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                     U.S. SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON D.C. 20549
                                   FORM 10-KSB

          X    Annual report under Section 13 or 15(d) of the Securities
               Exchange Act of 1934 (Fee required) for fiscal year ended
               DECEMBER 31, 2000

          ____ Transition report under Section 13 or 15(d) of the Securities
               Exchange Act of 1934 (No fee required) for the period
               from __________ to __________

                         Commission File Number 0-27666

                        NORTHERN CALIFORNIA BANCORP, INC.
                        ---------------------------------
                 (Name of Small Business Issuer in its Charter)

                     Incorporated in the State of California
                  IRS Employer Identification Number 77-0421107
                 Address: 601 Munras Avenue, Monterey, CA 93940
                            Telephone: (831) 649-4600

     Securities registered under Section 12(b) of the Exchange Act: None
     Securities registered under Section 12(g) of the Exchange Act: Common Stock

     Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the past 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 __

     Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB X

         Revenues for the year ended December 31, 2000.       $ 8,486,500.

     As of March 1, 2000, the Corporation had 1,216,677 shares of common stock
out-standing. The aggregate market value of voting stock held by non-affiliates
of the Corporation was $1,808,500, based on the most recent sale at $3.00 per
share on January 3, 2001.

     The following documents are incorporated by reference to the parts
indicated of this Form 10-KSB:

     1. Portions of the Independent Auditor's Report for the fiscal year ended
December 31, 2000 are incorporated by reference in Part I Item 3 and Part II
Item 6.


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                        FORM 10-KSB CROSS REFERENCE INDEX
<TABLE>
<CAPTION>
                                                                                               PAGE
PART I
<S>                                                                                        <C>
ITEM 1     Business                                                                               3
ITEM 2     Properties                                                                            16
ITEM 3     Legal Proceedings                                                                     16
ITEM 4     Submission of Matters to a Vote of Security Holders                                   16

PART II

ITEM 5     Market for the Corporation's Common Stock and Related
              Stockholder Matters                                                                17
ITEM 6     Management's Discussion and Analysis of Financial Condition
              and Results of Operations                                                          19
ITEM 7     Financial Statements and Supplementary Data                                           41
                 Independent Auditors' Report on the Financial Statements                      FS 1
                 Consolidated Balance Sheets at December 31, 1999 and 1998                     FS 2
                 Consolidated Statements of Operations for each of the three
                     years  in the period ended December 31, 1999                            FS 3-4
                 Consolidated Statements of Changes in Stockholders' Equity for
                     each of the three years in the period ended December 31, 1999             FS 5
                 Consolidated Statements of Cash Flows for each of the three years
                     in the period ended December 31, 1999                                   FS 6-7
                 Notes to Consolidated Financial Statements                                 FS 8-33
ITEM 8     Changes in and Disagreements with Accountants and Financial
               Disclosure                                                                        41
PART III

ITEM 9     Directors, Executive Officers, Promoters and Control Persons:
             Compliance with Section 16(a) of the Exchange Act                                   42
ITEM 10    Executive Compensation                                                                44
ITEM 11    Security Ownership of Certain Beneficial Owners and Management                        47
ITEM 12    Certain Relationships and Related Transactions                                        49
ITEM 13    Exhibits and Reports                                                                  50
           Signatures                                                                            51
</TABLE>


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                                     PART I

ITEM 1. BUSINESS

GENERAL

         Northern California Bancorp, Inc. (the "Corporation") was incorporated
on August 29, 1995, as a for-profit corporation under the California Corporate
laws for the principal purpose of engaging in banking and non-banking activities
as allowed for a bank holding company. The Corporation owns 100% of Monterey
County Bank (the "Bank"). The Corporation's sole sources of (unconsolidated)
revenues at this time are potential dividends, management fees and tax
equalization payments, if any, from the Bank. While these sources cannot be
assured, and may be limited, the Corporation has no direct cash needs other than
limited expenses related to corporate and regulatory compliance.

         Compliance with environmental laws has not had a material impact on the
operations of the Bank or the Corporation, although the Bank faces potential
liability or losses if its borrowers fail to comply with such laws and the Bank
acquires contaminated properties in foreclosure.

