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

FORM 10-K

Commission File No. 00-30747

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

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

Securities registered pursuant to Section 12(g) of the 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 ý    No o

        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. o

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes ý    No o

        The aggregate market value of the voting common stock held by non-affiliates of the registrant, computed by reference to the average bid and asked prices on the Nasdaq National Market as of the close of business on June 28, 2002 was $123,117,935. Registrant does not have any nonvoting common equities.

        As of March 18, 2003, there were 15,352,737 shares of registrant's common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

        The information required by Items 10, 11, 12 and 13 of Part III of this Annual Report on Form 10-K can be found in the Company's definitive Proxy Statement for the 2003 Annual Meeting of Shareholders, to be filed pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended, and such information is incorporated herein by this reference.

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PART I

ITEM 1. BUSINESS

General

        We are a bank holding company registered under the Bank Holding Company Act of 1956, as amended. Our principal business is to serve as a holding company for our banking subsidiaries. As of December 31, 2002, those subsidiaries were First National Bank, which we refer to as First National, and Pacific Western National Bank, or Pacific Western. On January 9, 2003, we acquired Bank of Coronado and merged Bank of Coronado into First National. We refer to Pacific Western and First National herein as the "Banks" and when we say "we", "our" or the "Company", we mean the Company on a consolidated basis with the Banks. When we refer to "First Community" or to the holding company, we are referring to the parent company on a stand alone basis. Discussions about the Banks as of and for the year ended December 31, 2002 refer only to Pacific Western and First National, without Bank of Coronado.

        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, real estate and construction loans, Small Business Administration guaranteed loans, or SBA loans, consumer loans, mortgage loans, international loans for trade finance and other business-oriented products. At December 31, 2002, the gross loans of the Banks totaled $1,429.3 million of which approximately 30% consisted of commercial loans, 66% consisted of real estate loans, including construction loans and 4% consisted of consumer and other loans. These percentages include foreign loans primarily to individuals or entities with business in Mexico representing 5% of total loans. Special services and requests beyond the lending limits of the Banks can be arranged through correspondent banks.

        We derive our 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 deposit services as well as loans and other services offered (including foreign exchange services and SBA loan servicing). Our major operating expenses are the interest paid by the Banks on deposits and borrowings, salaries and general operating expenses. The Banks rely on a foundation of locally generated deposits. We believe the Banks have a relatively low cost of funds due to a high percentage of low cost and noninterest bearing deposits. Our 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."

        We are 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 our target markets is the delivery of a finely-focused set of value-added products and services that satisfy the primary needs of our customers, emphasizing superior service and relationships as opposed to transaction volume.

        As of December 31, 2002, we had assets of approximately $2,115.9 million. As of March 18, 2003, we have two wholly-owned banking subsidiaries, First National with 16 branches across San Diego and Imperial Counties, and Pacific Western with 18 branches located in Los Angeles, Orange, Riverside, and San Bernardino Counties. All branches of our Banks are located in California.

        We operate in one business segment: banking and financial services.

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Strategic Evolution and Acquisition Strategy

        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 National Bank, First National's predecessor.

        We have grown rapidly through a series of acquisitions. The following chart summarizes the acquisitions since our inception, which are described in more detail below.

        We have financed our acquisitions, in part, with cash raised from the sale of our common stock or from the issuance of trust preferred securities. In January 2002, we raised $23.0 million in a private placement from the sale, via a rights offering, of 1.2 million shares of our common stock. The proceeds of the rights offering were used to help fund the acquisition of Pacific Western National Bank. In July 2002, we raised $89.3 million via the sale of 3.9 million shares of our common stock in a registered public offering, which we refer to as the 2002 offering. The proceeds of the 2002 offering were used to help fund the acquisitions of Upland Bank, Marathon Bancorp and First National Bank. We have issued and have outstanding a total of $38 million in trust preferred securities, of which $8 million was issued in 2000, $20 million was issued in the fourth quarter of 2001 and $10 million of was issued in June 2002. The proceeds from this most recent issuance were used to help fund the First National acquisition. See Note 9 of the Notes to Consolidated Financial Statements contained in "Item 8. Financial Statements and Supplementary Data." As described in more detail below, we have also financed the acquisitions with the exchange of our common stock for the stock of the target company.

First Community Bank of the Desert Acquisition

        On May 31, 2000, we completed the Company's formation whereby the former Rancho Santa Fe National Bank and First Community Bank of the Desert became our 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 Bank of the Desert received 0.30 shares of our common stock for each share of First Community Bank of the Desert common stock. Each Rancho Santa Fe National Bank share was exchanged for one share of our common stock. Upon completion of the merger, our common stock was listed on NASDAQ under the symbol FCBP. The Company accounted for the merger as a "pooling-of-interests."

        The merger created a $340 million bank holding company operating in the California markets of Northern San Diego County and the desert communities of the Coachella Valley and Morongo Basin. Each bank operated under its own name with Rancho Santa Fe National Bank having branches in Rancho Santa Fe, San Diego's Golden Triangle, Escondido and Carlsbad. First Community Bank of the Desert had branches located in Palm Springs, Indian Wells, Cathedral City, Joshua Tree, Yucca Valley and Twenty-nine Palms.

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Professional Bancorp Acquisition

        On January 16, 2001, we acquired Professional Bancorp, Inc., which we refer to as Professional, and its wholly-owned subsidiary, First Professional Bank, N.A., which we refer to as First Professional. Shareholders of Professional had the option to choose either $8.00 in cash or 0.55 shares of our common stock in exchange for each share of Professional common stock. We issued 504,747 shares of our common stock and $8.4 million in cash in exchange for all of the outstanding shares of Professional. The aggregate purchase price for Professional totaled approximately $16.3 million. Following the acquisition, First Professional became a third stand alone subsidiary of the Company, operating 5 branches located in Beverly Hills, Santa Monica, Pasadena, Redlands and Tarzana.

First Charter Acquisition

        On October 8, 2001, we acquired First Charter Bank, N.A., which we refer to as First Charter. Shareholders of First Charter received 0.008635 of a share of our common stock for each share of First Charter common stock. Approximately 661,609 shares were issued in this acquisition, resulting in a total purchase price of approximately $14.2 million. First Charter was merged into First Professional with First Professional as the surviving entity.

Pacific Western Acquisition

        On January 31, 2002, we acquired Pacific Western National Bank. References to Pacific Western National Bank refer to the bank acquired on January 31, 2002. The shareholders and option holders of Pacific Western National Bank were paid approximately $36.6 million in cash. Upon completion of the acquisition, Pacific Western National Bank and First Community Bank of the Desert were merged with First Professional. The resulting bank operates under the name Pacific Western National Bank and is headquartered in Santa Monica, California. When we refer to Pacific Western, we are referring to the surviving bank formed through the merger of Pacific Western National Bank, First Community Bank of the Desert and First Professional.

W.H.E.C., Inc. Acquisition

        On March 7, 2002, we acquired W.H.E.C., Inc., the holding company of Capital Bank of North County, which we refer to as Capital Bank. We issued 1,043,799 shares of our common stock in exchange for all of the outstanding common shares and options of W.H.E.C., Inc. The aggregate purchase price for W.H.E.C., Inc. totaled approximately $24.5 million. At the time of the merger, Capital Bank was merged into Rancho Santa Fe National Bank, with the surviving bank retaining the name Rancho Santa Fe National Bank.

Upland Bank Acquisition.

