FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON, DC. 20549


(Mark One)
(X)      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF SECURITIES EXCHANGE
            ACT OF 1934

For the quarterly period ended   September 30, 1996

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

For the transition period from __________________ to _____________________.


Commission File Number   0-13528

                             Pacific Capital Bancorp
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)
 
           California                                            77-0003875
-------------------------------                           ----------------------
(State or other jurisdiction of                              (I.R.S. Employer
 incorporation or organization)                           Identification Number)

              1001 S. Main Street, Salinas, California     93901
             ------------------------------------------------------
              (Address of principal executive offices)   (Zip Code)

                                 (408) 757-4900
             ------------------------------------------------------
              (Registrant's telephone number, including area code)

                                       N/A
             -------------------------------------------------------
             (Former name, former address and former fiscal year, if
                           changed since last report)

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.

Yes   X                  No
    ----                   ----

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

     Indicate the number of shares  outstanding of each of the issuer's  classes
of common stock, as of the latest practicable date.

                                                                 Outstanding at
         Class                                                  November 8, 1996
         -----                                                  ----------------
         Common stock, no par value                             2,600,174 Shares

This report contains a total of 18 pages.

                                      -1-

<PAGE>


                         PART I - FINANCIAL INFORMATION

ITEM 1                                                                      PAGE

PACIFIC CAPITAL BANCORP AND
SUBSIDIARIES FINANCIAL STATEMENTS

         CONSOLIDATED BALANCE SHEETS                                           3

         CONSOLIDATED STATEMENTS OF INCOME                                   4-5

         CONSOLIDATED STATEMENTS OF CASH FLOWS                                 6

         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                            7


ITEM 2

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS                                       9 - 16


                           PART II - OTHER INFORMATION

ITEM 5

OTHER EVENTS                                                                  17

SIGNATURES                                                                    18

                                      -2-


<PAGE>

<TABLE>

                               PART I - FINANCIAL INFORMATION
                          PACIFIC CAPITAL BANCORP AND SUBSIDIARIES
                                 CONSOLIDATED BALANCE SHEETS
                                         (UNAUDITED)
                            (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<CAPTION>
                                                                   September 30, December 31,
                                                                            1996         1995
Assets                                                                 ---------    ---------

<S>                                                                    <C>          <C>      
Cash and due from banks                                                $  28,482    $  24,891
Federal funds sold and other short term investments                       26,468       17,007
                                                                       ---------    ---------
      Total cash and equivalents                                          54,950       41,898
Investment securities:
   Available-for-sale securities, at fair value                           76,829       75,896
   Held-to-maturity securities, at amortized cost
     (fair value of $5,305 and $8,662, respectively)                       5,315        8,596

Loans available for sale at cost, which approximates market                5,034        3,876
Loans:
   Commercial                                                             62,008       49,862
   Consumer                                                               12,558       12,108
   Real estate - mortgage                                                144,304      126,048
   Real estate - construction                                             12,183       17,071
   Other                                                                  24,111        6,501
   Less deferred loan fees                                                  (320)        (246)
                                                                       ---------    ---------
      Total loans                                                        254,844      211,344
   Less allowance for possible loan losses                                (2,188)      (2,397)
                                                                       ---------    ---------
      Net loans                                                          252,656      208,947

Premises and equipment, net                                                9,156        7,523
Accrued interest receivable and other, net                                 8,570        6,843
                                                                       ---------    ---------

Total assets                                                           $ 412,510    $ 353,579
                                                                       =========    =========

Liabilities and shareholders' equity

Deposits:
   Demand, non-interest bearing                                        $  82,643    $  71,988
   Demand, interest bearing                                               59,000       56,527
   Savings and money market                                              104,191       97,087
   Time certificates                                                     118,888       82,217
                                                                       ---------    ---------
      Total deposits                                                     364,722      307,819

Accrued interest payable and other liabilities                             2,783        2,784
                                                                       ---------    ---------

Total liabilities                                                        367,505      310,603

Shareholders' equity:
Preferred stock; 20,000,000 shares authorized and unissued                  --           --
Common stock, no par value; 20,000,000 shares authorized;
   2,599,899 and 2,603,839 shares issued and outstanding at
   September 30, 1996 and at December 31, 1995, respectively              30,961       31,235
Retained earnings                                                         14,377       11,435
Net unrealized (losses) gains on available-for-sale securities              (333)         306
                                                                       ---------    ---------

Total shareholders' equity                                                45,005       42,976
                                                                       ---------    ---------

Total liabilities and shareholders' equity                             $ 412,510    $ 353,579
                                                                       =========    =========
<FN>

See accompanying notes to consolidated financial statements

</FN>
</TABLE>

                                            -3-

<PAGE>
<TABLE>

                          PACIFIC CAPITAL BANCORP AND SUBSIDIARIES
                              CONSOLIDATED STATEMENTS OF INCOME
                                         (UNAUDITED)
                     (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

<CAPTION>
                                                                     Nine months   Nine months
                                                                           ended         ended
                                                                   Sept 30, 1996 Sept 30, 1995
                                                                     -----------   -----------
Interest income:
<S>                                                                  <C>           <C>        
   Interest and fees on loans                                        $    16,704   $    15,353
   Interest on investment securities                                       3,860         2,870
   Interest on federal funds sold & short-term investments                   739           832
                                                                     -----------   -----------
     Total interest income                                                21,303        19,055
                                                                     -----------   -----------
Interest expense:
   Demand, interest bearing                                                  434           422
   Savings                                                                 2,066         2,082
   Time certificates                                                       4,139         2,513
                                                                     -----------   -----------
     Total interest expense                                                6,639         5,017
                                                                     -----------   -----------
     Net interest income                                                  14,664        14,038
 Provision for possible loan losses                                         --            --
                                                                     -----------   -----------
Net interest income after provision for possible loan losses              14,664        14,038
                                                                     -----------   -----------

