<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC. 20549
(Mark One)
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
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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 0-265520
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CALIFORNIA INDEPENDENT BANCORP
------------------------------
(Exact name of registrant as specified in its charter)
CALIFORNIA 68-0349947
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1227 BRIDGE ST., SUITE C, YUBA CITY, CALIFORNIA 95991
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(Address of principal executive offices)
(Zip Code)
(916) 674-4444
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(Registrant's telephone number, including area code)
N/A
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(Former name, former address and former fiscal year, if changed since last
report)
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
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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.
Outstanding at
Class September 30, 1997
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Common stock, no par value 1,634,621 Shares
This report contains a total of 23 pages
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1
<PAGE>
PART I- FINANCIAL INFORMATION
<TABLE>
<CAPTION>
ITEM 1 PAGE
<S> <C>
CALIFORNIA INDEPENDENT BANCORP AND
SUBSIDIARIES FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS 3
CONSOLIDATED STATEMENTS OF INCOME FOR THREE MONTHS 4
CONSOLIDATED STATEMENTS OF INCOME FOR NINE MONTHS 5
CONSOLIDATED STATEMENTS OF CASH FLOWS 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7-8
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 9-21
PART II- OTHER INFORMATION
ITEM 6
Exhibits and Reports on Form 8K 22
SIGNATURES 23
</TABLE>
2
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
CALIFORNIA INDEPENDENT BANCORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
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<S> <C> <C>
ASSETS
Cash and due from banks $ 18,521 $ 22,928
Federal funds sold 29,700 41,300
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Total Cash and Equivalents 48,221 64,228
Investment securities:
Available-for-sale securities, at fair value 14,256 11,374
Held-to-maturity securities, at amortized cost
(fair value of $23,963 and $23,511 respectively) 23,839 23,289
Loans:
Commercial 98,612 73,620
Consumer 2,237 2,984
Real Estate-mortgage 14,801 28,564
Real Estate-construction & land development 34,832 29,916
Leases and Other 32,752 16,016
------------- ----------
Total loans 183,234 151,100
Less allowance for possible loan losses (4,146) (4,053)
------------- ----------
Net Loans 179,088 147,047
Premises and equipment, net 8,091 7,420
Accrued interest receivable and other assets 9,242 9,244
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Total other assets 17,333 16,664
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TOTAL ASSETS $ 282,737 $ 262,602
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LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand, non-interest bearing $ 55,348 $ 55,117
Demand, interest bearing 36,573 33,659
Savings and Money Market 67,278 67,756
Time certificates 97,795 81,360
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Total deposits 256,994 237,892
Accrued interest payable and other liabilities 3,660 2,824
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TOTAL LIABILITIES 260,654 240,716
Shareholders' equity:
Common stock, no par value; 20,000,000 shares authorized;
1,634,621 and 1,546,032 shares issued and outstanding at
September 30, 1997 and at December 31, 1996,
respectively 12,116 11,088
Retained earnings 9,974 10,816
Net unrealized gains (losses) on available-for-sale
securities (7) (18)
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Total shareholders' equity 22,083 21,886
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 282,737 $ 262,602
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</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE>
CALIFORNIA INDEPENDENT BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996
------------------------------------------
<S> <C> <C>
Interest income:
Interest and fees on loans $ 5,395 $ 4,805
Interest on investment securities 573 404
Interest on federal funds sold 194 103
------------------- ------------------
Total interest income 6,162 5,312
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Interest expense:
Demand, interest bearing 326 280
Savings 627 596
Time certificates 1,447 993
Other 6 15
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Total interest expense 2,406 1,884
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Net interest income 3,756 3,428
Provision for possible loan losses - (80)
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Net interest income after provision for
possible loan losses 3,756 3,348
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Other income:
Service charges 274 190
Net gain (loss) on securities transactions - 1
Other 1,184 485
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Total other income 1,458 676
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Other expenses:
Salaries and benefits 1,988 1,336
Occupancy 203 137
Equipment 331 250
Advertising and promotion 85 56
Stationery and supplies 63 54
Legal and professional fees 95 83
Other operating expenses 811 667
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Total other expenses 3,576 2,583
Earnings before income taxes 1,638 1,441
Income taxes 650 537
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Net Income $ 988 $ 904
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------------------- ------------------
Primary earnings per share $ 0.63 $ 0.62
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------------------- ------------------
Weighted average shares outstanding 1,571,498 1,461,760
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Fully Diluted:
Earnings per share $ 0.55 $ 0.54
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------------------- ------------------
Weighted average shares outstanding 1,809,409 1,683,448
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Cash dividend paid per share of common stock $ 0.11 $ 0.11
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</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE>
CALIFORNIA INDEPENDENT BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996
----------------------------------------
<S> <C> <C>
Interest income:
Interest and fees on loans $ 14,646 $ 12,753
Interest on investment securities 1,867 1,325
Interest on federal funds sold 1,026 924
------------------- -------------------
Total interest income 17,539 15,002
------------------- -------------------
Interest expense:
Demand, interest bearing 1,038 775
Savings 1,945 1,799
Time certificates 3,975 2,772
Other 18 27
------------------- -------------------
Total interest expense 6,976 5,373
------------------- -------------------
Net interest income 10,563 9,629
Provision for possible loan losses (3,336) (180)
------------------- -------------------
Net interest income after provision
for possible loan losses 7,227 9,449
------------------- -------------------
Other income:
Service charges 760 673
Net gain (loss) on securities transactions - 5
Other 2,853 1,226
------------------- -------------------
Total other income 3,613 1,904
------------------- -------------------
Other expenses:
Salaries and benefits 5,585 3,758
Occupancy 527 415
Equipment 941 716
Advertising and promotion 309 270
Stationery and supplies 242 191
Legal and professional fees 232 189
Other operating expenses 2,081 1,751
------------------- -------------------
Total other expenses 9,917 7,290
Earnings before income taxes 923 4,063
Income taxes 311 1,585
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Net Income $ 612 $ 2,478
------------------- -------------------
------------------- -------------------
Primary earnings per share $ 0.39 $ 1.70
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------------------- -------------------
Weighted average shares outstanding 1,556,873 1,453,404
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Fully Diluted:
Earnings per share $ 0.34 $ 1.47
------------------- -------------------
------------------- -------------------
Weighted average shares outstanding 1,798,145 1,688,438
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Cash dividend paid per share of common stock $ 0.33 $ 0.33
------------------- -------------------
------------------- -------------------
</TABLE>
See accompanying notes to consolidated financial statements
5
<PAGE>
CALIFORNIA INDEPENDENT BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND SEPTEMBER 30, 1996
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1997 1996
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 612 $ 2,187
Adjustments to reconcile net income to net cash
provided by operating activities-
Depreciation and amortization 718 513
Provision for possible loan losses 3,336 775
Provision for deferred taxes 9 (1,023)
(Increase) decrease in assets-
Interest receivable (455) (616)
Other assets 336 1,050
Increase (decrease) in liabilities-
Interest payable 329 638
Other liabilities 507 (60)
------------- -------------
Net cash provided by operating activities 5,392 3,464
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (increase) decrease in loans (35,444) (9,015)
Purchase of investments (18,100) (11,660)
Proceeds from maturity of HTM Securities 11,406 5,965
Proceeds from sales/maturity of AFS Securities 3,273 14,605
Proceeds from sales of other real estate owned 178 543
Purchases of premises and equipment (1,388) (791)
------------- -------------
Net cash used for investing activities (40,075) (353)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in noninterest bearing deposits 231 (7,734)
Net increase in interest bearing deposits 18,871 12,334
Cash dividends (512) (457)
Stock options exercised 101 122
Cash paid in lieu of fractional shares (15) (9)
------------- -------------
Net cash provided by financing activities 18,676 4,256
NET INCREASE (DECREASE) (16,007) 7,367
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CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 64,228 22,579
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CASH AND CASH EQUIVALENTS, END OF PERIOD 48,221 29,946
------------- -------------
------------- -------------
</TABLE>
6
<PAGE>
CALIFORNIA INDEPENDENT BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
In the opinion of the Company, the unaudited consolidated financial
statements, prepared on the accrual basis of accounting, contain all
adjustments (consisting of only normal recurring adjustments) which are
necessary to present fairly the financial position of the Company and its
subsidiaries at September 30, 1997 and December 31, 1996, and the results
of its operations for the periods ended September 30, 1997 and 1996,
respectively.
Certain information and footnote disclosures normally presented in
financial statements prepared in accordance with generally accepted
accounting principles have been omitted. The results of operations for
the period ended September 30, 1997 are not necessarily indicative of the
operating results for the full year ending December 31, 1997.
NOTE 2 - CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiary Feather River State Bank, and EPI Leasing
Company Inc., a subsidiary of Feather River State Bank. All material
intercompany accounts and transactions have been eliminated in
consolidation.
.
NOTE 3 - LOANS TO DIRECTORS
In the ordinary course of business, the Company makes loans to directors
of the Company, which on September 30, 1997, amounted to a total of
approximately $7,419,636.
