<PAGE>

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

                                    FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

For the quarterly period ended June 30, 1999
                               ------------------------------------------------

                                       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: 0-28938
                       --------------------------------------------------------

                                 Coast Bancorp
-------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

           California                                           77-0401327
-------------------------------------------------------------------------------
  (State or other jurisdiction                                (I.R.S. Employer
of incorporation or organization)                            Identification No.)

740 Front Street, Santa Cruz, California                                95060
-------------------------------------------------------------------------------
(Address of principal executive offices)                             (Zip Code)

                               (831) 458-4500
-------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)

                               Not Applicable
-------------------------------------------------------------------------------
   (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.
                                                             /X/ Yes   / / No

     No. of shares of Common Stock outstanding on June 30, 1999: 4,783,378
                                                                      ---------


<PAGE>

                                 COAST BANCORP

                                   FORM 10-Q

                      FOR THE QUARTER ENDED JUNE 30, 1999
                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                    PART I
                                                                           Page
<S>       <C>                                                              <C>

Item 1.   Financial Statements                                               1
Item 2.   Management's Discussion and Analysis of Financial
          Condition and Results of Operations                                5

<CAPTION>
                                    PART II
<S>       <C>                                                              <C>

Item 1.   Legal Proceedings                                                 16
Item 2.   Changes in Securities                                             16
Item 3.   Defaults Upon Senior Securities                                   16
Item 4.   Submission of Matters to a Vote of Security Holders               16
Item 5.   Other Information                                                 16
Item 6.   Exhibits and Reports on Form 8-K                                  16

</TABLE>


<PAGE>

PART I
Item 1.  Financial Statements
COAST BANCORP
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

                                                                                 JUNE 30,               DECEMBER 31,
                                                                                   1999                    1998
                                                                               -------------           -------------
<S>                                                                            <C>                     <C>
ASSETS
                                                                                (unaudited)
Cash and due from banks                                                         $ 18,981,000            $ 23,084,000
Federal funds sold                                                                 4,650,000              29,000,000
                                                                                ------------            ------------
      Total cash and equivalents                                                  23,631,000              52,084,000

Securities:
   Available for sale, at fair value                                             111,465,000             106,960,000

Loans:
   Commercial                                                                     38,380,000              38,874,000
   Real estate-term                                                              109,078,000              95,360,000
   Real estate-construction                                                       31,474,000              22,206,000
   Installment and other                                                           4,853,000               4,536,000
                                                                                ------------            ------------
      Total loans                                                                183,785,000             160,976,000
   Unearned income                                                                (3,763,000)             (3,272,000)
   Allowance for credit losses                                                    (3,829,000)             (3,871,000)
                                                                                ------------            ------------
Net loans                                                                        176,193,000             153,833,000
Bank premises and equipment-net                                                    2,205,000               2,408,000
Accrued interest receivable and other assets                                      10,273,000               9,463,000
                                                                                ------------            ------------
TOTAL ASSETS                                                                    $323,767,000            $324,748,000
                                                                                ------------            ------------
                                                                                ------------            ------------

LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits:
   Noninterest-bearing demand                                                   $ 70,227,000            $ 75,978,000
   Interest-bearing demand                                                        91,708,000             100,707,000
   Savings                                                                        53,045,000              51,873,000
   Time                                                                           52,161,000              52,252,000
                                                                                ------------            ------------
      Total deposits                                                             267,141,000             280,810,000
Other borrowings                                                                  21,500,000              10,416,000
Accrued expenses and other liabilities                                             3,787,000               3,325,000
                                                                                ------------            ------------
        Total liabilities                                                        292,428,000             294,551,000

Commitments and contingencies

STOCKHOLDERS' EQUITY:
Preferred stock-no par value; 10,000,000 shares                                       -                       -
   authorized; no shares issued
Common stock-no par value; 20,000,000 shares                                      20,801,000              20,689,000
   authorized; shares outstanding: 4,783,378 in
   1999 and 4,768,678 in 1998
Accumulated other comprehensive income (loss)                                     (1,033,000)                317,000
Retained earnings                                                                 11,571,000               9,191,000
                                                                                ------------            ------------
   Total stockholders' equity                                                     31,339,000              30,197,000
                                                                                ------------            ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                      $323,767,000            $324,748,000
                                                                                ------------            ------------
                                                                                ------------            ------------
</TABLE>

         See notes to unaudited consolidated financial statements


                                      -1-

<PAGE>

COAST BANCORP
CONSOLIDATED INCOME STATEMENTS
(unaudited)

<TABLE>
<CAPTION>
                                                              THREE MONTHS ENDED JUNE 30,          SIX MONTHS ENDED JUNE 30,
                                                              ---------------------------          -------------------------
                                                                1999              1998              1999               1998
                                                                ----              ----              ----               ----
<S>                                                         <C>                <C>               <C>               <C>

Interest income:
   Loans, including fees                                    $ 4,429,000        $ 4,223,000       $ 8,562,000       $ 8,370,000
  Securities:
      Taxable                                                 1,539,000          1,226,000         2,877,000         2,451,000
      Nontaxable                                                192,000            187,000           384,000           332,000
   Federal funds sold                                           199,000            253,000           573,000           353,000
                                                            ------------------------------------------------------------------
Total interest income                                         6,359,000          5,889,000        12,396,000        11,506,000
Interest expense:
   Deposits                                                   1,467,000          1,299,000         2,979,000         2,419,000
   Other borrowings                                             202,000            330,000           341,000           760,000
                                                            ------------------------------------------------------------------
Total interest expense                                        1,669,000          1,629,000         3,320,000         3,179,000
                                                            ------------------------------------------------------------------
Net interest income                                           4,690,000          4,260,000         9,076,000         8,327,000
Provision for credit losses                                           -             75,000                 -           150,000
                                                            ------------------------------------------------------------------
Net interest income after provision for credit losses         4,690,000          4,185,000         9,076,000         8,177,000
Noninterest income:
   Customer service fees                                        645,000            555,000         1,277,000         1,177,000
   Gain from sale of loans                                      119,000            628,000           630,000         1,294,000
   Loan servicing fees                                          214,000            248,000           438,000           495,000
   Gains (losses) on sales of securities                         (9,000)            26,000            52,000            11,000
   Other                                                         40,000             41,000            84,000            88,000
                                                            ------------------------------------------------------------------
Total noninterest income                                      1,009,000          1,498,000         2,481,000         3,065,000
Noninterest expenses:
   Salaries and benefits                                      1,733,000          1,561,000         3,540,000         3,100,000
   Occupancy                                                    313,000            291,000           608,000           562,000
   Equipment                                                    282,000            267,000           570,000           552,000
   Customer services                                            172,000            168,000           342,000           333,000
   Advertising and promotion                                    140,000            170,000           245,000           303,000
   Stationery and postage                                       112,000             96,000           203,000           193,000
   Professional services                                         99,000             80,000           178,000           202,000
   Data processing                                               97,000             77,000           182,000           145,000
   Insurance                                                     47,000             57,000           108,000           117,000
   Other                                                        224,000            238,000           446,000           415,000
                                                            ------------------------------------------------------------------
Total noninterest expenses                                    3,219,000          3,005,000         6,422,000         5,922,000
                                                            ------------------------------------------------------------------
Income before income taxes                                    2,480,000          2,678,000         5,135,000         5,320,000
Income taxes                                                    891,000          1,121,000         1,990,000         2,207,000
                                                            ------------------------------------------------------------------
Net income                                                  $ 1,589,000        $ 1,557,000       $ 3,145,000       $ 3,113,000
                                                            ------------------------------------------------------------------
                                                            ------------------------------------------------------------------
Earnings per share:
Basic                                                              $.33               $.32              $.66              $.65
                                                            ------------------------------------------------------------------
                                                            ------------------------------------------------------------------
Diluted                                                            $.32               $.31              $.64              $.63
                                                            ------------------------------------------------------------------
                                                            ------------------------------------------------------------------
</TABLE>