Other income:
   Service charges                                                         1,062         1,074
   Gain on sale of loans                                                      21            15
   Mortgage banking fees                                                     123            95
   Net gain (loss) on securities transactions                                 15           (18)
   Other                                                                     295           264
                                                                     -----------   -----------
     Total other income                                                    1,516         1,430
                                                                     -----------   -----------

Other expenses:
   Salaries and benefits                                                   5,306         4,852
   Occupancy                                                               1,076         1,024
   Equipment                                                                 800           772
   Advertising and promotion                                                 358           326
   Stationary and supplies                                                   241           229
   Legal and professional fees                                               535           409
   Regulatory assessments                                                     67           373
   Other operating                                                         1,110         1,069
                                                                     -----------   -----------
     Total other expenses                                                  9,493         9,054

Earnings before income taxes                                               6,687         6,414

Income taxes                                                               2,575         2,491
                                                                     -----------   -----------

Net income                                                           $     4,112   $     3,923
                                                                     ===========   ===========

Net income per share                                                 $      1.50   $      1.44
                                                                     ===========   ===========

Weighted average shares outstanding                                    2,740,857     2,722,082
                                                                     ===========   ===========
<FN>
See accompanying notes to consolidated financial statements
</FN>
</TABLE>
                                             -4-


<PAGE>

<TABLE>

                    PACIFIC CAPITAL BANCORP AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (UNAUDITED)
               (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

<CAPTION>
                                                                    Three months  Three months
                                                                           ended         ended
                                                                   Sept 30, 1996 Sept 30, 1995
                                                                   -------------   -----------
Interest income:
<S>                                                                  <C>           <C>        
   Interest and fees on loans                                        $     5,847   $     5,108
   Interest on investment securities                                       1,524         1,125
   Interest on federal funds sold                                             68           373
                                                                     -----------   -----------
     Total interest income                                                 7,439         6,606
                                                                     -----------   -----------
Interest expense:
   Demand, interest bearing                                                  155           145
   Savings                                                                   691           706
   Time certificates                                                       1,533         1,074
                                                                     -----------   -----------
     Total interest expense                                                2,379         1,925
                                                                     -----------   -----------
     Net interest income                                                   5,060         4,681
 Provision for possible loan losses                                         --            --
                                                                     -----------   -----------
 Net interest income after provision for possible loan losses              5,060         4,681
                                                                     -----------   -----------

Other income:
   Service charges                                                           356           351
   Gain on sale of loans                                                       6            (1)
   Mortgage banking fees                                                      22            40
   Net gain (loss) on securities transactions                               --              (4)
   Other                                                                      92            92
                                                                     -----------   -----------
     Total other income                                                      476           478
                                                                     -----------   -----------

Other expenses:
   Salaries and benefits                                                   1,766         1,645
   Occupancy                                                                 360           369
   Equipment                                                                 268           281
   Advertising and promotion                                                 132           134
   Stationary and supplies                                                    90            75
   Legal and professional fees                                               267           131
   Regulatory assessments                                                     23            (1)
   Other operating                                                           433           375
                                                                     -----------   -----------
     Total other expenses                                                  3,339         3,009

Earnings before income taxes                                               2,197         2,150

Income taxes                                                                 844           839
                                                                     -----------   -----------

Net income                                                           $     1,353   $     1,311
                                                                     ===========   ===========

Net income per share                                                 $      0.49   $      0.48
                                                                     ===========   ===========


Weighted average shares outstanding                                    2,737,657     2,720,462
                                                                     ===========   ===========
<FN>

See accompanying notes to consolidated financial statements
</FN>

</TABLE>
                                            -5-


<PAGE>

<TABLE>

                           PACIFIC CAPITAL BANCORP AND SUBSIDIARIES
                             CONSOLIDATED STATEMENTS OF CASH FLOWS
              For the Nine months Ended September 30, 1996 and September 30, 1995
                                          (UNAUDITED)
                                        (IN THOUSANDS)

<CAPTION>
                                                                   September 30, September 30,
                                                                            1996         1995
                                                                        --------     --------

Cash flows from operating activities:
<S>                                                                     <C>         <C>     
Net income                                                              $  4,112    $  3,923
Adjustments to reconcile net income to net cash provided by
     operating activities:
   Depreciation and amortization                                             873         677
   Provision for possible loan losses                                       --          --
   (Gain) loss on sale of investment securities, net                         (15)         18
   Net originations of loans held for sale                                (1,158)     (1,320)
   Gain on sale of loans                                                     (21)        (16)
   Deferral of loan origination fees (costs)                                  50         (11)
   Change in accrued interest receivable and other assets                 (2,366)       (313)
   Change in accrued interest payable and other liabilities                   20         865
                                                                        --------    --------
Net cash provided by  operating activities                                 1,495       3,823
                                                                        --------    --------

Investing activities:
   Net change in loans                                                   (43,759)      2,980
   Maturities of investment securities                                     4,158      14,736
   Purchases of investment securities                                    (27,680)    (46,620)
   Proceeds from sale of available-for-sale securities                    25,695      24,839
   Capital expenditures, net                                              (2,316)       (718)
                                                                        --------    --------
Net cash used in investing activities                                    (43,902)     (4,783)
                                                                        --------    --------

Financing activities:
   Net increase in deposits                                               56,903      12,618
   Cash paid for retirement of stock                                        (551)       (111)
   Proceeds from exercise of options                                         277         157
   Cash paid for dividends                                                (1,170)       (930)
                                                                        --------    --------
Net cash provided by financing activities                                 55,459      11,734
                                                                        --------    --------

