FORM 10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

(Mark One)


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

For the quarterly period ended September 30, 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.)

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, it 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: 13,682,781 shares as of November 7, 2002.

TABLE OF CONTENTS


PART I FINANCIAL INFORMATION
	ITEM 1. FINANCIAL STATEMENTS
		Consolidated Statements of Financial Condition
		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
	ITEM 4. CONTROLS AND PROCEDURES
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

PART I
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 30, 2002 have been prepared 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 30, 2002 have been made. The results of operations for the period ended September 30, 2002 are 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, 2002 and December 31, 2001
(Unaudited)


			September 30,			December 31,
			2002			2001

ASSETS
Cash and due from banks			$	43,451,188		$	57,164,524
Federal funds sold				—			1,500,000

		Total cash and cash equivalents		43,451,188			58,664,524
Interest bearing deposits				39,310			648,035
Securities available for sale (note B)				303,082,746			194,471,496
Federal Home Loan and Federal Reserve Bank stock, at cost				13,897,950			11,140,250
Loans: (note C)
	Commercial			84,158,851			84,744,363
	Agricultural			35,929,733			53,287,734
	Real estate-construction			208,401,384			164,862,160
	Real estate-other			509,352,446			506,505,603
	Consumer			25,788,786			32,520,842

		Total Loans		863,631,200			841,920,702
Net deferred loan fees				(4,233,057	)		(4,146,246	)
Allowance for credit losses				(10,242,260	)		(9,344,248	)

		Net Loans		849,155,883			828,430,208
Premises and equipment				11,067,669			12,310,908
Other real estate owned				1,596,562			3,138,697
Cash surrender life insurance				31,527,857			22,581,441
Deferred tax asset				5,371,013			7,338,000
Goodwill and intangible assets				16,654,851			17,149,444
Accrued interest and other assets				13,642,292			12,363,751

TOTAL ASSETS			$	1,289,487,321		$	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, 2002 and December 31, 2001
(Unaudited)


			September 30,		December 31,
			2002		2001

LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits
	Noninterest-bearing demand		$	238,984,620	$	239,820,321
	Money Market and NOW			213,118,750		205,078,944
	Savings			101,352,370		63,806,829
	Time deposits under $100,000			190,197,631		182,953,344
	Time deposits $100,000 and over			234,188,683		193,270,400

		Total Deposits		977,842,054		884,929,838
Federal Home Loan Bank advances				168,658,923		156,218,358
Capital lease obligation				2,987,154		2,976,966
Company-obligated mandatorily redeemable preferred securities of subsidiary trusts holding solely junior subordinated debentures of the Company				33,290,400		33,360,672
Accrued interest and other liabilities				9,723,027		9,113,431

		Total Liabilities		1,192,501,558		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: 13,597,110 in 2002 and 13,038,488 in 2001			75,779,853		69,655,705
	Retained Earnings			17,466,898		11,808,477
	Accumulated other comprehensive income, net of tax of $2,598,296 in 2002 and $120,433 in 2001			3,739,012		173,307

		Total Stockholders’ Equity		96,985,763		81,637,489

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY			$	1,289,487,321	$	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
		Period Ended				Period Ended
		September 30,		September 30,		September 30,		September 30,
		2002		2001		2002		2001

Interest Income:
	Interest and Fees on Loans	$	16,474,377	$	18,039,799	$	48,653,481	$	56,776,312
	Interest on Investment Securities-Taxable		3,831,209		1,840,170		9,203,012		3,415,964
	Interest on Investment Securities-Nontaxable		401,153		423,198		1,195,262		1,653,525
	Other Interest Income		811		13,198		13,406		190,076

Total Interest Income			20,707,550		20,316,365		59,065,161		64,035,877
Interest Expense:
	Interest on Money Market and NOW		846,164		1,019,600		2,353,348		3,716,924
	Interest on Savings Deposits		275,086		175,787		562,059		610,325
	Interest on Time Deposits		3,138,253		4,931,592		9,486,710		17,414,182
	Interest on Trust Preferred Securities		666,395		809,594		2,047,071		2,430,459
	Interest on Other Borrowings		2,061,354		1,212,163		5,366,356		3,682,270

Total Interest Expense			6,987,252		8,148,736		19,815,544		27,854,160

Net Interest Income			13,720,298		12,167,629		39,249,617		36,181,717
Provision for Credit Losses			624,999		750,000		1,874,997		2,250,000