NOTE 4 - COMMITMENTS & CONTINGENT LIABILITIES
In the normal course of business, there are outstanding various
commitments and contingent liabilities, such as commitments to extend
credit and letters of credit, which are not reflected in the financial
statements. Management does not anticipate any material loss as a result
of these transactions.
NOTE 5 - NET INCOME PER SHARE
Net Income per share is computed using the weighted average number of
shares of common stock outstanding (as adjusted retroactively to reflect
the 5% stock dividends paid on August 16, 1996 and September 12, 1997).
7
<PAGE>
NOTE 6 - CASH DIVIDENDS
The Company paid an eleven cent per share dividend in February 1997, May
1997 and August 1997, respectively.
NOTE 7- EARNINGS PER SHARE
Effective December 31, 1997, the Bank is required to adopt Financial
Accounting Standards Board No. 128, Earnings Per Share (EPS). Among other
things, the new standard requires replacement of primary EPS with basic
EPS. Basic EPS is computed by dividing reported earnings available to
common stockholders by weighted average shares outstanding. No dilution
for any potentially dilutive securities is included. Fully diluted EPS,
now called diluted EPS, is still required. The Bank has not quantified
the effect of applying the new standard.
8
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW OF CHANGES IN THE FINANCIAL STATEMENTS
Net income for the third quarter was $988,000 for fully-diluted earnings of $.55
per share, representing an increase of 9.3% over the third quarter 1996, which
saw net income of $904,000, or $.54 per share on a fully-diluted basis.
Year-to-date, the nine months ending September 30, 1997, saw net income of
$612,000, or $.34 per share on a fully-diluted basis as compared to the same
period in 1996, at which time the Company reported net year-to-date earnings of
$2,478,000, or $1.47 per share on a fully-diluted basis.
During the second quarter of 1997, the Company determined that additional
contributions to Loan Loss Reserves were required in order to recognize the
increased risk exposure for a small number of sizable loans in its portfolio.
Management's action resulted in a one -time $3,200,000 contribution to Loan Loss
Reserves. As a result, the second quarter operating results showed a loss and
year-to-date net income for 1997 over 1996 shows a decline.
Total assets at September 30,1997, were $282,737,000, an increase of 7.7% over
December 31, 1996, total assets of $262,602,000.
Outstanding net loans were $179,088,000 at September 30, 1997, compared to
$147,047,000 at December 31, 1996, an increase of $32,041,000 or 21.8%.
The Company's investment portfolio at September 30, 1997, was $38,095,000, or
13.5% of total assets, an increase from $34,663,000 or 13.2% of total assets at
December 31, 1996, as the Company shifted assets from overnight Federal Funds to
longer term, higher yielding investments. At September 30, 1997, Federal Funds
Sold were $29,700,000 as compared to $41,300,000 at December 31, 1996.
Total deposits at September 30, 1997, were $256,994,000 compared to
$237,892,000 at December 31, 1996, an increase of 8.0%. At September 30, 1997,
interest-bearing deposits were $201,646,000, as compared to $182,775,000 at
December 31, 1996, an increase of 10.3%. This increase was primarily due to an
increase of $16,435,000 or 20.2% from December 31, 1996, to September 30, 1997,
in Time Certificates of Deposit. This growth is attributed to the opening of
the new Wheatland Branch and the Bank's aggressive marketing efforts and
competitive rates.
The total loan-to-deposit ratio was 71.3% at September 30, 1997, compared to
63.5% at December 31, 1996. This increase is the result of normal lending
cycles of agricultural loans, real estate loans and the purchase of leases.
9
<PAGE>
LOANS
Total gross loans outstanding as of September 30, 1997 were $183,234,000
representing an increase of $32,134,000 or 21.27% over December 31, 1996.
The increase is attributable to three principal events.
1. The Company's lease portfolio increased from $16,016,000 on December 31,
1996 to $32,752,000 on September 30, 1997 representing growth of 104.5%.
The Company originates commercial and industrial equipment leases through
its subsidiary EPI Leasing Company (EPI) located in Sacramento. EPI was
acquired by the Company during the fourth quarter of 1996 and lease
origination volume has increased substantially during the first nine
months of 1997. One of the Company's loan portfolio management strategies
has been to increase the lease portfolio in order to increase net interest
margin and diversify the portfolio.
2. Agricultural and Commercial loans have increased $24,992,000 or 33.9% as
of September 30, 1997, over December 31 1996. The Company provides a wide
range of loan products to farmers and agri-businesses throughout its trade
area. Agricultural loans are reported under the "Commercial Loans"
category in the consolidated balance sheet. The increase is ascribed to
increased market penetration in the Sacramento and San Joaquin Valleys.
Agricultural and Commercial loan volume increased in concentration between
September 30, 1997 and December 31, 1996. Agricultural loans as a percent
of the Company's total loan portfolio increased from 49% to 62% between
these two time periods. These two periods however, represent the highest
point of the agricultural loans outstanding which occurs in September, and
the lowest point of agricultural loans outstanding typically occurring in
December. The fourth quarter is customarily the time when revenue for
numerous crops are received and applied to loans outstanding. Despite the
reflected increase due to timing, Management has made a conscious effort
to minimize portfolio risk concentrations.
3. Real estate construction loans increased by $4,916,000 or 16.4% from
December 31, 1996, nine months prior. The Company extends construction
loans primarily to builders of single family houses. Loans are made to
individual borrowers and to real estate developers. As a strategy to
increase loan volume, the Company has attempted to diversify its
construction loan activity into several new market areas. The Company
originates construction loans from its Real Estate Department in Yuba City
and its loan production offices in Chico, Roseville and Madera. The
Company's efforts have resulted in increased market share in the Davis,
Chico and greater Sacramento area markets. Construction loan growth has
occurred primarily in these regions.
10
<PAGE>
The Company lends primarily to small and medium sized businesses, small to large
sized farmers and consumers within its market area, which is comprised
principally of Sutter, Yuba, Colusa and Yolo counties and secondarily Butte,
Glenn, Sacramento, Placer, Madera and Fresno counties.
LOAN QUALITY
The Company places loans on nonaccrual status if (1) principal or interest has
been in default for 90 days or more, unless the loan is both well secured and in
the process of collection; (2) payment in full of principal or interest is not
expected; or (3) the financial condition of the borrower has significantly
deteriorated.
The table set forth below summarizes the composition of nonperforming loans as
of September 30, 1997, December 31, 1996 and September 30, 1996.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
ACCRUING LOANS PAST $ Amt. Change % of $ Amt. Change % of $ Amt. % of
DUE 90 DAYS 9/30/97 Prior Per. Class 12/31/96 Prior Per. Class 9/30/96 Class
OR MORE: --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial 428.0 (57.5%) 1.5% 1,006 100.0% 3.9% 62 .2%
Agricultural (-0-) (100.0%) 0.0% 981 509.3% 2.0% -0- 0.0%
Real Estate 379.0 100.0% .7% (-0-) 220 .4%
Leases 260.0 23.8% .8% 210 500.0% 1.3% 116 .6%
Consumer 54.0 +100.0% 2.2%
--------------------------------------------------------------------------------------------------
TOTAL 1,121 (49%) .6% 2,197 1020.9% 1.5% 399 .3%
--------------------------------------------------------------------------------------------------
NONACCRUAL LOANS
--------------------------------------------------------------------------------------------------
Commercial 1,221 692.8% 4.1% 154 340.0% 0.5% 192 .7%
Agricultural 3,480 9842.9% 5.6% 35 (96.3%) 0.0% 417 .7%
Real Estate 2,258 243.7% 4.0% 657 731.6% 1.2% 773 1.5%
Leases (-0-) 0.0% 0.0% (-0-) 0.0% 0.0% -0- 0.0%
Consumer (-0-) 0.0% 0.0% (-0-) 0.0% 0.0% -0- 0.0%
--------------------------------------------------------------------------------------------------
TOTAL 6,959 722.6% 3.8% 846 (20.9%) 0.6% 1382 .9%
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
TOTAL NON-
PERFORMING 8,080 165.5% 4.4% 3,043 140.6% 2.1% 1781 1.1%
--------------------------------------------------------------------------------------------------
</TABLE>
The trend in nonperforming loans has clearly escalated over the past year as
nonperforming loans increased from 1.1% of the portfolio on September 30, 1996
to 4.4% of the portfolio on September 30, 1997. This trend is attributable to
increased risk exposure present in five loan relationships. During the second
quarter of 1997, the Company identified increased credit risk exposure in four
large loan relationships and thirteen leases. Management elected to entirely
charge off twenty assets with a book value of $1,144,077 and write-down four
other assets in the aggregate
11
<PAGE>
amount of $1,980,435. The partially charged-off loans have been written down
to an estimate of the remaining collateral value.
For the nine months ending September 30, 1997, the Company charged off
$3,200,000 while the total charge-offs for all of 1996 were $327,000. As a
result, Management believes that a low loss exposure rests in the remaining
nonperforming loans. Progress has been made during the first nine months of
1997. Many of the nonperforming loans are now operating under either Workout
Agreements, Restructure Agreements or Liquidation Agreements. All of these
loans are in the process of collection. Management projects some progress
toward the reduction of nonperforming assets by year end 1997. However, the
Company is posed with lengthy solutions with a number of their larger workout
loans due to the complex nature of the credits. The overall duration of
these workouts is therefore difficult to predict. As a result, Management
projects a higher level of nonperforming loans (compared to historical
amounts) in the forthcoming two to three quarters.