Net increase in cash and equivalents                                      13,052      10,774
Cash and equivalents beginning of period                                  41,898      42,262
                                                                        --------    --------
Cash and equivalents at end of period                                   $ 54,950    $ 53,036
                                                                        ========    ========

Supplemental disclosures of cash flow information:
    Cash paid during the period
     Interest                                                              7,378       5,707
     Income taxes                                                          2,158       2,525

<FN>

See accompanying notes to consolidated financial statements

</FN>
</TABLE>
                                            -6-

<PAGE>


                    PACIFIC CAPITAL BANCORP AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

Note 1 - Basis of Presentation

                  In the  opinion of the  Company,  the  unaudited  consolidated
                  financial  statements,   prepared  on  the  accrual  basis  of
                  accounting, contain all adjustments (consisting of only normal
                  recurring  adjustments)  which are necessary to present fairly
                  the  financial  position of the Company  and  subsidiaries  at
                  September  30, 1996 and December 31, 1995,  the results of its
                  operations  and the  statements  of cash flows for the periods
                  ended September 30, 1996 and 1995.

                   Certain   information  and  footnote   disclosures   normally
                   presented in financial statements prepared in accordance with
                   generally accepted  accounting  principles have been omitted.
                   The results of operations for the period ended  September 30,
                   1996 are not necessarily  indicative of the operating results
                   for the full year ending December 31, 1996.

In October  1995,  the FASB  issued  SFAS No. 123,  Accounting  for  Stock-Based
                   Compensation.  SFAS No. 123 establishes  financial accounting
                   and reporting standards for stock-based employee compensation
                   plans.   Those  plans  include  all   arrangements  by  which
                   employees receive shares of stock or other equity instruments
                   of  the  employer  or  the  employer  incurs  liabilities  to
                   employees  in  amounts  based on the price of the  employer's
                   stock.  Examples are stock  options,  restricted  stock,  and
                   stock  appreciation  rights.  This  statement  defines a fair
                   value based method of accounting for an employee stock option
                   or similar equity instrument. Under this method, compensation
                   costs are  measured  at the grant  date based on the value of
                   the award and are recognized over the service  period,  which
                   is the vesting  period.  SFAS No. 123 encourages but does not
                   require  employers  to adopt  the new  method in place of the
                   provisions of Accounting  Principles  Board Opinion (APB) No.
                   25, Accounting for Stock Issued to Employees.  This statement
                   applies to fiscal years beginning after December 15, 1995. On
                   January 1, 1996,  the  Company  adopted  SFAS No. 123 and has
                   elected  to use the  method  prescribed  in APB No.  25.  The
                   Company does not  anticipate  that the  required  disclosures
                   will have a material  impact on the  financial  condition  or
                   results of operations.

Note 2 - Consolidation

                  The consolidated  financial statements include the accounts of
                  the Company and its wholly-owned subsidiaries,  First National
                  Bank of Central California,  (the "Bank"), and Pacific Capital
                  Services  Corporation,  an inactive  subsidiary.  All material
                  intercompany accounts and transactions have been eliminated in
                  consolidation.

Note 3 - Loans to Directors

                  In the ordinary course of business, the Company has made loans
                  to  directors  of the  Company  which at  September  30,  1996
                  amounted to approximately $4,980,000.

Note 4 - Commitments

                   The  Company  had  outstanding  standby  letters of credit of
                   approximately $5,650,000 at September 30, 1996.

Note 5 - Net Income Per Share and Dividends

                  Net income per share is computed  using the  weighted  average
                  number  of  shares  of common  and  common  equivalent  shares
                  outstanding (as adjusted retroactively to reflect the 5% stock
                  dividend paid on December 1, 1995). On January 23, 1996, April
                  23,  1996,  and July 23, 1996 the Company  declared  $0.15 per
                  share cash  dividends to  shareholders  of record on March 15,
                  1996,  June 14, 1996,  and September 16, 1996 payable on March
                  29, 1996, June 28, 1996, and September 30, 1996, respectively.

                                       -7-


<PAGE>

Note 6 - Taxes

                  As of September 30, 1996, the Company has a deferred tax asset
                  of approximately $2,022,000.  The asset results primarily from
                  the  provisions for possible loan losses and  depreciation  of
                  premises and equipment,  which are recognized in the financial
                  statements but are not yet deductible for income tax reporting
                  purposes.  Management  of the  Company  believes  that the net
                  deferred  tax  asset is fully  realizable  through  sufficient
                  taxable  income  within  carryback  periods and  current  year
                  taxable income.

Note 7 - Proposed Merger

                  On July 18, 1996,  the Company  entered into an Agreement  and
                  Plan  of  Reorganization   ("Agreement")   with  South  Valley
                  Bancorporation   (Commission   File  #  2-78293-LA),   ("South
                  Valley")  pursuant to which  South  Valley will merge with and
                  into  the  Company  in a  merger  transaction  expected  to be
                  accounted for as a pooling-of-interests.  The Company plans to
                  issue .92 shares of Pacific  Capital  Bancorp common stock for
                  each share of South Valley  common  stock,  subject to certain
                  potential downward adjustments described in the Agreement.  It
                  is anticipated that the transaction will be consummated during
                  the fourth quarter of 1996. Based on the outstanding shares of
                  South Valley as of September 30, 1996,  and the exchange ratio
                  specified  in the  Agreement,  the  Company  expects  to issue
                  approximately  1,285,000 shares in connection with the merger.
                  As of  September  30,  1996,  South Valley had total assets of
                  $183,230,000.