        On August 22, 2002, we acquired Upland Bank. We issued 419,059 shares of our common stock and $6.8 million in cash in exchange for all of the outstanding shares and options of Upland Bank. The aggregate purchase price of Upland Bank amounted to approximately $19.5 million. At the time of the merger, Upland Bank was merged into Pacific Western.

Marathon Bancorp Acquisition.

        On August 23, 2002, we acquired Marathon Bancorp, the holding company of Marathon Bank. We issued 537,770 shares of our common stock and $6.7 million in cash in exchange for all of the outstanding shares and options of Marathon Bancorp. The aggregate purchase price of Marathon Bancorp amounted to approximately $22.8 million. At the time of the merger, Marathon Bank was merged into Pacific Western.

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First National Bank Acquisition.

        On September 10, 2002, we acquired First National Bank. We issued 2,762,540 shares of our common stock, representing approximately 18% of the then outstanding shares of First Community common stock, and $74.5 million in cash in exchange for all of the outstanding preferred shares, common shares, warrants and options of First National Bank. The aggregate purchase price of First National Bank amounted to approximately $155.6 million. At the time of the merger, First National Bank was merged into Rancho Santa Fe National Bank and was renamed First National Bank. References to First National Bank refer to the bank acquired on September 10, 2002. When we refer to First National, we are referring to the surviving bank formed through the merger of First National Bank and Rancho Santa Fe.

Bank of Coronado Acquisition.

        On January 9, 2003, we acquired Bank of Coronado. We paid approximately $11.6 million in cash for all of the outstanding options and shares of common stock of Bank of Coronado. Upon completion of the acquisition, Bank of Coronado was merged into First National.

Banking Business

        Through the Banks, we provide banking and other financial services throughout Southern California to small- and medium-sized businesses and the owners and employees of those businesses. The Banks are full-service community banks that offer a broad range of banking products and services, including many types of business, personal savings and checking accounts and other commercial and consumer banking services, including foreign exchange services. We derive our income primarily from the interest received on the various loan products, interest on investment securities and to a lesser extent fees from providing deposit services, foreign exchange services and extending credit. The Banks originate several types of loans, including secured and unsecured commercial and consumer loans, commercial real estate mortgage loans, SBA loans and construction loans. We extend credit to customers located primarily in the counties we serve and through certain programs at First National, we also extend credit and make commercial and real estate loans to businesses located in Mexico. The Banks' loans are primarily short-term with adjustable rates and over half of our loan portfolio either matures or reprices within one year. Special services, including international banking services and investment 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 ATM and debit cards, and offer MasterCard and Visa credit cards through a correspondent bank.

        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 our primary market areas of Imperial, Los Angeles, Orange, 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 Bank's base rate, prime rate or another established index. The miniperm loans finance the purchase and/or ownership of commercial properties, including owner-occupied and income producing properties. Miniperm loans are generally made with an amortization schedule ranging from 15 to 25 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 generally bear a rate of interest that floats with the Bank's base rate or the prime rate and have maturities of five years. From time to time, we purchase participation

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interests in loans made by other financial institutions. These loans are subject to the same underwriting criteria and approval process as loans made directly by us.

        The Banks' real estate portfolio is subject to certain risks, including (i) a possible downturn in the Southern California economy, such as occurred during the early 1990s, (ii) interest rate increases, (iii) reduction in real estate values in Southern California and (iv) increased competition in pricing and loan structure. We strive to reduce the exposure to such risks by (a) reviewing each loan request and renewal individually, (b) using a dual signature approval system for the approval of each loan request for loans over a certain dollar amount (c) strict adherence to written loan policies, including, among other factors, minimum collateral requirements, maximum loan-to-value ratio requirements and often personal guarantees, (d) secondary appraisals and (e) external independent credit review. We review each loan request on the basis of our 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, our policies provide specific guidelines regarding required debt coverage and other 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 Bank's base rate, 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 rates which either floats with the Bank's base rate, 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 borrower's or guarantor's financial capabilities. We strive to reduce the exposure to such risks through (a) reviewing each loan request and renewal individually (b) a dual signature approval system, (c) strict adherence to written loan policies, (d) external independent credit review and (e) in the case of certain commercial loans to Mexican or foreign entities, third party insurance which limits our exposure to anywhere from 20 to 30 percent of the underlying loan. 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.    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 rate increases and (iii) consumer bankruptcy laws which allow consumers to discharge certain debts. We strive to reduce the exposure to such risks through the direct approval of all consumer loans by (a) reviewing each loan request and renewal individually (b) using a dual signature system of approval, (c) strict adherence to written credit policies and, (d) external independent credit review.

        As part of our efforts to achieve long-term stable profitability and respond to a changing economic environment in Southern California, we constantly evaluate a variety of options to augment our traditional focus by broadening the services and products we provide. Possible avenues of growth

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include more branch locations, expanded days and hours of operation and new types of lending. To date, we have not expanded into areas of brokerage, annuity, insurance or similar investment products and services and have concentrated primarily on the core businesses of accepting deposits, making loans and extending credit.

Business Concentrations

        No individual or single group of related accounts is considered material in relation to our total assets or to the assets or deposits of either of the Banks, or in relation to the overall business of the Banks or the Company. However, approximately 66% of our loan portfolio held for investment at December 31, 2002 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, our business activities are currently focused primarily in Southern California, with the majority of our business concentrated in Imperial, Los Angeles, Riverside, Orange, San Bernardino and San Diego Counties. Consequently, our results of operations and financial condition 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 our operations in Southern California exposes us 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. We conduct foreign lending activities through First National, including commercial and real estate lending, consisting predominantly of loans to individuals or entities located in Mexico. All of our foreign loans are denominated in U.S. dollars and most are collateralized by assets located in the United States or guaranteed or insured by businesses located in the United States.

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 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. These competitors offer certain services which we do not offer directly. In addition, by virtue of their greater total capitalization, such banks have substantially higher lending limits than we offer. Other entities, in both the public and private sectors, seeking to raise capital through the issuance and sale of debt or equity securities also compete with us for the acquisition of deposits. To obtain deposits, we 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 our 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 us.

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        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, we strive to anticipate and adapt to dynamic competitive conditions, but we can make no assurance as to the effectiveness of these efforts on our future business or results of operations or as to our continued ability to anticipate and adapt to changing conditions. In order to compete with other competitors in their primary service areas, we attempt to use, to the fullest extent possible, the flexibility which our independent status permits, including an emphasis on specialized services, local promotional activity and personal contacts. Each of our Banks strives to offer highly personalized banking services. In addition, we intend to continue improving our services and banking products and to cross-market services and banking products provided by one of our Banks but not the other. We believe that through the cross-marketing of products, our Banks can distinguish themselves from other community banks with which they compete based on the range of services provided and products offered. However, we can provide no assurance that we will be able to sufficiently improve our services and/or banking products or successfully compete with competitors in our primary service areas.

Employees

        As of March 18, 2003, First National had 224 full time equivalent employees, Pacific Western had 229 full time equivalent employees, and First Community had 87 full time equivalent employees in addition to those employed by the Banks.

Certain Business Risks

        A purchase of our common stock involves risk. You should carefully consider, in addition to the other information set forth herein, the following risk factors.

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Our business is subject to interest rate risk and variations in interest rates may negatively affect our financial performance.  