Management's decision to charge down nonperforming loans, during the second
quarter, significantly reduced the Company's Allowance for Loan Loss
Reserves. Instead of rebuilding the reserve account over a period of time,
Management elected to make a contribution to Loan Loss Reserves of $3,200,000
during the second quarter of 1997. As a result, the Company posted second
quarter 1997 losses of $1,193,000 and six month year to date net loss of
$375,000. Third quarter profitability of $988,000 has restored the nine month
year to date net income to $612,000. The Company uses the allowance method
in providing for possible loan losses. Loan losses are charged to the
allowance for possible loan losses and recoveries are credited to it. The
allowance for loan losses at September 30, 1997 was $4,146,000, an increase
of $93,000 from December 31, 1996. The allowance equates to 2.3% of the
Bank's outstanding loans at September 30, 1997. Management believes that the
total allowance for loan losses is adequate to cover potential losses in the
loan portfolio. While Management uses available information to provide for
loan losses, future additions to the allowance may be necessary based on
changes in economic conditions and other factors. The allowances and loss
estimates are reviewed constantly, and adjustments, as necessary, are charged
to operations in the period in which they become known.
Additions to the allowance for loan losses are made by provisions for
possible loan losses. The provision for possible loan losses is charged to
operating expense and is based upon past loan loss experience and estimates
of potential loan losses which, in Management's judgment, deserve current
recognition. Other factors considered by Management include growth,
composition and overall quality of the loan portfolio, review of specific
problem loans and current economic conditions that may affect the borrower's
ability to repay the loan. Actual losses may vary from current estimates.
The estimates are reviewed constantly, and
12
<PAGE>
adjustments, as necessary, are charged to operations in the period in which
they become known.
In addition to the above, the Company holds real estate properties as "Other
Real Estate Owned" (OREO) recorded at $927,000 at September 30, 1997. In all
cases, the amount recorded on the books is the lesser of the loan balance or the
fair market value obtained from a current appraisal. Therefore, any identified
losses have already been recognized. The Bank is in the process of marketing
the OREO properties.
13
<PAGE>
RESULTS OF OPERATIONS
Three months ended September 30, 1997
compared with
Three months ended September 30, 1996
During the three-month period ending September 30, 1997, the Company showed a
net income of $988,000, an increase of $84,000 over the same period in 1996.
Net interest income before provisions for loan losses increased from
$3,428,000 for the three months ended September 30, 1996, to $3,756,000 for
the same period in 1997, an increase of $328,000 or 9.6%. This additional
income is partially due to an increase of 15.3% in average outstanding loans
during the third quarter of 1997 over the same period in 1996. In addition,
the average prime rate was .25% higher in the third quarter of 1997 over the
same period in 1996.
Other income increased by $782,000 over the same period in 1996, mostly as
the result of increased commission and fees on leases earned by the Bank's
subsidiary, EPI Leasing Company. In addition the Company recognized an
increase in loan servicing fee income, brokered loan fee income and fee
income generated from the bank's alternative financial investment services.
Other expenses for the three months ended September 30, 1997, were
$3,576,000, an increase of $993,000 over the same period in 1996, mostly due
to increases in salaries and benefits. A major contributor to this increase
was the purchase of EPI Leasing Company and the opening of a new branch in
Wheatland, California, in March 1997. In addition, the Bank opened a new
loan production office in Madera, California, in March 1997.
The yield on average earning assets for the three-month period ended
September 30, 1997, compared to the same period in 1996, is set forth in the
following table (in thousands except for percentages):
<TABLE>
<CAPTION>
Three months ended Three months ended
September 30, 1997 September 30, 1996
<S> <C> <C>
Average loans
outstanding $ 195,101 $ 169,271
Average yields 11.06% 11.35%
Amount of interest
& fees earned $ 5,395 $ 4,805
Average prime rate 8.50% 8.25%
</TABLE>
14
<PAGE>
A large portion of the Company's loan portfolio is based upon the Bank's
reference rate, adjusted on a daily basis so that rate changes have an
immediate effect on the loan interest yield. The Bank's reference rate closely
tracks the prime rate.
Rates and amounts paid on average deposits, including noninterest-bearing
deposits for the three-month period ended September 30, 1997, compared to the
same period in 1996, are set forth in the following table (in thousands except
for percentages):
<TABLE>
<CAPTION>
Three months ended Three months ended
September 30, 1997 September 30,1996
<S> <C> <C>
Average deposits
outstanding $ 250,167 $ 199,898
Average rates paid 3.84% 3.74%
Amount of interest
paid or accrued $ 2,400 $ 1,869
</TABLE>
The following table summarizes the principal elements of operating expenses and
discloses the increases (decreases) and percent of increases (decreases) for the
three-month period ended September 30, 1997 and 1996 (in thousands except for
percentages):
<TABLE>
<CAPTION>
Three months ended September 30, 1997 Increase (Decrease)
1997 over 1996
1997 1996
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Salaries and benefits $ 1,988 $ 1,336 $ 652 48.8%
Occupancy 203 137 66 48.2%
Equipment 331 250 81 32.4%
Advertising and promotion 85 56 29 51.8%
Stationery & supplies 63 54 9 16.7%
Legal and professional fees 95 83 12 14.5%
Other operating expenses 811 667 144 21.6%
-------------------------------------------------------------
Total other expenses $ 3,576 $ 2,583 $ 993 38.4%
-------------------------------------------------------------
-------------------------------------------------------------
</TABLE>
Applicable income taxes for the three-month period ended September 30, 1997,
were $650,000, as compared to the September 30, 1996 amount of $537,000.
15
<PAGE>
RESULTS OF OPERATIONS
Nine months ended September 30, 1997
compared with
Nine months ended September 30, 1996
Year-to-date, the nine months ending September 30, 1997, saw net income of
$612,000, or $.34 per share on a fully-diluted basis as compared to the same
period in 1996, at which time the Company reported net year-to-date earnings of
$2,478,000, or $1.47 per share on a fully-diluted basis.
During the second quarter, the Bank determined that additional contributions to
loan loss reserves were required to recognize the increased risk exposure for a
small number of sizable loans in its portfolio. This action resulted in a
second quarter loss of ($1,193,440), which, despite improved first and third
quarter earnings, depressed earnings for the nine months ending September 30,
1997.
Net interest income before provisions for loan losses increased from $9,629,000
for the nine months ended September 30, 1996 to $10,563,000 for the same period
in 1997, an increase of $934,000. This additional income is partially due
to an increase of 19.3% in average outstanding loans during the third quarter of
1997 over the same period in 1996. In addition, the average prime rate was .17%
higher at the end of the third quarter of 1997 over the same period in 1996.
Other income increased by $1,709,000 over the same period in 1996, mostly as the
result of increased commission and fees on leases earned by the Bank's
subsidiary, EPI Leasing Company. In addition the Company recognized an increase
in loan servicing fee income, brokered loan fee income and fee income generated
from the bank's alternative financial investment services.
Other expenses for the nine months ended September 30, 1997, were $9,917,000, an
increase of $2,627,000 over the same period in 1996, mostly due to increases in
salaries and benefits and occupancy and equipment. A major contributor to this
increase was the purchase of EPI Leasing Company and the opening of a new branch
in Wheatland, California, in March 1997. In addition, the Bank opened a new
loan production office in Madera, California in March 1997.
16
<PAGE>
The yield on average earning assets for the nine-month period ended September
30, 1997, compared to the same period in 1996, is set forth in the following
table (in thousands except for percentages):
<TABLE>
<CAPTION>
Nine months ended Nine months ended
September 30, 1997 September 30, 1996
<S> <C> <C>
Average loans outstanding $ 175,596 $ 147,214
Average yields 11.12% 11.55%
Amount of interest
& fees earned $ 14,646 $ 12,753
Average prime rate 8.42% 8.25%
</TABLE>
A large portion of the Company's loan portfolio is based upon the Bank's
reference rate, adjusted on a daily basis so that rate changes have an
immediate effect on the loan interest yield. The Bank's reference rate closely
tracks the prime rate.
