10-K405

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

FORM 10-K

(Mark One)

/x/
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2000 or

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Commission File No. 00-30747

FIRST COMMUNITY BANCORP
(Exact Name of Registrant as Specified in Its Charter)

California	33-0885320
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification Number)
6110 El Tordo, PO Box 2388, Rancho Santa Fe, CA	92067
(Address of Principal Executive Offices)	(Zip Code)

Registrant's telephone number, including area code: (858) 756-3023

Securities registered pursuant to Section 12(b) of Exchange Act: None

Securities registered pursuant to Section 12(g) of Exchange Act: Common stock, no par value

    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 / /

    Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. /x/

    The aggregate market value of the common stock held by non-affiliates of the registrant, computed by reference to the average bid and asked prices on the Nasdaq National Market on March 1, 2001 of $17.125 was $52,762,039.

    As of March 1, 2001, there were 4,482,161 shares of the Registrant's common stock outstanding.

PART I
	ITEM 1.	Business	5
		General	5
		Strategic Evolution	6
		Management Changes	6
		Business of the Company	7
		Financial and Statistical Disclosure	10
		Supervision and Regulation	10
	ITEM 2.	Properties	12
		Rancho Santa Fe Properties	12
		First Community Properties	12
		First Professional Properties	12
	ITEM 3.	Legal Proceedings	12
	ITEM 4.	Submission of Matters to a Vote of Security Holders	13
PART II
	ITEM 5.	Market For Registrant's Common Equity and Related Stockholder Matters	14
		Marketplace Designation and Sales Price Information	14
		Dividends	14
	ITEM 6.	Selected Financial Data	15
	ITEM 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	16
		Overview	16
		Results of Operations	17
		Financial Condition	24
		Capital Resources	30
		Liquidity	30
		Recent Accounting Pronouncements	31
	ITEM 7A.	Qualitative and Quantitative Disclosure About Market Risk	32
	ITEM 8.	Financial Statements and Supplementary Data	35
		Contents	35
		Independent Auditors' Report	36
		Consolidated Balance Sheets as of December 31, 2000 and 1999	37
		Consolidated Statements of Earnings for the years ended December 31, 2000, 1999 and 1998	38
		Consolidated Statements of Shareholders' Equity and Comprehensive Income for the years ended December 31, 2000, 1999 and 1998	39
		Consolidated Statements of Cash Flows for the years ended December 31, 2000, 1999 and 1998	40
		Notes to Consolidated Financial Statements	41
	ITEM 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	65
PART III
	ITEM 10.	Directors and Executive Officers of the Registrant	65
	ITEM 11.	Executive Compensation	65

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ITEM 12.	Security Ownership of Certain Beneficial Owners and Management	65
ITEM 13.	Certain Relationships and Related Transactions	65
ITEM 14.	Exhibits, Financial Statement Schedules and Reports on Form 8-K	66

*

First Community Bancorp's definitive proxy statement for the 2001 Annual Meeting of Shareholders is incorporated herein by reference.

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    This Annual Report on Form 10-K includes forward-looking information, which is subject to the "safe harbor" created by Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. When the Company uses or incorporates by reference in this Annual Report on Form 10-K (the "Annual Report") the words "anticipate," "estimate," "expect," "project," "intend," "commit," "believe" and similar expressions, the Company intends to identify forward-looking statements. Such statements are subject to certain risks, uncertainties and assumptions, including those described in this Annual Report. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, expected, projected, intended, committed or believed. Such risks and uncertainties include, but are not limited to, the following factors:

•

Competitive pressure in the banking industry and changes in the regulatory environment.



•

Changes in the interest rate environment and volatility of rate sensitive loans and deposits.



•

A decline in the health of the economy nationally or regionally which could reduce the demand for loans or reduce the value of real estate collateral securing most of the Company's loans.



•

Credit quality deterioration which could cause an increase in the provision for loan losses.



•

Dividend restrictions.



•

Regulatory discretion.



•

Material losses in the Company's merchant credit card processing business from card holder fraud or merchant business failure.



•

Changes in the securities markets.



•

Asset/liability repricing risks and liquidity risks.

    The Company undertakes no obligation to revise or publicly release the results of any revision to these forward-looking statements. For additional information concerning risks and uncertainties related to the Company and its operations please refer to Item 1 through Item 7A of this Annual Report on Form 10-K.

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PART I

ITEM 1.  BUSINESS

General

    First Community Bancorp (individually and on a consolidated basis, where appropriate, the "Company") is a California corporation registered under the Bank Holding Company Act of 1956, as amended (the "BHCA"). The Company's principal business is to serve as a holding company for its banking subsidiaries, Rancho Santa Fe National Bank ("Rancho Santa Fe"), First Community Bank of the Desert ("First Community") and, as of January 16, 2001, First Professional Bank, N.A. ("First Professional" and, together with Rancho Santa Fe and First Community, the "Banks"). Discussions about the Banks as of and for the periods ended December 31, 2000 refer only to Rancho Santa Fe and First Community. Rancho Santa Fe, a federally chartered commercial bank organized in 1982, is a community bank serving the commercial, industrial, professional, real estate and private banking markets of San Diego County. In May 2000, the Company acquired both Rancho Santa Fe and First Community. First Community, a California chartered commercial bank organized in 1980, is a community bank established to serve the commercial, industrial, professional, real estate and private banking markets of San Bernardino and Riverside Counties. As of December 31, 2000, First Professional had approximately $268 million in assets and five branches in Santa Monica, Beverly Hills, Pasadena, Tarzana and Redlands. Professional focuses on serving the healthcare community.

    The Banks are full-service community banks offering a broad range of banking products and services including; accepting time and demand deposits, originating commercial loans, consumer loans, real estate and construction loans, Small Business Administration guaranteed loans ("SBA" loans) and mortgage loans and making other investments. The Banks' loans are primarily short-term and adjustable rate. At December 31, 2000, the gross loans of the Banks totaled approximately $251,185,000 of which approximately 47% consisted of commercial loans, 51% consisted of real estate loans and 2% consisted of consumer loans. Special services and requests beyond the lending limits of the Banks can be arranged through correspondent banks.

    The Company, through the Banks, derives its income primarily from interest received on real estate loans, commercial loans and consumer loans and, to a lesser extent, on fees from the sale of SBA loans originated, interest on investment securities, fees received in connection with loans and other services offered (including SBA loan servicing), and deposit services. The Company's major operating expenses are the interest it pays on deposits and borrowings and general operating expenses. The Banks rely on a foundation of locally generated deposits. Management believes it has a relatively low cost of funds due to a high percentage of low cost and noninterest bearing deposits. The Company's operations, like those of other financial institutions operating in California, are significantly influenced by economic conditions in California, including the strength of the real estate market, and the fiscal and regulatory policies of the federal government and the regulatory authorities that govern financial institutions. See "—Supervision and Regulation."

    The Company is committed to maintaining premier, relationship-based community banks in Southern California which serve the needs of small to medium sized businesses and the owners and employees of those businesses. The strategy for serving the Company's target markets is the delivery of a finely-focused set of value-added products and services that satisfy the primary needs of the Company's customers, emphasizing superior service and relationships as opposed to transaction volume.

    The Company operates in one business segment: banking.

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Strategic Evolution

First Community Bancorp

    The Company was organized on October 22, 1999 as a California corporation for the purpose of becoming a bank holding company and to acquire all the outstanding capital stock of Rancho Santa Fe. As of May 31, 2000, prior to the consummation of the First Community Acquisition described below, the Company had total assets of approximately $199 million.

First Community Acquisition

    On May 31, 2000, the Company completed its formation and combined Rancho Santa Fe with First Community as its wholly-owned subsidiaries. Shareholders for both banks approved the transaction at their respective Shareholder Meetings held on May 31, 2000. Under the terms of the merger agreement, each shareholder of First Community received 0.30 shares of Company common stock for each share of First Community common stock. Each Rancho Santa Fe share was exchanged for one share of Company common stock. At the same time as completion of the merger, the Company became listed on NASDAQ under the symbol FCBP. The Company accounted for the merger as a "pooling-of-interests."

    The merger created a $318 million bank holding company operating in the markets of Northern San Diego County and the desert communities of the Coachella Valley and Morongo Basin. Each bank operates under its own name with Rancho Santa Fe having branches in Rancho Santa Fe, San Diego's Golden Triangle, Escondido and Carlsbad. First Community has branches in Palm Springs, Indian Wells, Cathedral City, Yucca Valley and Twenty-nine Palms.

Professional Merger

    On January 16, 2001, the Company acquired Professional Bancorp, Inc. ("Professional") and its wholly-owned subsidiary, First Professional Bank, N.A. ("First Professional"). Shareholders of Professional received either $8.00 in cash or 0.55 shares of Company common stock for each share of Professional common stock. Professional shareholders had the option to choose either cash or stock consideration. The purchase price received by shareholders of Professional totaled approximately 504,747 shares of Company common stock and approximately $8.9 million in cash, resulting in a total purchase price of approximately $16.4 million.

    As of December 31, 2000, Professional had approximately $268 million in assets and five branches in Santa Monica, Beverly Hills, Pasadena, Tarzana and Redlands. Professional focuses on serving the healthcare community. Gene Gaines, President and CEO of Professional, joined the Board of Directors of the Company.

Management Changes

    During 2000, the Company hired the following additional executives to add to its senior management team: (1) Matthew P. Wagner, formerly President and Chief Executive Officer of Western Bancorp and an Executive Vice President of U.S. Bancorp, as President and Chief Executive Officer; (2) Robert M. Borgman, formerly Executive Vice President and Chief Credit Officer of Western Bancorp and President of National Business Finance, Inc. (a factoring company purchased by Norwest Corporation), as Executive Vice President and Chief Credit Officer; (3) Arnold C. Hahn, formerly Executive Vice President and Chief Financial Officer of Western Bancorp and Senior Vice President of U.S. Bancorp, as Executive Vice President and Chief Financial Officer; and (4) Michael L. Thompson, formerly Senior Vice President, Director of Human Resources of Western Bancorp and Senior Vice President, Director of Human Resources of Citizens Business Bank, as Executive Vice President, Director of Human Resources.

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    Certain executives continue in their previous roles. James A. Boyce continues as President and Chief Executive Officer of Rancho Santa Fe. William Powers continues as President and Chief Executive Officer of First Community. Gene F. Gaines, continues as President and Chief Executive Officer of First Professional.

Business of the Company

Banking Business

    The Company, through the Banks, provides banking and other financial services throughout Southern California to small and medium sized businesses and the owners and employees of those businesses. The Banks offer a broad range of banking products and services, including many types of business, personal savings and checking accounts and other consumer banking services. The Banks originate several types of loans, including secured and unsecured commercial and consumer loans, commercial and residential real estate mortgage loans, SBA loans and construction loans. The Banks' loans are primarily short-term and adjustable rate. Special services or requests beyond the lending limits of the Banks can be arranged through correspondent banks. The Banks have a network of ATMs and offer access to ATM networks through other major banks. The Banks issue MasterCard and Visa credit and debit cards through a correspondent bank and are also merchant depositories for cardholder drafts under Visa and MasterCard. The Banks can provide investment and international banking services through correspondent banks.

    The Company, through the Banks, concentrates its lending activities in three principal areas:

    (1) Real Estate Loans. Real estate loans are comprised of construction loans, miniperm loans collateralized by first or junior deeds of trust on specific properties and equity lines of credit. The properties collateralizing real estate loans are principally located in the Company's primary market areas of Los Angeles, San Bernardino, Riverside and San Diego counties in California and the contiguous communities. The construction loans are comprised of loans on residential and income producing properties that generally have terms of less than two years and typically bear an interest rate that floats with the prime rate or another established index. The miniperm loans finance the purchase and/or ownership of income producing properties. Miniperm loans are generally made with an amortization schedule ranging from fifteen to twenty-five years with a lump sum balloon payment due in one to ten years. Equity lines of credit are revolving lines of credit collateralized by junior deeds of trust on real properties. They bear a rate of interest that floats with the prime rate, LIBOR or another established index and have maturities of five years. From time to time, the Company purchases participation interests in loans made by other institutions. These loans are subject to the same underwriting criteria and approval process as loans made directly by the Company. The Banks' real estate portfolio is subject to certain risks, including (i) a possible downturn in the Southern California economy, especially like the one which occurred during the early 1990s, (ii) interest rate increases, (iii) reduction in real estate values in Southern California and (iv) continued increase in competitive pricing and loan structure. The Banks strive to reduce the exposure to such risks by (a) reviewing each loan request and renewal individually, (b) using a dual signature approval system whereby both the marketing and credit administration departments must approve each request individually and (c) following strict written loan policies, including, among other factors, minimum collateral requirements and maximum loan-to-value ratio requirements. Each loan request is reviewed on the basis of the Bank's ability to recover both principal and interest in view of the inherent risks.

    (2) Commercial Loans. Commercial loans are made to finance operations, to provide working capital or for specific purposes, such as to finance the purchase of assets, equipment or inventory. Since a borrower's cash flow from operations is generally the primary source of repayment, the Company's policies provide specific guidelines regarding required debt coverage and other

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important financial ratios. Commercial loans include lines of credit and commercial term loans. Lines of credit are extended to businesses or individuals based on the financial strength and integrity of the borrower and generally (with some exceptions) are collateralized by short term assets such as accounts receivable, inventory, equipment or real estate and have a maturity of one year or less. Such lines of credit bear an interest rate that floats with the prime rate, LIBOR or another established index. Commercial term loans are typically made to finance the acquisition of fixed assets, refinance short term debt originally used to purchase fixed assets or, in rare cases, to finance the purchase of businesses. Commercial term loans generally have terms from one to five years. They may be collateralized by the asset being acquired or other available assets and bear interest which either floats with the prime rate, LIBOR or another established index or is fixed for the term of the loan. The Banks' portfolio of commercial loans is subject to certain risks, including (i) a possible downturn in the Southern California economy, (ii) interest rate increases and (iii) the deterioration of a company's financial capabilities. The Banks strive to reduce the exposure to such risks through (a) a dual signature approval system and (b) following strict written loan policies. In addition, loans based on short term asset values are monitored on a monthly or quarterly basis. In general, the Banks receive and review financial statements of borrowing customers on an ongoing basis during the term of the relationship and respond to any deterioration noted.

    (3) Consumer Loans and Leases. Consumer loans include personal loans, auto loans, boat loans, home improvement loans, equipment loans, revolving lines of credit and other loans typically made by banks to individual borrowers. The Banks' consumer loan portfolio is subject to certain risks, including (i) amount of credit offered to consumers in the market, (ii) interest rates increases and (iii) consumer bankruptcy laws which allow consumers to discharge certain debts. The Banks strive to reduce the exposure to such risks through the direct approval of all consumer loans by (a) using a dual signature system of approval and (b) strict adherence to written credit policies.

    As part of its efforts to achieve long-term stable profitability and respond to a changing economic environment in Southern California, the Company is investigating all possible options to augment its traditional focus by broadening its customer services. Possible avenues of growth and future diversification include more branch locations, expanded days and hours of operation and new types of lending, brokerage, annuity and mutual funds products.

Business Concentrations

    No individual or single group of related accounts is considered material in relation to the Company's assets or the Banks' assets or deposits, or in relation to the overall business of the Banks or the Company. However, approximately 61.3% of the Company's loan portfolio held for investment at December 31, 2000 consisted of real estate-related loans, including construction loans, miniperm loans, real estate mortgage loans and commercial loans secured by real estate. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Loans. Moreover, the business activities of the Company currently are focused in Southern California, with the majority of its business concentrated in Los Angeles, San Diego, Riverside and San Bernardino Counties in California. Consequently, the results of operations and financial condition of the Company are dependent upon the general trends in the Southern California economies and, in particular, the residential and commercial real estate markets. In addition, the concentration of the Company's operations in Southern California exposes it to greater risk than other banking companies with a wider geographic base in the event of catastrophes, such as earthquakes, fires and floods in this region.

Competition

    The banking business in California, specifically in the Banks' primary service areas, is highly competitive with respect to both loans and deposits as well as other banking and mortgage banking services. The market is dominated by a relatively small number of major banks with a large number of

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offices and full-service operations over a wide geographic area. Among the advantages such major banks have in comparison to the Banks are their ability to finance and engage in wide-ranging advertising campaigns and to allocate their investment assets to regions of higher yield and demand. Such banks offer certain services which are not offered directly by the Banks. In addition, by virtue of their greater total capitalization, such banks have substantially higher lending limits than the Banks. Other entities, in both the public and private sectors, seeking to raise capital through the issuance and sale of debt or equity securities also provide competition for the Banks in the acquisition of deposits. Banks also compete with money market funds and other money market instruments which are not subject to interest rate ceilings. In recent years, increased competition has also developed from specialized finance and non-finance companies that offer wholesale finance, credit card and other consumer finance services (including on-line banking services and personal finance software). Competition for deposit and loan products remains strong from both banking and non-banking firms and this competition directly affects the rates of those products and the terms on which they are offered to consumers.

    Technological innovation continues to contribute to greater competition in domestic and international financial services markets. Technological innovation has, for example, made it possible for non-depository institutions to offer customers automated transfer payment services previously limited to traditional banking products. In addition, customers now expect a choice of several delivery systems and channels, including telephone, mail, home computer, ATMs, self-service branches and in-store branches.

    Mergers between financial institutions have placed additional pressure on banks within the industry to consolidate their operations, reduce expenses and increase revenues to remain competitive. In addition, competition has intensified due to federal and state interstate banking laws, which permit banking organizations to expand geographically with fewer restrictions than in the past. These laws allow banks to merge with other banks across state lines, thereby enabling banks to establish or expand banking operations in the Company's most significant markets. The competitive environment is also significantly impacted by federal and state legislation which make it easier for non-bank financial institutions to compete with the Company.

    Economic factors, along with legislative and technological changes, will have an ongoing impact on the competitive environment within the financial services industry. As an active participant in financial markets, the Company strives to anticipate and adapt to dynamic competitive conditions, but there can be no assurance as to their impact on the Company's future business or results of operations or as to the Company's continued ability to anticipate and adapt to changing conditions. In order to compete with other competitors in their primary service areas, the Banks attempt to use to the fullest extent possible the flexibility which the Banks' independent status permits, including an emphasis on specialized services, local promotional activity and personal contacts. Each of the Banks strive to offer highly personalized banking services. In addition, the Company intends to continue diversifying its services and banking products and to cross-market services and banking products provided by one of the Banks but not the other. The Company believes that through the cross-marketing of products, the Banks can distinguish themselves from other community banks which they compete with based on the range of services provided and products offered. However, there can be no assurance the Company will be able to diversify its services and/or banking products or successfully compete with its competitors in its primary service area.

Employees

    As of March 1, 2001, Rancho Santa Fe had 70 full time equivalent employees, First Community had 52 full time equivalent employees, Professional had 89 full time equivalent employees and the Company had 10 full time equivalent employees in addition to those employed by the Banks.

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Financial and Statistical Disclosure

    Statistical information relating to the Company and its subsidiaries is presented within "Item 6. Selected Financial Data; Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations; Item 7A. Qualitative and Quantitative Disclosure About Market Risk." This information should be read in conjunction with the consolidated financial statements contained in "Item 8. Financial Statements and Supplementary Data."

Supervision and Regulation

General

    The banking and financial services businesses in which the Company engages are highly regulated. Such regulation is intended, among other things, to protect depositors insured by the Federal Deposit Insurance Corporation (the "FDIC") and the entire banking system. The commercial banking business is also influenced by the monetary and fiscal policies of the federal government and the policies of the Federal Reserve Board (the "Board"). The Board implements national monetary policies (with objectives such as curbing inflation and combating recession) by its open-market operations in United States Government securities, by adjusting the required level of reserves for financial intermediaries subject to its reserve requirements and by varying the discount rates applicable to borrowings by depository institutions. The actions of the Board in these areas influence the growth of bank loans, investments and deposits and also affects interest rates charged on loans and paid on deposits. Indirectly such actions may also impact the ability of non-bank financial institutions to compete with the Banks. The nature and impact of any future changes in monetary policies cannot be predicted.

    The laws, regulations and policies affecting financial services businesses are continuously under review by Congress and state legislatures and federal and state regulatory agencies. From time to time, legislation is enacted which has the effect of increasing the cost of doing business, limiting or expanding permissible activities or affecting the competitive balance between banks and other financial intermediaries. Proposals to change the laws and regulations governing the operations and taxation of banks, bank holding companies and other financial intermediaries are frequently made in Congress, in the California legislature and before various bank regulatory agencies and other professional agencies. Changes in the laws, regulations or policies that impact the Company cannot necessarily be predicted, but they may have a material effect on the business and earnings of the Company.

Bank Holding Company Regulation

    The Company, as a bank holding company, is subject to regulation under the BHCA. It is registered with and subject to the supervision and examination of the Board. Pursuant to the BHCA, the Company is required to obtain the prior approval of the Board before it acquires all or substantially all of the assets of any bank or ownership or control of voting shares of any bank if, after giving effect to such acquisition, it would own or control, directly or indirectly, more than 5 percent of such bank.

    Under the BHCA, the Company may not engage in any business other than managing or controlling banks or furnishing services to its subsidiaries that the Board deems to be so closely related to banking as "to be a proper incident thereto." The Company is also prohibited, with certain exceptions, from acquiring direct or indirect ownership or control of more than 5 percent of the voting shares of any company unless the company is engaged in banking activities or the Board determines that the activity is so closely related to banking to be a proper incident to banking. The Board's approval must be obtained before the shares of any such company can be acquired and, in certain cases, before any approved company can open new offices.

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    The BHCA and regulations of the Board also impose certain constraints on the redemption or purchase by a bank holding company of its own shares of stock.

    The Company's earnings and activities are affected by legislation, by regulations and by local legislative and administrative bodies and decisions of courts in the jurisdictions in which the Company and the Banks conduct business. For example, these include limitations on the ability of the Banks to pay dividends to the Company and the ability of the Company to pay dividends to its shareholders. It is the policy of the Board that bank holding companies should pay cash dividends on common stock only out of income available over the past year and only if prospective earnings retention is consistent with the organization's expected future needs and financial condition. The policy provides that bank holding companies should not maintain a level of cash dividends that undermines the bank holding company's ability to serve as a source of strength to its banking subsidiaries. Various federal and state statutory provisions limit the amount of dividends that subsidiary banks and savings associations can pay to their holding companies without regulatory approval. In addition to these explicit limitations, the federal regulatory agencies have general authority to prohibit a banking subsidiary or bank holding company from engaging in an unsafe or unsound banking practice. Depending upon the circumstances, the agencies could take the position that paying a dividend would constitute an unsafe or unsound banking practice.

    In addition, banking subsidiaries of bank holding companies are subject to certain restrictions imposed by federal law in dealings with their holding companies and other affiliates. Subject to certain exceptions set forth in the Federal Reserve Act, a bank can make a loan or extend credit to an affiliate, purchase or invest in the securities of an affiliate, purchase assets from an affiliate, accept securities of an affiliate as collateral for a loan or extension of credit to any person or company, issue a guarantee or accept letters of credit on behalf of an affiliate only if the aggregate amount of the above transactions of such subsidiary does not exceed 10 percent of such subsidiary's capital stock and surplus on an individual basis or 20 percent of such subsidiary's capital stock and surplus on an aggregate basis. Such transactions must be on terms and conditions that are consistent with safe and sound banking practices. A bank and its subsidiaries generally may not purchase a "low-quality asset," as that term is defined in the Federal Reserve Act, from an affiliate. Such restrictions also prevent a holding company and its other affiliates from borrowing from a banking subsidiary of the holding company unless the loans are secured by collateral.

    The Board has cease and desist powers over parent bank holding companies and non-banking subsidiaries where the action of a parent bank holding company or its non-financial institutions represent an unsafe or unsound practice or violation of law. The Board has the authority to regulate debt obligations, other than commercial paper, issued by bank holding companies by imposing interest ceilings and reserve requirements on such debt obligations.

Regulation of the Banks

    The Banks are extensively regulated under both federal and state law.

    The Banks are insured by the FDIC, which currently insures deposits of each member bank to a maximum of $100,000 per depositor. For this protection, the Banks, as is the case with all insured banks, pay a semi-annual statutory assessment and are subject to the rules and regulations of the FDIC. First Community is a member of the Federal Reserve System and is subject to primary regulation by the Board. Rancho Santa Fe and First Professional are national banks and therefore regulated primarily by the Office of the Comptroller of the Currency.

    Various requirements and restrictions under the laws of the State of California and the United States affect the operations of the Banks. State and federal statutes and regulations relate to many aspects of the Banks' operations, including standards for safety and soundness, reserves against deposits, interest rates payable on deposits and loans, investments, mergers and acquisitions,

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borrowings, dividends, locations of branch offices, fair lending requirements, Community Reinvestment Act activities and loans to affiliates. Further, the Banks are required to maintain certain levels of capital. The following are the regulatory capital guidelines and the actual capitalization levels for Rancho Santa Fe, First Community and the Company as of December 31, 2000:

	Requirement		Actual
	Adequately Capitalized	Well Capitalized	Rancho Santa Fe	First Community	Company Consolidated
	(greater than or equal to)
Tier 1 risk-based capital ratio	4.00%	6.00%	11.10%	9.88%	12.97%
Total risk-based capital	8.00%	10.00%	12.35%	11.13%	14.22%
Tier 1 leverage capital ratio	4.00%	5.00%	8.82%	7.38%	10.21%

Hazardous Waste Clean-Up

    Since the Company is not involved in any business that manufactures, uses or transports chemicals, waste, pollutants or toxins that might have a material adverse effect on the environment, its primary exposure to environmental laws is through its lending activities. Based on a general survey of the loan portfolios of the Banks, conversations with local appraisers and the type of lending currently and historically done by the Banks, the Company is not aware of any potential liability for hazardous waste contamination that might have a material adverse effect on the Company as of March 1, 2001.

ITEM 2.  PROPERTIES

Rancho Santa Fe Properties

    Rancho Santa Fe's principal office is located at 6110 El Tordo, Rancho Santa Fe, California 92067. As of March 1, 2001, Rancho Santa Fe had a total of five properties consisting of four branch offices and one operations location. All locations are leased.

First Community Properties

    First Community's principal office is located at 74-750 Highway 111, Indian Wells, California 92210. As of March 1, 2001, First Community had a total of six properties consisting of five branch offices and one discontinued branch location. Four locations are owned and two are leased.

First Professional Properties

    First Professional's principal office is located at 606 Broadway, Santa Monica, California 90401. As of March 1, 2001, First Professional had a total of seven properties consisting of five branch offices and one discontinued branch location with an ATM and one operations center. All locations are leased.

    For additional information regarding properties of the Company and of the Banks, see "Item 8. Financial Statements and Supplementary Data."

ITEM 3.  LEGAL PROCEEDINGS

General

    From time to time, the Company and the Banks are party to claims and legal proceedings arising in the ordinary course of business. Management of the Company evaluates the Company's and/or the Banks' exposure to the cases individually and in the aggregate and provides for potential losses on such litigation if the amount of the loss is determinable and the loss is probable.

    Management of the Company and/or the Banks believe that there are no material litigation matters at the current time. However, litigation is inherently uncertain and no assurance can be given

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that any current or future litigation will not result in any loss which might be material to the Company and/or the Banks.

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

    No matters have been submitted to the shareholders of the Company, through the solicitation of proxies or otherwise, during the fourth quarter of the year ended December 31, 2000.

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PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Marketplace Designation and Sales Price Information

    The Company's common stock trades on the Nasdaq National Market® under the symbol "FCBP." Prior to June 1, 2000, trading in Rancho Santa Fe's common stock occurred solely "over the counter," and was not extensive. Consequently, the prices listed before that date represent quotations by dealers making a market in Rancho Santa Fe common stock and reflect inter-dealer prices, without adjustments for mark-ups, mark-downs or commissions and may not necessarily represent actual transactions. Prior to June 1, 2000, trading in the Company's common stock was limited in volume and may not be a reliable indicator of its market value. On June 1, 2000, the Company's common stock was designated for quotation on the Nasdaq National Market®. The prices listed below for periods prior to June 1, 2000 are the prices of Rancho Santa Fe. Prices subsequent to June 1, 2000 are prices for the Company as reported by the Nasdaq National Market®.

    The Company believes, based on the records of the transfer agent, that the number of record holders of the Company's common stock as of March 1, 2001 was approximately 1,083.

    The following table summarizes those trades of Company common stock of which management is aware, setting forth the approximate high and low trade prices for each quarterly period ended since January 1, 1999:

		Approximate Sales Prices
		High		Low
Quarter Ended
1999:
	First quarter	$	13.75	$	11.75
	Second quarter	$	14.38	$	11.00
	Third quarter	$	14.88	$	13.13
	Fourth quarter	$	15.50	$	13.50
2000
	First quarter	$	15.50	$	13.75
	Second quarter	$	14.25	$	13.00
	Third quarter	$	15.44	$	13.88
	Fourth quarter	$	15.13	$	14.75

    On March 1, 2001, the approximate high and low trade price for the Company's common stock was $17.125 and $17.125, respectively.

Dividends

    The ability of the Company to pay dividends to its shareholders is subject to the restrictions set forth in the California General Corporation Law (the "CGCL"). The CGCL provides that a corporation may make a distribution to its shareholders if the corporation's retained earnings equal at least the amount of the proposed distribution. The CGCL further provides that, in the event that sufficient retained earnings are not available for the proposed distribution, a corporation may nevertheless make a distribution to its shareholders if it meets two conditions: (i) the corporation's assets equal at least 1¹/4 times its liabilities and (ii) the corporation's current assets equal at least its current liabilities or, alternatively, if the average of the corporation's earnings before taxes on income and interest expense for the two preceding fiscal years was less than the average of the corporation's

14

interest expense for such fiscal years, the corporation's current assets equal at least 1¹/4 times its current liabilities. The Company's ability to pay dividends is also subject to certain other limitations. See "Item 1. Business—Supervision and Regulation."

    The primary source of income of the Company is the receipt of dividends from the Banks. The availability of dividends from the Banks is limited by various statutes and regulations. California law restricts the amount available for cash dividends by state-chartered banks to the lesser of retained earnings or the bank's net income for its last three fiscal years (less any distributions to shareholders made during such period). In the event a bank is unable to pay cash dividends due to insufficient retained earnings or net income for its last three fiscal years, cash dividends may be paid under certain circumstances with the prior approval of the California Department of Financial Institutions (the "DFI"). It is possible, depending upon the financial condition of the Bank in question, and other factors, that the Board and/or the Office of the Comptroller of the Currency could assert that payment of dividends or other payments is an unsafe or unsound practice. In addition, the Company's ability to pay dividends is limited by a Revolving Credit Agreement, dated as of June 26, 2000 (the "Credit Agreement"), between the Company and the Northern Trust Company which provides that the Company may not declare or pay any dividend, other than dividends payable in the Company's common stock or in the ordinary course of business exceeding 50% of net income per fiscal quarter of the Company before goodwill amortization and any restructuring charges incurred in connection with any merger, consolidation or other restructuring contemplated by transactions similar to a merger. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations-Liquidity; and Note 14 of Notes to Consolidated Financial Statements contained in "Item 8. Financial Statements and Supplementary Data."