            See notes to unaudited consolidated financial statements


                                       -2-


<PAGE>

COAST BANCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)

<TABLE>
<CAPTION>
                                                                                SIX MONTHS ENDED JUNE 30,
                                                                            --------------------------------
                                                                                1999                1998
                                                                            ------------        ------------
<S>                                                                         <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                                  $  3,145,000        $  3,113,000
Adjustments to reconcile net income to net cash provided by operating
   activities:
   Provision for credit losses                                                         -             150,000
   Depreciation and amortization                                                (147,000)             92,000
   (Gains) on securities transactions                                            (52,000)            (11,000)
   Deferred income taxes                                                        (265,000)            188,000
   Proceeds from loan sales                                                   41,626,000          37,497,000
   Origination of loans held for sale                                        (41,509,000)        (40,560,000)
   Accrued interest receivable and other assets                                 (545,000)         (1,578,000)
   Accrued expenses and other liabilities                                        462,000             156,000
   Increase in unearned income                                                 1,134,000             994,000
   Other operating activities                                                    943,000             (83,000)
                                                                            --------------------------------
Net cash provided by (used in) operating activities                            4,792,000             (42,000)
                                                                            --------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of securities available for sale                          14,600,000          22,468,000
Proceeds from maturities of securities                                        10,411,000          11,643,000
Purchases of securities available for sale                                   (31,874,000)        (43,598,000)
Net increase (decrease) in loans                                             (22,968,000)          3,173,000
Purchases of bank premises and equipment                                        (176,000)           (541,000)
                                                                            --------------------------------
Net cash used in investing activities                                        (30,007,000)         (6,855,000)
                                                                            --------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in deposits                                          (13,669,000)         27,049,000
Net proceeds from other borrowings                                            11,084,000          (4,570,000)
Repurchase of common stock                                                             -            (834,000)
Payment of cash dividends                                                       (765,000)           (646,000)
Exercise of stock options                                                        112,000              43,000
Payment of fractional shares resulting from stock dividend                             -              (6,000)
                                                                            --------------------------------
Net cash (used in) provided by financing activities                           (3,238,000)         21,036,000
                                                                            --------------------------------
Net (decrease) increase in cash and equivalents                              (28,453,000)         14,139,000
Cash and equivalents, beginning of period                                     52,084,000          30,853,000
                                                                            --------------------------------
Cash and equivalents, end of period                                         $ 23,631,000        $ 44,992,000
                                                                            --------------------------------
                                                                            --------------------------------

SUPPLEMENTAL CASH FLOW INFORMATION CASH PAID DURING THE PERIOD FOR:
Interest                                                                    $  3,402,000        $  3,145,000
Income taxes                                                                   1,264,000           2,274,000
NON-CASH INVESTING AND FINANCING TRANSACTIONS:
Additions to other real estate owned                                        $          -        $    156,000

</TABLE>


            See notes to unaudited consolidated financial statements


                                       -3-


<PAGE>

COAST BANCORP
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JUNE 30, 1999 and 1998
-------------------------------------------------------------------------------

1.  BASIS OF PRESENTATION - These financial statements reflect, in management's
    opinion, all adjustments, consisting of adjustments of a normal recurring
    nature, which are necessary for a fair presentation of Coast Bancorp's
    financial position and results of operations and cash flows for the periods
    presented. The results of interim periods are not necessarily indicative of
    results of operations expected for the full year. These financial statements
    should be read in conjunction with the audited consolidated financial
    statements for 1998 included in the Company's Annual Report on Form 10-K.

2.  EARNINGS PER SHARE - Basic earnings per share is computed by dividing net
    income by the number of weighted average common shares outstanding. Diluted
    earnings per share reflects potential dilution from outstanding stock
    options, using the treasury stock method. The number of weighted average
    shares used in computing basic and diluted earnings per share are as
    follows:

<TABLE>
<CAPTION>
                                                                     Three months ended June 30,
                                                                  ----------------------------------
                                                                     1999                    1998
                                                                     ----                    ----
<S>                                                               <C>                      <C>
        Basic shares                                              4,781,414                4,816,058
        Dilutive effect of stock options                            120,755                  153,214
                                                                  ----------------------------------
        Diluted shares                                            4,902,169                4,969,272
                                                                  ----------------------------------
                                                                  ----------------------------------

<CAPTION>
                                                                       Six months ended June 30,
                                                                  ----------------------------------
                                                                     1999                   1998
                                                                     ----                   ----
<S>                                                               <C>                     <C>
        Basic shares                                              4,777,470               4,826,694
        Dilutive effect of stock options                            112,287                 135,812
                                                                  ----------------------------------
        Diluted shares                                            4,889,757               4,962,506
                                                                  ----------------------------------
                                                                  ----------------------------------

</TABLE>



3.  COMPREHENSIVE INCOME - The Company's source of other comprehensive income is
    unrealized gains and losses on securities available for sale. Total
    comprehensive income was computed as follows:

<TABLE>
<CAPTION>
                                                                           Three Months Ended June 30,
                                                                       --------------------------------
                                                                           1999                 1998
                                                                       --------------------------------
<S>                                                                    <C>                   <C>
        Net income                                                     $ 1,589,000           $1,557,000
        Other comprehensive income (loss)                               (1,150,000)              73,000
                                                                       --------------------------------
        Total comprehensive income                                        $439,000           $1,630,000
                                                                       --------------------------------
                                                                       --------------------------------

<CAPTION>
                                                                           Six Months Ended June 30,
                                                                       --------------------------------
                                                                           1999                 1998
                                                                       --------------------------------
<S>                                                                    <C>                   <C>
        Net income                                                     $ 3,145,000           $3,113,000
        Other comprehensive income (loss)                               (1,350,000)             (90,000)
                                                                       --------------------------------
        Total comprehensive income                                     $ 1,795,000           $3,023,000
                                                                       --------------------------------
                                                                       --------------------------------

</TABLE>


                                       -4-



<PAGE>

Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

OVERVIEW

Net income for the three months ended June 30, 1999 was $1,589,000 compared to
$1,557,000 for the three months ended June 30, 1998. Net income for the six
months ended June 30, 1999 was $3,145,000 compared to $3,113,000 for the six
months ended June 30, 1998. During 1999 an increase in net interest income
combined with decreases in the provision for credit losses and provision for
income taxes was offset by a decrease in noninterest income and an increase in
noninterest expenses.