Net Interest Income after Provision for Credit Losses			13,095,299		11,417,629		37,374,620		33,931,717
Non-interest Income:
	Service Charges and Fees		1,980,299		2,063,053		5,796,674		5,397,812
	Gain on Sale of Loans and Servicing Fees		65,414		160,192		769,111		745,630
	Gain on Sale of Securities		13,415		1,539		43,492		1,474,217
	Dividends on Cash Surrender Value of Life Insurance		210,349		343,668		898,733		1,031,004
	Other Income		64,009		78,884		364,506		81,373

Total Non-interest Income			2,333,486		2,647,336		7,872,516		8,730,036
Non-interest Expense:
	Salaries and Employee Benefits		5,171,069		5,041,007		14,827,114		15,989,998
	Occupancy Expenses		992,763		930,923		2,757,010		2,670,540
	Furniture and Equipment		830,588		965,879		2,502,689		2,722,398
	Other Expenses (note D)		3,658,311		3,739,231		10,273,008		11,082,733

Total Non-interest Expense			10,652,731		10,677,040		30,359,821		32,465,669

Income Before Income Taxes			4,776,054		3,387,925		14,887,315		10,196,084
Income Taxes			1,051,000		1,151,000		4,515,641		3,554,300

Net Income		$	3,725,054	$	2,236,925	$	10,371,674	$	6,641,784
Per Share Data: (note E)
	Net Income — Basic	$	0.27	$	0.17	$	0.77	$	0.50
	Net Income — Diluted	$	0.26	$	0.17	$	0.75	$	0.49

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

VIB CORP AND SUBSIDIARIES

Consolidated Statement of Changes in Shareholders’ Equity


											Accumulated
				Common Shares							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								10,371,674						10,371,674
	Other comprehensive income
		Unrealized gains on securities, net of taxes of $2,495,694										3,591,365			3,591,365
			Less reclassification adjustments for gains included in net income, net of taxes of $17,832									(25,660	)		(25,660	)

	Total Other comprehensive income														3,565,705

Total Comprehensive income															13,937,379
Cash dividends									(17,268	)					(17,268	)
Stock dividends					392,838		4,695,985		(4,695,985	)					—
Exercise of stock options					165,784		1,428,163								1,428,163

Balance at September 30, 2002					13,597,110	$	75,779,853	$	17,466,898		$	3,739,012		$	96,985,763

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

VIB CORP AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited)


					For the Nine-Month Periods Ended September 30,
					2002			2001

Cash flow from operating activities:
Net income					$	10,371,674		$	6,641,784
Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization				2,582,297			3,192,526
		Deferred income taxes				(510,877	)		(279,390	)
		Provision for credit losses				1,874,997			2,250,000
		Originations of loans held for sale				(12,337,348	)		(33,838,124	)
		Proceeds from sale of loans				6,816,822			33,852,399
		Net gain on loan sales				(572,552	)		(477,858	)
		Loss on sale of other real estate owned				36,444			54,574
		Net increase in cash surrender value of life insurance				(946,416	)		(1,031,688	)
		Net realized gains on available for sale securities				(43,492	)		(1,474,217	)
		Net amortization of premium/discount on available for sale securities				1,117,224			301,409
		Net change in accrued interest, other assets, and other liabilities				(688,945	)		58,114

				Net cash provided by operating activities		7,719,928			9,249,529
		Cash flow from investing activities
			Purchase of investment securities			(207,183,308	)		(159,995,122	)
			Proceeds from sales of other real estate owned			1,770,448			2,317,995
			Proceeds from sales of investment securities			8,514,068			51,002,296
			Proceeds from maturities of investment securities			92,270,127			92,256,000
			Purchase of Cash Surrender Value Life Insurance			(8,000,000	)		—
			Net change in loans			(16,772,351	)		(25,866,769	)
			Premises and equipment expenditures			(844,465	)		(1,024,155	)
			Net decrease in interest bearing deposits			608,725			1,142,605

				Net cash used by investing activities		(129,636,756	)		(40,167,150	)
		Cash flow from financing activities
			Net increase in demand deposits and savings			44,749,646			4,041,836
			Net increase/(decrease) in time deposits			48,162,570			(23,010,188	)
			Net change in capitalized lease obligations			10,188			17,775
			Net change in fed funds purchased			—			40,150,000
			Net change in other borrowings			12,370,293			(750,000	)
			Payments for dividends			(17,268	)		(10,693	)
			Proceeds from exercise of stock options			1,428,163			624,378

				Net cash provided by financing activities		106,703,592			21,063,108
				Net change in cash and cash equivalents	$	(15,213,336	)	$	(9,854,513	)

	Cash and cash equivalents
			Beginning of period		$	58,664,524		$	51,604,079
			End of period		$	43,451,188		$	41,749,566
	Supplemental disclosure of cash flow information: (in thousands)
	Cash paid for interest expense				$	19,489		$	27,705
	Cash paid for income taxes				$	6,472		$	3,342

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 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 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, 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 30, 2002 had a net unrealized gain of approximately $6,337,000, as compared with a net unrealized gain of approximately $294,000 at December 31, 2001, an increase during the nine months beginning January 1, 2002 of $6,043,000. The change for the period is attributable to the recomposition of the portfolio using a leveraging strategy to enhance earnings.