    Holders of the Company's common stock are entitled to receive dividends declared by the Company's Board of Directors out of funds legally available under the laws of the State of California, subject to the rights of holders of any preferred stock of the Company that may be issued in the future. In January 1998, the Company's Board of Directors (the Rancho Santa Fe Board prior to June 2000) approved the institution of a quarterly dividend and thereafter declared the following dividends:

Record Date	Pay Date	Amount per Share
February 13, 1998	February 27, 1998	$0.06
May 15, 1998	May 29, 1998	$0.06
August 14, 1998	August 31, 1998	$0.06
November 13, 1998	November 30, 1998	$0.06
February 12, 1999	February 26, 1999	$0.06
May 14, 1999	May 28, 1999	$0.06
August 13, 1999	August 31, 1999	$0.09
November 15, 1999	November 30, 1999	$0.09
February 15, 2000	February 29, 2000	$0.09
May 15, 2000	May 31, 2000	$0.09
August 15, 2000	August 31, 2000	$0.09
November 15, 2000	November 30, 2000	$0.09

    The Company's management believes that it will be able to continue paying quarterly dividends. However, because the Company must comply with the CGCL and banking regulations, there can be no assurance that the Company will continue to pay dividends.

ITEM 6.  SELECTED FINANCIAL DATA

    The following table sets forth statistical information relating to the Company and its subsidiaries for each of the years in the five-year period ended December 31, 2000. This data should be read in conjunction with the audited consolidated financial statements as of December 31, 2000 and 1999 and

15

for each of the years in the three-year period ended December 31, 2000 and related notes included elsewhere herein. See "Item 8. Financial Statements and Supplementary Data."

			At or for the Years Ended December 31,
			2000		1999		1998		1997		1996
			(In thousands except per share data)
Results of Operations:
	Interest Income		$	28,831	$	23,405	$	20,258	$	16,707	$	13,752
	Interest Expense			7,924		5,688		5,390		4,564		3,942
NET INTEREST INCOME				20,907		17,717		14,868		12,143		9,810
	Provision for loan losses			520		518		941		310		360
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES				20,387		17,199		13,927		11,833		9,450
	Non-interest income			2,465		2,304		2,692		2,426		3,229
	Non-interest expense			18,145		12,073		10,897		9,544		9,987
EARNINGS BEFORE INCOME TAXES				4,707		7,430		5,722		4,715		2,692
	Income tax (benefit)			2,803		3,166		2,140		1,878		(479	)
NET EARNINGS			$	1,904	$	4,264	$	3,582	$	2,837	$	3,171
Ending Balance Sheet Data:
	Assets		$	358,287	$	304,362	$	277,613	$	214,846	$	175,663
		Time deposits in financial institutions		495		7,502		5,440		4,160		—
		Securities		46,313		50,563		38,380		28,136		22,646
		Loans, net of deferred fees		250,552		206,102		170,980		151,064		125,247
		Allowance for loan losses		3,930		4,025		3,785		3,382		3,194
		Deposits		316,938		274,232		251,421		191,940		156,481
		Borrowed funds		9,689		1,657		470		—		—
		Common shareholders' equity		27,772		25,855		22,833		19,680		16,769
Per Share Data and Other Selected Ratios:
	Earnings per common share:
		Basic	$	0.49	$	1.10	$	0.93	$	0.74	$	0.83
		Diluted		0.47		1.05		0.88		0.71		0.83
	Dividends declared per share			0.36		0.30		0.24		—		—
	Dividends payout ratio			76.7%		28.6%		27.3%		—		—
	Book value per share		$	6.99	$	6.67	$	5.92	$	5.15	$	4.39
	Shareholders' equity to assets at period end			7.75%		8.49%		8.22%		9.16%		9.55%
	Return on average assets			0.56		1.44		1.48		1.45		1.94
	Return on average equity			7.01		17.46		16.87		15.62		21.16
	Average equity/average assets			7.99		8.27		8.77		9.30		9.16
	Net interest margin			6.81		6.60		6.79		6.85		6.82

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

    The Company had total assets of approximately $358,287,000 at December 31, 2000 as compared to total assets of approximately $304,362,000 at December 31, 1999. At January 31, 2001, the Company had total assets of approximately $628,000,000 after giving effect to the Professional Merger. The Company's total deposits increased from approximately $274,232,000 at December 31, 1999 to approximately $316,938,000 at December 31, 2000. The Professional Acquisition added approximately

16

$238,000,000 of deposits as of January 31, 2001. Common shareholders' equity increased $1,917,000 million from $25,855,000 million at December 31, 1999 to $27,772,000 million at December 31, 2000.

Results of Operations

    Earnings Performance.  The Company reported net earnings for the year ended December 31, 2000 of $1,904,000, compared to $4,264,000 for the year ended December 31, 1999, a decrease of $2,360,000, or 55.3%. The Company reported net earnings for the year ended December 31, 1999 of $4,264,000, compared with $3,582,000 for 1998, an increase of $682,000 or 19.0%. In 2000, basic earnings per share and diluted earnings per share were $0.49 and $0.47, compared with $1.10 and $1.05 in 1999 and $0.93 and $0.88 in 1998. The decrease in net earnings for the year ended December 31, 2000 was primarily attributable to nonrecurring merger costs of $3,561,000 related to the First Community Acquisition. Before these nonrecurring merger costs net income would have been $4,702,000, or a 10.3% increase from 1999. The Company's improved earnings performance between 1999 and 1998 is primarily attributable to an increase in net interest income arising from a greater quantity of interest-earnings assets particularly in the loan segment. The Company believes that the demand for loans increased in the Banks' market areas due to a strong local economy as well as low interest rates. In addition to the growth in earning assets, a general improvement in operating efficiencies contributed to the Company's earnings performance.

    The following is a condensed summary of the statement of operations along with selected profitability ratios:

Analysis of Net Income

	Year Ended December 31,
	2000		1999		1998
Net interest income	$	20,907,000	$	17,717,000	$	14,868,000
Provision for loan losses		520,000		518,000		941,000
Other non-interest income		2,151,000		1,951,000		2,071,000
Net gains on sales of SBA loans		314,000		353,000		621,000
Non-interest expenses		18,145,000		12,073,000		10,897,000
Income taxes		2,803,000		3,166,000		2,140,000
Net income		1,904,000		4,264,000		3,582,000
Return on average assets		0.56%		1.44%		1.48%
Return on average equity		7.01		17.46		16.87
Dividend payout ratio		76.7		28.6		27.3
Average equity to average assets at period end		7.99		8.27		8.77
Measures before after-tax nonrecurring merger costs
Return on average assets		1.38%		1.44%		1.48%
Return on average equity		17.31		17.46		16.87
Dividend payout ratio		31.3		28.7		2745

    Net Interest Income.  Net interest income, which constitutes one of the principal sources of income for the Company, represents the difference between interest earned on assets and interest paid on liabilities. Net interest margin is net interest income expressed as a percentage of average interest-earning assets. Net interest income is affected by changes in both interest rates and the volume of average earning assets and interest-bearing liabilities. The following tables provide information concerning average interest-earning assets and interest-bearing liabilities, interest earned and paid and the related yields and rates on major categories for the periods indicated:

17

Analysis of Average Rates and Balances

		Average Balance		2000 Interest Income/ Expense		Interest Yields and Rates		Average Balance		1999 Interest Income/ Expense		Interest Yields and Rates		Average Balance		1998 Interest Income/ Expense		Interest Yields and Rates
ASSETS
Loans, net (1) and (2)		$	228,638,000	$	23,980,000	10.49	%	$	187,811,000	$	19,056,000	10.15	%	$	160,895,000	$	16,971,000	10.55	%
Investment securities (2)			47,620,000		2,957,000	6.21			45,731,000		2,614,000	5.72			31,549,000		1,838,000	5.83
Federal funds sold			26,602,000		1,637,000	6.15			28,372,000		1,380,000	4.86			21,524,000		1,135,000	5.27
Deposits with financial institutions			4,227,000		257,000	6.08			6,512,000		355,000	5.45			5,111,000		314,000	6.14
	Total interest earning assets		307,087,000		28,831,000	9.39			268,426,000		23,405,000	8.72			219,079,000		20,258,000	9.25
Noninterest earning assets			32,931,000						26,930,000						22,961,000
	Total assets		340,018,000						295,356,000						242,040,000
LIABILITIES
Time deposits of $100,000 or more			28,779,000		1,810,000	6.29			25,680,000		1,253,000	4.88			17,181,000		904,000	5.26
All other interest-bearing deposits			172,190,000		5,741,000	3.33			154,692,000		4,395,000	2.84			133,127,000		4,450,000	3.34
Other interest-bearing liabilities			4,278,000		373,000	8.72			793,000		40,000	5.04			622,000		36,000	5.79
	Total interest-bearing liabilities		205,247,000		7,924,000	3.86			181,165,000		5,688,000	3.14	%		150,930,000		5,390,000	3.57	%
Noninterest-bearing deposits			104,518,000						87,466,000						67,344,000
Other liabilities			3,082,000						2,310,000						2,529,000
Shareholders' equity			27,171,000						24,415,000						21,237,000
Total liabilities and shareholders' equity		$	340,018,000					$	295,356,000					$	242,040,000
Net interest rate spread						5.53	%					5.58	%					5.68	%
Net interest income				$	20,907,000					$	17,717,000					$	14,868,000
Net yield of interest-earning assets						6.81	%					6.60	%					6.79	%

(1)

Includes nonaccrual loans and loan fees

(2)

Yields on loans and securities have not been adjusted to a tax-equivalent basis because the impact is not material

    Net interest income before provision for loan losses was $20,907,000 for the year ended December 31, 2000 compared to $17,717,000 in 1999, an increase of $3,190,000 or 18.0%. The increase was attributable to an increase in average interest earning assets of $38,661,000 in 2000 compared to an increase of average interest bearing liabilities of $23,799,000, a net increase of $14,862,000. The rate earned on interest bearing assets increased to 9.39% in 2000 compared to 8.72% in 1999. The increase was attributable to increased interest rate environment in 2000 over 1999 due to increases in interest rates by the Federal Reserve Bank. Average net loans outstanding during 2000 was $228,638,000 and yielded 10.49% compared to average loans outstanding of $187,811,000 in 1999 that yielded 10.15%. The increase in average loans outstanding of $40,827,000 in 2000 was due to a continued strong economic climate in Southern California throughout the year and the Company's successful efforts to exploit this economic climate.

    Average investments outstanding during 2000 were $47,620,000 earning interest at a yield of 6.21%, compared with $45,731,000 and 5.72% in 1999. Average Federal funds sold were $26,602,000 and yielded 6.15% in 2000 compared with $28,372,000 and 4.86% in 1999. Average deposits with financial institutions were $4,227,000 and yielded 6.08% in 2000 compared to $6,512,000 and 5.45% in 1999. These changes in yields are comparable to the changes in interest rates in the general economy over the same period.

18

    Average outstanding interest-bearing liabilities were $204,964,000 and paid an average of 3.87% compared to $181,165,000 and 3.14% in 1999. The increase in average balances is due to the general increase in economic activity in this period of time and the Company's success in taking advantage of this increase. These changes in interest costs are comparable to the changes in interest rates in the general economy over this period of time.

    Net interest income before provision for loan losses for the year ended December 31, 1999 increased $2,849,000 or 19.2% compared with the year ended December 31, 1998. The increase in 1999 compared to 1998 was due to the increase in average earning assets of $49,347,000 or 22.5%. The yield earned on interest-earning assets during 1999 declined to 8.72% from 9.25% for the same period in 1998. The decline was primarily attributable to the effect of the overall decline in market interest rates experienced at the end of 1998. Average net loans outstanding during 1999 were $187,811,000, which earned interest at an average yield of 10.15%, compared with $160,895,000 at 10.55% in 1998. This increase in loans was due primarily to the strong economic climate in the Banks' market areas and emphasis on business development efforts to expand business in the Banks' market areas resulting in the growth of all loan categories.

    Average investments outstanding during 1999 were $45,731,000 and these investments earned interest at an average yield of 5.72% compared with $31,549,000 and 5.83% in 1998. Average federal funds sold during 1999 were $28,372,000 and earned an average yield of 4.86% in 1999 compared with $21,524,000 and 5.27% in 1998. Average deposits with financial institutions during 1999 were $6,512,000 and earned an average yield of 5.45% in 1999 compared with $5,111,000 and 6.14% in 1998. Short-term interest rates were lowered by the Federal Reserve Bank during the fourth quarter of 1998 resulting in lower short-term rates during 1999 compared with 1998.

    Average outstanding interest-bearing liabilities of $181,165,000 in 1999 paid an average rate of 3.14% during that period compared to $150,930,000 and 3.57% in 1998. This decrease in average rates paid in 1999 is a result of the above-mentioned decline in the general level of interest rates.

    As discussed above, the Company's net interest income is affected by the change in the amount and mix of interest-earning assets and interest-bearing liabilities, referred to as a "volume change," as well as yields earned on interest-earning assets and rates paid on deposits and other borrowed funds, referred to as a "rate change."

19

    The following table reflects changes in interest income and expense attributable to changes in volume and interest rates of significant interest-bearing assets and liabilities:

Analysis of Volume and Interest Rates

		2000 Compared to 1999 Attributable to Change									1999 Compared to 1998 Attributable to Change
		Total Change			In Volume			In Rate			Total Change			In Volume		In Rate
Loans, net (1) and (2)		$	4,924,000		$	4,142,000		$	782,000		$	2,085,000		$	2,839,000	$	(754,000	)
Investment securities (2)			343,000			108,000			235,000			776,000			826,000		(50,000	)
Federal funds sold			257,000			(86,000	)		343,000			245,000			361,000		(116,000	)
Deposits with financial institutions			(98,000	)		(125,000	)		27,000			41,000			86,000		(45,000	)
	Total		5,426,000			4,039,000			1,387,000			3,147,000			4,112,000		(965,000	)
Time deposits of $100,000 or more			557,000			151,000			406,000			349,000			447,000		(98,000	)
All other interest-bearing deposits			1,346,000			497,000			849,000			(55,000	)		721,000		(776,000	)
Other interest-bearing liabilities			333,000			162,000			171,000			4,000			10,000		(6,000	)
	Total		2,236,000			810,000			1,426,000			298,000			1,178,000		(880,000	)
Changes in net interest income		$	3,190,000		$	3,229,000		$	(39,000	)	$	2,849,000		$	2,934,000	$	(85,000	)

(1)

Includes nonaccrual loans and loan fees

(2)

Yields on loans and securities have not been adjusted to a tax-equivalent basis because the impact is not material

    The change in interest income/expense attributable to volume reflects the change in volume times the prior year's rate and the change in interest income/expense attributable to rate reflects the change in rates times the current year's volume. The change in rate/volume has been allocated to the change attributed to rate.

    Provision for Loan Losses.  The amount of the provision for loan losses in each year is a charge against earnings in that year. The amount of provision is based upon management's evaluation of the loan portfolio, past loan loss experience, general economic conditions and other pertinent factors.

    The Company provided $520,000 for loan losses for the year ended December 31, 2000 compared to $518,000 in the prior year. The small change in the provision for loan losses, even with the increase in loans and the small increase in net impaired loans, is reflective of the improved credit quality of the Company's loan portfolio during the year ended December 31, 2000. The allowance for loan losses was $3,930,000, or 1.56% of total loans outstanding, compared with an allowance for loan losses of $4,025,000, or 1.95% of total loans outstanding, as of December 31, 1999. Net loans charged off in 2000 increased by $337,000 to $615,000 compared to $278,000 in net loans charged off for the year ended December 31, 1999.

    The Company provided $518,000 for loan losses for the year ended December 31, 1999 compared to $941,000 for the same period in 1998. The decreased provision in 1999 was attributable to improvements in First Community's credit quality. The allowance for loan losses at December 31, 1999 was $4,025,000 or 1.95% of total net loans outstanding, a decrease from 2.21% at December 31, 1998.

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The allowance for loan losses as a percentage of total net loans outstanding declined at December 31, 1999 compared to the prior year period, due to the previously mentioned improvements in First Community's credit quality. Additionally, net charge-offs declined from $538,000 in 1998 to $278,000 in 1999.

    Noninterest Income.  The following table sets forth the details of noninterest income for the year ended December 31, 2000 and 1999:

			For the year ended December 31,
			2000		1999		Increase (Decrease)
			(In thousands)
Noninterest Income:
	Service charges on deposit accounts		$	1,185	$	1,175	$	10
	Merchant discount fees, net			107		84		23
	SBA loan servicing fees			268		170		98
	Mortgage fees			77		82		(5	)
	Gain on sale of loans			314		353		(39	)
	Other			514		440		74
		Total noninterest income	$	2,465	$	2,304	$	161

    Noninterest income increased $161,000, or 7.0%, to $2,465,000 for the year ended December 31, 2000 compared with $2,304,000 in 1999. SBA loan servicing fees increased $98,000, or 57.6%, to $268,000 in 2000 compared with $170,0000 in 1999. The primary reason for this increase was the increase in SBA loans serviced by the Company from current year and prior year loan sales.

    Merchant discount fees, net of expenses, increased $23,000, or 27.4%, to $107,000 in 2000 compared with $84,000 in 1999 due to the increased activity of the Company's merchant customer base.

    The decline in gain on sale of loans is due to the decline in SBA activity as a result of the higher interest rate environment in 2000.

    Other noninterest income increased $74,000, or 16.8%, in 2000 to $514,000 compared with $440,000 in 1999. The increase was attributable to small increases in several other income categories.

    The following table sets forth the details of noninterest income for the year ended December 31, 1999 and 1998:

			For the year ended December 31,
			1999		1998		Increase (Decrease)
			(In thousands)
Noninterest Income:
	Service charges on deposit accounts		$	1,175	$	1,158	$	17
	Merchant discount fees, net			84		71		13
	SBA loan servicing fees			170		207		(37	)
	Mortgage fees			82		263		(181	)
	Gain on sale of loans			353		621		(268	)
	Other			440		372		68
		Total noninterest income	$	2,304	$	2,692	$	(388	)

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    Noninterest income decreased $388,000, or 14.4%, to $2,304,000 in 1999 compared with $2,692,000 in 1998. This decrease is primarily the result of a decrease in the gain on sale of loans of $268,000, or 43.2%, as well as a decrease in mortgage brokerage fee income of $181,000, or 68.8%, to $82,000 in 1999. Gain on the sale of loans represents the premium earned on the sale of the guaranteed portion of Small Business Administration loans. During 1999, a lower volume of loans were sold at a reduced premium compared with the same period in 1998. The Company receives fees for packaging and processing loan applications for financing the purchase or refinancing single-family residences. Funding is provided by various outside mortgage lenders. The volume of transactions decreased during 1999 as a result of a less favorable interest rate environment for refinance or purchase transactions.

    Service charges on deposit accounts increased $17,000, or 1.5%, to $1,175,000 in 1999 compared with $1,158,000 in 1998. This increase is due to the growth in the number of accounts subject to service charges. Merchant discount fees, net of costs, increased $13,000, or 18.3%, during 1999 compared with the same period in 1998 as a result of a greater number of merchant accounts and transactions.

    Noninterest Expense.  The following table sets forth the details of noninterest expense for the year ended December 31, 2000 and 1999:

			For the year ended December 31,
			2000		1999		Increase (Decrease)
			(In thousands)
Noninterest expense:
	Salaries and employee benefits		$	6,673	$	5,623	$	1,050
	Occupancy			1,563		1,496		67
	Furniture and equipment			892		687		205
	Legal expenses			229		285		(56	)
	Other professional services			1,685		1,184		501
	Stationery, supplies and printing			418		395		23
	Advertising			435		305		130
	Real estate owned and property held for sale			356		182		174
	Insurance			128		120		8
	Loss on sale of securities			11		2		9
	Merger costs			3,561		—		3,561
	Other			2,194		1,794		400
		Total noninterest expense	$	18,145	$	12,073	$	6,072

    Total noninterest expenses increased $6,072,000, or 50.3%, to $18,145,000 for 2000 compared with $12,073,000 in 1999. Included in the current year non-interest expense was $3,561,000 in pre-tax, non-recurring expenses associated with the merger of Rancho Santa Fe and First Community. Salaries and employee benefits increased $1,050,000, or 18.7%, to $6,673,000 in 2000 compared with $5,623,000 in 1999. This increase is a result of increased staff levels necessary to accommodate the increased level of business at the Company and required to manage a larger company.

    Occupancy and furniture and equipment expenses increased $272,000, or 12.5%, to $2,455,000 in 2000 compared with $2,183,000 in 1999. This increase is primarily due to increased depreciation at First Community and increased rent expense at Rancho Santa Fe. Legal and other professional services, consisting of audit, tax and accounting services, data processing and other outside services, increased $445,000, or 30.3%, to $1,914,000 in 2000 compared with $1,469,000 in 1999. The increase in 2000 was mostly the result of outsourcing more activities, especially at First Community. This was partially offset by more favorable data processing contracts.

22

    Advertising increased $130,000, or 42.6%, in 2000 to $435,000 compared with $305,000 in 1999. The increase was a result of the Company's plan to become recognized as "The Community Bank" as competitors are being purchased by larger institutions. Real estate owned and property held-for-sale expenses increased $174,000, or 95.6%, to $356,000 in 2000 compared with $182,000 in 1999. The Company wrote down its other real estate owned to the amount of an offer received for the properties.

    Other noninterest expenses increased $400,000, or 22.3%, to $2,194,000 in 2000 compared with $1,794,000 in 1999. Other noninterest expense consists of many different categories, none of which account for a majority of the increase. The largest reasons for the increase are attributable to increases in expenses associated with the growth in loans and deposits such as loan expense and customer service expenses such as courier costs and customer analysis expense.

    The following table sets forth the details of noninterest expense for the year ended December 31, 1999 and 1998:

			For the year ended December 31,
			1999		1998		Increase (Decrease)
			(In thousands)
Noninterest expense:
	Salaries and employee benefits		$	5,623	$	5,270	$	353
	Occupancy			1,496		1,382		114
	Impairment loss on premises held for sale			—		38		(38	)
	Furniture and equipment			687		601		86
	Legal expenses			285		204		81
	Other professional services			1,184		1,293		(109	)
	Stationery, supplies and printing			395		273		122
	Advertising			305		337		(32	)
	Real estate owned and property held for sale			182		62		120
	Insurance			120		124		(4	)
	Loss on sale of securities			2		—		2
	Other			1,794		1,313		481
		Total noninterest expense	$	12,073	$	10,897	$	1,176

    Total noninterest expenses increased $1,176,000, or 10.8%, to $12,073,000 for 1999 compared with $10,897,000 in 1998. Salaries and employee benefits increased $353,000, or 6.7%, to $5,623,000 during 1999 compared with $5,270,000 in 1998. This increase was primarily the result of an increase in the number of employees, pay increases, incentives and promotions granted to employees for improved performance.

    Occupancy and furniture and equipment expenses increased $200,000, or 10.1%, during 1999 compared with the prior year. The increase is attributable primarily to costs associated with additional branch and operations locations and the upgrading of technology. Legal expenses and other professional services, consisting of audit, tax and accounting services, data processing and other outside services, decreased $28,000, or 1.9%, during 1999 compared with 1998. In addition, other operating expenses increased $481,000, or 36.6%, during 1999 compared with the same period in 1998 as a result of expenses associated with Year 2000 preparation, profit improvement projects, the general growth of the Company and routine vendor price increases.

    Real estate owned and property held-for-sale expenses increased $120,000, or 193.5%, to $182,000 in 1999 compared with $62,000 in 1998 due primarily to $159,000 in write-downs of properties (primarily land acquired for development).

    Income Taxes.  The provision for income taxes was $2,803,000, $3,166,000 and $2,140,000 for the years ended December 31, 2000, 1999 and 1998, respectively. Effective tax rates were 59.5%, 42.6% and 37.4% for the years ended December 31, 2000, 1999 and 1998, respectively. The effective tax rate in 2000 is higher than previous years due to the nondeductability of certain merger costs.

23

Financial Condition

    Loans.  The following table presents the balance of each major category of loans at the dates indicated:

	2000				1999				1998					1997					1996
	Amount			% of Loans	Amount			% of Loans	Amount			% of Loans		Amount			% of Loans		Amount			% of Loans
	(Dollars in thousands)
Loan Category:
Commercial	$	118,827		47%	$	94,657		46%	$	86,946		51	%	$	80,247		53	%	$	65,002		52	%
Real estate—construction		47,989		19		38,464		19		31,492		18			48,452		32			35,408		28
Real estate—mortgage		79,458		32		67,235		32		48,060		28			19,066		12			22,913		18
Consumer		4,911		2		6,293		3		5,121		3			3,944		3			2,448		2
Total gross loans		251,185		100%		206,649		100%		171,619		100	%		151,709		100	%		125,771		100	%
Less allowance for loan losses		(3,930	)			(4,025	)			(3,785	)				(3,382	)				(3,194	)
Less deferred loan fees		(633	)			(547	)			(639	)				(645	)				(524	)
Total net loans	$	246,622			$	202,077			$	167,195				$	147,682				$	122,053

    The Company's loan portfolio net of allowance for loan losses, deferred fees and costs totaled $246,622,000 as of December 31, 2000. This represents an increase of $44,545,000, or 22.0%, compared to December 31, 1999. Loans have increased consistently over the past five years. In 1999 net loans increased $34,882,000, or 20.9%, compared with 1998. The Company focuses on small to medium sized commercial and real estate secured lending and loans guaranteed by the Small Business Administration. During 2000 and 1999, the strong demand for commercial real estate and construction lending is primarily attributable to the continued health of the Southern California economy.

    The following table presents the Company's interest rate sensitivity analysis at the dates indicated with respect to individual categories of loans and provides separate analyses with respect to fixed interest rate loans and floating interest rate loans:

Loan Repricing or Maturing
As of December 31, 2000

	Repricing or Maturing In
	1 year or less		Over 1 to 5 years		Over 5 years		Total
Loan Category:
Commercial	$	108,301,000	$	3,361,000	$	7,165,000	$	118,827,000
Real estate—construction		47,989,000		—		—		47,989,000
Total	$	156,290,000	$	3,361,000	$	7,165,000	$	166,816,000

		Fixed Rate		Floating Rate		Total
Commercial		$	13,159,000	$	105,668,000	$	118,827,000
Real estate—construction			2,199,000		45,790,000		47,989,000
	Total	$	15,358,000	$	151,458,0000	$	166,816,000

24

    Nonperforming Loans.  The following table sets forth certain information with respect to the Company's nonaccrual loans and accruing loans for which payments of principal and interest were contractually past due 90 days or more:

Nonperforming Loans

	December 31,
	2000		1999	1998	1997	1996
	(in thousands)
Nonaccrual loans	$	2,271	1,845	559	490	1,401
Loans past due 90 days or more and still accruing		—	75	243	408	—
Nonperforming loans	$	2,271	1,920	802	898	1,401

    Loans are generally placed on nonaccrual status when the borrowers are past due 90 days and when payment in full of principal or interest is not expected. At the time a loan is placed on nonaccrual status, any interest income previously accrued but not collected is reversed and charged against current period income. Income on nonaccrual loans is subsequently recognized only to the extent cash is received and the loan's principal balance is deemed collectible. Loans are restored to accrual status only when the loans become both well secured and are in the process of collection.

    Interest income of $413,000, $158,000 and $41,000 would have been recorded for the years ended December 31, 2000, 1999 and 1998, respectively, if nonaccrual loans had been performing in accordance with their original terms. Interest income of $60,000 and $76,000 was recorded on loans subsequently transferred to a nonaccrual status for the years ended December 31, 2000 and 1999, respectively. No interest income was recorded on loans subsequently transferred to nonaccrual status for the year ended December 31, 1998.

    On December 31, 2000, the Company had $2,271,000 of loans on nonaccrual status, compared to $1,845,000 and $559,000 on December 31, 1999 and 1998, respectively. As of December 31, 2000, there were no loans past due over 90 days and still accruing interest. On December 31, 1999, the Company had $75,000 of loans that were past due 90 days or more and still accruing interest, compared to $243,000 on December 31, 1998.

    Allowance for Loan Losses.  The Company's allowance is available to absorb future loan losses. The current level of the allowance for loan losses is a result of management's assessment of the risk within the loan portfolio based on the information revealed in the credit reporting processes. The Company utilizes a risk-rating system on loans and a monthly credit review and reporting process. This assessment of risk takes into account the composition of the loan portfolio, review of specific problem loans, previous loan experience, current and anticipated economic conditions and other factors which, in management's judgment, deserve recognition.

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    The following table presents the changes in the Company's allowance for loan losses as of the dates indicated:

Analysis of Allowance for Loan Losses

			December 31,
			2000			1999		1998		1997		1996
			(dollars in thousands)
Balance at beginning of year			$	4,025		3,785		3,382		3,194		2,948
Loans charged off:
	Commercial			(573	)	(480	)	(664	)	(274	)		*
	Real estate—construction			—		—		—		—			*
	Real estate—mortgage			—		(60	)	—		—			*
	Consumer			(36	)	(52	)	(32	)	(25	)		*
	Small Business Administration, unguaranteed portion held for investment			(99	)	—		—		—			*
		Total loans charged off		(708	)	(592	)	(696	)	(299	)	(290	)
Recoveries on loans charged off:
	Commercial			81		271		150		153			*
	Real estate—construction			4		—		—		—			*
	Real estate—mortgage			—		—		—		20			*
	Consumer			8		37		8		4			*
	Small Business Administration, unguaranteed portion held for investment			—		—		—		—			*
		Total recoveries on loans charged off		93		314		158		177		27
Net loans charged off				(615	)	(278	)	(538	)	(122	)	(114	)
Provision for loan losses				520		518		941		310		360
Balance at end of year			$	3,930		4,025		3,785		3,382		3,194
Ratios:
Allowance for loan losses as a % of total loans at year end				1.56%		1.95%		2.21%		2.24%		2.55%
Net loans charged off to average loans				0.26%		0.15%		0.33%		0.09%

*

The Company did not maintain records for this category during the period specified.

    The allowance for loan losses at December 31, 2000 was $3,930,000 or 1.56% of total loans outstanding, net of deferred fees and costs, a decrease from $4,025,000 or 1.95% of total loans, net of deferred fees and costs, at the end of 1999. The decrease in the allowance for loan losses as a percentage of total loans, net of deferred fees and costs, is the result of improved credit quality. During 2000, First Community had net charge-offs of $615,000 compared to $278,000 for the year ended December 31, 1999. Management believes that the allowance for loan losses of $3,930,000 at December 31, 2000 is adequate to cover known and inherent risks in the loan portfolio.

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    The following table allocates the allowance for loan losses based on management's judgment of potential losses in the respective areas. While management has allocated reserves to various portfolio segments for purposes of this table, the allowance for loan losses is general and is available for the portfolio in its entirety:

Allocation of Allowance for Loan Losses

	Commercial		Real Estate		Consumer		Small Business Administration		Total
	(dollars in thousands)
At December 31,
2000
Allowance for loan losses	$	1,563	$	2,006	$	84	$	277	$	3,930
% of loans in each category to total loans		40%		51%		2%		7%		100%
1999
Allowance for loan losses	$	1,622	$	1,430	$	356	$	617	$	4,025
% of loans in each category to total loans		40%		36%		9%		15%		100%
1998
Allowance for loan losses	$	1,894	$	757	$	379	$	755	$	3,785
% of loans in each category to total loans		50%		20%		10%		20%		100%
1997
Allowance for loan losses	$	1,693	$	676	$	339	$	674	$	3,382
% of loans in each category to total loans		50%		20%		10%		20%		100%
1996
Allowance for loan losses	$	1,598	$	638	$	320	$	638	$	3,194
% of loans in each category to total loans		50%		20%		10%		20%		100%

    Investment Portfolio.  The investment activities of the Company are designed to assist in maximizing income consistent with quality and liquidity requirements, to supply collateral to secure public funds, to provide a means for balancing market and credit risks and to provide consistent income and market value throughout changing economic times.