        Changes in the interest rate environment may reduce our profits. It is expected that we will continue to realize income from the differential or "spread" between the interest earned on loans, securities and other interest-earning assets, and interest paid on deposits, borrowings and other interest-bearing liabilities. Net interest spreads are affected by the difference between the maturities and repricing characteristics of interest-earning assets and interest-bearing liabilities. In addition, loan volume and yields are affected by market interest rates on loans, and rising interest rates generally are associated with a lower volume of loan originations. We cannot assure you that we can minimize our interest rate risk. In addition, an increase in the general level of interest rates may adversely affect the ability of certain borrowers to pay the interest on and principal of their obligations. Accordingly, changes in levels of market interest rates could materially and adversely affect our net interest spread, asset quality, loan origination volume and overall profitability.

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We face strong competition from financial service companies and other companies that offer banking services which could hurt our business.  

        We conduct our banking operations exclusively in Southern California. Increased competition in our market may result in reduced loans and deposits. Ultimately, we may not be able to compete successfully against current and future competitors. Many competitors offer the same banking services that we offer in our service area. These competitors include national banks, regional banks and other community banks. We also face competition from many other types of financial institutions, including without limitation, savings and loan institutions, finance companies, brokerage firms, insurance companies, credit unions, mortgage banks and other financial intermediaries. In particular, our competitors include several major financial companies whose greater resources may afford them a marketplace advantage by enabling them to maintain numerous banking locations and mount extensive promotional and advertising campaigns. Additionally, banks and other financial institutions with larger

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capitalization and financial intermediaries not subject to bank regulatory restrictions have larger lending limits and are thereby able to serve the credit needs of larger customers. Areas of competition include interest rates for loans and deposits, efforts to obtain deposits, and range and quality of products and services provided, including new technology-driven products and services. Technological innovation continues to contribute to greater competition in domestic and international financial services markets as technological advances enable more companies to provide financial services. We also face competition from out-of-state financial intermediaries that have opened low-end production offices or that solicit deposits in our market areas. If we are unable to attract and retain banking customers, we may be unable to continue our loan growth and level of deposits and our results of operations and financial condition may otherwise be adversely affected.

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Changes in economic conditions, in particular an economic slowdown in Southern California, could hurt our business materially.  

        Our business is directly affected by factors such as economic, political and market conditions, broad trends in industry and finance, legislative and regulatory changes, changes in government monetary and fiscal policies and inflation, all of which are beyond our control. A deterioration in economic conditions, whether caused by national concerns or local concerns, in particular an economic slowdown in Southern California, could result in the following consequences, any of which could hurt our business materially:

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loan delinquencies may increase;



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problem assets and foreclosures may increase;



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demand for our products and services may decline;



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low cost or noninterest bearing deposits may decrease; and



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collateral for loans made by us, especially real estate, may decline in value, in turn reducing customers' borrowing power, and reducing the value of assets and collateral associated with our existing loans.




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A downturn in the real estate market could hurt our business.  

        A downturn in the real estate market could hurt our business because many of our loans are secured by real estate. Our ability to recover on defaulted loans by selling the real estate collateral would then be diminished, and we would be more likely to suffer losses on defaulted loans. As of March 18, 2003, approximately 67% of the book value of our loan portfolio consisted of loans secured by various types of real estate. Substantially all of our real property collateral is located in Southern California. If there is a significant decline in real estate values, especially in Southern California, the collateral for our loans will provide less security. Real estate values could be affected by, among other things, an economic slowdown, earthquakes and other natural disasters particular to California.

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We are dependent on key personnel and the loss of one or more of those key personnel may materially and adversely affect our prospects.  

        We currently depend heavily on the services of our chairman, John Eggemeyer, our chief executive officer, Matthew Wagner, and a number of other key management personnel. The loss of Mr. Eggemeyer's or Mr. Wagner's services or that of other key personnel could materially and adversely affect our results of operations and financial condition. Our success will also depend in part on our ability to attract and retain additional qualified management personnel. Competition for such personnel is strong in the banking industry and we may not be successful in attracting or retaining the personnel we require.

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We are subject to extensive regulation which could adversely affect our business.  

        Our operations are subject to extensive regulation by federal, state and local governmental authorities and are subject to various laws and judicial and administrative decisions imposing requirements and restrictions on part or all of our operations. Because our business is highly regulated, the laws, rules and regulations applicable to us are subject to regular modification and change. There are currently proposed various laws, rules and regulations that, if adopted, would impact our operations. There can be no assurance that these proposed laws, rules and regulations, or any other laws, rules or regulations, will not be adopted in the future, which could make compliance much more difficult or expensive, restrict our ability to originate, broker or sell loans, further limit or restrict the amount of commissions, interest or other charges earned on loans originated or sold by us or otherwise adversely affect our business or prospects.

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We are exposed to transactional, currency and legal risk related to our foreign loans that is in addition to risks we face on loans to U.S.-based borrowers.  

        A portion of our loan portfolio is represented by credit we extend and loans we make to businesses located outside the United States, predominantly in Mexico. These loans, which include commercial loans, real estate loans and credit extensions for the financing of international trade, are subject to risks in addition to risks we face with our loans to businesses located in the United States including, but not limited to, currency risk, transaction risk and legal risk. While these loans are dollar denominated, the ability of the borrower to repay may be affected by fluctuations in the borrower's home country currency relative to the U.S. dollar. Additionally, while most of our foreign loans are insured by U.S. based institutions or guaranteed by a U.S.-based entity, our ability to collect in the event of default is subject to a number of conditions, and often a deductible, and we may not be successful in obtaining repayment. Furthermore, foreign laws may further restrict our ability to foreclose on, take a security interest in, or seize collateral located in the foreign country.

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We are exposed to risk of environmental liabilities with respect to properties to which we take title.  

        In the course of our business, we may foreclose and take title to real estate, and could be subject to environmental liabilities with respect to these properties. We may be held liable to a governmental entity or to third parties for property damage, personal injury, investigation and clean-up costs incurred by these parties in connection with environmental contamination, or may be required to investigate or clean up hazardous or toxic substances, or chemical releases at a property. The costs associated with investigation or remediation activities could be substantial. In addition, as the owner or former owner of a contaminated site, we may be subject to common law claims by third parties based on damages and costs resulting from environmental contamination emanating from the property. If we ever become subject to significant environmental liabilities, our business, financial condition, liquidity and results of operations could be materially and adversely affected.

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Our ability to pay dividends is restricted by law and contractual arrangements and depends on capital distributions from the Banks which are subject to regulatory limits.  

        Our ability to pay dividends to our shareholders is subject to the restrictions set forth in California law. In addition, our ability to pay dividends to our shareholders is restricted under specified circumstances under indentures and a revolving credit agreement to which we are a party. See "Item 5. Market for Registrant's Common Equity and Related Stockholder Matters—Dividends" for more information on these restrictions. We cannot assure you that we will meet the criteria specified under California law or under these agreements in the future, in which case we may reduce or stop paying dividends on our common stock.

        The primary source of our income from which we pay dividends is the receipt of dividends from our Banks. The availability of dividends from the Banks is limited by various statutes and regulations. It

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is possible, depending upon the financial condition of the bank in question, and other factors, that the Board of Governors of the Federal Reserve System, 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 the event our subsidiaries were unable to pay dividends to us, we in turn would likely have to reduce or stop paying dividends on our common stock. Our failure to pay dividends on our common stock could have a material adverse effect on the market price of our common stock. See "—Supervision and Regulation" for additional information on the regulatory restrictions to which we and our Banks are subject.

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Only a limited trading market exists for First Community common stock which could lead to price volatility.  

