<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(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, 2000
---------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
----------------------- -------------------
Commission file number 0-11337
FOOTHILL INDEPENDENT BANCORP
-----------------------------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 95-3815805
----------------------------------- ----------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
510 SOUTH GRAND AVENUE, GLENDORA, CALIFORNIA 91741
-------------------------------------------- ---------------------
(Address of principal executive offices) (Zip Code)
(626) 963-8551 or (909) 599-9351
----------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
--------------------------------------------------
(Former name, former address and former fiscal
year, if changed, since last year)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports); and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
5,301,241 shares of Common Stock as of November 3, 2000
<PAGE> 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
FOOTHILL INDEPENDENT BANCORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------- ------------
(Dollars in Thousands)
<S> <C> <C>
ASSETS
Cash and due from banks $ 26,327 $ 23,262
Federal funds sold 15,500 3,600
--------- ---------
Total Cash and Cash Equivalents 41,827 26,862
Interest-bearing deposits in other financial institutions 6,030 7,919
Investment Securities Held-To-Maturity (approximate
market value: $20,422 in 2000 and $7,245 in 1999):
U.S. Treasury 999 2,997
U.S. Government Agencies 16,374 1,000
Municipal Agencies 1,053 1,062
Other Securities 2,250 2,250
--------- ---------
Total Investment Securities Held-To-Maturity 20,676 7,309
Investment Securities Available-For-Sale 39,350 56,015
--------- ---------
Loans, net of unearned discount and prepaid
points and fees 369,026 343,294
Direct lease financing 1,225 2,341
Less reserve for possible loan and lease losses (3,901) (6,102)
--------- ---------
Total Loans & Leases, net 366,350 339,533
Bank premises and equipment 6,641 6,779
Accrued interest 2,827 2,928
Other real estate owned, (net of allowance for
possible losses of $-0- in 2000 and $42 in 1999) 2,420 1,714
Cash surrender value of life insurance 5,410 4,997
Prepaid expenses 1,450 1,618
Deferred tax asset 2,234 2,412
Other assets 518 590
--------- ---------
TOTAL ASSETS $ 495,973 $ 458,676
========= =========
LIABILITIES AND STOCKHOLDERS EQUITY
Deposits
Demand deposits $ 142,910 $ 133,115
Savings and NOW deposits 106,054 101,839
Money market deposits 71,122 72,400
Time deposits in denominations of $100,000 or more 46,318 40,408
Other time deposits 70,410 49,502
--------- ---------
Total deposits 436,814 397,264
Accrued employee benefits 2,033 2,002
Accrued interest and other liabilities 1,073 2,152
Short-term debt 8,000 8,800
Long-term debt 0 19
--------- ---------
Total Liabilities 447,920 410,237
Stockholders' Equity
Capital stock - authorized 25,000,000 shares,
par value $.001 per share; issued and outstanding:
5,354,213 in 2000 and 5,772,614 in 1999 36,742 36,415
Additional Paid-in Capital 963 963
Retained Earnings 10,788 11,898
Accumulated Other Comprehensive Income (440) (837)
--------- ---------
Total Stockholders' Equity 48,053 48,439
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 495,973 $ 458,676
========= =========
</TABLE>
2
<PAGE> 3
FOOTHILL INDEPENDENT BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(dollars in thousands)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
---------------------- --------------------
2000 1999 2000 1999
------- ------- ------ ------
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $25,238 $21,643 $8,561 $7,199
Interest on investment securities
U.S. Treasury 61 365 13 83
Obligations of other U.S. government agencies 1,925 1,974 675 662
Municipal agencies 237 264 76 87
Other securities 732 1,077 247 413
Interest on deposits 154 641 60 233
Interest on Federal funds sold 464 410 190 119
Lease financing income 63 133 17 41
------- ------- ------ ------
Total Interest Income 28,874 26,507 9,839 8,837
Interest expense:
Interest on savings & NOW deposits 1,165 1,154 388 386
Interest on money market deposits 2,267 2,094 794 742
Interest on time deposits in denominations of
$100,000 or more 1,930 1,174 718 360
Interest on other time deposits 2,600 1,858 1,014 609
Interest on borrowings 54 4 6 1
------- ------- ------ ------
Total Interest Expense 8,016 6,284 2,920 2,098
------- ------- ------ ------
Net Interest Income 20,858 20,223 6,919 6,739
Provision for loan and lease losses 665 485 190 205
------- ------- ------ ------
Net Interest Income After Provisions for
Loan and Lease Losses 20,193 19,738 6,729 6,534
Other income
Fees and service charges 3,293 3,309 1,153 1,094
Gain on sale SBA loans 27 112 21 12
Other 75 42 19 19
------- ------- ------ ------
Total other income 3,395 3,463 1,193 1,125
Other expenses
Salaries and benefits 7,357 7,294 2,331 2,504
Occupancy expenses, net of revenue of $154 in 2000
and $141 in 1999 1,661 1,574 547 538
Furniture and equipment expenses 1,153 1,223 376 398
Other expenses (Note 2) 5,537 5,716 1,898 1,652
------- ------- ------ ------
Total Other Expenses 15,708 15,807 5,152 5,092
------- ------- ------ ------
Income before income taxes 7,880 7,394 2,770 2,567
Provision for income taxes 2,911 2,699 1,023 937
------- ------- ------ ------
NET INCOME $ 4,969 $ 4,695 $1,747 $1,630
======= ======= ====== ======
Earnings per share
Basic $ 0.91 $ 0.79 $ 0.33 $ 0.28
======= ======= ====== ======
Diluted (Note 3) $ 0.85 $ 0.75 $ 0.30 $ 0.26
======= ======= ====== ======
</TABLE>
See accompanying notes to financial statements
3
<PAGE> 4
FOOTHILL INDEPENDENT BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
(dollars in thousands)
<TABLE>
<CAPTION>
Accumulated
Number of Additional Other