Rates and amounts paid on average deposits, including noninterest bearing
deposits for the nine-month period ended September 30, 1997, compared to the
same period in 1996, are set forth in the following table (in thousands except
for percentages):
<TABLE>
<CAPTION>
Nine months ended Nine months ended
September 30, 1997 September 30,1996
<S> <C> <C>
Average deposits
outstanding $ 243,566 $ 194,702
Average rates paid 3.82% 3.66%
Amount of interest
paid or accrued $ 6,976 $ 5,346
</TABLE>
17
<PAGE>
The following table summarizes the principal elements of operating expenses and
discloses the increases (decreases) and percent of increases (decreases) for the
nine- month periods ended September 30, 1997 and 1996, respectively (in
thousands except for percentages):
<TABLE>
<CAPTION>
Nine months ended September 30, Increase (Decrease)
1997 over 1996
1997 1996
---------------------------------------------------
<S> <C> <C> <C> <C>
Salaries and benefits $ 5,585 $ 3,758 $ 1,827 48.6%
Occupancy 527 415 112 27.0%
Equipment 941 716 225 31.4%
Advertising and promotion 309 270 39 14.4%
Stationery & supplies 242 191 51 26.7%
Legal and professional fees 232 189 43 22.8%
Other operating expenses 2,081 1,751 330 18.8%
---------------------------------------------------
Total other expenses $ 9,917 $ 7,290 $ 2,627 36.0%
---------------------------------------------------
---------------------------------------------------
</TABLE>
The increases in salaries and benefits resulted from normal salary increases and
increased staffing for the opening of the new Wheatland Branch and the addition
of the employees at EPI Leasing Company, the Bank's subsidiary. Additional
staff has also been added to the new office location in Marysville, California
and new loan production office in Madera, California.
The Company employed 191 full-time equivalent employees on September 30, 1997,
compared to 179 on December 31, 1996, and 153 on September 30, 1996.
The increase in occupancy and equipment expense over 1996 is attributable to the
purchase, relocation and remodeling of a new building for the Bank's Marysville
Branch which opened in the second quarter of 1996, the opening of the Bank's new
Wheatland Branch, and the addition of the Bank's subsidiary, EPI Leasing
Company. In addition, the Company purchased Automated Teller Machines (ATM's)
for each of its seven branches. The Bank also purchased a bank building in Yuba
City to provide much needed space for its Residential and Ag Real Estate
Departments and also installed walk-up and drive-up ATM's at the new Real
Estate Loan Center. In addition, during the second quarter of 1997, the Company
remodeled and relocated its Administrative Office to a complex owned by the
Company.
Applicable income taxes for the nine-month period ended September 30, 1997, were
$311,000 as compared to the September 30, 1996, amount of $1,585,000. The
decrease of $1,274,000 was attributed to a tax credit during the second quarter
of 1997 as a result of a loss recognized during that quarter.
18
<PAGE>
LIQUIDITY
During the first two quarters and in to the third quarter of each year, the Bank
tends to have excess liquidity. The Bank's seasonal agricultural loan demand
tends to challenge the Bank's liquidity position beginning in the second
quarter and continuing into the third quarter of each year. The Bank's liquid
assets consist of cash and due from banks, federal funds sold and investment
securities with maturities of one year or less (exclusive of pledged
securities).
The Bank has formal and informal borrowing arrangements with the Federal Reserve
Bank and its correspondent bank to meet unforeseen deposit outflows or seasonal
loan funding demands. As of September 30, 1997, and December 31, 1996,
respectively, the Bank had no balances outstanding on these lines.
The Bank has also entered into an agreement with Lehman Brothers for a standby
short-term loan secured by U.S. Government and Agency Obligations in the Bank's
investment portfolio, in order to fund any liquidity needs not met by other
sources of funding as warranted by loan demand.
RATE SENSITIVITY
On a monthly basis, the Bank tracks its RSA's (Rate Sensitive Assets) and RSL's
(Rate Sensitive Liabilities) and calculates the difference between the two (GAP)
as a percentage of total assets for various time horizons.
The Bank's goal is to maintain a cumulative one year GAP of between -10% and
+10%. The September 30, 1997 one-year GAP was -3.8%.
Since this figure is negative, it means that when interest rates change, more
RSL's will reprice than RSA's over a one-year period. If interest rates go up,
the Bank's net interest margin will decrease, if interest rates go down, it will
increase.
On September 30, 1997, the Bank's cumulative 90-day GAP was +5.7% which means
that an increase in rates would have a positive effect on earnings and a
decrease in interest rates in the next 90 days would have a negative effect on
earnings.
19
<PAGE>
CAPITAL RESOURCES
Total shareholders' equity on September 30, 1997, increased by $197,000 over
December 31, 1996, total shareholders' equity of $21,886,000.
The Company is subject to capital adequacy guidelines issued by federal
regulators. These guidelines are intended to reflect the degree of risk
associated with both on and off-balance sheet items.
Financial institutions are expected to comply with a minimum ratio of qualifying
total capital to risk-weighted assets of 8%, at least half of which must be in
Tier 1 Capital.
In addition, federal agencies have adopted a minimum leverage ratio of Tier 1
Capital to total assets of 4%, which is intended to supplement risk-based
capital requirements and to ensure that all financial institutions continue to
maintain a minimum level of core capital.
As can be seen by the following tables, the Company exceeded all regulatory
capital ratios on September 30, 1997, and on December 31, 1996:
<TABLE>
<CAPTION>
RISK-BASED CAPITAL RATIO
AS OF SEPTEMBER 30, 1997
- -------------------------------------------------------------------------------
Company Bank
(Dollars in thousands) Amount Ratio Amount Ratio
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tier 1 Capital $ 21,866 8.90% $ 21,736 8.85%
Tier 1 Capital
minimum requirement 9,823 4.00% 9,820 4.00%
-----------------------------------------------
Excess $ 12,043 4.90% $ 11,916 4.85%
-----------------------------------------------
-----------------------------------------------
Total Capital 24,949 10.16% 24,818 10.11%
Total Capital
minimum requirement 19,647 8.00% 19,639 8.00%
-----------------------------------------------
Excess $ 5,302 2.16% $ 5,179 2.11%
-----------------------------------------------
Risk-adjusted assets $245,586 $245,488
-----------------------------------------------
-----------------------------------------------
LEVERAGE CAPITAL RATIO
Tier 1 Capital to quarterly $ 21,866 7.91% $ 21,736 7.87%
average total assets
Minimum leverage requirement 11,060 4.00% 11,051 4.00%
-----------------------------------------------
Excess $ 10,806 3.91% $ 10,685 3.87%
-----------------------------------------------
-----------------------------------------------
Total quarterly average assets $276,509 $276,269
-------- --------
-------- --------
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
RISK BASED CAPITAL RATIO
AS OF DECEMBER 31, 1996
- -------------------------------------------------------------------------------
Company Bank
(Dollars in thousands)
Amount Ratio Amount Ratio
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tier 1 Capital $ 21,813 11.31% $ 21,804 11.32%
Tier 1 Capital
minimum requirement 7,713 4.00% 7,708 4.00%
-----------------------------------------------
Excess $ 14,100 7.31% $ 14,096 7.32%
-----------------------------------------------
-----------------------------------------------
Total Capital 22,918 11.89% 24,225 12.57%
Total Capital minimum
requirement 15,426 8.00% 15,415 8.00%
-----------------------------------------------
Excess $ 7,492 3.89% $ 8,810 4.57%
-----------------------------------------------
Risk-adjusted assets $192,825 $192,693
-----------------------------------------------
-----------------------------------------------
LEVERAGE CAPITAL RATIO
Tier 1 Capital to quarterly $ 21,813 8.82% $ 21,804 8.82%
average total assets
Minimum leverage requirement 9,891 4.00% 9,890 4.00%
-----------------------------------------------
Excess $ 11,922 4.82% $ 11,914 4.82%
-----------------------------------------------
-----------------------------------------------
Total quarterly average assets $247,274 $247,255
-------- --------
-------- --------
</TABLE>
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The future results of the Company's operations, the necessity of further
provisions for its loan loss reserves, quality of its loan portfolio, and
ability to pay future dividends constitute "forward-looking" information as
defined by: (1) the Private Litigation Reform Act of 1995 ("Act"); and (2)
releases made by the Securities and Exchange Commission ("SEC"). This
cautionary statement is being made pursuant to the provisions of the Act with
the express intention of obtaining the benefits of the "safe harbor" provisions
of the Act. Investors are cautioned that any forward-looking statements made by
the Company and its Management are not guarantees of future performance and that
actual results may differ materially from those in the forward-looking
statements as a result of, but not limited to, the following factors: the
economic environment, particularly in the region in which the Company operates;
competitive products and pricing; fiscal and monetary policies of the federal
government; changes in government regulations affecting financial institutions,
including regulatory fees and capital requirements; changes in prevailing
interest rates; acquisitions and the integration of acquired businesses; credit
risk management and asset/liability management; the financial and securities
markets; and the availability of and costs associated with sources of liquidity.
21
<PAGE>
PART II OTHER INFORMATION
ITEM 6 EXHIBITS AND REPORTS ON FORM 8K
(a) Exhibits
10.1 Change in control compensation agreement.
(b) Reports on Form 8K
No reports on Form 8K were filed during the quarter.
22
<PAGE>
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.
California Independent Bancorp
Date November 2, 1997 /S/ Robert J. Mulder
--------------------- --------------------------
Robert J. Mulder
President/CEO
Date November 2, 1997 /S/ Annette Bertolini
--------------------- --------------------------
Annette Bertolini
Chief Financial Officer
23
<PAGE>
CHANGE IN CONTROL COMPENSATION AGREEMENT
This Change in Control Compensation Agreement ("Agreement") is entered
into as of the first day of July 1, 1997 by and between FEATHER RIVER STATE
BANK, a California banking corporation ("Bank"), CALIFORNIA INDEPENDENT
BANCORP, a California corporation ("CIB") (collectively referred to herein as
"Employer"), and ROBERT J. MULDER ("Executive").
