FORM 10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

(Mark One)

[X] Quarterly report pursuant to ~~under~~ Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the quarterly period ended ~~September~~June 30, ~~2001~~2002.


[ ]		Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the transition period from ____________________________ to ____________________________

Commission File Number: 333-43021

VIB Corp

(Exact name of registrant as specified in its charter)

California		33-0780371
(State or Other Jurisdiction of Incorporation or Organization)		(IRS Employer Identification No.)


California (State or Other Jurisdiction of Incorporation or Organization)		33-0780371 (IRS Employer Identification No.)

1498 Main Street, El Centro, California 92243

(Address of Principal Executive Offices)

(760) 337-3200

(Registrant’s Telephone Number, Including Area Code)

(Former Name, Former Address and Former Fiscal Year, ifit changed since Last Report)

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X] No [ ]

APPLICABLE ONLY TO CORPORATE ISSUERS:

State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 1213,~~656~~587,~~168~~031 shares as of ~~October~~ August 262, ~~2001~~2002.

TABLE OF CONTENTS

PART 1 FINANCIAL INFORMATION
	ITEM 1. FINANCIAL STATEMENTS
		Consolidated Statements of Financial Condition
		Consolidated Statements of Income
		Consolidated Statement of Changes in Shareholders’ Equity
		Consolidated Statements of Cash Flows (Unaudited)
	NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
	ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
	ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
PART II OTHER INFORMATION
	ITEM 1. LEGAL PROCEEDINGS
	ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
	ITEM 3. DEFAULTS UPON SENIOR SECURITIES
	ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
	ITEM 5. OTHER INFORMATION
	ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
EXHIBIT 3.1
Exhibit 3.1
Exhibit 10.22
Exhibit 10.23
Exhibit 10.24
Exhibit 10.25
Exhibit 10.26
Exhibit 10.27
Exhibit 10.28
Exhibit 10.29
Exhibit 10.30
Exhibit 10.31
Exhibit 10.32
Exhibit 10.33
Exhibit 10.34
Exhibit 10.35
Exhibit 10.36

PART 1
FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

The following Consolidated Balance Sheets, Consolidated Statements of Income, Consolidated Statements of Cash Flows, and Consolidated Statement of Stockholders’ Equity for the period ended ~~September~~June 30, ~~2001~~2002 have been prepared by by VIB Corp (the “Company”) without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and changes in financial condition at or for the period ended ~~September~~June 30, ~~2001~~2002 have been made. The results of operations for the period ended ~~September~~June 30, ~~2001~~2002 are ~~not~~ not necessarily indicative of the results that may be expected for the full year.

VIB CORP AND SUBSIDIARIES ~~Consolidated Statements of Financial Condition~~ ~~September 30, 2001 and December 31, 2000~~ ~~(Unaudited)~~

			September 30			December 31
			2001			2000
ASSETS
Cash and due from banks			$	40,249,566		$	51,604,079
Federal funds sold				1,500,000			—
		Total cash and cash equivalents		41,749,566			51,604,079
Interest bearing deposits				305,283			1,447,888
Investment Securities: (note B)
	Securities available for sale			212,917,195			189,876,563
	Securities held to maturity			—			2,440,928
		Total investment securities		212,917,195			192,317,491
Federal Home Loan and Federal Reserve Bank stock, at cost				9,703,950			9,185,249
Loans: (note C)
	Commercial			83,926,375			139,020,547
	Agricultural			51,315,311			70,217,153
	Real estate-construction			178,821,874			129,170,418
	Real estate-other			502,203,251			453,041,114
	Consumer			33,997,597			36,280,567
		Total Loans		850,264,408			827,729,799
Net deferred loan fees				(4,550,672	)		(4,007,270	)
Allowance for credit losses				(9,873,321	)		(8,297,814	)
		Net Loans		835,840,415			815,424,715
Premises and equipment				12,660,268			13,863,823
Other real estate owned				2,651,988			1,359,905
Cash surrender life insurance				21,022,038			19,990,350
Investment in unconsolidated subsidiary				2,000,000			—
Deferred tax asset				5,453,496			6,923,000
Intangible assets				17,471,049			18,435,865
Accrued interest and other assets				12,054,746			12,375,595
TOTAL ASSETS			$	1,173,829,994		$	1,142,927,960

Consolidated Statements of Financial Condition

June 30, 2002 and December 31, 2001
(Unaudited)


			June 30,			December 31,
			2002			2001

ASSETS
Cash and due from banks			$	47,726,877		$	57,164,524
Federal funds sold				—			1,500,000

		Total cash and cash equivalents		47,726,877			58,664,524
Interest bearing deposits				64,855			648,035
Securities available for sale (note B)				334,629,506			194,471,496
Federal Home Loan and Federal Reserve Bank stock, at cost				13,727,950			11,140,250
Loans: (note C)
	Commercial			78,538,607			84,744,363
	Agricultural			38,976,153			53,287,734
	Real estate-construction			187,023,255			164,862,160
	Real estate-other			523,098,697			506,505,603
	Consumer			28,650,582			32,520,842

		Total Loans		856,287,294			841,920,702
Net deferred loan fees				(4,248,821	)		(4,146,246	)
Allowance for credit losses				(9,978,599	)		(9,344,248	)

		Net Loans		842,059,874			828,430,208
Premises and equipment				11,453,881			12,310,908
Other real estate owned				1,631,562			3,138,697
Cash surrender life insurance				31,301,086			22,581,441
Deferred tax asset				6,120,010			7,338,000
Goodwill and intangible assets				16,842,386			17,149,444
Accrued interest and other assets				14,180,547			12,363,751

TOTAL ASSETS			$	1,319,738,534		$	1,168,236,754

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

VIB CORP AND SUBSIDIARIES ~~Consolidated Statements of Financial Condition~~ ~~September 30, 2001 and December 31, 2000 (Unaudited)~~

			September 30		December 31
			2001		2000
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
	Noninterest-bearing demand		$	218,921,040	$	211,541,381
	Money Market and NOW			202,044,271		208,177,709
	Savings			65,452,851		62,657,235
	Time deposits under $100,000			200,852,045		220,547,372
	Time deposits $100,000 and over			203,999,466		207,314,327
		Total Deposits		891,269,673		910,238,024
Fed funds purchased				—		750,000
Federal Home Loan Bank advances				158,350,000		118,200,000
Capital lease obligations				2,972,770		2,954,995
Company-obligated mandatorily redeemable Capital Securities of subsidiary trusts holding solely Subordinated Debentures of the Company				32,400,000		32,400,000
Accrued interest and other liabilities				8,838,118		7,534,152
		Total Liabilities		1,093,830,561		1,072,077,171
Stockholders’ Equity:
	Preferred shares, no par value; 10,000,000 shares authorized; issued 0 shares in 2001 and 2000			—		—
	Common shares, no par value, authorized 25,000,000 in 2001 and 2000, Outstanding: 12,651,491 in 2001 and 12,542,553 in 2000			65,921,547		62,283,298
	Undivided Profits			12,790,714		9,173,494
	Accumulated other comprehensive income, net of tax of $894,476 in 2001 and $(421,122) in 2000			1,287,172		(606,003	)
		Total Stockholders’ Equity		79,999,433		70,850,789
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY			$	1,173,829,994	$	1,142,927,960

Consolidated Statements of Financial Condition

June 30, 2002 and December 31, 2001
(Unaudited)


			June 30,		December 31,
			2002		2001

LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits
	Noninterest-bearing demand		$	241,906,879	$	239,820,321
	Money Market and NOW			215,632,866		205,078,944
	Savings			73,782,734		63,806,829
	Time deposits under $100,000			194,967,503		182,953,344
	Time deposits $100,000 and over			242,257,493		193,270,400

		Total Deposits		968,547,475		884,929,838
Federal Home Loan Bank advances				213,323,209		156,218,358
Capital lease obligation				2,985,772		2,976,966
Company-obligated mandatorily redeemable preferred securities of subsidiary trusts holding solely junior subordinated debentures of the Company				33,313,824		33,360,672
Accrued interest and other liabilities				9,580,996		9,113,431

		Total Liabilities		1,227,751,276		1,086,599,265
Shareholders’ Equity
	Preferred stock, no par value; 10,000,000 shares authorized; Issued and outstanding: None			—		—
	Common stock, no par value, 125,000,000 shares authorized; Issued and outstanding: 13,573,885 in 2002 and 13,038,488 in 2001			75,557,161		69,655,705
	Retained Earnings			13,741,844		11,808,477
	Accumulated other comprehensive income, net of tax of $1,849,300 in 2002 and $120,433 in 2001			2,688,253		173,307

		Total Stockholders’ Equity		91,987,258		81,637,489

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY			$	1,319,738,534	$	1,168,236,754

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

VIB CORP AND SUBSIDIARIES ~~Consolidated Statements of Income~~ ~~(Unaudited)~~

		For the Three Month				For the Nine Month
		Periods Ended				Periods Ended
		September 30,		September 30,		September 30,		September 30,
		2001		2000		2001		2000
Interest Income:
	Interest and Fees on Loans	$	18,039,799	$	19,524,995	$	56,776,312	$	55,263,370
	Interest on Investment Securities-Taxable		1,840,170		2,330,799		5,415,964		6,882,504
	Interest on Investment Securities-Nontaxable		423,198		723,593		1,653,525		2,087,574
	Other Interest Income		13,198		17,406		190,076		82,619
Total Interest Income			20,316,365		22,596,793		64,035,877		64,316,067
Interest Expense:
	Interest on Money Market and NOW		1,019,600		1,465,213		3,716,924		3,907,946
	Interest on Savings Deposits		175,787		276,138		610,325		880,556
	Interest on Time Deposits		4,931,592		6,395,576		17,414,182		17,357,963
	Interest on Other Borrowings		2,021,757		2,759,641		6,112,729		7,931,552
Total Interest Expense			8,148,736		10,896,568		27,854,160		30,078,017
Net Interest Income			12,167,629		11,700,225		36,181,717		34,238,050
Provision for Credit Losses			750,000		675,000		2,250,000		2,225,000
Net Interest Income after Provision for Credit Losses			11,417,629		11,025,225		33,931,717		32,013,050
Non-interest Income:
	Service Charges and Fees		2,063,053		1,619,912		5,397,812		4,813,068
	Gain on Sale of Loans and Servicing Fees		160,192		373,651		745,630		996,994
	Gain on Sale of Securities		1,539		—		1,474,217		—
	Other Income		422,552		303,493		1,112,377		969,542
Total Non-interest Income			2,647,336		2,297,056		8,730,036		6,779,604
Non-interest Expense:
	Salaries and Employee Benefits		5,041,007		4,805,096		15,989,998		14,865,760
	Occupancy Expenses		930,923		859,277		2,670,540		2,360,687
	Furniture and Equipment		965,879		764,838		2,722,398		2,273,489
	Other Expenses (note D)		3,739,231		3,468,352		11,082,733		10,215,102
Total Non-Interest Expense			10,677,040		9,897,563		32,465,669		29,715,038
Income Before Income Taxes			3,387,925		3,424,718		10,196,084		9,077,616
Income Taxes			1,151,000		1,161,513		3,554,300		2,995,763
Net Income		$	2,236,925	$	2,263,205	$	6,641,784	$	6,081,853
Per Share Data: (note E)
	Net Income — Basic	$	0.18	$	0.18	$	0.53	$	0.49
	Net Income — Diluted	$	0.18	$	0.18	$	0.52	$	0.48

Consolidated Statements of Income

(Unaudited)


		For the Three Month					For the Six Month
		Period Ended					Period Ended

		June 30,			June 30,		June 30,		June 30,
		2002			2001		2002		2001

Interest Income:
	Interest and Fees on Loans	$	16,235,404		$	19,109,456	$	32,179,104	$	38,736,513
	Interest on Investment Securities — Taxable		3,325,739			1,441,601		5,371,803		3,575,794
	Interest on Investment Securities — Nontaxable		400,098			540,904		794,109		1,230,327
	Other Interest Income		891			143,422		12,595		176,878

Total Interest Income			19,962,132			21,235,383		38,357,611		43,719,512
Interest Expense:
	Interest on Money Market and NOW		785,713			1,123,484		1,507,184		2,697,324
	Interest on Savings Deposits		149,355			196,793		286,973		434,538
	Interest on Time Deposits		3,122,990			5,956,405		6,348,457		12,482,590
	Interest on Trust Preferred Securities		703,154			810,262		1,380,676		1,620,865
	Interest on Other Borrowings		1,797,974			925,425		3,305,002		2,470,107

Total Interest Expense			6,559,186			9,012,369		12,828,292		19,705,424

Net Interest Income			13,402,946			12,223,014		25,529,319		24,014,088
Provision for Credit Losses			624,999			750,000		1,249,998		1,500,000

Net Interest Income after Provision for Credit Losses			12,777,947			11,473,014		24,279,321		22,514,088
Non-interest Income:
	Service Charges and Fees		1,975,580			1,768,432		3,816,375		3,334,759
	Gain on Sale of Loans and Servicing Fees		84,881			275,479		703,697		585,438
	Gain on Sale of Securities		(15	)		641,783		30,077		1,472,678
	Dividends on Cash Surrender Value of Life Insurance		340,875			343,668		688,384		687,336
	Other Income		50,130			65,978		300,497		2,489

Total Non-interest Income			2,451,451			3,095,340		5,539,030		6,082,700
Non-interest Expense:
	Salaries and Employee Benefits		4,773,341			5,551,603		9,656,045		10,948,991
	Occupancy Expenses		907,524			876,343		1,764,247		1,739,617
	Furniture and Equipment		832,959			910,225		1,672,101		1,756,519
	Other Expenses (note D)		3,388,215			3,638,962		6,614,697		7,343,502

Total Non-interest Expense			9,902,039			10,977,133		19,707,090		21,788,629

Income Before Income Taxes			5,327,359			3,591,221		10,111,261		6,808,159
Income Taxes			1,707,641			1,291,000		3,464,641		2,403,300

