |                      |   |                                 |         |         |  |         |      |   |  |      |     
|               | Non-Interest Bearing |   | $                               | 153,027 |         |  |         | 22.3 | % |  |      | N/A  |  
|               | Money Market and NOW |   |                                 | 140,425 |         |  |         | 20.5 |   |  |      | 2.39 | %
|Savings:       |                      |   | 72,658                          |         |         |  | 10.6    |      |   |  | 2.03 |     
|Time:          |                      |   |                                 |         |         |  |         |      |   |  |      |     
|               | Under $100,000       |   |                                 | 194,901 |         |  |         | 28.5 |   |  |      | 4.89 |  
|               | $100,000 or More     |   |                                 | 123,974 |         |  |         | 18.1 |   |  |      | 5.13 |  
|               |                      |   |                                 |         |         |  |         |      |   |  |      |     
|Total Deposits |                      | $ | 684,985                         |         |         |  | 100.0   | %    |   |  | 3.06 |     
|               |                      |   |                                 |         |         |  |         |      |   |  |      |     

BORROWED FUNDS

Borrowed funds, which consist of Federal funds purchased and other forms
of borrowing, were utilized primarily for funding loans and investments.
During 2001, the Company employed two different leveraging strategies, totaling
$75 million, to enhance earnings. These strategies, which involved borrowing
at a fixed cost and reinvesting at a higher fixed rate, hold limited interest
rate risk and provide similar positive earnings in both increasing and
decreasing interest rate environments. As a result of these strategies, there
was an increase in the use of borrowed funds at year end.

In 2001 borrowed funds averaged $140.6 million, a decrease of $18.9
million, or 11.9%, from 2000. At year end there was $192.6 million outstanding
in borrowed funds, an increase of $38.3 million from the prior year end. This
was the result of the leveraging strategies discussed above occurring in the
3rd and 4th quarters. The cost of borrowed funds decreased 91 basis points to
6.12% in 2001 from 7.03% in 2000. The decrease in cost was reflective of the
lower interest rate environment.

Borrowed funds in 2000 averaged $159.5 million, an increase of $75.5
million, or 90.0%, compared to 1999. At year end 2000 there was $154.3 million
outstanding in borrowed funds. This represented an increase of $1.2 million
from year end 1999. The cost of borrowed funds increased 50 basis points to
7.03% from 6.53% in 1999. The increase in cost was reflective of the increase
in the use of higher cost short term advances, the addition of trust preferred
debt in the third quarter, and in part to a higher interest rate environment.

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PROVISION FOR CREDIT LOSSES

The allowance for credit losses at December 31, 2001 was $9.3 million,
compared to $8.3 million at December 31, 2000, an increase of $1.0 million, or
12.6%. As a percent of total loans, the allowance was 1.12% at year-end 2001
and 1.01% at year-end 2000. At year-end 1999, the allowance was $5.7 million
or .87% of total loans.

Management believes the allowance at December 31, 2001, was adequate based
on present economic conditions and its ongoing evaluation of the risks inherent
in the Companys loan portfolio. Although the Company seeks to avoid
concentrations of loans to a single industry or based upon a single class of
collateral, real estate and agricultural associated businesses are among the
principal industries in the Companys market areas. As a result, the Companys
loan and collateral portfolios are, to some degree, concentrated in those
industries.

In evaluating the adequacy of the allowance for credit losses the Company
considers the special risks involved in agriculture because the agriculturally
related loans in the Imperial, Coachella and Central Valleys are dependent upon
the success of their agricultural businesses. These risks include fluctuations
in commodity prices which do not necessarily match the general rate of
inflation; dependence of the agricultural community on the export market and
the adverse impact which the dollars strength against other currencies has had
on such exports; variability of production costs, weather and climatic changes;
and the fact that, in any downturn in the economy, agriculture is usually one
of the last sectors of the economy to recover. Furthermore, agricultural
businesses are extremely sensitive to actions of governmental agencies
regarding price supports, subsidies and import or export policies, the impact
of which cannot be predicted.

The Company has a quarterly standardized process for assessing the
adequacy of the allowance for credit losses. In addition to reviewing the
inherent risks of the loan portfolios, consideration is given to exposures such
as economic conditions, credit concentrations, collateral coverage, the
composition of the loan portfolio and trends in delinquencies. Specific
allocations are identified by individual loans with general allocations
assigned to the various loan categories. The Company has an established
risk-rating system that identifies and quantifies the risk associated with each
loan in the portfolio. Loans classified by the Companys internal review or by
the regulatory authorities are included in the process of assessing the
adequacy of the allowance for credit losses. This process seeks to maintain an
allowance level adequate to provide for potential losses.

The provision for credit losses was $3.0 million in 2001 and $2.9 million
in 2000. The provision expense in 1999 was $2.6 million. Net charge-offs were
$2.0 million, or .24% of average loans, in 2001 as compared to $1.0 million, or
     .13%, in 2000. In 1999 net charge-offs were $1.2 million, or .21% of average
loans. Net charge-offs are projected to be $1.1 million in 2002. Based upon
the known risks in VIBs portfolio as well as historical trends, 50% of the
projected 2002 net charge-offs are anticipated to be commercial and
agricultural, 10% are anticipated to be real estate construction loans, and 40%
are anticipated to be installment loans to individuals.

At December 31, 2001, the Companys loan portfolio was not subject to any
known significant risks except the non-performing loans previously identified.
The loan portfolio at December 31, 2001 did not have any outstandings in
international loans and, accordingly, did not have any direct risk associated
with currency fluctuations in Mexico.

The following table summarizes, for the periods indicated, loan balances
at the end of each period and average loans for the period, changes in the
allowance for credit losses arising from loans charged off, recoveries on loans
previously charged off, and additions to the allowance which have been charged
to operating expense and certain ratios relating to the allowance for credit
losses. While management has attributed reserves to various portfolio
segments, the allowance is general in nature and is available for the entire
portfolio.

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|                                    |                                                             |                             |       |                         |       |      |       |         |     |      |       |         |     |   |       |         |       |   |       |         |       | 
|----------------------------------- | ----------------------------------------------------------- | --------------------------- | ----- | ----------------------- | ----- | ---- | ----- | ------- | --- | ---- | ----- | ------- | --- | - | ----- | ------- | ----- | - | ----- | ------- | ----- | 
|                                    |                                                             |                             |       | Year Ended December 31,
|                                    |                                                             |                             |       |                        
|                                    |                                                             |                             |       | 2001                    |       | 2000 |       | 1999    |     | 1998 |       | 1997   
|                                    |                                                             |                             |       |                         |       |      |       |         |     |      |       |        
|Balances (000s)                    |                                                             |                             |       |                         |       |      |       |         |     |      |       |         |     |   |       |         |       |   |       |        
|                                    | Average Loans                                               |                             | $     | 827,459                 |       |      | $     | 763,401 |     |      | $     | 569,471 |     |   | $     | 432,834 |       |   | $     | 362,024 |      
|                                    | Total Loans at end of Period                                |                             |       | 837,774                 |       |      |       | 823,723 |     |      |       | 653,455 |     |   |       | 498,324 |       |   |       | 404,986 |      
|Allowance for Credit losses (000s) |                                                             |                             |       |                         |       |      |       |         |     |      |       |         |     |   |       |         |       |   |       |        
|Balance  Beginning of Period       |                                                             | $                           | 8,298 |                         |       | $    | 5,696 |         |     | $    | 4,296 |         |     | $ | 3,145 |         |       | $ | 3,792 |        
|                                    | Charge  Offs                                               |                             |       |                         |       |      |       |         |     |      |       |         |     |   |       |         |       |   |       |         |      
|                                    |                                                             | Commercial and Agricultural |       |                         | 864   |      |       |         | 730 |      |       |         | 377 |   |       |         | 1,066 |   |       |         | 1,983 | 
|                                    |                                                             | Real Estate  Construction  |       |                         | 138   |      |       |         | 63  |      |       |         | 444 |   |       |         | 73    |   |       |         | 770   | 
|                                    |                                                             | Installment                 |       |                         | 1,176 |      |       |         | 322 |      |       |         | 432 |   |       |         | 476   |   |       |         | 438   | 
|                                    |                                                             |                             |       |                         |       |      |       |         |     |      |       |         |     |   |       |         |       |   |       |        
|Total Charge  Offs                 |                                                             |                             | 2,178 |                         |       |      | 1,115 |         |     |      | 1,253 |         |     |   | 1,615 |         |       |   | 3,191 |        
|                                    | Recoveries:                                                 |                             |       |                         |       |      |       |         |     |      |       |         |     |   |       |         |       |   |       |         |      
|                                    |                                                             | Commercial and Agricultural |       |                         | 165   |      |       |         | 99  |      |       |         | 12  |   |       |         | 38    |   |       |         | 63    | 
|                                    |                                                             | Real Estate  Construction  |       |                         | 9     |      |       |         | 11  |      |       |         | 14  |   |       |         | 2     |   |       |         | 33    | 
|                                    |                                                             | Installment                 |       |                         | 50    |      |       |         | 48  |      |       |         | 35  |   |       |         | 145   |   |       |         | 183   | 
|                                    |                                                             |                             |       |                         |       |      |       |         |     |      |       |         |     |   |       |         |       |   |       |        
|Total Recoveries                    |                                                             |                             | 224   |                         |       |      | 158   |         |     |      | 61    |         |     |   | 185   |         |       |   | 279   |        
|                                    |                                                             |                             |       |                         |       |      |       |         |     |      |       |         |     |   |       |         |       |   |       |        
|                                    | Net Charge  Offs                                           |                             |       | 1,954                   |       |      |       | 957     |     |      |       | 1,192   |     |   |       | 1,430   |       |   |       | 2,912   |      
|                                    | Provision for Credit Losses                                 |                             |       | 3,000                   |       |      |       | 2,905   |     |      |       | 2,592   |     |   |       | 2,581   |       |   |       | 2,265   |      
|                                    | Reserves Acquired by Acquisition                            |                             |       | -0-                     |       |      |       | 654     |     |      |       |         |     |   |       |         |       |   |       |         |      
|                                    |                                                             |                             |       |                         |       |      |       |         |     |      |       |         |     |   |       |         |       |   |       |        
|Balance  End of Period             |                                                             | $                           | 9,344 |                         |       | $    | 8,298 |         |     | $    | 5,696 |         |     | $ | 4,296 |         |       | $ | 3,145 |        
|                                    |                                                             |                             |       |                         |       |      |       |         |     |      |       |         |     |   |       |         |       |   |       |        
|Ratios                              |                                                             |                             |       |                         |       |      |       |         |     |      |       |         |     |   |       |         |       |   |       |        
|                                    | Net Loans Charged Off to Average Loans                      |                             |       | 0.24                    | %     |      |       | 0.13    | %   |      |       | 0.21    | %   |   |       | 0.33    | %     |   |       | 0.80    | %    
|                                    | Net Loans Charged Off to Total Loans
at End of Period       |                             |       | 0.23                    |       |      |       | 0.12    |     |      |       | 0.18    |     |   |       | 0.29    |       |   |       | 0.72    |      
|                                    | Allowance for Credit Losses to Average Loans                |                             |       | 1.13                    |       |      |       | 1.09    |     |      |       | 1.00    |     |   |       | 0.99    |       |   |       | 0.87    |      
|                                    | Allowance for Credit Losses to Total Loans
at End of Period |                             |       | 1.12                    |       |      |       | 1.01    |     |      |       | 0.87    |     |   |       | 0.86    |       |   |       | 0.78    |      
|                                    | Net Loans Charged Off to Allowance
for Credit Losses        |                             |       | 20.91                   |       |      |       | 11.83   |     |      |       | 20.93   |     |   |       | 33.29   |       |   |       | 92.59   |      
|                                    | Net Loans Charged Off to Provision
for Credit Losses        |                             |       | 65.13                   |       |      |       | 33.52   |     |      |       | 45.99   |     |   |       | 55.40   |       |   |       | 128.57  |      

NON INTEREST INCOME

Total non interest income was $11.4 million in 2001, $9.1 million in 2000
and $7.0 million in 1999. Service charges and fees on deposits were $6.7
million in 2001, an increase of $.8 million, or 12.8%, over 2000. In 2000
service charge income rose $1.4 million, representing an increase of 30.3%,
from 1999. The increases in service charge income have been due to the
internal growth in the number and volume of deposit accounts. The growth in
2000 over 1999 was partially attributed to the additional income provided by
Kings River.

Other income amounted to $765,000 in 2001, an increase of $196,000, or
34.4%, compared to the prior year. The primary reason for the increase was an
increase of $137,000 in fees collected from funding mortgage loans. In 2000
other income totaled $569,000, representing an increase of $447,000, or 367.3%,
from 1999.

Dividends on cash surrender value of life insurance was $1.2 million for
the year ended December 31, 2001, an increase of $ 41 thousand, or 3.4%, over
2000. In 2000 the dividends were $1.2 million, an increase of $.6 million, or
99.1% from 1999. The increase in dividends is used primarily to fund the
Companys deferred compensation programs.

Income generated through the sale of small business government guaranteed
loans provides an additional source of earnings. In 2001, the gain on sale of
these loans and related servicing fees totaled $833,000, a decrease of
$516,000, or 38.2%, from 2000. Loan sale gains in 2000 amounted to $1.3
million, a decrease of $371,000, or 21.6%, from 1999.

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For the year ended December 31, 2001, the gain on sale of investment
securities was $1.9 million, and there were no securities sold during the year
ended December 31, 2000. Investment securities gains were $2,000 in 1999. The
gains in 2001 reflect the Companys strategy to restructure its portfolio in
the lower interest rate environment.

NON INTEREST EXPENSE

During the year ended December 31, 2001 the Company made a concentrated
effort to reduce overhead by taking a number of actions to improve efficiencies
and provide cost savings. These actions included the dissolution of its
mortgage-banking business, consolidation of its three subsidiary banks into
one, and simplification of its product line. The full effect of these changes
will be reflected in the financial performance of the Company in the year 2002.

Total non interest expense for the year ended December 31, 2001 was $43.0
million, an increase of $3.3 million, or 8.4%, as compared to 2000. These
expenditures amounted to $39.7 million in 2000, representing an increase of
$6.1 million, or 18.3%, over 1999. After adjusting for $.4 million in merger
and one-time related expenses, non-interest expense for the year ended December
31, 2001 was $42.6 million, an increase of $2.9 million, or 7.3%.

Salary expense during the year ended December 31, 2001 was $15.8 million,
an increase of $1.1 million, or 7.4%, over 2000. The growth in salary expense
is attributable to merit increases, paid commissions, increased overtime and
temporary personnel, offset by a decrease in bonus expense. In 2000, salary
expense was $14.7 million, an increase of $2.7 million, or 22.2%, compared to
1999.

Employee benefits expense was $5.2 million for the year ended December 31,
2001, an increase of $229,000, or 4.6%, compared to 2000. The increase in
benefits was attributable primarily to increases in payroll taxes, workers
compensation insurance, and one-time accruals in the supplemental employee
retirement program of $344,000, offset by decreases in group insurance,
education expense and the Companys funding of the ESOP plan. In 2000,
employee benefits expense amounted to $5.0 million, representing an increase of
$.5 million, or 11.9%, compared to 1999.

Occupancy expenses were $3.6 million in 2001, an increase of $.4 million,
or 12.2%, compared to 2000. The increase in 2001 was attributable to normal
increases in lease expense and the full year effect of the addition of branch
offices in Las Vegas, Nevada, and Fresno, Selma and Visalia, California. In
2000, occupancy expense amounted to $3.2 million, representing an increase of
$.6 million, or 21.6%, compared to 1999. The increase in 2000 was mostly
attributable to the addition of the Kings River locations. Furniture and
equipment expense totaled $3.6 million in 2001, an increase of $.4 million, or
14.3%, compared with 2000. In 2000, furniture and equipment expense was $3.1
million, an increase of $.6 million, or 21.3%, compared with 1999. These
increases were primarily the result of increased depreciation expense on
planned additions to computer hardware and software expenditures.

Other non interest expenses amounted to $14.7 million during the year
ended December 31, 2001, an increase of $1.2 million, or 8.7%, from 2000.
Increases in data processing, legal and professional fees, advertising, and
general office expenses were the primary causes for the overall increase. Of
those increases, $435,000 related to one-time merger and related expenditures.
All other non-interest expenses in 2000 were $13.6 million, representing an
increase of $1.6 million, or 13.5%, over 1999.

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INCOME TAX EXPENSE

Income tax expense for the year ending December 31, 2001 was $4.7 million
as compared with $4.2 million for 2000, an increase of $.5 million, or 12.3%.
The increase in tax expense was primarily attributable to an increase in the
Companys effective tax rate from 32.6% for the year ended December 31, 2000 to
33.7% for the year ended December 31, 2001. The effective tax rate increase
was primarily the result of a reduction in interest income attributed to
nontaxable state and municipal securities, and a general increase in operating
income at marginal rates.

Income tax expense for the year ending December 31, 2000 was $4.2 million
as compared with $2.7 million for 1999, an increase of $1.5 million, or 57.0%.
The increase in tax expense was primarily attributed to an increase in the
Companys effective tax rate from 31.1% for the year ended December 31, 1999 to
32.5% for the year ended December 31, 2000. The effective tax rate increase
was primarily the result of increases in non-deductible intangible asset
amortization and a general increase in operating income at marginal rates.

CAPITAL RESOURCES

Total shareholders equity averaged $77.1 million in 2001, an increase of
$14.0 million, or 22.1%, compared to 2000. At December 31, 2001 shareholders
equity amounted to $81.6 million, an increase of $10.8 million, or 15.2%, over
the prior year-end. During 2000 shareholders equity averaged $63.1 million,
an increase of $6.7 million, or 12.0%, compared to 1999. At December 31, 2000,
shareholders equity totaled $70.9 million, representing an increase of $12.6
million, or 21.6%, compared to year-end 1999. Per common share book value
increased to $6.26 at year-end 2001 from $5.49 the prior year end. Book value
per common share at year-end 1999 was $4.52.

Under regulatory guidelines, capital adequacy is measured as a percentage
of risk-adjusted assets in which risk percentages are applied to assets on as
well as off the balance sheet. At December 31, 2001, the Tier 1 and total risk
based capital ratios were 10.18% and 11.91%, respectively, compared to 8.73%
and 10.64%, respectively, at December 31, 2000. The current minimum regulatory
guidelines for Tier 1 and total risk-based capital ratios are 4.0% and 8.0%,
respectively. The leverage ratio, which is a measure of average Tier 1 capital
to adjusted average assets was 7.98% at December 31, 2001, compared to 7.01% at
year-end 2000. The leverage ratio at December 31, 1999 was 8.87%. The
Companys leverage ratio exceeds the current regulatory minimum of 3.0%. The
Companys capital ratios exceed all regulatory minimums and support future
planned growth, but may not be adequate to support additional acquisitions.

LIQUIDITY AND LIABILITY MANAGEMENT

VIBs liquidity position remains adequate to meet future contingencies.
At December 31, 2001 VIB had $154.7 million in net Federal funds purchased and
FHLB advances outstanding. This compared to $119.0 million in net Federal
funds outstanding at December 31, 2000. Since December 31, 2000, net Federal
funds purchased and FHLB advances have increased $35.7 million. VIBs
liquidity ratio at December 31, 2001 was 21.44%. This ratio represented an
increase from 20.88% at December 31, 2000.

VIBs Asset/Liability Committee (ALCO) functions to oversee the
maintenance of liquidity and to preserve net interest income when subjected to
fluctuations in market interest rates. The ability to meet existing and future
funding commitments is the measure of liquidity. Liquidity is also required to
meet borrowing needs, deposit withdrawals and asset growth. VIB develops
liquidity through deposit growth, maturities and repayments of loans and
investments, net interest income, fee income and access to purchase funds
through correspondent banks or other entities.

The ALCO manages the interest rate sensitivity or repricing
characteristics of VIBs assets and liabilities. The primary source of
earnings for VIB is net interest income, which is subject to movements in
interest rates. To minimize the effect of changes in rates, the balance sheet
requires

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structuring in order that the repricing opportunities for both assets and
liabilities exist in nearly equivalent amounts and at approximately similar
time intervals. Interval differences may exist at times creating interest
sensitivity gaps, which represent the difference between interest sensitive
assets and interest sensitive liabilities. These gaps are static in nature and
do not consider future activity. As such, these gap measurements serve best as
an indicator for potential interest rate exposure.

The sensitivity to interest rate fluctuations is measured in several time
frames. Various strategies such as liability cost administration and
redeployment of asset maturities are utilized to preserve interest income from
the effect of changes in interest rates. The gap positions are monitored as a
function of the asset and liability management process. The monitoring process
includes the use of periodic simulated business forecasts, which incorporate
various interest rate environments. Financial modeling is utilized to assist
management in maintaining consistent earnings in an environment of changing
interest rates.