    The Company's portfolio consists of U.S. Treasury and U.S. Government agency obligations, mortgage-backed securities, obligations of states and political subdivisions, corporate debt and Federal Reserve Bank and Federal Home Loan Bank stock. First Community's investment portfolio contains no investments in any one issuer in excess of 10% of the Company's total equity. Exempt from this calculation are securities of the U.S. Treasury and U.S. government agencies.

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    The following table presents the composition of the Company's investment portfolio at the dates indicated:

Investment Portfolio

		December 31,
		2000		1999		1998
U.S. Treasury and government agency securities		$	34,300,000	$	36,783,000	$	17,135,000
States and political subdivisions			347,000		349,000		351,000
Corporate bonds			—		504,000		506,000
Equity securities			425,000		—		—
Federal Reserve Bank Stock			593,000		725,000		440,000
Federal Home Loan Bank Stock			320,000		510,000		416,000
Mortgage backed securities			10,328,000		11,692,000		13,969,000
	Total Investments	$	46,313,000	$	50,563,000	$	38,380,000

    For the investment portfolio as of December 31, 2000, the following table presents a summary of yields and maturities:

Analysis of Investment Yields and Maturities
December 31, 2000

		One Year or Less			One Year Through Five Years			Five Years Through Ten Years			Over Ten Years			Total
		Amount		Yield	Amount		Yield	Amount		Yield	Amount		Yield	Amount		Yield
U.S. Treasury and government agency securities		$	9,115,000	6.30%	$	25,173,000	6.52%	$	12,000	7.00%	$	—	—	$	34,300,000	6.46%
States and political subdivisions			—	—		—	—		347,000	5.55%		—	—		347,000	5.55%
	Total investments (1)	$	9,115,000	6.30%	$	25,173,000	6.52%	$	359,000	5.60%	$	—		$	34,647,000	6.45%

(1)

Yields on securities have not been adjusted to a fully tax-equivalent basis because the impact is not material

Note: Federal Reserve Bank stock, Federal Home Loan Bank stock, mortgage backed securities and common stock have no maturity and have been excluded from this table.

    Deposits.  The following table presents a summary of the Company's average deposits as of the dates indicated and average rate paid:

Analysis of Average Deposits

	December 31,
	2000				1999				1998
	Amount		Rate		Amount		Rate		Amount		Rate
Non-interest bearing	$	104,518,000	—		$	87,466,000	—		$	67,344,000	—
Savings deposits		12,386,000	1.63	%		11,567,000	1.62	%		10,891,000	1.95	%
Market rate deposits		129,496,000	3.25			115,333,000	2.56			98,360,000	3.08
Time deposits <$100,000		30,308,000	4.40			27,792,000	4.51			23,876,000	5.06
Time deposits >$100,000		28,779,000	6.29			25,680,000	4.88			17,181,000	5.26
Total deposits	$	305,487,000	2.47	%	$	267,838,000	2.11	%	$	217,652,000	2.46	%

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    For time deposits $100,000 or more, the following table presents a summary of maturities for the time periods indicated:

Maturity of Time Deposits of $100,000 or More

	3 Months or Less		Over 3 Months Through 6 Months		Over 6 Months Through 12 Months		Over 12 Months		Total
December 31, 2000	$	16,042,000	$	7,498,000	$	7,455,000	$	525,000	$	31,520,000

    Due to the Company's business development activities, deposits have increased consistently over the past three years. Average deposits for the period through December 31, 2000 were $305,487,000 compared with $267,838,000 in 1999, an increase of $37,649,000 or 14.1%. For 1999, average deposits were $267,838,000 compared with $217,652,000 in 1998, an increase of $50,186,000 or 23.1%.

    Borrowings.  The Company and the Banks have various lines of credit available. The Company also borrows funds from time to time on a short term or overnight basis from the FHLB or other financial institutions. As of December 31, 2000 and 1999, there were no balances outstanding. The average balances were $462,000 and $82,000 and $0 in 2000, 1999 and 1998, respectively. The highest balance at any month-end was $10,400,000 and $700,000 in 2000 and 1999, respectively. The average rate paid was 5.9% and 4.9% in 2000 and 1999, respectively.

Federal Funds Arrangements with Commercial Banks.  As of December 31, 2000 and 1999, the Company had lines of credit in the amount of $14,000,000 and $11,500,000, respectively, from correspondent banks, none of which were outstanding as of December 31, 2000 or 1999. These lines are renewable annually.

Borrowing arrangements at the Federal Reserve Discount Window.  As of December 31, 2000 and 1999, the Company had a Fed discount limit of approximately $4,737,000 and $3,327,000, respectively, none of which was outstanding.

Federal Home Loan Bank Lines of Credit.  As of December 31, 2000 and December 31, 1999, the Company had a Federal Home Loan Bank limit of approximately $15,551,000 and $9,000,000, respectively, none of which was outstanding. The availability of the lines of credit, as well as adjustments in deposit programs, provide for liquidity in the event that the level of deposits should fall abnormally low. These sources provide that funding thereof, may be withdrawn depending upon the financial strength of the Company.

Treasury, Tax and Loan Note.  The Company participates in the Treasury, Tax and Loan Note program. The Company has a limit of $1,700,000 at the Federal Reserve Bank. Treasury, Tax and Loan balances fluctuate based on the amounts deposited by customers and the amounts called for payment by the Federal Reserve Bank. At December 31, 2000 and 1999, the interest rates on the Treasury, Tax and Loan Note, was 5.41% and 4.54%, respectively. As of December 31, 2000, 1999 and 1998, the balance outstanding under the Note program was $1,689,000, $1,657,000 and $470,000, respectively. The average balances under the Note program were $800,000 in 2000, $711,000 in 1999 and $622,000 in 1998. The highest balance at any month-end was $1,700,000 in 2000, 1999 and 1998, respectively. The average rate paid was 5.3%, 5.0% and 5.8% in 2000, 1999 and 1998, respectively.

Revolving Line of Credit.  In May 2000 the Company executed a Revolving Credit Agreement with The Northern Trust Company for $5,000,000. The loan agreement contains covenants which impose certain restrictions on activities of the Company and its financial condition. Such covenants include minimum net worth ratios, maximum debt ratios, a minimum return on average assets, a dividend limitation and minimum and maximum credit quality ratios. As of December 31, 2000 the Company, and where applicable, its subsidiaries were in compliance with each of such covenants or the appropriate waivers

29

have been obtained. Shares of common stock of Rancho Santa Fe have been pledged as collateral against the note payable to The Northern Trust Company. In January 2001, the Company executed the first Amendment to the Revolving Credit Agreement increasing the credit line to $10 million and modifying certain covenants to reflect the Company' larger size and the Professional Merger. Shares of common stock of First Community have been pledged as additional collateral against the note payable. The maximum outstanding amount during 2000 was $2,450,000 and the average outstanding amount was $305,000. The loan bears interest at the prime rate less 75 basis points and was 8.75% at December 31, 2000. The Company pays a fee of 25 basis points on the unused amount. At December 31, 2000 there were no outstandings under this line of credit.

Trust Preferred Securities.  In September 2000, the Company issued $8,000,000 of trust preferred securities bearing a fixed interest rate of 10.60% and maturing in thirty years. This security is considered Tier 1 capital for regulatory purposes. These instruments were issued to fund part of the Professional Merger.

Capital Resources.

    Bank regulatory agencies measure capital adequacy through standardized risk-based capital guidelines which compare different levels of capital (as defined by such guidelines) to risk-weighted assets and off-balance sheet obligations. Banks are required to maintain a minimum total risk-based capital ratio of 8% of which at least 4.0% must be Tier 1 capital. Banking organizations considered to be "well capitalized" must maintain a minimum leverage ratio of 5% and a minimum risk-based capital ratio of 10% of which at least 6.0% must be Tier 1 capital.

    The following table presents regulatory capital requirements and risk-based capital levels of the Company:

	Regulatory Requirements		Actual
	Adequately Capitalized	Well Capitalized	The Company
December 31, 2000
Tier 1 leverage capital ratio	4.00%	5.00%	10.21%
Tier 1 risk-based capital ratio	4.00%	6.00%	12.97%
Total risk-based capital	8.00%	10.00%	14.22%

    As of December 31, 2000, the Company exceeded each of the capital requirements of the Federal Reserve Board and was deemed to be "well capitalized." In addition, each of the Banks exceeded the capital requirements of its primary federal banking regulator and was deemed to be "well capitalized."

    In January 1998, Rancho Santa Fe instituted a quarterly dividend of $0.06 per share, which increased to $0.09 per share in the third quarter of 1999. First Community Bank of the Desert did not pay a dividend.

Liquidity.

    Liquidity management requires an ability to meet financial commitments when contractually due and to respond to other demands for funds. The Company has an Asset/Liability Management Committee responsible for managing balance sheet and off-balance sheet commitments to meet the needs of customers while achieving the Company's financial objectives. The Company's Asset/Liability Management Committees meet regularly to review funding capacities, current and forecasted loan demand and investment opportunities.

    Funds are held in cash and cash equivalents, which are comprised of cash on hand, cash due from banks and federal funds sold. Cash and cash equivalents at December 31, 2000 totaled $52,655,000, or 14.7% of total assets, compared with $32,037,000, or 10.5%, at December 31, 1999. The increase was

30

the result of a decrease in interest-bearing deposits in financial institutions and securities and the issuance of $8,000,000 of trust preferred securities. Deposits increased during the period at approximately the same rate as loans. Loans net of deferred loan fees increased $44,450,000 during 2000 as a result of significant loan demand, particularly in commercial real estate and construction lending. Total deposits by comparison increased $42,706,000 during this same period, primarily in noninterest bearing and market rate deposits.

    As an additional source of liquidity, the Banks maintains lines of credit for $14,000,000 with correspondent banks for purchase of overnight funds. These lines are subject to availability of funds. The Banks also have a combined Fed discount window limit of approximately $4,737,000 as well as a credit line with the Federal Home Loan Bank which would allow the Banks to borrow up to approximately $15,551,000. Historically, the Banks has infrequently used its borrowing capabilities. The Company has a revolving line of credit with Northern Trust Bank of Chicago.

    The ability of the Company to obtain funds for the payment of dividends and for other cash requirements is largely dependent upon its earnings. Dividends paid by a national bank such as Rancho Santa Fe and First Professional, are regulated by the Office of the Comptroller of the Currency under its general supervisory authority as it relates to a bank's capital requirements. A national bank may declare a dividend without the approval of the Office of the Comptroller of the Currency as long as the total dividends declared in a calendar year does not exceed the total of net profits for that year combined with the retained profits for the preceding two years. Dividends paid by a California state-chartered bank, like First Community Bank, are regulated by California law. In general, a state-chartered bank may declare a dividend without the approval of the Commissioner of Financial Institutions as long as the total of dividends declared in a calendar year do not exceed the lesser of the retained earnings of the bank or the net income of the bank for its last three fiscal years.

    The Company defines "Cash Liquidity" as cash and cash equivalents plus securities less pledged assets and the reserve requirement divided by total deposits and borrowings less assets, mainly securities and loans, pledged for deposit balances. The Company manages Cash Liquidity on a consolidated basis and will sell or borrow federal funds between the Banks and will participate in loans based upon the liquidity needs of each of the Banks subject to certain regulatory limitations. At December 31, 2000, Cash Liquidity at the Company was 22.2% compared to Cash Liquidity of 21.7% at December 31, 1999. Cash Liquidity of approximately $64,843,000 was a product of increasing demand for loans and the growth in deposits. The Company hesitated to commit liquid funds to mid to long term investments during a period when the yield curve was relatively flat or inverted, such as existed during most of 2000, and while it anticipated increased funding needs due to expected growth in its loan portfolio.

    The Company's primary sources of liquidity are the receipt of dividends from the Banks, the ability to raise capital and a revolving line of credit (See "—Borrowings"). The availability of dividends from the Banks is limited by various statutes and regulations of state and federal law (See "Item 5. Market For Registrant's Common Equity and Related Stockholders Matters—Dividends"). During 2000 the Company received additional dividends of $2,000,000 million from Rancho Santa Fe. (See Note 14 of Notes to Consolidated Financial Statements contained in "Item 8. Financial Statements and Supplementary Data" and "—Liquidity, Interest Rate Risk and Market Risk").

Recent Accounting Pronouncements

    See Note 1 of the Notes to Consolidated Financial Statements contained in "Item 8. Financial Statements and Supplementary Data" for information on current accounting pronouncements and their impact on the Company's consolidated financial statements.

31

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

    The Company's market risk arises primarily from interest rate risk inherent in its lending and deposit taking activities. The Company does not have any market risk sensitive instruments entered into for trading purposes. Significant changes in interest rates affect the composition, yield and cost of balance sheet components. The rate sensitivity of these assets and liabilities is monitored and matched to control the risk associated with movements in rates. The Asset/Liability Management Committee for the Company meets quarterly to monitor and formulate strategies and policies to provide sufficient levels of net interest income while maintaining acceptable levels of interest rate sensitivity, risk and liquidity. The primary objective of rate sensitivity management is to ensure earnings stability by minimizing the sensitivity of net interest income to fluctuations in interest rates. The Company uses gap analysis and other systems to measure, monitor and adapt to changing interest rate environments. The Company monitors and evaluates its interest rate risk position on a quarterly basis using traditional gap analysis and an analysis of the sensitivity of net interest income to changes in interest rates and an analysis of the impact of changes in interest rates on the market value of equity. Gap analysis calculates the mismatches over certain time periods between assets and liabilities whose interest rates are subject to repricing at their contractual maturity dates or repricing period.

    Management uses various asset/liability strategies to manage the repricing characteristics of its assets and liabilities to ensure that exposure to interest rate fluctuations is limited within the Company guidelines of acceptable levels of risk-taking. Hedging strategies, including the terms and pricing of loans and deposits, and managing the deployment of its securities, are used to reduce mismatches in interest rate repricing opportunities of portfolio assets and their funding sources. When appropriate, management may utilize off balance sheet instruments such as interest rate floors, caps and swaps to hedge its interest rate position. A Board of Directors approved hedging policy statement governs the use of these instruments. As of December 31, 2000, the Company had not utilized any interest rate swap or other such financial derivative to alter its interest rate risk profile.

    One way to measure the impact that future changes in interest rates will have on net interest income is through a cumulative gap measure. The gap represents the net position of assets and liabilities subject to repricing in specified time periods. Generally, a liability sensitive gap position indicates that there would be a net positive impact on the net interest margin of the Company for the period measured in a declining interest rate environment since the Company's liabilities would reprice to lower market rates before its assets. A net negative impact would result from an increasing interest rate environment. Conversely, an asset sensitive gap indicates that there would be a net positive impact on the net interest margin in a rising interest rate environment since the Company's assets would reprice to higher market interest rates before its liabilities.

    The following table sets forth the distribution of repricing opportunities of the Company's interest-earning assets and interest-bearing liabilities, the interest rate sensitivity gap for the period (i.e., interest rate sensitive assets less interest rate sensitive liabilities), the cumulative interest rate sensitivity gap and the cumulative gap as a percentage of total assets and total interest-earning assets as of December 31, 2000. The table also sets forth the time periods during which interest-earning assets and interest-bearing liabilities will mature or may reprice in accordance with their contractual terms. The interest rate relationships between the repriceable assets and repriceable liabilities are not necessarily constant and may be affected by many factors, including the behavior of customers in response to changes in interest rates. This table should, therefore, be used only as a guide as to the possible effect changes in interest rates might have on the net interest margins of the Company.

32

Interest Rate Sensitivity
As of December 31, 2000

		Less than 3 months		3 months to 1 year		1 to 5 years		Over 5 years		Non-rate Sensitive			Total
		(Dollars in thousands)
Repricing Interval
Deposits with financial institutions		$	495	$	—	$	—	$	—	$	—		$	495
Federal funds sold			16,903		—		—		—		—			16,903
Investment securities			2,115		7,143		27,352		8,365		425			45,400
Loans, gross			185,564		19,047		27,346		19,228		—			251,185
	Total rate sensitive assets		205,077		26,190		54,698		27,593		425			313,983
All other assets			—		—		—		—		44,304			44,304
	Total assets	$	205,077	$	26,190	$	54,698	$	27,593	$	44,729		$	358,287
Savings deposits		$	—	$	—	$	12,383	$	—	$	—		$	12,383
Money market deposits			133,375		—		—		—		—			133,375
Time deposits under $100,000			13,414		10,945		1,232		27		—			25,618
Time deposits of $100,000 or more			16,042		14,686		792		—		—			31,520
Other interest-bearing liabilities			1,689		—		—		8,000		—			9,689
	Total rate sensitive liabilities		164,520		25,631		14,407		8,027		—			212,585
All other liabilities			—		—		—		—		117,931			117,931
Shareholders' equity			—		—		—		—		27,771			27,771
	Total liabilities and shareholders' equity	$	164,520	$	25,631	$	14,407	$	8,027	$	145,702		$	358,287
Period gap		$	40,557	$	559	$	40,291	$	19,566	$	(100,973	)
Cumulative gap			40,557		41,116		81,407		100,973
Cumulative rate sensitive gap %			11%		11%		23%		28%

Note: All amounts are reported at their contractual maturity or repricing periods. This analysis makes certain assumptions as to interest rate sensitivity of savings and NOW accounts which have no stated maturity and have had very little price fluctuation in the past three years. Money market accounts are repriced at discretion of management and generally are more rate sensitive.

    At December 31, 2000, the Company had $231,267,000 million in assets and $190,151,000 million in liabilities repricing within one year. This means that $41,116,000 million more of the Company's interest rate sensitive assets than the Company's interest rate sensitive liabilities will change to the then current rate (changes occur due to the instruments being at a variable rate or because the maturity of the instrument requires its replacement at the then current rate). The ratio of interest-earning assets to interest-bearing liabilities maturing or repricing within one year at December 31, 2000 is 122%. Interest income is likely to be affected to a greater extent than interest expense for any changes in interest rates within one year from December 31, 2000. If rates were to fall during this period, interest income would decline by a greater amount than interest expense and net income would decrease. Conversely, if rates were to rise, the opposite would apply.

    Management is continuing to take steps to reduce the positive gap of the Company by lengthening the maturities in its investment portfolio and originating more fixed rate assets. Management strives to maintain a balance between its interest-earning assets and interest-bearing liabilities in order to minimize the impact on net interest income due to changes in market rates.

    In order to measure interest rate risk at December 31, 2000, the Company also used a simulation model to project changes in net interest income that result from forecasted changes in interest rates.

33

This analysis calculates the difference between net interest income forecasted using a rising and a falling interest rate scenario and net interest income forecast using a base market interest rate derived from the current treasury yield curve. For the rising and falling interest rate scenarios, the base market interest rate forecast was increased or decreased, on an instantaneous and sustained basis, by 100 and 200 basis points. At December 31, 2000, the Company's net interest income exposure related to these hypothetical changes in market interest rate was slightly outside the current guidelines established by the Banks. The Asset/Liability Committee has made the determination to remain more asset sensitive in the short term due to the expected growth in loans.

Sensitivity for Net Interest Income
(Dollars in thousands)

Interest Rate Scenario	Adjusted Net Interest Income		Percentage Change from Base		Net Interest Margin Percent		Net Interest Margin change from Base
Down 200 basis points	$	19,770	(10.4	%)	6.39	%	(0.65	%)
Down 100 basis points		21,090	(4.4	)	6.77		(0.28	)
BASE		22,068	—		7.04		—
Up 100 basis points		22,492	1.9		7.15		0.10
Up 200 basis points		23,405	6.1		7.41		0.37

    The Company measures the impact of market interest rate changes on the net present value of estimated cash flows from its assets, liabilities and off-balance sheet items, defined as market value of equity, using a simulation model. This simulation model assesses the changes in market value of interest rate sensitive financial instruments that would occur in response to an instantaneous and sustained increase or decrease in market interest rates of 100 and 200 basis points. At December 31, 2000, the Company's market value of equity exposure related to these changes in market interest rates was within the current guidelines established by the Banks.

Market Value of Portfolio Equity
(Dollars in Thousands)

Interest Rate Scenario	Market Value		Percentage Change from Base		Percentage of Total Assets		Percentage of Portfolio Equity Book Value
Down 200 basis points	$	46,200	(15.9	%)	12.9	%	166.4	%
Down 100 basis points		50,866	(7.4	)	14.2		183.2
BASE		54,925	—		15.3		197.8
Up 100 basis points		58,113	5.8		16.2		209.3
Up 200 basis points		60,927	10.9		17.0		219.4

    The computation of prospective effects of hypothetical interest rate changes are based on numerous assumptions, including relative levels of market interest rates, asset prepayments and deposit decay, and should not be relied upon as indicative of actual results. Further, the computations do not contemplate any actions the Company may undertake in response to changes in interest rates. Actual results may vary.

    This information is not available for December 31, 1999. However, management believes that the information would not be materially different.

34

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Contents
Independent Auditors' Report	36
Consolidated Balance Sheets as of December 31, 2000 and 1999	37
Consolidated Statements of Earnings for the years ended December 31, 2000, 1999 and 1998	38
Consolidated Statements of Shareholders' Equity and Comprehensive Income for the years ended December 31, 2000, 1999 and 1998	39
Consolidated Statements of Cash Flows for the years ended December 31, 2000, 1999 and 1998	40
Notes to Consolidated Financial Statements	41

35

Independent Auditors' Report

The Board of Directors
First Community Bancorp:

    We have audited the accompanying consolidated balance sheets of First Community Bancorp and subsidiaries (the "Company") as of December 31, 2000 and 1999 and the related consolidated statements of earnings, shareholders' equity and comprehensive income and cash flows for each of the years in the three-year period ended December 31, 2000. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

    We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

    In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of First Community Bancorp and subsidiaries as of December 31, 2000 and 1999 and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2000 in conformity with accounting principles generally accepted in the United States of America.

/s/ KPMG LLP

January 26, 2001
San Diego, California

36

FIRST COMMUNITY BANCORP AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 2000 and 1999

				2000			1999
Assets
Cash and due from banks (note 15)				$	35,752,000		21,148,000
Federal funds sold					16,903,000		10,889,000
	Total cash and cash equivalents				52,655,000		32,037,000
Time deposits in financial institutions					495,000		7,502,000
Investments:
	Federal Reserve Bank and Federal Home Loan Bank stock, at cost				913,000		1,235,000
	Securities available-for-sale, at fair value (note 2)				40,428,000		34,460,000
	Securities held-to-maturity, at amortized cost (note 3)				4,972,000		14,868,000
			Total investments		46,313,000		50,563,000
	Loans (note 4)				250,552,000		206,102,000
		Less allowance for loan losses			3,930,000		4,025,000
			Net loans		246,622,000		202,077,000
Premises and equipment, net (note 5)					5,027,000		5,480,000
Other real estate owned (note 4)					1,031,000		1,315,000
Deferred income taxes (note 9)					2,222,000		2,555,000
Accrued interest					2,278,000		1,885,000
Other assets					1,644,000		948,000
			Total assets	$	358,287,000		304,362,000
Liabilities and Shareholders' Equity
Deposits (notes 3 and 7):
	Noninterest bearing			$	114,042,000		93,763,000
	Interest bearing				202,896,000		180,469,000
			Total deposits		316,938,000		274,232,000
Interest payable and other liabilities					3,888,000		2,618,000
Borrowings (note 14)					1,689,000		1,657,000
Trust preferred securities (note 14)					8,000,000		—
			Total liabilities		330,515,000		278,507,000
Shareholders' equity (notes 10, 16 and 18):
	Serial preferred stock, no par value. Authorized 5,000,000 shares; none issued and outstanding				—		—
	Common stock, no par value. Authorized 15,000,000 shares; issued and outstanding 3,971,421 and 3,878,259 shares as of December 31, 2000 and 1999, respectively				20,402,000		19,394,000
	Accumulated other comprehensive loss, net unrealized losses on securities available-for-sale, net (note 2)				(62,000	)	(565,000	)
	Retained earnings				7,432,000		7,026,000
			Total shareholders' equity		27,772,000		25,855,000
Commitments and contingencies (notes 13, 14 and 17)
			Total liabilities and shareholders' equity	$	358,287,000		304,362,000

See accompanying notes to consolidated financial statements.

37

FIRSTCOMMUNITY BANCORP AND SUBSIDIARIES
Consolidated Statements of Earnings
Years ended December 31, 2000, 1999, and 1998

			2000		1999	1998
Interest income:
	Interest and fees on loans		$	23,980,000	19,056,000	16,971,000
	Interest on federal funds sold			1,637,000	1,380,000	1,135,000
	Interest on time deposits in financial institutions			257,000	355,000	314,000
	Interest on investment securities			2,957,000	2,614,000	1,838,000
		Total interest income		28,831,000	23,405,000	20,258,000
Interest expense:
	Deposits (note 7)			7,551,000	5,648,000	5,354,000
	Borrowings			373,000	40,000	36,000
		Total interest expense		7,924,000	5,688,000	5,390,000
		Net interest income before provision for loan losses		20,907,000	17,717,000	14,868,000
Provision for loan losses (note 4)				520,000	518,000	941,000
		Net interest income after provision for loan losses		20,387,000	17,199,000	13,927,000
Noninterest income:
	Service charges on deposit accounts			1,185,000	1,175,000	1,158,000
	Merchant discount fees, net			107,000	84,000	71,000
	SBA loan servicing fees			268,000	170,000	207,000
	Mortgage fees			77,000	82,000	263,000
	Gain on sale of loans			314,000	353,000	621,000
	Other			514,000	440,000	372,000
		Total noninterest income		2,465,000	2,304,000	2,692,000
Noninterest expense:
	Salaries and employee benefits			6,673,000	5,623,000	5,270,000
	Occupancy			1,563,000	1,496,000	1,382,000
	Impairment loss on premises held-for-sale (note 6)			—	—	38,000
	Furniture and equipment			892,000	687,000	601,000
	Legal expenses			229,000	285,000	204,000
	Other professional services			1,685,000	1,184,000	1,293,000
	Stationery, supplies and printing			418,000	395,000	273,000
	Advertising			435,000	305,000	337,000
	Real estate owned and property held-for-sale			356,000	182,000	62,000
	Insurance			128,000	120,000	124,000
	Loss on sale of securities (note 2)			11,000	2,000	—
	Merger costs			3,561,000	—	—
	Other			2,194,000	1,794,000	1,313,000
		Total noninterest expense		18,145,000	12,073,000	10,897,000
Earnings before income taxes				4,707,000	7,430,000	5,722,000
Income taxes (note 9)				2,803,000	3,166,000	2,140,000
		Net earnings	$	1,904,000	4,264,000	3,582,000
Basic earnings per share (note 12)				$0.49	1.10	0.93
Diluted earnings per share (note 12)				$0.47	1.05	0.88

See accompanying notes to consolidated financial statements.

38

FIRST COMMUNITY BANCORP AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity and Comprehensive Income
Years ended December 31, 2000, 1999 and 1998

	Common Stock			Accumulated other comprehensive income (loss)
						Retained Earnings				Comprehensive income
	Shares	Amount						Total
Balance at December 31, 1997	3,822,632	$	18,158,000	(12,000	)	1,534,000		19,680,000
Net earnings	—		—	—		3,582,000		3,582,000		3,582,000
Exercise of stock options	31,460		117,000	—		—		117,000
Transfer pursuant to regulatory guidelines (note 16)	—		497,000	—		(497,000	)	—
Cash dividends paid	—		—	—		(589,000	)	(589,000	)
Other comprehensive income, net unrealized gains on securities available-for-sale, net of tax effect of $31,000	—		—	43,000		—		43,000		43,000
Balance at December 31, 1998	3,854,092		18,772,000	31,000		4,030,000		22,833,000		3,625,000
Net earnings	—		—	—		4,264,000		4,264,000		4,264,000
Exercise of stock options	24,167		96,000	—		—		96,000
Transfer pursuant to regulatory guidelines (note 16)	—		526,000	—		(526,000	)	—
Cash dividends paid	—		—	—		(742,000	)	(742,000	)
Other comprehensive income, net unrealized losses on securities available-for-sale, net of tax effect of $432,000	—		—	(596,000	)	—		(596,000	)	(596,000	)
Balance at December 31, 1999	3,878,259		19,394,000	(565,000	)	7,026,000		25,855,000		3,668,000
Net earnings	—		—	—		1,904,000		1,904,000		1,904,000
Exercise of stock options and warrants	93,162		306,000	—		—		306,000
Transfer pursuant to regulatory guidelines (note 16)	—		342,000	—		(342,000	)	—
Cash dividends paid	—		—	—		(1,156,000	)	(1,156,000	)
Tax benefits of exercise of Stock options and warrants	—		360,000	—		—		360,000
Other comprehensive income, net unrealized gains on securities available-for-sale, net of tax effect of $364,000	—		—	503,000		—		503,000		503,000
Balance at December 31, 2000	3,971,421	$	20,402,000	(62,000	)	7,432,000		27,772,000		2,407,000

See accompanying notes to consolidated financial statements.