                                      -8-

<PAGE>


                    PACIFIC CAPITAL BANCORP AND SUBSIDIARIES
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                                       OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Overview of Changes in the Financial Statements

         As used herein,  the term Company shall mean the Company or the Bank as
the context  requires.  Net income for the nine months ended  September 30, 1996
was  $4,112,000  or $1.50 per share  compared to  $3,923,000  or $1.44 per share
during the same period in 1995.  This 4.8%  increase in net income is due mainly
to a $626,000  increase in net interest  income  partially  offset by a $439,000
increase in non-interest  expense. The increase in net interest income is due to
growth in average  total loans of  $32,570,000  partially  offset an increase in
average  interest  bearing  deposits of $39,052,000 as compared to the same 1995
period.

         Outstanding  loans were  $254,844,000 at September 30, 1996 compared to
$211,344,000 at December 31, 1995, a $43,500,000 or 20.6% increase. The increase
in  outstanding  loans from  December  31, 1995 to September  30, 1996  resulted
primarily  from an increase in real estate  mortgage  loans of  $18,256,000,  an
increase in commercial  loans of  $12,146,000  and an increase in other loans of
$17,610,000  partially offset by a decrease in real estate construction loans of
$4,888,000

         Federal Funds Sold and Investment Securities at September 30, 1996 were
$108,612,000,  a $7,113,000 or 6.5%  increase  from December 31, 1995.  This was
primarily due to the increase in total deposits which resulted in an increase in
cash invested in Federal Funds.

         The Company's  total  deposits at September 30, 1996 were  $364,722,000
compared to  $307,819,000 at December 31, 1995, a $56,903,000 or 18.5% increase.
Non-interest  bearing demand deposits  increased  $10,655,000,  interest bearing
demand  deposits  increased  $2,473,000  and  savings and money  market  deposit
accounts increased $7,104,000 in the first nine months of 1996.  Certificates of
deposit  increased by $36,671,000 or 44.6% during the first nine months of 1996.
Management  believes  that the  growth in  deposits  is a result  of the  recent
strength in the tourism and agribusiness  industries  within the local economies
in which the Company  operates.  The loan to deposit ratio at September 30, 1996
was 69.9% as compared to 68.6% at December 31, 1995. The Company's  total assets
as of September 30, 1996 increased 16.7% compared to year end 1995.


Loans

         Outstanding total loans averaged $233,915,000 for the nine months ended
September  30, 1996  compared to  $201,345,000  for the same period in 1995,  an
increase of  $32,570,000,  or 16.2%.  This increase in loans is due to increased
loan demand from qualified borrowers and reflects the strength of the economy in
most of the  primary  markets  which  the  Company  serves.  The  Company  lends
primarily to small and medium  sized  businesses  within its markets,  which are
comprised principally of the Salinas, Watsonville,  Monterey and Carmel areas. A
majority  of  the  Company's  loan  portfolio   consists  of  loans  secured  by
commercial, industrial and residential real estate.


Quality of Loans

         The Company follows the policy of discontinuing the accrual of interest
income and  reversing  any  accrued  and  unpaid  interest  when the  payment of
principal  or interest is 90 days past due unless the loan is both  well-secured
and in the process of collection.

         The  composition  of  non-performing  loans as of  September  30, 1996,
December 31, 1995, and September 30, 1995 is summarized in the following table.


                                      -9-

<PAGE>

                               Nonperforming Loans
                             (Dollars in Thousands)

                                        September       December       September
                                           30,             30,            30,
                                          1996            1995           1995
                                          ----            ----           ----
Accruing loans
past due 90 days
or more
      Commercial                           $    0         $    0         $    0
      Consumer                                 11              1              0
      Real Estate                             147            140            423
                                           ------         ------         ------
Total                                      $  158         $  141         $  423

Nonaccrual loans
      Commercial                              663            110            229
      Consumer                                108            136            151
      Real Estate                           1,195            747            834
                                           ------         ------         ------
Total                                      $1,966         $  993         $1,214

Total Nonperforming
Loans                                      $2,124         $1,134         $1,637
                                           ======         ======         ======

Nonperforming Loans
To Total Loans                               0.83%          0.54%          0.83%

Allowance For Possible
Loan Losses To Total
Non Performing Loans                       103.01%        211.38%        137.14%

         The  increase  in  non-performing  loans is  primarily  due to one real
estate loan for $800,000  which has become  delinquent  and is  consequently  on
non-accrual  status as of  September  30,  1996.  The Company does not expect to
sustain  losses  from  any  of  the  non-performing  loans  in  excess  of  that
specifically provided for in the allowance for possible loan losses.  Currently,
the Company's level of non-performing loans to total loans is below that of peer
banks.

         In addition to the above, the Company holds six Other Real Estate Owned
(OREO) properties, which aggregate $1,344,000. In all cases, the amount recorded
represented the lesser of the loan balance or current fair value obtained from a
current appraisal less anticipated selling costs; therefore, any identified loss
has already been recognized.

         Inherent in the  lending  function is the fact that loan losses will be
experienced  and that the risk of loss will vary with the type of loan  extended
and the creditworthiness of the borrower. To reflect the estimated risks of loss
associated  with  its  loan  portfolio,  additions  are  made  to the  Company's
allowance  for possible loan losses.  As an integral  part of this process,  the
allowance for possible loan losses is subject to review and possible  adjustment
as a  result  of  management's  assessment  of risk or  regulatory  examinations
conducted  by  governmental  agencies.  The  Company's  entire  allowance  is  a
valuation  allocation  created by direct charges against  operations through the
provision for possible loan losses.