Shares Capital Paid-In Comprehensive Retained Comprehensive
Outstanding Stock Capital Income Earnings Income Total
----------- -------- ---------- --------------- -------- ------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, January 1, 1999 5,985,244 $ 36,057 $ 963 $ 11,516 $ (157) $48,379
Cash dividend (1,481) (466) (1,947)
Exercise of stock options 17,579 124 124
Common stock issued under Employee
Benefit and Dividend reinvestment 13,090 187 187
Plans
Common stock repurchased and retired (179,179) (2,563) (2,563)
Comprehensive Income
Net Income 4,695 4,695 4,695
Unrealized security holding losses
(Net of taxes $194) (509) (509) (509)
---------
Total Comprehensive Income 4,186 3,532
--------- -------- ----- ========= -------- ------- --------
BALANCE, September 30, 1999 5,836,734 $ 36,368 $ 963 $ 12,167 $(1,132) $ 48,366
========= ======== ===== ======== ======= ========
BALANCE, January 1, 2000 5,772,614 36,415 963 11,898 (837) 48,439
Cash dividend (853) (853)
Exercise of Stock Options 4,048 24 24
Common stock issued under Employee
Benefit and Dividend reinvestment 31,030 303 303
Plans
Common stock repurchased and retired (453,479) -- (5,226) (5,226)
Comprehensive Income
Net Income 4,969 4,969 4,969
Unrealized security holding gains
(net of taxes of $177) 397 397 397
---------
Total Comprehensive Income 5,366 4,358
---------- -------- ----- ========== -------- ------- --------
BALANCE, September 30, 2000 5,354,213 $ 36,742 $ 963 $ 10,788 $ (440) $ 48,053
========== ======== ===== ======== ======= ========
</TABLE>
See accompanying notes to financial statements
4
<PAGE> 5
FOOTHILL INDEPENDENT BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(dollars in thousands)
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
<TABLE>
<CAPTION>
2000 1999
----------- -----------
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Cash Flows From Operating Activities:
Interest and fees received $ 28,810 $ 26,722
Service fees and other income received 2,984 3,128
Financing revenue received under leases 63 133
Interest paid (7,749) (6,421)
Cash paid to suppliers and employees (15,608) (15,043)
Income taxes paid (2,916) (2,314)
----------- -----------
Net Cash Provided (Used) by Operating Activities 5,584 6,205
----------- -----------
Cash Flows From Investing Activities:
Proceeds from maturity of investment securities (AFS) 1,356,319 1,730,101
Purchase of investment securities (AFS) (1,354,591) (1,714,638)
Proceeds from maturity of investment securities (HTM) 2,140 9,563
Purchase of investment securities (HTM) (132) (6,039)
Proceeds from maturity of deposits in other financial institutions 10,892 24,839
Purchase of deposits in other financial institutions (9,003) (28,011)
Net (increase) decrease in credit card and revolving credit receivables (16) 352
Recoveries on loans previously written off 103 107
Net (increase) decrease in loans (28,906) (21,619)
Net (increase) decrease in leases 1,116 1,069
Proceeds from property, plant & equipment 20 20
Capital expenditures (1,526) (970)
Proceeds from sale of other real estate owned -- 1,134
Stock repurchased and retired (5,226) (2,563)
----------- -----------
Net Cash Provided (Used) in Investing Activities (28,810) (6,665)
----------- -----------
Cash Flows From Financing Activities
Net increase (decrease) in demand deposits, NOW accounts,
savings accounts and money market deposits 12,718 10,213
Net increase (decrease) in certificates of deposit with maturities of three 4,319 3,245
months or less
Net increase (decrease) in certificates of deposit with maturities of more than 22,499 (14,764)
three months
Net increase (decrease) in short term borrowing (800) --
Proceeds from exercise of stock options 24 124
Proceeds from stock issued under employee benefit and dividend reinvestment plans 303 187
Principal payment on long term debt (19) (40)
Dividends paid (853) (1,481)
----------- -----------
Net Cash Provided by Financing Activities 38,191 (2,516)
----------- -----------
Net Increase (Decrease) in Cash and Cash Equivalents 14,965 (2,966)
Cash and Cash Equivalents at Beginning of Year 26,862 37,482
----------- -----------
Cash and Cash Equivalents at September 30, 2000 and 1999 $ 41,827 $ 34,516
=========== ===========
</TABLE>
5
<PAGE> 6
FOOTHILL INDEPENDENT BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(dollars in thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------
2000 1999
------- -------
<S> <C> <C>
Net Income $ 4,969 $ 4,695
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities
Depreciation and amortization 977 960
Provision for possible credit losses 665 485
Provision for possible OREO losses 42 (46)
Loss on sale of equipment 2 3
Provision for deferred taxes 178 98
Increase (decrease) in taxes payable (183) 287
Decrease in other assets 66 13
Decrease in interest receivable 101 329
Increase (decrease) in discounts and premiums (102) 19
Increase (decrease) in interest payable 267 (137)
(Increase) decrease in prepaid expenses 168 (2)
(Decrease) in accrued expenses and other liabilities (1,153) (161)
Increase in cash surrender value of live insurance (413) (338)
------- -------
Total Adjustments 615 1,510
------- -------
Net Cash Provided (Used) by Operating Activities $ 5,584 $ 6,205
======= =======
</TABLE>
DISCLOSURE OF ACCOUNTING POLICY
For purposes of reporting cash flows, cash and cash equivalents include
cash on hand, amounts due from banks and Federal funds sold. Generally, Federal
funds are purchased and sold for one-day periods.
See accompanying notes to financial statements
6
<PAGE> 7
FOOTHILL INDEPENDENT BANCORP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(dollars in thousands)
September 30, 2000 and 1999
NOTE #1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments considered necessary for a fair
statement of the results for the interim periods presented have been included.