Whereas, Executive has been employed by the Bank since March 1, 1980, and
CIB since May 2, 1995. Executive currently serves as president and chief
executive officer of the Bank and CIB; and
Whereas, the Board of Directors of the Bank and CIB recognize Executive's
contribution to both entities along with his experience, training and ability
in the financial institution industry; and
Whereas the Board of Directors of the Bank and CIB consider it to be in
the best interest of the Bank and CIB to assure the continuation of
Executive's employment in an executive capacity and to compensate Executive
therefor; and
Whereas, Executive is desirous of committing to serve Employer on the
terms provided herein:
NOW, THEREFORE, Employer and Executive agree as follows:
1. TERM AND OPERATION OF AGREEMENT. Subject to the provisions for
termination as hereinafter provided, the term of this Agreement shall
commence on the date hereof and shall continue in effect through July 2,
1998; PROVIDED, HOWEVER, that commencing on July 3, 1998 and each July 1
thereafter, the term of this Agreement shall automatically be extended for
one additional year unless not later than March 30 of the preceding year,
either party shall have given written notice that it does not wish to extend
this Agreement; and PROVIDED, FURTHER, that notwithstanding any such notice
by Employer not to extend, this Agreement shall continue in effect for a
period of thirty (30) months beyond the term provided herein if a "Change in
Control" of the Company (as hereinafter defined) shall have occurred during
such term.
2. POSITION; SCOPE OF EMPLOYMENT. Executive is employed as the
President and Chief Executive Officer of Bank and Bancorp and shall perform
the customary duties of a person in that position with a California financial
institution and such other duties as may, from time to time, be reasonably
requested of him by the boards of directors of either Employer.
2.1. ENTIRE TIME AND EFFORT. Executive shall devote Executive's
best efforts and such time and attention to the business of Employer as shall
be necessary to perform Executive's duties and advance the best interest of
Employer, and shall not, during the term of this Agreement, directly or
indirectly, alone or as a member of a partnership, or as an officer, director
or shareholder of any corporation (other than any which are owned by or
affiliated with Employer) be engaged in any other business activity, whether
or not such business activity is pursued for gaining profit or other
pecuniary advantage, without the approval of Employer; but this shall not be
construed as preventing Executive from (i) investing Executive's assets in
such form or manner as will not require any services on the part of Executive
in the operation of the affairs of the companies in which such investments
are made, (ii) serving on the boards of directors of companies other than
Employer and its affiliates, and/or (iii) engaging in public service and
volunteer activities as long as they do not unreasonably interfere
-1-
<PAGE>
with the performance of Executive's duties as set forth in this Agreement.
In addition, Employer shall provide Executive with such executive perquisites
as shall be determined from time to time by the Board or the proper committee
of the Board.
2.2. RULES AND REGULATIONS. Executive agrees to observe and comply
with Employer's rules and regulations as may be amended from time to time by
Employer, and will carry out and faithfully perform such orders, directions
and policies of Employer.
2.3. PLACE OF PERFORMANCE. In connection with Executive's
employment by Employer, Executive shall be based at Employer's principal
executive offices and shall not be required to be absent therefrom on travel
status or otherwise an excessive or unreasonable amount of time in the
aggregate in any calendar year. Employer shall not, without the written
consent of Executive, relocate or transfer its principal executive offices to
a location other than at the headquarters of a major segment of Employer's
business. Employer will promptly pay (or reimburse Executive for) all
reasonable moving expenses incurred by Executive relating to a change of
Executive's principal residence in connection with any such relocation of
Employer's principal executive offices, and will indemnify Executive against
any loss realized (a) in the sale of Executive's principal residence in
connection with any such change of residence (including, without limitation,
(i) the difference, if any, between the fair market value of such residence,
as determined by a licensed real estate appraiser, and the amount actually
realized in the sale thereof, and (ii) the difference, if any, between the
amount realized from the sale of the residence and the cost (including
financing costs) of comparable housing at the new location), or (b) in the
termination of lease pertaining to Executive's principal residence (including
the difference, if any, between the amount of rent paid pursuant to the lease
so terminated and that which would be paid for comparable housing at the new
location). In no event shall the amount payable to Executive for moving
expenses and loss realized in connection with a change in Executive's
principal residence relating to a relocation of Employer's principal
executive offices be less than the amount Executive would otherwise be
entitled to receive under Employer's then existing policy relating to
executive relocations.
3. FRINGE BENEFITS. The compensation provided for under this Agreement
due to the change in control of Employer is granted as a fringe benefit to
Executive and does not affect, amend, or modify any of Executive's rights or
obligations under any benefit, pension or compensation plan, Executive stock
ownership plan, savings and profit sharing plan, stock option plan, life
insurance plan, medical insurance plan or health-and-accident plan in which
Executive is participating, or in which Executive is entitled to participate,
at the effective date hereof (or plans providing Executive with substantially
similar benefits), including but not limited to his Executive Salary
Continuation Plan with the Bank dated April 28, 1993, his Executive Salary
Continuation Plan with the Bank dated February 4, 1997 (collectively, the
"Salary Continuation Plans"), the 1996 and 1997 Bonus Plans (collectively,
the "Incentive Compensation Plans"), the 1988 Feather River State Bank
Employee Stock Ownership Plan, California Independent Bancorp 1989 Amended
and Restated Stock Option Plan and the California Independent Bancorp 1996
Stock Option Plan (collectively, the "Stock Option Plans" and, together with
the Salary Continuation Plans and Incentive Compensation Plans, the "Employer
Plans").
4. TERMINATION.
4.1. Executive's employment with Employer may be terminated prior
to the expiration of the term of this Agreement, upon any of the following
events:
-2-
<PAGE>
4.1.1. The written agreement of Employer and Executive;
4.1.2. Executive's death or disability;
4.1.3. By Employer for cause;
4.1.4. By Executive for good reason;
4.1.5. By Executive without good reason;
4.1.6. By Executive upon a change in control of Employer;
4.1.7. By either party at the option of either party and
without prejudice to any other remedy to which either party may be entitled
at law, in equity or under this Agreement, if either party:
(a) Files a petition in bankruptcy court or is adjudicated a bankrupt;
(b) Institutes or suffers to be instituted against him any procedure in
bankruptcy court for reorganization or rearrangement of his financial affairs;
(c) Has a receiver of his assets or property appointed because of
insolvency; or
(d) Makes a general assignment for the benefit of creditors.
4.2. TERMINATION BASED ON STATUTORY GROUNDS. This Agreement shall
terminate immediately upon the occurrence of any of the following events,
which events are described in sections 2290 and 2921 of the California Labor
Code:
(a) The occurrence of circumstances that make it impossible or
impractical for the business of Employer to be continued;
(b) The death of Executive;
(c) The loss of Executive of legal capacity. This does not affect
Executive's rights under Paragraph 6.3 of this Agreement;
(d) The loss by Employer of legal capacity to contract;
(e) The continued incapacity on the part of Executive under this
Agreement, unless waived by Employer; or
(f) The willful or permanent breach by Executive of the obligations
owed to Employer.
4.3. DEFINITION OF DISABILITY. Termination by this Agreement based
on Executive's "Disability" shall mean termination because of Executive's
inability, either for a period exceeding sixty (60) consecutive days or for
ninety (90) days accumulated during one (1) year, as determined by a
qualified physician, and which qualifies Executive for benefits under
Employer's long-term disability
-3-
<PAGE>
policy, to perform in the usual manner the material duties usually and
customarily pertaining to Executive's long-term employment, unless within
thirty (30) days after Notice of Termination (as hereinafter defined) is
given following such absence Executive shall have returned to the full time
performance of Executive's duties.
4.4. DEFINITION OF CAUSE. Any of the following shall constitute
"Cause" to terminate this Agreement: (i) willful or habitual breach of
Executive's duties; (ii) fraud, including intentional material
misrepresentation or concealment, by Executive to Employer or any others;
(iii) theft or conversion by Executive; (iv) unauthorized disclosure or other
use of Employer's trade secrets, customer lists or confidential information;
(v) habitual misuse of alcohol or any nonprescribed drug or intoxicant; (vi)
the willful engaging by Executive in conduct which is demonstrably and
materially injurious to Employer, monetarily or otherwise; (vii) willful
violation of any other standards of conduct as set forth in Employer's
Executive Manual; (viii) incompetence; (ix) breach of fiduciary duty
involving personal profit; (x) material breach of any of the terms of this
Agreement; (xi) willful or negligent violation of any law (other than minor
traffic violations or similar offenses), rule, regulation, cease-and-desist
order or any other regulatory order or agreement Employer enters into with
their banking regulatory agencies. In addition, Employer reserves the right
to terminate this Agreement "for cause" in the event that any formal or
informal actions are brought by any regulatory agency having jurisdiction to
remove or suspend Executive from office, whether or not such actions have
become final.