Net Income		$	3,619,718		$	2,300,221	$	6,646,620	$	4,404,859
Per Share Data: (note E)
	Net Income — Basic	$	0.27		$	0.17	$	0.49	$	0.33
	Net Income — Diluted	$	0.26		$	0.17	$	0.48	$	0.33

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

VIB CORP AND SUBSIDIARIES ~~Consolidated Statement of Stockholders’ Equity~~

				Common Shares							Accumulated
											Other
				Number of				Undivided			Comprehensive
				Shares		Amount		Profits			Income			Total
Balance January 1, 2000					11,443,037	$	57,449,500	$	5,252,469		$	(4,456,609	)	$	58,245,360
Comprehensive Income
	Net income								8,620,407						8,620,407
	Other comprehensive income
		Unrealized gain on securities, net of taxes of $2,681,226										3,850,606			3,850,606
Total Comprehensive income															12,471,013
Cash dividends (fractional shares)									(15,784	)					(15,784	)
Stock dividend					696,289		4,683,598		(4,683,598	)					—
Exercise of stock options					29,318		150,200								150,200
Balance at December 31, 2000					12,168,644		62,283,298		9,173,494			(606,003	)		70,850,789
Comprehensive Income
	Net income								6,641,784						6,641,784
	Other comprehensive income
		Unrealized gains on securities, net of taxes of $1,920,025										2,762,963			2,762,963
			Less reclassification adjustments for gains included in net income, net of taxes of $604,429									(869,788	)		(869,788	)
	Total Other comprehensive income														1,893,175
Total Comprehensive income															8,534,959
Cash dividends (fractional shares)									(10,693	)					(10,693	)
Stock dividend					365,761		3,013,871		(3,013,871	)					—
Exercise of stock options					117,086		624,378								624,378
Balance at September 30, 2001					12,651,491	$	65,921,547	$	12,790,714		$	1,287,172		$	79,999,433

Consolidated Statement of Changes in Shareholders’ Equity


				Common Shares							Accumulated
											Other
				Number of				Retained			Comprehensive
				Shares		Amount		Earnings			Income			Total

Balance January 1, 2001					12,168,644	$	62,283,298	$	9,173,494			($606,003	)	$	70,850,789
Comprehensive Income
	Net Income								9,222,088						9,222,088
	Other comprehensive income
		Unrealized gain on securities, net of taxes of $1,320,756										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	)
Total Comprehensive income															10,001,398
Cash dividends									(23,589	)					(23,589	)
Stock dividends					744,188		6,563,516		(6,563,516	)					—
Exercise of stock options					125,656		808,891								808,891

Balance at December 31, 2001					13,038,488		69,655,705		11,808,477			173,307			81,637,489
Comprehensive income
	Net Income								6,646,620						6,646,620
	Other comprehensive income
		Unrealized gains on securities, net of taxes of $1,760,001										2,532,685			2,532,685
			Less reclassification adjustments for gains included in net income, net of taxes of $12,338									(17,739	)		(17,739	)
	Total Other comprehensive income														2,514,946
Total Comprehensive income															9,161,566
Cash dividends									(17,268	)					(17,268	)
Stock dividends					392,838		4,695,985		(4,695,985	)					—
Exercise of stock options					142,559		1,205,471								1,205,471

Balance at June 30, 2002					13,573,885	$	75,557,161	$	13,741,844		$	2,688,253		$	91,987,258

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

VIB CORP AND SUBSIDIARIES ~~Consolidated Statement of Cash Flows~~ ~~(Unaudited)~~

					For the Nine-Month
					Periods Ended
					September 30,
					2001			2000
Cash flow from operating activities:
Net income					$	6,641,784		$	6,081,853
Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization				3,192,526			2,877,805
		Deferred income taxes				(279,390	)		(802,696	)
		Provision for credit losses				2,250,000			2,225,000
		Originations of loans held for sale				(33,838,124	)		(25,599,051	)
		Proceeds from sale of loans				33,852,399			32,130,639
		Net gain on loan sales				(477,858	)		(1,066,885	)
		Loss/(Gain) on sale of other real estate owned				54,574			(73,338	)
		Net increase in cash surrender value of life insurance				(1,031,688	)		(830,115	)
		Net realized gains in available for sale securities				(1,474,217	)		—
		Net amortization of premium/discount on available for sale securities				301,409			(81,411	)
		Net change in accrued interest, other assets, and other liabilities				58,114			(2,130,591	)
				Net cash provided by operating activities		9,249,529			12,731,210
		Cash flow from investing activities:
			Purchases of investment securities			(159,995,122	)		(12,430,113	)
			Net cash used for purchase of King’s River State Bank			—			(15,596,765	)
			Net cash paid for the purchase of life insurance			—			(1,800,000	)
			Proceeds from sales of other real estate owned			2,317,995			1,472,593
			Proceeds from sales of investment securities			51,002,296			—
			Proceeds from maturities of investment securities			92,256,000			14,594,275
			Loans granted net of repayments			(25,866,769	)		(94,591,003	)
			Premises and equipment expenditures			(1,024,155	)		(2,210,869	)
			Net (increase)/decrease in interest bearing deposits			1,142,605			(561,953	)
				Net cash (used)/provided by investing activities		(40,167,150	)		(111,123,835	)
		Cash flow from financing activities:
			Net increase in demand deposits and savings			4,041,836			16,087,619
			Net increase/(decrease) in time deposits			(23,010,188	)		55,750,067
			Net change in capitalized lease obligations			17,775			24,152
			Net change in fed funds purchased			40,150,000			(14,050,000	)
			Net change in other borrowings			(750,000	)		25,600,000
			Proceeds from Capital Securities			—			10,000,000
			Payments for dividends			(10,693	)		(6,868	)
			Proceeds from exercise of stock options and warrants			624,378			150,201
				Net cash (used)/provided by financing activities		21,063,108			93,555,171
				Net change in cash and cash equivalents		($9,854,513	)		($4,837,454	)
	Cash and cash equivalents:
				Beginning of period	$	51,604,079		$	45,758,670
				End of period	$	41,749,566		$	40,921,216
		Supplemental disclosure of cash flow information:
				(in Thousands)
		Cash paid for interest expense			$	27,705		$	29,733
		Cash paid (received) for income taxes			$	3,342		$	1,517

Consolidated Statements of Cash Flows (Unaudited)


					For the Six-Month Periods Ended June 30,

					2002			2001

Cash flow from operating activities:
Net income					$	6,646,620		$	4,404,859
Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization				1,722,230			2,074,176
		Deferred income taxes				(510,877	)		(279,390	)
		Provision for credit losses				1,249,998			1,500,000
		Originations of loans held for sale				(10,287,748	)		(31,691,990	)
		Proceeds from sale of loans				6,816,822			30,516,917
		Net gain on loan sales				(572,552	)		(402,266	)
		Loss on sale of other real estate owned				36,444			53,785
		Net increase in cash surrender value of life insurance				(719,645	)		(685,173	)
		Net realized gains on available for sale securities				(30,077	)		(1,472,678	)
		Net amortization of premium/discount on available for sale securities				665,694			51,718
		Net change in accrued interest, other assets, and other liabilities				(1,349,231	)		1,350,397

				Net cash provided by operating activities		3,667,678			5,420,355
		Cash flow from investing activities
			Purchase of investment securities			(202,664,910	)		(65,630,264	)
			Proceeds from sales of other real estate owned			1,770,448			2,167,995
			Proceeds from sales of investment securities			6,441,531			50,966,251
			Proceeds from maturities of investment securities			57,085,865			84,839,324
			Purchase of Cash Surrender Value Life Insurance			(8,000,000	)		—
			Net change in loans			(11,135,943	)		(8,592,122	)
			Premises and equipment expenditures			(558,145	)		(1,039,865	)
			Net (increase)/decrease in interest bearing deposits			583,180			1,301,253

				Net cash (used)/provided by investing activities		(156,477,974	)		64,012,572
		Cash flow from financing activities
			Net increase/(decrease) in demand deposits and savings			22,616,385			(3,032,299	)
			Net increase/(decrease) in time deposits			61,001,252			(11,809,779	)
			Net change in capitalized lease obligations			8,806			13,711
			Net change in fed funds purchased			—			(55,200,000	)
			Net change in other borrowings			57,058,003			(750,000	)
			Payments for dividends			(17,268	)		(10,693	)
			Proceeds from exercise of stock options			1,205,471			342,609

				Net cash (used)/provided by financing activities		141,872,649			(70,446,451	)
				Net change in cash and cash equivalents	$	(10,937,647	)	$	(1,013,524	)

	Cash and cash equivalents
			Beginning of period		$	58,664,524		$	51,604,079
			End of period		$	47,726,877		$	50,590,555
	Supplemental disclosure of cash flow information: (in thousands) Cash paid for interest expense				$	12,133		$	19,532
	Cash paid (received) for income taxes				$	4,932		$	1,869

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

VIB CORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(A) General

See Note A of Notes to Financial Statements incorporated by reference in the Company’s ~~2000~~2001 Annual Report on Form 10-K for a summary of significant accounting policies.

The unaudited financial statements included herein were prepared from the books of the Company in accordance with generally accepted accounting principles and reflect all adjustments which are, in the opinion of management, necessary to provide a fair statement of the results of operations and financial position for the interim periods. Such financial statements generally conform to the presentation reflected in the Company’s ~~2000~~2001 Annual Report on Form 10-K, and reflect adjustments that are solely of a normal, recurring nature. The current interim periods reported herein are included in the fiscal year subject to independent audit at the end of the year. The unaudited financial statements of VIB Corp include the accounts of the Company and its wholly owned subsidiaries, Valley Independent Bank, Valley Capital Trust, VIBC Capital Trust I, ~~and~~Valley Capital Trust II, VIBC Services Company and Valley Independent Bank’s wholly owned subsidiary, VIB Investment Trust. All significant intercompany accounts and transactions have been eliminated in the consolidated financial statements. Certain items previously reported have been reclassified to conform to the current period’s classifications.

(B) Investment Securities

The Company’s investment securities portfolio at ~~September~~June 30, ~~2001~~2002 had a net unrealized gain of approximately $ 24,~~182~~538,000, as compared with a net unrealized ~~loss~~gain of approximately $1294,~~027,~~000 at December 31, ~~2000~~2001, an increase during the ~~nine~~ six months beginning January 1, ~~2001~~2002 of $34,~~209~~244,000. The change for the period is is attributable to the recomposition of the portfolio using a ~~declining~~leveraging ~~interest~~strategy to ~~rate~~enhance ~~environment~~earnings.

Investment Securities

September 30, 2001

June 30, 2002

Gross

Gross Unrealized

Amortized

Unrealized

Fair

($ in 000's)

Gross Amortized Cost

Gains

Losses

Fair Value

($ In 000's)

Cost

Gains

Losses

Value

Available-for Sale Securities:

U.S. Treasury Securities

~~355~~499

—

~~357~~500

U.S. Government and Agency Securities

~~133~~50,~~993~~439

~~1,630~~494

555

~~135~~50,~~568~~928

State and Political Subd.

42,895

633

120

43,408

State and Political Subdivisions

38,150

536

—

38,686

Mortgage-Backed Securities

24235,~~932~~488

~~232~~3,559

5—

25239,~~159~~046

Other Equity

85,~~561~~516

~~166~~67

~~302~~114

85,~~425~~470

~~210~~330,~~736~~092

24,~~663~~657

~~482~~119

~~212~~334,~~917~~630

Held-to-Maturity Securities:

Mortgage-Backed Securities

—

December 31, 2000

December 31, 2001

Gross

Gross Unrealized

Amortized

Unrealized

Fair

($ in 000's)

Gross Amortized Cost

Gains

Losses

Fair Value

($ In 000's)

Cost

Gains

Losses

Value

Available-for Sale Securities:

~~U.S. Treasury Securities~~

U.S. Treasury Securities

122,~~540~~252

292

—13

122,~~569~~241

~~U.S. Government and Agency Securities~~

U.S. Government and Agency Securities

8130,~~411~~482

~~196~~96

~~840~~8

8030,~~767~~570

State and Political Subd.

67,709

906

1,013

67,602

State and Political Subdivisions

39,471

308

663

39,116

~~Mortgage-Backed Securities~~

Mortgage-Backed Securities

2196,~~576~~571

95721

~~217~~71

2197,~~454~~221

~~Other Equity~~

Other Equity

185,~~668~~402

~~118~~55

~~301~~134

185,~~485~~323

~~190~~194,~~904~~178

1,~~344~~182

~~2,371~~889

~~189~~194,~~877~~471

Held-to-Maturity Securities:

Mortgage-Backed Securities

2,441

—

2,425

Investment securities carried at approximately $~~195~~319,~~712~~299,000 and $~~166~~186,~~427~~576,000, at ~~September~~June 30, ~~2001~~2002 and December 31,~~@nbsp2000~~2001, respectively, were ~~pledged~~ pledged to secure public deposits, bank advances and other purposes as required by law.

The Company’s loan portfolio consists primarily of loans to borrowers within southern and central California~~, Las Vegas, Nevada and Yuma, Arizona~~. 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 area. As a result, the Company’s loan and collateral portfolio are, to some degree, concentrated in those industries.

The Company also originates real estate related and farmland loans for sale to governmental agencies and institutional investors. At ~~September~~June 30, ~~2001~~ 2002 and December 31, ~~2000~~2001 the Company was servicing approximately $8278,~~144~~690,000 ~~and~~ and $9880,~~368~~028,000, respectively, in loans previously sold.