For further information, refer to the financial statements and footnotes thereto
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1999.
NOTE #2 - OTHER EXPENSES
The following is a breakdown of other expenses for the nine and three
month periods ended September 30, 2000 & 1999.
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
-------------------- ------------------
2000 1999 2000 1999
------- ------ ------ ------
<S> <C> <C> <C> <C>
Data processing $ 799 $ 714 $ 266 $ 246
Marketing expenses 769 878 205 275
Office supplies, postage and telephone 797 847 288 265
Bank Insurance 360 327 121 45
Supervisory Assessments 88 69 26 28
Professional Expenses 1,122 1,406 357 327
Provision for OREO Loss -- 64 -- 18
Provision for Y2K Expense (285) -- -- --
Other Expenses 1,887 1,411 635 448
------- ------ ------ ------
Total Other Expenses $ 5,537 $5,716 $1,898 $1,652
======= ====== ====== ======
</TABLE>
NOTE #3 - EARNINGS PER SHARE
The following is a reconciliation of net income and shares outstanding
to the income and number of shares used to compute earnings per share (amounts
in thousands):
<TABLE>
<CAPTION>
Nine Months Ended September 30, Three Months Ended September 30,
-------------------------------------- -------------------------------------
2000 1999 2000 1999
---------------- ----------------- ----------------- ----------------
Income Shares Income Shares Income Shares Income Shares
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net income as reported $4,969 $4,695 $1,747 $1,630
Shares outstanding at period end 5,354 5,837 5,354 5,837
Impact of weighting shares
purchased during the period 125 73 (8) 34
------ ------ ------ ------ ------ ------ ------ ------
Used in Basic EPS 4,969 5,479 4,695 5,910 1,747 5,346 1,630 5,871
Dilutive effect of outstanding
stock options 386 361 388 351
------ ------ ------ ------ ------ ------ ------ ------
Used in Dilutive EPS $4,969 5,865 $4,695 6,271 $1,747 5,734 $1,630 6,222
====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
7
<PAGE> 8
Notes to Condensed Consolidated Financial Statements (continued)
NOTE #4 - INCOME TAXES
The Bank adopted Statement No. 109 of the Financial Accounting
Standards Board, Accounting for Income Taxes, commencing January 1, 1993. This
new statement supersedes Statement No. 96 and among other things, changes the
criteria for the recognition and measurement of deferred tax assets. This
adoption does not create a material change in the financial statements of the
Bank or the Company.
NOTE #5 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial Accounting Standards Board Statement 107 is effective for
financial statements for fiscal years ending after December 15, 1992. The
Statement considers the fair value of financial instruments for both assets and
liabilities.
The following methods and assumptions were used to estimate the fair
value of financial instruments.
Investment Securities
For U.S. Government and U.S. Agency securities, fair values are based
on market prices. For other investment securities, fair value equals quoted
market price if available. If a quoted market price is not available, fair value
is estimated using quoted market prices for similar securities as the basis for
a pricing matrix.
Loans
The fair value for loans with variable interest rates is the carrying
amount. The fair value of fixed rate loans is derived by calculating the
discounted value of the future cash flows expected to be received by the various
homogeneous categories of loans. All loans have been adjusted to reflect changes
in credit risk.
Deposits
The fair value of demand deposits, savings deposits, savings accounts
and NOW accounts is defined as the amounts payable on demand at September 30,
2000. The fair value of fixed maturity certificates of deposit is estimated
based on the discounted value of the future cash flows expected to be paid on
the deposits.
Notes Payable
Rates currently available to the Bank for debt with similar terms and
remaining maturities are used to estimate the fair value of existing debt.
8
<PAGE> 9
Notes to Condensed Consolidated Financial Statements (continued)
Note #5 - Disclosures about Fair Value of Financial Instruments (Continued)
Commitments to Extend Credit and Standby Letter of Credit
The fair value of commitments is estimated using the fees currently
charged to enter into similar agreements, taking into account the remaining
terms of the agreements and the present creditworthiness of the parties
involved. For fixed-rate loan commitments, fair value also considered the
difference between current levels of interest rates and committed rates.
The fair value of guarantees and letters of credit are based on fees
currently charged for similar agreements or on the estimated cost to terminate
them or otherwise settle the obligations with parties involved at September 30,
2000.
The estimated fair values of the Bank's financial instruments are as
follows:
September 30, 2000
----------------------------
Carrying Amount Fair Value
--------------- ----------
(dollars in thousands)
Financial Assets
Cash and Cash equivalents $ 41,827 $ 41,827
Investment securities and deposits 66,296 63,768
Loans 369,189 365,977
Direct lease financing 1,225 1,216
Financial Liabilities
Deposits 436,814 436,834
Short term debt 8,000 8,000
Long term debt 0 0
Unrecognized Financial Instruments
Commitments to extend credit 47,118 47,118
Standby letters of credit 954 954
9
<PAGE> 10
NOTE # 6 - NON-PERFORMING LOANS
The following table sets forth information regarding the Bank's
non-performing loans at September 30, 2000 and December 31, 1999.
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------- ------------
(dollars in thousands)
<S> <C> <C>
Accruing Loans More Than 90 Days Past Due (1)
Aggregate Loan Amounts
Commercial, financial and agricultural $ -- $ 148
Real Estate 240 50
Installment loans to individuals -- 4
Aggregate Leases -- --
Total Loans Past Due More Than 90 Days 240 202
Troubled Debt Restructurings (2) 1,602 1,780
Non-accrual loans (3) 3,399 6,068
------ -------
Total Non-Performing Loans $5,241 $8,050
====== ======
</TABLE>
-----------------
(1) Reflects loans for which there has been no payment of interest and/or
principal for 90 days of more. Ordinarily, loans are placed on non-accrual
status (accrual of interest is discontinued) when the Bank has reason to
believe that continued payment of interest and principal is unlikely.