The following table sets forth the relative maturities of the commercial,
agricultural and construction loan portfolios and provides a breakout relative
to fixed and variable rate loan maturities:

|                                                |  |          |         |            |  |            |         |       |  |   |         |  |  |   |         | 
|----------------------------------------------- |  | -------- | ------- | ---------- |  | ---------- | ------- | ----- |  | - | ------- |  |  | - | ------- | 
|                                                |  |          |         |            |  | Over One   |         |       |  |   |         |  |  |  
|                                                |  |          |         |            |  | Year       |         |       |  |   |         |  |  |  
|                                                |  |          |         |            |  | But Less   |         |       |  |   |         |  |  |  
|                                                |  | One Year |         | Than       |  | Over       |         |       |  |  
|                                                |  | or Less  |         | Five Years |  | Five Years |         | Total
|                                                |  |          |         |            |  |            |         |      
|Loans (000s)                                   |  |          |         |            |  |            |         |       |  |   |         |  |  |   |         | 
|Commercial and Agricultural                     |  | $        | 96,589  |            |  | $          | 34,554  |       |  | $ | 6,889   |  |  | $ | 138,032 | 
|Real Estate  Construction                      |  |          | 109,829 |            |  |            | 35,945  |       |  |   | 19,088  |  |  |   | 164,862 | 
|Real Estate  Other                             |  |          | 49,429  |            |  |            | 174,134 |       |  |   | 282,943 |  |  |   | 506,506 | 
|Consumer                                        |  |          | 8,622   |            |  |            | 19,830  |       |  |   | 4,069   |  |  |   | 32,521  | 
|                                                |  |          |         |            |  |            |         |       |  |   |         |  |  |   |         | 
|Total                                           |  | $        | 264,469 |            |  | $          | 264,463 |       |  | $ | 312,989 |  |  | $ | 841,921 | 
|                                                |  |          |         |            |  |            |         |       |  |   |         |  |  |   |         | 
|Loans With Predetermined (Fixed) Interest Rates |  | $        | 40,148  |            |  | $          | 120,070 |       |  | $ | 252,566 |  |  | $ | 412,784 | 
|Loans With Variable (Floating) Interest Rates   |  |          | 224,321 |            |  |            | 144,393 |       |  |   | 60,423  |  |  |   | 429,137 | 
|                                                |  |          |         |            |  |            |         |       |  |   |         |  |  |   |         | 
|Total                                           |  | $        | 264,469 |            |  | $          | 264,463 |       |  | $ | 312,989 |  |  | $ | 841,921 | 
|                                                |  |          |         |            |  |            |         |       |  |   |         |  |  |   |         | 

The following schedule sets forth the maturities of time certificates of
deposit over $100,000 and their relative mix:

|                                   |  |         |         |          |  |  |       |  
|---------------------------------- |  | ------- | ------- | -------- |  |  | ----- | -
|                                   |  | Balance |         | Percent 
|                                   |  | (000's) |         | of Total
|                                   |  |         |         |         
|Less Than Three Months             |  | $       | 80,888  |          |  |  | 41.9  | %
|Three Months Through Six Months    |  |         | 71,718  |          |  |  | 37.1  |  
|Seven Months Through Twelve Months |  |         | 31,868  |          |  |  | 16.5  |  
|Over Twelve Months                 |  |         | 8,796   |          |  |  | 4.6   |  
|                                   |  |         |         |          |  |  |       |  
|Total                              |  | $       | 193,270 |          |  |  | 100.0 | %
|                                   |  |         |         |          |  |  |       |  

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

In addition to gap measurement, the ALCO is further responsible for the
measurement of interest rate risk, i.e., the risk of loss in value due to
changes in interest rates. The ALCO monitors and considers methods of managing
interest rate risk by monitoring changes in net portfolio value (NPV) and net
interest income under various interest rate scenarios. The ALCO attempts to

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manage the various components of the balance sheet to minimize the impact
of sudden and sustained changes in interest rates on NPV and net interest
income.

VIBs exposure to interest rate risk is reviewed on a periodic basis by
the Board of Directors and ALCO. If potential changes to NPV and net interest
income resulting from hypothetical interest rate swings are not within the
limits established by the Board, the Board may direct management to adjust its
assets and liability mix to bring interest rate risk within Board-approved
limits.

VIB utilizes interest rate sensitivity analysis to measure interest rate
risk by computing estimated changes in NPV of cash flows from assets and
liabilities within a range of assumed changes in market interest rates. NPV
represents the market value of portfolio equity and is equal to the market
value of assets minus the market value of liabilities. This analysis assesses
the risk of loss in market rate sensitive instruments in the event of sudden
and sustained increases and decreases in market interest rates ranging from one
hundred to three hundred basis points. The Board of Directors has adopted an
interest rate risk policy, which establishes a maximum limit of decrease in the
NPV in the event of sudden and sustained increases, and decreases in market
interest rates.

The following tables present the Companys projected changes in NPV and
net interest income for the various rate shock levels as of December 31, 2001.
Although the majority of the assets and liabilities are at the bank level, the
table does include the effect of the Companys trust preferred obligations.

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|                              |  |               |         |                |  |            |         |   |  |  |       |  
|----------------------------- |  | ------------- | ------- | -------------- |  | ---------- | ------- | - |  |  | ----- | -
|Change in Net Portfolio Value
|at December 31, 2001         
|                             
|                              |  | Net Portfolio |         | Actual         |  | Percentage
|Change in Interest Rates      |  | Value (000's) |         | Change (000's) |  | Change    
|                              |  |               |         |                |  |           
|300 basis point rise          |  | $             | 151,594 |                |  | $          | 6,063   |   |  |  | 4.2   | %
|200 basis point rise          |  |               | 154,841 |                |  |            | 9,310   |   |  |  | 6.4   |  
|100 basis point rise          |  |               | 154,235 |                |  |            | 8,704   |   |  |  | 6.0   |  
|Base Rate Scenario            |  |               | 145,531 |                |  |            |        |   |  |  |      |  
|100 basis point decline       |  |               | 127,565 |                |  |            | (17,966 | ) |  |  | (12.3 | )
|200 basis point decline       |  |               | 109,969 |                |  |            | (35,562 | ) |  |  | (24.4 | )
|300 basis point decline       |  |               | 108,752 |                |  |            | (36,779 | ) |  |  | (25.3 | )

|                              |  |                |        |                |  |            |         |   |  |  |       |  
|----------------------------- |  | -------------- | ------ | -------------- |  | ---------- | ------- | - |  |  | ----- | -
|Change in Net Interest Income
|at December 31, 2001         
|                             
|                              |  | Net Interest   |        | Actual         |  | Percentage
|Change in Interest Rates      |  | Income (000's) |        | Change (000's) |  | Change    
|                              |  |                |        |                |  |           
|300 basis point rise          |  | $              | 48,775 |                |  | $          | 3,664   |   |  |  | 8.1   | %
|200 basis point rise          |  |                | 48,165 |                |  |            | 3,054   |   |  |  | 6.8   |  
|100 basis point rise          |  |                | 46,908 |                |  |            | 1,797   |   |  |  | 4.0   |  
|Base Rate Scenario            |  |                | 45,111 |                |  |            |        |   |  |  |      |  
|100 basis point decline       |  |                | 42,733 |                |  |            | (2,378  | ) |  |  | (5.3  | )
|200 basis point decline       |  |                | 39,570 |                |  |            | (5,541  | ) |  |  | (12.3 | )
|300 basis point decline       |  |                | 34,832 |                |  |            | (10,279 | ) |  |  | (22.8 | )

Certain shortcomings are inherent in the method of analysis presented in
the computation of NPV. Although certain assets and liabilities may have
similar maturities or periods within which they will reprice, they may react
differently to changes in market interest rates. The interest rates on certain
types of assets and liabilities may fluctuate in advance of changes in market
interest rates, while interest rates on other types may lag behind changes in
market rates. There may also be repayment risk if interest rates rise on
loans.

Computation of forecasted effects of hypothetical interest rate changes
should not be relied upon as indicative of actual future results. Further, the
computations do not contemplate any actions the ALCO could undertake in
response to change in interest rates.

The Company is a legal entity, separate and distinct from its
subsidiaries. Although there exists the ability to raise capital on its own
behalf (such as the recent private placement of trust preferred securities)
or borrow from external sources, the Company may obtain additional funds
through dividends paid by, and fees for services provided to, its subsidiaries.
Regulations limit the amount of dividends as well as service fees paid by
subsidiaries. The Companys expenses have been primarily covered by fees
charged to and dividends received from VIB and it is anticipated that the
Company will be able to continue to rely on dividends from VIB to fund its
separate operations and obligations. The Company may not always be able to
rely solely on its current or future subsidiaries to meet its obligations,
including obligations under the trust preferred securities, or to maintain
its separate liquidity. Under such circumstances, the Company would be forced
to seek other means to raise capital. At December 31, 2001 the Company had
adequate liquidity to meet its anticipated funding needs.

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INFLATION

The impact of inflation on a financial institution differs significantly
from that exerted on an industrial concern, primarily because its assets and
liabilities consist largely of monetary items. The relatively low proportion
of the Companys fixed assets to total assets of 1.1% at December 31, 2000, and
1.2% at December 31, 2000, reduces both the potential for inflated earnings
resulting from understated depreciation changes, and the potential for
significant understatement of absolute asset values. However, financial
institutions are affected by inflations impact on non-interest expenses, such
as salaries and occupancy expense, and to some extent, by inflative impact on
interest rates.




ITEM 7A  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Information in response to this Item is included in Item 7  MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
herein.

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ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The following Financial Statements are included in this Annual Report on
Form 10-K:

|                                                                                                               |  |      |    | 
|-------------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|INDEX                                                                                                          |  | PAGE
|                                                                                                               |  |     
|Independent Auditors Report  Vavrinek, Trine, Day & Co., LLP                                                 |  |      | 53 | 
|Consolidated Balance Sheets as of December 31, 2001 and 2000                                                   |  |      | 54 | 
|Consolidated Statements of Income for the Years Ended December 31, 2001,
2000 and 1999                         |  |      | 56 | 
|Consolidated Statement of Changes in Shareholders Equity for the Years
Ended December 31, 2001, 2000 and 1999 |  |      | 57 | 
|Consolidated Statements of Cash Flows for the Years Ended December 31,
2001, 2000 and 1999                     |  |      | 58 | 
|Notes to Consolidated Financial Statements                                                                     |  |      | 59 | 

The following table provides selected quarterly financial information for the periods indicated:

|                           |  |               |        |              |  |               |        |              |  |              |        |  |  |   |        |  |  |   |        | 
|-------------------------- |  | ------------- | ------ | ------------ |  | ------------- | ------ | ------------ |  | ------------ | ------ |  |  | - | ------ |  |  | - | ------ | 
|                           |  | Quarter Ended |        | For the Year
|                           |  |               |        | Ended       
|                           |  | March 31,     |        | June 30,     |  | September 30, |        | December 31, |  | December 31,
|                           |  |               |        |              |  |               |        |              |  |             
|2001                       |  |               |        |              |  |               |        |              |  |              |        |  |  |   |        |  |  |   |        | 
|Net interest income        |  | $             | 11,791 |              |  | $             | 12,223 |              |  | $            | 12,168 |  |  | $ | 12,276 |  |  | $ | 48,458 | 
|Other income               |  |               | 2,987  |              |  |               | 3,096  |              |  |              | 2,647  |  |  |   | 2,710  |  |  |   | 11,440 | 
|Net income                 |  |               | 2,105  |              |  |               | 2,300  |              |  |              | 2,237  |  |  |   | 2,580  |  |  |   | 9,222  | 
|Basic earnings per share   |  |               | 0.16   |              |  |               | 0.18   |              |  |              | 0.17   |  |  |   | 0.20   |  |  |   | 0.71   | 
|Diluted earnings per share |  |               | 0.16   |              |  |               | 0.18   |              |  |              | 0.17   |  |  |   | 0.20   |  |  |   | 0.71   | 
|2000                       |  |               |        |              |  |               |        |              |  |              |        |  |  |   |        |  |  |   |        | 
|Net interest income        |  | $             | 10,457 |              |  | $             | 10,531 |              |  | $            | 11,025 |  |  | $ | 11,374 |  |  | $ | 43,387 | 
|Other income               |  |               | 2,014  |              |  |               | 2,469  |              |  |              | 2,297  |  |  |   | 2,282  |  |  |   | 9,062  | 
|Net income                 |  |               | 1,840  |              |  |               | 1,978  |              |  |              | 2,263  |  |  |   | 2,539  |  |  |   | 8,620  | 
|Basic earnings per share   |  |               | 0.14   |              |  |               | 0.15   |              |  |              | 0.18   |  |  |   | 0.20   |  |  |   | 0.67   | 
|Diluted earnings per share |  |               | 0.14   |              |  |               | 0.15   |              |  |              | 0.18   |  |  |   | 0.20   |  |  |   | 0.67   | 

The foregoing selected quarterly data for 2001 is consistent with the
quarterly information filed during 2001 on Forms 10-Q, as well as the quarterly
information for 2000 filed during 2000 on Forms 10-Q.

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INDEPENDENT AUDITORS REPORT

To the Shareholders and Board of Directors
of VIB Corp and Subsidiaries

We have audited the accompanying consolidated balance sheets of VIB Corp and
Subsidiaries as of December 31, 2001 and 2000 and the related consolidated
statements of income, changes in shareholders equity, and cash flows for the
years then ended. These financial statements are the responsibility of the
Companys management. Our responsibility is to express an opinion on these
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 financial statements referred to above present fairly, in
all material respects, the financial position of VIB Corp and Subsidiaries as
of December 31, 2001 and 2000, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 2001, in
conformity with accounting principles generally accepted in the United States
of America.

/s/ Vavrinek, Trine, Day & Co., LLP

Laguna Hills, California
January 16, 2002

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VIB CORP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
December 31, 2001 and 2000

|                                                          |                               |                                 |               |             |             |      |               |             |             | 
|--------------------------------------------------------- | ----------------------------- | ------------------------------- | ------------- | ----------- | ----------- | ---- | ------------- | ----------- | ----------- | 
|                                                          |                               |                                 |               | 2001        |             | 2000
|                                                          |                               |                                 |               |             |             |     
|ASSETS                                                    |                               |                                 |               |             |             |      |               |            
|Cash and Due from Banks                                   |                               | $                               | 57,164,524    |             |             | $    | 51,604,079    |            
|Money Market Mutual Funds                                 |                               |                                 | 1,500,000     |             |             |      |              |            
|                                                          |                               |                                 |               |             |             |      |               |            
|                                                          |                               | TOTAL CASH AND CASH EQUIVALENTS |               |             | 58,664,524  |      |               |             | 51,604,079  | 
|Interest-Bearing Deposits                                 |                               |                                 | 648,035       |             |             |      | 1,447,888     |            
|Investment Securities:                                    |                               |                                 |               |             |             |      |               |            
|                                                          | Securities Available for Sale |                                 |               | 194,471,496 |             |      |               | 189,876,563 |            
|                                                          | Securities Held to Maturity   |                                 |               |            |             |      |               | 2,440,928   |            
|                                                          |                               |                                 |               |             |             |      |               |            
|                                                          |                               | TOTAL INVESTMENT SECURITIES     |               |             | 194,471,496 |      |               |             | 192,317,491 | 
|Federal Home Loan and Federal Reserve Bank Stock, at cost |                               |                                 | 11,140,250    |             |             |      | 9,185,249     |            
|Loans:                                                    |                               |                                 |               |             |             |      |               |            
|                                                          | Commercial                    |                                 |               | 84,744,363  |             |      |               | 139,020,547 |            
|                                                          | Agricultural                  |                                 |               | 53,287,734  |             |      |               | 70,217,153  |            
|                                                          | Real Estate  Construction    |                                 |               | 164,862,160 |             |      |               | 129,170,418 |            
|                                                          | Real Estate  Other           |                                 |               | 506,505,603 |             |      |               | 453,041,114 |            
|                                                          | Consumer                      |                                 |               | 32,520,842  |             |      |               | 36,280,567  |            
|                                                          |                               |                                 |               |             |             |      |               |            
|                                                          |                               | TOTAL LOANS                     |               |             | 841,920,702 |      |               |             | 827,729,799 | 
|Net Deferred Loan Fees                                    |                               |                                 | (4,146,246    | )           |             |      | (4,007,270    | )          
|Allowance for Credit Losses                               |                               |                                 | (9,344,248    | )           |             |      | (8,297,814    | )          
|                                                          |                               |                                 |               |             |             |      |               |            
|                                                          |                               | NET LOANS                       |               |             | 828,430,208 |      |               |             | 815,424,715 | 
|Premises and Equipment                                    |                               |                                 | 12,310,908    |             |             |      | 13,863,823    |            
|Other Real Estate Owned                                   |                               |                                 | 3,138,697     |             |             |      | 1,359,905     |            
|Cash Surrender Value of Life Insurance                    |                               |                                 | 22,581,441    |             |             |      | 19,990,350    |            
|Deferred Tax Assets                                       |                               |                                 | 7,338,000     |             |             |      | 6,923,000     |            
|Goodwill and Core Deposit Intangibles                     |                               |                                 | 17,149,444    |             |             |      | 18,435,865    |            
|Accrued Interest and Other Assets                         |                               |                                 | 12,363,751    |             |             |      | 12,375,595    |            
|                                                          |                               |                                 |               |             |             |      |               |            
|                                                          |                               | $                               | 1,168,236,754 |             |             | $    | 1,142,927,960 |            
|                                                          |                               |                                 |               |             |             |      |               |            

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

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VIB CORP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
December 31, 2001 and 2000

|                                                                                                                                                             |                                                                                                                 |                  |                            |             |      |               |               |             |  |               | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------ | --------------------------------------------------------------------------------------------------------------- | ---------------- | -------------------------- | ----------- | ---- | ------------- | ------------- | ----------- |  | ------------- | 
|                                                                                                                                                             |                                                                                                                 |                  |                            |             | 2001 |               | 2000         
|                                                                                                                                                             |                                                                                                                 |                  |                            |             |      |               |              
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                                         |                                                                                                                 |                  |                            |             |      |               |               |            
|Deposits:                                                                                                                                                    |                                                                                                                 |                  |                            |             |      |               |               |            
|                                                                                                                                                             | Noninterest-Bearing Demand                                                                                      |                  | $                          | 239,820,321 |      |               | $             | 211,541,381 | 
|                                                                                                                                                             | Money Market and NOW                                                                                            |                  |                            | 205,078,944 |      |               |               | 208,177,709 | 
|                                                                                                                                                             | Savings                                                                                                         |                  |                            | 63,806,829  |      |               |               | 62,657,235  | 
|                                                                                                                                                             | Time Deposits Under $100,000                                                                                    |                  |                            | 182,953,344 |      |               |               | 220,547,372 | 
|                                                                                                                                                             | Time Deposits $100,000 and Over                                                                                 |                  |                            | 193,270,400 |      |               |               | 207,314,327 | 
|                                                                                                                                                             |                                                                                                                 |                  |                            |             |      |               |               |            
|                                                                                                                                                             |                                                                                                                 |                  | TOTAL DEPOSITS             |             |      | 884,929,838   |               |             |  | 910,238,024   | 
|Federal Funds Purchased                                                                                                                                      |                                                                                                                 |                  |                           |             |      |               | 750,000       |            
|Federal Home Loan Bank Advances                                                                                                                              |                                                                                                                 |                  | 156,218,358                |             |      |               | 118,200,000   |            
|Capitalized Lease Obligation                                                                                                                                 |                                                                                                                 |                  | 2,976,966                  |             |      |               | 2,954,995     |            
|Company Obligated Mandatorily Redeemable Preferred
Securities of Subsidiary Trusts Holding Solely Junior
Subordinated Debentures                             |                                                                                                                 |                  | 33,360,672                 |             |      |               | 32,400,000    |            
|Accrued Interest and Other Liabilities                                                                                                                       |                                                                                                                 |                  | 9,113,431                  |             |      |               | 7,534,152     |            
|                                                                                                                                                             |                                                                                                                 |                  |                            |             |      |               |               |            
|                                                                                                                                                             |                                                                                                                 |                  | TOTAL LIABILITIES          |             |      | 1,086,599,265 |               |             |  | 1,072,077,171 | 
|Commitments and Contingencies  Notes D and J                                                                                                                |                                                                                                                 |                  |                            |             |      |               |               |            
|Shareholders Equity:                                                                                                                                        |                                                                                                                 |                  |                            |             |      |               |               |            
|                                                                                                                                                             | Preferred Stock  Authorized 10,000,000 Shares,                                                                 |                  |                            |             |      |               |               |             | 
|                                                                                                                                                             |                                                                                                                 | None Outstanding |                            |             |      |               |               |             |  |              
|                                                                                                                                                             | Common Shares  Authorized
25,000,000 Shares; Issued and
Outstanding: 13,038,488 in 2001 and
12,168,644 in 2000 |                  |                            | 69,655,705  |      |               |               | 62,283,298  | 
|Retained Earnings                                                                                                                                            |                                                                                                                 |                  | 11,808,477                 |             |      |               | 9,173,494     |            
|Accumulated Other Comprehensive Income-Net
Unrealized Gains (Losses) on Available-for-Sale
Securities, net of Taxes of $120,433 in 2001 and
$421,122 in 2000 |                                                                                                                 |                  | 173,307                    |             |      |               | (606,003      | )          
|                                                                                                                                                             |                                                                                                                 |                  |                            |             |      |               |               |            
|                                                                                                                                                             |                                                                                                                 |                  | TOTAL SHAREHOLDERS EQUITY |             |      | 81,637,489    |               |             |  | 70,850,789    | 
|                                                                                                                                                             |                                                                                                                 |                  |                            |             |      |               |               |            
|                                                                                                                                                             |                                                                                                                 | $                | 1,168,236,754              |             |      | $             | 1,142,927,960 |            
|                                                                                                                                                             |                                                                                                                 |                  |                            |             |      |               |               |            