EARNINGS SUMMARY

NET INTEREST INCOME
Net interest income refers to the difference between interest and fees earned
on loans and investments and the interest paid on deposits and other borrowed
funds.  It is the largest component of the net earnings of a financial
institution.  The primary factors to consider in analyzing net interest
income are the composition and volume of earning assets and interest-bearing
liabilities, the amount of noninterest bearing liabilities and nonaccrual
loans, and changes in market interest rates.

Table I sets forth average balance sheet information, interest income and
expense, average yields and rates, and net interest income and net interest
margin for the three months ended June 30, 1999 and 1998.

                                       -5-



<PAGE>

Table I  Components of Net Interest Income

<TABLE>
<CAPTION>
                                                                  THREE MONTHS ENDED JUNE 30,
                                          ----------------------------------------------------------------------------------
                                                          1999                                         1998
                                          -------------------------------------        -------------------------------------
                                           AVERAGE                      AVERAGE        AVERAGE                       AVERAGE
                                           BALANCE      INTEREST        RATE (4)       BALANCE        INTEREST       RATE (4)
                                           -------      --------       --------        -------        --------       --------
                                                                        (DOLLARS IN THOUSANDS)
<S>                                       <C>           <C>            <C>            <C>             <C>            <C>
Assets:
Loans (1)(2)                              $172,917        $4,429         10.2%        $149,716         $4,223         11.3%
Securities:
      Taxable                               95,615         1,539          6.4%          75,217          1,226          6.5%
      Nontaxable (3)                        15,305           291          7.6%          14,677            283          7.7%
Federal funds sold                          16,675           199          4.8%          19,482            253          5.2%
                                          --------      --------                       -------        --------
Total earning assets                       300,512         6,458          8.6%         259,092          5,985          9.2%
Cash and due from banks                     15,632                                      18,136
Allowance for credit losses                 (3,835)                                     (3,683)
Unearned income                             (3,685)                                     (2,686)
Bank premises and equipment, net             2,386                                       2,154
Other assets                                10,924                                       9,628
                                          --------                                     -------
Total assets                              $321,834                                    $282,641
                                          --------                                     -------
                                          --------                                     -------

Interest-bearing liabilities:
Deposits:
      Demand                               $93,772           394          1.7%         $80,339            385          1.9%
      Savings                               54,641           479          3.5%          27,677            218          3.2%
      Time                                  52,190           594          4.6%          54,818            696          5.1%
                                          --------      --------                       -------        --------
Total deposits                             200,603         1,467          2.9%         162,834          1,299          3.2%
Borrowed funds                              14,600           202          4.9%          25,083            330          5.3%
                                          --------      --------                       -------        --------
Total interest-bearing liabilities         215,203         1,669          3.1%         187,917          1,629          3.5%
Demand deposits                             68,379                                      63,502
Other liabilities                            3,718                                       2,834
Stockholders' equity                        34,534                                      28,388
                                          --------                                     -------
Total liabilities and stockholders'
   equity                                 $321,834                                    $282,641
                                          --------                                     -------
                                          --------                                     -------

Net interest income and margin                            $4,789          6.4%                         $4,356          6.7%
                                                        --------                                      --------
                                                        --------                                      --------

</TABLE>


(1)  Loan fees totaling $420,000 and $352,000 are included in loan interest
income for the three months ended June 30, 1999 and 1998.

(2)  Average nonaccrual loans totaling $1,999,000 and $373,000 are included in
average loans for the three months ended June 30, 1999 and 1998.

(3)  Tax exempt income includes $99,000 and $96,000 in 1999 and 1998, to adjust
to a fully taxable equivalent basis using the federal statutory rate of 34%.

(4)  Annualized
                                       -6-


<PAGE>

Table I  Components of Net Interest Income



<TABLE>
<CAPTION>
                                                                   SIX MONTHS ENDED JUNE 30,
                                          ----------------------------------------------------------------------------------
                                                          1999                                         1998
                                          -------------------------------------        -------------------------------------
                                           AVERAGE                      AVERAGE        AVERAGE                       AVERAGE
                                           BALANCE      INTEREST        RATE (4)       BALANCE        INTEREST       RATE (4)
                                           -------      --------       --------        -------        --------       --------
                                                                        (DOLLARS IN THOUSANDS)
<S>                                       <C>           <C>            <C>            <C>             <C>            <C>
Assets:
Loans (1)(2)                              $167,822       $ 8,562         10.2%        $150,201        $ 8,370         11.0%
Securities:
      Taxable                               89,719         2,877          6.4%          74,282          2,451          6.7%
      Nontaxable (3)                        15,241           582          7.6%          12,665            332          8.2%
Federal funds sold                          24,309           573          4.7%          13,625            171          5.1%
                                          --------      --------                       -------        --------
Total earning assets                       297,091        12,594          8.5%         250,773         11,677          9.4%
Cash and due from banks                     15,790                                      17,761
Allowance for credit losses                (3,868)                                     (3,662)
Unearned income                            (3,486)                                     (2,548)
Bank premises and equipment, net             2,331                                      2,1144
Other assets                                10,087                                       8,951
                                          --------                                     -------
Total assets                              $317,945                                    $273,389
                                          --------                                     -------
                                          --------                                     -------

Interest-bearing liabilities:
Deposits:
      Demand                              $ 93,577           803          1.7%        $ 79,059            761          1.9%
      Savings                               56,153         1,001          3.6%          27,351            431          3.2%
      Time                                  51,485         1,175          4.6%          47,690          1,227          5.2%
                                          --------      --------                       -------        --------
Total deposits                             201,215         2,979          3.0%         154,100          2,419          3.1%
Borrowed funds                              12,941           341          5.3%          27,804            760          5.5%
                                          --------      --------                       -------        --------
Total interest-bearing liabilities         214,156         3,320          3.1%         181,904          3,179          3.5%
Demand deposits                             66,804                                      60,394
Other liabilities                            3,516                                       2,708
Stockholders' equity                        32,677                                      28,383
                                          --------                                     -------
Total liabilities and stockholders'
   equity                                 $317,945                                    $273,389
                                          --------                                     -------
                                          --------                                     -------

Net interest income and margin                           $ 9,274          6.2%                         $8,498          6.8%
                                                        --------                                      --------
                                                        --------                                      --------

</TABLE>


(1)  Loan fees totaling $746,000 and $669,000 are included in loan interest
income for the six months ended June 30, 1999 and 1998.