Investment Securities


		September 30, 2002

				Gross Unrealized
($ in 000’s)		Gross Amortized Cost		Gains		Gross Unrealized Losses		Fair Value

Available-for Sale Securities:
	U.S. Treasury Securities	$	503	$	—	$	—	$	503
	U.S. Government and Agency Securities		37,053		479		6		37,526
	State and Political Subdivisions		38,497		1,047		15		39,529
	Mortgage-Backed Securities		215,189		4,776		13		219,952
	Other Equity		5,503		176		106		5,573

		$	296,745	$	6,478	$	140	$	303,083


		December 31, 2001

						Gross Unrealized
($ in 000’s)		Gross Amortized Cost		Gross Unrealized Gains		Losses		Fair Value

Available-for Sale Securities:
	U.S. Treasury Securities	$	22,252	$	2	$	13	$	22,241
	U.S. Government and Agency Securities		30,482		96		8		30,570
	State and Political Subdivisions		39,471		308		663		39,116
	Mortgage-Backed Securities		96,571		721		71		97,221
	Other Equity		5,402		55		134		5,323

		$	194,178	$	1,182	$	889	$	194,471

Investment securities carried at approximately $297,301,000 and $186,576,000, at September 30, 2002 and December 31,2001, respectively, were 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. Although the Company seeks to avoid concentrations of loans to a single industry or based upon 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 30, 2002 and December 31, 2001 the Company was servicing approximately $76,271,000 and $80,028,000, respectively, in loans previously sold.

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


	Nine months ended			Twelve months ended
($ In 000’s)	September 30, 2002			December 31,2001

Balance at beginning of year	$	9,344		$	8,298
Additions to the allowance charged to expense		1,875			3,000
Recoveries on loans charged off		102			224
Loans charged off		(1,079	)		(2,178	)

Balance at end of period	$	10,242		$	9,344

A summary of nonperforming loans and assets follows:


($ in 000’s)		September 30, 2002			December 31,2001

Non-accrual loans		$	14,542		$	14,095
Loans 90 days past due and still accruing			31			—

	Total nonperforming loans		14,573			14,095
Other Real Estate Owned			1,597			3,139

	Total nonperforming assets	$	16,170		$	17,234
Nonperforming loans to total ending loans			1.72	%		1.70	%
Nonperforming assets to total loans and Other Real Estate Owned			1.90	%		2.07	%

(D) Other Expenses

Other expenses for the periods indicated are as follows:


($ in 000’s)		September 30, 2002		September 30, 2001

Data Processing		$	2,300	$	2,184
Advertising			486		426
Legal and Professional			2,419		2,416
Regulatory Assessments			116		124
Insurance			102		90
Amortization of Intangibles			495		965
Office Expenses			1,699		1,939
Promotion			1,047		1,321
Other			1,609		1,618

	Total Other Expenses	$	10,273	$	11,083

(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: 13,588,262 for the three months ended September 30, 2002 and 13,401,316 for the three months ended September 30, 2001; 13,537,007 for the nine months ended September 30, 2002 and 13,366,766 for the nine months ended September 30, 2001.

Diluted earnings per share for the three- and nine-month periods ended September 30, 2002 and 2001, are computed by dividing net earnings by the weighted average common equivalent shares outstanding during the respective periods as follows: 14,058,658 for the three months ended September 30, 2002 and 13,518,265 for the three months ended September 30, 2001; 13,914,541 for the nine months ended September 30, 2002 and 13,443,047 for the nine months ended September 30, 2001. Common share equivalents include dilutive common stock option share equivalents determined by using the treasury stock method.

(F) Commitments and Contingencies

The Company is a party to financial instruments in the normal course of business to meet financing needs of its customers and to reduce its own exposure to fluctuating interest rates. These financial instruments include commitments to make loans and standby letters of credit.

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.