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

55



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##### Table of Contents



VIB CORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31, 2001, 2000, and 1999

|                                  |                                                       |                                                       |            |            |            |      |            |            |            |   |            |            |            | 
|--------------------------------- | ----------------------------------------------------- | ----------------------------------------------------- | ---------- | ---------- | ---------- | ---- | ---------- | ---------- | ---------- | - | ---------- | ---------- | ---------- | 
|                                  |                                                       |                                                       |            | 2001       |            | 2000 |            | 1999      
|                                  |                                                       |                                                       |            |            |            |      |            |           
|INTEREST INCOME                   |                                                       |                                                       |            |            |            |      |            |            |            |   |            |           
|                                  | Interest and Fees on Loans                            |                                                       | $          | 73,729,778 |            |      | $          | 75,829,002 |            |   | $          | 53,590,352 |           
|                                  | Interest on Investment Securities  Taxable           |                                                       |            | 7,691,506  |            |      |            | 8,469,982  |            |   |            | 6,930,742  |           
|                                  | Interest on Investment Securities  Nontaxable        |                                                       |            | 2,065,539  |            |      |            | 2,780,133  |            |   |            | 2,373,456  |           
|                                  | Other Interest Income                                 |                                                       |            | 195,182    |            |      |            | 820,331    |            |   |            | 962,143    |           
|                                  |                                                       |                                                       |            |            |            |      |            |            |            |   |            |           
|                                  |                                                       | TOTAL INTEREST INCOME                                 |            |            | 83,682,005 |      |            |            | 87,899,448 |   |            |            | 63,856,693 | 
|INTEREST EXPENSE                  |                                                       |                                                       |            |            |            |      |            |            |            |   |            |           
|                                  | Interest on Money Market and NOW                      |                                                       |            | 4,502,664  |            |      |            | 5,617,648  |            |   |            | 3,363,120  |           
|                                  | Interest on Savings Deposits                          |                                                       |            | 749,484    |            |      |            | 1,141,326  |            |   |            | 1,476,627  |           
|                                  | Interest on Time Deposits                             |                                                       |            | 21,374,024 |            |      |            | 23,629,486 |            |   |            | 15,899,901 |           
|                                  | Interest on Trust Preferred Securities                |                                                       |            | 3,209,385  |            |      |            | 2,559,675  |            |   |            | 1,845,925  |           
|                                  | Interest on Other Borrowings                          |                                                       |            | 5,388,742  |            |      |            | 8,659,501  |            |   |            | 3,640,228  |           
|                                  |                                                       |                                                       |            |            |            |      |            |            |            |   |            |           
|                                  |                                                       | TOTAL INTEREST EXPENSE                                |            |            | 35,224,299 |      |            |            | 41,607,636 |   |            |            | 26,225,801 | 
|                                  |                                                       |                                                       |            |            |            |      |            |            |            |   |            |           
|                                  |                                                       | NET INTEREST INCOME                                   |            |            | 48,457,706 |      |            |            | 46,291,812 |   |            |            | 37,630,892 | 
|Provision for Credit Losses       |                                                       |                                                       | 3,000,000  |            |            |      | 2,904,928  |            |            |   | 2,592,464  |           
|                                  |                                                       |                                                       |            |            |            |      |            |            |            |   |            |           
|                                  |                                                       | NET INTEREST INCOME AFTER
PROVISION FOR CREDIT LOSSES |            |            | 45,457,706 |      |            |            | 43,386,884 |   |            |            | 35,038,428 | 
|NONINTEREST INCOME                |                                                       |                                                       |            |            |            |      |            |            |            |   |            |           
|                                  | Service Charges and Fees                              |                                                       |            | 6,692,517  |            |      |            | 5,935,295  |            |   |            | 4,556,788  |           
|                                  | Gain on Sale of Loans and Servicing Fees              |                                                       |            | 832,767    |            |      |            | 1,348,557  |            |   |            | 1,719,904  |           
|                                  | Gain on Sale of Securities                            |                                                       |            | 1,900,491  |            |      |            |           |            |   |            | 1,755      |           
|                                  | Dividends on Cash Surrender Value of Life Insurance   |                                                       |            | 1,249,992  |            |      |            | 1,209,315  |            |   |            | 607,528    |           
|                                  | Other Income                                          |                                                       |            | 764,555    |            |      |            | 569,016    |            |   |            | 121,755    |           
|                                  |                                                       |                                                       |            |            |            |      |            |            |            |   |            |           
|                                  |                                                       |                                                       | 11,440,322 |            |            |      | 9,062,183  |            |            |   | 7,007,730  |           
|                                  |                                                       |                                                       |            |            |            |      |            |            |            |   |            |           
|                                  |                                                       |                                                       | 56,898,028 |            |            |      | 52,449,067 |            |            |   | 42,046,158 |           
|NONINTEREST EXPENSE               |                                                       |                                                       |            |            |            |      |            |            |            |   |            |           
|                                  | Salaries and Employee Benefits                        |                                                       |            | 21,059,480 |            |      |            | 19,739,425 |            |   |            | 16,338,098 |           
|                                  | Occupancy Expenses                                    |                                                       |            | 3,609,090  |            |      |            | 3,215,593  |            |   |            | 2,644,348  |           
|                                  | Furniture and Equipment                               |                                                       |            | 3,580,322  |            |      |            | 3,133,462  |            |   |            | 2,583,302  |           
|                                  | Data Processing                                       |                                                       |            | 2,886,861  |            |      |            | 2,642,657  |            |   |            | 2,004,070  |           
|                                  | Advertising                                           |                                                       |            | 635,297    |            |      |            | 586,352    |            |   |            | 552,079    |           
|                                  | Legal and professional                                |                                                       |            | 3,055,849  |            |      |            | 2,638,105  |            |   |            | 2,819,771  |           
|                                  | Regulatory Assessments                                |                                                       |            | 276,327    |            |      |            | 363,340    |            |   |            | 321,290    |           
|                                  | Insurance                                             |                                                       |            | 122,673    |            |      |            | 320,098    |            |   |            | 214,228    |           
|                                  | Office Expenses                                       |                                                       |            | 2,613,472  |            |      |            | 2,317,444  |            |   |            | 2,046,631  |           
|                                  | Promotion                                             |                                                       |            | 1,496,531  |            |      |            | 1,535,443  |            |   |            | 1,157,333  |           
|                                  | Other Real Estate Owned                               |                                                       |            | 216,789    |            |      |            | 88,454     |            |   |            | 98,111     |           
|                                  | Amortization of Goodwill and Core Deposit Intangibles |                                                       |            | 1,286,421  |            |      |            | 1,286,416  |            |   |            | 401,813    |           
|                                  | Other Expenses                                        |                                                       |            | 2,159,528  |            |      |            | 1,796,468  |            |   |            | 2,346,170  |           
|                                  |                                                       |                                                       |            |            |            |      |            |            |            |   |            |           
|                                  |                                                       |                                                       | 42,998,640 |            |            |      | 39,663,257 |            |            |   | 33,527,244 |           
|                                  |                                                       |                                                       |            |            |            |      |            |            |            |   |            |           
|                                  |                                                       | INCOME BEFORE INCOME TAXES                            |            |            | 13,899,388 |      |            |            | 12,785,810 |   |            |            | 8,518,914  | 
|Income Taxes                      |                                                       |                                                       | 4,677,300  |            |            |      | 4,165,403  |            |            |   | 2,653,191  |           
|                                  |                                                       |                                                       |            |            |            |      |            |            |            |   |            |           
|                                  |                                                       | NET INCOME                                            |            | $          | 9,222,088  |      |            | $          | 8,620,407  |   |            | $          | 5,865,723  | 
|                                  |                                                       |                                                       |            |            |            |      |            |            |            |   |            |           
|Per Share Data
Net Income  Basic |                                                       | $                                                     | 0.71       |            |            | $    | 0.67       |            |            | $ | 0.47       |           
|                                  | Net Income  Diluted                                  |                                                       | $          | 0.71       |            |      | $          | 0.67       |            |   | $          | 0.46       |           

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

56



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##### Table of Contents



VIB CORP AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY
Years Ended December 31, 2001, 2000, and 1999

|                             |                                                                                              |                            |            |               |  |        |            |           |  |               |   |            |            |               |            |            |   |   |            |            |   |   |            |            |   | 
|---------------------------- | -------------------------------------------------------------------------------------------- | -------------------------- | ---------- | ------------- |  | ------ | ---------- | --------- |  | ------------- | - | ---------- | ---------- | ------------- | ---------- | ---------- | - | - | ---------- | ---------- | - | - | ---------- | ---------- | - | 
|                             |                                                                                              |                            |            | Common Shares |  |        |            |           |  |               |   |            |            | Accumulated   |            |            |   |  
|                             |                                                                                              |                            |            |               |  |        |            |           |  |               |   |            |            | Other         |            |            |   |  
|                             |                                                                                              |                            |            | Number of     |  |        |            |           |  | Comprehensive |   | Retained   |            | Comprehensive |            |            |   |  
|                             |                                                                                              |                            |            | Shares        |  | Amount |            | Income    |  | Earnings      |   | Income     |            | Total        
|                             |                                                                                              |                            |            |               |  |        |            |           |  |               |   |            |            |              
|Balance at January 1, 1999   |                                                                                              |                            | 10,513,543 |               |  | $      | 50,445,799 |           |  |               |   |            |            | $             | 5,052,918  |            |   | $ | 103,430    |            |   | $ | 55,602,147 |           
|                             | Stock Dividends                                                                              |                            |            | 646,076       |  |        |            | 5,639,846 |  |               |   |            |            |               |            | (5,639,846 | ) |   |            |            |   |   |            |           |  
|                             | Cash Dividends                                                                               |                            |            |               |  |        |            |           |  |               |   |            |            |               |            | (26,326    | ) |   |            |            |   |   |            | (26,326    | )
|                             | Exercise of Warrants                                                                         |                            |            | 10            |  |        |            | 181       |  |               |   |            |            |               |            |            |   |   |            |            |   |   |            | 181        |  
|                             | Exercise of Stock Options, Including the
Realization of Tax Benefits of $224,000             |                            |            | 283,408       |  |        |            | 1,363,674 |  |               |   |            |            |               |            |            |   |   |            |            |   |   |            | 1,363,674  |  
|Comprehensive Income:        |                                                                                              |                            |            |               |  |        |            |           |  |               |   |            |            |               |            |            |   |   |            |            |   |   |            |           
|                             | Net Income for the Year                                                                      |                            |            |               |  |        |            |           |  |               | $ | 5,865,723  |            |               |            | 5,865,723  |   |   |            |            |   |   |            | 5,865,723  |  
|                             | Unrealized loss on Available-for-Sale
Securities, net of Taxes of $3,173,065                 |                            |            |               |  |        |            |           |  |               |   | (4,559,004 | )          |               |            |            |   |   |            | (4,559,004 | ) |   |            | (4,559,004 | )
|                             | Less Reclassification Adjustments
for Gains Included in Net Income,
net of Taxes of $720     |                            |            |               |  |        |            |           |  |               |   | (1,035     | )          |               |            |            |   |   |            | (1,035     | ) |   |            | (1,035     | )
|                             |                                                                                              |                            |            |               |  |        |            |           |  |               |   |            |            |               |            |            |   |   |            |            |   |   |            |           
|                             |                                                                                              | Total Comprehensive Income |            |               |  |        |            |           |  |               |   | $          | 1,305,684  |               |            |            |   |   |            |            |   |   |            |            |   | 
|                             |                                                                                              |                            |            |               |  |        |            |           |  |               |   |            |            |               |            |            |   |   |            |            |   |   |            |           
|                             |                                                                                              |                            |            |               |  |        |            |           |  |               |   |            |            |               |            |            |   |   |            |            |   |   |            |           
|Balance at December 31, 1999 |                                                                                              |                            | 11,443,037 |               |  |        | 57,449,500 |           |  |               |   |            |            |               | 5,252,469  |            |   |   | (4,456,609 | )          |   |   | 58,245,360 |           
|                             | Stock Dividends                                                                              |                            |            | 696,289       |  |        |            | 4,683,598 |  |               |   |            |            |               |            | (4,683,598 | ) |   |            |            |   |   |            |           |  
|                             | Cash Dividends                                                                               |                            |            |               |  |        |            |           |  |               |   |            |            |               |            | (15,784    | ) |   |            |            |   |   |            | (15,784    | )
|                             | Exercise of Stock Options                                                                    |                            |            | 29,318        |  |        |            | 150,200   |  |               |   |            |            |               |            |            |   |   |            |            |   |   |            | 150,200    |  
|Comprehensive Income:        |                                                                                              |                            |            |               |  |        |            |           |  |               |   |            |            |               |            |            |   |   |            |            |   |   |            |           
|                             | Net Income for the Year                                                                      |                            |            |               |  |        |            |           |  |               | $ | 8,620,407  |            |               |            | 8,620,407  |   |   |            |            |   |   |            | 8,620,407  |  
|                             | Unrealized Gain on Available-for-Sale
Securities, net of Taxes of $2,681,226                 |                            |            |               |  |        |            |           |  |               |   | 3,850,606  |            |               |            |            |   |   |            | 3,850,606  |   |   |            | 3,850,606  |  
|                             |                                                                                              |                            |            |               |  |        |            |           |  |               |   |            |            |               |            |            |   |   |            |            |   |   |            |           
|                             |                                                                                              | Total Comprehensive Income |            |               |  |        |            |           |  |               |   | $          | 12,471,013 |               |            |            |   |   |            |            |   |   |            |            |   | 
|                             |                                                                                              |                            |            |               |  |        |            |           |  |               |   |            |            |               |            |            |   |   |            |            |   |   |            |           
|                             |                                                                                              |                            |            |               |  |        |            |           |  |               |   |            |            |               |            |            |   |   |            |            |   |   |            |           
|Balance at December 31, 2000 |                                                                                              |                            | 12,168,644 |               |  |        | 62,283,298 |           |  |               |   |            |            |               | 9,173,494  |            |   |   | (606,003   | )          |   |   | 70,850,789 |           
|                             | Stock Dividends                                                                              |                            |            | 744,188       |  |        |            | 6,563,516 |  |               |   |            |            |               |            | (6,563,516 | ) |   |            |            |   |   |            |           |  
|                             | Cash Dividends for Fractional Shares                                                         |                            |            |               |  |        |            |           |  |               |   |            |            |               |            | (23,589    | ) |   |            |            |   |   |            | (23,589    | )
|                             | Exercise of Stock Options, Including the
Realization of Tax Benefits of $135,000             |                            |            | 125,656       |  |        |            | 808,891   |  |               |   |            |            |               |            |            |   |   |            |            |   |   |            | 808,891    |  
|Comprehensive Income:        |                                                                                              |                            |            |               |  |        |            |           |  |               |   |            |            |               |            |            |   |   |            |            |   |   |            |           
|                             | Net Income for the Year                                                                      |                            |            |               |  |        |            |           |  |               | $ | 9,222,088  |            |               |            | 9,222,088  |   |   |            |            |   |   |            | 9,222,088  |  
|                             | Unrealized Gain on Available-for-Sale
Securities, net of Taxes of $1,320,756                 |                            |            |               |  |        |            |           |  |               |   | 1,900,600  |            |               |            |            |   |   |            | 1,900,600  |   |   |            | 1,900,600  |  
|                             | Less Reclassification Adjustments
For Gains included in Net Income,
Net of Taxes of $779,201 |                            |            |               |  |        |            |           |  |               |   | (1,121,290 | )          |               |            |            |   |   |            | (1,121,290 | ) |   |            | (1,121,290 | )
|                             |                                                                                              |                            |            |               |  |        |            |           |  |               |   |            |            |               |            |            |   |   |            |            |   |   |            |           
|                             |                                                                                              | Total Comprehensive Income |            |               |  |        |            |           |  |               |   | $          | 10,001,398 |               |            |            |   |   |            |            |   |   |            |            |   | 
|                             |                                                                                              |                            |            |               |  |        |            |           |  |               |   |            |            |               |            |            |   |   |            |            |   |   |            |           
|                             |                                                                                              |                            |            |               |  |        |            |           |  |               |   |            |            |               |            |            |   |   |            |            |   |   |            |           
|Balance at December 31, 2001 |                                                                                              |                            | 13,038,488 |               |  | $      | 69,655,705 |           |  |               |   |            |            | $             | 11,808,477 |            |   | $ | 173,307    |            |   | $ | 81,637,489 |           
|                             |                                                                                              |                            |            |               |  |        |            |           |  |               |   |            |            |               |            |            |   |   |            |            |   |   |            |           

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

57



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##### Table of Contents



VIB CORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 2001, 2000, and 1999