39

FIRST COMMUNITY BANCORP AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 2000, 1999 and 1998

				2000			1999		1998
Cash flows from operating activities:
	Net earnings			$	1,904,000		4,264,000		3,582,000
	Adjustments to reconcile net earnings to net cash provided by operating activities:
		Depreciation and amortization			1,198,000		893,000		984,000
		Impairment loss on premises held-for-sale			—		—		38,000
		Net accretion on investment securities			(56,000	)	(142,000	)	(189,000	)
		Provision for loan losses			520,000		518,000		941,000
		Gain on sale of loans			(314,000	)	(353,000	)	(621,000	)
		Real estate valuation adjustments			284,000		159,000		(54,000	)
		Loss on sale of securities			11,000		2,000		—
		Proceeds on sale of SBA loans			4,780,000		4,607,000		5,866,000
		Originations of SBA loans			(4,140,000	)	(1,935,000	)	(4,073,000	)
		Increase in interest receivable and other assets			(857,000	)	(735,000	)	(198,000	)
		Increase in deferred income taxes			(31,000	)	(925,000	)	(309,000	)
		Increase (decrease) in interest payable and other liabilities			1,270,000		(272,000	)	471,000
			Net cash provided by operating activities		4,569,000		6,081,000		6,438,000
Cash flows used in investing activities:
	Net increase in loans outstanding				(45,391,000	)	(37,719,000	)	(21,626,000	)
	Maturities of time deposits in financial institutions				7,007,000		5,143,000		4,160,000
	Purchases of time deposits in financial institutions				—		(7,205,000	)	(5,440,000	)
	Maturities of securities held-to-maturity				12,503,000		5,700,000		11,376,000
	Purchases of securities held-to-maturity				(2,614,000	)	(14,719,000	)	(11,459,000	)
	Proceeds from sale of securities available-for-sale				1,489,000		1,499,000		—
	Maturities of securities available-for-sale				14,274,000		15,164,000		28,552,000
	Purchases of securities available-for-sale				(20,812,000	)	(20,369,000	)	(38,733,000	)
	Sales of FRB and FHLB stock				322,000		—		—
	Proceeds from sale of other real estate owned				—		104,000		308,000
	Proceeds from sales of investment property held-for-sale				—		50,000		27,000
	Increase in investment property held-for-sale				—		(132,000	)	—
	Purchases of premises and equipment				(737,000	)	(1,093,000	)	(2,771,000	)
	Proceeds from sale of premises and equipment				—		38,000		225,000
	Additions to premises held-for-sale				—		—		(489,000	)
	Proceeds from sale of premises held-for-sale				—		1,176,000		—
			Net cash used in investing activities		(33,959,000	)	(52,363,000	)	(35,870,000	)
Cash flows from financing activities:
	Net increase in deposits:
		Noninterest bearing			20,279,000		14,120,000		19,521,000
		Interest bearing			22,427,000		8,691,000		39,960,000
	Tax benefit related to stock options exercised				360,000		—		—
	Proceeds from trust preferred securities				8,000,000		—		—
	Net increase in borrowings				32,000		1,188,000		(339,000	)
	Payment of debt issuance costs				(240,000	)	—		—
	Proceeds from exercise of stock options				306,000		96,000		117,000
	Cash dividends paid				(1,156,000	)	(742,000	)	(589,000	)
			Net cash provided by financing activities		50,008,000		23,353,000		58,670,000
			Net increase (decrease) in cash and cash equivalents		20,618,000		(22,929,000	)	29,238,000
Cash and cash equivalents at beginning of year					32,037,000		54,966,000		25,728,000
Cash and cash equivalents at end of year					52,655,000		32,037,000		54,966,000
Supplemental disclosure of cash flow information:
	Cash paid during the year for:
		Interest		$	7,682,000		5,673,000		5,318,000
		Income taxes			2,540,000		3,880,000		2,253,000
Supplemental disclosure of noncash investing and financing activities:
	Transfer of loans to other real estate owned				—		—		104,000
	Transfer from retained earnings to common stock				342,000		526,000		497,000

See accompanying notes to consolidated financial statements.

40

FIRST COMMUNITY BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2000 and 1999

(1) Nature of Operations and Summary of Significant Accounting Policies

    First Community Bancorp (the "Company") is the holding company for Rancho Santa Fe National Bank ("Rancho Santa Fe") and First Community Bank of the Desert ("First Community") (collectively the "Banks") and its wholly owned subsidiary, Desert Community Properties, Inc. On May 31, 2000, a subsidiary of the Company merged with and into First Community pursuant to an Agreement and Plan of Merger, by and between the Company, Rancho Santa Fe and First Community (the "First Community Acquisition"). As a result of the First Community Acquisition, First Community became a wholly owned subsidiary of the Company. The First Community Acquisition was accounted for by the pooling-of-interest method of accounting, and accordingly, the financial information for all periods presented herein has been restated to present the combined consolidated financial condition and results of operations of the Company, Rancho Santa Fe and First Community as if the First Community Acquisition had been in effect for all periods presented.

    The Company conducts business through the Banks. Rancho Santa Fe and First Community are full service banks with four and five banking offices, respectively. The Banks are subject to the laws of the State of California and federal regulations governing the financial services industry. The Company is a registered bank holding company under the Bank Holding Company Act of 1956, as amended, and is subject to regulation and supervision by the Federal Reserve Board. The areas served by the Banks are San Diego County, the Desert Communities of the Coachella Valley and the Morongo Basin.

(a) Basis of Presentation

    The accounting and reporting policies of the Company and its wholly owned subsidiaries, Rancho Santa Fe and First Community, are in accordance with accounting principles generally accepted in the United States of America and conform to general practices within the banking industry. All significant intercompany balances and transactions have been eliminated. The following is a description of the more significant accounting policies:

(b) Investment Securities and Securities Available-for-Sale

    Management determines the appropriate classification of securities at the time of purchase. If management has the intent and the Company has the ability at the time of purchase to hold securities until maturity, they are classified as held-to-maturity. Investment securities held-to-maturity are stated at cost, adjusted for amortization of premiums and accretion of discounts over the period to call or maturity of the related security using the interest method. Securities to be held for indefinite periods of time, but not necessarily to be held-to-maturity or on a long-term basis, are classified as available-for-sale and carried at fair value with unrealized gains or losses reported as a separate component of shareholders' equity in accumulated other comprehensive income, net of applicable income taxes. Realized gains or losses on the sale of securities available-for-sale, if any, are determined using the amortized cost of the specific securities sold. If a decline in the fair value of a security below its amortized cost is judged by management to be other than temporary, the cost basis of the security is written down to fair value and the amount of the write-down is included in operations. Securities available-for-sale include securities that management intends to use as part of its asset/liability management strategy and that may be sold in response to changes in interest rates, prepayment risk and other related factors. Securities are individually evaluated for appropriate classification, when acquired; consequently, similar types of securities may be classified differently depending on factors existing at the time of purchase.

41

(c) Loans and Loan Fees

    Loans are stated at the principal amount outstanding. Interest income is recorded on the accrual basis in accordance with the terms of the respective loan. Loans on which the accrual of interest has been discontinued are designated as nonaccrual loans. The accrual of interest on loans is discontinued when principal or interest payments are past due 90 days or when, in the opinion of management, there is a reasonable doubt as to the collectibility in the normal course of business. When loans are placed on nonaccrual status, all interest previously accrued but not collected is reversed against current period interest income. Income on nonaccrual loans is subsequently recognized only to the extent that cash is received and the loan's principal balance is deemed collectible. Loans are restored to accrual status when the loans become both well-secured and are in the process of collection.

    Nonrefundable loan fees and related direct costs associated with the origination or purchase of loans are deferred and netted against outstanding loan balances. The net deferred fees or costs are recognized as an adjustment to interest income over the contractual life of the loans using the interest method or taken into income when the related loans are sold. The amortization of loan fees is discontinued on nonaccrual loans.

(d) Transfers and Servicing of Financial Assets and Extinguishments of Liabilities

    Gains or losses resulting from sales of loans are recognized at the date of settlement and are based on the difference between the cash received and the carrying value of the related loans less related transaction costs. A transfer of financial assets in which control is surrendered is accounted for as a sale to the extent that consideration other than beneficial interests in the transferred assets is received in the exchange. Liabilities and derivative financial instruments issued or obtained by the transfer of financial assets are measured at fair value, if practicable. Assets or other retained interests received by the transfer are measured by allocating the previous carrying value between the asset sold and the asset or retained interest received, if any, based on their relative fair values at the date of the sale. The Company records the cash gain on the sale of the guaranteed portion of SBA loans.

(e) Comprehensive Income

    Comprehensive income consists of net earnings and net unrealized gains (losses) on securities available-for-sale, net and is presented in the consolidated statements of shareholders' equity and comprehensive income.

(f) Allowance for Loan Losses

    An allowance for loan losses is maintained at a level deemed appropriate by management to adequately provide for known and inherent risks in the loan portfolio and other extensions of credit, including off-balance sheet credit extensions. The allowance is based upon a continuing review of the portfolio, past loan loss experience, current economic conditions which may affect the borrowers' ability to pay, and the underlying collateral value of the loans. Loans which are deemed to be uncollectible are charged off and deducted from the allowance. The provision for loan losses and recoveries on loans previously charged off are added to the allowance.

    A loan is considered impaired when it is probable that a creditor will be unable to collect all amounts due according to the original contractual terms of the loan agreement. If the measurement of impairment for the loan is less than the recorded investment in the loan, a valuation allowance is established with a corresponding charge to the provision for loan losses.

    Management believes that the allowance for loan losses is adequate. In making its evaluation of the adequacy of the allowance for loan losses, management considers the Company's historical experience, the volume and type of lending conducted by the Company, the amounts of classified and

42

nonperforming assets, regulatory policies, general economic conditions and other factors regarding the collectibility of loans in the Company's portfolio. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Company's allowance for loan losses. These agencies may require the Company to recognize additions to the allowance based on their judgments related to information available to them at the time of their examinations.

(g) Premises and Equipment

    Premises and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is charged to noninterest expense using the straight-line method over the estimated useful lives of the assets which range from two to twenty-five years. Leasehold improvements are capitalized and amortized to noninterest expense on a straight-line basis over the terms of the leases or the estimated useful lives of the improvements, whichever is shorter.

(h) Other Real Estate Owned

    Other real estate owned is recorded at the fair value of the property at the time of acquisition. Fair value is based on current appraisals less estimated selling and holding costs. The excess of the recorded loan balance over the estimated fair value of the property at the time of acquisition is charged to the allowance for loan losses. Any subsequent write downs are charged to noninterest expense and recognized as a valuation allowance. Subsequent increases in the fair value of the asset less selling costs reduce the valuation allowance, not below zero, and is credited to income. Operating expenses of such properties, and gains and losses on their disposition are included in noninterest expense.

(i) Cash and Cash Equivalents

    For purposes of the consolidated statements of cash flows, cash and cash equivalents consist of cash, due from banks and federal funds sold. Generally, federal funds are sold for one-day periods.

(j) Income Taxes

    Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

(k) Stock Option Plan

    The Company applies the intrinsic value-based method of accounting prescribed by Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations, in accounting for its fixed plan stock options. As such, compensation expense would be recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price. Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation," established accounting and disclosure requirements using a fair value-based method of accounting for stock-based employee compensation plans. As allowed by SFAS No. 123, the Company has elected to continue to apply the intrinsic value-based method of accounting described above, and has adopted the pro forma disclosure provisions of SFAS No. 123.

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(l) Use of Estimates

    Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period to prepare these consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses. Actual results could differ from those estimates.

(m) New Accounting Standards

    In March 2000, the Financial Accounting Standards Board ("FASB") issued Interpretation No. 44, "Accounting for Certain Transactions Involving Stock Compensation," an interpretation of APB Opinion No. 25. FASB Interpretation No. 44 clarifies certain issues related to the application of APB Opinion 25 and is effective July 1, 2000, with certain conclusions covering specific events that occurred either December 15, 1998 or January 12, 2000. FASB Interpretation No. 44 is not expected to have a material effect on the Company's financial position or results of operations.

    In June 1998, the FASB issued Statement of Financial Accounting Standards ("FAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities," (Statement 133), as amended by FAS No. 137, "Accounting for Derivative Investments and Hedging Activities" and FAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities." Statement 133 requires companies to recognize all derivatives as either assets or liabilities with the instruments measured at fair value and was effective January 1, 2001. The accounting for changes in fair value gains and losses depends on the intended use of the derivative and its resulting designation. The adoption of Statement No. 133 did not have a material impact on the consolidated financial statements.

    In September 2000, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities - a replacement of FASB Statement No. 125," which revises the standards for accounting for securitizations and other transfers of financial assets and collateral and requires certain disclosures. Although it replaces FASB Statement No. 125, it carries over most of statement 125's provisions without reconsideration.

    The accounting provisions are effective for fiscal years beginning after March 15, 2001. The reclassification and disclosure provisions are effective for fiscal years beginning after December 15, 2000. It is not anticipated that the financial impact of this statement will have a material effect on the Company.

(n) Reclassifications

    Certain prior year amounts have been reclassified to conform to the current year's presentation.

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(2) Securities Available-for-Sale

    The amortized cost, gross unrealized gains and losses and fair value of securities available-for-sale as of December 31, 2000 and 1999 are as follows:

	2000
	Amortized cost		Gross unrealized gains	Gross unrealized losses	Fair value
U.S. Treasury and Government Agency Securities	$	29,723,000	45,000	93,000	29,675,000
Mortgage-backed Securities		10,388,000	17,000	77,000	10,328,000
Equity securities		425,000	—	—	425,000
	$	40,536,000	62,000	170,000	40,428,000

	1999
	Amortized cost		Gross unrealized gains	Gross unrealized losses	Fair value
U.S. Treasury and Government Agency Securities	$	22,784,000	—	515,000	22,269,000
Mortgage-backed Securities		12,151,000	—	459,000	11,692,000
Corporate Bonds		500,000	—	1,000	499,000
	$	35,435,000	—	975,000	34,460,000

    The maturity distribution based on amortized cost and fair value as of December 31, 2000, by contractual maturity, is shown below. Mortgage-backed securities have contractual terms to maturity, but require periodic payments to reduce principal. In addition, expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. Equity securities are not included in the table.

	Maturity distribution
	Amortized cost		Fair value
Due in one year or less	$	4,634,000	4,645,000
Due after one year through five years		27,434,000	27,352,000
Due after five years through ten years		5,549,000	5,522,000
Due after ten years		2,494,000	2,484,000
	$	40,111,000	40,003,000

    Proceeds from the sale of securities available-for-sale during 2000 were $1,489,000. Gross losses of $11,000 were realized on sales in 2000. Proceeds from the sale of securities available-for-sale during 1999 were $1,499,000. Gross losses of $2,000 were realized on sales in 1999. There were no sales of securities during 1998.

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(3) Investment Securities Held-to-Maturity

    The amortized cost, gross unrealized gains and losses and fair value of investment securities held-to-maturity as of December 31, 2000 and 1999 are as follows:

	2000
	Amortized cost		Gross unrealized gains	Gross unrealized losses	Fair value
U.S. Treasury and Government Agency Securities	$	4,625,000	8,000	1,000	4,632,000
State and Political Subdivision Securities		347,000	17,000	—	364,000
	$	4,972,000	25,000	1,000	4,996,000

	1999
	Amortized cost		Gross unrealized gains	Gross unrealized losses	Fair value
U.S. Treasury and Government Agency Securities	$	14,514,000	—	91,000	14,423,000
State and Political Subdivision Securities		349,000	1,000	3,000	347,000
Other Securities		5,000	—	—	5,000
	$	14,868,000	1,000	94,000	14,775,000

    The maturity distribution based on amortized cost and fair value as of December 31, 2000 by contractual maturity, is shown below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Maturity distribution
	Amortized cost		Fair value
Due within one year	$	4,613,000	4,621,000
Due after five years through ten years		359,000	375,000
	$	4,972,000	4,996,000

    As of December 31, 2000 and 1999, investment securities held-to-maturity with an amortized cost of $4,358,000 and $5,863,000, respectively, and securities available-for-sale with a fair value of $22,611,000 and $16,418,000, respectively, (Note 2) totaling $26,969,000 and $22,281,000, respectively, were pledged as security for public deposits and other purposes as required by various statutes and agreements.

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(4) Loans and Related Allowance for Loan Losses and Other Real Estate Owned

    As of December 31, 2000 and 1999, loans consist of the following:

		2000			1999
Commercial		$	101,812,000		87,465,000
Real estate, construction			47,989,000		38,464,000
Real estate, mortgage			79,458,000		67,235,000
Consumer			4,555,000		6,169,000
Investment in leveraged and direct leases			356,000		124,000
SBA, portion held for sale, at cost which approximates market			4,314,000		946,000
SBA, unguaranteed portion held for investment			12,701,000		6,246,000
			251,185,000		206,649,000
Less:
	Deferred loan fees, net		(633,000	)	(547,000	)
	Allowance for loan losses		(3,930,000	)	(4,025,000	)
		$	246,622,000		202,077,000

    Nonaccrual loans totaling $2,271,000, $1,845,000 and $559,000 were outstanding as of December 31, 2000, 1999 and 1998, respectively. There were no loans that were past due 90 days or more and still accruing interest as of December 31, 2000. Loans that were past due 90 days or more and still accruing interest were $75,000 and $243,000 as of December 31, 1999 and 1998, respectively. Interest income of $413,000, $158,000 and $41,000 would have been recorded for the years ended December 31, 2000, 1999 and 1998, respectively, if nonaccrual loans had been performing in accordance with their original terms. Interest income of $60,000 and $76,000 was recorded on loans subsequently transferred to a nonaccrual status for the years ended December 31, 2000 and 1999, respectively. No interest income was recorded on loans subsequently transferred to nonaccrual status for the year ended December 31, 1998.

    A summary of the activity in the allowance for loan losses is as follows:

	2000			1999		1998
Balance, beginning of year	$	4,025,000		3,785,000		3,382,000
Provision for loan losses		520,000		518,000		941,000
Loans charged-off		(708,000	)	(592,000	)	(696,000	)
Recoveries on loans previously charged off		93,000		314,000		158,000
Loans charged-off, net of recoveries		(615,000	)	(278,000	)	(538,000	)
Balance, end of year	$	3,930,000		4,025,000		3,785,000

    The Company measures its impaired loans by using the fair value of the collateral if the loan is collateral-dependent and the present value of the expected future cash flows discounted at the loan's effective interest rate if the loan is not collateral-dependent. As of December 31, 2000 and 1999, all impaired loans were collateral-dependent. The Company recognizes income from impaired loans on the accrual basis unless the loan is on nonaccrual status. Income from loans on nonaccrual status is recognized to the extent cash is received and the loan's principal balance is deemed collectible. The

47

following table presents a breakdown of impaired loans and any impairment allowance related to impaired loans as of December 31, 2000 and 1999:

	2000			1999
	Recorded investment		Impairment allowance	Recorded investment	Impairment allowance
Loans with impairment allowance — other collateral	$	240,000	63,000	499,000	159,000
Loans with impairment allowance — real estate		2,031,000	305,000	—	—
Loans without impairment allowance — real estate		—	—	1,334,000	—
Total impaired loans	$	2,271,000	368,000	1,833,000	159,000

    Based on the Company's evaluation process to determine the level of the allowance for loan losses mentioned previously and the fact that a majority of the Company's nonperforming loans are secured, management believes the allowance level to be adequate as of December 31, 2000 to absorb the estimated known and inherent risks identified through its analysis. For the years ended December 31, 2000, 1999 and 1998, interest income of $31,000, $76,000 and $125,000 was recorded on impaired loans, respectively, and the average balance of impaired loans was $1,841,000, $1,409,000 and $1,519,000, respectively.

    The following is the activity in the allowance for other real estate owned:

	2000		1999	1998
Balance beginning of year	$	226,000	67,000	—
Additions related to increases in other real estate owned		—	—	67,000
Adjustments to the market value of real estate owned		284,000	159,000	—
Balance end of year	$	510,000	226,000	67,000

(5) Premises and Equipment

    Premises and equipment as of December 31, 2000 and 1999 are as follows:

	2000		1999
Land	$	384,000	384,000
Buildings		2,693,000	3,034,000
Furniture, fixtures and equipment		5,014,000	5,186,000
Leasehold improvements		1,240,000	1,141,000
Vehicles		99,000	77,000
		9,430,000	9,822,000
Less accumulated amortization and depreciation		4,403,000	4,342,000
	$	5,027,000	5,480,000

    Depreciation expense for the years ended December 31, 2000, 1999 and 1998 was $940,000, $807,000 and $733,000, respectively.

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(6) Premises Held-for-Sale

    During 1996, Rancho Santa Fe committed to a plan to dispose of the premises previously occupied by Rancho Santa Fe's escrow function. The fair value of this property was less than the carrying value and accordingly Rancho Santa Fe recorded a provision for impairment loss to write down the carrying value of the property to the amount of the estimated fair value, less estimated selling costs to dispose of the property. The impairment provision totaled approximately $268,000 for the year ended December 31, 1996. During 1998, Rancho Santa Fe took an additional write-down of $38,000 to bring the impairment allowance to approximately $306,000 at December 31, 1998 and made improvements of $489,000.

    The building was sold to an affiliate in April 1999 at book value which approximated market.

(7) Deposits

    Interest bearing deposits as of December 31, 2000 and 1999 are comprised of the following:

	2000		1999
Savings deposits	$	12,383,000	11,895,000
Market rate deposits		133,375,000	112,358,000
Time deposits under $100,000		25,618,000	25,117,000
Time deposits of $100,000 or more		31,520,000	31,099,000
	$	202,896,000	180,469,000

    The following summarizes the maturity of time deposits as of December 31, 2000:

Less than one year	$	55,087,000
One to two years		972,000
Two to five years		1,052,000
Five to ten years		27,000
	$	57,138,000

    Interest expense on deposits for the years ended December 31, 2000, 1999 and 1998 is comprised of the following:

	2000		1999	1998
Savings deposits	$	202,000	187,000	212,000
Market rate deposits		4,205,000	2,955,000	3,031,000
Time deposits under $100,000		1,334,000	1,253,000	1,207,000
Time deposits of $100,000 or more		1,810,000	1,253,000	904,000
	$	7,551,000	5,648,000	5,354,000

(8) Fair Value of Financial Instruments

    Estimated fair values for the Company's financial instruments and a description of the methodologies and assumptions used to determine such amounts follows:

(a) Cash and Due from Banks and Federal Funds Sold

    The carrying amount is assumed to be the fair value because of the liquidity of these instruments.

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(b) Time Deposits in Financial Institutions

    The carrying amount is assumed to be the fair value given the short-term nature of these deposits.

(c) Investment Securities

    Fair values are based on quoted market prices available as of the balance sheet date. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities.

(d) Loans

    Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type and further segmented into fixed and adjustable rate interest terms and by credit risk categories. The fair value estimates do not take into consideration the value of the loan portfolio in the event the loans had to be sold outside the parameters of normal operating activities.

    The fair value of fixed rate loans and non-performing or adversely classified adjustable rate loans is calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest rate risk inherent in the loans. The discount rates used for performing fixed rate loans are the Company's current offer rates for comparable instruments with similar terms.

    The fair value of performing adjustable rate loans is estimated to be carrying value. These loans reprice frequently at market rates and the credit risk is not considered to be greater than normal.

(e) Deposits

    The fair value of deposits with no stated maturity, such as noninterest bearing demand deposits, savings and checking accounts, is equal to the amount payable on demand as of the balance sheet date. The fair value of time deposits is based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered for deposits of similar remaining maturities. No value has been assigned to the Company's long-term relationships with its deposit customers (core deposit intangible).

(f) Borrowings

    The carrying amount is assumed to be the fair value because rates paid are the same as rates currently offered for borrowings with similar remaining maturities and characteristics.

(g) Trust preferred securities

    The fair value of the trust preferred securities is based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered for similar securities of similar maturity.

(h) Commitments to Extend Credit and Standby Letters of Credit

    The fair value of commitments to extend credit 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 counterparties. The fair value of letters of credit is based on fees currently charged for similar agreements or on the estimated cost to terminate them or otherwise settle the obligations with the counterparties.

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(i) Limitations

    Fair value estimates are made at a specific point in time and are based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company's entire holdings of a particular financial instrument. Because no market exists for a portion of the Company's financial instruments, fair value estimates are based on what management believes to be conservative judgments regarding expected future cash flows, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. Since the fair values have been estimated as of December 31, 2000 and 1999, the amounts that will actually be realized or paid at settlement or maturity of the instruments could be significantly different.

    The fair values of the Company's financial instruments as of December 31, 2000 and 1999 are as follows:

		2000			1999
		Carrying or contract amount		Fair value estimates	Carrying or contract amount	Fair value estimates
Financial Assets:
Cash and due from banks		$	35,752,000	35,752,000	21,148,000	21,148,000
Federal funds sold			16,903,000	16,903,000	10,889,000	10,889,000
Investment in Federal Reserve Bank and Federal Home Loan Bank Stock			913,000	913,000	1,235,000	1,235,000
Time deposits in financial institutions			495,000	495,000	7,502,000	7,502,000
Securities available-for-sale			40,428,000	40,428,000	34,460,000	34,460,000
Securities held-to-maturity			4,972,000	4,996,000	14,868,000	14,775,000
Loans, net			246,622,000	243,662,000	202,077,000	201,887,000
Financial Liabilities:
	Deposits		316,938,000	316,291,000	274,232,000	274,185,000
	Borrowings		1,689,000	1,689,000	1,657,000	1,657,000
	Trust Preferred Securities		8,000,000	8,184,000	—	—
Off-balance sheet financial instruments:
	Commitments to extend credit		87,900,000	—	73,115,000	—
	Standby letters of credit		2,850,000	—	2,641,000	—

(9) Income Taxes

    The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of December 31, 2000 and 1999 are as follows:

		2000		1999
Deferred tax assets:
	Loan loss allowance, due to differences in computation of bad debts	$	860,000	861,000
	Unrealized losses on securities available-for-sale		46,000	410,000
	Other real estate and investment in property held-for-sale		396,000	304,000
	Interest on nonaccrual loans		320,000	237,000
	Deferred loan fees and costs		53,000	147,000
	Deferred compensation		133,000	144,000
	Net operating losses		112,000	113,000
	Accrued liabilities		170,000	34,000

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	State tax benefit			(10,000	)	312,000
	Other			142,000		146,000
		Total gross deferred tax assets		2,222,000		2,708,000
Deferred tax liabilities:
	Premises and equipment, principally due to differences in depreciation.			—		(153,000	)
		Total gross deferred tax liabilities		—		(153,000	)
		Total net deferred tax assets	$	2,222,000		2,555,000

    Based upon projections for future taxable income over the next year in which the deferred tax assets are deductible, management believes it is more likely than not the Company will realize the benefits of these deductible differences.

    For the years ended December 31, 2000, 1999 and 1998, the components of income taxes consist of the following:

		2000			1999		1998
Current income taxes:
	Federal	$	1,983,000		2,770,000		1,757,000
	State		839,000		889,000		723,000
			2,822,000		3,659,000		2,480,000
Deferred income taxes:
	Federal		117,000		(416,000	)	(343,000	)
	State		(136,000	)	(77,000	)	3,000
			(19,000	)	(493,000	)	(340,000	)
		$	2,803,000		3,166,000		2,140,000

    A reconciliation of total income taxes for the years ended December 31, 2000, 1999 and 1998 to the amount computed by applying the applicable statutory federal income tax rate of 34% to earnings before income taxes follows:

	2000		1999	1998
Computed expected income taxes	$	1,601,000	2,526,000	1,945,000
State tax, net of federal tax benefit		464,000	536,000	479,000
Reduction of liabilities from prior years		—	—	(147,000	)
Merger related costs		592,000	—	—
Other, net		146,000	104,000	(137,000	)
	$	2,803,000	3,166,000	2,140,000

    As of December 31, 2000 and 1999 taxes payable totaled $525,000 and $243,000, respectively.

    The Company has available at December 31, 2000 and 1999 approximately $406,000 and $447,000, respectively, of unused federal operating loss carryforwards that may be applied against future taxable income through 2009. The applications of the net operating loss and other carryforwards are assumed to be subject to annual IRC Section 382 limitations.

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(10) Stock Options and Warrants

    At the time of the First Community Acquisition, all outstanding stock options of First Community were converted into stock options of the Company at an exchange rate of 0.30 shares. The following disclosures reflect the combination of the Company, First Community and Rancho Santa Fe stock option data.

    The Company has a stock option plan (the "Plan") pursuant to which the Company's Board of directors may grant stock options to officers, directors and key employees. The Plan authorizes grants of options to purchase up to 780,000 shares of authorized but unissued Company common stock. Stock options are granted with an exercise price greater than or equal to the stock's fair market value at the date of grant. Stock options have terms not to exceed 10 years from the date of the grant and vest and become fully exercisable in installments determined at the date of grant. All of First Community's stock options vested at the Merger.

    As of December 31, 2000, there were 98,424 additional shares available for grant under the Plan. The per share weighted-average fair value of stock options granted during 2000, 1999 and 1998 was $2.43, $1.57 and $2.13, respectively, on the date of grant using the Black-Scholes options-pricing model with the following weighted-average assumptions: 2000—expected dividend yield 2.42%, risk-free interest rate of 5.75%, volatility of 22% and an expected life of 2.5 years. 1999—expected dividend yield 2.32%, risk-free interest rate of 5.27%, no volatility and an expected life of 5 years; 1998—expected dividend yield 1.50%, risk-free interest rate of 4.69%, no volatility and an expected life of 5 years;

    The Company applies APB Opinion No. 25 in accounting for its Plan and, accordingly, no compensation cost has been recognized for its stock options in the consolidated financial statements. Had the Company determined compensation cost based on the fair value at the grant date for its stock options under SFAS No. 123, the Company's net earnings would have been reduced to the pro forma amounts indicated below:

	2000		1999	1998
Net earnings, as reported	$	1,904,000	4,264,000	3,582,000
Pro forma net earnings		1,667,000	4,107,000	3,454,000
Basic earnings per share, as reported		$0.49	1.10	0.93
Pro forma basic earnings per share		0.43	1.06	0.90
Diluted earnings per share, as reported		0.47	1.05	0.88
Pro forma basic earnings per share		0.41	1.01	0.85

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    Stock option activity during the periods indicated is as follows:

	Number of shares		Weighted average Exercise price
Balance at December 31, 1997	351,382		$	7.03
Granted	107,750			11.90
Exercised	(31,460	)		3.71
Cancelled	(19,635	)		9.70
Balance at December 31, 1998	408,037			8.45
Granted	81,000			13.01
Exercised	(24,167	)		4.13
Cancelled	(35,000	)		15.86
Forfeited	(1,666	)		5.00
Balance at December 31, 1999	428,204			8.96
Granted	260,500			14.65
Exercised	(36,333	)		8.42
Cancelled	(3,795	)		16.79
Balance at December 31, 2000	648,576		$	11.27

    As of December 31, 2000, the range of exercise prices and weighted-average remaining contractual life of outstanding options was $3.60 to $45.00 and 4.3 years, respectively. As of December 31, 2000, the number of options exercisable was 343,911 and the weighted-average exercise price of those options was $8.51.

    During 1995, the Company issued to certain shareholders warrants for 83,555 shares of common stock. The warrants entitle these shareholders to acquire a like number of shares of common stock for an exercise price of $4.80 per share. The warrants were all exercised during the year ended December 31, 2000.

(11) Employee Benefit Plans

    The Banks have 401(k) plans for the benefit of substantially all employees. Amounts accrued and charged to expense were $25,000, $14,000 and $42,000 for the years ended December 31, 2000, 1999 and 1998, respectively.

54

(12) Net Earnings Per Share

    The following is a reconciliation of the numerators and denominators of the basic and diluted EPS computations:

			Earnings (numerator)		Shares (denominator)	Per share amount
Basic 2000 EPS:
	Net earnings		$	1,904,000	3,908,000	0.49
	Effect of dilutive stock options			—	182,000	(0.02	)
		Diluted EPS		1,904,000	4,090,000	0.47
Basic 1999 EPS:
	Net earnings			4,264,000	3,863,000	1.10
	Effect of dilutive stock options			—	214,000	(0.05	)
		Diluted EPS		4,264,000	4,077,000	1.05
Basic 1998 EPS:
	Net earnings			3,582,000	3,836,000	0.93
	Effect of dilutive stock options			—	247,000	(0.05	)
		Diluted EPS	$	3,582,000	4,083,000	0.88

(13) Lease Commitments

    As of December 31, 2000, aggregate minimum rental commitments for certain real property under noncancellable operating leases having an initial or remaining term of more than one year are as follows:

2001	$	837,000
2002		656,000
2003		489,000
2004		361,000
2005		369,000
Thereafter		759,000
	$	3,471,000

    Total gross rental expense for the years ended December 31, 2000, 1999 and 1998 was $861,000, $815,000 and $762,000, respectively. There are no contingent rental payments applicable to any of the leases. Most of the leases provide that the Company pay maintenance, insurance and certain other operating expenses applicable to the leased premises in addition to the monthly minimum payments. Management expects that in the normal course of business, leases that expire will be renewed or replaced by other leases.