        Our common stock was designated for quotation on the Nasdaq National Market in June 2000 and trading volumes since that time have been modest. The limited trading market for our common stock may cause fluctuations in the market value of our common stock to be exaggerated, leading to price volatility in excess of that which would occur in a more active trading market of our common stock. In addition, even if a more active market in our common stock develops, we cannot assure you that such a market will continue or that shareholders will be able to sell their shares.

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Our allowance for loan losses may not be adequate to cover actual losses.  

        Like all financial institutions, we maintain an allowance for loan losses to provide for loan defaults and non-performance. Our allowance for loan losses may not be adequate to cover actual loan losses, and future provisions for loan losses could materially and adversely affect our operating results. Our allowance for loan losses is based on prior experience, as well as an evaluation of the risks in the current portfolio. The amount of future losses is susceptible to changes in economic, operating and other conditions, including changes in interest rates that may be beyond our control, and these losses may exceed current estimates. Federal regulatory agencies, as an integral part of their examination process, review our loans and allowance for loan losses. While we believe that our allowance for loan losses is adequate to cover current losses, we cannot assure you that we will not further increase the allowance for loan losses or that regulators will not require us to increase this allowance. Either of these occurrences could materially adversely affect our earnings. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations."

•

Concentrated ownership of our common stock creates a risk of sudden changes in our share price.  

        As of March 18, 2003, directors and members of our executive management team owned or controlled approximately 18% of our common stock. Investors who purchase our common stock may be subject to certain risks due to the concentrated ownership of our common stock. The sale by any of our large shareholders of a significant portion of that shareholder's holdings could have a material adverse effect on the market price of our common stock. In addition, the registration of any significant amount of additional shares of our common stock will have the immediate effect of increasing the public float of our common stock and any such increase may cause the market price of our common stock to decline or fluctuate significantly.

Financial and Statistical Disclosure

        Certain of our statistical information is presented within "Item 6. Selected Financial Data," "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" and "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."

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Supervision and Regulation

General

        The banking and financial services business in which we engage is highly regulated. Such regulation is intended, among other things, to protect depositors insured by the Federal Deposit Insurance Corporation, or 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 Board of Governors of the Federal Reserve System, also known as the FRB. The FRB 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 FRB 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 by various bank regulatory agencies and other professional agencies. Changes in the laws, regulations or policies that impact us cannot necessarily be predicted, but they may have a material effect on our business and earnings.

Bank Holding Company Regulation

        As a bank holding company, First Community is registered with and subject to regulation by the FRB under the Bank Holding Company Act of 1956, as amended, or the BHCA. In accordance with FRB policy, First Community is expected to act as a source of financial strength to the Banks and to commit resources to support the Banks in circumstances where it might not otherwise do so. Under the BHCA, we are subject to periodic examination by the FRB. We are also required to file with the FRB periodic reports of our operations and such additional information regarding the Company and its subsidiaries as the FRB may require. Pursuant to the BHCA, we are required to obtain the prior approval of the FRB before we acquire 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, we would own or control, directly or indirectly, more than 5 percent of such bank.

        Under the BHCA, we may not engage in any business other than managing or controlling banks or furnishing services to its subsidiaries that the FRB deems to be so closely related to banking as "to be a proper incident thereto." We are 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 FRB determines that the activity is so closely related to banking to be a proper incident to banking. The FRB'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.

        Additionally, bank holding companies that meet certain eligibility requirements prescribed by the BHCA and elect to operate as financial holding companies may engage in, or own shares in companies engaged in, a wider range of nonbanking activities, including securities and insurance activities and any other activity that the FRB, in consultation with the Secretary of the Treasury, determines by regulation

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or order is financial in nature, incidental to any such financial activity or complementary to any such financial activity and does not pose a substantial risk to the safety or soundness of depository institutions or the financial system generally. The BHCA generally does not place territorial restrictions on the domestic activities of non-bank subsidiaries of bank holding companies. As of the date of this filing, we do not operate as a financial holding company.

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

        Our 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 we and the Banks conduct business. For example, these include limitations on the ability of the Banks to pay dividends to us and our ability to pay dividends to our shareholders. It is the policy of the FRB 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 FRB 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 FRB 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 FRB. First National and Pacific Western are national banks and therefore regulated primarily by the Office of the Comptroller of the Currency.

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        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, 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 First National, Pacific Western and the Company as of December 31, 2002:

Prompt Corrective Action

        The Federal Deposit Insurance Corporation Improvement Act, or FDICIA, requires each federal banking agency to take prompt corrective action to resolve the problems of insured depository institutions, including but not limited to those that fall below one or more prescribed minimum capital ratios. Pursuant to FDICIA, the Office of the Comptroller of the Currency promulgated regulations defining the following five categories in which an insured depository institution will be placed, based on the level of its capital ratios: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized. Under the prompt corrective action provisions of FDICIA, an insured depository institution generally will be classified as undercapitalized if its total risk-based capital is less than 8% or its Tier 1 risk-based capital or leverage ratio is less than 4%. An institution that, based upon its capital levels, is classified as "well capitalized," "adequately capitalized" or "undercapitalized" may be treated as though it were in the next lower capital category if the appropriate federal banking agency, after notice and opportunity for hearing, determines that an unsafe or unsound condition or an unsafe or unsound practice warrants such treatment. At each successive lower capital category, an insured depository institution is subject to more restrictions and prohibitions, including restrictions on growth, prohibitions on payment of dividends and restrictions on the acceptance of brokered deposits. Furthermore, if a bank is classified in one of the undercapitalized categories, it is required to submit a capital restoration plan to the federal bank regulator, and the holding company must guarantee the performance of that plan.

        In addition to measures taken under the prompt corrective action provisions, commercial banking organizations may be subject to potential enforcement actions by the federal banking agencies for unsafe or unsound practices in conducting their businesses or for violations of any law, rule, regulation or any condition imposed in writing by the agency or any written agreement with the agency. Enforcement actions may include the imposition of a conservator or receiver, the issuance of a cease-and-desist order that can be judicially enforced, the termination of insurance of deposits (in the case of a depository institution), the imposition of civil money penalties, the issuance of directives to increase capital, the issuance of formal and informal agreements, the issuance of removal and prohibition orders against institution-affiliated parties. The enforcement of such actions through injunctions or restraining orders may be based upon a judicial determination that the agency would be harmed if such equitable relief was not granted.

Hazardous Waste Clean-Up

        Since we are 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, our primary exposure to environmental laws is through our lending activities and through properties or businesses

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we may own or acquire. 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, we are not aware of any potential liability for hazardous waste contamination that would be reasonably likely to have a material adverse effect on the Company as of March 18, 2003.

Sarbanes-Oxley Act

        On July 30, 2002, the President signed into law the Sarbanes-Oxley Act of 2002. The Sarbanes-Oxley Act aims to restore the credibility lost as a result of recent high profile corporate scandals by addressing, among other issues, corporate governance, auditing and accounting, executive compensation and enhanced and timely disclosure of corporate information. The Nasdaq National Market has proposed additional corporate governance rules that have been presented to the Securities and Exchange Commission for review and approval. The proposed changes are intended to allow shareholders to more easily and effectively monitor the performance of companies and directors.