BANK SUBSIDIARY

         Monterey County Bank, an independent, California chartered commercial
banking corporation was chartered by the State of California on July 30, 1976.
The Bank's customer base includes individuals, small and medium sized businesses
and a variety of government agencies with residences, offices or other
relationships located in or about the city and county of Monterey, California,
including the cities of Carmel and Pacific Grove. The Bank offers its customers
a wide variety of the normal personal, consumer and commercial services expected
of a locally owned, independently operated bank. The Bank's deposits are insured
by the FDIC, and, as such, the Bank is subject to regulations by that federal
agency and to periodic audits of its operations and documentary compliance by
FDIC personnel. As a state chartered bank, which is not a member of the Federal
Reserve System, it is also regulated and periodically examined by the California
State Banking Department.

         The Bank's activities are conducted at its principal offices, 601
Munras Ave., Monterey, California and at its two branch offices in Carmel and
Pacific Grove, California.

         At December 31, 2000 the Bank had total assets, deposits and
shareholders' equity of approximately $83,686,200, $72,266,600 and $5,370,400,
respectively. On December 29, 2000 the Bank received on behalf of one of its
customers two wire transfers totaling $10,030,000 for deposit to the customer's
demand deposit account. These unusual transactions significantly increased both
the total assets and deposits at December 31, 2000. The funds remained on
deposit until January 12, 2001.


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EMPLOYEES

         At December 31, 2000 the Northern California Bancorp, Inc. and its
subsidiary Monterey County Bank employed a total of 38 full time equivalent
persons.



COMPETITION

         All phases of the Bank's business have been, since inception, and will
continue to be subject to significant competitive forces. Although the Bank has
increasing recognition in its primary service area and Monterey County, it
nevertheless has to compete with other independent local banking institutions,
including commercial banks and savings and loan associations, as well as branch
offices of regional commercial banks, some of which have assets, capital and
lending limits substantially larger than the Bank, as well as wider geographic
markets, more support services and larger media advertising capabilities. The
Bank will also compete with respect to its lending activities, as well as in
attracting demand deposits, with savings banks, savings and loan associations,
insurance companies, regulated small loan companies and credit unions, as well
as securities brokerage offices which can issue commercial paper and other
securities (such as shares in money market funds).

         Among the advantages such institutions have over the Bank are their
ability to finance wide ranging advertising campaigns and to allocate their
investment assets to regions of highest yields and demand. Many institutions
offer certain services, such as trust services and international banking, which
the Bank does not currently offer or plan to offer. By virtue of their greater
total capital, such institutions have substantially higher lending limits than
the Bank (legal lending limits to an individual customer being limited to a
percentage of a bank's total capital accounts). These competitors may intensify
their advertising and marketing activities to counter any efforts by the Bank to
further attract new business as a commercial bank. In addition, as a result of
legislation enacted earlier in the decade, there is increased competition
between banks, savings and loan associations and credit unions for the deposit
and loan business of individuals. These activities may hinder the Bank's ability
to capture a significant market share.

         To compete with the financial institutions in its primary service area,
the Bank intends to use the flexibility, which its independent status will
permit. Its activities in this regard include an ability and intention to
respond quickly to changes in the interest rates paid on time and savings
deposits and charged on loans, and to charges imposed on depository accounts, so
as to remain competitive in the market place. It also will continue to emphasize
specialized services for the small business person and professional, and
personal contacts by the Bank's officers, directors and employees. If there are
customers whose loan demands exceed the Bank's lending limits, the Bank has the
ability to arrange for such loans on a participation basis with other financial
institutions. No assurance can be given, however, that the Bank's efforts to
compete with other financial institutions in its primary service area will be
successful.


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         The Bank provides a range of competitive retail and commercial banking
services. The deposit services offered include various types of personal and
business checking accounts, savings accounts, money market investment accounts,
certificates of deposit, and retirement accounts. Lending services include
consumer loans, various type of mortgage loans for residential and commercial
real estate, personal lines of credit, home equity loans, real estate
construction, accounts receivable financing, commercial loans to small and
medium size businesses and professionals. The Bank also provides drive-through
facilities, at its Monterey and Carmel offices, and night depository facilities
for customer convenience. The Bank offers safe deposit box facilities, cashiers'
checks, travelers' checks, U.S. Savings Bonds, and wire transfers. The Bank does
not provide trust services.