         The provision for possible loan losses  charged  against  operations is
based upon the actual net loan losses  incurred plus an amount for other factors
which, in management's judgment, deserve recognition in estimating possible loan
losses.  The Company  evaluates  the adequacy of its allowance for possible loan
losses on a quarterly  basis.  For the last several years,  the Company has also
contracted with an independent  loan review  consulting firm to evaluate overall
credit quality and the adequacy of the allowance for possible loan losses.  Both
internal and external evaluations take into account the following: specific loan
conditions as determined by  management;  the  historical  relationship  between
charge-offs  and the level of the  allowance;  the estimated  future loss in all
significant  loans;  known  deterioration in concentrations  of credit,  certain
classes of loans or pledged  collateral;  historical  loss  experience  based on
volume and types of loans;  the results of any independent  review or evaluation
of the loan  portfolio  quality  conducted  by or at the  direction  of  Company
management or by bank regulatory agencies;  trends in portfolio volume, maturity
and  composition;   off-balance   sheet  credit  risk;   volume  and  trends  in
delinquencies and nonaccruals;  lending policies and procedures  including those
for

                                      -10-


<PAGE>


charge-off,  collection and recovery; national and local economic conditions and
their effects on specific  local  industries;  and the  experience,  ability and
depth of lending management and staff. These factors are essentially  judgmental
and may not be reduced to a mathematical formula.

         The Company closely monitors the local markets in which it conducts its
lending activities. The overall increase in loan demand from qualified borrowers
during  the past  year is  indicative  of the  strength  in the  local  economic
climate.

<TABLE>
         The table  set forth  below  summarizes  the  actual  loan  losses  and
provision for possible losses for the periods ended September 30, 1996, December
31, 1995, and September 30, 1995.

                          Charge-Off/Recovery Activity
                             (Dollars in Thousands)

<CAPTION>
                                                Nine months             Year              Nine months
                                                   Ended                Ended                Ended
                                            September 30, 1996    December 31,1995    September 30, 1995
                                            ------------------    ----------------    ------------------

<S>                                             <C>                   <C>                  <C>     
Total Loans Outstanding                         $254,844              $211,344             $197,618

Average Net Loans                               $233,915              $201,360             $201,345

Allowance Balance
Beginning Of Period                                 2,397                2,438                2,438

     Charge-Offs By Loan Category
         Commercial                                   151                  129                  114
         Consumer                                     111                   61                   49
         Real Estate                                    0                  131                  130
         Other                                          0                    0                    0
                                                  -------              -------              -------
         Total                                      $ 262                $ 321               $  293
                                                  -------              -------              -------

     Recoveries By Loan Category
         Commercial                                     5                   58                   28
         Consumer                                      31                   38                   29
         Real Estate                                   17                   49                   43
         Other                                          0                    0                    0
                                                  -------              -------              -------
         Total                                       $ 53                $ 145                 $100
                                                  -------              -------              -------

Net Charge-Offs                                     $ 209                $ 176                $ 193
                                                  -------              -------              -------

Provision Charged
To Expense                                             $0                 $135                   $0

Allowance Balance
End Of Period                                     $ 2,188              $ 2,397              $ 2,245
                                                  =======              =======              =======

Allowance For Possible
Loan Losses
To Total Loans                                      0.86%                 1.13%                1.14%

Annualized Net Charge-
Offs To Average Loans                               0.12%                 0.09%                0.13%

</TABLE>

         The Company did not provide an  additional  provision to the  allowance
for  possible  loan losses for the nine months  ended  September  30,  1996,  or
September 30, 1995,  primarily due to  management's  recognition of the strength
and growth of the local economy,  resulting in a lower level of classified loans
and the reduced potential of future charge-offs.


                                      -11-


<PAGE>

         The  provision  for possible loan losses  charged  against  earnings is
based upon an analysis of the actual migration of loans to losses plus an amount
for other factors  which,  in  management's  judgment,  deserve  recognition  in
estimating  possible  loan losses.  While these  factors  cannot be reduced to a
mathematical  formula,  it is management's  view that the allowance for possible
loan losses of  $2,188,000  or .86% of total loans was  adequate as of September
30, 1996.

Results of Operations
                      Nine months Ended September 30, 1996
                                  Compared with
                      Nine months Ended September 30, 1995

         Net income for the nine months ended September 30, 1996 was $4,112,000,
an  increase  of  $189,000  or 4.8% as  compared  to the same 1995  period.  The
increase  in net income for the period was due  primarily  to an increase in net
interest  income of $626,000  partially  offset by an  increase in  non-interest
expense of  $439,000.  In addition,  other income  increased by $86,000 over the
same period in 1995.  The  increase in net  interest  income is due to growth in
average total loans of  $32,570,000  partially  offset by an increase in average
interest bearing deposits of $39,052,000 compared to the same 1995 period.

         The average  balance of interest  earning assets during the nine months
ended September 30, 1996 was $342,446,000,  a $44,290,000 or 14.9% increase over
the comparable  1995 period.  The Company's  average yield on earning assets for
the nine months ended  September  30, 1996  decreased  to 8.3%  compared to 8.5%
during the comparable period in 1995. Total interest income increased $2,248,000
or 11.8% for the nine months ended  September 30, 1996 compared to the same 1995
period due to an increase in average interest earning assets of $44,290,000.