        Among other provisions, Section 302(a) of the Sarbanes-Oxley Act requires that our Chief Executive Officer and Chief Financial Officer certify that our quarterly and annual reports do not contain any untrue statement of a material fact. Specific requirements of the certifications include (i) having these officers confirm that they are responsible for establishing, maintaining and regularly evaluating the effectiveness of our internal controls; (ii) they have made certain disclosures to our auditors and Audit Committee about our internal controls; (iii) and they have included information in our quarterly and annual reports about their evaluation and whether there have been significant changes in our internal controls or in other factors that could significantly affect internal controls subsequent to their evaluation.

        In response to these requirements, we have established a Disclosure Committee to monitor compliance with new rules. Membership of the Disclosure Committee is comprised of senior management from throughout the organization who we believe collectively provide an extensive understanding of our corporate operations.

        We cannot be certain of the effect, if any, of the foregoing legislation on our business. Future changes in the laws, regulation, or policies that impact us cannot necessarily be predicted and may have a material effect on our business and earnings.

USA Patriot Act

        On October 26, 2001, the President signed into law comprehensive anti-terrorism legislation known as the USA Patriot Act. Title III of the USA Patriot Act requires financial institutions, including the Banks, to help prevent, detect and prosecute international money laundering and the financing of terrorism. The Banks have augmented their systems and procedures to accomplish this. We believe that the cost of compliance with Title III of the USA Patriot Act is not likely to be material to the Company.

Federal Deposit Insurance

        Because of favorable loss experience and a healthy reserve ratio in the Bank Insurance Fund (BIF) of the FDIC, well-capitalized and well-managed banks, including the Banks, have in recent years paid minimal premiums for FDIC insurance. While we have no expectation of increased premiums, the amount of any future premiums will depend on the BIF loss experience, legislation or regulatory initiatives and other factors, none of which we are in position to predict at this time.

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Basel Committee Guidelines

        The U.S. federal bank regulatory agencies' risk-capital guidelines are based upon the 1988 capital accord of the Basel Committee on Banking Supervision, or the BIS. The BIS is a committee of central banks and bank supervisors/regulators from the major industrialized countries that develops broad policy guidelines that each country's supervisors can use to determine the supervisory policies they apply. In January 2001 the BIS released a proposal to replace the 1988 capital accord with a new capital accord that would set capital requirements for operational risk and refine the existing capital requirements for credit risk and market risk exposures. Operational risk is defined to mean the risk of direct or indirect loss resulting from inadequate or failed internal processes, people and systems or from external events. The 1988 capital accord does not include separate capital requirements for operational risk. The events of September 11, 2001 demonstrate the importance for financial institutions of managing operational risks. This BIS proposal outlines several alternatives for capital assessment of operational risks, including two standardized approaches and an "internal measurement approach" tailored to individual institutions' circumstances. The BIS has stated that its objective is to finalize a new capital accord in 2003 and for member countries to implement the new accord in 2006. The ultimate timing for the new accord and the specifics of capital assessments for addressing operational risk are uncertain. However, we expect that a new capital accord addressing operational risk will eventually be adopted by the BIS and implemented by the U.S. federal bank regulatory agencies. We cannot determine whether new capital requirements that may arise out of a new BIS capital accord will increase or decrease minimum capital requirements applicable to the Company and its Banks.

Available Information

        We maintain an Internet website at www.firstcommunitybancorp.com, and a website for each of our Banks at www.banksandiego.com and www.pacificwesternbank.com. At www.firstcommunitybancorp.com and via the "Investor Relations" link at each of the Banks' websites, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to such reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available, free of charge, as soon as reasonably practicable after such forms are electronically filed with the SEC. Copies of the Company's filings with the SEC may also be obtained directly from the SEC's website at www.sec.gov. These documents may also be obtained free of charge from us by directing a request to: First Community Bancorp c/o Pacific Western Bank, 275 North Brea Boulevard, Brea, CA 92821. Attention: Investor Relations. Telephone 714-671-6800.

Forward Looking Information

        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 we use or incorporate by reference in this Annual Report the words "anticipate," "estimate," "expect," "project," "intend," "commit," "believe" and similar expressions, we intend 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, our 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:

•

Increases in competitive pressure among financial institutions or in the banking industry generally.



•

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

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•

A decline in the health of the economy nationally or regionally which could reduce the demand for loans, reduce the value of real estate collateral securing our loans or reduce the ability of borrowers to repay loans.



•

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



•

Dividend restrictions.



•

Regulatory discretion.



•

The effects of the September 11, 2001 terrorist attacks and their aftermath, including the continuing war on terrorism or other events of war.



•

Changes in the securities markets.



•

Asset/liability repricing risks and liquidity risks.



•

The cost savings expected from recent or future mergers may not be fully realized or realized during the expected time frame.

        We undertake 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 us and our operations please refer to Item 1 through Item 7A of this Annual Report.

ITEM 2. PROPERTIES

        As of March 18, 2003, we had a total of 46 properties consisting of 34 branch offices, one annex office, three operations centers and eight other properties of which four are subleased. We own four locations and the remaining properties are leased.

        Pacific Western operates through 18 branches and its principal office is located at 120 Wilshire Blvd., Santa Monica, California 90401. First National operates through 16 branches and its principal office is located at 401 West "A" Street, San Diego, California 92101.

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

ITEM 3. LEGAL PROCEEDINGS

        From time to time, we are party to claims and legal proceedings arising in the ordinary course of business. Our management 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 estimable and the loss is probable.

        We believe that there are no material litigation matters at the current time. However, litigation is inherently uncertain and no assurance can be given that any current or future litigation will not result in any loss which might be material to us.

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

        No matters were submitted to the shareholders of the Company, through the solicitation of proxies or otherwise, during the fourth quarter of the year ended December 31, 2002.

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PART II

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

Marketplace Designation and Sales Price Information

        On June 1, 2000, our common stock was designated for quotation on the Nasdaq National Market® and trades under the symbol "FCBP." The following table summarizes the high and low trade prices for each quarterly period ended since January 1, 2001 for our common stock, as traded on and reported by the Nasdaq National Market:

        As of March 18, 2003, the closing price of our common stock on Nasdaq was $28.69 per share. As of that date, we believe, based on the records of our transfer agent, that there were approximately 1,450 record holders of our common stock.

Dividends

        Our ability to pay dividends to our shareholders is subject to the restrictions set forth in the California General Corporation Law, or 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 interest expense for such fiscal years, the corporation's current assets equal at least 1¹/4 times its current liabilities. Our ability to pay dividends is also subject to certain other limitations. See "Item 1. Business—Supervision and Regulation."

        Our primary source of income is the receipt of dividends from the Banks. The availability of dividends from the Banks is limited by various statutes and regulations. It is possible, depending upon the financial condition of the Bank in question, and other factors, that the FRB 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, our ability to pay dividends is limited by a Revolving Credit Agreement, dated as of June 26, 2000, and as amended, between the Company and The Northern Trust Company which provides that we 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 earnings per

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fiscal quarter of the Company before goodwill or intangibles 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 19 of Notes to Consolidated Financial Statements contained in "Item 8. Financial Statements and Supplementary Data."

        Our ability to pay dividends is also limited by certain covenants contained in the indentures governing trust preferred securities that we have issued, and the debentures underlying the trust preferred securities. The indentures provide that if an Event of Default (as defined in the indentures) has occurred and is continuing, or if we are in default with respect to any obligations under our guarantee agreement which covers payments of the obligations on the trust preferred securities, or if we give notice of any intention to defer payments of interest on the debentures underlying the trust preferred securities, then we may not, among other restrictions, declare or pay any dividends (other than a dividend payable by the Banks to the Company) with respect to our common stock. See Note 9 of the Notes to Consolidated Financial Statements contained in "Item 8. Financial Statements and Supplementary Data."