(2) Renegotiated loans are those which have been renegotiated to provide a
deferral of interest or principal.
(3) There were 8 loans on non-accrual status totaling approximately $3,399,000
at September 30, 2000 and 14 loans totaling approximately $6,068,000 at
December 31, 1999.
The policy of the Company is to review each loan in the loan portfolio
to identify problem credits. In addition, as an integral part of its review
process of the Bank, the Federal Reserve Bank and the California Department of
Financial Institutions also classifies problem credits. There are three
classifications for problem loans: "substandard", "doubtful", and "loss".
Substandard loans have one defined weaknesses and are characterized by the
distinct possibility that the Bank will sustain some loss if the deficiencies
are not corrected. Doubtful loans have the weaknesses of substandard loans with
the additional characteristic that the weaknesses make collection or liquidation
in full, on the basis of currently existing facts, conditions, and values,
questionable. A loan classified as "loss" is considered uncollectible and of
such little value that the continuance as an asset of the institution is not
warranted. Another category designated "special mention" is maintained for loans
which do not currently expose the Bank to a significant degree of risk to
warrant classification as substandard, doubtful or loss, but do possess credit
deficiencies or potential weaknesses deserving management's close attention.
As of September 30, 2000, the Bank's classified loans consisted of
approximately $11,483,970 of loans classified as substandard. There were no
loans classified as doubtful. The Bank's $11,483,970 of loans classified as
substandard consisted of approximately $8,084,000 of performing and accruing
loans and approximately $3,399,490 of non-accrual loans.
Notes to Condense Consolidated Financial Statements (continued)
NOTE # 7 - RESERVE FOR LOAN AND LEASE LOSSES
The reserve for loan and lease losses is a general reserve established
by Management to absorb potential losses inherent in the entire portfolio. The
level of and ratio of additions to the reserve are based on a continuous
analysis of the loan and lease portfolio and, at September 30, 2000, reflected
an amount which, in Management's judgement, was adequate to provide for known
and inherent loan losses. In evaluating the adequacy of the reserve, Management
gives consideration to the composition of the loan portfolio, the performance of
loans in the portfolio, evaluations of loan collateral, prior loss experience,
current economic conditions and the prospects or worth of
10
<PAGE> 11
respective borrowers or guarantors. In addition, the Federal Reserve Bank or
Department of Financial Institutions, as an integral part of their examination
process, periodically reviews the Bank's allowance for possible loan and lease
losses. The examiners may require the Bank to recognize additions to the
allowance based upon their judgement of the information available to it at the
time of its examination. The Bank was most recently examined by the Federal
Reserve Bank as of March 31, 2000.
The reserve for loan and lease losses at September 30, 2000, was
$3,901,000 or 1.05% of total loans and leases. Additions to the reserve are
effected through the provision for loan losses which is an operating expense of
the Company.
The following table provides certain information with respect to the
Company's allowance for loan losses as well as charge-off and recovery activity.
The following table provides certain information with respect to the Company's
allowance for loan losses as well as charge-off and recovery activity.
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------- ------------
(dollars in thousands)
<S> <C> <C>
Allowance for Loan Losses
Balance, Beginning of period $ 6,102 $ 5,576
Charge-Offs
Commercial, financial and agricultural (3,067) (112)
Real estate - construction -- --
Real estate - mortgage -- (45)
Consumer Loans (29) (39)
Lease Financing -- --
Other -- --
------- -------
Total Charge-Offs (3,096) (196)
------- -------
Recoveries
Commercial, financial and agricultural 53 44
Real estate - construction -- --
Real estate - mortgage 170 188
Consumer loans 7 5
Lease Financing -- --
Other -- --
------- -------
Total Recoveries 230 237
------- -------
Net Recoveries (Charge-Offs) (2,866) 41
Provision Charged to Operations 665 485
------- -------
Balance, End of period $ 3,901 $ 6,102
======= =======
Net Charge-Offs During the Period to Average Loans
Outstanding During the Period Ended 0.80% (0.01)%
======= =======
Allowance for Loan Losses to Total Loans 1.05% 1.76%
======= =======
</TABLE>
In accordance with SFAS No. 114 (as amended by SFAS No. 118),
"Accounting by Creditors for Impairment of a Loan," loans identified as
"impaired" are measured on the present value of expected future cash flows
discounted at the loan's effective interest rate, except that as a practical
expedient, a creditor may measure impairment based on a loan's observable market
price, or the fair value of the collateral if the loan is collateral dependent.
A loan is impaired when it is probable the creditor will not be able to collect
all contractual principal and interest payments due in accordance with the terms
of the loan agreement. Loan impairment is evaluated on a loan-by-loan basis as
part of normal loan review procedures of the Bank.
For additional information regarding the loan charge-offs in the
quarter ended September 30, 2000, see "MANAGEMENT'S DISCUSSION OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS --RESULTS OF OPERATIONS -- Provision for
Loan and Lease Losses."
11
<PAGE> 12
Notes to Condense Consolidated Financial Statements (continued)
NOTE # 8 - MARKET RISK
The Company's management utilizes the results of a dynamic simulation
model to quantify the estimated exposure of net interest income to sustained
interest rate changes. The simulation model estimates the impact of changing
interest rates on the interest income from all interest earning assets and the
interest expense paid on all interest bearing liabilities reflected on the
Company's balance sheet. This sensitivity analysis is compared to policy limits
which specify maximum tolerance level for net interest income exposure over a
one year horizon assuming no balance sheet growth and 100 and 300 basis point
upward and downward shifts in interest rates. Parallel and pro rata shifts in
rates over a 12-month period are assumed.