    Total rental income for the years ended December 31, 2000, 1999 and 1998 was approximately $98,000, $121,000 and $137,000, respectively.

(14) Borrowings and Commitments and Contingencies

    The Banks are party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of their customers. These financial instruments include commitments to extend credit, standby letters of credit and financial guarantees. Those instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the

55

consolidated balance sheets. The contract or notional amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments.

    Commitments to extend credit amounting to $87,900,000 and $73,115,000 were outstanding as of December 31, 2000 and 1999, respectively. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

    Standby letters of credit and financial guarantees amounting to $2,850,000 and $2,641,000 were outstanding as of December 31, 2000 and 1999, respectively. Standby letters of credit and financial guarantees are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support private borrowing arrangements. Most guarantees will expire within one year. The Company generally requires collateral or other security to support financial instruments with credit risk. Management does not anticipate that any material loss will result from the outstanding commitments to extend credit, standby letters of credit or financial guarantees.

    The Company also borrows funds from time to time on a short term or overnight basis from the FHLB or other financial institutions. As of December 31, 2000, 1999 and 1998, there were no balances outstanding. The average balances were $462,000 and $82,000 and $0 in 2000, 1999 and 1998, respectively. The highest balance at any month-end was $10,400,000, and $700,000 in 2000 and 1999, respectively. The average rate paid was 5.9% and 4.9% in 2000 and 1999, respectively.

Federal Funds Arrangements with Commercial Banks

    As of December 31, 2000 and 1999, the Company had lines of credit in the amount of $14,000,000 and $11,500,000, respectively, from correspondent banks, none of which were outstanding as of December 31, 2000 or 1999. These lines are renewable annually.

Borrowing arrangements at the Federal Reserve Discount Window

    As of December 31, 2000 and 1999, the Company had a Fed discount limit of approximately $4,737,000 and $3,327,000, respectively, none of which was outstanding.

Federal Home Loan Bank Lines of Credit

    As of December 31, 2000 and December 31, 1999, the Company had a Federal Home Loan Bank limit of approximately $15,551,000 and $9,000,000, respectively, none of which was outstanding. The availability of the lines of credit, as well as adjustments in deposit programs, provide for liquidity in the event that the level of deposits should fall abnormally low. These sources provide that funding thereof, may be withdrawn depending upon the financial strength of the Company.

Treasury, Tax and Loan Note

    The Company participates in the Treasury, Tax and Loan Note program. The Company has a limit of $1,700,000 at the Federal Reserve Bank. Treasury, Tax and Loan balances fluctuate based on the amounts deposited by customers and the amounts called for payment by the Federal Reserve Bank. At December 31, 2000 and 1999 the interest rates on the Treasury, Tax and Loan Note, was 5.41% and 4.54%, respectively. As of December 31, 2000, 1999 and 1998, the balance outstanding under the Note program was $1,689,000, $1,657,000 and $470,000, respectively. The average balances under the Note program were $800,000 in 2000, $711,000 in 1999 and $622,000 in 1998. The highest balance at any

56

month-end was $1,700,000 in 2000, 1999 and 1998, respectively. The average rate paid was 5.3%, 5.0% and 5.8% in 2000, 1999 and 1998, respectively.

Revolving Line of Credit

    In May 2000 the Company executed a Revolving Credit Agreement with The Northern Trust Company for $5,000,000. The loan agreement contains covenants which impose certain restrictions on activities of the Company and its financial condition. Such covenants include minimum net worth ratios, maximum debt ratios, a minimum return on average assets, a dividend limitation and minimum and maximum credit quality ratios. As of December 31, 2000 the Company, and where applicable, its subsidiaries were in compliance with each of such covenants or had obtained the appropriate waivers. Shares of common stock of Rancho Santa Fe have been pledged as collateral against the note payable to The Northern Trust Company. In January 2001, the Company executed the first Amendment to the Revolving Credit Agreement increasing the credit line to $10 million and modifying certain covenants to reflect the Company' larger size and the merger with Professional Bancorp, Inc. in January 2001 (the "Professional Merger"—see note 19). Shares of common stock of First Community have been pledged as additional collateral against the note payable. The maximum outstanding amount during 2000 was $2,450,000 and the average outstanding amount was $305,000. The loan bears interest at the prime rate less 75 basis points and was 8.75% at December 31, 2000. The Company pays a fee of 25 basis points on the unused amount. At December 31, 2000 there were no outstandings under this line of credit.

Trust Preferred Securities

    In September 2000 the Company issued $8,000,000 of trust preferred securities bearing a fixed interest rate of 10.60% and maturing in thirty years. This security is considered tier 1 capital for regulatory purposes. These instruments were issued to fund part of the Professional Merger (see note 19).

(15) Restricted Cash Balances

    The Company is required to maintain reserve balances with the Federal Reserve Bank. Reserve requirements are based on a percentage of deposit liabilities. The average reserves held at the Federal Reserve Bank for the years ended December 31, 2000 and 1999 were approximately $7,156,000 and $5,369,000, respectively.

(16) Dividend Availability

    Holders of Company common stock are entitled to receive dividends declared by the board of directors out of funds legally available therefore under the laws of the State of California and certain federal laws and regulations governing the banking and financial services business. In addition, the Banks are subject to certain restrictions under the laws of the State of California and certain federal laws and regulations governing banks which limit their ability to transfer funds to the Company through intercompany loans, advances or cash dividends.

    During 2000, 1999 and 1998, the Company paid $1,156,000, $742,000 and $589,000, respectively, in dividends and transferred $342,000, $526,000 and $497,000, respectively, from retained earnings to common stock in accordance with guidelines of the Office of the Comptroller of the Currency.

(17) Litigation

    The Company is involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company.

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(18) Regulatory Matters

    The Company, as a bank holding company, is subject to regulation by the Board of Governors of the Federal Reserve System under the Bank Holding Company Act of 1956, as amended.

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

    Quantitative measures established by regulation to ensure capital adequacy require the Company and the Banks to maintain minimum amounts and ratios (set forth in the table below) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier I capital (as defined) to average assets (as defined). Management believes, as of December 31, 2000, that the Company and the Banks have met all capital adequacy requirements to which they are subject.

    As of December 31, 2000, the most recent notification from the regulatory agencies categorized the Company and each of the Banks as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized the Company and the Banks must maintain minimum total risk-based, Tier I risk-based and Tier I leverage ratios as set forth in the table. There are no conditions or events since that notification that management believes have changed the Company's or either of the Banks' categories.

58

    Actual capital amounts and ratios for the Company and the Banks as of December 31, 2000 and 1999 are presented in the following table:

			Actual				Capital adequacy requirement				Well capitalized
			Amount		Ratio		Amount		Ratio		Amount		Ratio
As of December 31, 2000
	Total Capital (to Risk-Weighted Assets):
		Consolidated Company	$	39,292,000	14.22	%	$	22,099,000	>8	%	$	27,624,000	>10	%
		Rancho Santa Fe		21,426,000	12.35			13,881,000	>8			17,351,000	>10
		First Community		11,295,000	11.13			8,117,000	>8			10,147,000	>10
	Tier I Capital (to Risk-Weighted Assets):
		Consolidated Company		35,834,000	12.97			11,049,000	>4			16,574,000	>6
		Rancho Santa Fe		19,254,000	11.10			6,941,000	>4			10,411,000	>6
		First Community		10,024,000	9.88			4,059,000	>4			6,088,000	>6
	Tier I Capital (to Average Assets):
		Consolidated Company		35,834,000	10.21			14,039,000	>4			17,548,000	>5
		Rancho Santa Fe		19,254,000	8.82			8,733,000	>4			10,916,000	>5
		First Community		10,024,000	7.38			5,431,000	>4			6,788,000	>5
As of December 31, 1999
	Total Capital (to Risk-Weighed Assets):
		Consolidated Company	$	29,463,000	12.15	%	$	19,400,000	>8	%	$	24,249,000	>10	%
		Rancho Santa Fe		19,567,000	12.44			12,581,000	>8			15,726,000	>10
		First Community		9,896,000	11.61			6,819,000	>8			8,523,000	>10
	Tier I Capital (to Risk-Weighted Assets):
		Consolidated Company		24,419,000	10.89			9,700,000	>4			14,550,000	>6
		Rancho Santa Fe		17,595,000	11.19			6,290,000	>4			9,436,000	>6
		First Community		8,824,000	10.35			3,409,000	>4			5,114,000	>6
	Tier I Capital (to Average Assets):
		Consolidated Company		26,419,000	8.56			12,343,000	>4			15,429,000	>5
		Rancho Santa Fe		17,595,000	9.48			7,421,000	>4			9,277,000	>5
		First Community		8,824,000	7.17			4,922,000	>4			6,152,000	>5

(19) Acquisitions

Separate Company Information for Pooling-of-Interest Acquisitions

    On May 31, 2000 the Company completed its formation and combined Rancho Santa Fe with First Community as its wholly-owned subsidiaries. Shareholders for both banks approved the transaction at their respective Shareholder Meetings held on May 31, 2000. Under the terms of the merger agreement, each shareholder of First Community received 0.300 shares of Company common stock for each share of First Community common stock. Each Rancho Santa Fe share was exchanged for one share of Company common stock. At the same time as completion of the merger, the Company became listed on NASDAQ under the symbol FCBP. The merger was accounted for using pooling-of-interests accounting.

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    The following table presents certain financial data reported separately by each company and on a combined basis for the years ended December 31:

		1999		1998
Net interest income:
	Rancho Santa Fe	$	10,233,000	8,865,000
	First Community		7,484,000	6,003,000
	Combined	$	17,717,000	14,868,000
Net income:
	Rancho Santa Fe	$	3,058,000	2,509,000
	First Community		1,206,000	1,073,000
	Combined	$	4,264,000	3,582,000
Issuance of common stock:
	Rancho Santa Fe	$	96,000	116,000
	First Community		—	1,000
	Combined	$	96,000	117,000

Pro Forma Information for Purchase Acquisitions

    On January 16, 2001 the Company acquired Professional Bancorp, Inc. ("Professional") and its wholly-owned subsidiary, First Professional Bank, N.A. ("First Professional"). Shareholders of Professional received either $8.00 in cash or 0.55 shares of First Community common stock for each share of Professional common stock. Professional shareholders had the option to choose either cash or stock consideration. The purchase price received by shareholders of Professional totaled approximately 504,747 shares of First Community common stock and approximately $8.9 million in cash resulting in a total purchase price of approximately $16.4 million. For Professional shareholders receiving stock, 0.55 shares of Company common stock was received for each share of Professional common stock.

    The following table presents unaudited pro forma results of operations of the Company for the years ended December 31, 2000 and 1999 as if the acquisition of Professional had been effective at the beginning of 1999. The unaudited pro forma combined summary of operations is intended for informational purposes only and is not necessarily indicative of the future operating results of the Company or operating results that would have occurred had this acquisition been in effect for all the years presented.

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Unaudited Pro Forma
Combined Summary of Operations

		2000		1999
Interest income		$	48,153,000	41,700,000
Interest expense			11,988,000	9,949,000
	Net interest income		36,165,000	31,751,000
Provision for loan losses			7,167,000	14,511,000
	Net interest income after provision for loan losses		28,998,000	17,240,000
Noninterest income			8,425,000	4,155,000
Noninterest expense			33,539,000	26,655,000
	Income (loss) before income taxes		3,884,000	(5,260,000	)
Income taxes (benefit)			2,559,000	(388,000	)
	Net income (loss)	$	1,325,000	(4,872,000	)
Net income (loss) per share:
	Basic		$0.30	(1.12	)
	Diluted		0.29	(1.12	)
Weighted average shares outstanding:
	Basic		4,413,000	4,368,000
	Diluted		4,595,000	4,368,000

(20) Condensed (Parent Company only) Financial Information

    The parent company was formed in October of 1999, but did not have any material activity until May 31, 2000 when it became the parent of First Community and Rancho Santa Fe. The following parent company only condensed balance sheet information is presented as of December 31, 2000 and as of December 31, 1999 as if the parent company began operations on that day. The condensed statement of operations and condensed statement of cash flows is presented for the years ended December 31, 2000 and 1999.

			December 31, 2000		December 31, 1999
Condensed Balance Sheet
Assets:
	Cash and due from banks		$	5,663,000	—
	Investments in subsidiaries			29,729,000	25,855,000
	Other investments			425,000	—
	Other assets			1,176,000	—
		Total assets	$	36,993,000	25,855,000
Liabilities:
	Junior subordinated debt due to subsidiary		$	8,248,000	—
	Other liabilities			973,000	—
		Total liabilities		9,221,000	—
Shareholders' equity				27,772,000	25,855,000
		Total liability and shareholders' equity	$	36,993,000	25,855,000

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		Year Ended
		December 31, 2000			December 31, 1999
Condensed Statement of Operations
Dividend income from subsidiaries		$	2,000,000		—
	Total income		2,000,000		—
Interest expense			311,000		—
Merger costs			3,561,000		—
Other expense			1,152,000		—
	Total expense		5,024,000		—
	Loss before income taxes and equity in undistributed earnings of subsidiaries		(3,024,000	)	—
Income tax benefit			(1,375,000	)	—
	Loss before equity in undistributed earnings of subsidiaries		(1,649,000	)	—
	Equity in undistributed income of subsidiaries		3,553,000		4,264,000
Net income		$	1,904,000		4,264,000

		Year Ended
		December 31, 2000			December 31, 1999
Condensed Statement of Cash Flows
Net income		$	1,904,000		4,264,000
Change in other assets			(1,176,000	)	—
Change in other liabilities			973,000		—
Undistributed earnings of subsidiaries			(3,553,000	)	(4,264,000	)
	Cash flows used in operating activities		(1,852,000	)	—
Increase in investment in subsidiaries			(248,000	)	—
Other investing activities			(425,000	)	—
	Cash flows used in investing activities		(673,000	)	—
Proceeds from exercise of common stock options			306,000		—
Dividends paid			(1,156,000	)	—
Issuance of junior subordinated debt			8,248,000		—
Subsidiary financing activities prior to June 1, 2000			430,000		—
Other financing activities			360,000		—
	Cash flows provided by financing activities		8,188,000		—
Net increase in cash			5,663,000		—
Cash beginning of the period			—		—
Cash end of the period		$	5,663,000		—

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(21) Quarterly Results of Operations (Unaudited)

		Quarters ended:
		Mar 31, 2000		Jun 30, 2000		Sep 30, 2000	Dec 31, 2000
		(In thousands, except per share data)
Interest income		$	6,567	7,268		7,393	7,603
Interest expense			1,603	1,945		2,090	2,286
Net interest income			4,964	5,323		5,303	5,317
Provision for loan losses			—	—		180	340
Net interest income after provision for loan losses			4,964	5,323		5,123	4,977
Other income			581	692		545	647
Merger costs			—	3,561		—	—
Other expenses			3,335	3,738		3,651	3,860
Income (loss) before income taxes			2,210	(1,284	)	2,017	1,764
Income taxes			918	207		887	791
Net income (loss)		$	1,292	(1,491	)	1,130	973
Shares outstanding (weighted average)
	Basic		3,878	3,884		3,902	3,968
	Diluted		4,097	3,884		4,103	4,130
Net income per share:
	Basic	$	0.33	(0.38	)	0.29	0.25
	Diluted	$	0.33	(0.38	)	0.28	0.24
Dividends per common share declared and paid		$	0.09	0.09		0.09	0.09
Common stock price range:
	High	$	15.50	14.25		15.44	15.13
	Low	$	13.75	13.00		13.88	14.75

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		Quarters ended:
		Mar 31, 1999		Jun 30, 1999	Sep 30, 1999	Dec 31 1999
		(In thousands, except per share data)
Interest income		$	5,382	5,946	6,256	5,821
Interest expense			1,433	1,365	1,406	1,484
Net interest income			3,949	4,581	4,850	4,337
Provision for loan losses			135	105	173	105
Net interest income after provision for loan losses			3,814	4,476	4,677	4,232
Other income			558	601	515	630
Other expenses			2,852	3,220	3,258	2,743
Income before income taxes			1,520	1,857	1,934	2,119
Income taxes			634	804	815	913
Net income		$	886	1,053	1,119	1,206
Shares outstanding (weighted average)
	Basic		3,855	3,860	3,867	3,872
	Diluted		4,060	4,058	4,073	4,088
Net income per share:
	Basic	$	0.23	0.27	0.29	0.31
	Diluted	$	0.22	0.26	0.27	0.30
Dividends per common share declared and paid		$	0.06	0.06	0.09	0.09
Common stock price range:
	High	$	13.75	14.38	14.88	15.50
	Low	$	11.75	11.00	13.13	13.50

(22) Comprehensive Income

			2000			1999			1998
			(In thousands)
Net income			$	1,904			4,264			3,582
Other comprehensive income (loss), net of related income taxes:
	Unrealized gains (losses) on securities:
		Unrealized holding gains (losses) arising during the period		506			(596	)		43
		Less reclassifications of realized losses included in income		(3	)		—			—
				503			(596	)		43
Comprehensive income			$	2,407		$	3,668		$	3,625

(23) Related Party Transactions

    Belle Plaine Partners, Inc.("Belle Plaine") serves as a financial advisor to the Company under an engagement letter dated May 2, 1995. In that capacity, the Company paid Belle Plaine fees of $619,000 in connection with the First Community Acquisition which closed on May 31, 2000. Belle Plaine provided financial advice, but was not paid a fee for the Professional Merger.

    As of December 31, 2000 the Company had loans outstanding to related parties of approximately $2,649,000 and committments outstanding of approximately $4,737,000. These loans and committments are at market rates and terms.

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ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

    Not Applicable.

PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

    The information required by this Item can be found in the Company's most recent Definitive Proxy Statement, filed pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended, and is incorporated herein by this reference.

ITEM 11.  EXECUTIVE COMPENSATION

    The information required by this Item can be found in the Company's most recent Definitive Proxy Statement, filed pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended, and is incorporated herein by this reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

    The information required by this Item can be found in the Company's most recent Definitive Proxy Statement, filed pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended, and is incorporated herein by this reference.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

    The information required by this Item can be found in the Company's most recent Definitive Proxy Statement, filed pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended, and is incorporated herein by this reference.

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PART IV

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

(a) 1. Financial Statements

The consolidated financial statements of First Community Bancorp and its subsidiaries and independent auditors' report are included in Part II (Item 8) of this Form 10-K

       2. Financial Statement Schedules

          All financial statement schedules have been omitted, as inapplicable.

       3. Exhibits

    The following documents are included or incorporated by reference in this Annual Report on Form 10-K:

2.	Third Amended and Restated Agreement and Plan of Merger, dated as of October 22, 1999, by and among Rancho Santa Fe National Bank, First Community Bancorp and First Community Bank of the Desert (Appendix A to Registration Statement No. 333-93827 filed on Form S-4/A on May 5, 2000 and incorporated herein by this reference).
2.1	Agreement and Plan of Merger, dated as of August 7, 2000, by and between First Community Bancorp and Professional Bancorp, Inc. (Annex A to Registration Statement No. 333-47242 filed on Form S-4/A on November 16, 2000 and incorporated herein by this reference).
3.1	Articles of Incorporation of First Community Bancorp (Exhibit 3.1 to a Form 8-A filed on June 2, 2000 and incorporated herein by this reference).
3.2	Bylaws of First Community Bancorp (Exhibit 3.2 to a Form 8-A filed on June 2, 2000 and incorporated herein by this reference).
10.	First Community Bancorp 2000 Stock Incentive Plan; Form of Incentive Stock Option Agreement, Form of Nonstatutory Stock Option Agreement for directors and Form of Nonstatutory Stock Option agreement for consultants (Exhibit 10.1 of a Form 10Q filed on August 10, 2000 and incorporated herein by this reference).
10.1	Revolving Credit Agreement and Pledge Agreement and Waiver, dated June 26, 2000 (Exhibit 10.2 of a Form 10Q filed on August 10, 2000 and incorporated herein by this reference).
10.2	Directors' Deferred Compensation Plan (Exhibit 10.3 of a Form 10Q filed on August 10, 2000 and incorporated herein by this reference).
10.3	Guarantee Agreement By and Between First Community Bancorp and State Street Bank and Trust Company of Connecticut, National Association Dated as of September 7, 2000 (Exhibit 10.4 of a Form 10Q filed on November 13, 2000 and incorporated herein by this reference).
10.4	Amended and Restated Declaration of Trust By and Among State Street Bank and Trust Company of Connecticut, National Association as Institutional Trustee, First Community Bancorp, as Sponsor and Mark Christian and Arnold C. Hahn, as Administrators dated September 7, 2000 (Exhibit 10.5 of a Form 10Q filed on November 13, 2000 and incorporated herein by this reference).
10.5	Indenture between State Street Bank and Trust Company of Connecticut, National Association and First Community Bancorp dated as of September 7, 2000 (Exhibit 10.6 of a Form 10Q filed on November 13, 2000 and incorporated herein by this reference).
10.7	First Amendment to Revolving Credit Agreement dated January 12, 2001.

66

10.8	First Community Bancorp Executive Severance Policy.
10.9	First Community Bancorp Employee Severance Policy.
10.10	Gaines Employment Contract
11.	Computation of Earnings Per Common Share and Common Share Equivalent. (See Note 12 of the Notes to Consolidated Financial Statements contained in "Item 8. Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.)
21.	Subsidiaries of First Community Bancorp Bancorp.
23.	Consent of KPMG LLP

(b) Reports on Form 8-K

    The Company did not file any reports on Form 8-K during the quarter ended December 31, 2000.

(c) Exhibits

    The exhibits listed in Item 14(a)3 are incorporated by reference or attached hereto.

(d) Excluded Financial Statements

    Not Applicable.

67

SIGNATURES

    Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

FIRST COMMUNITY BANCORP
By:	/s/ MATTHEW P. WAGNER Matthew P. Wagner (President and Chief Executive Officer)	Dated: March 21, 2001

And By: /s/ ARNOLD C. HAHN Arnold C. Hahn
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer) Dated: March 21, 2001

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

Signature	Date
/s/ MATTHEW P.WAGNER Matthew P. Wagner President and Chief Executive Officer and Director	March 21, 2001
/s/ JOHN M. EGGEMEYER John M. Eggemeyer Chairman and Director	March 21, 2001
/s/ ARNOLD C. HAHN Arnold C. Hahn Executive Vice President and Chief Financial Officer	March 21, 2001
/s/ JAMES A. BOYCE James A. Boyce Director	March 21, 2001
/s/ GENE F. GAINES Gene F. Gaines Director	March 21, 2001

68

/s/ ROBERT E. HERRMANN Robert E. Herrmann Director	March 21, 2001
/s/ WILLIAM T. POWERS William T. Powers Director	March 21, 2001
/s/ ROBERT A. SCHOELLHORN Robert A. Schoellhorn Director	March 21, 2001
/s/ PAUL I. STEVENS Paul I. Stevens Director	March 21, 2001
/s/ ROBERT A. STINE Robert A. Stine Director	March 21, 2001
/s/ DALE E. WALTER Dale E. Walter Director	March 21, 2001
/s/ DAVID S. WILLIAMS David S. Williams Director	March 21, 2001

69

QuickLinks

PART I

ITEM 1. BUSINESS
ITEM 2. PROPERTIES
ITEM 3. LEGAL PROCEEDINGS
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
ITEM 6. SELECTED FINANCIAL DATA
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

PART IV

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

SIGNATURES

EX-10.7

                              FIRST AMENDMENT DATED
                             AS OF JANUARY ___, 2001
                          TO REVOLVING CREDIT AGREEMENT
                            DATED AS OF JUNE 26, 2000
                              AND PLEDGE AGREEMENT
                            DATED AS OF JUNE 26, 2000

         THIS AMENDMENT, dated as of January __, 2001, is entered into between
FIRST COMMUNITY BANCORP, a California corporation (the "BORROWER"), and THE
NORTHERN TRUST COMPANY, an Illinois banking corporation having its principal
office at 50 South LaSalle Street, Chicago, Illinois 60675 (the "LENDER").

                                    RECITALS:

         A. The Borrower and the Lender have entered into a Revolving Credit
Agreement dated as of June 26, 2000 (said Revolving Credit Agreement, as so
amended, shall hereinafter be referred to as the "AGREEMENT"; the terms defined
in the Agreement and not otherwise defined herein shall be used herein as
defined in the Agreement).

         B. The Borrower and the Lender have entered into a Pledge Agreement
dated as of June 26, 2000 (the "PLEDGE AGREEMENT").

         C. The Borrower and the Lender wish to amend the Agreement to increase
the amount of the Commitment and to otherwise amend certain provisions of the
Agreement.

         D. The Borrower and the Lender wish to amend the Pledge Agreement to
amend the definition of "PLEDGED SHARES" appearing therein.

         E. Therefore, the parties hereto agree as follows:

1. AMENDMENTS TO THE AGREEMENT.

                  1.1. SECTION 1.1 OF THE AGREEMENT. SECTION 1.1 of the
Agreement is hereby amended as of the date hereof by deleting the phrase "FIVE
MILLION and NO/100 UNITED STATES DOLLARS ($5,000,000)" appearing therein and
substituting the phrase "TEN MILLION and NO/100 UNITED STATES DOLLARS
($10,000,000)" therefor.

                  1.2. SECTION 4.15 OF THE AGREEMENT. SECTION 4.15 of the
Agreement is hereby deleted in its entirety as of the date hereof and the
following substituted therefor:

                  "SECTION 4.15. PLEDGED SHARES. The Pledged Shares (as
hereinafter defined) constitute 100% of the issued and outstanding capital stock
of (a) Rancho Santa Fe National Bank and (b) First Community Bank of the Desert,
have been duly authorized and validly issued and are fully paid and
non-assessable. Borrower owns the Pledged Shares free and clear of all other
interest, liens or encumbrances of any nature whatsoever, other than liens in
favor of Lender."



                  1.3. SECTION 5.4(a) OF THE AGREEMENT. SECTION 5.4(a) of the
Agreement is hereby deleted in its entirety as of the date hereof and the
following substituted therefor:

                  "(a) LEVERAGE RATIO. Borrower and each Subsidiary Bank shall
maintain at all times a ratio of Tier 1 Capital to average quarterly assets less
all non-qualified intangible assets of at least four and one-half percent (4.5%)
from January __, 2001 through September 30, 2001, and at least five percent (5%)
thereafter, all calculated on a consolidated basis."

                  1.4. SECTION 5.4(c) OF THE AGREEMENT. SECTION 5.4(c) of the
Agreement is hereby deleted in its entirety as of the date hereof and the
following substituted therefor:

                  "(c) RISK-BASED CAPITAL RATIO. Borrower and each Subsidiary
Bank shall maintain a ratio of Total Capital to risk-weighted assets of not less
than nine and one-quarter percent (9.25%) from January __, 2001 through
September 30, 2001, and not less than ten percent (10%) thereafter."

                  1.5. SECTION 5.4(f) OF THE AGREEMENT. SECTION 5.4(f) of the
Agreement is hereby deleted in its entirety as of the date hereof and the
following substituted therefor:

                  "(f) MINIMUM TANGIBLE NET WORTH. Borrower shall maintain a
consolidated minimum Tangible Net Worth equal to at least $30,000,000 at all
times."

                  1.6. SECTION 5.11 OF THE AGREEMENT. SECTION 5.11 of the
Agreement is hereby deleted in its entirety as of the date hereof and the
following substituted therefor:

                  `SECTION 5.11. COLLATERAL. Borrower shall execute and deliver
to Lender a pledge agreement dated even date herewith, substantially in the form
of EXHIBIT B, with appropriate insertions (as the same may be amended from time
to time, herein called the "PLEDGE AGREEMENT"), pursuant to which Borrower shall
pledge to Lender all of the issued and outstanding shares of the capital stock
owned by Borrower (herein collectively called the "PLEDGED SHARES") of (a)
Rancho Santa Fe National Bank, located in Rancho Santa Fe, California and (b)
First Community Bank of the Desert ("FCBD"), located in Indian Wells,
California. Within five (5) business days from January __, 2001, Borrower shall
deliver to Lender such stock certificate(s) evidencing its equity ownership
interest in FCBD, together with stock powers, duly executed, in blank, and a
legal opinion from Borrower's counsel as to the perfection, as a first priority
lien, of Lender's security interest in the stock of FCBD owned by Borrower.
Failure by Borrower to deliver such documents on or before January __, 2001
shall automatically constitute an Event of Default.'

                  1.7. SECTION 7.1(e) OF THE AGREEMENT. SECTION 7.1(e) of the
Agreement is hereby deleted in its entirety as of the date hereof and the
following substituted therefor:

                  "(e) Any guaranty of or pledge of collateral security for the
Loans shall be repudiated or become unenforceable or incapable of performance or
Borrower shall fail to pledge and deliver to Lender any share certificate of (i)
Rancho Santa Fe National Bank and (ii) First Community Bank of the Desert as
provided in SECTION 3(c) of the Pledge Agreement;"


                                      -2-


                  1.8. EXHIBIT A OF THE AGREEMENT. EXHIBIT A of the Agreement is
hereby amended as of the date hereof to be in the form of EXHIBIT A hereto.

2. AMENDMENT TO THE PLEDGE AGREEMENT.

                  2.1. SECTION 1 OF THE PLEDGE AGREEMENT. The definition of
"PLEDGED SHARES" in SECTION 1 of the Pledge Agreement is hereby deleted in its
entirety as of the date hereof and the following substituted therefor:

                  ` "PLEDGED SHARES" shall mean 100% of the issued and
outstanding shares of capital stock of (a) Rancho Santa Fe National Bank and (b)
First Community Bank of the Desert held by the Pledgor or (c) otherwise held
from time to time by the Pledgor.'

3. WARRANTIES. To induce the Lender to enter into this Amendment, the Borrower
warrants that:

                  3.1. AUTHORIZATION. The Borrower is duly authorized to execute
and deliver this Amendment and the Replacement Note (as hereinafter defined) and
is and will continue to be duly authorized to borrow monies under the Agreement,
as amended hereby, and to perform its obligations under the Agreement, as
amended hereby, the Pledge Agreement, as amended hereby and the Replacement
Note.

                  3.2. NO CONFLICTS. The execution and delivery of this
Amendment and the Replacement Note, and the performance by the Borrower of its
obligations under the Agreement, as amended hereby, the Pledge Agreement, as
amended hereby and the Replacement Note, do not and will not conflict with any
provision of law or of the charter or by-laws of the Borrower or of any
agreement binding upon the Borrower.

                  3.3. VALIDITY AND BINDING EFFECT. The Agreement, as amended
hereby, the Pledge Agreement, as amended hereby are, and the Replacement Note
when duly executed and delivered will be, legal, valid and binding obligations
of the Borrower, enforceable against the Borrower in accordance with their
terms, except as enforceability may be limited by bankruptcy, insolvency or
other similar laws of general application affecting the enforcement of
creditors' rights or by general principles of equity limiting the availability
of equitable remedies.

                  3.4. NO AMENDMENTS. There have been no amendments to the
Articles of Incorporation or by-laws of the Borrower since June 26, 2000 and
they are in full force and effect.