At September 30, 2002 and December 31, 2001, commitments to make loans totaled $285.5 million and $288.7 million, and standby letters of credit totaled $4.1 million and $1.6 million, respectively.

Since commitments to make loans may expire without being used, this amount does not necessarily represent future cash commitments. Collateral obtained upon exercise of the commitment is determined using managements’ credit evaluation of the borrower and may include accounts receivable, inventory, property, land and other items.

(G) Goodwill and Other Intangible Assets

In June 2001, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”). Under the new rules, goodwill and intangible assets deemed to have indefinite lives will no longer be amortized but will be subject to annual impairment tests in accordance with the new statement. Other identifiable intangible assets, which include deposit-based intangibles, will continue to be amortized over their useful lives and reviewed for impairment in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of long-Lived Assets.” Useful lives of amortizable intangible assets are required to be reevaluated each reporting period with any changes in estimated useful lives being accounted for prospectively over the revised remaining useful life.

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 September 30, 2001 had SFAS 142 been applied retroactively:


		Three Months ended September 30,				Nine months ended September 30,

($000’s except for earnings per share)		2002		2001		2002		2001

Net income		$	3,725	$	2,237	$	10,372	$	6,642
Addback: Goodwill amortization			—		202		—		606

Adjusted net income		$	3,725	$	2,439	$	10,372	$	7,248
Basic earnings per share:
	Net income	$	.27	$	.17	$	.77	$	.50
	Goodwill amortization		—		.01		—		.04

	Adjusted net income	$	.27	$	.18	$	.77	$	.54
Diluted earnings per share:
	Net income	$	.26	$	.17	$	.75	$	.49
	Goodwill amortization		—		.01		—		.05

	Adjusted net income	$	.26	$	.18	$	.75	$	.54

The Company’s initial test for impairment of goodwill as of December 31, 2001 has been performed utilizing both the market and cost approach and both methods indicated no impairment of goodwill.

Amortizable intangible assets are to be reviewed for impairment in accordance with SFAS No. 144. That is, if a triggering event occurs, the recoverability of the intangible asset’s cost must be evaluated. Where the carrying amount is not recoverable, the Company must test the carrying amount of the intangible asset for impairment. Examples of triggering events are:

	1.		The asset market value decreases significantly.

	2.		The use of the asset is significantly changed in extent or manner.

	3.		Legal factors or business climate changes adversely affect asset value.

	4.		Regulator’s adverse assessment or action.

	5.		Original expected costs are significantly exceeded.

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

As of September 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 September 30, 2002 consisted of core deposit intangibles with a net carrying value of $3,168,180. Accumulated amortization through September 30, 2002 was $1,997,308. Amortization expense for the periods ended September 30, 2002, and September 30, 2001 was $494,593 and $358,570, respectively. Goodwill amortization for the period ended September 30, 2001 amounted to $ 606,000.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

This analysis is designed to provide a more complete understanding of the material changes and trends related to the Company’s financial condition, results of operations, cash flow and capital resources. This discussion should be read in conjunction with the attached Financial Statements included in Item 1, and the Company’s Annual Report on Form 10-K. This document may contain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those projected. For a discussion of factors that could cause actual results to differ, please see the Company’s publicly available Securities and Exchange Commission filings, including its Annual Report on Form 10-K for the year ended December 31, 2001 and particularly the discussion of “Other Significant Factors” within that document.

GENERAL

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

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

The Stockdale merger was accounted for as a pooling of interests. The Company issued 2,896,764 shares of its Common Stock (adjusted for subsequent stock dividends) in exchange for all 1,212,265 shares of Stockdale’s issued and outstanding common stock.

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

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

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

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

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

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

In July, 2000, the Company raised approximately $9.6 million in net proceeds from an offering of “trust preferred” securities at 11.695%, due July 19, 2030, in a private placement conducted as a part of a pooled offering. The Company formed a wholly-owned New York common law trust subsidiary, VIBC Capital Trust I (“Trust I”), to facilitate the transaction. The proceeds to the Company are treated as Tier 2 capital for regulatory purposes. The proceeds were used to increase VIB’s capital by $8.5 million, with the balance used for general corporate purposes. The interest will be deductible by the Company. The Company has the right, assuming that no default has occurred, to defer interest payments at any time and for a period of up to twenty consecutive calendar quarters. The “trust preferred” securities can be called after July 19, 2010.