Termination by Employer of Executive's employment for "Cause" shall
mean termination upon any of the events constituting "Cause" as defined above
(other than any such events resulting from Executive's incapacity due to
physical or mental illness or from Executive's termination for Good Reason),
after a demand for substantial performance is delivered to Executive by the
Board which specifically identifies the manner in which the Board believes
that Executive has not substantially performed Executive's duties. For
purposes of this paragraph, no act, or failure to act, on Executive's part
shall be considered "willful" unless done, or omitted to be done, by
Executive not in good faith and without reasonable belief that Executive's
action or omission was in the best interest of Employer.
4.5. DEFINITION OF GOOD REASON. "Good Reason" shall mean, without
Executive's express written consent, any of the following:
4.5.1. The assignment to Executive of any duties
inconsistent with Executive's position, duties and status with Employer
immediately prior to a Change in Control of Employer; a substantial
alteration in the nature or status of Executive's authority or
responsibilities from those in effect immediately prior to a Change in
Control of Employer; the failure to provide Executive with substantially the
same perquisites which Executive had immediately prior to a Change in Control
of Employer, including but not limited to an office and appropriate support
services; or a change in Executive's titles or offices as in effect
immediately prior to a Change in Control of Employer, or any removal of
Executive from or any failure to re-elect Executive to any of such positions;
4.5.2. A reduction by Employer in Executive's Base Salary as
in effect on the effective date of this Agreement or as the same may be
increased from time to time;
4.5.3. Employer's requiring Executive to be based anywhere
other than the metropolitan area in which Executive's office is located at
the effective date of this Agreement, except
-4-
<PAGE>
for required travel on Employer's business to an extent substantially
consistent with Executive's present business travel obligation;
4.5.4. The failure by Employer to continue in effect any
Employer Plan; the taking of any action by Employer which would adversely
affect Executive's participation in or materially reduce Executive's benefit
under any of such plans or deprive Executive of any material fringe benefit
enjoyed by Executive, or to which Executive is entitled, at the effective
date of this Agreement; or the failure by Employer to provide Executive with
the number of paid vacation days to which Executive is entitled on the basis
of years of service with Employer in accordance with Employer's normal
vacation policy in effect on the date hereof; or
4.5.5. The failure by Employer to obtain the assumption of
the agreement to perform this Agreement by any successor as contemplated in
Section 6 hereof
4.6. DEFINITION OF CHANGE IN CONTROL. For purposes of this
Agreement, a "Change in Control of Employer" shall mean (i) the sale,
transfer or other exchange of the voting securities of either the Bank or CIB
which would result in the ownership or control by any individual or entity of
40% or more of any class of voting security of the Bank or CIB; (ii) any
transaction which results in the Bank or CIB being merged or consolidated
with another financial institution or corporation that results in less than
60% of resultant bank or corporation's outstanding voting securities being
owned in the aggregate by the former shareholders of the Bank or CIB; (iii)
any transaction which results in the Bank or CIB substantially selling all of
its assets to another financial institution or corporation which is not a
wholly owned subsidiary or corporate affiliate of the Bank or CIB; or (iv)
during any period of twenty-four (24) consecutive months, at least a majority
of the board of directors of either the Bank or CIB ceases to consist of the
same individuals who have served continuously on the respective Board since
the beginning of such period or whose election, or nomination for election by
the respective shareholders, were approved by a vote of at least two-thirds
of the directors then still in office who have served continuously on the
respective Board since the beginning of the period.
4.7. NOTICE OF TERMINATION. Any purported termination by Employer
or by Executive for Good Reason, shall be communicated by written Notice of
Termination to Employer hereto in accordance with Section 7 hereof. For
purposes of this Agreement, a "Notice of Termination" shall mean a notice
which shall indicate the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of Executive's
employment under the provision so indicated.
4.8. DATE OF TERMINATION. "Date of Termination" shall mean (i) if
Executive's employment is terminated as a result of Executive's death, the
date of death; (ii) if Executive's employment is terminated for Disability,
thirty (30) days after Notice of Termination is given (provided that
Executive shall not have returned to the performance of Executive's duties on
a full-time basis during such thirty (30) day period); and (iii) if
Executive's employment is terminated for any other reason, the date specified
in the Notice of Termination (which, in the case of a termination by Employer
for Cause shall not be less than thirty (30) days, and in the case of a
termination by Executive for Good Reason shall not be more than sixty (60)
days, from the date such Notice of Termination is given); provided that if
within thirty (30) days after any Notice of Termination is given the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be the date
on which the dispute is finally determined, either by mutual written
agreement of the parties, by a binding and final arbitration award or by a
final
-5-
<PAGE>
judgment, order or decree of a court of competent jurisdiction (the time for
appeal therefrom having expired and no appeal having been perfected); and
provided further that the Date of Termination shall be extended by a notice
of dispute only if such notice is given in good faith and the party giving
such notice pursues the resolution of such dispute with reasonable diligence.
5. COMPENSATION UPON TERMINATION.
5.1. COMPENSATION FOLLOWING TERMINATION BASED ON EXECUTIVE'S DEATH,
EXECUTIVE'S DISABILITY, EXECUTIVE'S RESIGNATION OTHER THAN FOR GOOD REASON,
BY EMPLOYER FOR CAUSE, OR UPON AGREEMENT OF THE PARTIES. If this Agreement
is terminated due to Executive's Death, or Executive's Disability, or
Executive's resignation during the term of this Agreement for other than Good
Reason, or Employer terminated this Agreement for Cause, or by written
agreement between the parties, Employer shall have no further obligation to
Executive to pay any compensation under this Agreement, except as may
otherwise be provided by such written agreement.
5.2. TERMINATION FOLLOWING EXECUTIVE'S RESIGNATION FOR GOOD REASON
PRIOR TO A CHANGE IN CONTROL. Executive shall be entitled to terminate
Executive's employment for Good Reason, and in the event that such a
termination occurs prior to a Change in Control, Employer shall have no
further obligation to Executive to pay any compensation under this Agreement.
Executive's right to terminate Executive's employment pursuant to this
paragraph shall not be affected by Executive's incapacity due to physical or
mental illness.
5.3. TERMINATION FOLLOWING EXECUTIVE'S RESIGNATION FOR GOOD REASON
FOLLOWING A CHANGE IN CONTROL. Executive shall be entitled to terminate
Executive's employment for Good Reason, and in the event that such a
termination occurs following a Change in Control, Executive shall be entitled
to the benefits provided in Section 5.4 below. Executive's right to
terminate Executive's employment pursuant to this paragraph shall not be
affected by Executive's incapacity due to physical or mental illness.
5.4. TERMINATION FOLLOWING A CHANGE IN CONTROL. If any of the
events described in Paragraph 4.6 hereof constituting a Change in Control of
Employer shall have occurred, Executive shall be entitled to the benefits
provided in this Section 5.4 upon the subsequent termination of Executive's
employment during the term of this Agreement unless such termination is (i)
because of Executive's death or Disability, (ii) by Employer for Cause, or
(iii) by Executive other than for Good Reason.
5.4.1. Employer shall pay Executive's full base salary
through the Date of Termination at the rate in effect at the time Notice of
Termination is given;
5.4.2. In lieu of any further salary payments to Executive
for periods subsequent to the Date of Termination, Employer shall pay as
severance pay to Executive, not later than the fifth day following the Date
of Termination, a lump sum severance payment (together with the payments
provided in Paragraphs 5.4.3 and 5.4.4, the "Severance Payments") equal to
two and one-half (21/2) times the sum of (a) Executive's annual base salary
at the highest rate in effect during the year immediately preceding the
occurrence of the circumstances giving rise to the Notice of Termination
given in respect thereof, and (b) the amount of any bonus paid to Executive
and the amount paid to Executive pursuant to the Incentive Compensation Plans
during the year immediately preceding that in which the Date of Termination
occurs;
-6-
<PAGE>
5.4.3. Notwithstanding any provision of the Incentive
Compensation Plans, Employer shall pay to Executive in one lump sum in cash
not later than the fifth day following the Date of Termination, an amount
equal to the sum of (A) any incentive compensation which has been allocated
for the fiscal year preceding that in which the Date of Termination occurs
but has not yet been paid, and (B) any award under the Incentive Compensation
Plans which has not yet been paid for any period which has closed prior to
the Date of Termination, and (C) a pro rata portion of the aggregate value of
all contingent awards to Executive for all uncompleted periods under the
Incentive Compensation Plans calculated by multiplying for each such award,
(1) a fraction the numerator of which shall be the number of full months
elapsed during the period for such award prior to the Date of Termination,
and the denominator of which shall be the total number of months contained in
such period, by (2) the amount of the award which would have been payable to
Executive following completion of such period at the "fully competent" (or
comparable) level of performance as described in the plan documents and the
individual objective development worksheets.
5.4.4. In lieu of shares of common stock of CIB (the
"Shares") issuable upon the exercise of options ("Options"), if any, granted
to Executive under the Stock Option plans (which Options shall be canceled
upon the making of the payment referred to below in this section 5.4.4),
Executive shall receive in one lump sum in cash not later than the fifth day
following the Date of Termination an amount equal to the difference between
the cumulative exercise price of the Options and the higher of (a) the NASDAQ
closing price of CIB stock on the Date of Termination; and (b) the actual
price per share paid in connection with a change of control.