4. CONDITIONS PRECEDENT TO AMENDMENTS. The amendments contemplated by SECTION 1
hereof are subject to the satisfaction of each of the following conditions
precedent:

                  4.1. DOCUMENTATION. The Borrower shall have delivered to the
Lender all of the following, each duly executed and, except for the Replacement
Note, dated the date hereof or other date satisfactory to the Lender, in form
and substance satisfactory to the Lender:


                                      -3-


                  (a) REPLACEMENT NOTE. A promissory note of the Borrower (the
"REPLACEMENT NOTE"), substantially in the form set forth as EXHIBIT A hereto.

                  Upon receipt of the Replacement Note, the Lender will: (i)
record the aggregate unpaid principal amount of the Revolving Credit Note dated
June 26, 2000 (the "ORIGINAL NOTE") issued under the Agreement in its records
or, at its option, on the schedule attached to the Replacement Note as the
aggregate unpaid principal amount of the Replacement Note; (ii) mark the
Original Note as replaced by the Replacement Note; and (iii) return the Original
Note to the Borrower upon the Borrower's request. Thereafter, all references in
the Agreement and in any and all instruments or documents provided for therein
or delivered or to be delivered thereunder or in connection therewith to the
Original Note shall be deemed references to the Replacement Note. The
replacement of the Original Note with the Replacement Note shall not be
construed to deem paid or forgiven the unpaid principal amount of, or unpaid
accrued interest on, the Original Note outstanding at the time of replacement.

                  (b) RESOLUTIONS. A copy, duly certified by the secretary or an
assistant secretary of the Borrower, of (i) resolutions of the Borrower's Board
of Directors authorizing or ratifying the execution and delivery of this
Amendment and the Replacement Note, authorizing the borrowings under the
Agreement, as amended hereby, and the pledge of the Pledged Shares; (ii) all
documents evidencing other necessary corporate action; and (iii) all approvals
or consents, if any, with respect to this Amendment and the Replacement Note.

                  (c) INCUMBENCY CERTIFICATE. A certificate of the secretary or
an assistant secretary of the Borrower certifying the names of the Borrower's
officers authorized to sign this Amendment, the Replacement Note and all other
documents or certificates to be delivered hereunder, together with the true
signatures of such officers.

                  (d) OPINION. An opinion of counsel to the Borrower, addressed
to the Lender, in substantially the form of EXHIBIT B hereto.

                  (e) CERTIFICATE. A certificate of the president or chief
financial officer of the Borrower as to the matters set out in SECTIONS 4.2 and
4.3 hereof.

                  (f) EVIDENCE OF ACQUISITION OF PROFESSIONAL BANCORP. A
certificate by the Borrower certifying that its acquisition of Professional
Bancorp, located in Santa Monica, California, will be completed concurrently
with the funding by the Lender under the Agreement, as amended hereby, and with
funding by other sources (the "PB ACQUISITION").

                  (g) AMENDMENT OF FINANCING STATEMENTS. A duly executed UCC-2
financing statement amending existing financing statements and such other
documents and actions as may be necessary to establish and perfect the Lender's
security interest in the Pledged Shares.

                  (h) PROCEEDS. The proceeds of the initial loan after giving
effect to this Amendment will be used in connection with the PB Acquisition.

                  (i) OTHER. Such other documents as the Lender may reasonably
request.


                                      -4-


                  4.2. NO DEFAULT. No Event of Default or Unmatured Event of
Default under the Agreement shall have occurred and be continuing.

                  4.3. WARRANTIES. The warranties in SECTION 4 of the Agreement
and in SECTION 3 of this Amendment shall be true and correct as though made on
such date, except for such changes as are specifically permitted under the
Agreement.

5. GENERAL.

                  5.1. EXPENSES. The Borrower agrees to pay the Lender upon
demand for all reasonable expenses, including reasonable attorneys' and legal
assistants' fees (which attorneys and legal assistants may be employees of the
Lender), incurred by the Lender in connection with the preparation, negotiation
and execution of this Amendment, the Replacement Note and any document required
to be furnished therewith.

                  5.2. LAW. THIS AMENDMENT AND THE REPLACEMENT NOTE SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF
ILLINOIS.

                  5.3. SUCCESSORS. This Amendment shall be binding upon the
Borrower and the Lender and their respective successors and assigns, and shall
inure to the benefit of the Borrower and the Lender and the successors and
assigns of the Lender.

                  5.4. CONFIRMATION OF THE AGREEMENT. The Agreement, as amended
hereby, shall remain in full force and effect and is hereby ratified and
confirmed in all respects.

                  5.5. REFERENCES TO THE AGREEMENT. Each reference in the
Agreement and the Pledge Agreement to "this Agreement," "hereunder," "hereof,"
or words of similar import in instruments or documents provided for in the
Agreement and in the Pledge Agreement or delivered or to be delivered thereunder
or in connection therewith, shall, except where the context otherwise requires,
be deemed, respectively, a reference to the Agreement and the Pledge Agreement
as amended hereby.

                  5.6. COUNTERPARTS. This Amendment may be executed in any
number of counterparts, each of which shall be deemed to be an original and all
of which, taken together, shall constitute but one and the same Amendment.



                            [SIGNATURE PAGE FOLLOWS.]


                                      -5-


         IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed at Chicago, Illinois by their respective officers thereunto duly
authorized as of the date first written above.

                                            FIRST COMMUNITY BANCORP

                                            By:
                                                --------------------------------

                                            Title
                                                  ------------------------------

                                            THE NORTHERN TRUST COMPANY

                                            By:
                                                --------------------------------
                                            Name:  Thomas E. Bernhardt

                                            Title Vice President


                                      -6-


                                    EXHIBIT A

                              REVOLVING CREDIT NOTE

$10,000,000
                                                               Chicago, Illinois
                                                                January __, 2001

         FOR VALUE RECEIVED, on or before the Maturity Date (as such term is
defined in the Credit Agreement (as hereinafter defined)), FIRST COMMUNITY
BANCORP, a California corporation (the "BORROWER"), promises to pay to the order
of THE NORTHERN TRUST COMPANY, an Illinois banking corporation (hereafter,
together with any subsequent holder hereof, called the "LENDER"), at its main
banking office at 50 South LaSalle Street, Chicago, Illinois 60675, or at such
other place as the Lender may direct, the aggregate unpaid principal balance of
each advance (a "LOAN" and collectively the "LOANS") made by the Lender to the
Borrower under this Note. The total principal amount of Loans outstanding at any
one time under this Note will not exceed TEN MILLION UNITED STATES DOLLARS
($10,000,000).

         The Lender is hereby authorized by the Borrower at any time and from
time to time at the Lender's sole option to attach a schedule (grid) to this
Note and to endorse thereon notations with respect to each Loan specifying the
date and principal amount thereof, and the date and amount of each payment of
principal and interest made by the Borrower with respect to each such Loan. The
Lender's endorsements as well as its records relating to Loans is rebuttably
presumptive evidence of the outstanding principal and interest on the Loans,
and, in the event of inconsistency, will prevail over any records of the
Borrower and any written confirmations of Loans given by the Borrower.

         The Borrower agrees to pay interest on the unpaid principal amount from
time to time outstanding under this Note on the dates and at the rate or rates
as set forth in the Credit Agreement.

         Payments of both principal and interest are to be made in immediately
available funds in lawful money of the United States of America.

         This Note evidences indebtedness incurred under a Revolving Credit
Agreement dated as of June 26, 2000 (as amended, restated, renewed or replaced,
the "CREDIT AGREEMENT") between the Borrower and the Lender, to which Credit
Agreement reference is hereby made for a statement of its terms and provisions,
including without limitation those under which this Note may be paid prior to
its due date or have its due date accelerated. Capitalized terms not otherwise
defined herein have the same meaning herein as in the Credit Agreement.

         This Note and any document or instrument executed in connection with
this Note are governed by and construed in accordance with the internal law of
the State of Illinois, and are deemed to have been executed in the State of
Illinois. This Note binds the Borrower, its successors and assigns, and inures
to the benefit of the Lender, its successors and assigns, except



that the Borrower may not transfer or assign any of its rights or interest under
this Note without the prior written consent of the Lender.

         The Borrower agrees to pay upon demand all expenses (including without
limitation attorneys' fees, legal costs and expenses, and time charges of
attorneys who may be employees of the Lender, in each case whether in or out of
court, in original or appellate proceedings or in bankruptcy) incurred or paid
by the Lender or any holder hereof in connection with the enforcement or
preservation of its rights hereunder or under any document or instrument
executed in connection herewith. The Borrower expressly and irrevocably waives
presentment, protest, demand and notice of any kind in connection herewith.

         This Note is secured by the property described in the Pledge Agreement
(as such term is defined in the Credit Agreement), to which reference is made
for a description of the collateral provided thereby and the rights of the
Lender and the Borrower in respect of such collateral.

         This Note is a restatement of the indebtedness evidenced by, and is a
replacement of, that certain Revolving Credit Note of the undersigned dated June
26, 2000 in the face principal amount of $5,000,000 payable to the order of the
Lender, and nothing contained herein or in the First Amendment dated as of
January __, 2001 to the Credit Agreement referred to above shall be construed to
deem paid or forgiven the unpaid principal amount of, or unpaid accrued interest
on, said Revolving Credit Note outstanding at the time of its replacement by
this Note, or to release or otherwise adversely affect any lien, mortgage or
security interest securing such indebtedness or any rights of the Lender against
any guarantor, surety or other party primarily or secondarily liable for such
indebtedness.


                                           FIRST COMMUNITY BANCORP

                                           By:
                                              ----------------------------
                                           Title:
                                                 ---------------------------


                                      -8-


                                    EXHIBIT B

                           FORM OF OPINION OF COUNSEL
                                 TO THE BORROWER


The Northern Trust Company
50 South LaSalle Street
Chicago, Illinois  60675
Attention:  Correspondent Services Division

Ladies and Gentlemen:

         We have acted as counsel for First Community Bancorp (the "BORROWER")
in connection with the authorization, execution and delivery of the First
Amendment dated as of January ___, 2001 (the "AMENDMENT") to the Revolving
Credit Agreement dated as of June 26, 2000 (the "AGREEMENT") and the Pledge
Agreement dated as of June 26, 2000 (the "PLEDGE AGREEMENT"), as amended,
entered into between the Borrower and The Northern Trust Company (the "LENDER"),
and the Revolving Credit Note referred to therein (the Amendment and the
Revolving Credit Note shall collectively be called the "LOAN DOCUMENTS"). Unless
otherwise defined herein, capitalized terms used herein shall have the
respective meanings assigned to such terms in the Amendment.

         We have reviewed the corporate proceedings of the Borrower in
connection with the authorization, execution, and delivery of the Loan
Documents. We have examined originals (or copies certified to our satisfaction)
of such records of the Borrower and its Subsidiaries and such other instruments
and certificates of public officials, officers and representatives of the
Borrower and its Subsidiaries, and such other persons, as we have deemed
appropriate as a basis for the opinions hereinafter expressed. We have relied on
the accuracy of the facts set forth in such records, instruments and
certificates. In particular, in respect of the opinion expressed in paragraph
(1) below concerning qualification to transact business, we have relied on
officers of the Borrower as to those matters of fact, including the
jurisdictions in which the Borrower and its Subsidiaries conduct business
activities or own or lease property, that we deemed relevant to such opinion.

         On the basis of the foregoing and of such investigations of law as we
have deemed appropriate, it is our opinion as follows:

         1. The Borrower is a corporation duly formed and validly existing under
the laws of the State of California, is in good standing therein, and is duly
qualified or licensed to transact business in all places where failure to do so
might have a material adverse effect on the financial condition, prospects or
business of the Borrower. The Borrower has power to execute and deliver the Loan
Documents and to incur and perform its obligations thereunder. The Borrower is a
bank holding company duly registered with the Board of Governors of the Federal
Reserve



System under the Bank Holding Company Act of 1956, as amended. Each "SUBSIDIARY
BANK" is either a national banking association duly formed and is validly
existing under the laws of the United States or a state banking corporation duly
formed and is validly existing under the laws of the state of its incorporation,
and in each case is in good standing therein and is duly qualified or licensed
to transact business in all places where failure to do so might have a material
adverse effect on the financial condition, prospects or business of such
Subsidiary Bank. Each Subsidiary of the Borrower which is not a Subsidiary Bank
is a corporation which has been duly formed and is validly existing under the
laws of its state of incorporation, is in good standing therein and is duly
qualified or licensed to transact business in all places where failure to do so
might have a material adverse effect on the financial condition, prospects or
business of such Subsidiary.

         2. The execution, delivery and performance by the Borrower of the Loan
Documents and the documents in connection with the PB Acquisition (the "PB
ACQUISITION DOCUMENTS") and the transactions contemplated thereby have been duly
authorized by all necessary action on the part of the Borrower and, if required,
its shareholders, and will not violate any provision of law or regulation, writ,
order or judgment or of the Borrower's articles of incorporation or bylaws, as
applicable, or result in the breach of or constitute a default or require a
consent under any indenture or other agreement or instrument known to us after
due inquiry to which the Borrower or any Subsidiary is a party or by which the
Borrower or its property, or any Subsidiary or its property, may be bound or
affected.

         3. The Loan Documents have been duly executed and delivered by the
Borrower and constitute the legal, valid and binding obligations of the Borrower
enforceable in accordance with their terms (subject to limitations as to
enforceability which might result from bankruptcy, insolvency, or other similar
laws affecting creditors' rights generally, and from the discretionary nature of
equitable remedies).

         4. We have no knowledge, after due inquiry of the Borrower and its
Subsidiaries, of any suits or proceedings pending, or to the knowledge of the
Borrower or any Subsidiary threatened against or affecting the Borrower or any
Subsidiary which, if adversely determined, would have a material adverse effect
on the financial condition, prospects or business of the Borrower and its
Subsidiaries on a consolidated basis.

         5. All filings or registrations with, and any licenses, consents,
authorizations and approvals of, any governmental agency, authority or court
necessary in connection with the execution, delivery and performance of the Loan
Documents and the PB Acquisition Documents have been obtained or made and are in
full force and effect.

         6. The Borrower is in material compliance with all rules and
regulations of the Bank Holding Company Act, as amended, and with all existing
regulations of the Board of Governors of the Federal Reserve System relating to
bank holding companies.

         7. The Borrower is not an "investment company" or a company
"controlled" by an "investment company," within the meaning of the Investment
Company Act of 1940, as amended.



         8. The Borrower is not under investigation by, or operating under any
restrictions (applicable specifically to the Borrower) imposed by, any
regulatory authority.

         9. The Pledge Agreement, as amended by the Amendment, creates a valid
security interest in the Borrower's right, title and interest in the
"COLLATERAL" referred to therein which secures the "LIABILITIES" referred to
therein. Upon delivery to the Lender of certificates evidencing any "PLEDGED
SHARES" referred to in the Pledge Agreement, such security interest in such
Pledged Shares shall constitute a duly perfected first priority lien on such
Pledged Shares.

                                           Very truly yours,



The Northern Trust Company
50 South LaSalle Street
Chicago, Illinois  60675

         Re:      First Amendment dated as of January __, 2001 (the "AMENDMENT")
                  to Revolving Credit Agreement dated as of June 26, 2000 (the
                  "AGREEMENT") and Pledge Agreement dated as of June 26, 2000,
                  between First Community Bancorp (the "BORROWER") and The
                  Northern Trust Company (the "LENDER")

Ladies and Gentlemen:

This certificate is being delivered to the Lender pursuant to SECTION 4.1(e) of
the Amendment. Terms used in this certificate which are defined in the Agreement
shall have the same meaning herein as therein.

In connection with the closing today of the Amendment, the undersigned officer
of the Borrower hereby certifies as follows:

         1.       No Event of Default or Unmatured Event of Default under the
                  Agreement has occurred and is continuing.

         2.       The warranties in SECTION 4 of the Agreement and in SECTION 3
                  of the Amendment are true and correct as of the date hereof as
                  though made on the date hereof, except for such changes as are
                  specifically permitted under the Agreement.

                                              Very truly yours,

Dated January ___, 2001                       FIRST COMMUNITY BANCORP




                                              By:
                                                 -------------------------------
                                              Title:  [Insert "President" or
                                                       title of chief financial
                                                       officer, as applicable]

EX-10.8

                             FIRST COMMUNITY BANCORP


                                    ARTICLE I
                                   DEFINITIONS


1.1      DEFINITIONS

         Whenever used in this Plan, the following capitalized terms shall have
         the meanings set forth in this Section 1.1, certain other capitalized
         terms being defined elsewhere in this Plan:

         (a) "Board" means the Board of Directors of the Company.

         (b) "Change in Control" shall mean the occurrence of any of the
         following:

                                    (i) Any "Person" or "Group" (as such terms
                           are defined in Section 13(d) of the Securities
                           Exchange Act of 1934 (the "Exchange Act") and the
                           rules and regulations promulgated thereunder) is or
                           becomes the "Beneficial Owner" (within the meaning of
                           Rule 13d-3 under the Exchange Act), directly or
                           indirectly, of securities of the Company, or of any
                           entity resulting from a merger or consolidation
                           involving the Company, representing more than fifty
                           percent (50%) of the combined voting power of the
                           then outstanding securities of the Company or such
                           entity.

                                    (ii) The individuals who, as of the date
                           hereof, are members of the Board (the "Existing
                           Directors"), cease, for any reason, to constitute
                           more than fifty percent (50%) of the number of
                           authorized directors of the Company as determined in
                           the manner prescribed in the Company's Articles of
                           Incorporation and Bylaws; PROVIDED, HOWEVER, that if
                           the election, or nomination for election, by the
                           Company's stockholders of any new director was
                           approved by a vote of at least fifty percent (50%) of
                           the Existing Directors, such a new director shall be
                           considered an Existing Director; PROVIDED, FURTHER,
                           HOWEVER, that no individual shall be considered an
                           Existing Director if such individual initially
                           assumed office as a result of either an actual or
                           threatened "Election Contest" (as described in Rule
                           14a-11 promulgated under the Exchange Act) or other
                           actual or threatened solicitation of proxies by or on
                           behalf of anyone other than the Board (a "Proxy
                           Contest"), including by reason of any agreement
                           intended to avoid or settle any Election Contest or
                           Proxy Contest.

                                    (iii) The consummation of (x) a merger,
                           consolidation or reorganization to which the Company
                           is a party, whether or not the Company is the person
                           surviving or resulting therefrom, or (y) a sale,


                                       1


                           assignment, lease, conveyance or other disposition of
                           all or substantially all of the assets of the
                           Company, in one transaction or a series of related
                           transactions, to any Person other than the Company,
                           where any such transaction or series of related
                           transactions as is referred to in clause (x) or
                           clause (y) above in this subparagraph (iii) (a
                           'Transaction") does not otherwise result in a "Change
                           in Control" pursuant to subparagraph (i) of this
                           definition of "Change in Control"; PROVIDED, HOWEVER,
                           that no such Transaction shall constitute a "Change
                           in Control" under this subparagraph (iii) if the
                           persons who were the Shareholders of the Company
                           immediately before the consummation of such
                           Transaction are the Beneficial Owners, immediately
                           following the consummation of such Transaction, of
                           fifty percent (50%) or more of the combined voting
                           power of the then outstanding voting securities of
                           the Person surviving or resulting from any merger,
                           consolidation or reorganization referred to in clause
                           (x) above in this subparagraph (iii) or the Person to
                           whom the assets of the Company are sold, assigned,
                           leased, conveyed or disposed of in any transaction or
                           series of related transactions referred in clause (y)
                           above in this subparagraph (iii).

         (c)      "Code" means the Internal Revenue Code of 1986, as amended.

         (d)      "Company" means First Community Bancorp, a California
                  corporation, and any successor or assignee as provided in
                  Article V.

         (e)      "Compensation" means your highest annual compensation for any
                  calendar year in the three calendar years ending with the
                  calendar year which includes the date of your termination of
                  employment with the Company and its Subsidiaries, with your
                  compensation for any such calendar year in which you do not
                  complete twelve (12) months or service being annualized on the
                  basis of a twelve (12) month year. For purposes of determining
                  your "Compensation", your annual compensation for any calendar
                  year or portion thereof shall be limited to your base salary,
                  your nonaccountable automobile and other expense allowances,
                  and your bonus attributable to such calendar year regardless
                  of when paid (or, if you did not receive a bonus for a
                  calendar year, your target bonus), before reductions for any
                  amounts excludable from your gross income for federal income
                  tax purposes pursuant to Section 125 or Section 401(k) of the
                  Code or under any nonqualified deferred compensation plan.
                  "Compensation" shall NOT include your income from --- the
                  grant or vesting of restricted stock, or from the grant,
                  vesting, or exercise of stock options.

         (f)      "Disability" means a physical or mental infirmity which
                  substantially impairs your ability to perform your material
                  duties for a period of at least one hundred eighty (180)
                  consecutive calendar days, and, as a result of such
                  Disability, you have not returned to your full-time regular
                  employment prior to termination.

         (g)      "Employee Grade" means the grade within the compensation
                  system to which you are assigned by the Company.


                                       2


         (h)      "Executive" means a regular full-time salaried or hourly
                  employee of the Company or its Subsidiaries in Employee Grades
                  1, 2, 3, A or B who does not have an individual agreement with
                  the Company or its Subsidiaries regarding severance payments.

         (i)      "ERISA" means Employee Retirement Income Security Act of 1974,
                  as amended.

         (j)      "Good Reason" means any of the following events, provided that
                  you give the Company or its Subsidiary at least thirty (30)
                  days prior written notice of your termination with the Company
                  or its Subsidiary:

                  (i) a reduction by the Employer in the your base salary as in
                  effect immediately before such reduction; or

                  (ii) a diminution in your duties and responsibilities, as in
                  effect immediately before the Change in Control, or an adverse
                  change, after the occurrence of a Change in Control, in your
                  place in the Company's organization chart or in the seniority
                  of the individual to whom you report; or

                  (iii) a material reduction in the your annual target bonus
                  opportunity (if any) (for this purpose, a reduction for any
                  year of over ten percent (10%) of your annual target bonus
                  opportunity (if any) measured by the preceding year shall be
                  considered "material"); or

                  (iv) a material reduction in your Welfare Benefits (for this
                  purpose, a reduction for any one year of over ten percent
                  (10%) of aggregate Welfare Benefits shall be considered
                  "material"); or

                  (v) the failure by the Company or its Subsidiaries to provide
                  and credit you with the number of accrued annual leave days to
                  which you are entitled in accordance with the Company's normal
                  annual leave policy as in effect immediately before the Change
                  in Control; or

                  (vi) the Employer's requiring you to be based more than twenty
                  five (25) miles from the location of your place of employment
                  immediately before the Change in Control, except for normal
                  business travel in connection with your duties with the
                  Company or its Subsidiaries.

         (k)      "Just Cause" means:

                  (i) the willful and continued failure by you to perform
                  substantially your duties with the Company and its
                  Subsidiaries, and such willful and continued failure continues
                  after a demand for substantial performance is delivered to you
                  by the Company or its Subsidiaries which specifically
                  identifies the manner in which you have not substantially
                  performed your duties; or


                                       3


                  (ii) the willful engaging by you in conduct which is
                  materially and demonstrably injurious to the business or
                  reputation of the Company or its Subsidiaries.

         For purposes of determining whether "Just Cause" exists, no act or
         failure to act on your part shall be considered "willful" unless done,
         or omitted to be done, by you in bad faith and without reasonable
         belief that the action or omission was in, or not opposed to, the best
         interests of the Company and its Subsidiaries.

         (l)      "Multiplier" for each Employee Grade shall be the number set
                  forth opposite such Employee grade below:




                  Employee Grade                                Multiplier
                  --------------                                ----------
                                                                 
                  Grade One                                         3
                  Grade Two                                         2
                  Grade Three                                       2
                  Grade A                                           2
                  Grade B                                           1


         (m)      "Person" shall have the meaning set forth in the definition of
                  "Change in Control".

         (n)      "Release" means the Separation and General Release Agreement
                  in the form attached hereto as Exhibit "A".

         (o)      "Severance Payment" means the payment of severance
                  compensation as provided in Article III.

         (p)      "Severance Period" means the number of whole months equal to
                  the product of 12 multiplied by the Multiplier for your
                  Employee Grade, beginning on the date of your termination of
                  employment with the Company and its Subsidiaries.

         (q)      "Subsidiary" means any corporation or other Person, a majority
                  of the voting power, equity securities or equity interest of
                  which is owned directly or indirectly by the Company.

         (r)      "WARN" means Worker Adjustment and Retraining Notification
                  Act, 29 U.S.C. Section 2101 ET SEQ.

         (s)      "Welfare Benefits" means the medical, dental, disability and
                  life insurance coverages (including coverage under
                  self-insured arrangements or plans) which the Company or its
                  Subsidiaries provide to you or your dependents immediately
                  before a Change in Control.


                                       4


                                   ARTICLE II
                  INDEMNIFICATION AND GROSS-UP FOR EXCISE TAXES

         2.1      INDEMNIFICATION AND GROSS-UP

                  The Company hereby indemnifies you and holds you harmless from
         and against any and all liabilities, costs and expenses (including,
         without limitation, attorney's fees and costs) you may incur as a
         result of the excise tax imposed by Section 4999 of the Code or any
         similar provision of state or local income tax law (the "Excise Tax"),
         to the end that you shall be placed in the same tax position with
         respect to the Severance Payment under this Plan and all other payments
         from the Company to you in the nature of compensation as you would have
         been in if the Excise Tax had never been enacted. In furtherance of
         such indemnification, the Company shall pay to you a payment (the
         "Gross-Up Payment") in an amount such that, after payment by you of all
         taxes, including income taxes and Excise Tax imposed on the Gross-Up
         Payment and any interest or penalties (other than interest and
         penalties imposed by reason of your failure to file timely tax returns
         or to pay taxes shown due on such returns and any tax liability,
         including interest and penalties, unrelated to the Excise Tax or the
         Gross-Up Amount), you shall be placed in the same tax position with
         respect to the Severance Payment under this Plan and all other payments
         from the Company to you in the nature of compensation as you would have
         been in if the Excise Tax had never been enacted. At such time or times
         necessary to carry out the purposes of this Article II in view of the
         withholding requirements of Section 4999 (c) (1) of the Code, the
         Company shall pay to you one or more Gross-Up Payments for the
         Severance Payment and any other payments in the nature of compensation
         which the Company determines are "excess parachute payments" under
         Section 280G(b) (1) of the Code ("Excess Parachute Payments"). If,
         through a local taxing authority (a "Taxing Authority"), or a judgement
         of any court, you become liable for an amount of Excise Tax not covered
         by the Gross-Up Payment payable pursuant to the preceding sentence, the
         Company shall pay you an additional Gross-Up Payment to make you whole
         for such additional Excise Tax; PROVIDED, HOWEVER, that, pursuant to
         Section 2.3, the Company shall have the right to require you to
         protest, contest, or appeal any such determination or judgement. For
         purposes of this Article II, any amount which the Company is required
         to withhold under Sections 3402 or 4999 of the Code or under any other
         provision of law shall be deemed to have been paid for you.

         2.2      REPORTING

                  Upon payment to you of a Gross-Up Payment, the Company shall
         provide you with a written statement showing the Company's computation
         of such Gross-Up Payment and the Excess Parachute Payments and Excise
         Tax to which it relates, and setting forth the Company's determination
         of the amount of gross income you are required to recognize as a result
         of such payments and your liability for the Excise Tax. You shall cause
         your federal, state and local income tax returns for the period in
         which you receive such Gross-Up Payment to be prepared and filed in
         accordance with such statement, and, upon such fling, you shall certify
         in writing to the Company that such returns have been so prepared and
         filed. At your request, the Company shall furnish to


                                       5


         you, at no cost to you, assistance in preparing your federal, state and
         local income tax returns for the period in which you receive such
         Gross-Up Payment in accordance with such statement. Notwithstanding the
         provisions of Section 2.1, the Company shall not be obligated to
         indemnify you from and against any tax liability, cost or expenses
         (including, without limitation, any liability for the Excise Tax or
         attorney's fees or costs) to the extent such tax liability, cost or
         expense is attributable to your failure to comply with the provisions
         if this Section 2.2.

         2.3      CONTROVERSIES

                  If any controversy arises between you and a Taxing Authority
         with respect to the treatment on any return of the Gross-Up Amount, or
         of any payment you receive from the Company as an excess Parachute
         Payment, or with respect to Excess Parachute Payment, including,
         without limitation, any audit, protest to an appeals authority of a
         Taxing Authority or litigation (a "Controversy"), the Company shall
         have the right to participate with you in the handling of such
         Controversy. The Company shall have the right, solely with respect to a
         Controversy, to direct you to protest or contest any proposed
         adjustment or deficiency, initiate an appeals procedure within any
         Taxing Authority, commence any judicial proceeding, make any settlement
         agreement, or file a claim for refund of tax, and you shall not take
         any of such steps without the prior written approval of the Company,
         which the Company shall not unreasonably withhold. If the Company
         elects, you shall be represented in any Controversy by attorneys,
         accountants, and other advisors selected by the Company, and the
         Company shall pay the fees, costs and expenses of such attorneys,
         accountants, or advisors, and any tax liability you may incur as a
         result of such payment. You shall promptly notify the Company of any
         communication with a Taxing Authority, and you shall promptly furnish
         to the Company copies of any written correspondence, notices or
         documents received from a Taxing Authority relating to a Controversy.
         You shall cooperate fully with the Company in the handling of any
         Controversy; PROVIDED, HOWEVER, that you shall not be obligated to
         furnish to the Company copies of any portion of your tax returns which
         do not bear upon, and are not affected by, the Controversy.

         2.4 REFUNDS

                  You shall pay over to the Company, within ten (10) days after
         your receipt thereof, any refund you receive from any Taxing Authority
         of all or any portion of the gross-Up Payment or the Excise Tax,
         together with any interest you receive from such Taxing Authority on
         such refund. For purposes of this Section 2.4, a reduction in your tax
         liability attributable to the previous payment of the Gross-Up Amount
         or the Excise Tax shall be deemed to be a refund. If you would have
         received a refund of all or any portion of the Gross-Up Payment or the
         Excise Tax, except that a Taxing Authority offset the amount of such a
         refund against other tax liabilities, interest, or penalties, you shall
         pay the amount of such offset over to the Company, together with the
         amount of interest you would have received from the Taxing Authority if
         such offset had been an actual refund, within ten (10) days after
         receipt of notice from the Taxing Authority of such offset.


                                       6


                                   ARTICLE III
                               SEVERANCE PAYMENTS

         3.1      RIGHT TO SEVERANCE PAYMENT; RELEASE

                  Conditioned on the execution and delivery by you (or your
         beneficiary or personal representative, if applicable) of the Release,
         you shall be entitled to receive a Severance Payment from the Company
         in the amount provided in Section 3.2 if (a) you are an Executive, and
         (b) within twenty four (24) months after the occurrence of a Change of
         Control, your employment with the Company and its Subsidiaries
         terminates for any reason other than:

                  (a)      Death,

                  (b)      Disability,

                  (c)      Termination by the Company or its Subsidiaries for
                           Just Cause,

                  (d)      Retirement in accordance with the normal retirement
                           policy of the Company,

                  (e)      Voluntary termination by you for other than Good
                           Reason, or

                  (f)      The sale by the Company of the Subsidiary which
                           employed you before such sale, if you have been
                           offered employment with the purchaser of such
                           Subsidiary on substantially the same terms and
                           conditions under which such you worked for the
                           Subsidiary before the sale.