(2)  Average nonaccrual loans totaling $1,516,000 and $322,000 are included in
average loans for the six months ended June 30, 1999 and 1998.

(3)  Tax exempt income includes $198,000 and $171,000 in 1999 and 1998, to
adjust to a fully taxable equivalent basis using the federal statutory rate
of 34%.

(4)  Annualized
                                      -7-


<PAGE>

    For the three months ended June 30, 1999, net interest income, on a fully
    taxable-equivalent basis, was $4,788,000 or 6.4% of average earning assets,
    an increase of 10% over $4,356,000 or 6.7% of average earning assets in the
    comparable period in 1998. For the six months ended June 30, 1999, net
    interest income, on a fully taxable-equivalent basis, was $9,275,000 or
    6.2% of average earning assets, an increase of 9% over $8,498,000 or 6.8% of
    average earning assets in the comparable period in 1998. The increase in
    1999 reflects higher levels of earning assets.

    Interest income, on a fully taxable-equivalent basis, was $6,458,000 and
    $5,985,000 for the three months and $12,594,000 and $11,677,000 for the six
    months ended June 30, 1999 and 1998. The increase in 1999 resulted from the
    growth in average earning assets. Loan yields averaged 10.2% and 11.3% for
    the three months and 10.2% and 11.0% for the six months ended June 30, 1999
    and 1998. Approximately 84% of the Bank's loans have interest rates indexed
    to the prime rate which are variable or reset within 3 months. The Bank's
    average prime rate was 7.75% and 8.50% for the three month and six month
    periods ended June 30, 1999 and 1998. Average earning assets were
    $300,512,000 and $297,091,000 for the three and six months ended June 30,
    1999 compared to $259,092,000 and $250,773,000 for the same periods in 1998.
    The growth in average earning assets resulted from increased levels of
    deposits which were invested primarily in loans and securities.

    The increase in interest income during 1999 on a fully taxable-equivalent
    basis, was partially offset by an increase in interest expense. The average
    rate paid on interest bearing deposits was 2.9% and 3.2% for the three
    months ended June 30, 1999 and 1998 and 3.0% and 3.1% for the six months
    ended June 30, 1999 and 1998.


NONINTEREST INCOME

Table 2 summarizes the sources of noninterest income for
the periods indicated:

Table 2 - Noninterest Income
(Dollars in thousands)

<TABLE>
<CAPTION>
                                                                                 THREE MONTHS ENDED
                                                                                       JUNE 30,
                                                                                 ------------------
                                                                                   1999       1998
                                                                                  ------     ------
<S>                                                                              <C>        <C>
Customer service fees                                                            $  645     $  555
Gain on sale of loans                                                               119        628
Loan servicing fees                                                                 214        248
Gains (losses) on sales of securities                                                (9)        26
Other                                                                                40         41
                                                                                 -------    -------
      Total noninterest income                                                   $1,009     $1,498
                                                                                 -------    -------
                                                                                 -------    -------

<CAPTION>

                                                                                 SIX MONTHS ENDED
                                                                                      JUNE 30,
                                                                                 ------------------
                                                                                   1999       1998
                                                                                  ------     ------
<S>                                                                              <C>        <C>
Customer service fees                                                            $1,277     $1,177
Gain on sale of loans                                                               630      1,294
Loan servicing fees                                                                 438        495
Gains on sales of securities                                                         52         11
Other                                                                                84         88
                                                                                 ------     ------
      Total noninterest income                                                   $2,481     $3,065
                                                                                 ------     ------
                                                                                 ------     ------
</TABLE>


The Company sells SBA loans and FHLMC conforming mortgage loans with SBA loan
sales providing the primary source of gains on sale. Gains on sale of loans
decreased as a result of a lower volume of Small Business Administration (SBA)
loans sold and a significant decline in market prices for SBA loans in 1999
compared to 1998. During the second quarter of 1999 the Company retained SBA
loans ready for sale due to declining market prices. The Company will attempt to
sell the seasoned SBA loans should market prices return to levels seen during
1995 through 1998.

                                      -8-



<PAGE>

NONINTEREST EXPENSES

The major components of noninterest expenses stated in dollars and as a
percentage of average earning assets are set forth in Table 3 for the periods
indicated.

Table 3 - Noninterest Expenses
(Dollars in thousands)

<TABLE>
<CAPTION>
                                                                   THREE MONTHS ENDED JUNE 30,
                                                            ----------------------------------------
                                                                  1999                    1998
                                                            ----------------       -----------------
<S>                                                         <C>        <C>         <C>         <C>
Salaries and benefits                                       $1,733     2.31%       $1,561      2.41%
Occupancy                                                      313      .42%          291       .45%
Equipment                                                      282      .38%          267       .47%
Customer services                                              172      .23%          168       .26%
Advertising and promotion                                      140      .19%          170       .26%
Stationery and postage                                         112      .15%           96       .15%
Data processing                                                 97      .13%           77       .12%
Professional services                                           99      .13%           80       .12%
Insurance                                                       47      .06%           57       .09%
Other                                                          224      .30%          238       .37%
                                                            ----------------------------------------
      Total noninterest expenses                            $3,219     4.28%       $3,005      4.64%
                                                            ----------------------------------------
                                                            ----------------------------------------
</TABLE>


<TABLE>
<CAPTION>
                                                                     SIX MONTHS ENDED JUNE 30,
                                                            ----------------------------------------
                                                                  1999                    1998
                                                            ----------------       -----------------
<S>                                                         <C>        <C>         <C>         <C>
Salaries and benefits                                       $3,540     2.38%       $3,100      2.47%
Occupancy                                                      608      .41%          562       .45%
Equipment                                                      570      .38%          552       .44%
Customer services                                              342      .23%          333       .27%
Advertising and promotion                                      245      .16%          303       .24%
Stationery and postage                                         203      .14%          193       .15%
Data processing                                                182      .12%          145       .12%
Professional services                                          178      .12%          202       .16%
Insurance                                                      108      .07%          117       .09%
Other                                                          446      .30%          415       .33%
                                                            ----------------------------------------
      Total noninterest expenses                            $6,422     4.32%       $5,922      4.72%
                                                            ----------------------------------------
                                                            ----------------------------------------
</TABLE>


The increases in 1999 were primarily related to higher staff and occupancy costs
and increases in data processing and other noninterest expenses partially offset
by decreases in advertising and promotion and professional services. The
increase in noninterest expenses reflects the opening of a new branch in August
1998 and the growth in total loans, deposits and assets. The decrease in
noninterest expense as a percentage of average earning assets is the result of
the rate of growth in average earning assets in 1999 exceeding the rate of
increase in noninterest expenses.