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

On May 24, 2001 Stockdale and Kings River merged with and into VIB pursuant to the terms of Plans of Reorganization and Agreements of Merger dated March 21 and March 22, 2001. All of the former offices of Stockdale and Kings River operate as branches of VIB;

however, some continue to use the Stockdale and Kings River names as DBA’s. The merger is anticipated to provide significant cost savings and improve operating efficiencies by removing layers of regulatory reporting and operating expenses.

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

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

In November, 2001, the Company raised approximately $19.1 million in net proceeds from an offering of floating rate 6% “trust preferred” securities in a private placement conducted as a part of a pooled offering. The proceeds were used to repurchase $19.2 million of the 9% “trust preferred” securities issued in February, 1999, in connection with the Company’s first “trust preferred” offering, with the balance to be used for general corporate purposes. The Company formed a wholly-owned Delaware business trust subsidiary, Valley Capital Trust II (“Trust II”), to facilitate the transaction. The proceeds to the Company will be treated as Tier 1 capital for regulatory purposes. The 9% “trust preferred” securities issued in 1999 were repurchased at a discount. They will not be retired; however, they will be eliminated for consolidated and regulatory accounting purposes. As “trust preferred” securities, they were treated as Tier 1 capital. The interest will be deductible and paid by the Company. The Company has the right, assuming that no default has occurred, to defer interest payments at any time and for a period of up to twenty consecutive calendar quarters. These “trust preferred” securities will mature concurrently on December 8, 2031; but can be called after December 8, 2006 or earlier upon the occurrence of certain defined events.

During April, 2002, VIB formed a Maryland real estate investment trust (“VIB Investment Trust”) by contributing certain qualifying real estate assets in exchange for one thousand (1,000) common and one thousand (1,000) preferred shares of beneficial interest in VIB Investment Trust. The amount of investment in VIB Investment Trust is dictated by the size of VIB’s current mortgage loan, mortgage-backed and mortgage related securities portfolios. VIB Investment Trust’s overriding objective will be to acquire, hold, finance, and manage assets consisting of participation interests in residential mortgage loans, commercial real estate loans, construction loans, and possible mortgage-related securities.

The purpose for establishing VIB Investment Trust is to enable VIB to readily gain access to capital markets and to reduce the expenses associated with holding the assets contributed to VIB Investment Trust.

On July 30, 2002, Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A., Rabobank Nederland (“Rabobank”), a Netherlands based cooperative bank, and VIB Corp entered into a definitive agreement pursuant to which the Company will merge with and become a wholly-owned subsidiary of Rabobank. After the merger, the Company will continue to operate under its current name and will retain its subsidiaries.

Under the terms of the agreement, Rabobank will acquire 100% of VIB Corp’s issued and outstanding shares of no par value Common Stock at $15.10 per share in a cash transaction. The aggregate amount to be paid to VIB Corp’s shareholders is estimated to amount to approximately $212.5 million and will be funded from Rabobank’s existing cash resources.

Subject to obtaining applicable regulatory and VIB Corp shareholder approvals, the transaction is expected to be completed in the fourth quarter 2002 or early first quarter 2003.

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 Kings River and Stockdale mergers into VIB, the Company has conducted 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 September 30, 2002 was $3.7 million or $.26 per share diluted based upon average shares outstanding of 14,058,658. This compares with net income of $2.2 million or $.17 per share fully diluted based upon the average shares outstanding of 13,518,265 for the same period in 2001. Consolidated net income for the nine months ended September 30, 2002, was $10.4 million or $.75 per share diluted based upon average shares outstanding of 13,914,541. This compares with net income of $6.6 million or $.49 per share fully diluted based upon the average shares outstanding of 13,443,047 for the same period in 2001.

Total gross loans at September 30, 2002 were $859.4 million, which represented an increase of $21.6 million or 2.6% from December 31, 2001. Since September 30, 2001, total gross loans have increased $13.7 million or 1.6%.

On March 13, 2002, the Board of Directors approved a 3% stock dividend for shareholders of record on May 24, 2002. The dividend was paid on June 14, 2002. All per share figures have been adjusted for this and previous 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 $1,123.6 million during the nine months ended September 30, 2002, an increase of $123.7 million or 12.4% compared to the same period last year. This growth was highlighted by an increase in average total loans of $21.7 million, or 2.6%, to $843.3 million and an increase in average investments of $102.0 million, or 57.2%, to $280.3 million. Average interest-bearing liabilities in the first nine months of 2002 increased $85.1 million, or 10.4%, to average $900.2 million as compared to the same period last year. During the first nine months of 2002, average interest-bearing deposit categories increased $9.2 million, or 1.3%, to $702.3 million as compared to the same period last year. Average borrowed funds increased $75.9 million, or 62.2%, to $197.9 million during the same time frame.