         If your employment with the Company or its Subsidiaries terminates
         before the occurrence of a Change in Control for any reason other than
         one of those enumerated immediately above, your employment will be
         deemed to have terminated on the day after the occurrence of the Change
         in Control if (I) your employment terminates within ninety (90) days
         before a Change in Control actually occurs, or (ii) you reasonably
         demonstrate that the Company or its Subsidiaries involuntarily
         terminated your employment, or gave you Good Reason, a the request of a
         Person (other than the Company or its Subsidiaries) who has indicated
         an intention or taken steps reasonably calculated to effect a Change in
         Control, or otherwise in connection with, or in anticipation of, a
         Change in Control which actually occurs.

         3.2      AMOUNT OF SEVERANCE PAYMENT

                  If you become entitled to a Severance Payment under this Plan,
         the amount of your Severance Payment, when added to any payments which
         the Company or its Subsidiaries are required to make to you under WARN,
         shall equal the product of your Compensation multiplied by the
         Multiplier for your Employee Grade.


                                       7


         3.3      NO MITIGATION

                  The Company acknowledges and agrees that you shall be entitled
         to receive your entire Severance Payment regardless of any income,
         which you may receive from other sources following your termination on
         or after the Effective Time.

         3.4      PAYMENT OF SEVERANCE PAYMENT

                  The Severance Payment to which you are entitled shall be paid
         to you, in cash and in full, not later than eight (8) calendar days
         after the execution and delivery by you (or your beneficiary or
         personal representative, if applicable) of the Release Agreement, but
         in no event before the date on which such Release becomes effective. If
         you should die before all amounts payable to you have been paid, such
         unpaid amounts shall be paid to your beneficiary under this Plan or, if
         you have not designated such a beneficiary in writing to the Company,
         to the personal representative(s) of your estate.

         3.5      WELFARE BENEFITS

                  If you are entitled to receive a Severance Payment under
         Section 3.1, you will also be entitled to receive continued Welfare
         benefits on the same basis, including required employee contributions,
         if any, as in effect for similarly-situated Executives in the employ of
         the Company or its Subsidiaries, for your Severance Period.
         Notwithstanding the foregoing, your right to any particular type of
         Welfare Benefit shall be subject to cancellation by the Company if you
         or your dependents obtain alternative coverage of a similar type during
         the Severance Period; period, however, that if any such alternative
         group health coverage excludes any pre-existing condition that you or
         your dependents may have when coverage under such group health plan
         would otherwise begin, coverage under this Section 3.5 shall continue
         (but not beyond the Severance Period) with respect to such pre-existing
         condition until such exclusion under such other group health plan
         lapses or expires. You shall be obligated to notify the Company's Human
         Resources Department of any such alternative coverage within thirty
         (30) days of its first becoming applicable to you or your dependents.
         In the event you are required to make an election under Sections 601
         through 607 of ERISA (commonly known as COBRA) to qualify for
         continuing health benefits coverage described in this Section 3.5, the
         obligations of the Company and its Subsidiaries under this Section 3.5
         to continue your health benefits coverage shall be conditioned upon
         your timely making such an election.

         3.6      AUTOMOBILE

                  If you become entitled to receive a Severance Payment under
         Section 3.1, and you then have the use of an automobile that is
         provided to you at the expense of the Company or any Subsidiary, you
         shall have the right, for ninety (90) days following your termination
         of employment, (a) to continue your use of the automobile on the same
         basis on which you used it immediately before your termination of
         employment, or (b) to purchase the automobile from the Company or
         Subsidiary for its low wholesale bluebook value, or, it the Company or
         Subsidiary has leased the automobile, to assume the lease, or (c) to
         take the actions described in clause (a) and (b) of this sentence.


                                       8


         3.7      OUTPLACEMENT SERVICES

                  If you become entitled to Severance Payment under Section 3.1,
         you will also become entitled to receive outplacement services in
         accordance with the Company's usual practice for Executives.

         3.8      WITHHOLDING OF TAXES

                  The Company may withhold from any amounts payable under this
         Plan all federal, state, city or other taxes required by applicable law
         to be withheld by the Company.


                                   ARTICLE IV
                     OTHER RIGHTS AND BENEFITS NOT AFFECTED

         4.1      OTHER BENEFITS

                  This Plan does not provide a pension for you, nor shall any
         payment hereunder be characterized as deferred compensation. Except as
         set forth in Section 4.2, neither the provisions of this Plan nor the
         Severance Payment provided for hereunder shall reduce any amounts
         otherwise payable, or in any way diminish your rights as an employee,
         whether existing now or hereafter, under any written benefit,
         incentive, retirement, stock option, stock bonus or stock purchase plan
         or any written employment agreement or other written plan or
         arrangement not related to severance.

         4.2      OTHER SEVERANCE PLANS SUPERSEDED

                  As of the Effective Time, this Plan will supersede any and all
         other severance plans of the Company or its Subsidiaries to the extent
         they apply to Executives (except for any individual severance agreement
         between you and the Company and its Subsidiaries), and your
         participation in any other severance plan of the Company and its
         Subsidiaries will be hereby terminated.

         4.3      EMPLOYMENT STATUS

                  This Plan does not constitute a contract of employment or
         impose on you any obligation to remain in the employ of the Company,
         nor does it impose on the Company or any of its Subsidiaries any
         obligation to retain you in your present or any other position, nor
         does it change the status of your employment as an employee at will.
         Nothing in this Plan shall in any way affect the right of the Company
         or any of its Subsidiaries in its absolute discretion to change or
         reduce your compensation at any time, or to change at any time one or
         more benefit plans, dental plans, health care plans, savings plans,
         bonus plans, vacation pay plans, disability plans, and the like.


                                       9


                                    ARTICLE V
                            SUCCESSOR TO THE COMPANY

                  The Company shall require any successor or assignee, whether
         direct or indirect, by purchase, merger, consolidation or otherwise, to
         all or substantially all the business or assets of the Company,
         expressly and unconditionally to assume and agree to perform the
         Company's obligations under this Plan, in the same manner and to the
         same extent that the Company would be required to perform if no
         succession or assignment had taken place. In such event, the term
         "Company", as used in this Plan, shall mean (from and after, but not
         before, the occurrence of such event) the Company as herein before
         defined and any successor or assignee to the business or assets which
         by reason hereof becomes bound by the terms and provisions of this
         Plan.


                                   ARTICLE VI
                                 CONFIDENTIALITY

         6.1      NONDISCLOSURE OF CONFIDENTIAL MATERIAL

                  In the performance of your duties, you have previously had,
         and may in the future have, access to confidential records and
         information, including, but not limited to, development, marketing,
         purchasing, organizational, strategic, financial, managerial,
         administrative, manufacturing, production, distribution and sales
         information, data, specifications and processes presently owned or at
         any time hereafter developed by the Company or its agents or
         consultants or used presently or at any time hereafter in the course of
         its business, that are not otherwise part of the public domain
         (collectively, the "Confidential Material"). All such Confidential
         Material is considered secret and has been and/or will be disclosed to
         you in confidence. By your acceptance of your Severance Payment under
         this Plan, you shall be deemed to have acknowledged that the
         Confidential Material constitutes propriety information of the Company
         which draws independent economic value, actual or potential, from not
         being generally known to the public or to other persons who could
         obtain economic value from its disclosure or use, and that the Company
         has taken efforts reasonable under the circumstances, of which this
         Section 6.1 is an example, to maintain its secrecy. Except in the
         performance of your duties to the Company, you shall not, directly or
         indirectly for any reason whatsoever, disclose or use any such
         Confidential Material that (i) has been publicly disclosed or was
         within your possession prior to its being furnished to you by the
         Company or becomes available to you on a nonconfidential basis from a
         third party (in any of such cases, not due to a breach by you or your
         obligations to the Company or by breach of any other person of a
         confidential, fiduciary or confidential obligation, the breach of which
         you know or reasonably should know), (ii) is required to be disclosed
         by you pursuant to applicable law, and you provide notice to the
         Company of such requirement as promptly as possible, or (iii) was
         independently acquired or developed by you without violating any of the
         obligations under this Plan and without relying on Confidential
         Material of the Company. All records, files, drawings, documents,
         equipment and other tangible items, wherever located, relating in any
         way to the Confidential Material or otherwise to the Company's
         business, which you have prepared, used or encountered or shall in the
         future prepare, use or encounter, shall be and


                                       10


         remain the Company's sole and exclusive property and shall be included
         in the Confidential Material. Upon your termination of employment with
         the Company, or whenever requested by the Company, you shall promptly
         deliver to the Company any and all of the Confidential Material and
         copies thereof, not previously delivered to the Company, that may be,
         or at any previous time has been, in your possession or under your
         control.

         6.2      NONSOLICITATION OR EMPLOYEES

                  By your acceptance of your Severance Payment under this Plan,
         you agree that, for a period of two (2) years following your
         termination of employment with the Company or its Subsidiaries, neither
         you nor any Person or entity in which you have an interest shall
         solicit any person who was employed on the date of your termination of
         employment by the Company or any of its Subsidiaries, to leave the
         employ of the Company or any of its Subsidiaries. Nothing in this
         Section 6.2, however, shall prohibit you or any Person or entity in
         which you have an interest from placing advertisements in periodicals
         of general circulation soliciting applications for employment, or from
         employing any person who answers any such advertisement. For purposes
         of this Section 6.2, you shall not be deemed to have an interest in any
         corporation whose stock is publicly traded merely because you are the
         owner of not more than two percent (2%) of the outstanding shares of
         any class of stock of such corporation, provided you have no active
         participation in the business of such corporation (other than voting
         your stock) and you do not provide services to such corporation in any
         capacity (whether as an employee, an independent contractor or
         consultant, a board member, or otherwise).

         6.3      EQUITABLE RELIEF

                  By your acceptance of your Severance Payment under this Plan,
         you shall be deemed to have acknowledged that violation of Sections 6.1
         or 6.2 would cause the Company irreparable damage for which the Company
         can not be reasonably compensated in damages in an action at law, and
         that therefore in the event of any breach by you of Sections 6.1 or
         6.2, the Company shall be entitled to make application to a court of
         competent jurisdiction for equitable relief by way of injunction or
         otherwise (without being required to post a bond). This provision shall
         not, however, be construed as a waiver of any of the rights which the
         Company may have for damages under this Plan or otherwise, and, except
         as limited in Article VII, all of the Company's rights and remedies
         shall be unrestricted.


                                   ARTICLE VII
                                   ARBITRATION

                  Except for equitable relief as provided in Section 6.3,
         arbitration in accordance with the then most applicable rules of the
         American Arbitration Association shall be the exclusive remedy for
         resolving any dispute or controversy between you and the Company or any
         of its Subsidiaries, including, but not limited to, any dispute
         regarding your employment or he termination of your employment or any
         dispute regarding the application, interpretation or validity of this
         Plan not otherwise resolved through claims


                                       11


         procedure set forth in Section 8.10. The arbitrator shall be empowered
         to grant only such relief as would be available in a court of law. In
         the event of any conflict between this Plan and the rules of the
         American Arbitration Association, the provisions of this Plan shall be
         determinative. If the parties are unable to agree upon an arbitrator,
         they shall select a single arbitrator from a list designated by the
         office of the American Arbitrator Association having responsibility for
         the city in which you primarily performed services for the Company or
         its Subsidiaries immediately before your termination of employment of
         seven arbitrators, all of whom shall be retired judges who are actively
         involved in hearing private cases or members of the National Academy of
         Arbitrators, and who, in either event, are residents of the area in
         which you primarily performed services for the Company or its
         Subsidiaries immediately before your termination of employment. If the
         parties are unable to agree upon an arbitrator from such list, they
         shall each strike names alternatively from the list, with the first to
         strike being determined by lot. After each party has used three
         strikes, the remaining name on the list shall be the arbitrator. The
         fees and expenses of the arbitrator shall initially be responsible for
         the fees and expenses of its own representatives and witnesses. Unless
         mutually agreed otherwise by the parties, any arbitration shall be
         conducted at a location within fifty (50) miles from the location in
         which you primarily performed services for the Company or any of its
         Subsidiaries immediately before your termination of employment. If the
         parties cannot agree upon a location for the arbitration, the
         arbitrator shall determine the location within such fifty (50) mile
         radius. Judgement may be entered on the award of the arbitrator in any
         court having jurisdiction. The prevailing party in the arbitration
         proceeding, as determined by the arbitrator, and in any enforcement or
         other court proceedings, shall be entitled to the extent provided by
         law to reimbursement from the other party for all of the prevailing
         party's costs (including but not limited to the arbitrator's
         compensation), expenses and reasonable attorney's fees.


                                  ARTICLE VIII
                                  MISCELLANEOUS

         8.1      APPLICABLE LAW

                  To the extent not preempted by the laws of the United States,
         the laws of the State of California shall be the controlling law in all
         matters relating to this Plan, regardless of the choice-of-law rules of
         the State of California or any other jurisdiction.

         8.2      CONSTRUCTION

                  No term or provision of this Plan shall be construed so as to
         require the commission of any act contrary to law, and wherever there
         is any conflict between any provisions of this Plan and any present or
         future statute law, ordinance, or regulation, the latter shall prevail,
         but in such event the affected provision of this Plan shall be
         curtailed and limited only to the extent necessary to bring such
         provision with the requirements of the law.


                                       12


         8.3      SEVERABILITY

                  If a provision of this Plan shall be held illegal or invalid,
         the illegality or invalidity shall not affect the remaining parts of
         this Plan and this Plan shall be construed and enforced as if the
         illegal or invalid provision had not been included.

         8.4      HEADINGS

                  The Section headings in this Plan are inserted only as a
         matter of convenience, and in no way define, limit, or extend or
         interpret the scope of this Plan or of any particular Section.

         8.5      ASSIGNABILITY

                  Your rights or interests under this Plan shall not be
         assignable or transferrable (whether by pledge, grant of a security
         interest, or otherwise) by you, your beneficiaries or legal
         representatives, except by will or by the laws of descent and
         distribution.

         8.6      TERM

                  This Plan shall continue in full force and effect until its
         terms and provisions are completely carried out, unless terminated by
         the Board with at least a two-thirds majority before the occurrence of
         a Change in Control; provided, however, that no termination of this
         Plan shall be effective if made while the Company (or any Person acting
         on the Company's behalf) is conducting negotiations to effect a Change
         in Control, or within ninety (90) days before the Company (or any
         Person acting on its behalf) executes a letter of intent (whether or
         not binding) or a definitive agreement to effect a Change in Control.

         8.7      AMENDMENT

                  This Plan may be amended in any respect by resolution adopted
         by the Board with at least a two-thirds majority until Change in
         Control occurs; provided, however, that this Section 8.7 shall not be
         amended, and no amendment shall be effective if made while the Company
         (or any Person acting on the Company's behalf) is conducting
         negotiations to effect a Change in Control, or within ninety (90) days
         before the Company (or any Person acting on its behalf) executes a
         letter of intent (whether or not binding) or a definitive agreement to
         effect a Change in Control. After a Change in Control occurs, this Plan
         shall no longer be subject to amendment, change, substitution,
         deletion, revocation or termination in any respect whatsoever. No
         agreement or representations written or oral, express or implied, with
         respect to the subject matter hereof, have been made by the Company
         which are not expressly set forth in this Plan.

         8.8      NOTICES

                  For purposes of this Plan, notices and all other
         communications provided for herein shall be in writing and shall be
         deemed to have been duly given when personally delivered, telecopied,
         or sent by certified or overnight mail, return receipt requested,


                                       13


         postage prepaid, addressed to the respective addresses, or sent to the
         respective telecopier numbers, last given by each party to the other,
         provided that all notices to the Company shall be directed to the
         attention of the Board of Directors with a copy to the General Counsel.
         All notices and communications shall be deemed to have been received on
         the date of delivery thereof if personally delivered, upon return
         confirmation if telecopied, on the third business day after the mailing
         thereof, or on the date after sending by overnight mail, except that
         notice of change of address shall be effective only upon actual
         receipt. No objection to the method of delivery may be made if the
         written notice or other communication is actually received.

         8.9      ADMINISTRATION

                  This Plan constitutes a welfare benefit plan within the
         meaning of Section 3 (1) of ERISA. This letter constitutes the
         governing document of the Plan and the Summary Plan Description under
         ERISA. The Administrator of the Plan, within the meaning of Section
         3(16) of ERISA, and the Named Fiduciary thereof, within the meaning of
         Section 402 of ERISA, is the Company. Attached hereto as Exhibit "B" is
         a statement of your rights under ERISA.

         8.10     CLAIMS

                  If you believe you are entitled to a benefit under this Plan,
         you may make a claim for such benefit by filing with the Company a
         written statement setting forth the amount and type of payment so
         claimed. The statement shall also set forth the facts supporting the
         claim. The claim may be filed by mailing or delivering it to the
         Secretary of the Company.

                  Within sixty (60) calendar days after receipt of such a claim,
         the Company shall notify you in writing of its action on such claim and
         if such claim is not allowed in full, shall state the following in a
         manner calculated to be understood by you:

                           (a)      The specific reason or reasons for the
                                    denial;

                           (b)      Specific reference to pertinent provisions
                                    of this Plan on which the denial is based;

                           (c)      A description of any additional material or
                                    information necessary for you to be entitled
                                    to the benefits that have been denied and an
                                    explanation of why such material or
                                    information is necessary; and

                           (d)      An explanation of this Plan's claim review
                                    procedure.

                  If you disagree with the action taken by the Company, you or
         your duly authorized representative may apply to the Company for a
         review of such action. Such application shall be made within one
         hundred twenty (120) calendar days after receipt by you of the notice
         of the Company's action on your claim. The application for review shall
         be filed in the same manner as the claim for benefits. In connection
         with such review, you may inspect any documents or records pertinent to
         the matter and may


                                       14


         submit issues and comments in writing to the Company. A decision by the
         Company shall be communicated to you within sixty (60) calendar days
         after receipt of the application. The decision on review shall be in
         writing and shall include specific reasons for the decision, written in
         a manner calculated to be understood by you, and specific references to
         the pertinent provisions of this Plan on which the decision is based.

                                                  Sincerely,

                                                  First Community Bancorp



                                                  By:
                                                     ---------------------------
                                                  Matthew P. Wagner
                                                  Chief Executive Officer


                                       15

EX-10.9

HUMAN RESOURCES
                         EMPLOYEE SEVERANCE PAY PLAN
================================================================================
INTRODUCTION
                           First Community Bancorp is the sponsor of the
                           Employee Severance Pay Plan Policy ("the Plan").
                           First Community Bancorp and its subsidiaries (the
                           "Company" or the "Companies" as the context requires)
                           have adopted the Plan to provide financial assistance
                           to those employees who are involuntarily terminated
                           from the Company. This Plan will expire on December
                           31, 2001, unless terminated prior thereto or extended
                           as provided below.

                           The purpose of this Plan is to provide certain
                           benefits ("Severance Benefits") to Eligible Employees
                           (defined below whose employment is involuntarily
                           terminated by any of the Companies for reasons such
                           as permanent layoffs, permanent reductions in force,
                           cutbacks in business, the discontinuance of all or
                           any part of a Company's operations or the elimination
                           of an Eligible Employee's job) resulting from the
                           Company's acquisition of, or merger with, another
                           financial institution.

                           Furthermore, this document serves as both the Plan
                           document and summary plan description and sets forth
                           the requirements for eligibility under the Plan,
                           explains the Severance Benefits available under the
                           Plan and the manner in which payments are calculated,
                           describes circumstances which may limit or terminate
                           an Eligible Employee's eligibility for Severance
                           Benefits and discusses the administration of the Plan
                           in general.

                           In all cases, your rights and benefits under the
                           Plan, if any, are governed solely by the terms and
                           conditions of this Plan. None of the Companies, their
                           current and former directors, shareholders, officers,
                           employees or agents, will be bound by or liable to
                           you or anyone for any representation, promise or
                           inducement made by any of their officers, employees,
                           or agents about the Plan that is not contained in
                           this Plan.

                           Interpretation and application of the Plan to a
                           particular circumstance will be made by the Company
                           at its sole discretion. The Company has the sole and
                           absolute power and authority to make all legal and
                           factual determinations, construe and interpret terms
                           and provisions, and make eligibility and benefit
                           determinations in accordance with its interpretation
                           of the Plan. First Community Bancorp also reserves
                           the right to change, suspend, continue or terminate
                           all or any part of the Plan, either in an individual
                           case or in general, at any time without notice. A
                           copy of this Plan may be obtained from the Human
                           Resource Director of First Community Bancorp.

                           The Plan is not intended to, and does not, provide
                           employees with vested benefits. Moreover, the Plan
                           may be terminated or amended at any time and for any
                           reason by First Community Bancorp. If the Plan is
                           terminated or the eligibility criteria or benefits
                           changed in general, the change will apply to all
                           Eligible Employees except for Eligible Employees who
                           have signed a settlement Agreement and General
                           Release (the "Agreement") or whose Severance Pay
                           Period (defined


                                       1


                           below) began before the effective date of the change.
                           This Plan and the policies set forth herein are not
                           intended to imply a contractual relationship, except
                           for employees who have signed an Agreement, and this
                           Plan does not affect the at-will employment status of
                           the employees to which this Plan applies.

                           Any time the words "you" and "your" are used in this
                           Policy; they are to be understood as synonymous with
                           "Eligible Employee."

HOW THE PLAN
OPERATES
                           WHO IS ELIGIBLE TO  PARTICIPATE

                               ELIGIBLE EMPLOYEES - You are an "Eligible
                               Employee" for purposes of this Plan if you
                               experience an "Employment Loss," as defined
                               below, and are a salaried or hourly employee of
                               any of the Companies who has completed at least
                               three (3) months of continuous service with any
                               of the Companies. The Company will notify you in
                               writing if your employment is involuntarily
                               terminated and you are an Eligible Employee.

                               INELIGIBLE PERSONS - An individual is not
                               eligible to participate in the Plan if such
                               individual falls into one of the following
                               categories:

                                    1.  You are an independent contractor;
                                    2.  You are employed through an agency or
                                        are a temporary employee;
                                    3.  You are employed without regular
                                        employee benefits under a written
                                        agreement for a defined period of time;
                                    4.  You are employed under a written
                                        agreement that provides for payment in
                                        the event of a termination of
                                        employment; and/or
                                    5.  You are covered by another severance or
                                        change in control plan.

WHAT IS AN
"EMPLOYMENT
LOSS"?
                           EMPLOYMENT LOSS DEFINED - As used in this Plan,
                           "Employment Loss' means a termination of employment,
                           initiated by a Company, which results directly from
                           changes in such Company's business needs, operations
                           or organization including reorganizations, staffing
                           changes, job eliminations or reductions in work
                           force.

                           WHAT IS EXCLUDED FROM EMPLOYMENT LOSS? - There are
                           certain circumstances that do not qualify and are
                           excluded from the category of an Employment Loss. If
                           you are an employee that falls into one of these
                           categories, you will not receive Severance Benefits.
                           The following circumstances, among others, are NOT
                           included in the category of Employment Loss as
                           defined in the Plan:

                               1.   Terminations for cause;


                                       2


                               2.   Reductions of less than 50% in an employee's
                                    scheduled hours, unless such reductions
                                    change the employee's benefits status from
                                    eligible to ineligible;
                               3.   Reassignments within the Companies; and/or
                               4.   Transfers to a Successor Employer (as used
                                    in this Plan, "Successor Employer" means an
                                    employer that acquires assets or a share of
                                    ownership in a Company, or an employer with
                                    whom a Company contracts for services or to
                                    perform functions it previously performed).

DISQUALIFICATION
OF BENEFITS UNDER
THE PLAN
                           Circumstances can occur which will disqualify you
                           from receiving Severance Benefits even after you are
                           notified of an Employment Loss. You will not receive
                           Severance Benefits if:

                               1.   You resign from your position before your
                                    termination date;
                               2.   You stop working for any reason before your
                                    termination date;
                               3.   You refuse an assignment or fail to fully
                                    perform any assignment given to you
                                    by a Company before your termination date;
                               4.   You are terminated for cause;
                               5.   Your employment is terminated at the end of
                                    a leave of absence as a result of your
                                    failure to return to work;
                               6.   You withdraw from employment due to
                                    participation in a long-term disability
                                    plan;
                               7.   Your employment terminates due to your death
                                    or incapacitation;
                               8.   You accept employment within a Company or a
                                    Successor Employer; and/or
                               9.   You fail to accept an offer of a Comparable
                                    Position, as defined below, within a Company
                                    or a Successor Employer.

COMPARABLE
POSITION
OFFERED
                           If you are offered a Comparable Position within one
                           of the Companies or a Successor Employer and refuse
                           the position, you will not receive Severance Benefits
                           under this Plan. For purposes of defining "Comparable
                           Position," the Human Resource Director (as defined
                           below) will determine, in his sole discretion,
                           whether the position you are offered is comparable to
                           the position you held at the time you received notice
                           of your job elimination. For purposes of this Plan, a
                           Comparable Position is one that has job
                           responsibilities and skill requirements that are
                           similar to the previous position held by you and
                           requires limited additional training to perform
                           competently, that is within a reasonable commuting
                           distance and that is at a reasonably similar salary
                           level. If questions arise as to the comparability of
                           the position, your Severance Benefits may be


                                       3


                           withheld until the matter is resolved by the Human
                           Resource Director of First Community Bancorp.

                           Reasonable commuting distance is defined as no
                           further than 30 miles from your current work location
                           at the time of your job elimination. Reasonably
                           similar salary level is defined as no more than a 20%
                           reduction in your base salary at the time of your job
                           elimination.

CALCULATION OF
PLAN BENEFITS
                           Two forms of Severance Benefits are defined under the
                           Plan: a Basic Severance Benefit and a Supplemental
                           Severance Benefit (each defined below and
                           collectively a "Severance Benefit"). If, in the
                           estimation of the Human Resource Director, you
                           qualify for a Basic Severance Benefit under the Plan,
                           you will receive a Basic Severance Benefit Statement,
                           an example of which is set forth below, showing the
                           manner in which your payment was calculated. No
                           action is necessary on your part to receive the Basic
                           Severance Benefit.

                           To receive a Supplemental Severance Benefit under the
                           Plan, you must be eligible to Participate in the Plan
                           and you must return a signed and properly completed
                           Agreement to the Human Resource Director.

                           TYPES OF BENEFITS

                               BASIC SEVERANCE BENEFIT - If you are eligible to
                               participate in the Plan, you will receive
                               compensation equal to one pay period based on
                               your Salary on the Day you were notified of the
                               termination or as of the termination date,
                               whichever is greater (the "Basic Severance
                               Benefit"). "Salary" means your base salary and
                               excludes compensation under any incentive plan,
                               agreement, commissions, bonuses, overtime or
                               other payments offered under any employee health,
                               pension, savings or welfare benefit plan
                               maintained by the Company.

                               SUPPLEMENTAL SEVERANCE BENEFIT - You will be
                               offered a Supplemental Severance Benefit under
                               this Plan provided that you sign an Agreement.

                               A Supplemental Severance Benefit is an additional
                               one time Severance Benefit (a "Supplemental
                               Severance Benefit") which will be calculated
                               based on your length of service with a Company.
                               Under the Plan, your months and years of service
                               will be calculated based upon your most recent
                               date of hire or rehire, as applicable, until the
                               effective date of your termination. Such years of
                               service include any periods of time you were
                               employed by a Company including time spent on
                               such things as vacation, holiday, jury duty,
                               medical or family leave of absence provided that
                               each such period did not exceed six (6)


                                       4


                               months or result in the termination of your
                               employment. Each year of service is completed on
                               the anniversary date of hire (or rehire).

                               Calculation of the Supplemental Severance Benefit
                               will be in accordance with the following chart:



                               --------------------------- ------------------------------
                               YEARS OF CONTINUOUS SERVICE SUPPLEMENTAL SEVERANCE BENEFIT
                               --------------------------- ------------------------------
                                                        
                               Less than 1 year            4 weeks of Salary
                               --------------------------- ------------------------------
                               1 or more years             4 weeks of Salary
                                                           plus 1 additional week for
                                                           each FULL year of service
                                                           beginning with the first
                                                           year.
                               --------------------------- ------------------------------

                               --------------------------- ------------------------------
                               SO THAT AN EMPLOYEE WITH:   WOULD BE ELIGIBLE FOR:
                               --------------------------- ------------------------------
                               2 full years of service     6 weeks of Salary
                               --------------------------- ------------------------------
                               3 full years of service     7 weeks of Salary
                               --------------------------- ------------------------------
                               4 full years of service     8 weeks of Salary
                               --------------------------- ------------------------------
                               5 full years of service     9 weeks of Salary
                               --------------------------- ------------------------------


                               Eligible Employees at the Senior Vice President
                               level will receive a minimum severance payment of
                               twelve weeks and eligible employees at the
                               Executive Vice President level will receive a
                               minimum severance payment of sixteen weeks under
                               the Supplemental Severance Benefit regardless of
                               years of service. In addition, the Company will
                               offer employees eligible for the Supplemental
                               Severance Benefit outplacement services. However,
                               the Company has absolute discretion regarding the
                               kind, nature, quality and cost of outplacement
                               services to be offered.

                               STATEMENT OF BENEFITS - You will receive a
                               personalized statement showing the calculation of
                               your Basic Severance Benefit (the "Basic Benefit
                               Statement"). The amount of your Supplemental
                               Severance Benefit, if you are eligible for one,
                               will be set forth in the personalized statement
                               (the "Supplemental Benefit Statement") at the
                               time the Company delivers the Agreement.


                                       5


                           PAYMENT OF BENEFITS - If you are entitled to receive
                           the Basic Severance Benefit payment, the Basic
                           Severance Benefit will be paid to you by either a
                           check or a direct deposit in the same manner as you
                           received your paycheck when employed. If you are
                           entitled to receive the Supplemental Severance
                           Benefit payment, the Supplemental Severance Benefit
                           payment will be paid to you after the expiration of
                           seven (7) calendar days following the date you sign
                           the Agreement. The Human Resource Director has the
                           sole discretion to provide the Supplemental Severance
                           Benefit payment, to those employees eligible, in one
                           lump sum or in equal semi-monthly installments.
                           Authorized deductions and other deductions required
                           by law will be taken from all payments.

DENIAL AND
APPEAL OF
BENEFITS
                           If you feel that you are entitled to Severance
                           Benefits or that your Severance Benefits are not
                           correctly stated on either the Basic Benefit
                           Statement or the Supplemental Benefit Statement, you
                           should make a claim in writing to the Human Resource
                           Director of First Community Bank. Your claim should
                           state the reasons for your appeal of the denial or
                           miscalculation of Severance Benefits. Furthermore, in
                           order to be considered timely, your claim should be
                           mailed to the Human Resource Director within sixty
                           (60) calendar days of the denial or miscalculation of
                           Severance Benefits. If the claim is not received
                           within the allotted time frame, your claim will be
                           denied. Under exceptional circumstances, if the claim
                           is not received timely, the Company may elect to
                           review your claim.