|                                                   |                                                                                   |                                                                    |                                                  |              |            |             |            |              |             |              |            |              |             |              |  
|-------------------------------------------------- | --------------------------------------------------------------------------------- | ------------------------------------------------------------------ | ------------------------------------------------ | ------------ | ---------- | ----------- | ---------- | ------------ | ----------- | ------------ | ---------- | ------------ | ----------- | ------------ | -
|                                                   |                                                                                   |                                                                    |                                                  |              | 2001       |             | 2000       |              | 1999       
|                                                   |                                                                                   |                                                                    |                                                  |              |            |             |            |              |            
|OPERATING ACTIVITIES                               |                                                                                   |                                                                    |                                                  |              |            |             |            |              |             |              |            |             
|                                                   | Net Income                                                                        |                                                                    | $                                                | 9,222,088    |            |             | $          | 8,620,407    |             |              | $          | 5,865,723    |            
|                                                   | Adjustments to Reconcile Net Income
to Net Cash Provided by Operating Activities: |                                                                    |                                                  |              |            |             |            |              |             |              |            |              |            
|                                                   |                                                                                   | Depreciation and Amortization                                      |                                                  |              | 5,096,561  |             |            |              | 3,920,545   |              |            |              | 3,003,625   |             
|                                                   |                                                                                   | Deferred Income Taxes                                              |                                                  |              | (957,000   | )           |            |              | (1,648,000  | )            |            |              | (1,265,000  | )           
|                                                   |                                                                                   | Net Realized Gains in Available-for-Sale Securities                |                                                  |              | (1,900,491 | )           |            |              |            |              |            |              | (1,755      | )           
|                                                   |                                                                                   | Provision for Credit Losses                                        |                                                  |              | 3,000,000  |             |            |              | 2,904,928   |              |            |              | 2,592,464   |             
|                                                   |                                                                                   | Proceeds From Loans Sold                                           |                                                  |              | 10,488,707 |             |            |              | 41,158,361  |              |            |              | 71,816,484  |             
|                                                   |                                                                                   | Originations of Loans Held for Sale                                |                                                  |              | (9,978,314 | )           |            |              | (40,054,111 | )            |            |              | (70,539,401 | )           
|                                                   |                                                                                   | Gain on Sale of Loans                                              |                                                  |              | (499,790   | )           |            |              | (1,050,739  | )            |            |              | (1,326,451  | )           
|                                                   |                                                                                   | Loss (Gain) on Sale of Other Real Estate Owned                     |                                                  |              | 103,251    |             |            |              | (54,227     | )            |            |              | 5,325       |             
|                                                   |                                                                                   | Net Increase in Cash Surrender Value of Life Insurance             |                                                  |              | (1,249,992 | )           |            |              | (1,209,315  | )            |            |              | (607,528    | )           
|                                                   |                                                                                   | Net Change in Accrued Interest, Other Assets
and Other Liabilities |                                                  |              | 1,190,916  |             |            |              | (261,243    | )            |            |              | (1,601,133  | )           
|                                                   |                                                                                   |                                                                    |                                                  |              |            |             |            |              |             |              |            |             
|                                                   |                                                                                   |                                                                    | NET CASH PROVIDED BY OPERATING ACTIVITIES        |              |            | 14,515,936  |            |              |             | 12,326,606   |            |              |             | 7,942,353    |  
|INVESTING ACTIVITIES                               |                                                                                   |                                                                    |                                                  |              |            |             |            |              |             |              |            |             
|                                                   | Proceeds from Sales of Other Real Estate Owned                                    |                                                                    |                                                  | 2,003,804    |            |             |            | 1,916,426    |             |              |            | 549,405      |            
|                                                   | Purchases of Available-for-Sale Securities                                        |                                                                    |                                                  | (229,185,218 | )          |             |            | (12,291,220  | )           |              |            | (76,979,320  | )          
|                                                   | Proceeds from Sales of Available-for-Sale Securities                              |                                                                    |                                                  | 107,985,716  |            |             |            |             |             |              |            | 2,455,316    |            
|                                                   | Proceeds from Maturities of Available-for-Sale Securities                         |                                                                    |                                                  | 119,236,484  |            |             |            | 12,693,596   |             |              |            | 24,311,579   |            
|                                                   | Purchases of Held-to-Maturities Securities                                        |                                                                    |                                                  |             |            |             |            |             |             |              |            | (1,491,563   | )          
|                                                   | Proceeds from Maturities of Held-to-Maturity Securities                           |                                                                    |                                                  | 2,442,239    |            |             |            | 454,603      |             |              |            | 1,490,207    |            
|                                                   | Net Change in Interest-Bearing Deposits                                           |                                                                    |                                                  | (799,853     | )          |             |            | (924,645     | )           |              |            | 199,316      |            
|                                                   | Purchase of Federal Home Loan and Federal Reserve Bank Stock                      |                                                                    |                                                  | (5,717,701   | )          |             |            | (1,937,449   | )           |              |            | (6,667,700   | )          
|                                                   | Proceeds from Sale of Federal Home Loan Bank Stock                                |                                                                    |                                                  | 4,159,600    |            |             |            | 5,794,200    |             |              |            |             |            
|                                                   | Net Cash Paid for the Purchase of Kings River Bancorp                             |                                                                    |                                                  |             |            |             |            | (15,695,931  | )           |              |            |             |            
|                                                   | Purchase of Cash Surrender Value Life Insurance                                   |                                                                    |                                                  | (1,356,468   | )          |             |            | (4,506,900   | )           |              |            | (5,079,877   | )          
|                                                   | Net Increase in Loans                                                             |                                                                    |                                                  | (19,923,702  | )          |             |            | (119,295,504 | )           |              |            | (156,792,499 | )          
|                                                   | Purchases of Premises and Equipment                                               |                                                                    |                                                  | (1,471,244   | )          |             |            | (3,468,248   | )           |              |            | (2,035,884   | )          
|                                                   |                                                                                   |                                                                    |                                                  |              |            |             |            |              |             |              |            |             
|                                                   |                                                                                   |                                                                    | NET CASH USED BY INVESTING ACTIVITIES            |              |            | (21,026,637 | )          |              |             | (137,251,072 | )          |              |             | (220,041,020 | )
|FINANCING ACTIVITIES                               |                                                                                   |                                                                    |                                                  |              |            |             |            |              |             |              |            |             
|                                                   | Net Increase in Demand Deposits and Savings Accounts                              |                                                                    |                                                  | 26,329,769   |            |             |            | 65,994,979   |             |              |            | 12,184,441   |            
|                                                   | Net Increase in Time Deposits                                                     |                                                                    |                                                  | (51,637,955  | )          |             |            | 70,990,480   |             |              |            | 87,924,003   |            
|                                                   | Net Change in Federal Funds Purchased                                             |                                                                    |                                                  | (750,000     | )          |             |            | (14,800,000  | )           |              |            | 15,550,000   |            
|                                                   | Net Change in Federal Home Loan Bank Advances                                     |                                                                    |                                                  | 38,018,358   |            |             |            | (1,550,000   | )           |              |            | 83,200,000   |            
|                                                   | Proceeds from Issuance of Trust Preferred Securities                              |                                                                    |                                                  | 960,672      |            |             |            | 10,000,000   |             |              |            | 22,400,000   |            
|                                                   | Payments for Dividends                                                            |                                                                    |                                                  | (23,589      | )          |             |            | (15,784      | )           |              |            | (26,326      | )          
|                                                   | Proceeds from Exercise of Warrants                                                |                                                                    |                                                  |             |            |             |            |             |             |              |            | 181          |            
|                                                   | Proceeds from Exercise of Stock Options                                           |                                                                    |                                                  | 673,891      |            |             |            | 150,200      |             |              |            | 1,139,674    |            
|                                                   |                                                                                   |                                                                    |                                                  |              |            |             |            |              |             |              |            |             
|                                                   |                                                                                   |                                                                    | NET CASH PROVIDED BY FINANCING ACTIVITIES        |              |            | 13,571,146  |            |              |             | 130,769,875  |            |              |             | 222,371,973  |  
|                                                   |                                                                                   |                                                                    |                                                  |              |            |             |            |              |             |              |            |             
|                                                   |                                                                                   |                                                                    | INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |              |            | 7,060,445   |            |              |             | 5,845,409    |            |              |             | 10,273,306   |  
|Cash and Cash Equivalents at Beginning of Year     |                                                                                   |                                                                    | 51,604,079                                       |              |            |             | 45,758,670 |              |             |              | 35,485,364 |             
|                                                   |                                                                                   |                                                                    |                                                  |              |            |             |            |              |             |              |            |             
|                                                   |                                                                                   |                                                                    | CASH AND CASH EQUIVALENTS AT END OF YEAR         |              | $          | 58,664,524  |            |              | $           | 51,604,079   |            |              | $           | 45,758,670   |  
|                                                   |                                                                                   |                                                                    |                                                  |              |            |             |            |              |             |              |            |             
|Supplemental Disclosures of Cash Flow Information: |                                                                                   |                                                                    |                                                  |              |            |             |            |              |             |              |            |             
|                                                   | Interest Paid                                                                     |                                                                    | $                                                | 35,307,192   |            |             | $          | 40,656,652   |             |              | $          | 25,663,098   |            
|                                                   | Income Taxes Paid                                                                 |                                                                    | $                                                | 5,143,406    |            |             | $          | 5,914,760    |             |              | $          | 3,670,284    |            

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

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VIB CORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001, 2000, and 1999

NOTE A  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The financial statements include the accounts of VIB Corp and its wholly owned
subsidiaries, Valley Independent Bank (Bank), Valley Capital Trust, VIBC
Capital Trust I, Valley Capital Trust II and VIBC Services Company,
collectively referred to herein as the Company. All significant intercompany
transactions have been eliminated.

Nature of Operations

The Bank has been organized as a single reporting segment and operates branches
throughout the Imperial, Coachella and San Joaquin Valleys and in Blythe,
Tecate, Julian, California, and Las Vegas, Nevada. The Bank also operates
business loan centers in El Centro, Rancho Mirage, Orange, Bakersfield, Fresno,
California, and Las Vegas, Nevada. The Banks primary source of revenue is
providing loans to customers, who are predominately small and middle-market
businesses and individuals.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
those estimates.

Cash and Cash Equivalents

For purposes of reporting cash flows, cash and cash equivalents include cash,
due from banks and money market mutual funds.

Cash and Due From Banks

Banking regulations require that all banks maintain a percentage of their
deposits as reserves in cash or on deposit with the Federal Reserve Bank. The
Bank complied with the reserve requirements as of December 31, 2001.

The Company maintains amounts due from banks that exceed federally insured
limits. The Company has not experienced any losses in such accounts.

Investment Securities

Bonds, notes, and debentures for which the Company has the positive intent and
ability to hold to maturity are reported at cost, adjusted for premiums and
discounts that are recognized in interest income using the interest method over
the period to maturity.

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VIB CORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001, 2000, and 1999

NOTE A  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  Continued

Investment Securities  Continued

Investments not classified as trading securities nor as held to maturity
securities are classified as available-for-sale securities and recorded at fair
value. Unrealized gains or losses on available-for-sale securities are
excluded from net income and reported as an amount net of taxes as a separate
component of other comprehensive income included in shareholders equity.
Premiums or discounts on held-to-maturity and available-for-sale securities are
amortized or accreted into income using the interest method. Realized gains or
losses on sales of held-to-maturity or available-for-sale securities are
recorded using the specific identification method.

Loans Held for Sale

Mortgage and SBA loans originated and intended for sale in the secondary market
are carried at the lower of cost or estimated market value in the aggregate.
Net unrealized losses are recognized through a valuation allowance by charges
to income. Gains or losses realized on the sales of loans are recognized at
the time of sale and are determined by the difference between the net sales
proceeds and the carrying value of the loans sold, adjusted for any servicing
asset or liability. Gains and losses on sales of loans are included in
noninterest income.

Loans

Loans receivable that management has the intent and ability to hold for the
foreseeable future or until maturity or payoff are reported at their
outstanding unpaid principal balances reduced by any charge-offs or specific
valuation accounts and net of any deferred fees or costs on originated loans,
or unamortized premiums or discounts on purchased loans.

Loan origination fees and certain direct origination costs are capitalized and
recognized as an adjustment of the yield of the related loan.

Loans on which the accrual of interest has been discontinued are designated as
nonaccrual loans. The accrual of interest on loans is discontinued when
principal or interest is past due 90 days or when, in the opinion of
management, there is reasonable doubt as to collectibility. When loans are
placed on nonaccrual status, all interest previously accrued but not collected
is reversed against current period interest income. Income on nonaccrual loans
is subsequently recognized only to the extent that cash is received and the
loans principal balance is deemed collectible. Interest accruals are resumed
on such loans only when they are brought current with respect to interest and
principal and when, in the judgment of management, the loans are estimated to
be fully collectible as to all principal and interest.

The Bank considers a loan to be impaired when it is probable that the Bank will
be unable to collect all amounts due (principal and interest) according to the
contractual terms of the loan agreement. Measurement of impairment is based on
the expected future cash flows of an impaired loan which are to be discounted
at the loans effective interest rate, or measured by reference to an
observable market value, if one exists, or the fair value of the collateral for
a collateral-dependent loan. The Bank selects the measurement method on a
loan-by-loan basis except that collateral-dependent loans for which foreclosure
is probable are measured at the fair value of the collateral. The Bank
recognizes interest income on impaired loans based on its existing methods of
recognizing interest income on nonaccrual loans.

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VIB CORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001, 2000, and 1999

NOTE A  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  Continued

Allowance for Credit Losses

The allowance for credit losses is increased by charges to income and decreased
by charge-offs (net of recoveries). Quarterly detailed reviews are performed
to identify the risks inherent in the loan portfolio, assess the overall
quality of the loan portfolio and to determine the adequacy of the allowance
for credit losses and the related provision for loan losses to be charged to
expense. Loans identified as less than acceptable are reviewed individually
to estimate the amount of probable losses that need to be included in the
allowance. These reviews include analysis of financial information as well as
evaluation of collateral securing the credit. Additionally, the Company
considers the inherent risk present in the acceptable portion of the loan
portfolio taking into consideration historical losses on pools of similar
loans, adjusted for trends, conditions and other relevant factors that may
affect repayment of the loans in these pools.

Premises and Equipment

Land is carried at cost. Bank premises, furniture and equipment, and leasehold
improvements are carried at cost, less accumulated depreciation and
amortization. Depreciation is computed using the straight-line method over the
estimated service lives, which ranges from two to ten years for furniture and
fixtures and forty years for buildings. Leasehold improvements are amortized
using the straight-line method over the estimated useful lives of the
improvements or the remaining lease term, whichever is shorter. Expenditures
for betterments or major repairs are capitalized and those for ordinary repairs
and maintenance are charged to operations as incurred.

Other Real Estate Owned

Real estate properties acquired through, or in lieu of, loan foreclosure are
initially recorded at the lesser of the outstanding loan balance or the fair
value at the date of foreclosure minus estimated costs to sell. Any valuation
adjustments required at the time of foreclosure are charged to the allowance
for loan losses. After foreclosure, the properties are carried at the lower of
carrying value or fair value less estimated costs to sell. Any subsequent
valuation adjustments, operating expenses or income, and gains and losses on
disposition of such properties are recognized in current operations.

Goodwill and Other Intangibles

Goodwill represents the excess of the purchase price over the estimated fair
value of net assets associated with acquisition transactions of the Company
accounted for as purchases and is amortized over fifteen to twenty years. Core
deposit intangibles represent the intangible value of depositor relationships
resulting from deposit liabilities assumed in acquisitions and are amortized
not more than fifteen years. Goodwill and other intangibles are evaluated
periodically for other than temporary impairment. Should such an assessment
indicate that the undiscounted value of an intangible may be impaired, the net
book value of the intangible would be written down to net estimated recoverable
value.

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VIB CORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001, 2000, and 1999

NOTE A  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  Continued

Income Taxes

Deferred income taxes are computed using the asset and liability method, which
recognizes a liability or asset representing the tax effects, based on current
tax law, of future deductible or taxable amounts attributable to events that
have been recognized in the consolidated financial statements. A valuation
allowance is established to reduce the deferred tax asset to the level at which
it is more likely than not that the tax asset or benefits will be realized.
Realization of tax benefits of deductible temporary differences and operating
loss carryforwards depends on having sufficient taxable income of an
appropriate character within the carryforward periods.

Disclosure About Fair Value of Financial Instruments

Statement of Financial Accounting Standard (SFAS) No. 107 specifies the
disclosure of the estimated fair value of financial instruments. The Companys
estimated fair value amounts have been determined by the Company using
available market information and appropriate valuation methodologies.

However, considerable judgment is required to develop the estimates of fair
value. Accordingly, the estimates are not necessarily indicative of the
amounts the Company could have realized in a current market exchange. The use
of different market assumptions and/or estimation methodologies may have a
material effect on the estimated fair value amounts.

Although management is not aware of any factors that would significantly affect
the estimated fair value amounts, such amounts have not been comprehensively
revalued for purposes of these financial statements since the balance sheet
date and, therefore, current estimates of fair value may differ significantly
from the amounts presented in the accompanying notes.

Earnings Per Shares (EPS)

Basic EPS excludes 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 that could occur
if securities or other contracts to issue common stock were exercised or
converted into common stock or resulted in the issuance of common stock that
then shared in the earnings of the entity.

Stock-Based Compensation

SFAS No. 123, Accounting for Stock-Based Compensation,encourages, but does
not require, companies to record compensation cost for stock-based employee
compensation plans at fair value. The Company has chosen to continue to
account for stock-based compensation using the intrinsic value method
prescribed in Accounting Principles Board (APB) Opinion No. 25, Accounting
for Stock Issued to Employees,and related interpretations. Accordingly,
compensation cost for stock options is measured as the excess, if any, of the
quoted market price of the Companys stock at the date of the grant over the
amount an employee must pay to acquire the stock. The pro forma effects of
adoption are disclosed in Note K.

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VIB CORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001, 2000, and 1999

NOTE A  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  Continued

Comprehensive Income

Beginning in 1998, the Company adopted SFAS No. 130, Reporting Comprehensive
Income,which requires the disclosure of comprehensive income and its
components. Changes in unrealized gains (losses) on available-for-sale
securities, net of income taxes, are the only component of accumulated other
comprehensive income for the Company.

Financial Instruments

In the ordinary course of business, the Bank has entered into off-balance sheet
financial instruments consisting of commitments to extend credit, commercial
letters of credit, and standby letters of credit as described in Note J. Such
financial instruments are recorded in the financial statements when they are
funded or related fees are incurred or received.

Accounting for Trust Preferred Securities

Valley Capital Trust, VIBC Capital Trust I and Valley Capital Trust II
(Trusts) are statutory business trusts created for the exclusive purpose of
issuing and selling Cumulative Trust Preferred Securities (the Trust Preferred
Securities) and using the proceeds to acquire the junior subordinated
debentures issued by VIB Corp.

For financial reporting purposes, the Trusts are treated as subsidiaries of VIB
Corp and, accordingly, the accounts are included in the consolidated financial
statements of the Company. The Trust Preferred Securities are presented as a
separate line item in the consolidated balance sheet under the caption Company
Obligated Mandatory Redeemable Preferred Securities of Subsidiary Trusts
Holding Solely Junior Subordinated Debentures. For financial reporting
purposes, the Company records the dividend distributions payable on the Trust
Preferred Securities as interest expense in the consolidated statement of
income.

Current Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No.
142, Accounting for Goodwill and Other Intangible Assets,effective starting
with fiscal years beginning after December 15, 2001. This Statement
establishes new accounting standards for goodwill and continues to require the
recognition of goodwill as an asset but does not permit amortization of
goodwill as previously required by the APB Opinion No. 17. The Statement also
establishes a new method of testing goodwill for impairment. It requires
goodwill to be separately tested for impairment at a reporting unit level. The
amount of goodwill determined to be impaired would be expensed to current
operations. Management believes that the adoption of the statement will not
have a material effect on the Companys financial statements. Amortization of
goodwill charged to operations for 2001, 2000, and 1999 was $808,328, $808,328,
and $128,877, respectively.

Reclassifications

Certain reclassifications were made to prior years presentations to conform to
the current year. These reclassifications are of a normal recurring nature.

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VIB CORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001, 2000, and 1999

NOTE B  INVESTMENT SECURITIES

Debt and equity securities have been classified in the balance sheets according
to managements intent. The carrying amount of securities and their
approximate fair values at December 31 were as follows:

|                               |                    |                                       |             |           |            |            |           |            |         |       |           |   |           |   |             |   |            | 
|------------------------------ | ------------------ | ------------------------------------- | ----------- | --------- | ---------- | ---------- | --------- | ---------- | ------- | ----- | --------- | - | --------- | - | ----------- | - | ---------- | 
|                               |                    |                                       |             |           |            |            |           | Gross      |         | Gross |           |   |           |  
|                               |                    |                                       |             | Amortized |            | Unrealized |           | Unrealized |         | Fair 
|                               |                    |                                       |             | Cost      |            | Gains      |           | Losses     |         | Value
|                               |                    |                                       |             |           |            |            |           |            |         |      
|Available-for-Sale Securities: |                    |                                       |             |           |            |            |           |            |         |       |           |   |           |   |             |  
|                               | December 31, 2001: |                                       |             |           |            |            |           |            |         |       |           |   |           |   |             |   |           
|                               |                    | U.S. Treasury Securities              |             | $         | 22,251,842 |            |           | $          | 2,650   |       |           | $ | 13,188    |   |             | $ | 22,241,304 | 
|                               |                    | U.S. Government and
Agency Securities |             |           | 30,482,359 |            |           |            | 95,720  |       |           |   | 8,379     |   |             |   | 30,569,700 | 
|                               |                    | States and Political
Subdivisions     |             |           | 39,471,364 |            |           |            | 308,066 |       |           |   | 663,107   |   |             |   | 39,116,323 | 
|                               |                    | Mortgage-Backed Securities            |             |           | 96,570,395 |            |           |            | 721,374 |       |           |   | 70,259    |   |             |   | 97,221,510 | 
|                               |                    | Other                                 |             |           | 5,401,796  |            |           |            | 54,613  |       |           |   | 133,750   |   |             |   | 5,322,659  | 
|                               |                    |                                       |             |           |            |            |           |            |         |       |           |   |           |   |             |  
|                               |                    | $                                     | 194,177,756 |           |            | $          | 1,182,423 |            |         | $     | 888,683   |   |           | $ | 194,471,496 |  
|                               |                    |                                       |             |           |            |            |           |            |         |       |           |   |           |   |             |  
|                               | December 31, 2000: |                                       |             |           |            |            |           |            |         |       |           |   |           |   |             |   |           
|                               |                    | U.S. Treasury Securities              |             | $         | 1,539,364  |            |           | $          | 29,230  |       |           | $ |          |   |             | $ | 1,568,594  | 
|                               |                    | U.S. Government and
Agency Securities |             |           | 81,411,002 |            |           |            | 196,138 |       |           |   | 840,086   |   |             |   | 80,767,054 | 
|                               |                    | States and Political
Subdivisions     |             |           | 67,709,266 |            |           |            | 905,785 |       |           |   | 1,013,321 |   |             |   | 67,601,730 | 
|                               |                    | Mortgage-Backed Securities            |             |           | 21,575,912 |            |           |            | 94,406  |       |           |   | 216,895   |   |             |   | 21,453,423 | 
|                               |                    | Other                                 |             |           | 18,668,144 |            |           |            | 117,947 |       |           |   | 300,329   |   |             |   | 18,485,762 | 
|                               |                    |                                       |             |           |            |            |           |            |         |       |           |   |           |   |             |  
|                               |                    | $                                     | 190,903,688 |           |            | $          | 1,343,506 |            |         | $     | 2,370,631 |   |           | $ | 189,876,563 |  
|                               |                    |                                       |             |           |            |            |           |            |         |       |           |   |           |   |             |  
|Held-to Maturity Securities:   |                    |                                       |             |           |            |            |           |            |         |       |           |   |           |   |             |  
|                               | December 31, 2000: |                                       |             |           |            |            |           |            |         |       |           |   |           |   |             |   |           
|                               |                    | Mortgage-Backed Securities            |             | $         | 2,440,928  |            |           | $          | 197     |       |           | $ | 15,785    |   |             | $ | 2,425,340  | 
|                               |                    |                                       |             |           |            |            |           |            |         |       |           |   |           |   |             |  
|                               |                    | $                                     | 2,440,928   |           |            | $          | 197       |            |         | $     | 15,785    |   |           | $ | 2,425,340   |  
|                               |                    |                                       |             |           |            |            |           |            |         |       |           |   |           |   |             |  

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VIB CORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001, 2000, and 1999