Interest income for the nine-month period ending September 30, 2002 was $59.1 million, a decrease of $5.0 million or 7.8% compared to the first nine months in 2001. The full year effect of the declining interest rate environment during the year 2001 was the primary reason for the decrease in interest income in 2002. The yield on interest-earning assets decreased 153 basis points to 7.04% for the nine-month period ended September 30, 2002 from 8.57% for the comparative period last year.

Interest expense decreased $8.0 million or 28.9% during the nine months ended September 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. The cost of interest-bearing funds decreased 163 basis points from 4.57% for the nine months ended September 30, 2001 to 2.94% for the nine months ended September 30, 2002. The cost of funds decrease was also primarily the result of the declining interest rate environment.

Net interest income was $39.2 million for the nine months ending September 30, 2002, representing an increase of $3.1 million or 8.5% from the nine month period ended September 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 4.10% for the period ending September 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 4.68% for the period ending September 30, 2002, compared to 4.84% for the period ending September 30, 2001. The decrease in net interest margin was due to the greater proportionate growth in the lower 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 September 30, 2002, net interest income was $13.7 million, which was an increase of $1.6 million, or 12.8%, from the same period in 2001. The net interest spread decreased 8 basis points to 4.01% for the three months ended September 30, 2002 from 4.09% for the three months ended September 30, 2001. The net interest margin decreased from 4.85% for the quarter ended September 30, 2001 to 4.57% for the same period in 2002. The decrease in net interest spread and decrease in net interest margin are attributable to the same trends 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 8.57% for the nine months ended September 30, 2001 and 7.04% for the nine months ended September 30, 2002. The cost of interest-bearing liabilities for the year 2001 was 4.27% as compared to 4.57% for the nine months ended September 30, 2001 and 2.94% for the nine months ended September 30, 2002.

During the three months ended September 30, 2002, the yield on earning assets decreased 117 basis points to 6.89% as compared to 8.06% for the three months ended September 30, 2001. The cost of interest-bearing liabilities for the quarter ended September 30, 2002, also decreased 110 basis points to 2.88% from 3.98% for the quarter ended September 30, 2001.

PROVISION FOR CREDIT LOSSES

The allowance for credit losses at September 30, 2002 was $10.2 million, compared to $9.9 million at September 30, 2001, an increase of $.4 million or 3.7%. As a percent of total loans, the allowance was 1.19% at September 30, 2002, compared to 1.17% at September 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 $1,875,000 for the first nine months of 2002, compared with $2,250,000 provided for the nine months ended September 30, 2001, a decrease of 16.7%. The provision was $625,000 for the third quarter of 2002, compared to $750,000 for the third quarter of 2001, a decrease of $125,000 or 16.7%.

Total non-performing loans as of September 30, 2002 were $14.6 million as compared to $14.2 million at September 30, 2001 and $14.1 million at December 31, 2001. Non-performing loans increased $.5 million during the nine months ended September 30, 2002. The largest share of the non-performing loan balances for all of the mentioned periods 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 improvement in its coverage and reserve ratios.

Net charge-offs were $977,000 for the nine months ended September 30, 2002. This represents an increase of $302,000 when compared to $675,000 in net charge offs for the same period in 2001. During the third quarter ending September 30, 2002, $361,000 was recorded in net charge-offs compared to $371,000 in net charge-offs in the third 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 September 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 $7.9 million for the nine months ended September 30, 2002 representing a decrease of $.9 million or 9.8% compared with the same period in the prior year. The primary reasons for the decrease in non-interest income were a decrease of $1.4 million in gain on the sale of securities offset to some extent by an increase in service charges and fees of $399,000, and an increase in other income of $283,000.

The increase in service charges and fees is related to the Company’s consolidation of its product line, the establishment of new products, and growth in its core deposit base. The major component of the increase in other income was dividend income from AT Services of $195,000.

Non-interest income for the quarter ended September 30, 2002 decreased $314,000 to $2.3 million from $2.6 million for the same period in 2001. This decrease is mostly due to decreases in gains on the sale of loans, and decreases in dividend income on the cash surrender value of life insurance.

NON-INTEREST EXPENSE

Total non-interest expense for the nine months ended September 30, 2002 was $30.4 million, a decrease of $2.1 million or 6.5% as compared to the same period in 2001.