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

	September 30, 2001		December 31, 2000
	Six months ended			Twelve months ended
($ In 000’s)
($ In 000's)	June 30, 2002			December 31,2001
Balance at beginning of year	$	89,~~298~~344		$	58,~~696~~298
Additions to the allowance charged to expense		21,250			23,~~905~~000
Additions due to purchase of Kings River State Bank		—			654
Recoveries on loans charged off		77			224
Recoveries on loans charged off		202			158
Loans charged off		692			2,178
Loans charged off		877			1,115
Balance at end of period	$	9,979		$	9,344
Balance at end of period	$	9,873		$	8,298

A summary of nonperforming loans and assets follows:

		September 30, 2001			December 31, 2000
($ in 000's)		June 30, 2002			December 31,2001
($ In 000’s)
Non-accrual loans		$	15,088		$	14,095
Non-accrual loans		$	14,001		$	12,302
Loans 90 days past due and still accruing			61			—
Loans 90 days past due and still accruing			228			83
	Total nonperforming loans		15,149			14,095
	Total nonperforming loans		14,229			12,385
Other Real Estate Owned			1,632			3,139
Other Real Estate Owned			2,652			1,360
	Total nonperforming assets	$	16,781		$	17,234
	Total nonperforming assets	$	16,881		$	13,745
Nonperforming loans to total ending loans			1.80	%		1.70	%
Nonperforming loans to total ending loans			1.67	%		1.50	%
Nonperforming assets to total loans and Other Real Estate Owned			1.99	%		2.07	%
Nonperforming assets to total loans and Other Real Estate Owned			1.96	%		1.66	%

(D) Other Expenses

Other expenses for the periods indicated are as follows:

($ In 000's)		September 30, 2001			September 30, 2000
($ in 000's)			June 30, 2002			June 30, 2001
Data Processing		$	~~2,184~~$	1,514	$	~~2,011~~$	1,407
Advertising			~~426~~	324		~~435~~	232
Legal and Professional			~~2,416~~	1,459		~~2,023~~	1,749
Regulatory Assessments			~~124~~	77		~~172~~	82
Insurance			90	65		~~213~~	56
Amortization of Intangibles			~~965~~	307		~~965~~	643
Office Expenses			~~1,939~~	1,137		~~1,747~~	1,239
Promotion			~~1,321~~	676		~~1,190~~	927
Other			~~1,618~~	1,056		~~1,459~~	1,009
~~Total Other Expenses~~	Total Other Expenses	$	~~11,083~~$	6,615	$	~~10,215~~$	7,344

(E) Earnings Per Share

Basic earnings per share are calculated based on the weighted average number of common shares outstanding during each period as follows: 1213,~~631~~539,~~730~~991 for the three months ended ~~September~~June 30, ~~2001~~2002 and 1213,~~534~~367,~~970~~586 for the three ~~months~~ months ended ~~September~~June 30, ~~2000~~2001; 1213,~~595~~511,~~750~~083 for the ~~nine~~six months ended ~~September~~ June 30, ~~2001~~2002 and 12 13,~~531~~341,~~057~~160 for the ~~nine~~six months ended ~~September~~June 30, ~~2000~~2001.

Diluted earnings per share for the three and ~~nine~~six-month periods ended June ~~September~~ 30, ~~2001~~2002 and ~~2000~~2001, are computed by dividing net earnings by the ~~weighted~~ weighted average common equivalent shares outstanding during the respective periods as follows: 1213,~~741~~935,~~965~~997 for the three months ended ~~September~~June 30, ~~2001~~ 2002 and 1213,~~552~~428,~~536~~267 for the three months ended ~~September~~June 30, ~~2000~~2001; 1213,~~667~~842,~~652~~186 for the ~~nine~~six months ended ~~September~~June 30, 2002 ~~2001~~ and 1213,~~554~~397,~~460~~118 for the ~~nine~~six months ended ~~September~~June 30, ~~2000~~2001. Common share equivalents include dilutive common stock option share equivalents determined by using the treasury stock method.

~~ITEM~~(F) Commitments 2.and ~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION~~Contingencies

~~This~~ The ~~analysis~~Company is ~~designed to provide~~ a ~~more~~party ~~complete understanding of the material changes and trends related~~ to ~~the Company’s~~ financial ~~condition, results~~instruments ~~of operations, cash flow and capital resources. This discussion should be read~~ in ~~conjunction with~~ the ~~attached~~normal ~~Financial~~course ~~Statements included in Item~~of 1,business ~~and~~to ~~the~~meet ~~Company’s~~financing ~~Annual~~needs ~~Report~~of onits ~~Form 10-K.~~customers ~~This~~and ~~document may contain forward-looking statements that are subject~~ to ~~risks~~reduce ~~and~~its ~~uncertainties that~~own ~~could~~exposure ~~cause actual results~~ to ~~differ~~fluctuating ~~materially~~interest ~~from~~rates. ~~those~~These ~~projected.~~financial ~~For~~instruments ainclude ~~discussion~~commitments ~~of factors that could cause actual results~~ to ~~differ,~~make ~~please~~loans ~~see the Company’s publicly available Securities~~ and ~~Exchange~~standby ~~Commission~~letters ~~filings, including its Annual Report on Form 10-K for the year ended December 31, 2000 and particularly the discussion~~ of ~~“Other Significant Factors” within that document~~credit.

~~GENERAL~~ Exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to make loans and standby letters of credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments as it does for loans reflected in the financial statements.

~~VIB~~ At ~~Corp was incorporated in California on November~~June 730, ~~1997~~2002 ~~under~~and 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 a bank holding company. The holding company organization was consummated on MarchDecember 1231, ~~1998~~2001, ~~pursuant~~commitments to a ~~Plan~~make ofloans ~~Reorganization~~totaled $274.9 million and ~~Merger Agreement dated November~~$288.7 18million, ~~1997,~~ and ~~each outstanding~~standby ~~share~~letters of ~~VIB’s~~credit ~~Common~~totaled ~~Stock was converted into one share of the~~$4.4 ~~Company’s~~million ~~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~~$1. 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 October6 29million, ~~1999~~respectively.

On Since ~~January 28,~~commitments ~~1999,~~to ~~VIB~~make ~~Corp~~loans ~~acquired~~may ~~Bank~~expire ofwithout ~~Stockdale,~~being ~~F.S.B.~~used, ~~Bakersfield, California~~this ~~(“BOS”). As a result of the merger, the Company acquired total~~amount ~~assets~~does ofnot ~~$144.4 million,~~necessarily ~~comprising~~represent ~~$9.1 million~~future in cash ~~and~~commitments. ~~due~~Collateral ~~from banks,~~obtained ~~$23.5 million~~upon inexercise ~~securities~~of ~~and~~the ~~investments,~~commitment ~~$102.4 million~~is indetermined ~~net~~using ~~loans~~managements’ ~~and~~credit ~~$9.4 million~~evaluation inof ~~other~~the ~~assets.~~borrower ~~Total~~and ~~liabilities~~may ~~assumed~~include ~~amounted~~accounts toreceivable, ~~$134.6~~inventory, ~~million~~property, ofland ~~which $128.9 million comprised deposits. The remainder represented other borrowed funds~~ and other ~~liabilities~~items.

~~The BOS merger was accounted for as a pooling of interests. The Company issued approximately 2,730,589 shares of its Common Stock~~ (~~adjusted for subsequent stock dividends~~G) Goodwill inand ~~exchange~~Other ~~for~~Intangible ~~all 1,212,265 shares of Stockdale’s issued and~~Assets ~~outstanding common stock.~~

On In ~~January 22,~~June ~~1999~~2001, ~~VIB~~the ~~acquired~~Financial ~~Fremont~~Accounting ~~Investment~~Standards &Board ~~Loan’s~~(“FASB”) ~~Hemet branch~~issued ~~office~~Statement of Financial Accounting Standards No. 142, ~~including~~“Goodwill ~~substantially~~and ~~all~~Other Intangible ~~the~~Assets” ~~deposits~~(“SFAS of142”). Under the ~~branch.~~new ~~VIB~~rules, ~~assumed~~goodwill and intangible ~~approximately~~assets ~~$112 million~~deemed to have indefinite lives will no longer be amortized but will be subject to annual impairment tests in ~~deposits~~accordance ~~and~~with the ~~lease~~new onstatement. ~~the~~Other identifiable ~~branch~~intangible ~~premises~~assets, ~~and~~ ~~acquired~~which ~~approximately~~include ~~$27~~deposit-based intangibles,~~000~~ inwill continue ~~loans~~to asbe ~~well~~amortized asover ~~cash~~their onuseful ~~hand~~lives and ~~fixtures~~ ~~and~~reviewed ~~equipment~~for ~~associated~~impairment in accordance with SFAS No. 144, “Accounting for the ~~branch~~Impairment or Disposal of long-Lived Assets.” ~~The~~Useful ~~consideration~~lives ~~paid~~of amortizable intangible assets are ~~amounted~~required to ~~approximately~~be ~~$1.12 million.~~reevaluated ~~Goodwill~~each ~~arising~~reporting ~~from~~period ~~the~~with ~~transaction~~any changes in estimated ~~totaled~~useful ~~approximately~~lives $1being accounted for prospectively over the revised remaining useful life.~~14 million.~~

The Company adopted SFAS 142 on January 1, 2002. Upon adoption, the Company no longer amortizes goodwill. The following table presents the effect the adoption of SFAS 142 would have had on the period ended June 30, 2001 had SFAS 142 been applied retroactively:


		Three Months ended				Six months ended

($000's except for earnings per share)		June 30, 2002		June 30, 2001		June 30, 2002		June 30, 2001

Net income		$	3,620	$	2,300	$	6,647	$	4,405
Addback: Goodwill amortization			—		202		—		404

Adjusted net income		$	3,620	$	2,502	$	6,647	$	4,809
Basic earnings per share:
	Net income	$	.27	$	.17	$	.49	$	.33
	Goodwill amortization		—		.01		—		.03

	Adjusted net income	$	.27	$	.18	$	.49	$	.36
Diluted earnings per share:
	Net income	$	.26	$	.17	$	.48	$	.33
	Goodwill amortization		—		.01		—		.03

	Adjusted net income	$	.26	$	.18	$	.48	$	.36

It The ~~was~~Company’s ~~anticipated~~initial ~~that~~test ~~VIB~~for ~~would~~impairment ~~require~~of ~~additional~~goodwill ~~capitalization~~as ~~in connection~~of ~~with the branch acquisition. On February~~December 531, ~~1999, the Company~~ ~~raised~~2001 ~~approximately~~has ~~$22.4 million~~been inperformed ~~net~~utilizing ~~proceeds~~both ~~from~~the anmarket ~~offering~~and ofcost upapproach ~~to 23,000~~and ~~Capital Securities in a private placement. The proceeds were used to~~both ~~increase~~methods ~~VIB’s~~indicated ~~capital~~no byimpairment ~~$8.5 million and the balance was used for the acquisition~~ of ~~Kings River State Bank (“KRSB”) and general corporate purposes~~goodwill.

~~The~~ Amortizable ~~Company~~intangible ~~formed~~assets aare ~~wholly-owned~~to ~~business~~be ~~trust~~reviewed ~~subsidiary,~~for ~~Valley~~impairment ~~Capital~~in ~~Trust~~accordance ~~(the~~with ~~“Trust”),~~SFAS ~~pursuant~~No. 144. toThat ~~the~~is, ~~laws~~if ofa ~~the~~triggering ~~State~~event ~~of Delaware~~occurs, ~~for~~ the ~~specific~~recoverability ~~purpose~~ of ~~(1) investing in~~ the ~~Company~~intangible asset’s ~~9.00~~cost %must ~~Junior~~be ~~Subordinate Debentures (the “Debentures”), due February 5, 2029; (2) selling 9~~evaluated.00 %Where the ~~Cumulative~~carrying ~~Capital~~amount ~~Securities~~is ~~(the~~not ~~“Capital Securities”)~~recoverable, ~~representing~~the aCompany 97must ~~% beneficial~~test ~~interest in~~ the ~~Debentures~~carrying ~~owned~~amount of by the ~~Trust;~~intangible ~~and~~asset ~~(3) issuing beneficial~~for ~~interests~~impairment. inExamples ~~the~~of ~~Debentures~~triggering ~~owned~~events ~~by the Trust.~~are:

~~On February 5, 1999, the Company issued $23~~ 1.~~093~~ ~~million in Debentures to the Trust. Concurrently, the Trust issued $22.4 million of the Capital Securities to the accredited investors and $693,000 of Common Securities to the Company.~~ The ~~Debentures~~asset ~~were~~market ~~purchased~~value bydecreases ~~the Trust concurrently with the Trust’s issuance of the Capital Securities and Common Securities~~significantly. ~~The proceeds to the~~ ~~Company, net of the Placement Agent’s fees and other offering expenses, was~~ ~~approximately $22.4 million which is treated as Tier 1 capital for regulatory purposes.~~

2. The ~~interest~~use onof the ~~Capital~~asset ~~Securities~~ is ~~deductible.~~significantly ~~The~~changed ~~Company~~in ~~has~~extent ~~the right,~~or ~~assuming that no default has occurred, to defer interest payments at any time and for a period of up to twenty consecutive calendar quarters~~manner. ~~The~~ ~~Capital Securities will mature on February 5, 2029, but can be called after~~ ~~February 5, 2009.~~

~~On January~~ 3. 7,Legal ~~2000,~~factors ~~VIB~~or ~~Corp~~business ~~merged~~climate ~~with~~changes ~~Kings~~adversely ~~River~~affect ~~Bancorp,~~asset ~~Reedley, California, and acquired Kings River State Bank as a wholly-owned subsidiary~~value. ~~Kings River Bancorp’s shareholders received approximately $21.7 million in~~ ~~exchange for their stock.~~

~~For the year ended December 31, 1999, Kings River Bancorp had total assets of $87~~ 4.2 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 twenty years on a straight-line basis. The results of Kings River BancorpRegulator’s ~~operations~~adverse ~~were included~~assessment inor ~~those reported by the Company beginning January 10, 2000~~action.