                           Should a claim be filed timely, the Human Resource
                           Director will consider the claim and respond to you
                           within thirty (30) days of its receipt, or as soon as
                           practicable thereafter. Upon review of your claim,
                           you may be requested to provide additional facts,
                           documents or evidence, if necessary, within five (5)
                           days of written notice of such a request. At the
                           conclusion of your appeal, if you are entitled to
                           Severance Benefits or a modification of Severance
                           Benefits, you will be notified accordingly. If,
                           however, the claim is denied in total or in part, the
                           reasons for the denial will be stated in writing with
                           specific references to the Plan provisions on which
                           the denial is based. Unless the Human Resource
                           Director determines that there are special
                           circumstances, the review by the Human Resource
                           Director will be final.

TERMINATING OR
AMENDING THE
PLAN
                           The Plan may be terminated or amended at any time for
                           any reason by First Community Bancorp. NO PERSON IS
                           AUTHORIZED TO MAKE PROMISES REGARDING SEVERANCE
                           BENEFIT EXCEPT AS PROVIDED IN THIS PLAN. The
                           Severance Benefits available to employees who have
                           been notified in writing of the intention to


                                       6


                           terminate their employment prior to any amendment or
                           termination of this Plan ill not be reduced as the
                           result of such plan amendment or termination.

PAYMENT OF
BENEFITS UPON
AN EMPLOYEE'S
DEATH
                           If you die having satisfied all of the requirements
                           to receive a Severance Benefit, any Severance
                           Benefits not already paid to you will be distributed
                           to your legal successor, if not prohibited by law.

WHO ADMINISTERS
THE PLAN?
                           The Company by which you were employed will
                           administer the Plan through its Human Resource
                           Director. Please contact the Human Resource Director
                           at the following Company locations:

                           First Community Bancorp
                           2310 Camino Vida Roble, Suite B
                           Escondido, CA  92009
                           EIN 33-0885320

WHAT ARE MY RIGHTS
UNDER THE EMPLOYEE
RETIREMENT INCOME
SECURITY ACT
("ERISA")?
                           Under ERISA, if you are eligible to participate in
                           the Plan, you have the right to examine all Plan
                           documents without charge at the Plan Administrator's
                           office. You may also obtain copies of Plan documents
                           and other Plan information upon written request to
                           the Plan Administrator. These include copies of all
                           documents filed by the Companies with the U.S.
                           Department of Labor, such as annual reports. The Plan
                           Administrator may charge a reasonable fee for any
                           copies provided.

                           ERISA gives you the right to receive written notice
                           if your claim under the Plan is denied by one of the
                           Companies. It also provides you the right to a full
                           review of your case. If you request Plan materials
                           and do not receive them within 30 days, you may file
                           suit in federal court. The court may require the Plan
                           Administrator to provide the materials and pay up to
                           $100 per day until you receive them, unless the
                           materials were not sent due to reasons beyond the
                           control of the Human Resource Director.

                           If you have a claim for Severance Benefits that is
                           denied or ignored, you may file suit in a state or
                           federal court. If you are discriminated against for
                           asserting your rights, you may seek assistance from
                           the U.S. Department of Labor, or you may file suit in
                           federal court. The court will decide who should pay
                           court costs and legal fees. If you win your case, the
                           court may order the Companies to pay these


                                       7


                           costs. If you lose and if the court, for example,
                           finds that your claim is frivolous, you may be
                           ordered to pay these costs.

                           If you have any questions about the Plan, you should
                           contact the Human Resource Director. If you have any
                           questions about this statement or your rights under
                           ERISA, you should contact the nearest Area Office of
                           the Pension and Welfare Benefits Administration, U.S.
                           Department of Labor, listed in your telephone
                           directory or the Division of Technical Assistance and
                           Inquiries, Pension and Welfare Benefits
                           Administration, U.S. Department of Labor, 200
                           Constitution Avenue N.W., Washington, D.C. 20210.

STATUS OF YOUR
COMPANY BANKING
SERVICES AND
BENEFITS, IF ANY,
UPON TERMINATION
                           BANKING SERVICES - Your banking services will remain
                           at their present rates through the last day of the
                           month in which you are terminated. Your branch of
                           account, if any, will be notified by Human Resources
                           prior to such date. Please notify your branch of
                           account if you wish to change any of your banking
                           services.

                           EMPLOYEE LOANS AND CASH LINES - Your employee loan
                           will revert to the customer rate, if not already at
                           such rate, beginning the month following your
                           termination, as per your original loan agreement. If
                           you close your Company checking account, you will
                           continue to make at least the minimum monthly payment
                           on your outstanding overdraft protection line
                           balance. If you keep your Company checking account,
                           the overdraft protection line will continue under the
                           original agreement.

                           MEDICAL/DENTAL/VISION COVERAGE - Your current health
                           insurance benefits provided by the Company, if any,
                           will continue through the last day of the month in
                           which your termination occurs. Your current health
                           insurance benefits provided by the Company, if any,
                           will not continue during the period in which a
                           Supplemental Severance Benefit, if any, is being
                           paid. You may elect to continue your benefits under
                           the Consolidated Omnibus Budge Reconciliation Act
                           ("COBRA") once coverage under your current health
                           insurance benefits provided by the Company, if any,
                           ends. You will be notified by the Company's COBRA
                           administrator, and receive information to sign up.

                           COBRA is the legislation that allows you to continue
                           your current medical, dental and vision benefits up
                           to 18 months after your termination. The legislation
                           also permits individuals with pre-existing conditions
                           to continue COBRA coverage even if they obtain
                           coverage under a new employer's plan, if the new plan
                           excludes treatment for the pre-existing condition. In
                           the event that you obtain subsequent health insurance
                           coverage, you must immediately notify the Company


                                       8


                           of such coverage. Upon such notice, the Company shall
                           have no further obligation to continue such COBRA
                           coverage.

                           LONG-TERM DISABILITY ("LTD") - Long-Term Disability
                           insurance coverage ends on your last active day of
                           employment which generally is your Termination Date
                           and is not convertible to a private plan.

                           NON-CONTRIBUTORY LIFE INSURANCE/ACCIDENTAL DEATH &
                           DISMEMBERMENT ("AD&D") - The Company's
                           non-contributory life insurance will continue through
                           the last day of the month in which your termination
                           date occurs. Upon termination, you will receive a
                           notice of conversion privilege. If you are interested
                           in converting to an individual policy, please contact
                           the Human Resource Director for a Life Conversion
                           Application.

                           VOLUNTARY LIFE INSURANCE AND/OR AD&D - If you
                           currently have Voluntary Life and/or AD&D insurance
                           coverage, it will continue through the last day of
                           the month in which your termination occurs. You may
                           be eligible to continue this plan at current group
                           rates through the carrier. If you are interest in
                           continuing this insurance you must request an
                           "Election of Portability Coverage" form from the
                           Human Resource Director.

                           401(K) PLAN - If you are a current participant in the
                           401(k) Plan, a letter will be mailed to you in
                           approximately two (2) weeks after your termination
                           with information for disbursement of your funds. The
                           information will include: a Participant Distribution
                           Election Form and a Special Tax Notice regarding plan
                           payments. Since this distribution is from a qualified
                           plan, the taxable amount of your distribution is
                           eligible for rollover into another qualified plan or
                           IRA. If you have any questions regarding your
                           account, call your Company's Human Resource Director.

ADDITIONAL
PLAN INFORMATION



                                                             
                           Plan Number:                         001

                           Type of Plan:                        Severance Benefit Plan

                           Name/Address of Registered           Arnold Hahn
                           Agent for Service of Legal Address:  Executive Vice President
                                                                Human Resource Director
                                                                First Community Bancorp
                                                                2310 Camino Vida Roble, Suite B
                                                                Escondido, CA  92009

                           Plan Year:                           January1 , 2001 - December 31, 2001



                                       9


                             FIRST COMMUNITY BANCORP

                       EMPLOYEE SEVERANCE PAY PLAN POLICY





         I HAVE READ THE ABOVE SEVERANCE PAY PLAN POLICY AND UNDERSTAND THE
         TERMS AND CONDITIONS REGARDING SAME.




Date:                                   Employee:
     -----------------------------               -------------------------------


Employee Name:                          Social Security Number:
              --------------------                             -----------------


Mailing Address:                        Company Name and Number:
                ------------------                              ----------------


Daytime Telephone Number:
                         ----------------------


                                       10


                             BASIC SEVERANCE BENEFIT


The Company notified you on , 2001 that your termination date will be , 2001.
Your Basic Severance Benefit (as defined in the Employee Severance Pay Plan)
payment, will be prepared in the amount of your Salary (as defined in the
Employee Severance Pay Plan) for one pay period, minus legally required and
authorized deductions. Based on the following statement you will (have)
receive(d) a check or a direct deposit in the same manner as you received pay
when employed on______________. This Basic Severance Benefit is paid to you in
addition to and in combination with, any regular compensation due to you from
the Company as of your termination date. Salary does not include any shift
differential, commission pay, overtime or incentive payments you may have
received during your period of employment.

1. Basic Severance Benefit Payment:
   Salary received for one pay period                       =
                                                                 ---------------

2. Regular Compensation due to you as of                    =
                                         ---------------         ---------------

   Includes               hours of accrued vacation.
            -------------

3. Total Gross Amount of Final Pay                          =
                                                                 ---------------


                                       11


       CALCULATION OF THE SUPPLEMENTAL SEVERANCE BENEFIT - (IF APPLICABLE)


         In addition to the Basic Severance Benefit described above, you will be
         entitled to a Supplemental Severance Benefit if you (1) sign the
         Settlement Agreement and General Release (the "Agreement") delivered to
         you with this statement. The calculation of such Supplemental Severance
         Benefit is set forth below.

         A. Most recent hire date
                                                   --------------------------

         B. Termination date
                                                   --------------------------

         C. Number of full years of service
                                                   --------------------------

         D. Number of weeks of Supplemental
            Severance Benefits
                                                   --------------------------

         E. Weekly Salary rate
                                                   --------------------------

         F. Supplemental Severance Benefit
            amount (gross) (D x E)
                                                   --------------------------


                                       12


                                 ACKNOWLEDGMENTS


Prepared by:                                 Reviewed by:
             -----------------------                      ----------------------

Date:                                        Date:
      ------------------------------               -----------------------------

The above information has been discussed with me and I agree that it is correct.



- ----------------------------                 ----------------
Employee's Signature                         Date





I authorize the Human Resource Director or my former manager to contact me in
writing or by telephone at my home.



- -----------------------------                -----------------
Employee's Signature                         Date


                                       13

EX-10.10

                         EXECUTIVE EMPLOYMENT AGREEMENT


         THIS AGREEMENT (the "Agreement") is made effective as of the 21st day
of October, 1999, between FIRST PROFESSIONAL BANK, N.A. ("Employer") and GENE
GAINES ("Executive").



                                    RECITALS

         WHEREAS, Employer desires to employ Executive as its Chief Executive
Officer, and Executive desires to be employed by Employer, on the terms and
subject to the conditions set forth in this Agreement:



         NOW, THEREFORE, in consideration of the foregoing promises and the
terms, covenants and conditions set forth herein, the parties hereto agree as
follows:



         1. DEFINITIONS. For purposes of this Agreement, the definition set
forth on Exhibit B hereto shall apply unless the context clearly indicates
otherwise.



         2. EMPLOYMENT AND TERM. Employer hereby employs Executive and Executive
hereby accepts employment, upon the terms and conditions set forth herein. The
term of this Agreement (the "Term") shall be for a period of one year,
commencing October 20, 1999 and ending on October 19, 2000, unless earlier
terminated in accordance with the provisions hereof. This Agreement shall
automatically renew for successive one-year periods thereafter, unless
terminated by either party giving written notice of termination to the other
party at least ninety (90) days prior to the expiration of the then-current
one-year term.



         3. DUTIES. Executive shall serve as the Chief Executive Officer of
Employer and shall perform the duties and have the responsibilities set forth on
Exhibit A attached hereto and incorporated herein by reference, and shall have
the authority and perform such other duties, services and responsibilities
incident to such position as are customary of the Chief Executive Officer of a
bank, and such other reasonable duties and responsibilities as are determined
from time to time by the Board. Executive shall report to the Board, Executive
shall devote one hundred percent (100%) of his business time, attention and
skill to the performance of his duties hereunder, except that Executive is
permitted to spend a reasonable amount of business time to complete his
obligations under his Consulting Agreement with Shapiro Consulting Group, and
shall perform his duties to the best of his ability and subject to the policies
and instructions of the Board. Executive will not, without the prior written
approval of Employer, engage in any other business activity which would
interfere with the performance of his duties, services, and responsibilities
hereunder or which is in violation of policies established from time to time by
the Board.



         4. COMPENSATION.

                  (a) SALARY. Executive will receive an annual base salary of
One Hundred Fifty Thousand Dollars ($150,000) during the Term (the "Annual Base
Salary"), payable in equal bi-weekly installments. Salary payments shall be
subject to withholding and all other applicable taxes. Executive's Annual Base
Salary shall be reviewed at least annually by the Compensation Committee of the
Board and may be increased in the discretion of the Board based upon Executive's
performance. Employer's performance and profitability and other factors
generally used by Employer and in the industry in adjusting salaries of
executive employees.


                                       1


                  (b) ANNUAL BONUS. Executive may be eligible to receive an
annual bonus in an amount of up to 50% of his Annual Base Salary, based upon the
attainment of either (i) specific corporate budgetary and strategic objectives
or (ii) specific Individual performance objectives, any of which shall be set by
the Board. Bonuses, if any, may be payable in a combination of a lump sum cash
payment and the issuance of options to purchase shares of common stock of
Employer's parent company, Professional Bancorp, Inc. ("PBI"), to be allocated
as mutually agreed upon by the parties.

                  (c) STOCK OPTIONS. In consideration of Executive agreeing to
enter into this Agreement, on November 1, 1999, Employer caused PBI to grant to
Executive fully vested stock options to purchase 30,000 shares of PBI's common
stock at an exercise price of $11.16 per share. These 30,000 options shall be
exercisable on the earlier of: (i) the closing of the sale of all or
substantially all of the assets of Employer or PBI to, or the merger of Employer
or PBI with, a third party, (ii) on the fifteenth of the month anniversary date
of the effective date of this Agreement if Employer or PBI has not entered into
a Definitive Agreement to sell all or substantially all of its assets to or to
merge with a third party, or (iii) the date Employer terminates this Agreement
at will pursuant to Section 8(e) hereof or Employee terminates this Agreement
for Good Cause pursuant to Section 8(c) hereof. On the nine month anniversary
date of the effective date of this Agreement, if by such date PBI or Employer
has not entered into a Definitive Agreement to sell all or substantially all of
its assets to or to merge with a third party, Employer shall cause PBI to grant
to Executive fully vested and immediately exercisable options to purchase 20,000
shares of PBI's common stock at an exercise price determined pursuant to the
applicable stock option plan. Executive shall be eligible to receive additional
performance-based options, consistent with PBI's applicable stock option plans,
as determined by the Compensation Committee of the Board. All options are
subject to the terms of the applicable stock option plan(s).

                  (d) SEVERANCE. If Employer terminates this Agreement at will
pursuant to Section 8(e) hereof or if Employer terminates this Agreement for
Good Reason pursuant to Section 8 (c ) hereof, Employer will continue to pay
Executive the monthly base salary that he is earning at the time of the Notice
of Termination for twelve months following the date of the Notice of
Termination.

         5. FRINGE BENEFITS.

                  (a) INCENTIVE PLANS/BENEFITS. Subject to the eligibility
requirements of each plan, Executive shall be entitled to participate in all
medical or health plans, dental and vision plans, life insurance plans,
disability plans, 401(K)/savings and retirement plans, welfare plans, incentive
plans, equity based plans and all other benefits generally available to
full-time officers or senior management employees of Employer in effect from
time to time. All insurance is subject to the terms of the policies in effect
and to Executive's insurability under such policies.

                  (b) AUTO ALLOWANCE. Executive shall be entitled to an auto
allowance of Five Hundred Dollars ($500) per month.

                  (c) VACATION. Executive shall receive twenty (20) paid
vacation days per year.

                  (d) BUSINESS EXPENSES. In accordance with the policies
relating to Employer's senior executive employees, Employer will reimburse
Executive for reasonable out-of-pocket expenses incurred by Executive in the
performance of his duties hereunder. All such reimbursements will be made upon
submission to Employer of written expense reports or other documentation which
describe and substantiate such business expenses and which are in such form as
Employer may from time to time prescribe for its executive employees.


                                       2


6. CONFIDENTIAL INFORMATION. Executive acknowledges that in his position with
Employer, he will be exposed to and receive information relating to the
confidential affairs of Employer, Employer's subsidiaries and PBI, including but
not limited to, Employer's, Employer's subsidiaries' and PBI's customer lists,
financial information, strategic plans, business and marketing plans and
strategies, information concerning Employer's, Employer's subsidiaries' and
PBI's products, promotions, customers, development, financing, expansion plans,
business policies and practices, and other information considered by Employer,
Employer's subsidiaries and PBI to be confidential, proprietary and in the
nature of trade secrets (the "Confidential Information"). Executive acknowledges
that the Confidential Information is a valuable, special and unique asset of
Employer's subsidiaries' and PBI's businesses. Executive agrees to keep all
Confidential Information confidential and shall not, during the Term or
thereafter, directly or indirectly disclose all or any part of the Confidential
Information in any manner whatsoever to any person, firm, corporation,
association or other than outside professionals employed by Employer or use such
Confidential Information for his own personal benefit, without the prior written
consent of Employer, unless such disclosure is made in the ordinary course of
Employer's business and is necessary and advances the best interests of
Employer.

         7. EMPLOYER DOCUMENTS. Executive expressly agrees that all plans,
customer lists, reports, manuals, documents, files, studies, instruments and
other materials used and/or developed by Executive relating to Employer,
Employer's subsidiaries and PBI and their respective customers are solely the
property of the Employer, Employer's respective subsidiary or PBI and that
Executive has no right, title or interest therein. During Executive's employment
with Employer and after termination thereof, regardless of the reason therefor,
Executive shall hold fiduciary capacity for the benefit of Employer, all such
plans, lists, disks, documentation, programs, reports, memoranda, diaries,
notes, records, letters, manuals and all other documents and information of
Employer. Upon termination of Executive's employment for any reason, Executive
shall immediately deliver all such documents, without retaining any copies
thereof, to Employer.

         8. TERMINATION OF EMPLOYMENT.

                  (a) DEATH OR INCAPACITY. This Agreement shall terminate
automatically upon Executive's death during the Term. This Agreement shall also
terminate on the date of the determination by the Board that the Incapacity of
Executive has occurred during the Term ("Incapacity Effective Date").

                  (b) CAUSE. Employer may terminate Executive's employment for
Cause, as defined herein.

                  (c) GOOD REASON. Executive may terminate his employment for
Good Reason, as defined herein.

                  (d) WRITTEN NOTICE. Executive may terminate this Agreement at
any time upon ninety (90) days' prior written notice to Employer.

                  (e) AT WILL. Employer may terminate this Agreement by written
notice to Executive at any time for any reason.

                  (f) NOTICE OF TERMINATION. Any termination (except by death)
shall be communicated by a Notice of Termination to the other party hereto given
in accordance with Section 14 of this Agreement. For purposes of this Agreement,
a "Notice of Termination" means a written notice which (i) indicates the
specific termination provision in this Agreement relied upon, (ii) to the extent
applicable, sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination under the provision so indicated, (iii) in
the case of termination is pursuant to a resolution of the Board (which, in the
case of Cause, is pursuant to Section 8(b) hereof), and (iv) if the Date of
Termination (as defined below) is other than the date of such notice, specifies
the termination date. The failure by Executive or Employer, respectively,
hereunder or preclude Executive or Employer, respectively, from asserting such
fact or circumstance in enforcing Executive's or Employer's rights hereunder.

                  (g) DATE OF TERMINATION. "Date of Termination" means (I) if
Executive's employment is terminated by Employer for Cause, or by Employer other
than for Cause, death or Incapacity, the date of the Notice of Termination


                                       3


or any later date specified therein, as the case may be, (ii) if Executive's
employment is terminated by Executive for Good Reason, the Date of Termination
shall be thirty (30) days after the date of the Notice of Termination, however
Employer may specify an earlier date in its discretion after its receipt of the
notice from Executive, (iii) if Executive's employment is terminated by reason
of death or Incapacity, the Date of Termination shall be the date of death of
Executive or the Incapacity Effective Date, as the case may be, and (iv) if
Executive's employment is terminated by Written Notice by Executive, the Date of
termination shall be ninety (90) days after the date of the Notice of
Termination.

         9. OBLIGATIONS OF EMPLOYER UPON TERMINATION.

                  (a) OBLIGATIONS UPON TERMINATION. Upon termination of this
Agreement for any reason, Employer's sole obligation to Executive (except as
otherwise expressly set forth herein) shall be to pay any accrued but unpaid
salary or bonus up to the Date of Termination, less withholding and other taxes
are required by law, and provide to Executive any other accrued amounts or
benefits required to be paid or provided or which Executive is eligible to
receive under any Employer plan in which Executive participated (such other
amounts and benefits shall be paid to Executive within thirty (30) days after
the Date of Termination; and any benefits shall be paid pursuant to the
applicable Employer plan.

                  (b) EXCISE TAX LIMITATION. To the extent that the payment and
benefits provided under this Agreement and payments or benefits provided to, or
for the benefit of, Executive under any other Employer plan or agreement (such
payments or benefits are collectively referred to as the "Payments") would be
subject to the excise tax (the "Excise Tax") imposed under Section 4999 of the
Internal Revenue Code of 1986, as amended, the Payments shall be reduced (but
not below zero) if and to the extent necessary so that no Payment to be made or
benefit to be provided to Executive shall be subject to the Excise Tax.

         10. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent
or limit Executive's continuing or future participation in any Employer plan for
which Executive may qualify, nor shall anything herein limit or otherwise affect
such rights as Executive may have under any contract or agreement with Employer
or any of Employer's subsidiaries. Amounts which are vested benefits or which
Executive is otherwise entitled to receive under any Employer plan or subsequent
to the Date of Termination shall be payable in accordance with such plan,
policy, program, contract or agreement except as explicitly modified by this
Agreement.

         11. NON-SOLICITATION ON NON-COMPETITION. During the Term hereof,
Executive agrees that he shall not, directly or indirectly, either individually
or as an owner, partner, director, agent, employee, or otherwise, solicit,
endeavor to entice away from Employer or any of Employer's subsidiaries or
otherwise engage in any activity intended to disrupt or terminate the
relationship of Employer or nay of Employer's subsidiaries with any of their
clients, customers, employees or agents. During the Term hereof, Executive
agrees that he shall not, directly or indirectly, either individually or as an
owner, partner, director, agent, employee, consultant or otherwise, compete with
Employer or any of Employer's subsidiaries or PBI.

         12. REMEDIES. Executive agrees that any breach by Executive of the
terns of Section 6, 7 or 11 hereof would result in irreparable injury and damage
to Employer and Employer's parents and/or subsidiaries for which Employer and
Employer's parents and subsidiaries would have no adequate remedy at law.
Therefore, in the event of Executive's breach or threatened breach of Section
6,7 or 11 hereof, Executive agrees that Employer and Employer's parents and
subsidiaries shall be entitled to an immediate preliminary restraining order and
an injunction restraining and enjoining Executive to prevent such breach or
threatened breach or continued breach by Executive and any and all persons or
entities acting for and/or with Executive, without having to prove damages, and
to all costs and expenses, including reasonable attorneys' fees and costs, in
addition to any other remedies to which Employer or Employer's subsidiaries may
be entitled at law or in equity. In addition to or in lieu of the above,
Employer or Employer's subsidiaries may pursue all other remedies available to
Employer and Employer's subsidiaries for such breach or threatened breach,
including the recovery of damages and reasonable attorneys' fees, from
Executive.

         13. SUCCESSORS: BINDING AGREEMENT. This Agreement shall be binding upon
the respective successors, assigns, heirs and representative of the parties.


                                       4


         14. NOTICES. Any notice, request or other information to be given or
served hereunder by any party to another shall be deemed given or served
hereunder by any party to another if in writing and delivered personally or sent
by prepaid registered or certified mail, return receipt requested, to:


                  If to Employer:  First Professional Bank, N. A.
                                   606 Broadway
                                   Santa Monica, Ca. 90401
                                   Attn:  Mr. Matthew Wagner,
                                          Chairman of the Board

                  If to Executive: Mr. Gene F. Gaines
                                   1210 North Wetherly Drive
                                   Los Angeles, Ca. 90069

Or to such other address as any party may designate for itself by notice to the
other party given in accordance with the provisions hereof.

         15. ENTIRE AGREEMENT. This Agreement contains the entire agreement of
the parties with respect to the subject matter hereof and supersedes any and all
other agreements or understandings, written or oral, relating to such subject
matter. Each party to this Agreement acknowledges that no representations,
inducements, promises or agreements, oral 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 concerning its subject matter shall be valid or binding .

         16. MODIFICATION: WAIVER. No provision of this Agreement may be
modified, waived or discharged unless such modification, waiver or discharge is
agreed to in writing and signed by each party hereto. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time.

         17. NON-ASSIGNABILITY. Executive acknowledges that his services are
unique and personal. Accordingly, Executive may not assign any of his rights or
delegate his duties or obligations under this Agreement.

         18. GOVERNING LAW. This Agreement shall be governed and construed and
the legal relationship and obligations of the parties determined in accordance
with the laws of the State of California.

         19. SEVERABILITY. Should any provision of this Agreement for any reason
be declared invalid, void or unenforceable by a court of competent jurisdiction,
the validity and binding effect of any remaining portion shall not be affected,
and the remaining portions of this Agreement shall remain in full force and
effect as if this Agreement had been executed with said provision eliminated.

         20. SURVIVAL. The provisions of Sections 6,7 and 11 shall survive the
termination or expiration of the Agreement.

         21. ARBITRATION. In the event that any dispute shall arise between the
parties concerning the provisions of this Agreement by either of the parties
hereto, and the parties are unable to mutually adjust and settle same, such
dispute or disputes (other that dispute(s) concerning an alleged or threatened
breach be Executive of Section 6,7 or 11 hereof) shall be submitted to binding
arbitration in Santa Monica or Los Angeles, California pursuant to the
applicable commercial rules of the American Arbitration Association, and the
decision and determination of the arbitrators shall be final and binding upon
the parties.

         22. KEY PERSON INSURANCE. Executive agrees to make all reasonable
effort to obtain any key person insurance requested by Employer.


                                       5


         IN WITNESS WHEREOF, the Bank has caused this Agreement to be executed
in its corporate name by an officer duly authorized to enter into and execute
this Agreement, and Executive has affixed his signature hereto, as of the date
and year first above written.

                                    FIRST PROFESSIONAL BANK, N.A.

                                    By:
                                         ---------------------------------------
                                         Julie P Thompson, Chairman of the Board

                                         ---------------------------------------
                                         Gene Gaines


                                       6


                FIRST AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT

         This First Amendment to Executive Employment Agreement I made effective
as of the 1st day of February, 2000 among FIRST PROFESSIONAL BANK, N.A. (the
"Bank") and PROFESSIONAL BANCORP, INC. ("PBI") (PBI and the Bank being
collectively referred to herein as "Employer") and Gene Gaines ("Executive").

                                    RECITALS


         WHEREAS, the Bank and Executive entered into an Employment Agreement
dated effective as of the 21st day of October, 1999 (the "Employment
Agreement"); and

         WHEREAS, PBI now desires to also employ Executive, and PBI, the Bank
and Executive desire to amend the Employment Agreement in certain respects.

         NOW, THEREFORE, in consideration of the foregoing promises and the
terms covenants and conditions that are set forth herein, the parties here to
agree as follows:

1.       SECTION 3.  The first sentence of Section 3 of the Employment Agreement
is hereby amended to read as follows:

                  "Effective as of the date hereof, Executive shall serve as the
         Chairman of the Board and Chief Executive Officer of both PBI and the
         Bank and shall perform the duties and the responsibilities set forth in
         Exhibit A attached hereto and incorporated herein in reference and
         shall have the authority and perform such other duties, services and
         responsibilities incident in such positions as are the customary of the
         Chairman of the Board and Chief Executive Officer of a bank and a bank
         holding company, and such other reasonable duties and responsibilities
         that are determined from time to time by the Boards of Directors of the
         Bank and PBI (collectively, the "Board").

2.       SECTION 4(a). The first sentence of Section 4(a) of the Employment
Agreement is hereby amended to read as follows:

                  "Effective February 1, 2000, Executive shall receive an annual
         base salary of Two Hundred Thousand Dollars ($200,000) during the
         remainder of the Term (the "Annual Base Salary"), payable in equally,
         bi-weekly installments."


3.       SECTION 4(c). Section 4(c) is hereby amended and restated in its
entirety to read as follows:

                  "(c) STOCK OPTIONS. Effective February 1, 2000, the options to
         purchase 30,000 shares of PBI's common stock granted to Executive on
         November 1, 1999 are cancelled. In consideration of Executive agreeing
         to enter into this First Amendment to Executive Employment Agreement,
         PBI shall grant to Executive, effective February 1, 2000, stock options
         to purchase 100,000 shares of PBI. Of these options, as many thereof as
         possible shall be incentive stock options (as permitted by the
         applicable plan), and the remainder shall be non-qualified options. The
         options shall vest as follows: (i) option to purchase 50,000 shares
         shall vest immediately on the effective date hereof, (ii) options to
         purchase 25,000 shares shall vest on February 1, 2001, and (iii) the
         remaining options to purchase $25,000 shares shall vest on February 1,
         2002. The exercise price of the options hall be the average of the
         closing sales prices of the shares of PBI during the 30 day period
         immediately preceding February 1, 2000."

4.       RATIFICATION. The remainder of the Employment Agreement is hereby
ratified in all respects.


                                       7


         IN WITNESS WHEREOF, this First Amendment has been executed by Executive
and by duly authorized officers of the Bank and PBI effective as of the date
first written above.


                                      FIRST PROFESSIONAL BANK, N.A.
- --------------------------------
Gene Gaines, Executive
                                      By:
                                           --------------------------------
                                      Title:
                                              -----------------------------

                                      PROFESSIONAL BANCORP, INC.

                                      By:
                                           --------------------------------
                                      Title:
                                              -----------------------------


                                       8

EX-21

               EXHIBIT 21. SUBSIDIARIES OF FIRST COMMUNITY BANCORP


First Community Bank of the Desert, a California Corporation
Rancho Santa Fe National Bank, a California Corporation
First Professional Bank, N.A., a California Corporation
Desert Community Properties, a California Corporation

EX-23

                                                                     Exhibit 23



                          INDEPENDENT AUDITORS' CONSENT



The Board of Directors
First Community Bancorp:


We consent to incorporation by reference in the registration statements (No.
333-43330 and No. 333-47242) on Form S-8 of First Community Bancorp of our
report dated January 26, 2001, relating to the consolidated balance sheets of
First Community Bancorp and subsidiaries as of December 31, 2000 and 1999, and
the related consolidated statements of earnings, shareholders' equity and
comprehensive income and cash flows for each of the years in the three-year
period ended December 31, 2000, which report appears in the December 31, 2000,
annual report on Form 10-K of First Community Bancorp.


                                        /s/ KPMG LLP

San Diego, California
March 21, 2001