INCOME TAXES

The Company's effective tax rate was 35.9% and 38.8% for the three and six
months ended June 30, 1999 compared to 41.9% and 41.5% for the same periods in
1998. Changes in the effective tax rate for the Company are primarily due to
fluctuations in the proportion of tax exempt income generated from investment
securities to pre-tax income.

BALANCE SHEET ANALYSIS

Total assets were $323.8 million at June 30, 1999, compared to $324.7 million at
the end of 1998. Based on average balances, second quarter 1999 average total
assets of $321.8 million represent an increase of 14% over the second quarter of
1998 while six month 1999 average total assets of $317.9 million represent an
increase of 16% over six months 1998.


EARNING ASSETS
LOANS

Total gross loans at June 30, 1999 were $183.8 million, a 14% increase from
$161.0 million at December 31, 1998. Average loans in the three and six months
of 1999 were $172,917,000 and $167,822,000 representing increases of 15% and 12%
over the same period in 1998. The 1999 increases primarily reflected growth in
average real estate loans, particularly commercial real estate, SBA guaranteed
commercial real estate, construction and residential mortgage loans, which in
the opinion of the Company is due to favorable local economic conditions and the
level of interest rates. The origination of all types of real estate loans is
significantly affected by the level of interest rates and general economic
conditions. There can be no assurance the Company will maintain current
origination levels in its construction, SBA, commercial real estate and
residential mortgage lending operations as interest rates or economic conditions
change.

                                       -9-


<PAGE>

Risk Elements

Lending money involves an inherent risk of nonpayment.  Through the
administration of loan policies and monitoring of the portfolio, management
seeks to reduce such risks.  The allowance for credit losses is an estimate
to provide a financial buffer for losses, both identified and unidentified,
in the loan portfolio.


Nonaccrual Loans, Loans Past Due and OREO

The accrual of interest is discontinued and any accrued and unpaid interest is
reversed when the payment of principal or interest is 90 days past due unless
the amount is well secured and in the process of collection. Income on such
loans is then recognized only to the extent that cash is received and where the
future collection of principal is probable. At June 30, 1999 nonaccrual loans
totaled $2,091,000 or 1.14% of total loans compared to $1,108,000 or .69% of
total loans at December 31, 1998. Nonaccrual loans at June 30, 1999 consist of
one commercial real estate loan, partially guaranteed by the SBA, and one
commercial borrower. Collateral supporting the commercial borrower's loans
includes business and real estate assets.

Table 4 presents the composition of nonperforming assets at June 30, 1999.

Table 4  Nonperforming Assets
(dollars in thousands)



<TABLE>
<CAPTION>
                                                    JUNE 30, 1999
                                                    -------------
<S>                                                 <C>
Nonperforming Assets:
   Loans Past Due 90 Days or More                       $   10
   Nonaccrual Loans                                      2,091
                                                    ------------
Total Nonperforming Loans                                2,101
OREO                                                         -
                                                    ------------
Total Nonperforming Assets                              $2,101
                                                    ------------
                                                    ------------
Nonperforming Loans as a Percent of Total Loans           1.14%
OREO as a Percent of Total Assets                            -
Nonperforming Assets as a Percent of Total Assets         0.65%
Allowance for Credit Losses                             $3,829
   As a Percent of Total Loans                            2.08%
   As a Percent of Nonaccrual Loans                        183%
   As a Percent of Nonperforming Loans                     182%

</TABLE>


PROVISION AND ALLOWANCE FOR CREDIT LOSSES

Management has established an evaluation process designed to determine the
adequacy of the allowance for credit losses. This process attempts to assess the
risk of loss inherent in the portfolio by segregating the allowance for credit
losses into three components: "historical losses;" "specific;" and "margin for
imprecision." The "historical losses" component is calculated as a function of
the prior four years loss experience for commercial, real estate and consumer
loan types. The four years are assigned weightings of 35%, 30%, 20% and 15%
beginning with the most recent year. The "specific" component is established by
allocating a portion of the allowance to individual classified credits on the
basis of specific circumstances and assessments. The "margin for imprecision"
component is an unallocated portion that supplements the first two components as
a conservative margin to guard against unforeseen factors. The "historical
losses" and "specific" components include management's judgment of the effect of
current and forecasted economic conditions on the ability of the Company's
borrowers' to repay; an evaluation of the allowance for credit losses in
relation to the size of the overall loan portfolio; an evaluation of the
composition of, and growth trends within, the loan portfolio; consideration of
the relationship of the allowance for credit losses to nonperforming loans; net
charge-off trends; and other factors. While this evaluation process utilizes
historical and other objective information, the classification of loans and the
establishment of the allowance for credit losses, relies, to a great extent, on
the judgment and experience of management. We evaluate the adequacy of our
allowance for credit losses quarterly.

                                      -10-


<PAGE>

It is the policy of management to maintain the allowance for credit losses at a
level adequate for known and inherent risks in the loan portfolio. Based on
information currently available to analyze loan loss potential, including
economic factors, overall credit quality, historical delinquency and a history
of actual charge-offs, management believes that the loan loss provision and
allowance are adequate; however, no assurance of the ultimate level of credit
losses can be given with any certainty. Loans are charged against the allowance
when management believes that the collectibility of the principal is unlikely.
An analysis of activity in the allowance for credit losses is presented in Table
5.

TABLE 5 Allowance for Credit Losses
(Dollars in thousands)

<TABLE>
<CAPTION>
                                              SIX MONTHS ENDED
                                               JUNE 30, 1999
                                              ----------------
<S>                                           <C>
Total Loans Outstanding                           $183,785
Average Total Loans                                167,822
Allowance for credit losses:
Balance, January 1                                $  3,871
Charge-offs by Loan Category:
   Commercial                                           78
   Installment and other                                 3
   Real Estate construction                              -
   Real Estate-term                                      -
                                              -------------
Total Charge-Offs                                       81
Recoveries by Loan Category:
   Commercial                                           36
   Installment and other                                 -
   Real Estate construction                              -
   Real Estate-term                                      3
                                              -------------
      Total Recoveries                                  39
Net Charge-Offs                                         42
Provision Charged to Expense                             -
                                              -------------
Balance, June 30                                  $  3,829
                                              -------------
                                              -------------
Ratios:
   Net Charge-offs to Average Loans                   0.03%
   Reserve to Total Loans                             2.08%

</TABLE>


OTHER INTEREST-EARNING ASSETS

For the three and six months ended June 30, 1999, the average balance of
investment securities and federal funds sold totaled $127,595,000, and
$129,269,000, up from $109,376,000 and $100,572,000 for the same periods in
1998. The 1999 increases resulted from investing additional liquidity in federal
funds sold and investment securities. Additional liquidity was generated by the
excess of the increase in average deposits over the increase in average loans.
Management also uses borrowed funds to increase earning assets and enhance the
Company's interest rate risk profile.