~~In July 2000, the Company raised approximately $10~~ 5.0 ~~million~~Original inexpected ~~net~~costs ~~proceeds from~~are ansignificantly ~~offering of “trust preferred” securities in a private placement conducted as a part of a pooled offering sponsored by First Union Securities, Inc~~exceeded. ~~(“First Union”) acting as the placement agent. On July 12, 2000, the~~ ~~Company entered into a Placement Agent Agreement (the “Placement Agent~~ Agreement”) with First Union. Concurrently, the Company formed a wholly-owned New York common law trust subsidiary, VIBC Capital Trust I, for the specific purpose of: (1) investing in the Company’s 11.695% Junior Subordinated Notes (the “Notes”), due July 19, 2030; (2) selling 11.695% Preferred Securities (the “Preferred Securities”), representing a 97% beneficial interest in the Notes owned by VIBC Capital Trust I; and (3) issuing Common Securities to the

6. A history of cash flow losses and continued asset losses are forecasted.

As of June 30, 2002, there has been no triggering event that would cause the Company to reevaluate the recoverability of its intangible assets. During the quarter ending March 31, 2002, the Company reevaluated the remaining useful lives of all previously recognized intangible assets and adjusted those lives prospectively, where appropriate.

Other intangible assets at June 30, 2002 consisted of core deposit intangibles with a net carrying value of $3,355,715. Accumulated amortization through June 30, 2002 was $1,809,773. Amortization expense for the periods ended June 30, 2002, and June 30, 2001 was $307,058 and $239,046, respectively.

~~Company,~~ ITEM ~~representing~~2. aMANAGEMENT’S 3%DISCUSSION ~~beneficial~~AND ~~interest~~ANALYSIS inOF ~~the~~FINANCIAL ~~Notes~~CONDITION ~~owned by VIBC~~AND ~~Capital~~RESULTS ~~Trust~~OF I.OPERATION

On This ~~July 26,~~analysis ~~2000,~~is ~~the~~designed ~~Company~~to ~~issued~~provide ~~$10.309 million~~a inmore ~~Notes~~complete tounderstanding ~~VIBC~~of ~~Capital~~the ~~Trust~~material I,changes ~~which~~and trends related to the Company’s financial condition, results inof ~~turn~~operations, ~~issued~~cash ~~$10.0 million~~flow ofand ~~the~~capital ~~Preferred~~resources. ~~Securities~~This todiscussion should ~~First~~be ~~Union~~read ~~and~~in ~~$309,000~~conjunction ofwith the ~~Common~~attached ~~Securities~~Financial toStatements included in Item 1, and the Company’s Annual Report on Form 10-K. ~~The~~This ~~proceeds~~document may contain forward-looking statements that are subject to ~~the~~risks ~~Company,~~and ~~net~~uncertainties ofthat could ~~First~~cause ~~Union’s~~actual ~~fees~~results ~~and~~to ~~other~~differ ~~offering~~materially ~~expenses,~~from ~~was approximately~~those $9projected.~~6 million,~~ ofFor ~~which~~a discussion ~~$1.4 million~~of isfactors ~~treated~~that ascould ~~Tier~~cause Iactual ~~capital for~~results ~~regulatory~~to ~~purposes~~differ, ~~with~~please see the Company’s ~~remainder~~publicly ~~being~~available ~~treated~~Securities asand ~~Tier~~Exchange IICommission ~~capital.~~filings, ~~The~~including ~~proceeds~~its ~~were~~Annual ~~used~~Report toon ~~increase~~Form 10-K ~~VIB’s~~for ~~capital~~the byyear ~~$8.5~~ended December ~~million~~31, ~~with~~2001 and particularly the ~~balance~~ ~~used~~discussion ~~for~~of ~~general~~“Other ~~corporate~~Significant ~~purposes~~Factors” within that document.

~~The interest on the Notes will be deductible and paid by the Company and~~ GENERAL ~~represents the sole source of VIBC Capital Trust I’s revenue available for~~ distributions to the holders of the Preferred Securities. The Company has the right, assuming that no default has occurred regarding the Notes, to defer interest payments on the Notes, at any time and for a period of up to twenty consecutive calendar quarters. The Preferred Securities will mature concurrently with the Notes on July 19, 2030; but can be called after July 19, 2010.

~~During~~ VIB ~~2000~~Corp ~~and~~was ~~2001~~incorporated in California on November 7, 1997 under the ~~Company~~laws of ~~did~~the ~~not~~State ~~conduct~~of ~~any~~California ~~business~~at ~~other~~the ~~than through~~direction ~~VIB,~~of ~~BOS~~the ~~and~~Board ~~KRSB~~of Directors of Valley Independent Bank (~~collectively,~~“VIB” or the “~~Banking Subsidiaries~~Bank”) for the purpose of becoming a bank holding company. AtThe holding company organization was consummated on March 12, ~~year-end~~1998, ~~the~~pursuant ~~Company~~to ~~had~~a ~~total~~Plan ~~consolidated~~of ~~assets~~Reorganization ofand $1Merger Agreement dated November 18,~~143 million.~~ ~~Neither~~1997, and each outstanding share of VIB’s Common Stock was converted into one share of the Company’s ~~nor~~Common Stock and all outstanding shares of VIB’s Common Stock were transferred to the ~~Banking~~Company ~~Subsidiaries~~in ~~earn~~a ~~revenues~~transaction ~~from~~accounted ~~sources~~for ~~outside~~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 ~~United~~Company’s ~~States~~Common Stock. The conversion period for these warrants expired on October 29, 1999.

~~During~~ On ~~the~~January 28, ~~first quarter of 2001~~1999, ~~the~~VIB ~~Company’s~~Corp ~~board~~acquired Bank of ~~directors~~Stockdale, ~~made a strategic decision to merge BOS and KRSB into VIB~~F. ~~Effective May 24~~S.B., ~~2001, BOS~~ ~~and KRSB were merged into VIB~~Bakersfield, ~~which~~California ~~continues~~(“Stockdale”). toAs ~~operate under its state charter as~~ a ~~member~~result ~~bank. All~~ of the ~~former~~merger, ~~offices~~the ofCompany acquired ~~BOS~~total ~~and~~assets ~~KRSB operate as branches~~ of ~~VIB; however~~$144.4 million, ~~many~~comprising ~~continue~~$9.1 million toin ~~use~~cash ~~the BOS~~ and due ~~KRSB~~from ~~names~~banks, ~~as DBA’s~~$23. ~~The~~5 million ~~consolidation~~in issecurities ~~anticipated~~and toinvestments, ~~provide~~$102.4 million ~~significant~~in net ~~cost~~loans ~~savings~~ and ~~improve~~ ~~operating~~$9.4 million ~~efficiencies~~in byother ~~removing~~assets. ~~layers~~Total ofliabilities ~~regulatory~~assumed ~~reporting and~~amounted ~~operating~~to ~~expenses~~$134.6 million, ~~The~~of ~~Company~~which ~~expensed approximately~~ $~~435,000~~128.9 million ~~in restructuring~~comprised ~~charges~~deposits. ~~related~~The ~~to the consolidation during the first quarter of~~remainder ~~2001,~~represented ~~$90,000~~other inborrowed ~~the~~funds ~~second quarter~~ and ~~$27,000~~other ~~in the third quarter~~liabilities.

On The ~~April 24,~~Stockdale ~~2001,~~merger ~~the~~was ~~Board~~accounted offor ~~Directors~~as ~~approved~~ a 3%pooling ~~stock~~of ~~dividend~~interests. ~~for~~The ~~shareholders~~Company ofissued ~~record on May 25~~2,896,764 ~~2001.~~shares ~~The~~of ~~dividend~~its ~~was~~Common ~~paid~~Stock on(adjusted ~~June 15,~~for subsequent ~~2001.~~stock ~~All~~dividends) ~~per~~in ~~share~~exchange ~~figures~~for ~~have~~all ~~been~~1,212,265 ~~adjusted~~shares ~~for~~of ~~this~~Stockdale’s issued and outstanding ~~previous~~common stock ~~dividends~~.

~~During~~ Stockdale ~~the~~continued ~~second quarter of 2001, the Company made a strategic decision~~ to ~~invest~~ inoperate anunder ~~offering~~its offederal ~~preferred~~ stock ofsavings ~~Lenders Services Acquisition~~bank ~~Corporation~~charter ~~(“LSAC”).~~until ~~LSAC~~May 24, is2001 aat ~~newly~~which ~~organized~~time ~~Delaware~~it ~~corporation that~~ was ~~formed~~ ~~for~~merged ~~the~~with ~~purpose~~and ofinto ~~acquiring all of the outstanding stock of Diversified~~VIB ~~Capital~~pursuant ~~Holdings,~~to ~~Inc. (“Diversified”). Diversified is~~ a ~~California~~Plan ~~based insurance~~of ~~holding~~Reorganization ~~company whose principal subsidiaries are Northern Counties Title Insurance Company~~ and ~~South~~Agreement ~~Coast~~of ~~Title~~Merger ~~Company.~~entered ~~Through~~into ~~its~~on subsidiaries, Diversified provides real estate title insurance agency and underwriting services, trustee sale guarantees and services related to tax deferred real property exchanges. The Company invested $2.0March ~~million in the private placement which closed on September 14~~21, 2001.

~~Due~~ On toJanuary 22, ~~the~~1999, ~~reduction~~VIB inacquired ~~interest~~Fremont ~~rates~~Investment by& ~~the~~Loan’s ~~Federal~~Hemet ~~Reserve~~branch office, ~~Bank~~including ~~during~~substantially all the ~~year,~~ deposits of the ~~Company~~branch. ~~had~~VIB assumed approximately $~~66.7~~112 million in ~~securities~~deposits ~~called~~and ~~from~~the lease on the ~~Banking~~branch premises, ~~Subsidiaries’~~and ~~portfolios.~~acquired ~~These~~approximately ~~calls~~$27,000 ~~changed~~in ~~the~~loans ~~structure~~as ofwell ~~the~~as ~~balance~~cash on hand and ~~sheet~~fixtures and ~~its~~equipment ~~interest~~associated ~~rate~~with ~~risk~~the ~~characteristics~~branch. ~~Additionally,~~The consideration ~~security~~paid ~~sales~~amounted to approximately $1.12 million. Goodwill ~~were~~arising ~~performed~~from tothe ~~offset~~transaction ~~restructuring~~totaled ~~and~~approximately $1.14 million.

~~one-time~~ In ~~costs~~connection ~~incurred~~with in the ~~first and~~branch ~~second~~acquisition ~~quarter~~by asValley ~~well~~Independent asBank toit was ~~mitigate~~anticipated ~~the~~that ~~interest~~VIB ~~rate~~would ~~risk~~require ~~incurred~~additional bycapitalization. On February 5, 1999, the ~~unexpected~~Company ~~shortening~~raised ofapproximately ~~the~~$22.2 million in net proceeds from a “trust preferred” securities ~~portfolio~~offering ~~duration~~in a private placement. ~~During~~The ~~July~~proceeds ~~and~~were ~~August,~~used ~~the~~to ~~Company~~increase ~~employed~~Valley ~~two~~Independent ~~different~~Bank’s ~~leveraging~~capital ~~strategies,~~by ~~totaling~~ $758.5 million, toand ~~enhance~~the balance ~~earnings.~~was ~~These~~used ~~strategies,~~for ~~which~~the ~~involved~~acquisition ~~borrowing at~~of aKings ~~fixed~~River ~~cost~~State Bank and ~~reinvesting~~general corporate atpurposes. aThe ~~higher~~proceeds ~~fixed~~to ~~rate,~~the ~~hold~~Company ~~limited~~are treated as Tier 1 capital by the Company for regulatory purposes. The interest paid by the Company is ~~rate~~deductible. ~~risk~~The ~~and~~Company ~~provide~~has ~~similar~~the ~~positive~~right, ~~earnings~~assuming inthat ~~both~~no ~~increasing~~default ~~and~~has occurred, ~~decreasing~~to defer interest ~~rate~~payments ~~environments~~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.

~~Consolidated~~ On ~~net income for the three months ended~~ September 307, ~~2001~~1999, ~~was~~VIB ~~$2.2 million~~Corp, orKings ~~$.18~~River ~~per~~State ~~share~~Bank ~~diluted~~and ~~based~~Kings ~~upon~~River Bancorp, ~~average~~headquartered ~~shares~~in ~~outstanding~~Reedley, ~~of 12~~California,~~741,965.~~ ~~This~~entered ~~compares~~into ~~with~~an ~~net~~Agreement ~~income~~and Plan of ~~$2.3 million~~Reorganization orpursuant ~~$.18~~to ~~per~~which ~~share fully~~Kings ~~diluted~~River ~~based~~State ~~upon~~Bank ~~the~~would ~~average~~become ~~shares~~a wholly-owned ~~outstanding~~subsidiary of ~~12,552,536~~VIB ~~for~~Corp ~~the same~~and ~~period~~would incontinue ~~2000.~~to ~~Consolidated~~operate ~~net~~under ~~income for the nine months ended~~its ~~September 30,~~separate ~~2001,~~California ~~was~~commercial ~~$6.6 million~~bank ~~or $~~charter.52 ~~per~~Upon ~~share~~consummation ~~diluted~~of ~~based~~the ~~upon~~merger ~~average~~on ~~shares~~January 7, ~~outstanding of 12~~2000,~~667,652.~~ ~~This~~Kings ~~compares~~River ~~with~~Bancorp’s ~~net~~shareholders ~~income~~received ofapproximately $621.17 million orin ~~$.48~~exchange ~~per share fully diluted based upon the average shares outstanding of 12,554,460~~ for ~~the~~their ~~same period in 2000~~stock.