The Company does not engage in any hedging activities and does not have
any derivative securities in its portfolio. The following reflects the Company's
net interest income sensitivity analysis as of September 30, 2000:
<TABLE>
<CAPTION>
(Dollars in Thousands)
Market Value
Estimated Net Interest ---------------------------
Simulated Rate Changes Income Sensitivity Assets Liabilities
---------------------- ---------------------- -------- -----------
<S> <C> <C> <C>
+100 basis points -4.28% $477,084 $463,744
+300 basis points -12.92% $462,843 $435,761
-100 basis points 3.49% $492,997 $437,752
-300 basis points 6.52% $510,873 $438,786
</TABLE>
12
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FORWARD LOOKING INFORMATION
Certain information contained in this Report include statements that
are forward-looking, such as statements relating to the Company's expectations
regarding its future financial performance and its future plans and activities.
Such forward-looking information involves risks and uncertainties that could
cause our actual financial performance to differ, possibly significantly, from
our expected future financial performance. A discussion of those risks and
uncertainties follows this Section of this Form 10-Q Report and readers of this
Report are urged to review that discussion.
GENERAL
Our principal operating subsidiary, Foothill Independent Bank, which is
a California state chartered bank (the "Bank"), accounts for substantially all
of our revenues and income. Accordingly, the following discussion focuses
primarily on its operations and financial condition.
RESULTS OF OPERATIONS
OVERVIEW. During the first nine months of 2000, we generated net
earnings of $4,969,000, which represents an increase of $274,000, or 6%, over
net earnings in the first nine months of 1999. That increase was due primarily
to an increase in interest income and, to a lesser extent, to a reduction in
non-interest expense. Net earnings for the nine months ended September 30, 2000
represent an annualized return on average assets of 1.38% and an annualized
return on average equity of 14.2%, compared to 1.35% and 13.0%, respectively,
for the same period of 1999. On a per share basis, our net earnings increased by
15% to $0.91 for the nine months ended September 30, 2000, from $0.79 for the
same nine months of 1999, due to the increase in net earnings and a reduction in
the weighted average number of shares outstanding to 5,479,000 shares for the
nine months ended September 30, 2000, from 5,910,000 shares for the same nine
months of 1999, as a result of stock repurchases that we made under our open
market and private stock purchase program.
NET INTEREST INCOME. Net interest income is a principal determinant of
a bank's income. Net interest income represents the difference or "spread"
between the interest earned on interest-earning assets, such as loans and
investment securities, and the interest paid on interest-bearing liabilities,
principally deposits. Net interest income increased by $635,000, or 3.1%, in the
nine month period ended September 30, 2000, as compared to the same period of
1999, primarily as a result of a $2,367,000, or 8.9%, increase in interest
income that was partially offset by an increase of $1,732,000, or 27.6%, in
interest expense. Net interest income for the third quarter of 2000 increased by
$180,000, or 2.7%, compared to the third quarter of 1999, primarily as a result
of a $1,002,000, or 11.3%, increase in interest income which more than offset a
$822,000, or 39.2%, increase in interest expense. These increases in interest
income in the three and nine month periods ended September 30, 2000 were
attributable primarily to increases in the volume of outstanding loans, and, to
a lesser extent, increases in interest rates charged on loans in response to
increases in market rates of interest. The increase in interest expense was due
primarily to increases in the volume of time certificates of deposits ("time
deposits"), including those in denominations of $100,000 or more ("TCD's") on
which the Bank pays its highest rates of interest and, to a lesser extent, on
higher rates paid on interest bearing deposits due to increases in market rates
of interest.
RATE SENSITIVITY AND NET INTEREST MARGIN.
RATE SENSITIVITY. Like other banks and bank holding companies, our
margins (that is, the difference between yields we are able to realize on loans
and other interest earning assets and the interest we pay on deposits) are
affected by a number of factors, including the relative percentages or the "mix"
of (i) our assets, between loans, on the one hand, on which we are able to
obtain higher rates of interest, and investment securities, federal funds sold
and funds held in interest-bearing deposits with other financial institutions,
on the other hand, on which yields generally are lower; (ii) variable and fixed
rate loans in our loan portfolio; and (iii) demand and savings deposits, on the
one hand, and time deposits, on the other hand, on which we pay higher rates of
interest.
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It is generally the case that a bank with a relatively high
percentage of fixed-rate loans will experience a decline in interest income
during a period of increasing market rates of interest, because it will be
unable to "reprice" its fixed rate loans to fully offset the increase in the
rates of interest it must offer to retain maturing time deposits and attract new
deposits. Similarly, a bank with a high percentage of time deposits generally
will experience greater increases in interest expense, and therefore, a decrease
in net interest income, during a period of increasing market rates of interest
than a bank with a greater percentage of demand and savings deposits which are
less sensitive to changes in market rates of interest. By contrast, during a
period of declining market rates of interest, a bank with a higher percentage of
variable loans, as a general rule, will experience a decline in net interest
income because such loans usually contain automatic repricing provisions that
are "triggered" by declines in market rates of interest; whereas offsetting
reductions in the rates of interest paid on time deposits cannot be implemented
until they mature, at which time a bank can seek their renewal at lower rates of
interest or allow such deposits to be withdrawn in order to reduce interest
expense.
NET INTEREST MARGIN. We attempt to reduce our exposure to interest
rate fluctuations and, thereby, at least to maintain and, if possible, to
increase, our net interest margin or spread by seeking (i) to attract and
maintain a significant volume of demand and savings deposits that are not as
sensitive to interest rate fluctuations as are TCD's and other time deposits,
and (ii) to match opportunities to "reprice" earning assets, particularly loans,
in response to changes in market rates of interest which require or cause
repricing of deposits. At the end of 1999, we made the decision to offer
programs designed to bring additional TCD's in to the Bank, after two years of
allowing those deposits to "run off". As a result, demand and savings (including
money market) deposits represented 75% of average total deposits at September
30, 2000, with TCD deposits representing 25%, compared to 79% and 21%,
respectively, at December 31, 1999, and 78% and 22%, respectively, at September
30, 1999. As a result, in the quarter and nine months ended September 30, 2000,
the Bank's net interest margin (i.e., tax-adjusted net interest income stated as
a percentage of average interest-earning assets) was 6.31% and 6.47%,
respectively, compared to 6.39% and 6.44% for the same periods of 1999. However,
our net interest margin continues to exceed the average net interest margin for
California-based, publicly traded banks and bank holding companies with assets
ranging from $250-to-$750 million (the "Peer Group Banks").