                                    -11-


<PAGE>

FUNDING

Deposits represent the Company's principal source of funds for investment.
Deposits are primarily core deposits in that they are demand, savings, and time
deposits under $100,000 generated from local businesses and individuals. These
sources represent relatively stable, long term deposit relationships which
minimize fluctuations in overall deposit balances. We have accepted a $20
million time deposit from the State of California in part to replace borrowed
funds and to increase earning assets. The State of California time deposit is
renewable approximately every three months at a rate similar to the three month
U.S. Treasury bill. The Bank has never used brokered deposits.

Deposits decreased $13,669,000 from year-end or 5% to $267,141,000 as of June
30, 1999. Average total deposits in the three and six months of 1999 of
$268,982,000 and $268,019,000 increased from $226,336,000 and $214,494,000 in
the same periods in 1998.

Another source of funding for the Company is borrowed funds. Management uses
borrowed funds to increase earning assets, prudently leverage capital and
minimize interest rate risk. Typically, these funds result from the use of
advances from the FHLB and agreements to sell investment securities with a
repurchase at a designated future date, also known as repurchase agreements.
Repurchase agreements are conducted with major banks and investment brokerage
firms. The maturity of these arrangements for the Bank is typically 30 to 90
days. Repurchase agreements totaled $5,000,000 at June 30, 1999. Advances from
the FHLB may vary in maturity from 1 to 10 years. Advances from the FHLB at June
30, 1999 totaled $15,000,000, payable at maturity in 2003 and 2004. The advances
are callable by the FHLB beginning in February 1999 ($10,000,000) and March 2000
($5,000,000) and bear interest at a weighted average of 4.9%. The average
balance of borrowed funds was $14,600,000 and $12,941,000 during the three and
six months ended June 30, 1999 compared to $25,083,000 and $27,804,000 for the
same periods in 1998. The decrease in average borrowed funds reflects the
substitution of time deposits from the State of California for borrowed funds.


LIQUIDITY AND INTEREST RATE SENSITIVITY

Liquidity management refers to the Company's ability to provide funds on an
ongoing basis to meet fluctuations in deposit levels as well as the credit needs
and requirements of its clients. Both assets and liabilities contribute to the
Bank's liquidity position. Federal funds lines, short-term investments and
securities, and loan repayments contribute to liquidity, along with deposit
increases, while loan funding and deposit withdrawals decrease liquidity. The
Company assesses the likelihood of projected funding requirements by reviewing
historical funding patterns, current and forecasted economic conditions and
individual client funding needs. The Bank maintains informal lines of credit
with its correspondent banks for short-term liquidity needs. These informal
lines of credit are not committed facilities by the correspondent banks and no
fees are paid by the Bank to maintain them.

The Bank manages its liquidity by maintaining a majority of its investment
portfolio in liquid investments in addition to its federal funds sold. Liquidity
is measured by various ratios, including the liquidity ratio of net liquid
assets compared to total assets. As of June 30, 1999, this ratio was 22.6%.
Other key liquidity ratios are the ratios of loans to deposits and federal funds
sold to deposits, which were 68.8% and 1.7%, respectively, as of June 30, 1999.


INTEREST RATE SENSITIVITY

Interest rate sensitivity is a measure of the exposure of the Company's future
earnings due to changes in interest rates. If assets and liabilities do not
reprice simultaneously and in equal volumes, the potential for such exposure
exists. It is management's objective to achieve a near-matched to modestly
asset-sensitive cumulative position at one year, such that the net interest
margin of the Company increases as market interest rates rise and decreases when
short-term interest rates decline.

                                      -12-


<PAGE>

One quantitative measure of the "mismatch" between asset and liability repricing
is the interest rate sensitivity "gap" analysis. All interest-earning assets and
funding sources are classified as to their expected repricing or maturity date,
whichever is sooner. Within each time period, the difference between asset and
liability balances, or "gap," is calculated. Positive cumulative gaps in early
time periods suggest that earnings will increase if interest rates rise.
Negative gaps suggest that earnings will decline when interest rates rise. Table
6 presents the gap analysis for the Company at June 30, 1999. Mortgage backed
securities are reported in the period of their expected repricing based upon
estimated prepayments developed from recent experience.

Table 6  Interest Rate Sensitivity
(Dollars in thousands)


<TABLE>
<CAPTION>
                                                       NEXT DAY AND      OVER THREE     OVER ONE AND
                                                       WITHIN THREE      MONTHS AND     WITHIN FIVE    OVER FIVE
                                       IMMEDIATELY         MONTHS      WITHIN ONE YEAR      YEARS         YEARS         TOTAL
                                       -----------     ------------    ---------------  ------------   ---------      ---------
                                                                         (DOLLARS IN THOUSANDS)
<S>                                    <C>             <C>             <C>              <C>            <C>            <C>
As of June 30, 1999
Rate Sensitive Assets:
   Federal Funds Sold                   $   4,650       $       -       $       -       $       -      $       -      $   4,650
Investment Securities:
   Treasury and Agency Obligations              -               -               -           8,042              -          8,042
   Mortgage-Backed Securities                   -           2,200           6,764          27,123         36,119         72,206
   Municipal Securities                         -               -             225           3,402         11,395         15,022
   Corporate Securities                         -          10,078               -               -          4,283         14,361
   Other                                        -               -               -               -          1,834          1,834
                                       -----------     ------------    ---------------  ------------   ---------      ---------
                                       -----------     ------------    ---------------  ------------   ---------      ---------
Total Investment Securities                     -          12,278           6,989          38,567         53,631        111,465
Loans Excluding Nonaccrual Loans           92,851          59,033           1,828          12,771         15,211        181,694
                                       -----------     ------------    ---------------  ------------   ---------      ---------
                                       -----------     ------------    ---------------  ------------   ---------      ---------
Total Rate Sensitive Assets             $  97,501       $  71,311       $   8,817       $  51,338      $  68,842      $ 297,809
                                       -----------     ------------    ---------------  ------------   ---------      ---------