NOTE B  INVESTMENT SECURITIES  Continued

Gross realized gains and gross realized losses on sales of available-for-sale
securities were:

|                       |                                       |                                       |           |         |         |      |   |      |   |   |       |       |   | 
|---------------------- | ------------------------------------- | ------------------------------------- | --------- | ------- | ------- | ---- | - | ---- | - | - | ----- | ----- | - | 
|                       |                                       |                                       |           | 2001    |         | 2000 |   | 1999
|                       |                                       |                                       |           |         |         |      |   |     
|Gross Realized Gains:  |                                       |                                       |           |         |         |      |   |      |   |   |       |      
|                       | U.S. Government and Agency Securities |                                       | $         | 450,477 |         |      | $ |     |   |   | $     |      |  
|                       | States and Political Subdivisions     |                                       |           | 951,120 |         |      |   |     |   |   |       | 1,755 |  
|                       | Mortgage-Backed Securities            |                                       |           | 490,510 |         |      |   |     |   |   |       |      |  
|                       | Other                                 |                                       |           | 30,403  |         |      |   |     |   |   |       |      |  
|                       |                                       |                                       |           |         |         |      |   |      |   |   |       |      
|                       |                                       | $                                     | 1,922,510 |         |         | $    |  |      |   | $ | 1,755 |      
|                       |                                       |                                       |           |         |         |      |   |      |   |   |       |      
|Gross Realized Losses: |                                       |                                       |           |         |         |      |   |      |   |   |       |      
|                       |                                       | U.S. Government and Agency Securities |           | $       |        |      |   | $    |  |   |       | $     |  | 
|                       |                                       | Mortgage-Backed Securities            |           |         | (22,019 | )    |   |      |  |   |       |       |  | 
|                       |                                       |                                       |           |         |         |      |   |      |   |   |       |      
|                       |                                       | $                                     | (22,019   | )       |         | $    |  |      |   | $ |      |      
|                       |                                       |                                       |           |         |         |      |   |      |   |   |       |      

Investment securities carried at approximately $186,576,000 and $166,427,000,
at December 31, 2001 and 2000, respectively, were pledged to secure public
deposits, Federal Home Loan Bank advances and other purposes as required by
law. The scheduled maturities of securities available for sale and
held-to-maturity at December 31, 2001, were as follows:

|                                |  |                               |             |       |  |   |             | 
|------------------------------- |  | ----------------------------- | ----------- | ----- |  | - | ----------- | 
|                                |  | Available-for-Sale Securities
|                                |  |                              
|                                |  | Amortized                     |             | Fair 
|                                |  | Cost                          |             | Value
|                                |  |                               |             |      
|Due in One Year or Less         |  | $                             | 27,592,889  |       |  | $ | 27,656,681  | 
|Due from One Year to Five Years |  |                               | 31,613,399  |       |  |   | 31,772,573  | 
|Due from Five to Ten Years      |  |                               | 16,996,503  |       |  |   | 16,976,399  | 
|Due after Ten Years             |  |                               | 21,404,570  |       |  |   | 20,844,333  | 
|Mortgage-Backed Securities      |  |                               | 96,570,395  |       |  |   | 97,221,510  | 
|                                |  |                               |             |       |  |   |             | 
|                                |  | $                             | 194,177,756 |       |  | $ | 194,471,496 | 
|                                |  |                               |             |       |  |   |             | 

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VIB CORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001, 2000, and 1999

NOTE C  LOANS

The Banks loan portfolio consists primarily of loans to borrowers within
Imperial, Riverside, Kern, Orange and San Diego counties, California, Las
Vegas, Nevada and Yuma, Arizona. Although the Bank seeks to avoid
concentrations of loans to a single industry or based upon a single class of
collateral, real estate and agricultural associated businesses are among the
principal industries in the Banks market areas. As a result, the Banks loan
and collateral portfolio is, to some degree, concentrated in those industries.

The Bank also originates real estate related and farmland loans for sale to
governmental agencies and institutional investors. At December 31, 2001 and
December 31, 2000, the Bank was servicing approximately $80,028,000 and
$98,368,000, respectively, in loans previously sold.

Loans having a carrying value of approximately $135,000,000 were pledged to
secure Federal Home Loan Bank advances.

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

|                                                     |  |      |            |      |  |      |            |   |  |   |            |  
|---------------------------------------------------- |  | ---- | ---------- | ---- |  | ---- | ---------- | - |  | - | ---------- | -
|                                                     |  | 2001 |            | 2000 |  | 1999
|                                                     |  |      |            |      |  |     
|Balance at Beginning of Year                         |  | $    | 8,297,824  |      |  | $    | 5,696,222  |   |  | $ | 4,296,415  |  
|Additions to the Allowance Charged to Expense        |  |      | 3,000,000  |      |  |      | 2,904,928  |   |  |   | 2,592,464  |  
|Recoveries on Loans Charged Off                      |  |      | 223,856    |      |  |      | 157,571    |   |  |   | 61,363     |  
|Allowance on Loans Acquired from
Kings River Bancorp |  |      |           |      |  |      | 653,877    |   |  |   |           |  
|                                                     |  |      |            |      |  |      |            |   |  |   |            |  
|                                                     |  |      | 11,521,670 |      |  |      | 9,412,598  |   |  |   | 6,950,242  |  
|Less Loans Charged Off                               |  |      | (2,177,422 | )    |  |      | (1,114,784 | ) |  |   | (1,254,020 | )
|                                                     |  |      |            |      |  |      |            |   |  |   |            |  
|Balance at End of Year                               |  | $    | 9,344,248  |      |  | $    | 8,297,814  |   |  | $ | 5,696,222  |  
|                                                     |  |      |            |      |  |      |            |   |  |   |            |  

The following is a summary of the investment in impaired loans, the related
allowance for credit losses, and income recognized thereon as of December 31:

|                                              |  |      |            |      |  |      |            |  |  |   |           | 
|--------------------------------------------- |  | ---- | ---------- | ---- |  | ---- | ---------- |  |  | - | --------- | 
|                                              |  | 2001 |            | 2000 |  | 1999
|                                              |  |      |            |      |  |     
|Recorded Investment in Impaired Loans         |  | $    | 18,101,000 |      |  | $    | 15,629,000 |  |  | $ | 8,964,000 | 
|                                              |  |      |            |      |  |      |            |  |  |   |           | 
|Related Allowance for Credit Losses           |  | $    | 2,281,000  |      |  | $    | 1,946,000  |  |  | $ | 1,515,000 | 
|                                              |  |      |            |      |  |      |            |  |  |   |           | 
|Average Recorded Investment in Impaired Loans |  | $    | 14,529,000 |      |  | $    | 9,769,000  |  |  | $ | 8,362,000 | 
|                                              |  |      |            |      |  |      |            |  |  |   |           | 
|Interest Income Recognized from Cash Payments |  | $    | 608,000    |      |  | $    | 450,000    |  |  | $ | 582,000   | 
|                                              |  |      |            |      |  |      |            |  |  |   |           | 

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VIB CORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001, 2000, and 1999

NOTE C  LOANS  Continued

Loans having carrying values of $4,727,347, $1,533,732, and $1,251,895 were
transferred to other real estate owned in 2001, 2000, and 1999, respectively.
During 2001 and 1999, loans totaling $841,500, and $463,500, respectively,
were made to facilitate the sale of other real estate owned.

NOTE D  PREMISES AND EQUIPMENT

A summary of premises and equipment as of December 31 follows:

|                                               |  |      |             |      |  |   |             |  
|---------------------------------------------- |  | ---- | ----------- | ---- |  | - | ----------- | -
|                                               |  | 2001 |             | 2000
|                                               |  |      |             |     
|Land                                           |  | $    | 1,824,167   |      |  | $ | 2,136,628   |  
|Buildings and Improvements                     |  |      | 4,241,548   |      |  |   | 4,270,259   |  
|Leased Property under Capital Lease            |  |      | 2,850,000   |      |  |   | 2,850,000   |  
|Furniture, Fixtures, and Equipment             |  |      | 16,314,853  |      |  |   | 15,236,907  |  
|Leasehold Improvements                         |  |      | 2,899,616   |      |  |   | 2,602,875   |  
|                                               |  |      |             |      |  |   |             |  
|                                               |  |      | 28,130,184  |      |  |   | 27,096,669  |  
|Less Accumulated Depreciation and Amortization |  |      | (15,819,276 | )    |  |   | (13,232,846 | )
|                                               |  |      |             |      |  |   |             |  
|                                               |  | $    | 12,310,908  |      |  | $ | 13,863,823  |  
|                                               |  |      |             |      |  |   |             |  

During 1997, the Bank entered into a twenty-year lease agreement for
administrative offices that expires June 30, 2017. Total accumulated
amortization on property under capital lease at December 31, 2001 and 2000 was
$641,250 and $498,750, respectively.

The future lease payments under the capitalized lease obligation, together with
the present value of the net minimum lease payments as of December 31, 2001,
are as follows:

|                                            |  |   |            |  
|------------------------------------------- |  | - | ---------- | -
|2002                                        |  | $ | 372,433    |  
|2003                                        |  |   | 385,468    |  
|2004                                        |  |   | 398,959    |  
|2005                                        |  |   | 412,923    |  
|2006                                        |  |   | 427,376    |  
|Thereafter                                  |  |   | 5,495,804  |  
|                                            |  |   |            |  
|Net Minimum Lease Payments                  |  |   | 7,492,963  |  
|Less Amount Representing Interest           |  |   | (4,515,997 | )
|                                            |  |   |            |  
|Present Value of Net Minimum Lease Payments |  | $ | 2,976,966  |  
|                                            |  |   |            |  

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VIB CORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001, 2000, and 1999

NOTE D  PREMISES AND EQUIPMENT  Continued

The Bank has entered into leases for its branches and operating facilities,
which expire at various dates through 2015. These leases include provisions
for periodic rent increases as well as payment by the lessee of certain
operating expenses. Rental expense relating to these leases was approximately
$1,718,000 in 2001, $1,548,000 in 2000, and $1,072,000 in 1999.

The approximate future minimum annual payments for these leases by year are as
follows:

|           |      |   |           |           | 
|---------- | ---- | - | --------- | --------- | 
|           | 2002 |   | $         | 1,544,025 | 
|           | 2003 |   |           | 1,015,356 | 
|           | 2004 |   |           | 733,840   | 
|           | 2005 |   |           | 634,186   | 
|           | 2006 |   |           | 501,864   | 
|Thereafter |      |   | 1,243,043 |          
|           |      |   |           |          
|           |      | $ | 5,672,314 |          
|           |      |   |           |          

The minimum rental payments shown above are given for the existing lease
obligations and are not a forecast of future rental expense.

NOTE E  DEPOSITS

At December 31, 2001, the scheduled maturities of time deposits are as follows:

|           |      |   |             |             | 
|---------- | ---- | - | ----------- | ----------- | 
|           | 2002 |   | $           | 355,563,822 | 
|           | 2003 |   |             | 12,334,652  | 
|           | 2004 |   |             | 4,081,793   | 
|           | 2005 |   |             | 1,769,484   | 
|Thereafter |      |   | 2,473,993   |            
|           |      |   |             |            
|           |      | $ | 376,223,744 |            
|           |      |   |             |            

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VIB CORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001, 2000, and 1999

NOTE F  FEDERAL HOME LOAN BANK ADVANCES

Federal Home Loan Bank Advances consist of the following as of December 31,
2001:

|         |  |      |      |        |  |   |             | 
|-------- |  | ---- | ---- | ------ |  | - | ----------- | 
|Maturity |  | Rate |      | Amount
|         |  |      |      |       
|2002     |  |      | 2.08 | %      |  | $ | 56,200,000  | 
|2003     |  |      | 4.64 | %      |  |   | 27,750,000  | 
|2004     |  |      | 4.32 | %      |  |   | 20,750,000  | 
|2005     |  |      | 5.63 | %      |  |   | 15,000,000  | 
|2006     |  |      | 4.88 | %      |  |   | 26,750,000  | 
|2010     |  |      | 6.03 | %      |  |   | 5,000,000   | 
|2016     |  |      | 5.47 | %      |  |   | 4,968,358   | 
|         |  |      |      |        |  |   |             | 
|         |  |      |      |        |  | $ | 156,218,358 | 
|         |  |      |      |        |  |   |             | 

NOTE G  MANDATORILY REDEEMABLE PREFERRED SECURITIES OF SUBSIDIARY

The Trusts, wholly owned subsidiaries of VIB Corp, have issued Cumulative Trust
Preferred Securities and invested the gross proceeds from the offering in
junior subordinated debentures issued by VIB Corp. The subordinated debentures
were issued concurrent with the issuance of the Trust Preferred Securities.
VIB Corp will pay the interest on the junior subordinated debentures to the
Trusts, which represents the sole revenues and the sole source of dividend
distributions by the Trusts to the holders of the Trust Preferred Securities.
VIB Corp has guaranteed, on a subordinated basis, payment of the Trusts
obligations. VIB Corp has the right, assuming no default has occurred, to
defer payments of interest on the junior subordinated debentures at any time
for a period not to exceed 20 consecutive quarters. During 2001 the Company
purchased $19,200,000 of its outstanding $22,400,000 9% Cumulative Trust
Preferred Securities originally issued in 1999. Mandatorily redeemable
preferred securities of the Trusts consist of the following as of December 31,
2001 and 2000:

|                                                                                                                                                                                                                 |  |      |            |      |  |   |            | 
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ---------- | ---- |  | - | ---------- | 
|                                                                                                                                                                                                                 |  | 2001 |            | 2000
|                                                                                                                                                                                                                 |  |      |            |     
|9% trust preferred securities. Interest payable quarterly, principal
due February 5, 2029, but can be called after February 5, 2009                                                                              |  | $    | 3,660,672  |      |  | $ | 22,400,000 | 
|11.695% trust preferred securities. Interest payable quarterly, principal
due July 19, 2030, but can be called after July 19, 2010                                                                               |  |      | 10,000,000 |      |  |   | 10,000,000 | 
|6 month LIBOR + 3.75% trust preferred securities. Interest payable
semiannually. Interest rate cap is set at 11% until December 8, 2006
Principal due December 8, 2031, but can be called after December 8, 2006 |  |      | 19,700,000 |      |  |   |           | 
|                                                                                                                                                                                                                 |  |      |            |      |  |   |            | 
|                                                                                                                                                                                                                 |  | $    | 33,360,672 |      |  | $ | 32,400,000 | 
|                                                                                                                                                                                                                 |  |      |            |      |  |   |            | 

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##### Table of Contents



VIB CORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001, 2000, and 1999

NOTE H  INCOME TAXES

The provisions for income taxes included in the statements of income consist of
the following:

|         |         |   |           |           |      |   |            |           |  |   |            |           | 
|-------- | ------- | - | --------- | --------- | ---- | - | ---------- | --------- |  | - | ---------- | --------- | 
|         |         |   | 2001      |           | 2000 |   | 1999      
|         |         |   |           |           |      |   |           
|Current: |         |   |           |           |      |   |            |           |  |   |            |          
|         | Federal |   | $         | 4,195,000 |      |   | $          | 4,328,288 |  |   | $          | 2,915,326 | 
|         | State   |   |           | 1,439,300 |      |   |            | 1,485,115 |  |   |            | 1,002,865 | 
|         |         |   |           |           |      |   |            |           |  |   |            |          
|         |         |   | 5,634,300 |           |      |   | 5,813,403  |           |  |   | 3,918,191  |          
|Deferred |         |   | (957,000  | )         |      |   | (1,648,000 | )         |  |   | (1,265,000 | )        
|         |         |   |           |           |      |   |            |           |  |   |            |          
|         |         | $ | 4,677,300 |           |      | $ | 4,165,403  |           |  | $ | 2,653,191  |          
|         |         |   |           |           |      |   |            |           |  |   |            |          

Deferred taxes are a result of differences between income tax accounting and
generally accepted accounting principles with respect to income and expense
recognition.

The following is a summary of the components of the deferred tax asset and
liability accounts recognized in the accompanying statements of financial
condition:

|                          |                                                       |   |           |           |      |   |           |           |  
|------------------------- | ----------------------------------------------------- | - | --------- | --------- | ---- | - | --------- | --------- | -
|                          |                                                       |   | 2001      |           | 2000
|                          |                                                       |   |           |           |     
|Deferred Tax Assets:      |                                                       |   |           |           |      |   |           |          
|                          | Allowance for Credit Losses Due to Tax Limitations    |   | $         | 3,351,000 |      |   | $         | 2,664,000 |  
|                          | Valuation Allowance for Other Real Estate Owned       |   |           | 160,000   |      |   |           | 233,000   |  
|                          | Premises and Equipment Due to Depreciation Difference |   |           | 729,000   |      |   |           | 589,000   |  
|                          | State Taxes                                           |   |           | 494,000   |      |   |           | 509,000   |  
|                          | Net Operating Loss and Tax Credit Carryforwards       |   |           | 234,000   |      |   |           | 322,000   |  
|                          | Reserve for Deferred Compensation                     |   |           | 2,449,000 |      |   |           | 1,775,000 |  
|                          | Market Value Adjustment on Investment Securities      |   |           |          |      |   |           | 422,000   |  
|                          | Other Assets/Liabilities                              |   |           | 603,000   |      |   |           | 877,000   |  
|                          |                                                       |   |           |           |      |   |           |          
|                          |                                                       |   | 8,020,000 |           |      |   | 7,391,000 |          
|Less Valuation Allowance  |                                                       |   |          |           |      |   | (52,000   | )        
|Deferred Tax Liabilities: |                                                       |   |           |           |      |   |           |          
|                          | Federal Home Loan Bank Stock                          |   |           | (257,000  | )    |   |           | (296,000  | )
|                          | Market Value Adjustment on Investment Securities      |   |           | (120,000  | )    |   |           |          |  
|                          | Other Assets/Liabilities                              |   |           | (305,000  | )    |   |           | (120,000  | )
|                          |                                                       |   |           |           |      |   |           |          
|                          |                                                       |   | (682,000  | )         |      |   | (416,000  | )        
|                          |                                                       |   |           |           |      |   |           |          
|Net Deferred Taxes        |                                                       | $ | 7,338,000 |           |      | $ | 6,923,000 |          
|                          |                                                       |   |           |           |      |   |           |          

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VIB CORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001, 2000, and 1999

NOTE H  INCOME TAXES  Continued

At December 31, 2001, the Bank had net operating loss carryforwards for federal
income tax purposes of approximately $653,000, which expire beginning in the
year 2011. The net operating loss carryforwards are subject to an ownership
change, which limits the amount that can be used annually to $260,000.
Alternative minimum tax credit carryforwards for tax purposes, which do not
expire, are $12,000 as of December 31, 2001.

A comparison of the federal statutory income tax rates to the Companys
effective income tax rates follow:

|                                                       |  |        |            |      |  |        |      |      |  |        |            |      |  |  |      |   |  |   |           |   |  |  |       |  
|------------------------------------------------------ |  | ------ | ---------- | ---- |  | ------ | ---- | ---- |  | ------ | ---------- | ---- |  |  | ---- | - |  | - | --------- | - |  |  | ----- | -
|                                                       |  | 2001   |            | 2000 |  | 1999  
|                                                       |  |        |            |      |  |       
|                                                       |  | Amount |            | Rate |  | Amount |      | Rate |  | Amount |            | Rate
|                                                       |  |        |            |      |  |        |      |      |  |        |            |     
|Federal Tax Rate                                       |  | $      | 4,865,000  |      |  |        | 35.0 | %    |  | $      | 4,474,000  |      |  |  | 35.0 | % |  | $ | 2,897,000 |   |  |  | 34.0  | %
|California Franchise Taxes,
Net of Federal Tax Benefit |  |        | 793,000    |      |  |        | 5.7  |      |  |        | 732,000    |      |  |  | 5.7  |   |  |   | 468,000   |   |  |  | 5.4   |  
|Tax Savings from Exempt Income                         |  |        | (1,024,000 | )    |  |        | (7.4 | )    |  |        | (1,153,000 | )    |  |  | (9.0 | ) |  |   | (933,000  | ) |  |  | (11.0 | )
|Goodwill                                               |  |        | 283,000    |      |  |        | 2.0  |      |  |        | 283,000    |      |  |  | 2.2  |   |  |   | 44,000    |   |  |  | .5    |  
|Change in Valuation Allowance                          |  |        | (52,000    | )    |  |        | (.3  | )    |  |        | (154,000   | )    |  |  | (1.2 | ) |  |   | (101,000  | ) |  |  | (1.1  | )
|Merger Costs                                           |  |        |           |      |  |        |     |      |  |        |           |      |  |  |     |   |  |   | 223,000   |   |  |  | 2.6   |  
|Other Items  Net                                      |  |        | (187,700   | )    |  |        | (1.3 | )    |  |        | (16,597    | )    |  |  | (.2  | ) |  |   | 55,191    |   |  |  | (.7   | )
|                                                       |  |        |            |      |  |        |      |      |  |        |            |      |  |  |      |   |  |   |           |   |  |  |       |  
|Companys Effective Rate                               |  | $      | 4,677,300  |      |  |        | 33.7 | %    |  | $      | 4,165,403  |      |  |  | 32.5 | % |  | $ | 2,653,191 |   |  |  | 31.1  | %
|                                                       |  |        |            |      |  |        |      |      |  |        |            |      |  |  |      |   |  |   |           |   |  |  |       |  

NOTE I  EARNINGS PER SHARE (EPS)

The following is a reconciliation of net income and shares outstanding to the
income and number of shares used to compute EPS:

|                                                    |  |        |           |        |  |        |            |        |  |        |           |        |  |  |            |  |  |   |           |  |  |  |            | 
|--------------------------------------------------- |  | ------ | --------- | ------ |  | ------ | ---------- | ------ |  | ------ | --------- | ------ |  |  | ---------- |  |  | - | --------- |  |  |  | ---------- | 
|                                                    |  | 2001   |           | 2000   |  | 1999  
|                                                    |  |        |           |        |  |       
|                                                    |  | Income |           | Shares |  | Income |            | Shares |  | Income |           | Shares
|                                                    |  |        |           |        |  |        |            |        |  |        |           |       
|Net Income as Reported                              |  | $      | 9,222,088 |        |  |        |            |        |  | $      | 8,620,407 |        |  |  |            |  |  | $ | 5,865,723 |  |  |  |            | 
|Weighted Average Shares
Outstanding During the Year |  |        |           |        |  |        | 12,990,866 |        |  |        |           |        |  |  | 12,905,879 |  |  |   |           |  |  |  | 12,614,151 | 
|                                                    |  |        |           |        |  |        |            |        |  |        |           |        |  |  |            |  |  |   |           |  |  |  |            | 
|Used in Basic EPS                                   |  |        | 9,222,088 |        |  |        | 12,990,866 |        |  |        | 8,620,407 |        |  |  | 12,905,879 |  |  |   | 5,865,723 |  |  |  | 12,614,151 | 
|Dilutive Effect of Outstanding
Stock Options        |  |        |           |        |  |        | 81,922     |        |  |        |           |        |  |  | 23,847     |  |  |   |           |  |  |  | 113,157    | 
|                                                    |  |        |           |        |  |        |            |        |  |        |           |        |  |  |            |  |  |   |           |  |  |  |            | 
|Used in Dilutive EPS                                |  | $      | 9,222,088 |        |  |        | 13,072,788 |        |  | $      | 8,620,407 |        |  |  | 12,929,726 |  |  | $ | 5,865,723 |  |  |  | 12,727,308 | 
|                                                    |  |        |           |        |  |        |            |        |  |        |           |        |  |  |            |  |  |   |           |  |  |  |            | 

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VIB CORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001, 2000, and 1999

NOTE J  COMMITMENTS AND CONTINGENCIES

The Company has established a salary continuation plan for certain key
executives and a deferred compensation plan for directors and key officers.
Benefits under the salary continuation plan are payable for a period of fifteen
years upon retirement or death. The Company expenses annually an amount
sufficient to accrue the present value of the benefits to be paid to the
executives upon their retirement. Additionally, the key executives
beneficiaries are entitled to certain death benefits under the plan in the
event the executive dies while employed by the Company.