5.4.5. In the event that any payment or benefit received or
to be received by Executive in connection with a Change in Control of
Employer or the termination of Executive's employment, whether payable
pursuant to the terms of this Agreement or any other plan, arrangement or
agreement with Employer, its successors, any person whose actions result in a
Change in Control or any corporation ("Affiliate") affiliated (or which as a
result of the completion of the transactions causing a Change in Control will
become affiliated) with the Employer within the meaning of section 1504 of
the Internal Revenue Code of 1986, as amended (the "Code") (collectively with
the Severance Payments, "Total Payments") would not be deductible (in whole
or part) by Employer, an Affiliate or other person making such payment or
providing such benefit, as a result of section 280G of the Code, the
Severance Payments shall be reduced until no portion of the Total Payments is
not deductible as a result of section 280G of the Code, or the Severance
Payments are reduced to zero. For purposes of this limitation (A) no portion
of the Total Payments the receipt or enjoyment of which Executive shall have
effectively waived in writing prior to the date of payment of the Severance
Payments shall be taken into account; (B) no portion of the Total Payments
shall be taken into account which in the opinion of tax counsel selected by
Employer's independent auditors and acceptable to Executive does not
constitute a "parachute payment" within the meaning of section 280G(b)(2) of
the Code; (C) the Severance Payments shall be reduced only to the extent
necessary so that the Total Payments (other than those referred to in clauses
(A) or (B)) in their entirety constitute reasonable compensation for services
actually rendered within the meaning of section 280G(b)(4) of the Code, in
the opinion of the tax counsel referred to in clause (B); and (D) the value
of any non-cash benefit or any deferred payment or benefit included in the
Total Payments shall be determined by Employer's independent auditors in
accordance with the principles of sections 280G(d)(3) and (4) of the Code; and
5.4.6. Unless Executive is terminated for Cause, Employer
shall maintain or cause to be maintained in full force and effect, for
Executive's continued benefit, for a period of thirty (30) months, all health
and welfare benefit plans to include life insurance, health insurance and
dental
-7-
<PAGE>
insurance, in which Executive participated or was entitled to participate
immediately prior to the Date of Termination, provided that Executive's
continued participation is possible under the general terms and provisions of
such plans and programs. In the event that Executive's participation in any
such plan or program is barred, Employer shall arrange to provide Executive
with benefits substantially similar to those which Executive is entitled to
receive under such plans and programs. At the end of such thirty (30) month
period, Executive will be entitled to take advantage of any conversion
privileges applicable to the benefits available under any such plans or
programs.
5.5. In the event that Executive is terminated due to a Change in
Control, the Executive shall not be required to mitigate the amount of any
payment provided for in this Section 5 by seeking other employment or
otherwise, nor shall the amount of any payment provided for in this Section 5
be reduced by any compensation earned by Executive as the result of
employment by another employer after the Date of Termination.
5.6. The allocation between Bank and CIB for their respective share
of Executive's compensation under this Agreement shall be determined by the
Bank's board of directors, in its sole discretion.
6. SUCCESSORS: BINDING AGREEMENT.
6.1. Employer will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of Employer, by agreement in
form and substance satisfactory to Executive, to expressly assume and agree
to perform this Agreement in the same manner and to the same extent that
Employer would be required to perform it if no succession had taken place.
Failure of Employer to obtain such agreement prior to the effectiveness of
any such succession shall be a breach of this Agreement and shall entitle
Executive to compensation from Employer in the same amount and on the same
terms as Executive would be entitled to hereunder if Executive terminated
Executive's employment for Good Reason, except that for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination. As used in this Agreement,
the "Employer" shall mean Employer as hereinbefore defined and any successor
to its business and/or assets as aforesaid which executes and delivers the
agreement provided for in this section 6 or which otherwise becomes bound by
all the terms and provisions of this Agreement by operation of law, or
otherwise.
6.2. This Agreement and all rights of Executive hereunder shall
inure to the benefit of and be enforceable by Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributes,
devises and legatees. If Executive should die while any amounts would still
be payable to Executive hereunder if Executive had continued to live, all
such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to Executive's devisee, legatee, or other
designee or, if there be no such designee, to Executive's estate.
7. NOTICES. Any notice under this Agreement shall be in writing, and
any written notice or other document shall be deemed to have been duly given
(i) on the date of personal service on the parties, (ii) on the third
business day after mailing, if the document is mailed by registered or
certified mail, (iii) one day after being sent by professional or overnight
courier or messenger service guaranteeing one-day delivery, with receipt
confirmed by the courier, or (iv) on the date of transmission if sent by
telegram, telex, telecopy or other means of electronic transmission resulting
-8-
<PAGE>
in written copies, with receipt confirmed. Any such notice shall be
delivered or addressed to the parties at the addresses set forth below or at
the most recent address specified by the addressee through written notice
under this provision. Failure to give notice in accordance with any of the
foregoing methods shall not defeat the effectiveness of notice actually
received by the addressee.
8. RESOLUTION OF DISPUTES AND WAIVER OF JURY TRIAL.
8.1. DEFINITION OF DISPUTES. Any and all claims or controversies
arising out of, relating to, or pertaining to this Agreement, Employer Plans,
or the breach thereof ("dispute") shall be resolved as provided in this
paragraph. The parties agree that no party shall have the right to sue any
other party regarding a dispute except as provided in this paragraph. The
parties further agree, to the fullest extent permitted by law, that each
party waives any right to a trial by jury in any action, proceeding or
counterclaim of any kind arising out of, relating to, or pertaining to this
Agreement or the Employer Plans.
8.2. BINDING ARBITRATION. Any dispute between the parties shall be
submitted to, and be conclusively determined by, binding arbitration in
accordance with this paragraph. The provisions of this paragraph shall not
preclude any party from seeking injunctive or other provisional or equitable
relief in order to preserve the status quo of the parties pending resolution
of the dispute, and the filing of an action seeking injunctive or other
provisional relief shall not be construed as a waiver of that party's
arbitration rights. Any party seeking such relief, must immediately file a
motion for preliminary injunction and following a determination of the
motion, the action shall be stayed pending completion of the arbitration.
8.3. SELECTION OF ARBITRATOR(S). The parties shall endeavor in
good faith to select a single arbitrator. If they fail to do so within ten
(10) days of the notice demanding arbitration, each party shall have an
additional period of ten (10) days in which to appoint an arbitrator and
those arbitrators within ten (10 ) days shall select an additional
arbitrator. If any party fails to appoint an arbitrator or if the
arbitrators initially selected by the parties fail to appoint an additional
arbitrator within the time specified herein, any party may apply to have an
arbitrator appointed for the party who has failed to appoint, or to have the
additional arbitrator appointed in accordance with California Code of Civil
Procedure section 1281.6.
8.4. LOCATION OF ARBITRATION. Any arbitration hearing shall be
conducted in Sacramento County, California.
8.5. APPLICABLE LAW. The law applicable to the arbitration of any
dispute shall be the law of the State of California, excluding its conflicts
of law rules, its rules of civil procedure (unless otherwise incorporated in
this paragraph) and its laws of evidence.
8.6. ARBITRATION PROCEDURES. Except as otherwise provided in this
paragraph, the arbitration shall be governed by the following:
(a) The parties shall submit to the arbitration all written,
documentary or other evidence and oral testimony as is reasonably necessary
for a proper resolution of the dispute. Copies of all written submittals
shall be provided to the arbitrator(s) and all parties. Neither party shall
be entitled to conduct discovery, and the discovery provisions in California
Civil Code of Procedure sections 1283.1 and 1283.05 are waived. The
arbitrator(s) shall conduct such hearings as they
-9-
<PAGE>
consider necessary, may require the submission of briefs or points and
authorities and may submit written questions to the parties. The parties
shall respond to such questions in writing. If a question is addressed to an
individual or fewer than all parties, copies of the question and the answer
thereto shall be served on the other parties.
(b) At the hearing, any relevant evidence may be presented by any
party, and the formal rules of evidence applicable to judicial proceedings
shall not govern. Evidence may be admitted or excluded in the sole
discretion of the arbitrator(s). Except as provided above, the arbitration
procedures set forth in the California Arbitration Act (Code Civ. Proc.,
Section 1282 et seq.) shall apply to the arbitration.
(c) The arbitration shall proceed with due dispatch and a decision
shall be rendered within sixty (60 ) days after the appointment of the final
arbitrator. Such decision shall be in such written form that a judgment may
be entered on it in any court of competent jurisdiction in the State of
California. Any decision of the arbitrators shall be subject to the
limitations set forth in paragraph 8.7.
8.7. LIMITATION ON SCOPE OF ARBITRATORS' AWARD OR DECISION. The
arbitrators' decision shall pertain and be limited to the claims submitted to
the arbitrators in the demand for arbitration. The arbitrators award may be
reviewed by the appropriate superior and appellate courts for errors in law.
Such errors in law would not include the arbitrator(s)' rulings concerning
procedural or evidentiary matters, but may only be a review of errors in
application of the substantive law at issue in the dispute.
8.8. COSTS OF ARBITRATION. Each party shall pay the costs of the
arbitrator chosen by it and the losing party shall bear all other costs of
arbitration.