        Holders of our common stock are entitled to receive dividends declared by our 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. Since January 1, 2001 we have declared the following quarterly dividends:

        We believe that the Company will be able to continue paying quarterly dividends however we can provide no assurance that we will continue to declare dividends on a quarterly basis or otherwise.

        Information concerning securities authorized for issuance under equity compensation plans appears in "Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters."

ITEM 6. SELECTED FINANCIAL DATA

        The following table sets forth our statistical information for each of the years in the five-year period ended December 31, 2002. This data should be read in conjunction with our audited consolidated financial statements as of December 31, 2002 and 2001 and for each of the years in the

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three-year period ended December 31, 2002 and related notes included elsewhere herein. See "Item 8. Financial Statements and Supplementary Data."

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

Overview

        We are a bank holding company registered under the Bank Holding Company Act of 1956, as amended. Our principal business is to serve as a holding company for our banking subsidiaries. As of December 31, 2002, those subsidiaries were First National Bank, which we refer to as First National, and Pacific Western National Bank, or Pacific Western. On January 9, 2003, the Company acquired Bank of Coronado and merged Bank of Coronado into First National. We refer to Pacific Western and First National herein as the "Banks." Discussions about the Banks as of and for the year ended December 31, 2002 refer only to Pacific Western and First National, without Bank of Coronado.

        We have completed ten acquisitions since May 2000. This includes the transaction whereby the former Rancho Santa Fe National Bank and First Community Bank of the Desert became wholly-owned subsidiaries of the Company in a pooling-of-interests. Accordingly, all of our financial statements for the periods prior to these acquisitions have been restated as if they had occurred at the beginning of the earliest period presented. The other seven acquisitions completed before December 31, 2002, including Professional Bancorp and First Charter Bank during 2001 and Pacific Western National Bank, W.H.E.C., Inc., Upland Bank, Marathon Bancorp and First National Bank during 2002, were each accounted for using the purchase method of accounting. Accordingly, these acquisitions have been included in the consolidated financial statements from their respective dates of acquisition. Our acquisition of Bank of Coronado was completed January 9, 2003 and accordingly is not reflected in the consolidated financial statements contained herein. Please see "Item 1. Business—Strategic Evolution and Acquisition Strategy" for more information about these acquisitions.

        At December 31, 2002, we had total assets of $2,115.9 million, total loans of $1,424.4 million, total deposits of $1,738.6 million and shareholders' equity of $316.3 million. These amounts compare to $770.2 million in assets, $501.7 million in loans, $677.2 million in deposits and $55.3 million in shareholders' equity at December 31, 2001.

        Please refer to our disclosure entitled "Forward Looking Information" in Part I, Item 1 of this Annual Report.

Critical Accounting Policies

        The following discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements, and the notes thereto, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires us to make a number of estimates and assumptions that affect the reported amounts and disclosures in the consolidated financial statements. On an ongoing basis, we evaluate our estimates and assumptions based upon historical experience and various other factors and circumstances. We believe that our estimates and assumptions are reasonable; however, actual results may differ significantly from these estimates and assumptions which could have a material impact on the carrying value of assets and liabilities at the balance sheet dates and on our results of operations for the reporting periods.

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        Our significant accounting policies and practices are described in Note 1 to the consolidated financial statements. The accounting policies that involve significant estimates and assumptions by management, which have a material impact on the carrying value of certain assets and liabilities, are considered critical accounting policies. We have identified our policy for allowance for loan losses, fair value of financial instruments, and goodwill and other intangible assets as critical accounting policies which are summarized as follows:

Allowance for Loan Losses

        We maintain an allowance for loan losses at an amount which we believe is sufficient to provide adequate protection against losses in the loan portfolio. Our periodic evaluation of the adequacy of the allowance is based on such factors as our past loan loss experience, known and inherent risks in the portfolio, adverse situations that have occurred but are not yet known that may affect the borrowers' ability to repay, the estimated value of underlying collateral, and economic conditions. As we utilize information currently available to evaluate the allowance for loan losses, the allowance for loan losses is subjective and may be adjusted in the future depending on changes in economic conditions or other factors.

        During the time we hold collateral, we are subject to credit risks, including risks of borrower defaults, bankruptcies and special hazard losses that are not covered by standard hazard insurance (such as those occurring from earthquakes or floods). Although we have established an allowance for loan losses that we consider adequate, there can be no assurance that the established allowance for loan losses will be sufficient to offset losses on loans in the future.

Fair Value of Financial Instruments

        We estimate the fair value of our financial instruments for purposes of our accounting and preparation of our financial statements. We make assessments of fair value with respect to numerous items, including cash and due from banks and Federal Funds sold, interest-bearing deposits in financial institutions, investment securities, loans, deposits, borrowings, trust preferred securities and commitments to extend credit and standby letters of credit.

        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 our 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, 2002 and 2001, the amounts that will actually be realized or paid at settlement or maturity of the instruments could be significantly different. Please see Note 11 of the Notes to Consolidated Financial Statements contained in "Item 8. Financial Statements and Supplementary Data" for more information regarding our financial instruments and the calculation of fair value.

Goodwill and Other Intangible Assets

        As a result of our acquisition activity, goodwill increased to $168.6 million, or 8.0% of total assets, as of December 31, 2002 from $9.8 million, or 1.3% of total assets, as of December 31, 2001 and our core deposit intangible increased to $19.5 million from zero over the same time periods. While the core deposit intangible will be amortized over its estimated useful life of 10 years, the amortization of goodwill was discontinued for periods after December 31, 2002 in accordance with recent generally

23

accepted accounting principles in the United States of America. Instead, goodwill, a long-lived asset, is required to be evaluated for impairment at least annually.

        The process of evaluating goodwill for impairment requires us to make several assumptions and estimates. We begin the valuation process by identifying the reporting units related to the goodwill. We identified one reporting unit, banking operations, in relation to our goodwill asset. The goodwill for our one reporting unit was evaluated as of January 1, 2002 and June 30, 2002 for impairment. We have selected June 30th as our interim impairment analysis date to evaluate the carrying value of goodwill for future periods. If our impairment analysis indicates that the fair value of our reporting unit is less than the carrying amount of our reporting unit, then we will have to writedown the amount of goodwill we carry on our balance sheet through a charge to our operations.

        Our impairment analysis estimated the value of our reporting unit using three methods, an income approach which is a discounted cash flow model, a market comparison approach and a market transaction approach. Each of these valuation methods include several assumptions, including forecasts of future earnings of our reporting unit, discount rates, market trends and market multiples of companies engaged in similar lines of business. If any of the assumptions used in the valuation of our goodwill change over time, the estimated value assigned to our goodwill could differ significantly, including a decrease in the value of goodwill which would result in a charge to our operations.

        The calculation and subsequent amortization of a core deposit intangible also requires several assumptions including, among other things, the estimated cost to service deposits acquired, discount rates, estimated deposit attrition rates of the acquired deposits and its estimated useful life. Again, if the value of the core deposit intangible is determined to be less than the carrying value in future periods, this would result in a writedown of the core deposit intangible through a charge to our operations.

Results of Operations

Earnings Performance.