In accordance with the provisions of the deferred compensation plan, directors
and officers may choose to defer a portion of their annual compensation. The
Company expenses the compensation annually regardless of whether or not the
director or officer has chosen to defer compensation. Benefits under the plan
are payable over a ten year period. In the event of death, while a member of
the Board of Directors or an employee, the beneficiary will receive an amount
that would have been paid to the director or employee.

Death benefits payable under both plans is funded by life insurance policies
purchased by the Company. Compensation expense associated with the plans was
approximately $1,426,000 in 2001, $915,000 in 2000, and $851,000 in 1999.

The Company is involved in various litigation, which has arisen in the ordinary
course of its business. In the opinion of management, the disposition of such
pending litigation will not have a material effect on the Companys financial
statements.

In the ordinary course of business, the Bank enters into financial commitments
to meet the financing needs of its customers. These financial commitments
include commitments to extend credit and standby letters of credit. Those
instruments involve, to varying degrees, elements of credit and interest rate
risk not recognized in the statements of condition.

The Banks exposure to credit loss in the event of nonperformance on
commitments to extend credit and standby letters of credit is represented by
the contractual amount of those instruments. The Bank uses the same credit
policies in making commitments as it does for loans reflected in the financial
statements.

As of December 31, 2001, the Bank had the following outstanding financial
commitments whose contractual amount represents credit risk:

|                             |  |   |             | 
|---------------------------- |  | - | ----------- | 
|Commitments to Extend Credit |  | $ | 288,720,000 | 
|Standby Letters of Credit    |  |   | 1,595,000   | 
|                             |  |   |             | 
|                             |  | $ | 290,315,000 | 
|                             |  |   |             | 

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VIB CORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001, 2000, and 1999

NOTE J  COMMITMENTS AND CONTINGENCIES  Continued

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. Standby
letters of credit are conditional commitments to guarantee the performance of a
bank customer to a third party. Since many of the commitments and standby
letters of credit are expected to expire without being drawn upon, the total
amounts do not necessarily represent future cash requirements. The Bank
evaluated each customers credit worthiness on a case-by-case basis. The
amount of collateral obtained if deemed necessary by the Bank is based on
managements credit evaluation of the customer. The majority of the Banks
commitments to extend credit and standby letters of credit are secured by real
estate.

NOTE K  STOCK OPTION PLAN

At December 31, 2001, the Company has a fixed stock option plan, which is
described below. The Company applies APB Opinion No. 25 and related
interpretations in accounting for its plan. Accordingly, no compensation cost
has been recognized for its fixed stock option plan.

In 1997, the Company adopted a stock option plan (the 1997 Plan), under which
3,074,684 shares of the Companys common shares may be issued to directors,
officers, and key employees at not less than 100% of the fair market value at
the date the options are granted.

The fair value of each option grant was estimated on the date of grant using
the Black-Scholes option pricing model with the following assumptions for 2001,
2000, and 1999, respectively: risk-free rates of 4%, 6%, and 5%, volatility of
34.93%, 32.52%, and 29.8%, no dividends, and expected lives of 3 years.

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VIB CORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 20001 2000, and 1999

NOTE K  STOCK OPTION PLAN  Continued

A summary of the status of the Companys fixed stock option plan as of December
31, 2001, 2000, and 1999, and changes during the years ending on those dates is
presented below:

|                                                               |  |        |           |       |  |          |   |       |  |        |          |          |  |   |   |  |  |          |          |   |  |   |   | 
|-------------------------------------------------------------- |  | ------ | --------- | ----- |  | -------- | - | ----- |  | ------ | -------- | -------- |  | - | - |  |  | -------- | -------- | - |  | - | - | 
|                                                               |  | 2001   |           | 2000  |  | 1999    
|                                                               |  |        |           |       |  |         
|                                                               |  |        |           |       |  | Weighted |   |       |  |        |          | Weighted |  |   |   |  |  | Weighted
|                                                               |  |        |           |       |  | Average  |   |       |  |        |          | Average  |  |   |   |  |  | Average 
|                                                               |  |        |           |       |  | Exercise |   |       |  |        |          | Exercise |  |   |   |  |  | Exercise
|                                                               |  | Shares |           | Price |  | Shares   |   | Price |  | Shares |          | Price   
|                                                               |  |        |           |       |  |          |   |       |  |        |          |         
|Outstanding at Beginning
of Year                               |  |        | 871,158   |       |  | $        | 8 |       |  |        | 899,915  |          |  | $ | 8 |  |  |          | 950,553  |   |  | $ | 7 | 
|Granted                                                        |  |        | 617,162   |       |  |          | 8 |       |  |        | 166,486  |          |  |   | 6 |  |  |          | 312,907  |   |  |   | 8 | 
|Exercised                                                      |  |        | (123,586  | )     |  |          | 5 |       |  |        | (32,819  | )        |  |   | 5 |  |  |          | (327,332 | ) |  |   | 3 | 
|Forfeited                                                      |  |        | (54,528   | )     |  |          | 8 |       |  |        | (162,424 | )        |  |   | 7 |  |  |          | (36,213  | ) |  |   | 9 | 
|                                                               |  |        |           |       |  |          |   |       |  |        |          |          |  |   |   |  |  |          |          |   |  |   |   | 
|Outstanding at End of year                                     |  |        | 1,310,206 |       |  |          | 8 |       |  |        | 871,158  |          |  |   | 8 |  |  |          | 899,915  |   |  |   | 8 | 
|                                                               |  |        |           |       |  |          |   |       |  |        |          |          |  |   |   |  |  |          |          |   |  |   |   | 
|Options Exercisable
at Year-End                                |  |        | 396,396   |       |  |          | 9 |       |  |        | 381,367  |          |  |   | 8 |  |  |          | 269,034  |   |  |   | 7 | 
|Weighted-Average Fair Value
of Options Granted During
the Year |  | $      | 2.31      |       |  |          |   |       |  | $      | 1.83     |          |  |   |   |  |  | $        | 2.10     |   |  |   |   | 

The following table summarizes information about fixed options outstanding at
December 31, 2001:

|                   |  |                     |           |                     |  |            |  |             |       |          |  |  |         |           |  |   |       |  |  | 
|------------------ |  | ------------------- | --------- | ------------------- |  | ---------- |  | ----------- | ----- | -------- |  |  | ------- | --------- |  | - | ----- |  |  | 
|                   |  | Options Outstanding |           | Options Exercisable
|                   |  |                     |           |                    
|                   |  |                     |           |                     |  | Weighted-  |  | Weighted    |       |          |  |  |         | Weighted-
|                   |  |                     |           |                     |  | Average    |  | Average     |       |          |  |  |         | Average  
|Exercise           |  | Number              |           | Remaining           |  | Exercise   |  | Number      |       | Exercise
|Price              |  | Outstanding         |           | Contractual Life    |  | Price      |  | Exercisable |       | Price   
|                   |  |                     |           |                     |  |            |  |             |       |         
|$  3.00 to $  4.99 |  |                     | 2,577     |                     |  | 1.80 years |  | $           | 2.72  |          |  |  | 2,577   |           |  | $ | 2.72  | 
|$  5.00 to $  6.99 |  |                     | 196,359   |                     |  | 3.39 years |  |             | 6.50  |          |  |  | 88,226  |           |  |   | 6.57  | 
|$  7.00 to $  8.99 |  |                     | 899,964   |                     |  | 3.45 years |  |             | 8.17  |          |  |  | 185,717 |           |  |   | 8.37  | 
|$  9.00 to $10.99  |  |                     | 142,129   |                     |  | 1.53 years |  |             | 10.46 |          |  |  | 75,704  |           |  |   | 10.57 | 
|$11.00 to $12.99   |  |                     | 69,177    |                     |  | 1.10 years |  |             | 11.17 |          |  |  | 44,172  |           |  |   | 11.19 | 
|                   |  |                     |           |                     |  |            |  |             |       |          |  |  |         |           |  |   |       |  |  | 
|                   |  |                     | 1,310,206 |                     |  | 3.10 years |  |             | 8.32  |          |  |  | 396,396 |           |  |   | 8.67  | 
|                   |  |                     |           |                     |  |            |  |             |       |          |  |  |         |           |  |   |       |  |  | 

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VIB CORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001, 2000, and 1999

NOTE K  STOCK OPTION PLAN  Continued

Had the Company determined compensation cost based on the fair value at the
grant date for its stock options under SFAS No. 123, the Companys net income
would have been reduced to the following pro forma amount:

|                |                      |             |   |           |     |      |   |           |     |  |   |           |     | 
|--------------- | -------------------- | ----------- | - | --------- | --- | ---- | - | --------- | --- |  | - | --------- | --- | 
|                |                      |             |   | 2001      |     | 2000 |   | 1999     
|                |                      |             |   |           |     |      |   |          
|Net Income:     |                      |             |   |           |     |      |   |           |     |  |   |          
|                | As Reported          |             | $ | 9,222,088 |     |      | $ | 8,620,407 |     |  | $ | 5,865,723 |    
|                | Pro Forma            |             |   | 8,631,089 |     |      |   | 8,075,863 |     |  |   | 5,487,464 |    
|Per Share Data: |                      |             |   |           |     |      |   |           |     |  |   |          
|                | Net Income  Basic   |             |   |           |     |      |   |           |     |  |   |           |    
|                |                      | As Reported |   | $         | .71 |      |   | $         | .67 |  |   | $         | .47 | 
|                |                      | Pro Forma   |   |           | .66 |      |   |           | .63 |  |   |           | .44 | 
|                | Net Income  Diluted |             |   |           |     |      |   |           |     |  |   |           |    
|                |                      | As Reported |   | $         | .71 |      |   | $         | .67 |  |   | $         | .46 | 
|                |                      | Pro Forma   |   |           | .66 |      |   |           | .62 |  |   |           | .43 | 

NOTE L  EMPLOYEE STOCK OWNERSHIP AND RETIREMENT SAVINGS PLANS

The Company has adopted an Employee Stock Ownership Plan and a Retirement
Savings Plan for the benefit of its employees. Contributions to the Plans are
determined annually by the Board of Directors. The combined expenses for these
plans were $495,000 in 2001, $893,000 in 2000, and $752,000 in 1999.

NOTE M  RELATED PARTY TRANSACTIONS

In the ordinary course of business, the Bank has granted loans to certain
officers and directors and the companies with which they are associated. In
the Banks opinion, all loans and loan commitments to such parties are made on
substantially the same terms including interest rates and collateral, as those
prevailing at the time for comparable transactions with other persons.

The following is an analysis of the activity of all such loans:

|                                    |  |      |            |      |  |   |            |  
|----------------------------------- |  | ---- | ---------- | ---- |  | - | ---------- | -
|                                    |  | 2001 |            | 2000
|                                    |  |      |            |     
|Beginning Balance                   |  | $    | 8,152,000  |      |  | $ | 7,005,000  |  
|Credits Granted, Including Renewals |  |      | 484,000    |      |  |   | 2,700,000  |  
|Repayments                          |  |      | (3,013,000 | )    |  |   | (1,553,000 | )
|                                    |  |      |            |      |  |   |            |  
|                                    |  | $    | 5,623,000  |      |  | $ | 8,152,000  |  
|                                    |  |      |            |      |  |   |            |  

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VIB CORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001, 2000, and 1999

NOTE N  STOCK DIVIDENDS

VIB Corp has issued two 3% stock dividends during 2001, 2000, and 1999. The
per share data in the statements of income and the footnotes have been adjusted
to give retroactive effect to these dividends.

NOTE O  FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair value of a financial instrument is the amount at which the asset or
obligation could be exchanged in a current transaction between willing parties,
other than in a forced or liquidation sale. 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 entire
holdings of a particular financial instrument. Because no market value exists
for a significant portion of the 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, involve uncertainties
and matters of judgment and, therefore, cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.

Fair value estimates are based on financial instruments both on and off the
balance sheet without attempting to estimate the value of anticipated future
business and the value of assets and liabilities that are not considered
financial instruments. Additionally, tax consequences related to the
realization of the unrealized gains and losses can have a potential effect on
fair value estimates and have not been considered in many of the estimates.

The following methods and assumptions were used to estimate the fair value of
significant financial instruments:

Financial Assets

The carrying amounts of cash, short term investments, due from customers on
acceptances, and bank acceptances outstanding are considered to approximate
fair value. Short term investments include federal funds sold, securities
purchased under agreements to resell, and interest bearing deposits with banks.
The fair values of investment securities, including available for sale, are
generally based on quoted market prices. The fair value of loans are estimated
using a combination of techniques, including discounting estimated future cash
flows and quoted market prices of similar instruments where available.

Financial Liabilities

The carrying amounts of deposit liabilities payable on demand, commercial
paper, and other borrowed funds are considered to approximate fair value. For
fixed maturity deposits, fair value is estimated by discounting estimated
future cash flows using currently offered rates for deposits of similar
remaining maturities. The fair value of long term debt is based on rates
currently available to the Company for debt with similar terms and remaining
maturities.

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VIB CORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001, 2000, and 1999

NOTE O  FAIR VALUE OF FINANCIAL INSTRUMENTS  Continued

Off Balance Sheet Financial Instruments

The fair value of commitments to extend credit and standby letters of credit is
estimated using the fees currently charged to enter into similar agreements.
The fair value of these financial instruments is not material.

The estimated fair value of financial instruments at December 31 is summarized
as follows (dollar amounts in thousands):

|                       |                                       |  |             |         |            |  |             |         |            |  |   |         |  |  |   |         | 
|---------------------- | ------------------------------------- |  | ----------- | ------- | ---------- |  | ----------- | ------- | ---------- |  | - | ------- |  |  | - | ------- | 
|                       |                                       |  | 2001        |         | 2000      
|                       |                                       |  |             |         |           
|                       |                                       |  | Carry Value |         | Fair Value |  | Carry Value |         | Fair Value
|                       |                                       |  |             |         |            |  |             |         |           
|Financial Assets:      |                                       |  |             |         |            |  |             |         |            |  |   |         |  |  |   |        
|                       | Cash and Due From Banks               |  | $           | 57,165  |            |  | $           | 57,165  |            |  | $ | 51,604  |  |  | $ | 51,604  | 
|                       | Fed Funds Sold                        |  | $           | 1,500   |            |  | $           | 1,500   |            |  |   |        |  |  |   |        | 
|                       | Interest-Bearing Deposits             |  | $           | 648     |            |  | $           | 648     |            |  | $ | 1,448   |  |  | $ | 1,448   | 
|                       | Investment Securities                 |  | $           | 194,472 |            |  | $           | 194,472 |            |  | $ | 192,317 |  |  | $ | 192,302 | 
|                       | FHLB and FRB Stock, at cost           |  | $           | 11,140  |            |  | $           | 11,140  |            |  | $ | 9,185   |  |  | $ | 9,185   | 
|                       | Loans                                 |  | $           | 828,430 |            |  | $           | 850,307 |            |  | $ | 815,425 |  |  | $ | 802,509 | 
|                       | Cash Surrender Value  Life Insurance |  | $           | 21,393  |            |  | $           | 21,393  |            |  | $ | 19,990  |  |  | $ | 19,990  | 
|Financial Liabilities: |                                       |  |             |         |            |  |             |         |            |  |   |         |  |  |   |        
|                       | Deposits                              |  | $           | 884,930 |            |  | $           | 885,858 |            |  | $ | 910,238 |  |  | $ | 910,782 | 
|                       | Federal Funds Purchased               |  | $           |        |            |  | $           |        |            |  | $ | 750     |  |  | $ | 750     | 
|                       | Federal Home Loan Bank Advances       |  | $           | 158,218 |            |  | $           | 156,163 |            |  | $ | 118,200 |  |  | $ | 117,957 | 
|                       | Capitalized Lease Obligation          |  | $           | 2,977   |            |  | $           | 2,977   |            |  | $ | 2,955   |  |  | $ | 2,955   | 
|                       | Trust Preferred Securities            |  | $           | 33,361  |            |  | $           | 34,010  |            |  | $ | 32,400  |  |  | $ | 27,471  | 

NOTE P  REGULATORY MATTERS

VIB Corp and the Bank are subject to various regulatory capital requirements
administered by the federal and state banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory  and possibly
additional discretionary  actions by regulators that, if undertaken, could
have a direct material effect on the Companys and the Banks financial
statements. Under capital adequacy guidelines and the regulatory framework for
prompt corrective action, the Company and the Bank must meet specific capital
guidelines that involve quantitative measures of assets, liabilities, and
certain off-balance-sheet items as calculated under regulatory accounting
practices. The Capital amounts and classification are also subject to
qualitative judgments by the regulators about components, risk weightings, and
other factors.

Quantitative measures established by regulation to ensure capital adequacy
require the Company and the Bank to maintain minimum amounts and ratios (set
forth in the table below) of total and Tier 1 capital (as defined in the
regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as
defined) to average assets (as defined). Management believes, as of December
31, 2001, that the Company and the Bank meet all capital adequacy requirements
to which they are subject.