         Average  deposits for the Company for the nine months  ended  September
30, 1996 were  $334,172,000,  a $44,185,000  or 15.2%  increase  compared to the
period ended  September 30, 1995.  The  Company's  average cost of funds for the
nine  months  ended  September  30, 1996 was 3.4% which  yielded a net  interest
margin of 5.7%.  This  compares  to an  average  cost of funds of 3.0% and a net
interest  margin of 6.3% for the  comparable  1995 period.  Interest  expense of
$6,639,000 for the nine months ended  September 30, 1996 was $1,622,000 or 32.3%
over the comparable 1995 period due to an increase in average  interest  bearing
deposits of $39,052,000  and an increase in the average rate paid on deposits of
0.4%. Net interest income for the nine months ended September 30, 1996 increased
$626,000 or 4.5% and resulted from the increase of $2,248,000 in total  interest
income partially offset by an increase of $1,622,000 in total interest expense.

         The Company did not make any additional provisions to the allowance for
possible  loan loss for the nine months ended  September  30, 1996 or 1995.  The
analysis  of the loan  portfolio  completed  by the Company  indicates  that the
current allowance for loan losses is adequate based on the Company's  calculated
provision requirements.

         Total loans  charged-off  net of  recoveries  for the nine months ended
September 30, 1996  amounted to $209,000  compared to $193,000 net of recoveries
for the same period in 1995.  Annualized net loan charge-offs as a percentage of
average loans for the nine months ended September 30, 1996 was 0.12% compared to
0.13% for the nine months ended  September  30, 1995 and .09% for the year ended
December 31, 1995.

         Total other income was $1,516,000  for the nine months ended  September
30, 1996, an $86,000 or 6.0% increase  compared to the same period of 1995. Gain
on sale of investment  securities increased by $33,000,  other fees increased by
$31,000,  and mortgage banking fees increased  $28,000 for the nine months ended
September 30, 1995 partially  offset by a decrease in deposit service charges of
$12,000 as compared to the same period in 1995.

         Salaries and benefits  expense for the nine months ended  September 30,
1996 was  $5,306,000,  a $454,000  or 9.4%  increase  over the  comparable  1995
period.  This variance  resulted  primarily from normal salary  increases and an
increase in the Company's  health insurance  premiums.  The Company employed 163
full time  equivalent  employees at September 30, 1996 compared to 165 full time
equivalent employees at December 31, 1995 and 158 full time equivalent employees
at September 30, 1995.

         Total other  expenses,  excluding  salaries and benefits,  for the nine
months ended September 30, 1996, was $4,187,000, a $15,000 or 0.4% decrease from
the  comparable  1995 period.  This decrease was the result of a decrease in the
Company's  FDIC  Assessment of $306,000  compared to the same period in 1995. In
addition,  

                                      -12-

<PAGE>

legal and professional  fees increased from $409,000 in 1995 to $535,000 in 1996
primarily due to legal and accounting fees incurred due to the pending merger of
South Valley  Bancorporation with and into Pacific Capital Bancorp. (See Item 5,
Other  Information)  Other variances  included occupancy expense which increased
$52,000 due to normal rent increases and costs associated with the remodeling of
the  Company's  Salinas  Main Branch.  Advertising  and  promotion  expense also
increased  during the nine months  ended  September  30, 1996 by $32,000 or 9.8%
over the comparable period in 1995.

         Applicable  income  taxes  of  $2,575,000  for the  nine  months  ended
September 30, 1996 were $84,000,  or 3.4% more than the comparable  1995 period.
The Company's  effective  tax rate for the nine months ended  September 30, 1996
was 38.5% compared to 38.8% for the same period in 1995.

Results of Operations
                      Three Months Ended September 30, 1996
                                  Compared with
                      Three Months Ended September 30, 1995

         Net income of $1,353,000 for the three months ended  September 30, 1996
increased by $42,000 or 3.2% as compared to the same 1995  period.  The increase
in net income for the period was due  primarily  to an increase in net  interest
income of  $379,000  mostly  offset by an increase  in  non-interest  expense of
$330,000.

         The average balance of interest  earning assets during the three months
ended  September  30, 1996 was  $361,637,000,  a  $49,578,000  increase over the
comparable  1995  period  due  to  a  $49,087,000   increase  in  average  loans
outstanding  during the quarter.  The Company's  average yield on earning assets
for the three months ended September 30, 1996 decreased to 8.2% from 8.4% during
the  comparable  period in 1995.  The  decrease  in  average  yields is due to a
decrease in rates paid on adjustable rate loans within the loan portfolio due to
rate  decreases in the Prime Rate over the latter part of 1995.  Total  interest
income increased $833,000 or 12.6% for the three months ended September 30, 1996
compared to the same 1995 period due to the increase in average interest earning
assets.

         Average  deposits  for the  Company for the three  month  period  ended
September 30, 1996 were  $355,621,000,  a $52,224,000 or 17.2% increase compared
to the three months ended  September  30, 1995.  The  Company's  average cost of
funds for the three months ended September 30, 1996 was 3.4% which yielded a net
interest margin of 5.6%. This compares to an average cost of funds of 3.2% and a
net  interest  margin of 6.0% for the same period in 1995.  Interest  expense of
$2,379,000  for the three months ended  September 30, 1996 was $454,000 or 23.6%
over the comparable 1995 period due to an increase in average  interest  bearing
deposits of $43,218,000 and, to a lesser extent, an increase in the average rate
paid on deposits of 0.2%.  Net interest  income for the three month period ended
September 30, 1996 increased  $379,000 or 8.1% and resulted from the increase of
$833,000 in total interest  income and an increase of $454,000 in total interest
expense.

         Total loan  charge-offs  net of  recoveries  for the three months ended
September 30, 1996 amounted to $155,000,  compared to $177,000 of net recoveries
for the same period in 1995.  Annualized net loan charge-offs as a percentage of
average loans for the three months ended  September 30, 1996 was 0.25%  compared
to 0.35% for the three months ended September 30, 1995.