        We analyze our performance based on net income determined in accordance with accounting principles generally accepted in the United States, as well as on an operating income basis, which represents net income before merger-related costs and goodwill and core deposit intangible amortization, net of applicable taxes, which we refer to as "operating income." Operating income and related discussions are presented as supplementary information in this analysis to highlight trends in our core financial results, excluding the non-recurring effects of business acquisitions and restructuring activities as well as recurring non-cash amortization charges arising from purchase acquisitions. Operating income should not be considered a substitute for net income and earnings per share determined in accordance with accounting principles generally accepted in the United States. Merger and restructuring-related items excluded from net income to derive operating income may be significant and may not be comparable to other companies. The following table reconciles net income to operating

24

income and summarizes per share data and key financial ratios using both net income and operating income.

        Net income for 2002 increased 177% to $16.9 million, or $1.58 per diluted share, compared to net income of $6.1 million, or $1.23 per diluted share in 2001. Our diluted earnings per share increased 28%. Based on net income our return on average assets was 1.14% and our return on average equity was 9.66%. During 2001 our net income resulted in a return on average assets of 0.92% and a return on average equity of 16.33%.

        The 177% increase in net income during 2002 as compared to 2001 was due mainly to our acquisition activity, a shift in our earning asset mix to loans, net gains on the sale of assets (primarily securities available for sale) and operating efficiencies. Net interest income increased 119% to $69.8 million for 2002 compared to 2001; average interest earning assets increased 116% to $1,289.9 million for 2002 as compared to 2001. The increases in loans and deposits contributed to the 83% increase in income generated from service charges and fees on deposit accounts as well as other commissions and fee income. In order to focus our efforts and resources on our primary business—accumulating low-cost deposits and making quality commercial and real estate loans, 2002 net income includes some one-time gains and losses as we exited non-core activities and consolidated the operations of the acquired institutions. We recognized (i) a gain on the sale of our merchant card processing of $934,000; (ii) a gain on the sale of securities of $1.6 million to consolidate and reposition the combined securities portfolio; and (iii) a loss of $703,000 on the sale of the majority of our indirect auto loan portfolio. These nonrecurring items total $1.1 million, net of taxes. Net interest income plus noninterest income, excluding these nonrecurring items, for 2002 increased 118% compared to 2001 while operating expenses increased 106%. Increases in operating expenses were required to service and support our growth.

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        Our operating income for 2002 increased 179% to $17.6 million, or $1.65 per diluted share, compared to $6.3 million, or $1.27 per diluted share for 2001. Based on 2002 operating income, our return on average assets was 1.19% and our return on average equity was 10.1%. During 2001 our operating income resulted in a return on average assets of 0.95% and a return on average equity of 16.9%.

        Net income for 2001 totaled $6.1 million, or $1.23 per diluted share, compared to net income for 2000 of $1.9 million, or $0.47 per diluted share. Results for 2000 include non-recurring merger-related costs of $3.6 million ($2.8 million, net of taxes) related to the Rancho Santa Fe National Bank and First Community Bank of the Desert merger.

        Operating income for 2001 increased $1.6 million to $6.3 million, or $1.27 per diluted share, compared to $4.7 million, or $1.15 per diluted share for 2000. Diluted operating earnings per share increased 10%. The 34.4% increase in operating earnings during 2001 compared to 2000 was also the result of significant asset growth due to acquisition activity. Net interest income increased 52.4% to $31.9 million for 2001 compared to 2000 due mainly to a 95% increase in average earning assets for 2001 compared to 2000, offset partially by a compression in our net interest margin to 5.33% from 6.81%. The increase in loans and deposits contributed to the 137% increases in fees and service charges related to loan and deposit activity. Net interest income plus noninterest income for 2001 increased 58.6% compared to 2000 while operating expenses increased 76.4%. Increases in operating expenses were required to service and support our growth as well as our anticipated growth accomplished during 2002.

Net Interest Income.

        Net interest income, which constitutes one of our principal sources of income 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 interest-earning assets and interest-bearing liabilities. The following table presents, for the periods indicated, the distribution of average assets, liabilities and shareholders' equity, as well as interest income and yields earned on average interest-earning assets and interest expense and rates paid on average interest-bearing liabilities.

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Analysis of Average Rates and Balances

(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.

        Our net interest income is affected by changes in the amount and mix of interest-earning assets and interest-bearing liabilities, referred to as a "volume change," as well as changes in the yields earned on interest-earning assets and rates paid on deposits and other borrowed funds, referred to as a "rate change." The change in interest income/expense attributable to volume reflects the change in volume multiplied by the prior year's rate and the change in interest income/expense attributable to rate reflects the change in rates multiplied by the prior year's volume. The changes in interest income and expense which are not attributable specifically to either volume or rate are allocated between the two categories. The following table presents, for the years indicated, changes in interest income and expense and the amount of change attributable to changes in volume and rates.

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Analysis of Volume and Interest Rates

        Net interest income increased 119%, or $38.0 million, to $69.8 million for 2002 from $31.9 million for 2001 due to a 116% increase in average interest-earning assets resulting from our acquisition activity notwithstanding a decline in interest rates. Our net interest margin increased to 5.41% for 2002 compared to 5.33% for 2001 due primarily to the change in our earning asset mix, offset partially by a decline in rates.

        Interest income increased 94.6%, or $40.8 million, to $83.9 million for 2002 from $43.1 million for 2001. In addition to the increase in interest-earning assets during 2002, we have successfully shifted earning assets from investments and Federal funds sold to loans, which typically yield a higher return, and replaced higher cost deposits with low cost deposits. Average loans as a percentage of average earning assets increased to 79.4% for 2002 compared to 66.1% for 2001. Further, we increased our average loan to deposit ratio to 82.1% for 2002 compared to 65.8% for 2001. Despite shifting the composition of our earning assets, the yield on interest-earning assets decreased 71 basis points due primarily to the general decline in interest rates, led by the Federal Reserve Board's several rate reductions totaling 450 basis points during 2001 and 50 basis points in late 2002. The yields for loans in 2002 declined to 7.29% from 8.36% for 2001. In December 2002, we sold $48.3 million in indirect auto loans which we expect will lower our overall loan yield in the near term with current interest rates.

        Interest expense increased 25.2%, or $2.8 million, to $14.1 million for 2002 from $11.3 million for 2001. This increase is due to a 116% increase in our interest-bearing liabilities, offset partially by a 125 basis point drop in the cost of these funds. The cost of interest-bearing liabilities decreased to 1.72% from 2.97% as a result of deposits generally repricing in the lower interest rate environment and our ability to maintain a high percentage of noninterest-bearing deposits. This reduction in cost was offset partially by the addition of higher cost interest-bearing liabilities such as the trust preferred securities. We increased trust preferred securities by $20.0 million in the fourth quarter of 2001 and another $10.0 million in June 2002 with interest rates that float at 3-month or 6-month LIBOR plus 3.55% to 3.75%. Interest expense related to our trust preferred securities totaled $2.5 million for 2002 and $962,000 for 2001. A large percentage of our funding sources are demand deposits, 37.4% of average total deposits for 2002, which in a declining interest rate environment tends to compress our net interest margin as we do not have the ability to reprice these deposits downward. We were able to effectively reprice interest-bearing deposits to help reduce of the effect of the decline in rates as the

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average cost of interest-bearing deposits declined 126 basis points to 1.47% for 2002 as compared to 2.73% for 2001. Our overall cost of average deposits declined to 0.92% for 2002 from 1.64% for 2001.