Salary expense during the nine months ended September 30, 2002 was $11.0 million, a decrease of $1.1 million or 8.8% under the comparable period in 2001. The reduction in salary expense is partially attributable to $200,000 in severance being paid in the period ended March 31, 2001 and the Company’s concentrated effort to reduce overhead by taking a number of actions to improve efficiencies and provide cost savings. These actions included the dissolution of its mortgage-banking business, consolidation of its three subsidiary banks into one, and simplification of its product line. It is anticipated that the full effect of these changes will be reflected in the financial performance of the Company for the full year 2002. Employee benefits expense was $3.9 million for the period ending September 30, 2002, a decrease of $108,000 or 2.7% from the same period in the prior year.

Occupancy expense was $2,757,000 for the nine-month period ended September 30, 2002, an increase of $86,000 or 3.2% as compared to the first nine months in 2001. Furniture and equipment expense was $2,503,000 for the nine-month period ended September 30, 2002, a decrease of $220,000 or 8.1% from the same period in 2001. This decrease was primarily the result of the Company’s decreased depreciation expense on the planned obsolescence of furniture and equipment.

Other operating expense amounted to $10.3 million during the nine-month period ended September 30, 2002, a decrease of $810,000 or 7.3% from the same period in the prior year. The decrease was attributable to decreases in the amortization of intangibles,

general office expenses, and promotional expenses.

For the three months ended September 30, 2002, non-interest expense was $10.7 million. This was a decrease of $24,000 or .2% from the same period in 2001.

INCOME TAXES

Income tax expense for the nine months ending September 30, 2002 was $4,516,000 as compared with $3,554,000 for the same period in 2001. The increase in expense was primarily attributable to a $5.1 million increase in taxable income. The Company’s effective tax rate was 30.3% for the nine months ended September 30, 2002 as compared to 34.9% for the same period in the prior year, a decrease due primarily to the non-taxability of dividends at the state level from VIB Investment Trust and to a lesser extent to a decrease of $.5 million in nontaxable interest income.

Income taxes for the third quarter were $1,051,000, a decrease of $100,000 or 8.7% from the third quarter of 2001. The Company’s effective tax rate was 22.0% for the three months ended September 30, 2002 as compared to 34.0% for the same period in the prior year. The decrease in expense and effective tax rate for the third quarter was primarily related to the non-taxability of VIB Investment Trust at the state level offset to some extent by an increase of $1,410,000 in the Company’s taxable income.

CAPITAL RESOURCES

Total stockholders’ equity as of September 30, 2002 was $97.0 million, which represented an increase of $15.3 million from December 31, 2001, and $17.0 million from September 30, 2001. The increase since December 31, 2001 included $10.4 million in net income, $1.4 million from the exercising of stock options, and a $3.6 million increase in the cumulative unrealized gain on securities classified as available for sale. The increase since September 30 2001 included $13.0 million in net income, $1.6 million from the exercising of stock options, and a $2.5 million increase in the cumulative unrealized gain on securities classified as available for sale.

Under regulatory guidelines, capital adequacy is measured as a percentage of risk-adjusted assets in which risk percentages are applied to assets on as well as off the balance sheet. 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 September 30, 2002 the Tier 1 and total risk based capital ratios were 11.53% and 12.86%, respectively, compared to 9.55% and 11.30%, respectively, at September 30, 2001. The current minimum regulatory guidelines for Tier 1 and total risk-based capital ratios are 4.0% and 8.0%, respectively. The leverage ratio, which is a measure of Tier 1 capital to adjusted average assets, was 8.41% at September 30, 2002, compared to 8.00% at September 30, 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.

LIQUIDITY AND ASSET/LIABILITY MANAGEMENT

VIB’s liquidity position remains adequate to meet future contingencies. At September 30, 2002 VIB had $168.7 million in net Federal funds purchased and FHLB advances outstanding. This compared to $156.9 million in net Federal funds purchased and FHLB advances outstanding at September 30, 2001. Since December 31, 2001, net Federal funds purchased and FHLB advances have increased $13.9 million. The increases are attributable to the Company’s use of leveraging strategies to enhance earnings. These strategies, which involve borrowing at a fixed cost and reinvesting at a higher fixed rate, hold limited interest rate risk and provide similar positive earnings in both increasing and decreasing interest rate environments. As a result, there has been an increase in outstanding balances of FHLB advances. VIB’s liquidity ratio at September 30, 2002 was 25.5%. This ratio represented an increase from 20.3% at September 30, 2001 and an increase from 21.4% at December 31, 2001.