         Total other income was  $476,000  for the three months ended  September
30,  1996,  a $2,000  or 0.4%  decrease  compared  to the same  period  of 1995.
Mortgage  banking fees decreased by $18,000 or 45.0% during the third quarter of
1996 compared to the same period in 1995.  Other variances  include gain on sale
of loans which  increased by $7,000 and deposit  service charges which increased
from $351,000 to $356,000 in the third quarter of 1996.

         Salaries and benefits  expense for the three months ended September 30,
1996 was  $1,766,000,  a $121,000  or 7.4%  increase  over the  comparable  1995
period,  and resulted  primarily from normal salary increases and an increase in
the  Company's  group  insurance  premiums.  The Company  employed 161 full time
equivalent  employees at September 30, 1996 compared to 165 full time equivalent
employees  at  December  31,  1995 and 158 full  time  equivalent  employees  at
September 30, 1995.

         Total other expenses,  excluding  salaries and benefits,  for the three
months ended  September 30, 1996, was  $1,573,000,  a $209,000 or 15.3% increase
from the  comparable  1995  period.  The  increase  resulted  primarily  from an
increase in legal and professional fees of $136,000 principally  associated with
the pending merger of South Valley  Bancorporation with and into Pacific Capital
Bancorp.  (See Item 5, Other  Information)  

                                      -13-

<PAGE>

Other  expense  also  increased  in the third  quarter of 1996 to $433,000  from
$375,000 in the same period in 1995 due  primarily  to expense  associated  with
OREO.

         Applicable  income  taxes  of  $844,000  for  the  three  months  ended
September 30, 1996 were $5,000,  or 0.6% more than the  comparable  1995 period.
The Company's  effective tax rate for the three months ended  September 30, 1996
was 38.4% compared to 39.0% for the same period in 1995.

Liquidity Management

         Liquidity   represents   the   ability  of  the  Company  to  meet  the
requirements  of customer  borrowing  needs as well as  fluctuations  in deposit
flows.

         Core  deposits,  which  include  demand,  savings and interest  bearing
demand accounts,  money market accounts and time deposits of less than $100,000,
provide a relatively stable funding base. Core deposits averaged $183,019,000 or
43.1% of average total assets during the three months ended  September 30, 1996,
as compared to $158,984,000 or 45.9% of average total assets for the same period
in 1995. At September 30, 1996 core deposits were $184,672,000 or 44.8% of total
assets, compared to $164,574,000 or 46.5% of total assets at year end 1995.

         The Company's  principal  sources of asset  liquidity are cash and cash
due from banks, time deposits with other financial  institutions,  Federal Funds
sold, short term investments,  and available-for-sale  investment securities. At
September  30, 1996 these  sources  represented  $131,779,000  or 36.1% of total
deposits  compared to  $117,794,000  or 38.3% at year end 1995. This increase in
liquid assets for the nine months ended  September  30, 1996 resulted  primarily
from an increase in Federal Funds sold and short term investments.

         In the opinion of management,  there are  sufficient  resources to meet
the liquidity needs of the Company at present and projected future levels.

Capital Resources

         Capital  management  is a  continuous  process  of  providing  adequate
capital for current needs and  anticipated  future  growth.  Capital serves as a
source of funds for the  acquisition  of fixed and  other  assets  and  protects
depositors against potential losses. As the Company's assets increase, so do its
capital requirements.

         The  Company  and  the  Bank  are  subject  to  Federal  Reserve  Board
guidelines and regulations of the  Comptroller of the Currency  ("Comptroller"),
respectively,   governing  capital  adequacy.  The  Federal  Reserve  Board  has
established  final risk-based and leverage  capital  guidelines for bank holding
companies  which  are the  same as the  Comptroller's  capital  regulations  for
national banks.

         The Federal Reserve Board capital guidelines for bank holding companies
and  the  Comptroller's   regulations  for  national  banks  set  total  capital
requirements and define capital in terms of "core capital elements"  (comprising
Tier 1 capital) and "supplemental capital elements" (comprising Tier 2 capital).
Tier 1 capital is generally defined as the sum of the core capital elements less
goodwill.  The  following  items are defined as core  capital  elements:  common
stockholders' equity,  qualifying  noncumulative  perpetual preferred stock, and
minority  interests  in  the  equity  accounts  of  consolidated   subsidiaries.
Supplementary  capital  elements  include:  allowance  for loan and lease losses
(which cannot exceed 1.25% of an institution's risk weighted assets),  perpetual
preferred stock not qualifying as core capital,  hybrid capital  instruments and
mandatory   convertible  debt  instruments,   and  term  subordinated  debt  and
intermediate-term  preferred stock.  The maximum amount of supplemental  capital
elements which qualifies as Tier 2 capital is limited to 100% of Tier 1 capital,
net of goodwill.

         Risk-based   capital   ratios  are   calculated   with   reference   to
risk-weighted assets,  including both on and off-balance sheet exposures,  which
are multiplied by certain risk weights  assigned by the Federal Reserve Board to
those assets.  Both bank holding  companies  and national  banks are required to
maintain a minimum ratio of qualifying total capital to risk-weighted  assets of
8%, at least one-half of which must be in the form of Tier 1 capital.  There are
presently  four  risk-weight   categories:   0%  for  cash  and  unconditionally
guaranteed government  securities;  20% for conditionally  guaranteed government
securities;  50% for performing  residential  real estate loans secured by first
liens; and 100% for commercial loans.

                                      -14-

<PAGE>

         The Federal Reserve Board and the Comptroller  also have  established a
minimum  leverage  ratio of 3% Tier I capital to total  assets for bank  holding
companies and national banks that have received the highest composite regulatory
rating and are not  anticipating or experiencing  any  significant  growth.  All
other institutions will be required to maintain a leverage ratio of at least 100
to 200 basis points above the 3% minimum.