8.9. ACKNOWLEDGMENT OF CONSENT TO ARBITRATION. NOTICE: BY
EXECUTING THIS AGREEMENT YOU ARE AGREEING TO HAVE ANY DISPUTE ARISING OUT OF
THE MATTERS INCLUDED IN THE "ARBITRATION" PROVISION DECIDED BY NEUTRAL
ARBITRATION AS PROVIDED BY CALIFORNIA LAW AND YOU ARE GIVING UP ANY RIGHTS
YOU MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT OR JURY TRIAL. BY
EXECUTING THIS AGREEMENT, YOU ARE GIVING UP YOUR JUDICIAL RIGHTS TO DISCOVERY
AND APPEAL UNLESS SUCH RIGHTS ARE SPECIFICALLY INCLUDED IN THE "ARBITRATION"
PROVISION. IF YOU REFUSE TO SUBMIT TO ARBITRATION AFTER AGREEING TO THIS
PROVISION, YOU MAY BE COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF THE
CALIFORNIA CODE OF CIVIL PROCEDURE. YOUR EXECUTION OF THIS AGREEMENT
INDICATING YOUR AGREEMENT TO THIS ARBITRATION PROVISION IS VOLUNTARY.
BY INITIALING IN THE SPACE BELOW, YOU ARE INDICATING THAT YOU HAVE READ
AND UNDERSTOOD THE FOREGOING AND UNDERSTAND THAT BY EXECUTING THIS AGREEMENT
YOU AGREE TO SUBMIT DISPUTES ARISING OUT OF THE MATTERS INCLUDED IN THIS
ARBITRATION PROVISION TO NEUTRAL ARBITRATION.
-10-
<PAGE>
INITIALS OF CIB'S AUTHORIZED REPRESENTATIVE:
---------
INITIALS OF THE BANK'S AUTHORIZED REPRESENTATIVE:
---------
INITIALS OF EXECUTIVE:
---------
9. ACTIONS CONTRARY TO LAW. Nothing contained in this Agreement shall
be construed to require the commission of any act contrary to law, and
whenever there is any conflict between any provision of this Agreement and
any statute, law, ordinance, or regulation, contrary to which the parties
have no legal right to contract, then the latter shall prevail; but in such
event, the provisions of this Agreement so affected shall be curtailed and
limited only to the extent necessary to bring it within legal requirements.
10. ATTORNEYS' FEES; PREJUDGMENT INTEREST. If the services of an
attorney are required by any party to secure the performance of this
Agreement or otherwise upon the breach or default of another party to this
Agreement, or if any judicial remedy or arbitration is necessary to enforce
or interpret any provision of this Agreement or the rights and duties of any
person in relation thereto, the prevailing party shall be entitled to
reasonable attorneys' fees, costs and other expenses, in addition to any
other relief to which such party may be entitled. Any award of damages
following judicial remedy or arbitration as a result of the breach of this
Agreement or any of its provisions shall include an award of prejudgment
interest from the date of the breach at the maximum amount of interest
allowed by law. If the services of an attorney are required by any party to
secure the performance of this Agreement or otherwise upon the breach or
default of another party to this Agreement, or if any judicial remedy or
arbitration is necessary to enforce or interpret any provision of this
Agreement or the rights and duties of any person in relation thereto, the
prevailing party shall be entitled to reasonable attorneys' fees, costs and
other expenses, in addition to any other relief to which such party may be
entitled. Any award of damages following judicial remedy or arbitration as a
result of the breach of this Agreement or any of its provisions shall include
an award of prejudgment interest from the date of the breach at the maximum
amount of interest allowed by law.
11. CHOICE OF LAW, JURISDICTION, VENUE. This Agreement is drawn to be
effective in the State of California, and shall be construed in accordance
with California law, excluding its conflict of laws rules. The exclusive
jurisdiction and venue of any legal action by either party or arbitration
under this Agreement shall be the County of Sacramento, California.
12. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of
which together shall constitute one and the same instrument.
13. AMENDMENT. The provisions of this Agreement may be modified at any
time by agreement of the parties. Any such agreement hereafter made shall be
ineffective to modify this Agreement in any respect unless in writing and
signed by the parties against whom enforcement of the modification or
discharge is sought.
14. WAIVER. Any of the terms or conditions of this Agreement may be
waived at any time by the party entitled to the benefit thereof, but no such
waiver shall affect or impair the right of the waiving party to require
observance, performance or satisfaction either of that term or condition as
it applies on a subsequent occasion or of any other term or condition.
-11-
<PAGE>
15. NONASSIGNABILITY. This Agreement shall not be assigned by any
party without the prior written consent of the other parties. Any assignment
contrary to the provisions of this Agreement shall be deemed a default under
the Agreement, allowing the nondefaulting parties to exercise all remedies
available under law.
16. NO ATTACHMENT. Except as required by law, no right to receive
payments under this Agreement shall be subject to anticipation, commutation,
alienation, sale, assignment, encumbrance, charge, pledge or hypothecation or
to execution, attachment, levy or similar process or assignment by operation
of law, and any attempt, voluntary or involuntary, to effect any such action
shall be null, void and of no effect.
17. INDEPENDENT COVENANTS. All provisions herein concerning unfair
competition and confidentiality shall be deemed independent covenants and
shall be enforceable without regard to any breach by Employer unless such
breach by Employer is willful and reckless.
18. ENTIRE AGREEMENT. This Agreement supersedes any and all other
agreements, either oral or in writing, between the parties hereto with
respect to the employment of Employee by Employer and contains all of the
covenants and agreements between the parties with respect to such employment
in any manner whatsoever. Each party to this Agreement acknowledges that no
representations, inducements, promises or agreements, orally or otherwise,
have been made by any party, or anyone acting on behalf of any party, which
are not embodied herein, and that no other agreement, statement or promise
not contained in this Agreement shall be valid and binding. Any modification
of this Agreement will be effective only if it is in writing signed by the
party to be charged.
19. SUCCESSION. Subject to the provisions otherwise contained in this
Agreement, this Agreement shall inure to the benefit of and be binding on the
successors and assigns of Employer.
20. SEVERABILITY. If any provision of this Agreement is held by a
court of competent jurisdiction to be invalid or unenforceable, the remainder
of the Agreement which can be given effect without the invalid provision
shall continue in full force and effect and shall in no way be impaired or
invalidated.
21. CAPTIONS. All paragraph captions are for reference only and shall
not be considered in construing this Agreement.
22. AMBIGUITIES. The Agreement has been negotiated at arm's length
between persons sophisticated and knowledgeable in the matters dealt with
herein. Each party has cooperated and participated in the drafting and
preparation of this Agreement. Any rule of law, including, without
limitation, Civil Code Section 1654, or legal decision that would require
interpretation of any ambiguities in this Agreement against the drafting
party is not applicable and is waived. The provisions of this Agreement
shall be interpreted in a reasonable manner to effect the purpose of the
parties. In the interpretation of this Agreement or any of its terms, both
parties shall be construed to be equally responsible for the drafting and
preparation of the same.
23. ADVICE OF LEGAL COUNSEL. Each party to this Agreement has
consulted with, or had the opportunity to consult with, legal counsel
concerning all paragraphs of this Agreement. Each party has read this
Agreement, and has been fully advised by legal counsel with respect to the
rights and
-12-
<PAGE>
obligations under the Agreement, or has had the opportunity to obtain such
advice. Each party is fully aware of the intent and legal effect of the
Agreement, and has not been influenced to any extent whatsoever by any
representation or consideration other than as stated herein. After
consultation with and advice from, or the opportunity for consultation with
and advice from, legal counsel, each and every party voluntarily enters into
this Agreement.
24. NOT A CONTRACT OF EMPLOYMENT. This Agreement shall not be deemed
to be a contract of employment between the parties, nor shall any provision
restrict the right of Employer to discharge Executive,or restrict the right
of Executive to terminate his employment.
25. BANKING REGULATORY AGENCIES. The obligations and rights of the
parties hereunder are expressly conditioned upon the approval or
non-disapproval of (i) this Agreement, and/or (ii) Executive, in the event
such approvals are required, by those banking regulatory agencies which have
jurisdiction over Employer.
FEATHER RIVER STATE BANK:
-------------------------------------------------
(By:___________________________)
Address:________________________
_______________________________
CALIFORNIA INDEPENDENT BANCORP:
-------------------------------------------------
(By:___________________________)
Address:________________________
_______________________________
Executive:
-------------------------------------------------
(Robert J. Mulder)
Address:________________________
_______________________________
-13-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<CIK> 0000948976
<NAME> CALIFORNIA INDEPENDENT BANCORP
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<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 18,521
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<INVESTMENTS-CARRYING> 23,839
<INVESTMENTS-MARKET> 23,963
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<ALLOWANCE> 4,146
<TOTAL-ASSETS> 282,737
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<INCOME-PRETAX> 923
<INCOME-PRE-EXTRAORDINARY> 923
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<NET-INCOME> 612
<EPS-PRIMARY> 0.39
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<YIELD-ACTUAL> 8.38
<LOANS-NON> 6,329
<LOANS-PAST> 1,121
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