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

The ALCO manages the interest rate sensitivity or repricing characteristics of VIB’s assets and liabilities. The primary source of earnings for VIB is net interest income, which is subject to movements in interest rates. To minimize the effect of changes in rates, the balance sheet requires structuring in order that the repricing opportunities for both assets and liabilities exist in nearly equivalent amounts and at approximately similar time intervals. Interval differences may exist at times creating interest sensitivity gaps, which represent the difference between interest sensitive assets and interest sensitive liabilities. These gaps are static in nature and do not consider future activity. As such, these gap measurements serve best as an indicator for potential interest rate exposure.

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

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

In addition to gap measurement, the ALCO is further responsible for the measurement of interest rate risk, i.e., the risk of loss in value due to changes in interest rates. The ALCO monitors and considers methods of managing interest rate risk by monitoring changes in net portfolio value (“NPV”) and net interest income under various interest rate scenarios. The ALCO attempts to manage the various components of the balance sheet to minimize the impact of sudden and sustained changes in interest rates on NPV and net interest income.

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

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

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

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


	Net		Actual
Change in Interest Rates	Portfolio Value		Change			Percentage Change

(Dollars in Thousands)
300 basis point rise	$	159,157	$	25,298			18.9	%
200 basis point rise		159,070		25,211			18.8	%
100 basis point rise		150,860		17,001			12.7	%
Base Rate Scenario		133,859		—			—
100 basis point decline		106,601		(27,258	)		(20.4	)%
200 basis point decline		86,088		(47,771	)		(35.7	)%
300 basis point decline		82,818		(51,041	)		(38.1	)%

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


	Net		Actual
Change in Interest Rates	Interest Income		Change			Percentage Change

(Dollars in Thousands)
300 basis point rise	$	52,583	$	3,364			6.8	%
200 basis point rise		52,357		3,138			6.4	%
100 basis point rise		51,205		1,986			4.0	%
Base Rate Scenario		49,219		—			—
100 basis point decline		45,709		(3,510	)		(7.1	%)
200 basis point decline		41,368		(7,851	)		(16.0	%)
300 basis point decline		36,374		(12,845	)		(26.1	%)

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

in market rates. There may also be repayment risk if interest rates rise on loans.

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

The Company is a legal entity, separate and distinct from its subsidiaries. Although there exists the ability to raise capital on its own behalf (such as the recent private placement of “trust preferred” securities) or borrow from external sources, the Company may obtain additional funds through dividends paid by, and fees for services provided to, its subsidiaries. Regulations limit the amount of dividends as well as service fees paid by subsidiaries. The Company’s expenses have been primarily covered by fees charged to and dividends received from VIB and it is anticipated that the Company will be able to continue to rely on dividends from VIB to fund its separate operations and obligations. The Company may not always be able to rely solely on its current or future subsidiaries to meet its obligations, including obligations under the “trust preferred” securities, or to maintain its separate liquidity. Under such circumstances, the Company would be forced to seek other means to raise capital. At September 30, 2002 the Company had adequate liquidity to meet its anticipated funding needs.

INFLATION

The impact of inflation on a financial institution differs significantly 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 .9% at September 30, 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.

ITEM 4. CONTROLS AND PROCEDURES

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the

Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Based upon an evaluation within the 90 days prior to the filing date of this report, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective. There have been no significant changes in the Company’s internal controls or in other factors that could significantly affect the Company’s internal controls subsequent to the date of the evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

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 applicable.

ITEM 5. OTHER INFORMATION


	Not applicable.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits:


	None.

(b) Current Reports on Form 8-K:


	During the quarter ended September 30, 2002 the Company filed the following Current Reports on Form 8-K:


Description		Date of Report

Agreement and Plan of Reorganization by and between VIB Corp and Rabobank Nederland		August 1, 2002

Certifications pursuant to the Sarbanes-Oxley Act of 2002		August 9, 2002

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: November 8, 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

CERTIFICATIONS

			I, Dennis L. Kern, certify that:

	1.		I have reviewed this quarterly report on Form 10-Q of VIB Corp;

	2.		Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

	3.		Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

	4.		The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

			a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

			b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

			c) Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

	5.		The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

			a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

			b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

	6.		The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.


Date: November 8, 2002		/s/ Dennis L. Kern

		Dennis L. Kern, President and Chief Executive Officer

			I, Harry G. Gooding, III, certify that:

	1.		I have reviewed this quarterly report on Form 10-Q of VIB Corp;

	2.		Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

	3.		Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

	4.		The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

			a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

			b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

			c) Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

	5.		The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

			a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

			b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

	6.		The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.


Dated: November 8, 2002		/s/ Harry G. Gooding, III

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

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VIB CORP 10-Q