The ability to maintain our net interest margin is not entirely
within our control because the interest rates we are able to charge on loans and
the interest rates we must offer to maintain and attract deposits are affected
by national monetary policies established and implemented by the Federal Reserve
Board and by competitive conditions in our service areas. In addition, the
effect on a bank's net interest margins of changes in market rates of interest
will depend on the types and maturities of its deposits and earning assets. For
example, a change in interest rates paid on deposits in response to changes in
market rates of interest can be implemented more quickly in the case of savings
deposits and money market accounts than with respect to time deposits as to
which a change in interest rates generally cannot be implemented until such
deposits mature. In addition, a change in rates of interest paid on deposits can
and often does lead consumers to move their deposits from one type of deposit to
another or to shift funds from deposits to non-bank investments or from such
investments to bank deposit accounts or instruments, which also will affect a
bank's net interest margin.
PROVISION FOR LOAN AND LEASE LOSSES. We follow the practice of
maintaining a reserve for possible losses on loans and leases that occur from
time to time as an incidental part of the banking business. Write-offs of loans
(essentially reductions in the carrying values of non-performing loans due to
possible losses on their ultimate recovery) are charged against this reserve
(the "Loan Loss Reserve"). This Reserve is adjusted periodically to reflect
changes in (i) the volume of outstanding loans, and (ii) the risk of potential
losses due to a deterioration in the condition of borrowers or in the value of
property securing non-performing loans or changes in economic conditions.
Additions to the Loan Loss Reserve are made through a charge against income
referred to as the "provision for loan and lease losses." During the second
quarter of 2000, we charged off $3.055 million of non-accrual loans to their
then net realizable value, due to the bankruptcy of a large corporate borrower.
These loans had been fully reserved against potential losses during the previous
fiscal years and, as a result, these charge-offs had no effect on our operating
results during the nine months ended September 30, 2000. The quality of our loan
portfolio was improved, however, as a result of these charge-offs, as is
indicated by the following: the ratio of non-performing loans-to-total loans
improved to 0.98% at September 30, 2000 from 1.89% at September 30, 1999; and
the ratio of non-performing assets-to-total assets improved to 1.22% at
September 30, 2000 compared to 1.64% at September 30, 1999.
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<PAGE> 15
In the three and nine-month periods ended September 30, 2000, we made
provisions for potential loan and lease losses of $190,000 and $655,000,
respectively, as compared to $205,000 and $485,000 for the corresponding periods
of 1999. At September 30, 2000, the Loan Loss Reserve was approximately
$3,901,000 or 1.05% of total loans and leases outstanding, compared to
approximately $6,111,000 or 1.94% of total loans and leases outstanding at
September 30, 1999. Excluding the above-mentioned second quarter charge-offs,
recoveries of previously "charged-off" loans exceeded loan charge-offs by
$189,000 in the first nine months of 2000. By comparison, in the same nine
months of 1999, recoveries of previously charged-off loans exceeded loan
charge-offs by $50,000. See Note 7 to our Condensed Consolidated Financial
Statements in this Report for further information with respect to an analysis of
the Bank's loan and lease loss experience for the first nine months of 2000
compared to the experience for 1999.
OTHER INCOME. Other income increased by $68,000 or 6.0%, in the quarter
ended September 30, 2000, compared to the same quarter of 1999, due primarily to
increases in transaction fees and service charges collected on deposits and
other banking transactions. For the nine months ended September 30, 2000, other
income decreased by $68,000, or 2.0%, compared to the same period of 1999,
primarily due to a one-time gain on the sale of SBA loans in the first half of
1999 that was not realized in the first half of 2000.
OTHER EXPENSE. Other expense (also often referred to as "non-interest
expense"), consists primarily of (i) salaries and other employee expenses, (ii)
occupancy and furniture and equipment expenses, and (iii) other operating and
miscellaneous expenses that include insurance premiums, marketing expenses, data
processing costs, professional expenses, and charges that are periodically made
against income to establish reserves for possible losses on the disposition or
declines in market values of real properties acquired on or in lieu of
foreclosure of defaulted loans (commonly referred to as "other real estate
owned" or "OREO").
In order to attract a higher volume of non-interest bearing demand and
lower cost savings and money market deposits and, thereby, improve our net
interest margin, it has been our policy to provide a higher level of personal
service to our customers than the level of services that are provided by many of
our competitors. As a result, our net interest margin has usually exceeded the
average net interest margin of the Peer Group Banks and more than offset the
adverse effects that the higher costs of providing such services would otherwise
have had on our profitability.
Nevertheless, during the 1999 and continuing into 2000, we implemented
a number of cost reduction programs designed to reduce non-interest expenses
and, thereby increase operating efficiencies, without adversely affecting the
quality of service we provide to our customers. As a result of those programs,
during the nine month period ended September 30, 2000, we were able to reduce
our non-interest expenses by $99,000 compared to the same period of 1999,
despite a $60,000 increase in those expenses in the three-month period ended
September 30, 2000. Additionally, our "efficiency ratio" (that is, basically,
the ratio of non-interest expense to the sum of our net interest income and
other income) improved to 60.8% and 63.8%, respectively, in the three and nine
month periods ended September 30, 2000, from 64.8% and 66.7%, respectively, for
the same three and nine month periods of 1999.
INCOME TAXES. Income taxes increased by approximately $86,000 or 9.2%
and $212,000 or 7.8%, respectively, during the three and nine month periods
ended September 30, 2000 compared to the same periods of 1999, primarily as a
result of the increases in pre-tax income.