~~Total~~ For ~~gross~~the ~~loans~~year atended ~~September~~December 3031, ~~2001~~1999, ~~were~~Kings River Bancorp had total assets of $~~845~~87.72 million, ~~which~~interest ~~represented an~~and ~~increase~~non-interest income of $228.0 million orand ~~2.7%~~pretax income ~~from~~of ~~December~~$1.9 ~~31, 2000~~million. ~~Since~~The ~~September~~acquisition was accounted for using the purchase ~~30,~~method ~~2000,~~of ~~total~~accounting ~~gross~~in ~~loans~~accordance ~~have~~with ~~increased~~Accounting ~~$51~~Principals Board Opinion No.~~0 million~~ 16, or“Business 6Combinations.~~4%.~~” ~~During~~Under ~~the recent~~this ~~periods~~method of accounting, the ~~Company~~purchase price ~~undertook~~is aallocated ~~systematic~~to ~~review~~the ofassets ~~its~~acquired ~~loan~~and deposits and liabilities assumed ~~portfolio,~~based ~~resulting~~on intheir ~~several~~fair ~~reclassifications~~values toas ~~conform~~of tothe ~~regulatory~~acquisition date. Goodwill arising from ~~“call~~this ~~report”~~transaction ~~categories~~totaled $13.6 million. The ~~loan~~results ~~balances~~of ~~for~~Kings ~~prior~~River ~~periods~~Bancorp’s operations ~~have~~were ~~not~~included ~~been~~in those reported by the Company beginning January 10, ~~reclassified~~2000.

~~Total~~ Kings ~~deposits~~River atcontinued ~~September 30,~~to ~~2001~~operate ~~were~~under ~~$891.3 million,~~its ~~which~~California ~~represented~~commercial abank ~~decrease~~charter ofuntil ~~$19.0~~May ~~million~~24, or2001, ~~2.1%~~at ~~from~~which ~~December 31,~~time ~~2000.~~it ~~Since~~was ~~September 30,~~merged with and into VIB ~~2000,~~pursuant ~~total~~to ~~deposits~~a ~~have~~Plan ~~increased~~of ~~$46.1 million~~Reorganization orand 5Agreement of Merger entered into on March 22, 2001.~~4%.~~

~~The~~ In July, 2000, the Company’s ~~Internet~~raised approximately $9.6 million in net proceeds from an offering of “~~home~~trust ~~page~~preferred” onsecurities 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 ~~World~~transaction. ~~Wide~~The ~~Web~~proceeds ~~is:~~to ~~http://www~~the Company are treated as Tier 2 capital for regulatory purposes.~~vibcorp~~ The proceeds were used to increase VIB’s capital by $8.~~com~~5 million, with the balance used for general corporate purposes. ~~VIB~~The interest will be deductible by the Company. The Company has athe ~~home~~right, ~~page~~assuming that no default has occurred, ~~located~~to defer interest payments at: any time and for a period of up to twenty ~~http://www~~consecutive calendar quarters.~~vibank~~ The “trust preferred” securities can be called after July 19, 2010.~~com.~~

~~NET~~ On ~~INTEREST~~December 28, ~~INCOME~~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.

~~Average~~ On ~~interest earning assets totaled $999.3~~May ~~million during the nine months ended September 30~~24, 2001, anStockdale ~~increase~~and ofKings ~~$48.3 million~~River ormerged ~~5.1%~~with ~~compared~~and tointo ~~the~~VIB ~~same~~pursuant ~~period last year. This growth was highlighted by an increase in average total loans of $72.8 million or 9.7%~~ to ~~$821.6 million. Growth in average total loans was somewhat offset by a decrease in average securities from $201.4 million for~~ the ~~nine~~terms ~~months~~of ~~ended~~Plans ~~September 30, 2000 to $172.8 million for the same period in 2001 representing a decrease~~ of ~~$28.6 million,~~Reorganization orand ~~14.2%. Average~~Agreements ~~interest bearing liabilities in the first nine months~~ of ~~2001 increased~~Merger ~~$12.3 million~~dated ~~or 1.5% to average $815.1~~March ~~million~~21 asand ~~compared to the same period last year. During this comparative period average interest bearing deposit categories increased $43.0~~March ~~million or 6.6% to $693.0 million. Average borrowed~~22, ~~funds decreased $30.8 million or 20.1% to $122.0 million during the same time~~ ~~frame.~~

Interest income for the nine-month period ending September 30, 2001 was $64.0 million, a decrease of $.3 million or .4% compared to the first nine months in 2000. The decrease in interest income was primarily the result of a declining interest rate environment on the loan portfolios adjustable rate loans and the reduction in securities offset somewhat by loan volume increases previously discussed. The yield on interest earning assets decreased 46 basis points to 8.57% for the nine-month period ended September 30, 2001 from 9.03% for the comparative period last year. Although a

~~declining~~ ~~interest~~2001. ~~rate~~All ~~environment characterized~~of the ~~first~~former ~~nine~~offices ~~months~~of Stockdale and Kings River operate as branches of ~~2001~~VIB; however, ~~the~~some ~~decreased~~continue ~~yield~~to ~~would~~use ~~have~~the ~~been~~Stockdale ~~lower~~and ifKings ~~not~~River ~~for~~names ~~the~~as ~~relatively~~DBA’s. ~~larger~~The ~~growth~~merger inis ~~the~~anticipated ~~loan~~to ~~portfolio which~~provide ~~carries~~significant acost ~~higher~~savings ~~yield~~and ~~than~~improve ~~other~~operating ~~investments~~efficiencies by removing layers of regulatory reporting and operating expenses.

~~Interest~~ On ~~expense~~August 14, ~~decreased~~2001, ~~$2.2 million~~pursuant orto ~~7.4%~~a ~~during~~Preferred ~~the~~Shares ~~nine~~Rights ~~months~~Agreement ~~ended~~(the ~~September 30,~~“Rights ~~2001~~Agreement”) asbetween ~~compared to~~ the ~~same~~Company ~~period~~and ~~last~~U. ~~year~~S. ~~The~~Stock ~~decrease~~Transfer inCorporation, ~~interest~~as ~~expense~~Rights ~~was~~Agent, ~~principally~~ the ~~result~~Company’s Board of ~~volume~~Directors ~~decreases~~declared ina ~~borrowed funds~~dividend ~~and~~of one right (a ~~declining~~“Right”) ~~interest~~to ~~rate~~purchase ~~environment~~one-thousandth ~~partially~~share ~~offset~~of bythe anCompany’s ~~increase~~Series A inParticipating ~~the~~Preferred ~~volume~~Stock (“Series A Preferred”) for each outstanding share of ~~interest~~the ~~bearing~~Company’s ~~deposits~~no par value Common Stock. The ~~cost~~dividend ofwas ~~interest~~paid ~~bearing~~on ~~funds~~August ~~decreased~~31, 432001, ~~basis~~to ~~points~~shareholders ~~from~~of 5record as of the close of business on that date.~~00%~~ Each ~~for~~Right entitles the ~~nine~~registered holder to purchase from the Company one-~~months~~thousandth ~~ended~~of ~~September~~a share of Series 30A Preferred at an exercise price of $40.00, ~~2000~~subject to 4adjustment.57 However, if an acquiring party accumulates 15% ~~for~~or more of the ~~nine~~Company’s ~~months~~voting ~~ended~~stock ~~September 30,~~without ~~2001.~~the ~~This~~Board’s ~~decrease~~prior isapproval, each Right ~~primarily~~enables ~~due~~its toholder (other than the ~~declining~~acquiring party) to purchase the Preferred interest ~~rate~~at ~~environment~~50% of the market price. Further, in ~~which~~the event the Company is ~~currently~~acquired ~~operates~~in ~~along~~an ~~with~~unwanted amerger ~~deposit~~or ~~mix~~business ~~change~~combination, ~~that~~each ~~has~~Right ~~less~~enables ~~reliance~~the holder onto purchase shares of the acquiring entity at a similar discount. Under ~~higher~~certain ~~costing~~circumstances, ~~certificates~~the Rights may be exchanged for common stock of ~~deposit~~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.

~~Net~~ On ~~interest~~September 14, ~~income~~2001 ~~was~~the Company invested $~~36.~~2 ~~million~~,000,000 ~~for~~in the ~~nine months ending September~~Series ~~30,~~A ~~2001,~~Convertible ~~representing~~Preferred anStock ~~increase~~ of $1Lenders Services Acquisition Corp.~~9 million~~ or(“LSAC”), representing 5an 22.75% ~~from~~interest in the ~~same~~total ~~period ended~~issuance ~~September~~of the Series ~~30,~~A ~~2000~~Preferred Stock. ~~The~~LSAC ~~net~~is ~~interest~~a ~~spread,~~newly ~~which~~organized ~~represents~~Delaware ~~the difference~~corporation ~~between~~formed for the ~~rate~~purpose of ~~earned~~acquiring onall ~~average~~of ~~interest~~the ~~earning~~outstanding ~~assets~~stock ~~and~~of ~~the~~Diversified Capital Holdings, ~~rate~~Inc., ~~paid~~a onCalifornia-based ~~average~~insurance ~~interest~~holding ~~bearing~~company ~~liabilities,~~whose ~~decreased~~principal tosubsidiaries are ~~4.00%~~Northern ~~for~~Counties ~~the period~~Title ~~ending~~Insurance ~~September 30~~Company, ~~2001~~a title insurance underwriter, and ~~compared~~South toCoast ~~4.03%~~Title ~~for~~Company, ~~the~~a ~~same~~title ~~period~~insurance ~~in 2000~~agency. ~~Net~~The ~~interest~~Company’s decision ~~income~~to asinvest ain ~~percentage~~LSAC ofwas ~~average~~made ~~interest~~to ~~earning~~maintain ~~assets, or~~and ~~the~~diversify ~~net~~sources of non-interest ~~margin,~~income. ~~increased~~The toSeries A ~~4.84%~~Preferred ~~for~~Stock ~~the~~was ~~period~~issued ~~ending~~by ~~September~~LSAC pursuant ~~30,~~to ~~2001,~~a ~~compared~~private placement to 4financial institution holding companies.~~81%~~ ~~for~~In addition to the ~~period~~811,500 ~~ending~~shares ~~September~~of the Series 30A Preferred Stock outstanding, ~~2000.~~LSAC ~~The~~has ~~decrease~~109,090 inshares ~~net~~of ~~interest~~Common ~~spread~~Stock ~~was~~outstanding. ~~due~~The ~~primarily~~Series A toPreferred ~~the~~Stock ~~faster~~is initially ~~repricing~~convertible of into the ~~Company’s~~Common ~~interest~~on ~~earning~~a ~~assets~~one-for-one asbasis. ~~compared~~On toSeptember 14, 2001, ~~interest~~LSAC ~~bearing liabilities~~also inconsummated aits ~~period~~acquisition of ~~declining~~Diversified ~~interest~~Capital ~~rates~~Holdings, Inc. ~~The~~LSAC ~~increase~~has insince ~~net interest~~changed ~~margin~~its ~~was~~name ~~partially~~to ~~due~~Diversified toHolding ~~the~~Corporation ~~collection~~and formed ofAT ~~$469~~Services,~~0000~~ inLLC ~~interest~~to ~~on loans~~manage ~~previously~~its ontrust adeposits ~~non-accrual~~and ~~basis.~~the ~~This~~trust ~~collection~~deposits of ~~interest~~ ~~represented~~its ~~7 basis points of net interest margin~~subsidiaries.

~~For~~ In ~~the quarter ended September 30~~November, 2001, ~~net~~the ~~interest~~Company ~~income~~raised ~~was~~approximately $1219.2 1 million, ~~which~~in ~~was~~net proceeds from an ~~increase~~offering of ~~$.5 million,~~floating orrate ~~4.0~~6% ~~from~~“trust ~~the~~preferred” ~~same~~securities ~~period~~ in a ~~2000.~~private ~~The~~placement ~~net~~conducted ~~interest~~as ~~spread~~a ~~increased~~part 15of ~~basis~~a ~~points~~pooled offering. The proceeds were used to 4repurchase $19.~~09%~~2 million ~~for~~of the ~~three~~9% “trust preferred” securities issued ~~months~~in ~~ended~~February, ~~September 30~~1999, ~~2001~~in ~~from~~connection ~~3.94%~~with ~~for~~the Company’s first “trust preferred” offering, with the ~~three~~balance ~~months~~to ~~ended~~be ~~June 30~~used for general corporate purposes. The Company formed a wholly-owned Delaware business trust subsidiary, Valley ~~2000.~~Capital ~~Similarly~~Trust II (“Trust II”), to facilitate the ~~net~~transaction. ~~interest~~The ~~margin~~proceeds ~~also~~to the ~~increased~~Company ~~from~~will 4be treated as Tier 1 capital for regulatory purposes.76 The 9% ~~for~~“trust ~~the~~preferred” securities issued in 1999 ~~quarter~~were ~~ended~~repurchased ~~September 30~~at a discount. They will not be retired; however, ~~2000~~they towill ~~4.85%~~be eliminated for ~~the~~consolidated ~~same~~and ~~period~~regulatory inaccounting ~~2001~~purposes. ~~The~~As “trust ~~increase~~preferred” insecurities, ~~net~~they were treated as Tier 1 capital. The interest ~~spread~~will be deductible and ~~net~~paid ~~interest~~by ~~margin~~the ~~are~~Company. ~~mostly~~The ~~attributable to~~Company has the ~~collection~~right, ofassuming that no default has occurred, to defer interest onpayments ~~loans~~at ~~previously~~any ~~classified~~time asand ~~non-accrual~~for asa ~~previously~~period ~~discussed.~~of up to twenty consecutive calendar

The year 2000 was characterized by a rising rate environment. Interest rates began a steady decline during the first nine months of 2001. The yield on earning assets for the year 2000 was 9.10% as compared to 9.03% for the nine months ended September 30, 2000 and was 8.57% for the nine months ended September 30, 2001. The cost of interest bearing liabilities for the year 2000 was 5.11% as compared to 5.00% for the nine months ended September 30, 2000 and was 4.57% for the nine months ended September 30, 2001.