         The following  tables show the Company's and the Bank's  risk-based and
leverage  capital  ratios as of September  30, 1996 and  December  31, 1995.  As
indicated  in  these  tables,  the  Company's  and  the  Bank's  capital  ratios
significantly  exceeded the minimum  capital levels  required by current federal
regulations.  Management believes that the Company and the Bank will continue to
meet their respective minimum capital requirements in the foreseeable future.

                            Risk Based Capital Ratio
                             (Dollars in Thousands)
                                   (Unaudited)

                                              Pacific Capital Bancorp
                                 September 30, 1996           December 31, 1995
                                 ------------------          ------------------
                                 Amount      Ratio           Amount       Ratio
                                 ------      -----           ------       -----

Tier 1 Capital                  $45,005      14.96%          $42,976      17.60%

Tier 1 Capital Minimum
         Requirement             12,035       4.00%           9,765        4.00%
                                -------                     -------

Excess                          $32,970      11.79%         $33,211       13.60%
                                =======                     =======

Total Capital                   $47,193      15.69%         $45,373       18.59%

Total Capital Minimum
         Requirement             24,070       8.00%          19,529        8.00%
                                -------                     -------

Excess                          $23,123       7.69%         $25,844       10.59%
                                =======                     =======

Risk Adjusted Assets                  $300,870                     $244,114
                                      ========                     ========


                                    First National Bank of Central California
                                 September 30, 1996           December 31, 1995
                                 ------------------          ------------------
                                 Amount      Ratio           Amount       Ratio
                                 ------      -----           ------       -----

Tier 1 Capital                  $40,731      13.73%         $40,532       16.78%

Tier 1 Capital Minimum
         Requirement             11,864        4.00%          9,662        4.00%
                                -------                     -------

Excess                          $28,867        9.73%        $30,870       12.78%
                                =======                     =======

Total Capital                   $42,919       14.47%        $42,929       17.77%

Total Capital Minimum
         Requirement             23,728        8.00%         19,325        8.00%
                                -------                     -------

Excess                          $19,191        6.47%        $23,604        9.77%
                                =======                     =======
 
Risk Adjusted Assets                   $296,600                    $241,561
                                       ========                    ========


                                      -15-

<PAGE>

                                 Leverage Ratio
                             (Dollars in Thousands)
                                   (Unaudited)

                                             Pacific Capital Bancorp
                                 September 30, 1996         December 31, 1995
                                 ------------------        ------------------
                                 Amount      Ratio         Amount      Ratio
                                 ------      -----         ------      -----

Tier 1 Capital to Average
         Total Assets           $45,005      11.15%       $42,976      12.00%

Minimum Leverage                $12,104 to    3.00% to    $10,747 to    3.00% to
         Requirement            $20,173       5.00%       $17,912       5.00%

Excess                          $24,832 to    6.15% to    $25,064 to    7.00% to
                                $32,901       8.15%       $32,229       9.00%

Average Total Assets                  $403,452                       $358,232
                                      ========                       ========

                                    First National Bank of Central California
                                 September 30, 1996        December 31, 1995
                                 ------------------        ------------------
                                 Amount      Ratio         Amount     Ratio
                                 ------      -----         ------     -----

Tier 1 Capital to Average
         Total Assets           $40,731      10.18%       $40,532      11.38%

Minimum Leverage                $11,999 to    3.00% to    $10,685 to    3.00% to
         Requirement            $19,998       5.00%       $17,809       5.00%

Excess                          $20,733 to    5.18% to    $22,723 to    6.38% to
                                $28,732       7.18%       $29,847       8.38%

Average Total Assets                   $399,963                 $356,173
                                       ========                 ========

         Federal banking laws impose  restrictions  upon the amount of dividends
the Bank may declare to the Company.  Federal laws also impose restrictions upon
the  amount of loans or  advances  that the Bank may extend to the  Company.  In
management's opinion, these do not affect the ability of the Company to meet its
cash obligations.

                                      -16-

<PAGE>

                          PART II -- OTHER INFORMATION



Item 5.  Other Information

                   On July 18, 1996,  the Company  entered into an Agreement and
                   Plan  of  Reorganization   ("Agreement")  with  South  Valley
                   Bancorporation   (Commission  File  #  2-78293-LA),   ("South
                   Valley")  pursuant to which South  Valley will merge with and
                   into the  Company  in a  merger  transaction  expected  to be
                   accounted for as a pooling-of-interests. The Company plans to
                   issue .92 shares of Pacific  Capital Bancorp common stock for
                   each share of South Valley common  stock,  subject to certain
                   potential downward adjustments described in the Agreement. It
                   is  anticipated  that  the  transaction  will be  consummated
                   during the fourth  quarter of  1996.Based  n the  outstanding
                   shares of South  Valley as of  September  30,  1996,  and the
                   exchange  ratio  specified in the Definitive  Agreement,  the
                   Company expects to issue  approximately  1,285,000  shares in
                   connection with the merger.  As of September 30, 1996,  South
                   Valley had total assets of $183,230,000.






                                      -17-

<PAGE>


                                   SIGNATURES


         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
the  registrant  has duly  caused  this report to be signed on its behalf by the
undersigned thereunto duly authorized.



Date   November 8, 1996                                /S/    D. Vernon Horton
       -----------------                               -----------------------
                                                       D. Vernon Horton
                                                       Chief Executive Officer





Date   November 8, 1996                               /S/    Dennis A. DeCius
       -----------------                               -----------------------
                                                       Dennis A. DeCius
                                                       Executive Vice President
                                                       Chief Financial Officer





                                      -18-