FINANCIAL CONDITION
Our total assets increased during the nine months ended September 30,
2000 by $37,297,000, or 8.1%, when compared to total assets at December 31,
1999. Average assets at September 30, 2000 were $22,942,000 or 4.9%, higher than
total average assets at December 31, 1999. As mentioned above, in the latter
part of 1999 we implemented programs designed to attract additional time
deposits, including TCD's, while continuing programs to increase non-interest
bearing checking and lower cost savings and money market deposits. At September
30, 2000, the volume of demand and savings deposits at the Bank was $12,732,000,
or 4.17%, higher than at December 31, 1999, while the volume of time deposits,
including TCD's, was $26,818,000, or 29.8%, higher than at December 31, 1999.
However, the percentage of total deposits represented by time deposits increased
only to 26.7% at September 30, 2000 from 22.6% at December 31, 1999.
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LIQUIDITY MANAGEMENT. Liquidity management policies attempt to achieve
a matching of sources and uses of funds in order to enable us to fund our
customers' requirements for loans and for deposit withdrawals. In conformity
with those policies, we maintain a number of short-term sources of funds to meet
periodic increases in loan demand and deposit withdrawals and maturities. At
September 30, 2000, the principal sources of liquidity consisted of $26,327,000
of cash and demand balances due from other banks and $15,500,000 in Federal
funds sold, which, together, totaled $41,827,000, as compared to $27,862,000 at
December 31, 1999. Other sources of liquidity include $39,590,000 in securities
available-for-sale, of which approximately $12,855,000 mature within one year;
$5,000,000 in securities held-to-maturity which mature within one year; and
$6,030,000 in interest bearing deposits at other financial institutions, which
mature in 6 months or less. We also have established facilities enabling us to
borrow up to $10,100,000 of Federal funds from other banks and we have a
$13,735,500 line of credit with the Federal Home Loan Bank of which $8,000,000
was in use under a 30-day advance at September 30, 2000. During the third
quarter of 1999 we also received approval from the Federal Reserve Bank of San
Francisco to establish an account that will also allow us to borrow at their
discount window should the need arise. Additionally, substantially all of our
installment loans and leases, the amount of which aggregated $6,630,000 at
September 30, 2000, require regular installment payments from customers,
providing us with a steady flow of cash funds. Accordingly, we believe that we
have adequate cash and cash equivalent resources to meet any increases in demand
for loans-and leases and any increase in deposit withdrawals that might occur in
the foreseeable future.
CAPITAL RESOURCES. The increases in earnings achieved since January 1,
1997 caused our capital ratios to increase in relation to regulatory capital
requirements. However, those increases in capital also caused our return on
average equity to remain relatively fixed despite the increases in earnings. As
a result, in 1998, our Board of Directors authorized an open market and private
stock repurchase program to be funded out of earnings. Between the commencement
of that program in late 1998 and March 31, 2000, we purchased a total of 709,721
shares of common stock for an aggregate price of approximately $8,818,000 and,
in June of 2000, the Board of Directors authorized the continuation of that
repurchase program for an additional 5% of outstanding shares. Between July 1,
2000 and October 31, 2000, we have purchased an additional 53,260 shares for an
aggregate purchase price of $553,750.
In addition, in March 1999, the Board declared a $.25 per share cash
dividend that was paid on April 15, 1999 to shareholders of record as of April
5, 1999 and, in September of 1999 the Board adopted a new cash dividend policy
which provided for the Company to pay quarterly cash dividends of $.08 per
share. In October 2000, the Board of Directors increased the quarterly cash
dividend to $0.10 per share.
In has been and continues to be the objective of the Board of Directors
to retain earnings to meet capital requirements under applicable government
regulations and to support our growth. As a result, the Board may change the
amount or frequency of cash dividends to the extent that it deems necessary or
appropriate to achieve these objectives. For example the retention of earnings
in previous years enabled us to fund the opening of four new banking offices and
extend the Bank's market areas, all of which have contributed to our increased
profitability and the maintenance of our capital adequacy ratios well above
regulatory requirements.
We continue to evaluate and explore opportunities to expand our market
into areas such as eastern Los Angeles County, western San Bernardino County,
north Orange County and northern Riverside County, all of which are contiguous
to our existing markets. We believe that the mergers and consolidations of a
number of independent banks that have occurred since 1997 have created
opportunities for us to increase our market share in those areas. We took
advantage of those opportunities within our existing market areas in 1998 and
1999, during which we established a substantial number of new customer
relationships and increased the volume of our demand, savings and money market
deposit balances obtained largely from customers of the merged banks who we
disaffected by the quality of services they were receiving. We believe that
there are still expansion and growth opportunities to take advantage of and, we
are taking advantage of one of those opportunities by opening our 12th banking
office, in the city of Temecula, California in January of 2001.
At September 30, 2000, the Bank's Tier 1 leverage ratio and Tier 1
risk-based capital ratio were 9.75% and 11.86%, respectively, which were in
excess of minimum bank regulatory requirements. Our consolidated Tier 1
risk-based capital ratio was 11.92%. The risk-based capital ratio is determined
by weighting our assets in
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<PAGE> 17
accordance with certain risk factors and, the higher the risk profile of the
assets, the greater is the amount of capital that is required to maintain an
adequate risk-based capital ratio, which generally is at least 8%. The Tier 1
capital and Tier 1 risk-based capital ratios of the Bank compare favorably with
those of the Peer Group Banks.