         While the Bank has the authority to engage in a wide range of banking
activities, and offers most of the types of banking services of a commercial
bank, over the past three years it has derived much of its profitability and
differentiated itself from its competitors through (i) commercial and real
estate loans guaranteed by the Small Business Administration ("SBA"); and (ii)
credit card depository services for merchants.

         The Bank depends largely on rate differentials. In general, the
difference between the interest rate paid by the Bank on its deposits and its
other borrowings, and the interest rate received by the Bank on loans extended
to its customers and securities held in the Bank's portfolio, comprise the major
portion of the Bank's earnings. These rates are highly sensitive to many factors
that are beyond the control of the Bank. Accordingly, the earnings and growth of
the Bank are subject to the influence of domestic and foreign economic
conditions, including inflation, recession and unemployment.

         Monetary and fiscal policies of the federal government and the policies
of regulatory agencies, particularly the Federal Reserve Board, also impact on
the Bank's business. The Federal Reserve Board implements national monetary
policies (with objectives such as curbing inflation and combating recession) by
its open-market operations in U.S. Government securities, by adjusting the
required level of reserves for financial intermediaries subject to its reserve
requirements and by varying the discount rates applicable to borrowings by
depository institutions. The actions of the Federal Reserve Board in these areas
influence the growth of bank loans, investments and deposits and also affect
interest rates charged on loans and paid on deposits. The nature and impact of
any future changes in monetary policies cannot be predicted.

SUPERVISION AND REGULATION

THE CORPORATION

         Future offers or sales of the stock of the Corporation will be subject
to the registration requirements of the Securities Act of 1933, and
qualification under the California Corporate Securities Act of 1968, and
possibly other state Blue Sky laws, (unless an exemption is available), although
the Bank's Common Stock is exempt from such requirements.


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         On December 29, 1995, after receipt of appropriate approvals, and/or
passage of notice periods without objection, from the California Superintendent
of Banks, the Federal Deposit Insurance Corporation, the Board of Governors of
the Federal Reserve System and the shareholders of the Bank, the Corporation
acquired the Bank through a reverse triangular merger (the "Merger"). As a
result, by operation of law, each outstanding share of common stock of the Bank
prior to the Merger was converted into a share of common stock of the
Corporation, while the Corporation became the sole owner of the newly issued
shares of common stock of the Bank.

         The Bank Holding Company Act of 1956, as amended, places the
Corporation under the supervision of the Board of Governors of the Federal
Reserve System (the "FRB"). The Corporation must generally obtain the approval
of the FRB before acquiring all or substantially all of the assets of any bank,
or ownership or control of any voting securities of any bank if, after giving
effect to such acquisition, the Corporation would own or control more than 5% of
the voting shares of such bank.

         A bank holding company is generally prohibited from engaging in, or
acquiring direct or indirect control of more than 5% of the voting shares of any
company engaged in non-banking activities unless the FRB, by order or
regulation, has found such activities to be so closely related to banking or
managing or controlling banks as to be a proper incident thereto. In making such
determinations, the FRB considers whether the performance of such activities by
a bank holding company would offer advantages to the public, which outweigh
possible adverse effects.

         The FRB's Regulation "Y" sets out the non-banking activities that are
permissible for bank holding companies under the law, subject to the FRB's
approval in individual cases. Most of these activities are now permitted for
California banks that are well-capitalized. The Corporation and its subsidiaries
will also be subject to certain restrictions with respect to engaging in the
underwriting, public sale and distribution of securities. The Gramm-Leach-Bliley
Act (the "Act") was signed by the President and enacted into law on November 12,
1999. The Act does three fundamental things: 1) it repeals key provisions of the
Glass Steagal Act to permit commercial banks to affiliate with investment bank,
2) it substantially modifies the Bank Holding Company Act of 1956 to permit
companies that own commercial banks to engage in any type of financial activity
and 3) it allows subsidiaries of banks to engage in a broad range of financial
activities that are not permitted for banks themselves. Management cannot
predict what effect these changes will have on the Bank or the Corporation.