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VIB CORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001, 2000, and 1999

NOTE P  REGULATORY MATTERS  Continued

As of December 31, 2001, the most recent notification from the Federal Deposit
Insurance Corporation categorized the Bank as well-capitalized under the
regulatory framework for prompt corrective action (there are no conditions or
events since that notification that management believes have changed the Banks
category). To be categorized as well-capitalized, the Company must maintain
minimum ratios as set forth in the table below. The following table also sets
forth the Companys and the Banks actual capital amounts and ratios (dollar
amounts in thousands):

|                         |                                          |   |                |  |             |  |             |   |       |   |                            |  |       |  |     |   |  |   |        |  |  |  |      |   | 
|------------------------ | ---------------------------------------- | - | -------------- |  | ----------- |  | ----------- | - | ----- | - | -------------------------- |  | ----- |  | --- | - |  | - | ------ |  |  |  | ---- | - | 
|                         |                                          |   |                |  |             |  |             |   |       |   | Amount of Capital Required
|                         |                                          |   |                |  |             |  |             |   |       |   |                           
|                         |                                          |   |                |  |             |  |             |   |       |   | To Be                      |  | To Be
|                         |                                          |   |                |  |             |  |             |   |       |   | Adequately                 |  | Well-
|                         |                                          |   | Actual Capital |  | Capitalized |  | Capitalized
|                         |                                          |   |                |  |             |  |            
|                         |                                          |   | Amount         |  | Ratio       |  | Amount      |   | Ratio |   | Amount                     |  | Ratio
|                         |                                          |   |                |  |             |  |             |   |       |   |                            |  |      
|As of December 31, 2001: |                                          |   |                |  |             |  |             |   |       |   |                            |  |       |  |     |   |  |   |        |  |  |  |      |  
|                         | Total Capital (to Risk-Weighted Assets)  |   |                |  |             |  |             |   |       |   |                            |  |       |  |     |   |  |   |        |  |  |  |      |   | 
|VIB Corp                 |                                          | $ | 106,957        |  |             |  | 11.9        | % |       | $ | 71,912                     |  |       |  | 8.0 | % |  | $ | 89,891 |  |  |  | 10.0 | %
|Valley Independent Bank  |                                          | $ | 101,606        |  |             |  | 11.4        | % |       | $ | 71,479                     |  |       |  | 8.0 | % |  | $ | 89,348 |  |  |  | 10.0 | %
|                         | Tier 1 Capital (to Risk-Weighted Assets) |   |                |  |             |  |             |   |       |   |                            |  |       |  |     |   |  |   |        |  |  |  |      |   | 
|VIB Corp                 |                                          | $ | 91,407         |  |             |  | 10.2        | % |       | $ | 35,956                     |  |       |  | 4.0 | % |  | $ | 53,934 |  |  |  | 6.0  | %
|Valley Independent Bank  |                                          | $ | 92,261         |  |             |  | 10.3        | % |       | $ | 35,739                     |  |       |  | 4.0 | % |  | $ | 53,609 |  |  |  | 6.0  | %
|                         | Tier 1 Capital (to Average Assets)       |   |                |  |             |  |             |   |       |   |                            |  |       |  |     |   |  |   |        |  |  |  |      |   | 
|VIB Corp                 |                                          | $ | 91,407         |  |             |  | 8.0         | % |       | $ | 45,784                     |  |       |  | 4.0 | % |  | $ | 57,230 |  |  |  | 5.0  | %
|Valley Independent Bank  |                                          | $ | 92,261         |  |             |  | 8.1         | % |       | $ | 45,599                     |  |       |  | 4.0 | % |  | $ | 56,999 |  |  |  | 5.0  | %
|                        
|As of December 31, 2000: |                                          |   |                |  |             |  |             |   |       |   |                            |  |       |  |     |   |  |   |        |  |  |  |      |  
|                         | Total Capital (to Risk-Weighted Assets)  |   |                |  |             |  |             |   |       |   |                            |  |       |  |     |   |  |   |        |  |  |  |      |   | 
|VIB Corp                 |                                          | $ | 93,650         |  |             |  | 10.6        | % |       | $ | 70,135                     |  |       |  | 8.0 | % |  | $ | 87,668 |  |  |  | 10.0 | %
|Valley Independent Bank  |                                          | $ | 64,517         |  |             |  | 10.4        | % |       | $ | 49,384                     |  |       |  | 8.0 | % |  | $ | 61,730 |  |  |  | 10.0 | %
|                         | Tier 1 Capital (to Risk-Weighted Assets) |   |                |  |             |  |             |   |       |   |                            |  |       |  |     |   |  |   |        |  |  |  |      |   | 
|VIB Corp                 |                                          | $ | 76,768         |  |             |  | 8.7         | % |       | $ | 35,067                     |  |       |  | 4.0 | % |  | $ | 52,601 |  |  |  | 6.0  | %
|Valley Independent Bank  |                                          | $ | 58,575         |  |             |  | 9.5         | % |       | $ | 24,692                     |  |       |  | 4.0 | % |  | $ | 37,038 |  |  |  | 6.0  | %
|                         | Tier 1 Capital (to Average Assets)       |   |                |  |             |  |             |   |       |   |                            |  |       |  |     |   |  |   |        |  |  |  |      |   | 
|VIB Corp                 |                                          | $ | 76,768         |  |             |  | 7.0         | % |       | $ | 43,851                     |  |       |  | 4.0 | % |  | $ | 54,814 |  |  |  | 5.0  | %
|Valley Independent Bank  |                                          | $ | 58,575         |  |             |  | 7.6         | % |       | $ | 30,761                     |  |       |  | 4.0 | % |  | $ | 38,451 |  |  |  | 5.0  | %

The Bank may not make cash distributions to VIB Corp in excess of the lesser of
the Banks undivided profits or the Banks net income for its last three fiscal
years less the amount of any distribution made by the Bank to shareholders
during the same period.

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VIB CORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001, 2000, and 1999

NOTE Q  MERGERS AND ACQUISITIONS

On January 7, 2000 VIB Corp completed its acquisition of Kings River Bancorp
(KRB) for $21,728,000 in cash. The acquisition was accounted for using the
purchase method of accounting in accordance with APB No. 16 Business
Combinations.Under this method of accounting, the purchase price is
allocated to the assets acquired and deposits and liabilities assumed based on
their fair values as of the acquisition date. Goodwill and intangibles arising
from this transaction totaled approximately $13,589,000 and was being amortized
over twenty years on a straight-line basis. Effective January 1,2002, in
accordance with SFAS 142, goodwill will no longer be amortized and is subject
to annual testing for impairment as discussed in Note A. The results of KRBs
operations are included in those reported by the Company beginning on January
10, 2000.

On January 28, 1999, VIB Corp completed its acquisition of Bank of Stockdale,
FSB. The transaction was structured as a merger under which VIB Corp issued
common shares in exchange for the common shares of Bank of Stockdale, FSB. The
transaction was accounted for by the pooling of interest method, whereby the
Companys financial statements have been restated as if the two companies were
historically one unit. A total of 2,812,392 ( as adjusted for stock splits and
stock dividends) common shares were issued to the shareholders of Bank of
Stockdale, FSB.

NOTE R SHAREHOLDERS RIGHTS PLAN

In 2001, VIB Corp adopted a shareholder rights plan designed to maximize
long-term value and to protect the Companys shareholders from improper
takeover tactics and takeover bids that are not fair to all shareholders.

In accordance with the plan, preferred share purchase rights were distributed
as a dividend at the rate of one right for each common share held of record as
of the close of business on August 31, 2001. The rights, which are not
immediately exercisable, entitle the holders to purchase one one-thousandth of
a share of Series A Preferred Stock at a price of $40.00, subject to
adjustment, upon the occurrence of certain triggering events. In the event of
an acquisition not approved by the Board of Directors or an acquiring party
accumulates 15% or more of the Companys voting stock without the Board of
Directors prior approval, each right enable its holder (other than the
acquiring party) to purchase the Preferred Stock at 50% of the market price.
Further, in the event the Company is acquired in an unwanted merger or business
combination, each right enables the holder to purchase shares of the acquiring
entity at a similar discount. Under certain circumstances, the rights may be
exchanged for the common shares. The Board of Directors may, in its sole
discretion, redeem the rights at any time prior to any of the triggering events
for $.01 per right. The Rights will expire on August 14, 2011.

The rights can be exercised and separate rights certificates distributed only
if one of the following events occur: acquisition by a person of 15% or more
of the outstanding common shares or a tender offer for 15% or more of the
outstanding common shares. The rights do not have any voting rights. The
rights are not deemed by the Board of Directors to be presently exercisable.

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VIB CORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001, 2000, and 1999

NOTE S  CONDENSED FINANCIAL INFORMATION OF PARENT COMPANY ONLY

VIB Corp operates Valley Independent Bank, VIBC Capital Trust I, Valley Capital
Trust, and Valley Capital Trust II. VIB Corp commenced operations during 1998.
The earnings of the subsidiaries are recognized on the equity method of
accounting. Condensed financial statements of VIB Corp only are presented
below:

CONDENSED BALANCE SHEET

|                                      |                                                         |   |              |             |      |   |             |             | 
|------------------------------------- | ------------------------------------------------------- | - | ------------ | ----------- | ---- | - | ----------- | ----------- | 
|                                      |                                                         |   | December 31,
|                                      |                                                         |   |             
|                                      |                                                         |   | 2001         |             | 2000
|                                      |                                                         |   |              |             |     
|ASSETS:                               |                                                         |   |              |             |      |   |             |            
|                                      | Cash                                                    |   | $            | 585,115     |      |   | $           | 59,150      | 
|                                      | Investment in Valley Capital Trust Preferred Securities |   |              | 18,739,328  |      |   |             |            | 
|                                      | Investment in Valley Independent Bank                   |   |              | 109,646,451 |      |   |             | 100,278,304 | 
|                                      | Investment in Valley Capital Trust                      |   |              | 693,000     |      |   |             | 693,000     | 
|                                      | Investment in VIBC Capital Trust I                      |   |              | 309,000     |      |   |             | 309,000     | 
|                                      | Investment in VIBC Services Company                     |   |              |            |      |   |             | 500,000     | 
|                                      | Investment in Valley Capital Trust II                   |   |              | 610,000     |      |   |             |            | 
|                                      | Investment in Preferred Stock                           |   |              | 2,000,000   |      |   |             |            | 
|                                      | Premises and Equipment                                  |   |              |            |      |   |             | 88,315      | 
|                                      | Other Assets                                            |   |              | 3,421,341   |      |   |             | 2,838,790   | 
|                                      |                                                         |   |              |             |      |   |             |            
|                                      |                                                         | $ | 136,004,235  |             |      | $ | 104,766,559 |            
|                                      |                                                         |   |              |             |      |   |             |            
|LIABILITIES AND SHAREHOLDERS EQUITY: |                                                         |   |              |             |      |   |             |            
|                                      | Other Liabilities                                       |   | $            | 654,746     |      |   | $           | 513,770     | 
|                                      | Trust Preferred Securities                              |   |              | 53,712,000  |      |   |             | 33,402,000  | 
|                                      | Shareholders Equity                                    |   |              | 81,637,489  |      |   |             | 70,850,789  | 
|                                      |                                                         |   |              |             |      |   |             |            
|                                      |                                                         | $ | 136,004,235  |             |      | $ | 104,766,559 |            
|                                      |                                                         |   |              |             |      |   |             |            

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VIB CORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001, 2000, and 1999

NOTE S  CONDENSED FINANCIAL INFORMATION OF PARENT COMPANY ONLY  Continued

CONDENSED STATEMENTS OF INCOME

|          |                                        |                                                              |   |                         |           |      |   |            |            |  
|--------- | -------------------------------------- | ------------------------------------------------------------ | - | ----------------------- | --------- | ---- | - | ---------- | ---------- | -
|          |                                        |                                                              |   | Year Ended December 31,
|          |                                        |                                                              |   |                        
|          |                                        |                                                              |   | 2001                    |           | 2000
|          |                                        |                                                              |   |                         |           |     
|INCOME:   |                                        |                                                              |   |                         |           |      |   |           
|          | Interest Income                        |                                                              | $ | 157,964                 |           |      | $ | 66,439     |           
|          | Cash Dividends from Subsidiaries       |                                                              |   | 3,550,347               |           |      |   | 13,277,929 |           
|          |                                        |                                                              |   |                         |           |      |   |           
|          |                                        | TOTAL INCOME                                                 |   |                         | 3,708,311 |      |   |            | 13,344,368 |  
|EXPENSES: |                                        |                                                              |   |                         |           |      |   |           
|          | Interest on Trust Preferred Securities |                                                              |   | 3,463,297               |           |      |   | 2,637,604  |           
|          | Other                                  |                                                              |   | 633,464                 |           |      |   | 1,416,718  |           
|          | Allocated Tax Benefit                  |                                                              |   | (1,521,700              | )         |      |   | (1,715,000 | )         
|          |                                        | TOTAL EXPENSES                                               |   |                         | 2,575,061 |      |   |            | 2,339,322  |  
|          |                                        |                                                              |   |                         |           |      |   |           
|          |                                        | INCOME BEFORE EQUITY IN UNDISTRIBUTED
INCOME OF SUBSIDIARIES |   |                         | 1,133,250 |      |   |            | 11,005,046 |  
|          |                                        | EQUITY IN UNDISTRIBUTED
INCOME OF SUBSIDIARIES               |   |                         | 8,088,838 |      |   |            | (2,384,639 | )
|          |                                        |                                                              |   |                         |           |      |   |           
|          |                                        | NET INCOME                                                   |   | $                       | 9,222,088 |      |   | $          | 8,620,407  |  
|          |                                        |                                                              |   |                         |           |      |   |           

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VIB CORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001, 2000, and 1999

NOTE S  CONDENSED FINANCIAL INFORMATION OF PARENT COMPANY ONLY  Continued

CONDENSED STATEMENTS OF CASH FLOWS

|                                      |                                                       |                                  |                                                      |             |                         |             |      |             |             |             |  
|------------------------------------- | ----------------------------------------------------- | -------------------------------- | ---------------------------------------------------- | ----------- | ----------------------- | ----------- | ---- | ----------- | ----------- | ----------- | -
|                                      |                                                       |                                  |                                                      |             | Year Ended December 31,
|                                      |                                                       |                                  |                                                      |             |                        
|                                      |                                                       |                                  |                                                      |             | 2001                    |             | 2000
|                                      |                                                       |                                  |                                                      |             |                         |             |     
|CASH FLOWS FROM OPERATING ACTIVITIES: |                                                       |                                  |                                                      |             |                         |             |      |            
|                                      | Net Income                                            |                                  | $                                                    | 9,222,088   |                         |             | $    | 8,620,407   |            
|                                      | Noncash Items Included in Net Income:                 |                                  |                                                      |             |                         |             |      |             |            
|                                      |                                                       | Depreciation and Amortization    |                                                      |             | 10,666                  |             |      |             | 8,439       |            
|                                      |                                                       | Equity in Income of Subsidiaries |                                                      |             | (11,639,185             | )           |      |             | (10,893,290 | )          
|                                      |                                                       | Other                            |                                                      |             | (314,382                | )           |      |             | (566,294    | )          
|                                      |                                                       |                                  |                                                      |             |                         |             |      |            
|                                      |                                                       |                                  | NET CASH USED IN
OPERATING ACTIVITIES                |             |                         | (2,720,813  | )    |             |             | (2,830,738  | )
|CASH FLOWS FROM INVESTING ACTIVITIES: |                                                       |                                  |                                                      |             |                         |             |      |            
|                                      | Investment in Subsidiaries                            |                                  |                                                      | (610,000    | )                       |             |      | (32,928,786 | )          
|                                      | Dividends Received from Subsidiaries                  |                                  |                                                      | 3,550,347   |                         |             |      | 13,277,929  |            
|                                      | Purchase of Valley Capital Trust Preferred Securities |                                  |                                                      | (18,731,520 | )                       |             |      |            |            
|                                      | Purchase of Preferred Stock                           |                                  |                                                      | (2,000,000  | )                       |             |      |            |            
|                                      | Proceeds from Sale of Premises and Equipment          |                                  |                                                      | 77,649      |                         |             |      |            |            
|                                      | Purchases of Premises and Equipment                   |                                  |                                                      |            |                         |             |      | (96,754     | )          
|                                      |                                                       |                                  |                                                      |             |                         |             |      |            
|                                      |                                                       |                                  | NET CASH USED BY
INVESTING ACTIVITIES                |             |                         | (17,713,524 | )    |             |             | (19,747,611 | )
|CASH FLOWS FROM FINANCING ACTIVITIES: |                                                       |                                  |                                                      |             |                         |             |      |            
|                                      | Proceeds from Issuance of Trust Preferred Securities  |                                  |                                                      | 20,310,000  |                         |             |      | 10,309,000  |            
|                                      | Proceeds from Exercise of Stock Options and Warrants  |                                  |                                                      | 673,891     |                         |             |      | 150,200     |            
|                                      | Dividends Paid                                        |                                  |                                                      | (23,589     | )                       |             |      | (15,784     | )          
|                                      |                                                       |                                  |                                                      |             |                         |             |      |            
|                                      |                                                       |                                  | NET CASH PROVIDED
BY FINANCING ACTIVITIES            |             |                         | 20,960,302  |      |             |             | 10,443,416  |  
|                                      |                                                       |                                  |                                                      |             |                         |             |      |            
|                                      |                                                       |                                  | NET (DECREASE) INCREASE IN
CASH AND CASH EQUIVALENTS |             |                         | 525,965     |      |             |             | (12,134,933 | )
|                                      |                                                       |                                  | CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR       |             |                         | 59,150      |      |             |             | 12,194,083  |  
|                                      |                                                       |                                  |                                                      |             |                         |             |      |            
|                                      |                                                       |                                  | CASH AND CASH EQUIVALENTS
AT END OF YEAR             |             | $                       | 585,115     |      |             | $           | 59,150      |  
|                                      |                                                       |                                  |                                                      |             |                         |             |      |            

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|ITEM 9  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|-------- | ------------------------------------------------------------------------------------

There were no disagreements with the Companys accountants on accounting
or financial disclosure.




PART III




ITEM 10  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by this Item is incorporated by reference from
Pages 4 to 6 and Page 16 of the Companys Proxy Statement for the Annual
Meeting of Shareholders to be held April 24, 2002.




ITEM 11  EXECUTIVE COMPENSATION

The information required by this Item is incorporated by reference from
Pages 7 to 14 of the Companys Proxy Statement for the Annual Meeting of
Shareholders to be held April 24, 2002.




ITEM 12  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT

The information required by this Item is incorporated by reference from
Pages 2 to 3 of the Companys Proxy Statement for the Annual Meeting of
Shareholders to be held April 24, 2002.




ITEM 13  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this Item is incorporated by reference from
Page 15 of the Companys Proxy Statement for the Annual Meeting of Shareholders
to be held April 24, 2002.




PART IV




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



|A. |  | Financial Statements
|-- |  | --------------------

The Financial
Statements listed on the Index included under ITEM 8 
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA are filed as a part of this Annual
Report on Form 10-K.



|B. |  | Exhibits
|-- |  | --------

The following exhibits are filed as a part of this Report:

|            |  |                                                                                                                                    
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------
|Reg. S-K,   |  |                                                                                                                                    
|Item 601    |  |                                                                                                                                    
|Exhibit No. |  | Description                                                                                                                        
|            |  |                                                                                                                                    
|2.1         |  | Plan of Reorganization and Merger Agreement, dated November 18,
1997, by and between Valley Independent Bank and VIB Merger
Company
|2.2         |  | Agreement and Plan of Reorganization by and between VIB Corp and
Bank of Stockdale, F.S.B. dated September 15, 1998                

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|B. |  | Exhibits (continued)
|-- |  | --------------------

|            |  |                                                                                                                                                                                                                                                          
|----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Reg. S-K,   |  |                                                                                                                                                                                                                                                          
|Item 601    |  |                                                                                                                                                                                                                                                          
|Exhibit No. |  | Description                                                                                                                                                                                                                                              
|            |  |                                                                                                                                                                                                                                                          
|2.3         |  | Agreement and Plan of Reorganization by and between VIB Corp,
Kings River Bancorp and Kings River State Bank dated September 7,
1999                                                                                                                     
|2.4         |  | Plan of Reorganization and Agreement of Merger dated March 21,
2001 by and between Valley Independent Bank, Bank of Stockdale,
F.S.B., and VIB Corp                                                                                                      
|2.5         |  | Plan of Reorganization and Agreement of Merger dated March 22,
2001 by and between Valley Independent Bank, Kings River State
Bank and VIB Corp                                                                                                          
|3.1         |  | Articles of Incorporation of VIB Corp, as amended November 20,
2001                                                                                                                                                                                      
|3.2         |  | Bylaws of VIB Corp                                                                                                                                                                                                                                       
|4.1         |  | Form of Common Stock Certificate                                                                                                                                                                                                                         
|4.2         |  | Form of Warrant Certificate                                                                                                                                                                                                                              
|4.3         |  | Junior Subordinated Indenture dated as of February 5, 1999 by and
between the Registrant and Wilmington Trust Company, as trustee                                                                                                                        
|4.4         |  | Form of Junior Subordinated Debenture included in Article Two of
Exhibit 4.3                                                                                                                                                                             
|4.5         |  | Trust Agreement of Valley Capital Trust dated as of December 10,
1998 (included as Exhibit A to Exhibit 4.6)                                                                                                                                             
|4.6         |  | Amended and Restated Trust Agreement of Valley Capital Trust
dated as of February 5, 1999 among the Registrant, Wilmington
Trust Company, as Property Trustee, and Richard D. Foss, Harry G.
Gooding, III, and Dennis L. Kern, as Administrative Trustees
|4.7         |  | Form of Common Security Certificate of Valley Capital Trust
(included as Exhibit B to Exhibit 4.6)                                                                                                                                                       
|4.8         |  | Form of Capital Security Certificate of Valley Capital Trust
(included as Exhibit C to Exhibit 4.6)                                                                                                                                                      
|4.9         |  | Guarantee Agreement dated February 5, 1999 between the
Registrant, as Guarantor, and Wilmington Trust Company, as
Guarantee Trustee                                                                                                                      
|4.10        |  | Agreement as to Expenses and Liabilities dated February 5, 1999
between the Registrant and Valley Capital Trust                                                                                                                                          
|4.11        |  | Junior Subordinated Indenture dated as of July 12, 2000 by and
between the Registrant and First Union National Bank, as trustee                                                                                                                          
|4.12        |  | Form of Junior Subordinated Note included in Article II of
exhibit 4.11                                                                                                                                                                                  
|4.13        |  | Trust Agreement of VIBC Capital Trust I dated as of July 12,
2000, among the Registrant, First Union National Bank, as
Property Trustee, and Jack Brittain, Harry G. Gooding, III, and
Dennis L. Kern, as Administrative Trustees                        
|4.14        |  | Form of Common Security Certificate of VIBC Capital Trust I (
included as Exhibit B to Exhibit 4.13)                                                                                                                                                     
|4.15        |  | Form of Preferred Security Certificate of VIBC Capital Trust I
(included as Exhibit C to Exhibit 4.13)                                                                                                                                                   
|4.16        |  | Guarantee Agreement dated as of July 12, 2000 between the
Registrant, as Guarantor, and First Union National Bank, as
Guarantee Trustee.                                                                                                                 
|4.17        |  | Certificate of Determination  Series A Participating Preferred
Stock (included as Exhibit A to Exhibit 99.1)                                                                                                                                            
|4.18        |  | Form of Rights Certificate (included as Exhibit B to Exhibit
99.1)                                                                                                                                                                                       
|4.19        |  | Indenture dated as of November 28, 2001 by and between the
Registrant and Wilmington Trust Company, as Trustee                                                                                                                                           
|4.20        |  | Form of Floating Rate Junior Subordinated Debt (included as
Exhibit A to Exhibit 4.19)                                                                                                                                                                   