During the three months ended September 30, 2001, the yield on earning assets decreased 118 basis points to 8.06% as compared to 9.24% for the three months ended September 30, 2000. The cost of interest bearing liabilities for the quarter ended September 30, 2001, also decreased 132 basis points to 3.98% from 5.30% for the quarter ended September 30, 2000.

~~PROVISION~~quarters. ~~FOR~~These ~~CREDIT~~“trust ~~LOSSES~~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~~ During ~~allowance for credit losses at September 30~~April, ~~2001 was $9.9 million~~2002, ~~compared~~ toVIB ~~$7.8 million~~formed ata ~~September 30,~~Maryland ~~2000,~~real anestate ~~increase~~investment ~~of $2.1 million or~~trust ~~2.7%.~~(“VIB AsInvestment aTrust”) ~~percent~~by ofcontributing ~~total~~certain ~~loans,~~qualifying ~~the~~real ~~allowance~~estate ~~was 1.17% at September 30,~~assets ~~2001,~~in ~~compared~~exchange tofor ~~.98%~~one atthousand ~~September 30~~(1,000) ~~2000~~common and ~~1.01%~~one atthousand ~~December 31~~(1,000) ~~2000.~~preferred ~~Due~~shares toof ~~the~~beneficial ~~California~~interest ~~energy~~in ~~issue,~~VIB ~~and~~Investment ~~its~~Trust. ~~possible~~The ~~effect~~amount ~~on the Company’s~~of ~~loan~~investment ~~portfolio, an additional allocation was added to the allowance~~ in ~~the first~~VIB ~~quarter~~Investment ofTrust ~~2001.~~is ~~During~~dictated ~~the~~by ~~second quarter, as~~ the ~~Company~~size ~~gathered more information regarding the possible effect~~ of ~~the~~VIB’s ~~California energy issue on its~~current ~~loan~~mortgage ~~customers~~loan, ~~the~~mortgage-backed ~~Company~~and ~~removed~~mortgage ~~this~~related ~~allocation~~securities portfolios. ~~In the future the Company~~VIB ~~may~~Investment ~~again~~Trust’s ~~add~~overriding toobjective ~~the~~will ~~allowance~~be ~~due~~ to ~~the~~acquire, ~~risk~~hold, offinance, ~~energy-related defaults but~~and atmanage ~~the~~assets ~~current~~consisting ~~time it has not perceived an increased level~~ of ~~risk~~participation ~~due~~interests toin ~~this issue.~~residential ~~The impact of the September 11th events on the Company’s loan portfolio~~mortgage isloans, ~~currently~~commercial ~~being~~real ~~assessed~~estate ~~with~~loans, ~~some~~construction ~~increased~~loans, ~~delinquencies~~and ~~noted in the~~possible ~~hospitality~~mortgage-related ~~industry~~securities.

The ~~provision~~purpose for ~~credit~~establishing ~~losses~~VIB ~~was~~Investment ~~$2,250,000~~Trust ~~for~~is ~~the~~to ~~first~~enable ~~nine~~VIB ~~months of~~to ~~2001,~~readily ~~compared~~gain ~~with~~access ~~$2,225,000~~to ~~provided~~capital ~~for~~markets ~~the~~and ~~nine~~to ~~months~~reduce ~~ended September 30, 2000, an increase of 1.1%. The provision was $750,000 for~~ the ~~third~~expenses ~~quarter of~~associated ~~2001~~with ~~compared~~holding ~~to $675,000 for~~ the ~~third~~assets ~~quarter~~contributed ofto ~~2000,~~VIB anInvestment ~~increase of $75,000 or 11~~Trust.~~1%.~~

~~Total~~ On ~~non-performing loans as of September~~July 30, ~~2001 were $14.2 million as compared to $4.1 million at September 30~~2002, ~~2000~~Cooperatieve ~~and~~Centrale ~~$12.4 million at December 31, 2000. Non~~Raiffeisen-~~performing~~Boerenleenbank ~~loans increased $1~~B.~~8 million during the nine months~~A., ~~ended~~Rabobank ~~September~~Nederland (“Rabobank”), ~~2001.~~a ~~The~~Netherlands ~~increase~~based ~~from~~cooperative ~~September 30~~bank, ~~2000~~and ~~to December 31,~~VIB ~~2000~~Corp isentered ~~primarily attributed to two unrelated loans moving~~ into ~~non-accrual status.~~a ~~One~~definitive ofagreement ~~the~~pursuant ~~loans was transferred~~ to ~~Other~~which ~~Real~~the ~~Estate~~Company ~~Owned during the~~will ~~first~~merge ~~quarter~~with ~~of 2001~~ and ~~partially~~become ~~sold. The remaining loan was assumed by~~ a ~~new~~ ~~borrower~~wholly-owned ~~with~~subsidiary ~~added capital as collateral during the second quarter. The increase from December 31,2000 to September 30, 2001, after taking into effect the removal~~ of ~~the two unrelated loans discussed previously, was primarily attributed to two related loans on a hotel moving into non-accrual status~~Rabobank. ~~These~~ ~~loans~~After ~~are fully secured and in~~ the ~~process of collection~~merger, ~~with full~~ ~~recovery, including interest, expected over~~ the ~~next~~Company ~~two~~will ~~quarters.~~continue ~~By continuing~~ to ~~build~~operate ~~the~~under ~~loan~~its ~~loss~~current ~~reserve,~~name ~~combined~~and ~~with~~will ~~the~~retain ~~resolution of the these problem loans, the Company anticipates continued improvement in~~ its ~~coverage and reserve ratios~~subsidiaries.

~~Net~~ Under ~~charge-offs~~the ~~were~~terms ~~$674~~of the agreement,~~000~~ ~~for~~Rabobank ~~the~~will ~~nine~~acquire ~~months~~100% ~~ended~~of ~~September 30,~~VIB ~~2001.~~Corp’s ~~This~~issued ~~represents~~and aoutstanding ~~decrease~~shares of ~~$132,000~~no ~~when~~par ~~compared~~value toCommon ~~$806,000~~Stock inat ~~net~~$15.10 ~~charge~~per share ~~offs~~in ~~for~~a ~~the~~cash ~~same~~transaction. ~~period~~The inaggregate ~~2000.~~amount ~~During~~to ~~the~~be ~~third~~paid ~~quarter~~to ~~ending~~VIB ~~September~~Corp’s ~~30,~~shareholders ~~2001,~~is ~~$371,000~~estimated ~~was~~to ~~recorded~~amount into ~~net~~approximately ~~charge-offs~~$212.5 million ~~compared~~and towill ~~$484,000~~be funded infrom ~~the third~~Rabobank’s ~~quarter~~existing ofcash ~~2000~~resources.

~~VIB~~ Subject ~~(previously~~to ~~the~~obtaining ~~Banking~~applicable ~~Subsidiaries)~~regulatory ~~has~~and anVIB ~~established~~Corp ~~standard process~~shareholder ~~for~~approvals, ~~assessing~~ the ~~adequacy~~transaction ~~of the allowance for credit losses. In addition to reviewing the inherent risks of the loan portfolio, consideration~~ is ~~given~~expected to ~~exposures~~ ~~such~~be ascompleted ~~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~~fourth ~~loan categories. Loans classified by~~quarter ~~internal~~2002 ~~review~~ or byearly ~~the~~first ~~regulatory~~quarter ~~authorities are included in the process of assessing the adequacy of the allowance for credit losses~~2003. ~~This process seeks~~ ~~to maintain an allowance level adequate to provide for potential losses.~~

During 2001 and 2002 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 will conduct its banking business only through VIB. Neither the Company nor VIB earn revenues from sources outside of the United States.

Consolidated net income for the three months ended June 30, 2002 was $3.6 million or $.26 per share diluted based upon average shares outstanding of 13,935,997. This compares with net income of $2.3 million or $.17 per share fully diluted based upon the average shares outstanding of 13,428,267 for the same period in 2001. Consolidated net income for the six months ended June 30, 2002, was $6.6 million or $.48 per share diluted based upon average shares outstanding of 13,842,186. This compares with net income of $4.4 million or $.33 per share fully diluted based upon the average shares outstanding of 13,397,118 for the same period in 2001.

Total gross loans at June 30, 2002 were $852.0 million, which represented an increase of $14.3 million or 1.7% from December 31, 2001. Since June 30, 2001, total gross loans have increased $21.6 million or 2.6%.

On March 13, 2002, the Board of Directors approved a 3% stock dividend for

~~Management~~shareholders of ~~the~~record ~~Company~~on ~~believes the allowance at September~~May 3024, ~~2001,~~2002. The dividend was ~~adequate~~ ~~based~~paid on ~~present~~June 14, 2002. ~~economic~~All ~~conditions~~per ~~and~~share ~~its~~figures ~~ongoing~~have ~~evaluation~~been ofadjusted ~~the risks~~for ~~inherent~~this inand ~~the~~previous ~~loan portfolio~~stock dividends.

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.

NET INTEREST INCOME

Average interest-earning assets totaled $1,086.3 million during the six months ended June 30, 2002, an increase of $91.3 million or 9.18% compared to the same period last year. This growth was highlighted by an increase in average total loans of $20.3 million, or 2.5%, to $836.0 million and an increase in average investments of $76.3 million, or 44.2%, to $248.8 million. Average interest-bearing liabilities in the first six months of 2002 increased $52.8 million, or 6.5%, to average $869.7 million as compared to the same period last year. During the first six months of 2002, average interest-bearing deposit categories decreased $18.5 million, or 2.6%, to $682.1 million. Average borrowed funds increased $71.4 million, or 61.4%, to $187.6 million during the same time frame.

Interest income for the six-month period ending June 30, 2002 was $38.4 million, a decrease of $5.3 million or 12.3% compared to the first six months in 2001. The decrease in interest income was primarily the result of a declining interest rate environment during the year 2001. The yield on interest-earning assets decreased 174 basis points to 7.12% for the six-month period ended June 30, 2002 from 8.86% for the comparative period last year.

Interest expense decreased $6.9 million or 34.9% during the six months ended June 30, 2002 as compared to the same period last year. The decrease in interest expense was principally the result of the declining interest rate environment and a shift in deposit mix from interest-bearing deposits to non interest-bearing deposits. The cost of interest-bearing funds decreased 189 basis points from 4.86% for the six months ended June 30, 2001 to 2.97% for the six months ended June 30, 2002. The cost of funds decrease was also primarily the result of the declining interest rate environment.

Net interest income was $25.5 million for the six months ending June 30, 2002, representing an increase of $1.5 million or 6.3% from the six month period ended June 30, 2001. The net interest spread, which represents the difference between the rate earned on average interest earning assets and the rate paid on average interest-bearing liabilities, increased to 4.15% for the period ending June 30, 2002, compared to 4.00% for the same period in 2001. The increase in net interest spread was due primarily to a lower cost mix of interest-bearing liabilities. Net interest income as a percentage of average interest-earning assets, or the net interest margin, decreased to 4.74% for the period ending June 30, 2002, compared to 4.87% for the period ending June 30, 2001. The decrease in net interest margin was due to the greater proportionate growth in the higher yielding interest-earning asset categories along with a lower cost mix of interest-bearing liabilities offset to a greater degree by the faster repricing of the Company’s earning assets as compared to interest-bearing liabilities in a period of declining interest rates.

For the quarter ended June 30, 2002, net interest income was $13.4 million, which was an increase of $1.2 million, or 9.7%, from the same period in 2001. The net interest spread increased 2 basis points to 4.18% for the three months ended June 30, 2002 from 4.16% for the three months ended June 30, 2001. The net interest margin decreased from 5.01% for the quarter ended June 30, 2001 to 4.73% for the same period in 2002. The increase in net interest spread and decrease in net interest margin are attributable to the

same things as previously discussed.

The year 2001 was characterized by a declining rate environment. Interest rates began a steady decline during the first quarter of 2001 and continued their decline throughout the rest of the year. The yield on earning assets for the year 2001 was 8.25% as compared to 8.86% for the six months ended June 30, 2001 and 7.12% for the six months ended June 30, 2002. The cost of interest-bearing liabilities for the year 2001 was 4.27% as compared to 4.86% for the six months ended June 30, 2001 and 2.97% for the six months ended June 30, 2002.

During the three months ended June 30, 2002, yield on earning assets decreased 166 basis points to 7.05% as compared to 8.71% for the three months ended June 30, 2001. The cost of interest-bearing liabilities for the quarter ended June 30, 2002, also decreased 220 basis points to 2.35% from 4.55% for the quarter ended June 30, 2001.

PROVISION FOR CREDIT LOSSES

The allowance for credit losses at June 30, 2002 was $10.0 million, compared to $9.5 million at June 30, 2001, an increase of $.5 million or 5.1%. As a percent of total loans, the allowance was 1.17% at June 30, 2002, compared to 1.14% at June 30, 2001 and 1.12% at December 31, 2001. Due to the California energy issue, and its possible effect on the Company’s portfolio, an additional allocation was added to the allowance in the first quarter of 2001. As the Company gathered more information regarding the possible effect of the California energy issue on its loan customers, the Company removed this allocation later in the year. In the future the Company may again add to the allowance due to the risk of energy-related defaults but at the current time it has not perceived an increased level of risk due to this issue.

The provision for credit losses was $1,250,000 for the first six months of 2002, compared with $1,500,000 provided for the six months ended June 30, 2001, a decrease of 16.67%. The provision was $625,000 for the second quarter of 2002, compared to $750,000 for the second quarter of 2001, a decrease of $125,000 or 16.7%.

Total non-performing loans as of June 30, 2002 were $15.1 million as compared to $5.8 million at June 30, 2001 and $14.1 million at December 31, 2001. Non-performing loans increased $1.1 million during the six months ended June 30, 2002. The increase over the second quarter of 2001 is mainly attributable to two related loans on a hotel placed in non-accrual status. The loans are fully secured and the Company continues to aggressively work to resolve the lending relationship. By continuing to build the loan loss reserve combined with the resolution of the two problem hotel loans the Company anticipates seeing an improvement in its coverage and reserve ratios.