Under accounting principles that address the financial reporting
requirements for investments in certain equity and debt securities held by
financial institutions, any unrealized gain on such securities is required to be
credited to, and any unrealized losses are required to be charged against,
stockholders' equity. At September 30, 2000, we recorded a valuation reserve for
unrealized losses on such securities aggregating approximately $440,000. A
substantial portion of this amount is related to certain investments in mutual
funds, which are classified as investments in marketable equity securities, but
which we have held for several years and intend to continue to hold for the
foreseeable future.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is the risk of loss to future earnings, to fair values of
assets or to future cash flows that may result from changes in the price or
value of a financial instrument. The value of a financial instrument may change
as a result of changes in interest rate and other market conditions. Market risk
is attributed to all market risk sensitive financial instruments, including loan
and investment securities, deposits and borrowings. We do not engage in trading
activities or participate in foreign currency transactions for our own account.
Accordingly, our exposure to market risk is primarily a function of our asset
and liability management activities and of changes in market rates of interest
that can cause or require increases in the rates we pay on deposits that may
take effect more rapidly or may be greater than the increases in the interest
rates we are able to charge on loans and the yields that we can realize on our
investments. The extent of that market risk, depends on a number of variables,
including the sensitivity to changes in market interest rates and the maturities
of our interest earning assets and our deposits. See "Rate Sensitivity" above.
We use a dynamic simulation model to forecast the anticipated impact of
changes in market interest rates on our net interest income. That model is used
to assist management in evaluating, and in determining and adjusting strategies
designed to reduce, our exposure to these market risks, which may include, for
example, changing the mix of earning assets or interest-bearing deposits. See
Note 8 to our Condensed Consolidated Financial Statements in this Report for
further information with respect to that dynamic simulation model that, based on
certain assumptions, attempts to quantify the impact that simulated upward and
downward interest rate changes would have on our net interest income.
FORWARD LOOKING INFORMATION AND UNCERTAINTIES REGARDING FUTURE PERFORMANCE
This Report, including Management's Discussion and Analysis of
Financial Condition and Results of Operations, contains certain forward-looking
information, which reflects management's current views of future financial
performance. The forward-looking information is subject to certain risks and
uncertainties, which are discussed in detail in our Annual Report on Form 10-K
for the fiscal year ended December 31, 2000 filed with the Securities and
Exchange Commission and include the following:
INCREASED COMPETITION. Increased competition from other financial
institutions, mutual funds and securities brokerage and investment banking firms
that offer competitive loan and investment products could require the Bank to
reduce interest rates and loan fees to attract new loans or to increase interest
rates that it offers on time deposits, either or both of which could, in turn,
reduce interest income and net interest margins.
POSSIBLE ADVERSE CHANGES IN LOCAL ECONOMIC CONDITIONS. Adverse changes
in local economic conditions could (i) reduce loan demand which could, in turn,
reduce interest income and net interest margins; (ii) adversely affect the
financial capability of borrowers to meet their loan obligations which, in turn,
could result in increases in loan losses and require increases in reserves for
possible loan losses, thereby adversely affecting earnings; and (iii) lead to
reductions in real property values that, due to our reliance on real property to
secure many of our loans, could make it more difficult for us to prevent losses
from being incurred on non-performing loans through the sale of such real
properties.
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POSSIBLE ADVERSE CHANGES IN NATIONAL ECONOMIC CONDITIONS AND FRB
MONETARY POLICIES. Changes in national economic conditions, such as increases in
inflation or declines in economic output often prompt changes in Federal Reserve
Board monetary policies that could increase the cost of funds to us and reduce
net interest margins, particularly if we are unable, due to competitive
pressures or the rate insensitivity of earning assets, to effectuate
commensurate increases in the rates we are able to charge on existing or new
loans.
CHANGES IN REGULATORY POLICIES. Changes of federal and state bank
regulatory policies, such as increases in capital requirements or in loan loss
reserves, or changes in asset/liability ratios, could adversely affect earnings
by reducing yields on earning assets or increasing operating costs.
EFFECTS OF GROWTH. It is our intention to take advantage of
opportunities to increase our business, either through acquisitions of other
banks or the establishment of new banking offices. If we do acquire any other
banks or open any additional banking offices we are likely to incur additional
operating costs that may adversely affect our operating results, at least on an
interim basis, until any acquired bank is integrated into our operations or the
new banking offices are able to achieve profitability.
Due to these and other possible uncertainties and risks, readers are
cautioned not to place undue reliance on the forward-looking statements, which
speak only as of the date of this Quarterly Report, or to make predictions based
solely on historical financial performance.
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders was held on September 7, 2000. The
only matters voted on at the Annual Meeting were (i) the election of two Class I
Directors for a term of two years ending at the Annual Meeting of Stockholders
to be held in 2002, and (ii) the election of two Class II Directors for a term
of two years ending at the Annual Meeting of Stockholders to be held in 2003.
The only persons nominated at the Annual Meeting for election as Class I and
Class II Directors were the nominees of the Board of Directors, who are
identified below.
Directors Elected at Annual Meeting. Set forth below is the name of (i)
each of the Class I and Class II Directors that were elected at the Annual
Meeting and the respective numbers of votes cast for their election and the
respective number of votes withheld. As the election was uncontested, there were
no broker non-votes.
Nominee/Director Votes "For" Votes "Withheld"
---------------- ----------- ----------------
CLASS I DIRECTORS:
George Langley 4,057,335 507,844
Max Williams 4,058,710 506,469
CLASS II DIRECTORS:
Donna Miltenberger 4,007,994 557,185
George Sellers 4,044,852 520,327
Directors Continuing in Office. The terms of office of the following
incumbent Class III directors extend to 2001 and, therefore, they did not stand
for re-election at the 2000 Annual Meeting: Richard Galich, William V.
Landecena, and O. L. Mestad.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
27 - Financial Data Schedule
(b) Reports on Form 8-K:
None
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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.
Date: November 9, 2000 FOOTHILL INDEPENDENT BANCORP
By: /s/ CAROL ANN GRAF
----------------------------------
Carol Ann Graf
Senior Vice President and
Chief Financial Officer
and Assistant Secretary
<PAGE> 21
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------ -----------
27 Financial Data Schedule