Rate Sensitive Liabilities:
  Deposits:
      Demand and Savings                $ 144,753       $       -       $       -       $       -      $       -      $ 144,753
      Time                                      -          39,711          11,245           1,205              -         52,161
                                       -----------     ------------    ---------------  ------------   ---------      ---------
                                       -----------     ------------    ---------------  ------------   ---------      ---------
Total Interest-bearing Deposits           144,753          39,711          11,245           1,205              -        196,914
Other Borrowings                                -           6,500               -          15,000              -         21,500
                                       -----------     ------------    ---------------  ------------   ---------      ---------
                                       -----------     ------------    ---------------  ------------   ---------      ---------
Total Rate Sensitive Liabilities        $ 144,753       $  46,211       $  11,245       $  16,205      $       -      $ 218,414
                                       -----------     ------------    ---------------  ------------   ---------      ---------
                                       -----------     ------------    ---------------  ------------   ---------      ---------
Gap                                     $ (47,252)      $  25,100       $  (2,428)      $  35,133      $  68,842      $  79,395
Cumulative Gap                          $ (47,252)      $ (22,152)      $ (24,580)      $  10,553      $  79,395
</TABLE>



                                     -13-


<PAGE>

The Company's positive cumulative total gap results from the exclusion from the
above table of noninterest-bearing demand deposits, which represent a
significant portion of the Company's funding sources. The Company maintains a
negative cumulative gap in the immediate, next day and within three months and
the over three months and within one year time periods and a positive cumulative
gap in all other time periods. The Company's experience indicates money market
deposit rates tend to lag changes in the prime rate which immediately impact the
prime-based loan portfolio. Even in the Company's negative gap time periods,
rising rates result in an increase in net interest income. Should interest rates
stabilize or decline in future periods, it is reasonable to assume that the
Company's net interest margin, as well as net interest income, may decline
correspondingly.

CAPITAL RESOURCES

Management seeks to maintain adequate capital to support anticipated asset
growth and credit risks, and to ensure that the Company and the Bank are in
compliance with all regulatory capital guidelines. The primary source of new
capital for the Company has been the retention of earnings. The Company does not
have any material commitments for capital expenditures as of June 30, 1999.

The Company pays a quarterly cash dividend on its common stock as part of
efforts to enhance shareholder value. The Company's goal is to maintain a strong
capital position that will permit payment of a consistent cash dividend which
may grow commensurately with earnings growth.

During 1997, the Board of Directors approved a stock repurchase program
authorizing open market purchases of up to 3% of the shares outstanding, or
approximately 145,837 shares, in order to enhance long term shareholder value.
As of June 30, 1999, 145,500 shares had been purchased under the program.

The Company and the Bank are subject to capital adequacy guidelines issued by
the federal bank regulatory authorities. Under these guidelines, the minimum
total risk-based capital requirement is 10.0% of risk-weighted assets and
certain off-balance sheet items for a "well capitalized" depository institution.
At least 6.0% of the 10.0% total risk-based capital ratio must consist of Tier 1
capital, defined as tangible common equity, and the remainder may consist of
subordinated debt, cumulative preferred stock and a limited amount of the
allowance for credit losses.

The federal regulatory authorities have established minimum capital leverage
ratio guidelines for state member banks.  The ratio is determined using Tier
1 capital divided by quarterly average total assets.  The guidelines require
a minimum of 5.0% for a "well capitalized" depository institution.

The Bank's risk-based capital ratios were in excess of regulatory guidelines for
a "well capitalized" depository institution as of June 30, 1999, and December
31, 1998. Capital ratios for the Company and the Bank are set forth in Table 7:

Table 7 Capital Ratios

<TABLE>
<CAPTION>

The Company:

                                            JUNE 30, 1999          DECEMBER 31,1998
                                            -------------          ----------------
<S>                                         <C>                    <C>
   Total risk-based capital ratio                   15.1%                     15.4%
   Tier 1 risk-based capital ratio                  13.9%                     14.2%
   Tier 1 leverage ratio                            10.0%                      9.5%


<CAPTION>

Coast Commercial Bank:

                                            JUNE 30, 1999          DECEMBER 31,1998
                                            -------------          ----------------
<S>                                         <C>                    <C>
   Total risk-based capital ratio                   14.6%                     14.8%
   Tier 1 risk-based capital ratio                  13.3%                     13.6%
   Tier 1 leverage ratio                             9.6%                      9.3%
</TABLE>

                                      -14-

<PAGE>

YEAR 2000

The year 2000 problem exists because many computer systems use only the last two
digits to refer to a year. This convention could affect date-sensitive
calculations that treat "00" as the year 1900 rather than 2000. Another issue is
that the year 2000 is a leap year and some programs may not properly provide for
February 29, 2000.

This discussion of the implications of the year 2000 problem for us contains
numerous forward-looking statements on inherently uncertain information. The
cost of the project and the date on which we plan to complete the internal year
2000 modifications are based on management's best estimates, which were derived
utilizing a number of assumptions of future events including the continued
availability of internal and external resources, third party modifications and
other factors. We cannot guarantee, however, these estimates, and actual results
could differ. Moreover, although management believes it will be able to make the
necessary modifications in advance, there can be no guarantee that the failure
to modify the systems would not have a material adverse impact on us.

Readiness Preparation

Our plan to address the year 2000 issues includes a process of inventory,
analysis, modification, testing and certification, and implementation. In 1997
we alerted our business customers of the year 2000 problem and are now assessing
the readiness preparations of our major customers and suppliers. Reviews of our
information systems and information provided by our primary vendors, large
customers and suppliers have not identified any year 2000 readiness issues which
appear to be unresolvable by December 31, 1999.

Our major critical information system is our core transaction processing
software which provides transaction processing for loans, deposits and general
ledger. The vendor supplying our core transaction processing software has
provided evidence of year 2000 readiness. Efforts continue to ascertain the year
2000 readiness of various systems that integrate information into the core
processing software. Testing of the core processing software and other systems
which integrate into the core processing software is substantially complete.
Other purchased software and systems supported by external parties are also
being tested as part of the year 2000 program. To date, no significant
information systems have been found not ready for year 2000. Additional testing
may be conducted as on-going product updates by software vendors are installed.
In addition, contingency plans have been developed to reduce the impact of
potential events that may occur. We cannot guarantee, however, the systems of
vendors or customers with which we conduct business will be completed on a
timely basis, or that contingency plans will shield operations from failures
that may occur.

We do not significantly rely on embedded technology in our critical processes.
Embedded technology typically controls operations such as power management and
related facilities functions. Year 2000 risks associated with embedded
technology in our facilities appear low.

We rely on suppliers and customers, and we are addressing year 2000 issues with
both groups. We have identified vendors upon whom there is significant reliance
and made inquiries regarding year 2000 readiness plans and status. Appropriate
measures to minimize risk will be undertaken with those that appear to pose a
significant risk. Replacements may be effected where necessary. We have,
however, no viable alternative for some suppliers, such as power distribution
and local telephone companies. We are still evaluating these companies, and we
will use the results as information for contingency planning. As with all
financial institutions, we place a high degree of reliance on the systems of
other institutions, including government agencies, to settle transactions.
Principal settlement methods associated with major payment systems have been
tested as part of their integration with the core processing system.