Net charge-offs were $616,000 for the six months ended June 30, 2002. This represents an increase of $312,000 when compared to $304,000 in net charge offs for the same period in 2001. During the second quarter ending June 30, 2002, $568,000 was recorded in net charge-offs compared to $60,000 net charge-offs in the second quarter of 2001.

The Bank has an established standard process for assessing the adequacy of the allowance for credit losses. In addition to reviewing the inherent risks of its loan portfolio, 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. Loans classified by VIB’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.

Management of the Company believes the allowance at June 30, 2002, was adequate based on present economic conditions and its ongoing evaluation of the risks inherent in the Bank’s loan portfolio.

NON-INTEREST INCOME

Total non-interest income amounted to $85.75 million for the ~~nine~~six months ~~ended~~ ~~September~~ended June 30, ~~2001~~2002 representing ana ~~increase~~decrease of $2.05 million or ~~28.~~8.9% compared with the same period in the prior year. The primary ~~reason~~reasons for the ~~increase in~~decrease in non-interest income ~~was~~were a decrease of $1.54 million in ~~gains~~gain on the sale of ~~investment~~ securities. ~~Another~~offset ~~significant~~to ~~item~~some ~~was~~extent by an increase ~~of $585,000~~ in service charges and ~~fee~~fees ~~income~~of $482,000, ~~which~~an ~~was~~increase ~~primarily~~in ~~attributable~~gain toon ~~increases~~the insale ~~loan funding~~of ~~fees~~loans ~~charged~~of ~~to 3rd parties~~$170,000, ~~ATM charges~~ and an increase ~~in deposit~~ ~~service charges~~ in ~~the~~other ~~third~~income ~~quarter~~of ~~to bring the Company more in line with its competition~~$298,000.

~~Non-interest~~ The ~~income~~increase ~~for~~in ~~the~~service ~~quarter~~charges ~~ended~~and ~~September 30,~~fees ~~2001~~is ~~increased~~related ~~$350,000~~ to ~~$2.6 million~~the ~~from~~Company’s consolidation ~~$2.3 million~~of ~~for~~its ~~the~~product ~~same~~line, ~~period~~the inestablishment ~~2000.~~of ~~This~~new ~~increase~~products, and isgrowth ~~primarily~~in ~~due~~its tocore andeposit ~~increase~~base. The major component of ~~$.4 million~~the increase in ~~service~~other income ~~charges~~was ~~and~~dividend ~~fee~~ income asfrom ~~previously~~AT ~~discussed~~Services of $140,000.

Non-interest income for the quarter ended June 30, 2002 decreased $644,000 to $2.5 million from $3.1 million for the same period in 2001. This decrease is mostly due to decreases in gains on the sale of loans and securities, offset slightly by an increase in service charges and fees.

NON-INTEREST EXPENSE

Total non-interest expense for the ~~nine~~six months ended ~~September~~June 30, ~~2001~~2002 was $3219.57 million, ana ~~increase~~decrease of $2.81 million or 9.36% as compared to the same period in ~~2000. During the period ended September 30,~~ 2001~~, the Company incurred approximately $552,000 in non-recurring restructuring costs associated with the consolidation of its three subsidiary banks~~.

Salary expense during the ~~nine~~six months ended ~~September~~June 30, ~~2001~~2002 was $127.0 1 million, a andecrease ~~increase~~ of $~~923,000~~1.1 million or 813.31% ~~over~~under the comparable period in ~~2000~~2001. The reduction ~~growth~~ in salary expense is partially attributable to $200,000 in severance ~~related~~ tobeing paid in the ~~restructuring~~period ~~charges~~ended ~~discussed~~March 31, ~~above~~2001 and ~~normal~~the ~~annual~~Company’s ~~merit increases.~~concentrated ~~Employee~~effort ~~benefits~~to ~~expense~~reduce ~~was~~overhead ~~$4.0 million~~by ~~for~~taking ~~the~~a ~~nine-month~~number ~~period~~of ~~ending September 30,~~actions ~~2001,~~to animprove ~~increase~~efficiencies and ofprovide ~~$56,000~~cost ~~or 1~~savings.4% ~~from~~These ~~the~~actions ~~same~~included ~~period~~the indissolution ~~the~~of its ~~prior~~mortgage-banking ~~year.~~business, ~~This~~consolidation ~~increase~~of isits ~~mostly~~three ~~due~~subsidiary tobanks into one, ~~time~~and ~~supplemental~~simplification ~~executive retirement~~of ~~plan~~its ~~accruals~~product ~~for~~line. ~~$343,000,~~It ais ~~$115,000~~anticipated ~~increase~~that inthe ~~workers~~full ~~compensation~~effect ~~insurance~~of ~~and~~these anchanges ~~increase~~will be reflected in ~~payroll~~the ~~taxes~~financial performance of ~~$116,000~~the ~~partially offset~~Company byfor the ~~Company’s~~full ~~planned~~year 2002. ~~reduction~~Employee inbenefits ~~its~~expense ~~contribution~~was to$2.6 million for the ~~Employee~~period ending June ~~Stock~~30, ~~Ownership~~2002, ~~Plan~~a decrease of $~~304~~227,000 or 8.1% from the same period in the prior year.

Occupancy expense was $21,~~671~~764,000 for the ~~nine~~six-month period ended ~~September~~June 30, ~~2001~~2002, an increase of $~~310~~25,000 or ~~13.~~1.4% as compared to the first ~~nine~~six months in ~~2000~~2001. Furniture and equipment expense was $21,~~722~~672,000 for the ~~nine~~six-month period ended ~~September~~June 30, ~~2001~~2002, ana ~~increase~~decrease of $~~449~~84,000 or 194.78% from the same period in ~~2000~~2001. ~~These~~This ~~increases~~decrease ~~were~~was primarily the ~~result of the Company’s expansion of~~ ~~its geographic market area through the addition of full service branches in~~ ~~Fresno, Selma and Visalia, California and Las Vegas, Nevada along with increased depreciation expense on planned additions to computer hardware and software expenditures.~~

~~Other operating expense amounted to $11.1 million during the nine-month period~~19 ~~ended September 30, 2001, an increase of $868,000 or 8.5% from the same period~~ ~~in the prior year. The increase was largely attributable to increases in legal~~ ~~and professional fees.~~

~~For~~result ~~the three months ended September 30, 2001, non-interest expense was $10.7 million. This was an increase~~ of ~~$779,000 or 7.9% for~~ the ~~same~~Company’s ~~period in 2000.~~decreased ~~This~~depreciation ~~was~~expense ~~due~~on ~~mainly~~the toplanned ~~increases~~obsolescence ~~in salaries and employee benefits~~ of ~~$236,000,~~ offurniture ~~which $107,000 related to a one time supplemental executive retirement plan accrual, other professional fees of $142,000,~~ and ~~occupancy and~~ equipment ~~increases of $273,000 related to the Company’s expansion of its geographic area as discussed above~~.

Other operating expense amounted to $6.6 million during the six-month period ended June 30, 2002, a decrease of $729,000 or 9.9% from the same period in the prior year. The decrease was attributable to decreases in legal and other professional fees, amortization of intangibles, and promotional expenses.

For the three months ended June 30, 2002, non-interest expense was $9.9 million. This was a decrease of $1,075,000 or 9.8% from the same period in 2001. This was due mainly to decreases in salaries and employee benefits of $778,000.

INCOME TAXES

Income tax expense for the ~~nine~~six months ending ~~September~~June 30, ~~2001~~2002 was $3,~~554~~465,000 as compared with $2,~~996~~403,000 for the same period in ~~2000, an increase of $558,000 or 18~~2001.~~6%.~~ The increase in expense was primarily attributable to a $4.3.7 million increase in taxable ~~operating~~ income~~, partially offset by a $2~~.~~8 million~~ ~~increase in non-interest expense.~~ The Company’s effective tax rate was 34.93% for the ~~nine~~six months ended ~~September~~ June 30, ~~2001~~2002 as compared to 3335.03% for the same period in the prior year due primarily to a decrease of $.4 million in nontaxable interest income.

Income taxes for the ~~third~~second quarter were $1,~~151~~708,000, aan ~~decrease~~increase of $11417,000 or 32.93% from the ~~third~~second quarter of ~~2000~~2001. The increase in expense was primarily related to a $1,877,000 increase in the Company’s taxable income. The Company’s effective tax rate was 3432.01% for the three months ended ~~September~~June 30, 2002 ~~2001~~ as compared to 3335.9% for the same period in the prior year.

CAPITAL RESOURCES

Total stockholders’ equity as of ~~September~~June 30, ~~2001~~2002 was $8092.0 million, which represented an increase of $910.13 million from December 31, ~~2000~~2001, and $1415.08 million from ~~September~~June 30, ~~2000~~2001. The increase since December 31, ~~2000~~2001 included $6.6 million in net income, $1.2 million from the exercising of stock options, and a $12.95 million increase in the cumulative unrealized ~~loss~~gain on securities classified as available for sale. The increase since ~~September~~June 30, ~~2000~~2001 included $911.25 million in net income, $1.7 million from the exercising of stock options, and a $4.2.7 million increase in the cumulative unrealized ~~loss~~gain on securities classified as available for sale.

Under regulatory guidelines, capital adequacy is measured as a percentage of of risk-adjusted assets in which risk percentages are applied to assets on as ~~well~~ well as off the balance sheet. Tier 1 capital consists of common stock, a qualifying percentage of the Capital Securities, and retained earnings and total capital includes a portion of the allowance for credit losses. At June ~~September~~ 30, ~~2001~~2002 the Tier 1 and total risk based capital ratios were 910.5589% ~~and~~ 11and 12.3034%, respectively, compared to 89.6469% and 1011.7760%, respectively, at June ~~September~~ 30, ~~2000~~2001. The current minimum regulatory guidelines for Tier 1 and ~~total~~ total risk-based capital ratios are 4.0% and 8.0%, respectively. The leverage ratio, which is a measure of Tier 1 capital to adjusted average assets, was 8.0031% at ~~September~~ June 30, ~~2001~~2002, compared to 67.9085% at ~~September~~June 30, ~~2000~~2001. The Company’s leverage ratio also exceeds the current regulatory minimum of 3.0%. Accordingly, the Company’s capital ratios exceed all regulatory minimums and support future planned growth, but may not be adequate to support additional acquisitions.

1820

LIQUIDITY AND ASSET/LIABILITY MANAGEMENT

~~The Company~~ VIB’s ~~consolidated~~ liquidity position ~~remained~~remains adequate to meet future contingencies. At ~~September~~June 30, ~~2001,~~2002 ~~the~~VIB ~~Company~~ had $~~156~~213.93 million in net Federal funds purchased and FHLB advances outstanding. This compared to $~~143~~63.9 0 million in net Federal funds outstanding at ~~September~~June 30, ~~2000~~2001. Since December 31, ~~2000~~2001, net Federal funds purchased and FHLB advances have increased $3758.9 6 million. ~~This~~The ~~increase~~increases inare attributable ~~borrowed~~to ~~funds~~the isCompany’s ~~due~~use ~~primarily~~of leveraging strategies to ~~the~~enhance ~~$75 million~~earnings. inThese ~~leveraging~~ strategies, ~~discussed~~which ~~previously~~involve borrowing at a fixed cost and ~~put~~reinvesting inat ~~place~~a higher fixed rate, hold limited interest rate risk and provide similar positive earnings in ~~July~~both increasing and decreasing interest rate environments. As a ~~August~~result, there has been an increase in outstanding balances of FHLB advances. VIB’s liquidity ratio at June 30, 2002 was 28.1%. This ratio represented an increase from 14.4% at June 30, 2001 and an increase from 21.4% at December 31, 2001.

The Company’s ~~consolidated~~Asset/Liability Committee (“ALCO”) functions to oversee the maintenance of liquidity ~~ratio~~and atto ~~September 30,~~preserve ~~2001~~net ~~was~~interest 20income when subjected to fluctuations in market interest rates.~~32%~~ The ability to meet existing and future funding commitments is the measure of liquidity. Liquidity is also required to ~~This~~meet ~~represented~~borrowing anneeds, ~~increase~~deposit ~~from~~withdrawals 19and asset growth.~~78%~~ atVIB ~~September 30~~develops liquidity through deposit growth, ~~2000~~maturities and anrepayments ~~increase~~of loans and ~~from~~investments, ~~19.97%~~net atinterest ~~December 31~~income, ~~2000~~fee income and access to purchase funds through correspondent banks or other entities.

~~VIB’s~~ The ~~(previously~~ALCO manages the ~~Banking~~interest ~~Subsidiaries’)~~rate ~~Asset/Liability~~sensitivity ~~Committee~~or ~~(“ALCO”)~~repricing ~~functions~~characteristics toof ~~manage~~VIB’s ~~the~~assets ~~maintenance~~and ofliabilities. ~~liquidity~~The ~~and~~primary ~~the~~source ~~preservation~~ of earnings for VIB is net interest income, ~~when~~which ~~subjected~~is subject to ~~fluctuations~~movements in ~~market~~ interest rates. ~~The ability~~To tominimize ~~meet~~the ~~existing~~effect ~~and~~of ~~future~~changes ~~funding~~in ~~commitments~~rates, is the ~~measure~~balance ofsheet ~~liquidity.~~requires ~~Liquidity~~structuring isin ~~also~~order ~~needed~~that tothe ~~meet~~repricing ~~borrowing~~opportunities ~~needs,~~for ~~deposit~~both assets ~~withdrawals~~and liabilities exist in nearly equivalent amounts and ~~asset~~at ~~growth~~approximately similar time intervals. ~~VIB~~Interval ~~develops~~differences ~~liquidity~~may ~~through~~exist ~~deposit~~at ~~growth~~times creating interest sensitivity gaps, which represent the difference between interest sensitive ~~maturities~~assets and ~~repayments~~interest ofsensitive ~~loans~~liabilities. ~~and~~These ~~investments,~~gaps ~~net~~are ~~interest~~static ~~income,~~in ~~fee income~~nature and do ~~access~~not toconsider ~~purchase~~future ~~funds~~activity. ~~through~~As ~~correspondent~~such, ~~banks~~these orgap ~~other~~measurements serve best as ~~entities~~an indicator for potential interest rate exposure.