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|B. |  | Exhibits (continued)
|-- |  | --------------------

|            |  |                                                                                                                                                                                                                                                                                  
|----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Reg. S-K,   |  |                                                                                                                                                                                                                                                                                  
|Item 601    |  |                                                                                                                                                                                                                                                                                  
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                      
|            |  |                                                                                                                                                                                                                                                                                  
|4.21        |  | Amended and Restated Declaration of Trust of Valley Capital Trust
II dated as of November 28, 2001, among the Registrant,
Wilmington trust Company, as Delaware Trustee and Institutional
Trustee, and Dennis L. Kern, Richard Foss, and Harry G. Gooding,
III, as Administrators
|4.22        |  | Form of Common Security Certificate of Valley Capital Trust II
(included as Exhibit A-2 to Exhibit 4.21)                                                                                                                                                                         
|4.23        |  | Form of Capital Security Certificate of Valley Capital Trust II
(included as Exhibit A-1 to Exhibit 4.21)                                                                                                                                                                        
|4.24        |  | Guarantee Agreement dated as of November 28, 2001 between the
Registrant, as Guarantor, and Wilmington Trust Company, as
Guarantee Trustee                                                                                                                                       
|10.1        |  | Agreement to Assume Liabilities and to Acquire Branch Banking
Office (Calexico)                                                                                                                                                                                                  
|10.2        |  | Agreement and Plan of Reorganization Dated April 29, 1996 (Bank
of the Desert, N.A.)                                                                                                                                                                                             
|10.3        |  | Purchase and Assumption Agreement Dated October 15, 1996 (Blythe
and Tecate)                                                                                                                                                                                                     
|10.4        |  | VIB Corp 1997 Stock Option Plan                                                                                                                                                                                                                                                  
|10.5        |  | Form of VIB Corp Stock Option Agreement                                                                                                                                                                                                                                          
|10.6        |  | Form of VIB Corp Indemnity Agreement                                                                                                                                                                                                                                             
|10.7        |  | Profit Sharing and 401(k) Plan                                                                                                                                                                                                                                                   
|10.8        |  | Amendment to 401(k) Plan                                                                                                                                                                                                                                                         
|10.9        |  | 1994 Amendments to 401(k) Plan                                                                                                                                                                                                                                                   
|10.10       |  | Employee Stock Ownership Plan                                                                                                                                                                                                                                                    
|10.11       |  | Form of Directors Deferred Compensation Agreement                                                                                                                                                                                                                                
|10.12       |  | Form of Officers Deferred Compensation Agreement                                                                                                                                                                                                                                 
|10.13       |  | El Centro Lease                                                                                                                                                                                                                                                                  
|10.14       |  | Agreement to Assume Liabilities and to Acquire Assets of Branch
Banking Office Dated January 22, 1998 (Palm Springs)                                                                                                                                                             
|10.15       |  | Agreement to Assume Liabilities and to Acquire Assets of Branch
Office between Fremont Investment & Loan and Valley Independent
Bank dated September 22, 1998                                                                                                                    
|10.16       |  | VIB Corp 401(k) Plan (restated effective January 1, 1999)                                                                                                                                                                                                                        
|10.17       |  | Valley Independent Bank form of Executive Supplemental
Compensation Agreement                                                                                                                                                                                                    
|10.18       |  | Bank of Stockdale, F.S.B. form of Executive Supplemental
Compensation Agreement                                                                                                                                                                                                  
|10.19       |  | Bank of Stockdale, F.S.B. form of Life Insurance Endorsement
Method Split Dollar Plan Agreement (executive officers)                                                                                                                                                             
|10.20       |  | Bank of Stockdale, F.S.B. form of Director Supplemental
Compensation Benefits Agreement                                                                                                                                                                                          
|10.21       |  | Bank of Stockdale, F.S.B. form of Life Insurance Endorsement
Method Split Dollar Agreement (directors)                                                                                                                                                                           
|13          |  | VIB Corps 2001 Annual Report to Shareholders (incorporated
portion only)                                                                                                                                                                                                        
|21          |  | Subsidiaries of the Registrant                                                                                                                                                                                                                                                   
|23.1        |  | Consent of Vavrinek, Trine, Day & Co., LLP                                                                                                                                                                                                                                       
|99.1        |  | Preferred Shares Rights Agreement dated as of August 14, 2001,
between VIB Corp and U.S. Stock Transfer Corporation, as Rights
Agent                                                                                                                                             

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|C. |  | Reports on Form 8-K                                                                                  
|-- |  | -----------------------------------------------------------------------------------------------------
|  
|   |  | During the quarter ended December 31,2001 the Company filed the following
Current Report on Form 8-K:

|                                       |  |                  
|-------------------------------------- |  | -----------------
|Description                            |  | Date of Report   
|                                       |  |                  
|Issuance of Trust Preferred Securities |  | November 28, 2001

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SIGNATURES

Pursuant to the requirements of Section 13 or 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.

|                     |                                                                                  |                            
|-------------------- | -------------------------------------------------------------------------------- | ---------------------------
|                     | VIB CORP                                                                        
|                    
|Date: March 20, 2002 | By:                                                                              | /s/   Harry G. Gooding, III
|                     |                                                                                 
|                     | Harry G. Gooding, III,
     Executive Vice President and
Chief Financial Officer

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

|                                               |  |                                                                                       |  |                
|---------------------------------------------- |  | ------------------------------------------------------------------------------------- |  | ---------------
|Signature                                      |  | Title                                                                                 |  | Date           
|                                               |  |                                                                                       |  |                
|                                              
|/s/ Robert S. EllisonRobert S. Ellison         |  | Director                                                                              |  | March 20, 2002 
|                                              
|/s/ Richard D. FossRichard D. Foss             |  | Chairman of the Board of Directors                                                    |  | March 20, 2002 
|                                              
|/s/ Harry G. Gooding, IIIHarry G. Gooding, III |  | Executive Vice President and ChiefFinancial Officer(and Principal Accounting Officer) |  | March 20, 2002 
|                                              
|/s/ Thomas KelleyThomas Kelley                 |  | Director                                                                              |  | March 20, 2002 
|                                              
|/s/ Dennis L. KernDennis L. Kern               |  | Director, President and Chief Executive Officer                                       |  | March 20, 2002 
|                                              
|/s/ Edward McGrewEdward McGrew                 |  | Director                                                                              |  | March 20, 2002 
|                                              
|/s/ Ronald A. PedersenRonald A. Pedersen       |  | Vice Chairman of the Board of Directors                                               |  | March 20, 2002 
|                                              
|/s/ Pete J. PennerPete J. Penner               |  | Director                                                                              |  | March 20, 2002 
|                                              
|Alice Helen Lowery Westerfield                 |  | Vice Chairman of the Board of Directors                                               |  | March
   , 2002

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EXHIBIT INDEX

|            |  |                                                                                                                                                                                                                                                           |  |            |     |  
|----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------- | --- | -
|Reg. S-K,   |  |                                                                                                                                                                                                                                                           |  | Page (or  
|Item 601    |  |                                                                                                                                                                                                                                                           |  | footnote  
|Exhibit No. |  | Description                                                                                                                                                                                                                                               |  | reference)
|            |  |                                                                                                                                                                                                                                                           |  |           
|2.1         |  | Plan of Reorganization and Merger Agreement, dated November 18,
1997, by and between Valley Independent Bank and VIB Merger
Company                                                                                                                       |  |            | (1  | )
|2.2         |  | Agreement and Plan of Reorganization by and between VIB Corp and
Bank of Stockdale, F.S.B. dated September 15, 1998                                                                                                                                       |  |            | (2  | )
|2.3         |  | Agreement and Plan of Reorganization by and between VIB Corp,
Kings River Bancorp and Kings River State Bank dated September 7,
1999                                                                                                                      |  |            | (3  | )
|2.4         |  | Plan of Reorganization and Agreement of Merger dated March 21,
2001 by and between Valley Independent Bank, Bank of Stockdale,
F.S.B., and VIB Corp                                                                                                       |  |            | (12 | )
|2.5         |  | Plan of Reorganization and Agreement of Merger dated March 22,
2001 by and between Valley Independent Bank, Kings River State
Bank, and VIB Corp                                                                                                          |  |            | (12 | )
|3.1         |  | Articles of Incorporation of VIB Corp, as amended November 20,
2001                                                                                                                                                                                       |  |            | 96  |  
|3.2         |  | Bylaws of VIB Corp                                                                                                                                                                                                                                        |  |            | (4  | )
|4.1         |  | Form of Common Stock Certificate                                                                                                                                                                                                                          |  |            | (5  | )
|4.2         |  | Form of Warrant Certificate                                                                                                                                                                                                                               |  |            | (5  | )
|4.3         |  | Junior Subordinated Indenture dated as of February 5, 1999 by and
between the Registrant and Wilmington Trust Company, as trustee                                                                                                                         |  |            | (6  | )
|4.4         |  | Form of Junior Subordinate Debenture included in Article Two of
Exhibit 4.3                                                                                                                                                                               |  |            | (6  | )
|4.5         |  | Trust Agreement of Valley Capital Trust dated as of December 10,
1998 (included as Exhibit A to Exhibit 4.6)                                                                                                                                              |  |            | (6  | )
|4.6         |  | Amended and Restated Trust Agreement of Valley Capital Trust
dated as of February 5, 1999 among the Registrant, Wilmington
Trust Company, as Property Trustee, and Richard D. Foss, Harry G.
Gooding, III, and Dennis L. Kern, as Administrative Trustees |  |            | (6  | )
|4.7         |  | Form of Common Security Certificate of Valley Capital Trust
(included as Exhibit B to Exhibit 4.6)                                                                                                                                                        |  |            | (6  | )
|4.8         |  | Form of Capital Security Certificate of Valley Capital Trust
(included as Exhibit C to Exhibit 4.6)                                                                                                                                                       |  |            | (6  | )
|4.9         |  | Guarantee Agreement dated February 5, 1999 between the
Registrant, as Guarantor, and Wilmington Trust Company, as
Guarantee Trustee                                                                                                                       |  |            | (6  | )
|4.10        |  | Agreement as to Expenses and Liabilities dated February 5, 1999
between the Registrant and Valley Capital Trust                                                                                                                                           |  |            | (6  | )
|4.11        |  | Junior Subordinated Indenture dated as of July 12, 2000 by and
between the Registrant and First Union National Bank, as trustee                                                                                                                           |  |            | (11 | )
|4.12        |  | Form of Junior Subordinated Note included in Article II of
Exhibit 4.11                                                                                                                                                                                   |  |            | (11 | )
|4.13        |  | Trust Agreement of VIBC Capital Trust I dated as of July 12,
2000, among the registrant, First Union National Bank, as
Property Trustee, and Jack Brittain, Harry G. Gooding, III, and
Dennis L. Kern, as Administrative Trustees                         |  |            | (11 | )
|4.14        |  | Form of Common Security Certificate of VIBC Capital Trust I
(included as Exhibit B to Exhibit 4.13                                                                                                                                                        |  |            | (11 | )
|4.15        |  | Form of Preferred Security Certificate of VIBC Capital Trust I
(included as Exhibit C to Exhibit 4.13)                                                                                                                                                    |  |            | (11 | )
|4.16        |  | Guarantee Agreement dated as of July 12, 2000 between the
Registrant, as Guarantor, and First Union National Bank, as
Guarantee Trustee                                                                                                                   |  |            | (11 | )
|4.17        |  | Certificate of Determination  Series A Participating Preferred
Stock (included as Exhibit A to Exhibit 99.1)                                                                                                                                             |  |            | (13 | )
|4.18        |  | Form of Rights Certificate (included as Exhibit B to Exhibit
99.1)                                                                                                                                                                                        |  |            | (13 | )

88



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EXHIBIT INDEX (continued)

|            |  |                                                                                                                                                                                                                                                                                   |  |            |     |  
|----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------- | --- | -
|Reg. S-K,   |  |                                                                                                                                                                                                                                                                                   |  | Page (or  
|Item 601    |  |                                                                                                                                                                                                                                                                                   |  | footnote  
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                       |  | reference)
|            |  |                                                                                                                                                                                                                                                                                   |  |           
|4.19        |  | Indenture dated as of November 28, 2001 by and between the
Registrant and Wilmington Trust Company, as Trustee                                                                                                                                                                    |  |            | (14 | )
|4.20        |  | Form of Floating Rate Junior Subordinated Debt (included as
Exhibit A to Exhibit 4.19)                                                                                                                                                                                            |  |            | (14 | )
|4.21        |  | Amended and Restated Declaration of Trust of Valley Capital Trust
II dated as of November 28, 2001, among the Registrant,
Wilmington Trust Company, as Delaware Trustee and Institutional
Trustee, and Dennis L. Kern, Richard Foss, and Harry G. Gooding,
III, as Administrators |  |            | (14 | )
|4.22        |  | Form of Common Security Certificate of Valley Capital Trust II
(included as Exhibit A-2 to Exhibit 4.21)                                                                                                                                                                          |  |            | (14 | )
|4.23        |  | Form of Capital Security Certificate of Valley Capital Trust II
(included as Exhibit A-1 to Exhibit 4.21)                                                                                                                                                                         |  |            | (14 | )
|4.24        |  | Guarantee Agreement dated as of November 28, 2001 between the
Registrant, as Guarantor, and Wilmington Trust Company, as
Guarantee Trustee                                                                                                                                        |  |            | (14 | )
|10.1        |  | Agreement to Assume Liabilities and to Acquire Branch Banking
Office (Calexico)(P)                                                                                                                                                                                                |  |            | (7  | )
|10.2        |  | Agreement and Plan of Reorganization Dated April 29, 1996 (Bank
of the Desert, N.A.)(P)                                                                                                                                                                                           |  |            | (7  | )
|10.3        |  | Purchase and Assumption Agreement Dated October 15, 1996 (Blythe
and Tecate)(P)                                                                                                                                                                                                   |  |            | (7  | )
|10.4        |  | VIB Corp 1997 Stock Option Plan                                                                                                                                                                                                                                                   |  |            | (4  | )
|10.5        |  | Form of VIB Corp Stock Option Agreement                                                                                                                                                                                                                                           |  |            | (4  | )
|10.6        |  | Form of VIB Corp Indemnity Agreement                                                                                                                                                                                                                                              |  |            | (4  | )
|10.7        |  | Profit Sharing and 401(k) Plan(P)                                                                                                                                                                                                                                                 |  |            | (7  | )
|10.8        |  | Amendment to 401(k) Plan(P)                                                                                                                                                                                                                                                       |  |            | (7  | )
|10.9        |  | 1994 Amendments to 401(k) Plan(P)                                                                                                                                                                                                                                                 |  |            | (7  | )
|10.10       |  | Employee Stock Ownership Plan(P)                                                                                                                                                                                                                                                  |  |            | (7  | )
|10.11       |  | Form of Directors Deferred Compensation Agreement(P)                                                                                                                                                                                                                              |  |            | (7  | )
|10.12       |  | Form of Officers Deferred Compensation Agreement(P)                                                                                                                                                                                                                               |  |            | (7  | )
|10.13       |  | El Centro Lease(P)                                                                                                                                                                                                                                                                |  |            | (7  | )
|10.14       |  | Agreement to Assume Liabilities and to Acquire Assets of Branch
Banking Office Dated January 22, 1998 (Palm Springs)                                                                                                                                                              |  |            | (8  | )
|10.15       |  | Agreement to Assume Liabilities and to Acquire Assets of Branch
Office between Fremont Investment & Loan and Valley Independent
Bank dated September 22, 1998                                                                                                                     |  |            | (2  | )
|10.16       |  | VIB Corp 401(k) Plan (restated effective January 1, 2000)                                                                                                                                                                                                                         |  |            | (10 | )
|10.17       |  | Valley Independent Bank form of Executive Supplemental
Compensation Agreement                                                                                                                                                                                                     |  |            | (9  | )
|10.18       |  | Bank of Stockdale, F.S.B. form of Executive Supplemental
Compensation Agreement                                                                                                                                                                                                   |  |            | (9  | )
|10.19       |  | Bank of Stockdale, F.S.B. form of Life Insurance Endorsement
Method Split Dollar Plan Agreement (executive officers)                                                                                                                                                              |  |            | (9  | )
|10.20       |  | Bank of Stockdale, F.S.B. form of Director Supplemental
Compensation Benefits Agreement                                                                                                                                                                                           |  |            | (9  | )
|10.21       |  | Bank of Stockdale, F.S.B. form of Life Insurance Endorsement
Method Split Dollar Agreement (directors)                                                                                                                                                                            |  |            | (9  | )
|13          |  | VIB Corps 2001 Annual Report to Shareholders (incorporated
portion only)                                                                                                                                                                                                         |  |            | (15 | )

89



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##### Table of Contents



EXHIBIT INDEX (continued)

|            |  |                                                                                                                                      |  |            |     |  
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------------ |  | ---------- | --- | -
|Reg. S-K,   |  |                                                                                                                                      |  | Page (or  
|Item 601    |  |                                                                                                                                      |  | footnote  
|Exhibit No. |  | Description                                                                                                                          |  | reference)
|            |  |                                                                                                                                      |  |           
|21          |  | Subsidiaries of the Registrant                                                                                                       |  |            |     |  
|23.1        |  | Consent of Vavrinek, Trine, Day & Co., LLP                                                                                           |  |            |     |  
|99.1        |  | Preferred Shares Rights Agreement dated as of August 14, 2001,
between VIB Corp and U.S. Stock Transfer Corporation, as Rights
Agent |  |            | (13 | )



---

|(1)  |  | Filed as Exhibit A to the Proxy Statement/Prospectus included in the
Registrants Registration Statement on Form S-4 dated December 23, 1997
(the 1997 S-4 Registration Statement).                                                                                        
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|    
|    
|    
|(2)  |  | Filed as an exhibit to the Registrants Form 8-K dated September 29,
1998.                                                                                                                                                                                                     
|    
|    
|    
|    
|(3)  |  | Filed as an exhibit to the Registrants Form 8-K dated September 16, 1999.                                                                                                                                                                                                     
|    
|    
|    
|    
|(4)  |  | Filed as an exhibit to the 1997 S-4 Registration Statement.                                                                                                                                                                                                                    
|    
|    
|    
|    
|(5)  |  | Filed as an exhibit to the Registrants Registration Statement on Form
8-A dated March 19, 1998.                                                                                                                                                                               
|    
|    
|    
|    
|(6)  |  | Filed as an exhibit to the Registrants Form 8-K dated February 5, 1999.                                                                                                                                                                                                       
|    
|    
|    
|    
|(7)  |  | Filed as an exhibit to the Registrants Form 10-K for the year ended
December 31, 1997.                                                                                                                                                                                        
|    
|    
|    
|    
|(8)  |  | Filed as an exhibit to the Registrants Form 10-K for the year ended
December 31, 1998.                                                                                                                                                                                        
|    
|    
|    
|    
|(9)  |  | Filed as an exhibit to the Registrants Form 10-Q for the quarterly period
ended September 30, 1999.                                                                                                                                                                           
|    
|    
|    
|    
|(10) |  | Filed as an exhibit to the Registrants Form 10- K for the year ended
December 31, 1999.                                                                                                                                                                                       
|    
|    
|    
|    
|(11) |  | Filed as an exhibit to the Registrants Form 8-K dated July 26, 2000.                                                                                                                                                                                                          
|    
|    
|    
|    
|(12) |  | Filed as an exhibit to the Registrants Form 8-K dated March 21, 2001.                                                                                                                                                                                                         
|    
|    
|    
|    
|(13) |  | Filed as an exhibit to the Registrants Form 8-K dated August 14, 2001.                                                                                                                                                                                                        
|    
|    
|    
|    
|(14) |  | Filed as an exhibit to the Registrants Form 8-K dated November 28, 2001.                                                                                                                                                                                                      
|    
|    
|    
|    
|(15) |  | The Companys Annual Report to Shareholders, a portion of which is
incorporated by reference, will be submitted under separate cover. Except
that portion incorporated by reference, the Annual Report to Shareholders
is not to be deemed filed as a part of this Form 10-K.
|    
|    
|    
|    
|(P)  |  | Filed in paper format under cover of Form SE.                                                                                                                                                                                                                                  

90