We also rely on our customers to make necessary preparations for year 2000 so
that their business operations will not be interrupted, thus threatening their
ability to honor their financial commitments. Borrowers, funding sources and
large depositors are reviewed to determine those with financial volumes
sufficiently large to warrant inquiry and assessment of the year 2000 readiness
preparation. Financial volumes include loans and unused commitments, collected
deposit balances, ACH, and foreign exchange, etc.

                                      -15-


<PAGE>

The population of customers with loans and unused commitments outstanding
("borrowers") pose the highest risk level of concern for any lender. Business
purpose borrowings exceeding $50,000 were assigned one of three year 2000 risk
levels: low, medium or high. Borrowers representing 3% and 28% of outstanding
loans were assigned high and medium year 2000 risk levels, respectively.

Ongoing reassessments with risk mitigation plans will be made for all levels of
risk. Customers with low and medium risk will be reassessed annually, while
customers with high risk will be reassessed at least quarterly. The risk
mitigation plan will evaluate whether year 2000 issues will materially affect
the customer's cash flows, asset account values related to its balance sheet,
and/or collateral pledged to us. The risk mitigation plan is incorporated into
the normal credit review process.

Cost

Amounts expensed in the first three months of 1999 were not significant to
our financial position or results of operations. Although the remaining costs
associated with achieving year 2000 compliance have not yet been determined,
management believes the amounts expensed during 1999 will not have a material
effect on our financial position, results of operations or cash flows. In
addition, we may also replace certain equipment and software to ensure year
2000 readiness. The cost of the replacement items will be expensed over the
useful lives of those assets. During 1998, six existing automated teller
machines were replaced with new machines at a cost of approximately $300,000
due in part to year 2000 issues with the existing equipment. The cost of
other identified replacement items and contingency equipment is estimated at
less than $100,000. Estimated total costs could change as our analysis
continues.

Risks

The principal risks associated with the year 2000 problem can be grouped into
three categories:

    -   we do not successfully ready our operations for the next century,
    -   disruption of our operations due to operational failures of third
        parties, and
    -   business interruption among fund providers and obligors such that
        expected funding and repayment does not take place.

The only risk largely under our control is preparing our internal operations for
the year 2000. We, like other financial institutions, are heavily dependent on
our computer systems. The complexity of these systems and their interdependence
make it impracticable to switch to alternative systems without interruptions if
necessary modifications are not completed on schedule. Management believes it
will be able to make the necessary modifications on schedule.

Failure of third parties may jeopardize our operations, but the seriousness of
this risk depends on the nature and duration of the failures. The most serious
impact on our operations from suppliers would result if basic services such as
telecommunications, electric power suppliers and services provided by other
financial institutions and governmental agencies were disrupted. Some public
disclosure about readiness preparation among basic infrastructure and other
suppliers is now available. We are unable, however, to estimate the likelihood
of significant disruptions among our basic infrastructure suppliers. In view of
the unknown probability of occurrence and impact on operations, we consider the
loss of basic infrastructure services to be the most reasonably likely worst
case year 2000 scenario.

Operational failures among our customers could affect their ability to continue
to provide funding or meet obligations when due. The information we develop in
the customer assessments described earlier allows us to identify those customers
that exhibit a risk of not making the adequate preparations for the century
change. We are taking appropriate actions to manage these risks.

Program Assessment

Senior management and banking regulators regularly assess our year 2000
preparations. Additionally, a consulting and services firm has been retained to
review and advise senior management on internally developed testing plans for
critical systems.

                                      -16-



<PAGE>

Contingency Plans

We have developed remediation contingency plans and business resumption
contingency plans specific to the year 2000. Remediation contingency plans
address the actions to be taken if the current approach to remediating a system
is falling behind schedule or otherwise appears in jeopardy of failing to
deliver a year 2000 ready system when needed. Business resumption contingency
plans address the actions that would be taken if critical business functions can
not be carried out in the normal manner upon entering the next century due to
system or supplier failure. Most contingent action plans prepared at this time
involve manual processing of transactions. Given the size, scope and complexity
of our operations, manual processing appears a viable alternative for our
information systems.


PART II. OTHER INFORMATION

Item 1.   Legal Proceedings
          Not applicable.

Item 2.   Changes in Securities
          Not applicable

Item 3.   Defaults Upon Senior Securities
          Not applicable

Item 4.   Submission of Matters to a Vote of Security Holders
The Company's annual meeting was held May 18, 1999.  The purpose of
the meeting was to elect the company's board of directors and ratify the
appointment of Deloitte & Touche LLP as the Company's auditors for the year
ending December 31, 1999.  The following directors were elected based upon
the votes cast as indicated:

<TABLE>
<CAPTION>

Director                  Votes "for"    Votes "against"   Votes "withheld"
<S>                       <C>            <C>               <C>

Richard Alderson           3,883,253           0               18,532
Douglas D. Austin          3,872,083           0               29,702
John C. Burroughs          3,884,867           0               16,918
Bud W. Cummings            3,884,867           0               16,918
Ronald M. Israel, M.D.     3,884,867           0               16,918
Harvey J. Nickelson        3,884,867           0               16,918
Gus J.F. Norton            3,884,867           0               16,918
James C. Thompson          3,884,867           0               16,918

</TABLE>

The appointment of Deloitte & Touche LLP as the Company's auditors for the year
ending December 31, 1999 was ratified with 3,901,785 votes for ratification,
13,286 votes against, and 2,306 votes withheld.


Item 5.   Other Information

          On July 21, 1999, the Coast Bancorp Board of Directors declared
a cash dividend of eight cents ($0.08) per share, payable August 26, 1999,
to shareholders of record on August 6, 1999.

Item 6.   Exhibits and Reports on Form 8-K
a.        Exhibits
Exhibit Number

10.19         Employment Agreement between Coast Bancorp, Coast Commercial Bank
              and Harvey J. Nickelson dated June 21, 1999

27     Financial Data Schedule



b.  Reports on Form 8-K
          Not applicable


                                      -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.

                                       COAST BANCORP
                                       ---------------------------------------
                                       (REGISTRANT)

Date:  July 23, 1999

                                       /s/ HARVEY J. NICKELSON
                                       ---------------------------------------
                                       Harvey J. Nickelson
                                       President and Chief Executive Officer

                                       /s/ BRUCE H. KENDALL
                                       ---------------------------------------
                                       Bruce H. Kendall
                                       Senior Vice President
                                       and Chief Financial Officer
                                       (Principal Financial and Accounting
                                       Officer)


                                      -18-