The ~~ALCO~~sensitivity ~~manages~~to interest rate ~~risk~~fluctuations tois ~~minimize~~measured ~~the~~in ~~impact~~several ~~of fluctuating~~time ~~interest rates on earnings~~frames. ~~Simulation~~Various ~~techniques~~strategies ~~are~~such ~~used~~as ~~that~~liability ~~attempt~~cost toadministration and ~~measure~~redeployment ~~the volatility~~ of ~~changes~~asset inmaturities ~~the~~are ~~level~~utilized ofto ~~interest~~preserve ~~rates, basic banking~~ interest ~~rate~~income ~~spreads, and~~ from the ~~shape~~effect of ~~the~~changes ~~yield~~in ~~curve~~interest rates. The ~~primary~~gap ~~method~~positions ~~of measuring~~are ~~the~~monitored ~~sensitivity~~as ofa function ~~earnings~~ of ~~changing~~the ~~market~~asset ~~interest~~and ~~rates~~liability ismanagement ~~to simulate~~process. ~~expected~~The ~~cash~~monitoring ~~flows using varying assumed interest rates while also~~process ~~adjusting~~includes the ~~timing~~use ~~and magnitude~~ of ~~non-contractual~~periodic ~~deposit~~simulated ~~repricing~~business toforecasts, ~~more~~which incorporate ~~accurately~~various ~~reflect~~interest ~~anticipated~~rate ~~pricing behavior~~environments. ~~These~~Financial ~~simulations~~modeling ~~include adjustments~~is ~~for~~utilized ~~the~~to ~~lag~~assist management in ~~loan~~maintaining ~~repricing~~consistent ~~and~~earnings ~~the~~in ~~spread~~an ~~and~~environment ~~volume elasticity~~ of changing interest~~-bearing~~ ~~deposit accounts, regular savings, and money market deposit accounts~~rates.

~~The~~ VIB ~~principal~~does ~~function~~not ~~of interest rate risk management is to~~ maintain ~~an appropriate~~trading ~~relationship~~accounts ~~between~~for ~~those~~any ~~assets~~class ~~and~~of ~~liabilities that are~~financial ~~sensitive~~instrument tonor ~~changing~~does ~~market~~it ~~interest~~engage ~~rates.~~in ~~VIB~~hedging ~~closely~~activities ~~monitors~~or ~~the sensitivity~~purchase ~~of its assets and liabilities on an ongoing basis and projects the~~high-risk ~~effect~~derivative ~~of various interest rate changes on its net interest margin~~instruments. ~~Interest sensitive~~Furthermore, ~~assets~~VIB ~~and~~is ~~liabilities~~not ~~are~~subject ~~defined~~to asforeign ~~those assets or liabilities~~currency ~~that~~exchange ~~mature or reprice within a designated time-frame. The difference between~~ rate ~~sensitive~~risk ~~assets~~or ~~and~~commodity ~~rate~~price ~~sensitive liabilities for a specified period of time is known as “gap”~~risk.

~~Management~~ In ~~believes~~addition ~~VIB’s~~to ~~current~~gap ~~mix~~measurement, ofthe ~~assets~~ALCO ~~and~~is ~~liabilities~~further ~~provides~~responsible afor the ~~reasonable~~measurement ~~level~~ of ~~risk~~interest ~~related~~rate torisk, ~~significant~~i.e., ~~fluctuations~~the inrisk ~~net~~of ~~interest income~~loss ~~and~~in ~~the~~value ~~resulting~~due ~~volatility~~to changes ofin ~~VIB’s~~interest ~~earning base~~rates. The ALCO monitors and ~~the~~considers ~~Board~~ methods of ~~Directors reviews~~ managing interest rate risk by monitoring changes in ~~relation~~net toportfolio ~~its~~value ~~effect~~(“NPV”) onand net interest income, ~~net~~under various interest ~~margin,~~rate ~~and~~scenarios. The ALCO attempts to manage the ~~net~~various ~~portfolio~~components ~~value~~of ~~(“NPV”)~~the balance sheet to minimize the impact of ~~the~~sudden ~~Company~~and sustained changes in interest rates on NPV and net interest income.

1921

~~NPV~~ VIB’s ~~represents~~exposure ~~the~~to ~~market~~interest ~~value~~rate ofrisk ~~the~~is ~~portfolio~~reviewed ~~equity~~on ~~and~~a isperiodic ~~equal~~basis ~~to the~~by ~~market~~the ~~value~~Board of ~~assets~~Directors ~~minus~~and ~~the~~ALCO. ~~market~~If ~~value~~potential ofchanges ~~liabilities.~~to ~~VIB’s~~NPV ~~Board~~and ofnet interest ~~Directors~~income ~~has~~resulting ~~adopted~~from hypothetical interest rate ~~risk~~swings ~~policies,~~are ~~which~~not ~~establishes~~within ~~a maximum~~the ~~limit~~limits ofestablished ~~decrease~~by in the ~~NPV~~Board, in the ~~event~~Board ofmay ~~sudden~~direct ~~and~~management ~~sustained~~to ~~increases~~adjust ~~and~~its ~~decreases~~assets inand ~~market~~liability ~~interest~~mix ~~rates.~~to ~~The~~bring ~~following tables present the Company’s projected changes in NPV and net~~ interest ~~income for the various~~ rate ~~shock levels~~risk aswithin ~~of September 30, 2001:~~Board-approved limits.

VIB ~~CORP~~utilizes interest rate sensitivity analysis to measure interest rate ~~Change~~risk by computing estimated changes in ~~Net~~NPV ~~Portfolio~~of ~~Value~~cash flows from assets and atliabilities ~~September 30~~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, ~~2001~~which establishes a maximum limit of decrease in the NPV in the event of sudden and sustained increases, and decreases in market interest rates.

	Net Portfolio		Actual			Percentage
Change In Interest Rates	Value		Change			Change
(Dollars in Thousands)
300 basis point rise	$	170,520		($14,565	)		-7.9	%
200 basis point rise		179,916		(5,169	)		-2.8	%
100 basis point rise		189,482		4,398			2.4	%
Base Rate Scenario		185,084		—			—
100 basis point decline		172,697		(12,387	)		-6.7	%
200 basis point decline		157,972		(27,113	)		-14.6	%
300 basis point decline		141,691		(43,394	)		-23.4	%

The following tables present the Company’s projected changes in NPV and net interest income for the various rate shock levels as of June 30, 2002. 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.

~~Change in Net Interest Income~~22 ~~at September 30, 2001~~

	Net Interest		Actual			Percentage
Change In Interest Rates	Income		Change			Change
(Dollars in Thousands)
300 basis point rise	$	47,990		($471	)		-1.0	%
200 basis point rise		48,653		193			0.4	%
100 basis point rise		49,081		621			1.3	%
Base Rate Scenario		48,460		—			—
100 basis point decline		46,776		(1,684	)		-3.5	%
200 basis point decline		44,739		(3,721	)		-7.7	%
300 basis point decline		40,578		(7,882	)		-16.3	%

VIB CORP
Change in Net Portfolio Value
at June 30, 2002


	Net		Actual
Change in Interest Rates	Portfolio Value		Change			Percentage Change

(Dollars in Thousands)
300 basis point rise	$	153,796	$	17,056			12.5	%
200 basis point rise		154,539		17,799			13.0	%
100 basis point rise		149,051		12,311			9.0	%
Base Rate Scenario		136,740		—			—
100 basis point decline		112,136		(24,604	)		(18.0	)%
200 basis point decline		93,101		(43,639	)		(31.9	)%
300 basis point decline		89,959		(46,781	)		(34.2	)%

VIB CORP
Change in Net interest Income
at June 30, 2002


	Net		Actual
Change in Interest Rates	Interest Income		Change			Percentage Change

(Dollars in Thousands)
300 basis point rise	$	51,403	$	661			1.3	%
200 basis point rise		51,718		976			1.9	%
100 basis point rise		51,381		639			1.3	%
Base Rate Scenario		50,742		—			—
100 basis point decline		48,587		(2,155	)		(4.2	%)
200 basis point decline		45,807		(4,935	)		(9.7	%)
300 basis point decline		41,004		(9,738	)		(19.2	%)

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~~23 ~~not be relied upon as indicative of actual future results. Further, the~~ ~~computations do not~~

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 ~~Capital~~“trust ~~Securities)~~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 ~~Capital Securities~~“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 June 30, 2002 the Company had adequate liquidity to meet its anticipated funding needs.

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

At September 30, 2001 the Company had adequate liquidity to meet its anticipated funding needs.

In regards to the potential California energy crisis, the Company maintains contingency plans in the normal course of business designed to be deployed in the event of various potential business interruptions such as power and telecommunications. The Company has an established Business Resumption Plan in coordination with its Disaster Recovery Plan which addresses any potential failures due to energy interruptions. The Company has approximately 40% of its market area within the Imperial Irrigation District, which will not be subject to rolling blackouts, and anticipates that any energy shortages in other areas will have a minimal effect on the operations of its branches.

INFLATION

The impact of inflation on a financial institution differs significantly ~~from~~ from that exerted on an industrial company, primarily because its assets and liabilities consist largely of monetary items. The relatively low ratio of fixed assets to total assets of 1.089% at ~~September~~June 30, ~~2001~~2002 reduces the potential for inflated earnings resulting from understated depreciation changes. However, financial institutions are affected by inflation’s impact on non-interest expenses, such as salaries and occupancy expense, and to some extent, by the inflative impact on interest rates.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Information in response to this item is included in ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

PART II
OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS


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

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS


	Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES


	Not applicable.

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

~~Not~~On ~~Applicable~~April 24,2002, the shareholders of the Company held their 2002 Annual Meeting. At the Annual Meeting the following directors were elected to two-year terms:

ITEM 5. OTHER INFORMATION


	Votes For		Votes Withheld

R. Stephen Ellison		9,386,938		263,943
Richard D. Foss		9,382,557		268,324
Ronald A. (Rusty) Pedersen		9,385,527		265,354
Alice Helen Lowery Westerfield		9,577,085		73,796

~~Not~~The ~~Applicable.~~ following directors’ terms continued after the Annual Meeting and expire in 2003:

22 Thomas S. Kelly Dennis L. Kern Edward McGrew Pete J. Penner


	The shareholders also voted to amend Article IV(a) of the Company’s Articles of Incorporation to increase the authorized number of shares of the Company’s Common Stock from 25,000,000 shares to 125,000,000. The vote on this proposal was as follows:


							Broker
	For		Against		Abstain		Non Votes

Amend Article IV(a)		8,825,951		741,693		83,237		9,650,881

ITEM 5. OTHER INFORMATION


	On May 14, 2002, Director Alice Helen Lowery Westerfield passed away. The Company has no current plans to replace her.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(ah) Exhibits:

The following ~~exhibit~~exhibits isare filed as a part of this report:

Regulation S-K
Exhibit No.	Description	Page
3.1	Articles of Incorporation of VIB Corp as amended ~~September~~May 271,~~2001~~2002		2529
10.22	First Amendment of Valley Independent Bank Executive Supplemental Compensation Agreement — Dennis Kern		37
10.23	First Amendment of Valley Independent Bank Executive Supplemental Compensation Agreement — Harry Gooding		49
10.24	Second Amendment of Valley Independent Bank Executive Supplemental Compensation Agreement — Jack Brittain		61
10.25	First Amendment of Valley Independent Bank Executive Supplemental Compensation Agreement — William F. Henle		73
10.26	First Amendment of Valley Independent Bank Executive Supplemental Compensation Agreement — Janice Stewart Grady		85
10.27	Employment Agreement —		97

~~(b) Current Reports on Form 8-K:~~26

During the quarter ended September 30, 2001 the Company filed the following Current Reports on Form 8-K:

Description		Date of Report
Preferred Shares Rights Agreement		August 14, 2001
Lenders Services Acquisition Corp Investment		September 14, 2001


Regulation S-K
Exhibit No.	Description	Page

	Dennis Kern
10.28	Employment Agreement — Harry Gooding		110
10.29	Employment Agreement — Jack Brittain		121
10.30	Employment Agreement — William Henle		132
10.31	Employment Agreement — Janice Stewart Grady		143
10.32	Second Amendment of Valley Independent Bank Executive Supplemental Compensation Agreement — Dennis Kern		154
10.33	Second Amendment of Valley Independent Bank Executive Supplemental Compensation Agreement — Harry G. Gooding		156
10.34	Third Amendment of Valley Independent Bank Executive Supplemental Compensation Agreement — Jack Brittain		158
10.35	Second Amendment of Valley Independent Bank Executive Supplemental Compensation Agreement — William Henle		160
10.36	Second Amendment of Valley Independent Bank Executive Supplemental Compensation Agreement — Janice Stewart Grady		162

(i) Current Reports on Form 8-K:


	During the quarter ended June 30, 2002 the Company did not file any Current Reports on Form 8-K.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

VIB CORP

Date: October 31, 2001


Date: August 9, 2002
		/s/ Dennis L. Kern

		Dennis L. Kern, President and Chief Executive Officer


		/s/ Harry G. Gooding, III

		Harry G. Gooding, III, Executive Vice President and Chief Financial Officer

~~/s/ Dennis L. Kern Dennis L. Kern, President and Chief Executive Officer /s/ Harry G. Gooding, III Harry G. Gooding, III, Executive Vice President and Chief Financial Officer~~28

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Filing Compare · VIB CORP