        Net interest income for 2001 totaled $31.9 million compared to $20.9 million for 2000, an increase of 52.4%, or $11.0 million. The increase was due primarily to a 95%, or $291.1 million increase in average interest-earning assets in 2001 compared to 2000 offset partially by a decline in market interest rates. The decrease was attributable to a decreased interest rate environment in 2001 over 2000 due to decreases in interest rates led by the Federal Reserve Bank during 2001. Our net interest margin dropped to 5.33% for 2001 from 6.81% for 2000.

        Interest income increased 50%, or $14.3 million, to $43.1 million for 2001 compared to $28.8 million for 2000. The increase was due to the increase in interest-earning assets during 2002, offset partially by a decrease in the overall yield. The yield on interest-earning assets declined 218 basis points to 7.21% in 2001 as compared to 9.39% for 2000. The decrease in yield was attributed to a general decline in market interest rates in 2001 as compared to 2000 as well as a change in the mix of interest-earning assets. The yields for loans in 2001 declined to 8.36% from 10.49% for 2000. Although average loans increased 73% to $395.3 million in 2001 from $228.6 million during 2000, loans as a percentage of interest-earning assets declined to 66% for 2001 as compared to 74% in 2000. Average investments, including Federal funds sold totaled $303.6 million and represented 50.8% of average interest-earning assets in 2001 compared to $74.2 million, or 24.2% of average interest-earning assets, in 2000. The change in volume and mix of interest-earning assets was due mostly to the Professional Bancorp and First Charter acquisitions.

        Interest expense increased 42.0% to $11.3 million for 2001 from $7.9 million for 2000. This increase is due to an 84.5% increase in average interest-bearing liabilities to $378.7 million in 2001 from $205.2 million in 2000, offset partially by an 89 basis point drop in the cost of these funds. The cost of interest-bearing liabilities decreased to 2.97% from 3.86% as a result of deposits generally repricing in the lower interest rate environment and our ability to increase the percentage of noninterest-bearing deposits, offset partially by the addition of higher cost interest-bearing liabilities such as the trust preferred securities. We increased the percentage of noninterest-bearing deposits to total deposits to 39.9% for 2001 from 34.2% for 2000 contributing to a decrease in the overall cost of average deposits to 1.64% for 2001 from 2.47% for 2000. We increased trust preferred securities $20.0 million in the fourth quarter of 2001 as previously described.

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.

        We did not charge a provision for loan losses during 2002 compared to $639,000 for the 2001. No provision was considered necessary during 2002 based on the allowance for loan losses acquired during the year as well as the credit quality indicators in the loan portfolio during 2002. The allowance for loan losses was $24.3 million at December 31, 2002 and represented 1.71% of loans, net of deferred fees and costs and 237.8% of nonaccrual loans as of that date. At December 31, 2001, the allowance for loan losses totaled $11.2 million, or 2.23% of loans, net of deferred fees and costs, and 239.9% of nonaccrual loans. The higher ratio at the end of 2001 in the allowance for loan losses as a percentage of total loans was appropriate as we continued to work through the loan portfolios acquired through First Charter and Professional. Net loans charged off in 2002 decreased by $4.7 million to $1.6 million compared to $6.3 million in net loans charged off for the year ended December 31, 2001. The 2001 net charge-offs included $4.8 million of Professional loans charged-off during the first quarter of 2001 associated with the Professional acquisition.

        The Company provided $520,000 for loan losses for the year ended December 31, 2000.

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Noninterest Income.

        The following table sets forth the details of noninterest income for the years indicated. The columns entitled "Increase (Decrease)" set forth the year-over-year changes between 2002 and 2001 and 2001 and 2000.

        Total noninterest income, before other items increased $5.6 million to $10.8 million for 2002 from $5.2 million for 2001. The increase in noninterest income, before other items is due primarily to the increase in the service charges and fees related to both loan and deposit activity as we increased our loans and deposit base through the completion of several acquisitions since the end of the third quarter of 2001. In addition, other commissions and fees in 2002 includes foreign exchange fee income totaling $296,000 generated subsequent to the First National Bank acquisition. We increased our investment in bank-owned life insurance during 2002, through our acquisitions as well as a $10 million investment in December 2002. The appreciation in the cash surrender value of life insurance income increased $498,000 to $755,000 for 2002 as compared to 2001. The $762,000 increase in other income is primarily due to OREO gains recognized during the year of $272,000, loan referral fees of $161,000 and data processing servicing fees of $116,000. Data processing fee income is related to third party data and item processing services provided by InfoServ, the in-house data processing division of First National Bank. InfoServ was sold September 30, 2002, therefore this type of income, and any related expenses, will not continue in future periods.

        Although we sold our merchant card processing in May 2002 and recognized a gain on the sale of $934,000, we have an increase of $94,000 in net merchant discount fee income in 2002 compared to 2001. This increase is due to our acquisition activity as well as our continuance to recognize income and expense related to this activity until the purchaser of the merchant card processing converted all of the Banks' customers onto their system. Because of the sale, we expect merchant discount fee income to decrease in future periods.

        We sold the majority of our indirect auto loan portfolio with aggregate principal loan balances of $48.3 million at a discount and recorded a loss on sale of $703,000. We retained less than 10% of the loans in the portfolio and engaged a third party to service those remaining loans. We expect this loss to be offset in future periods by a reduction in loan charge-offs and the elimination of the cost to service this portfolio in-house.

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        We recognized a gain on sale of securities as we sold smaller odd-lot securities and other securities which met certain interest rate characteristics to generally reposition the securities portfolio to shorter duration vehicles. This exercise was completed during the fourth quarter after the majority of our announced acquisitions had been completed and the portfolios could be evaluated on a combined basis. In the recently falling or low interest rate environment, we experienced numerous bond calls and accelerated prepayment speeds on mortgage-backed securities, both of which resulted in additional proceeds requiring reinvestment. Electing to sell certain securities and recognize the gains shifted earnings on these securities to the current period from future periods. In repositioning the portfolio, we expect yields on securities to decline in the near term from the reinvestment, but expect these investments to have a positive impact on our interest rate risk profile. Current modeling of our interest rate risk indicates we will have minimal change in our net interest margin in an up or down 100 basis point movement in interest rates, without any action by management. Our goal was to shorten the duration in our investment portfolio while not increasing the risk that the duration of our securities will extend significantly in a rising rate environment which would negatively impact the value of our securities. We believe our securities portfolio is in a position to participate in additional returns in an eventual rise in interest rates while minimizing the affects of prepayment speeds in the current down interest rate environment.

        Noninterest income increased $2.7 million, or 111%, to $5.2 million for the year ended December 31, 2001 compared with $2.5 million in 2000. The increase in noninterest income is due primarily to the $2.3 million, or 137%, increase in service charges on deposits and other commissions and fees as we increased our loans and deposit base primarily through the 2001 acquisitions of Professional and First Charter. Merchant card processing fees, net increased $220,000 to $327,000 for 2001 due to the First Charter acquisition as this was a business focus of First Charter. The increase in gain on sale of loans in 2001 compared to 2000 related to sales of the guaranteed portion of SBA loans. This activity tends to increase in a declining interest rate environment as experienced in 2001. We recorded $257,000 in relation to the increase in the cash surrender value of bank-owned life insurance policies during 2001 which related to our initial $10.0 million investment in July 2001.

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Noninterest Expense.

        The following tables set forth the details of noninterest expense for the years indicated. The columns entitled "Increase (Decrease)" set forth the year-over-year changes between 2002 and 2001 and 2001 and 2000.