         The Corporation will be required to file reports with the FRB and
provide such additional information as the FRB may require. The FRB will also
have the authority to examine the Corporation and each of its subsidiaries with
the cost thereof to be borne by the Corporation. Under California banking law,
the Corporation and its subsidiaries are also subject to examination by, and may
be required to file reports with, the Superintendent Department of Financial
Institutions.

         The Corporation and any subsidiaries which it may acquire or organize
after the reorganization will be deemed affiliates of the Bank within the
meaning of the Federal Reserve Act. Pursuant thereto, loans by the Bank to
affiliates, investments by the Bank in affiliates'


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stock, and taking affiliates' stock by the Bank as collateral for loans to any
borrower will be limited to 10% of the Bank's capital, in the case of any one
affiliate, and will be limited to 20% of the Bank's capital, in the case of all
affiliates. Federal and State law place other limitations on transactions
between the Bank and its affiliates designed to ensure that the Bank receives
treatment in such transactions comparable to that available from unaffiliated
third parties.

         The Corporation and its subsidiaries are prohibited from engaging in
certain tie-in arrangements in connection with any extension of credit, sale or
lease of property or furnishing of services. For example, with certain
exceptions, the Bank may not condition an extension of credit on a customer's
obtaining other services provided by it, the Corporation or any other
subsidiary, or on a promise from its customer not to obtain other services from
a competitor.

SUBSIDIARY BANK

         Both federal and state law provide extensive regulation of the banking
business. State and federal statutes and regulations apply to many aspects of
the Bank's operations, including minimum capital requirements, reserves against
deposits, interest rates payable on deposits, loans, investments, mergers and
acquisitions, borrowings, dividends and locations of branch offices. The
California Superintendent of Banks and the FDIC provide primary supervision,
periodic examination and regulation of the Bank.

         The FDIC, through its Bank Insurance Fund (the "BIF") insures the
Bank's deposits, currently up to a maximum of $100,000 per depositor. For this
protection, the Bank, like all insured banks, pays a semi-annual statutory
assessment and is subject to the rules and regulations of the FDIC. Although the
Bank is not a member of the Federal Reserve System, certain regulations of the
Federal Reserve Board also apply to its operations.

         California law restricts the amount available for cash dividends by
state-chartered banks to the lesser of retained earnings or the bank's net
income for its last three fiscal years (less any distributions to stockholders
made during such period). Cash dividends may also be paid in an amount not
exceeding the net income for such bank's last preceding fiscal year after
obtaining the prior approval of the Superintendent. The FDIC also has authority
to prohibit the Bank from engaging in unsafe or unsound practices. The FDIC can
use this power, under certain circumstances, to restrict or prohibit a bank from
paying dividends.

         Federal law imposes restrictions on banks with regard to transactions
with affiliates, including any extensions of credit to, or the issuance of a
guarantee or letter of credit on behalf of, its affiliates, as well as the
purchase of or investments in stock or other securities thereof, or the taking
of such securities as collateral for loans, and the purchase of assets of from
affiliates. These restrictions have the effect of preventing affiliates (such as
the Corporation) from borrowing from the Bank unless the loans are secured by
marketable obligations of designated amounts. Secured loans and investments by
the Bank are limited to 10% of the Bank's capital and surplus (as defined by
federal regulations) in the case of any one affiliate, and 20% thereof in the
case of all affiliates. California law also imposes certain restrictions with
respect to transactions involving other controlling persons of the Bank.


PAGE 7

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         From time to time, legislation is enacted which has the effect of
increasing the cost of doing business, limiting or expanding permissible
activities or affecting the competitive balance between banks and other
financial intermediaries. Proposals to change the laws and regulations governing
the operations and taxation of banks, bank holding companies and other financial
intermediaries are frequently made in Congress, in the California legislature
and before various bank regulatory and other professional agencies. The Bank
cannot predict what, if any legislation or regulations will be enacted, or the
impact thereof on its business and profitability.

         CAPITAL STANDARDS

         Government agencies have traditionally regulated bank capital through
explicit and implicit guidelines and rules. State law requires "adequate"
capital, without objective definition. Federal law and regulations require
minimum levels of risk-based and so-called "Leverage" capital.

         FDIC guidelines implement the risk-based capital requirements. The
guidelines establish a systematic analytical framework that makes regulatory
capital requirements more sensitive to differences in risk profiles (using the
rough measures set forth therein) among banking organizations, take certain
off-balance sheet items into account in assessing capital adequacy and minimize
disincentives to holding liquid, low-risk assets. Under these guidelines, assets
and credit equivalent amounts of off-balance sheet items, such as letters of
credit and outstanding loan commitments, are assigned to one of several risk
categories, which range from 0% for risk-free assets, such as cash and certain
U.S. government securities, to 100% for relatively high-risk assets, such as
loans and investments in fixed assets, premises and other real estate owned. The
aggregate dollar amount of each category is then multiplied by the risk-weight
associated with that category. The resulting weighted values from each of the
risk categories are then added together to determine the total risk-weighted
assets.

         The guidelines require a minimum ratio of qualifying total capital to
risk-weighted assets of 8%, of which at least 4% must consist of Tier I capital.
Higher risk-based ratios are required to be considered "well capitalized" under
prompt corrective action provisions.

         A banking organization's qualifying total capital consists of two
components: Tier I capital (core capital) and Tier 2 capital (supplementary
capital). Tier I capital consists primarily of common stock, related surplus and
retained earnings, qualifying noncumulative perpetual preferred stock and
minority interests in the equity accounts of consolidated subsidiaries.
Intangibles, such as goodwill, are generally deducted from Tier 1 capital;
however, purchased mortgage servicing rights and purchased credit card
relationships may be included, subject to certain limitations. At least 50% of
the banking organization's total regulatory capital must consist of Tier 1
capital.

         Tier 2 capital may consist of (i) the allowance for loan and lease
losses in an amount up to 1.25% of risk-weighted assets; (ii) cumulative
perpetual preferred stock and long-term preferred stock and related surplus;
(iii) hybrid capital instruments (instruments with characteristics of both debt
and equity), perpetual debt and mandatory convertible debt


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securities; and (iv) eligible term subordinated debt and intermediate-term
preferred stock with an original maturity of five years or more, including
related surplus, in an amount up to 50% of Tier 1 capital. The inclusion of the
foregoing elements of Tier 2 capital are subject to certain requirements and
limitations of the federal banking agencies.

         The FDIC imposes a minimum leverage ratio of Tier I capital to average
total assets of 3% for the highest rated banks, and 4% for all other banks.
Institutions experiencing or anticipating significant growth or those with other
than minimum risk profiles are expected to maintain capital at least 100-200
basis points above the minimum level.

         In addition, the Federal Reserve Board and the FDIC have issued or
proposed rules to take account of interest rate risk, concentration of credit
risk and the risks of nontraditional activities in calculating risk-based
capital.

         For capital adequacy purposes, deferred tax assets that can be realized
from taxes paid in prior carry-back years, and from the future reversal of
temporary differences, are generally unlimited. However, deferred tax assets
that can only be realized through future taxable earnings, including the
implementation of a tax planning strategy, count toward regulatory capital
purposes only up to the lesser of (i) the amount that can be realized within one
year of the quarter-end report date or (ii) 10% of Tier I capital. The amount of
deferred taxes in excess of this limit, if any, would be deducted from Tier I
capital and total assets in regulatory capital calculations.

         A banking organization's risk-based capital ratios are obtained by
dividing its qualifying capital by its total risk adjusted assets, including
dollar equivalents for certain off-balance sheet assets.

         Effective January 17, 1995, the federal banking agencies issued a final
rule relating to capital standards and the risks arising from the concentration
of credit and nontraditional activities. Institutions which have significant
amounts of their assets concentrated in high risk loans or nontraditional
banking activities and who fail to adequately manage these risks, will be
required to set aside capital in excess of the regulatory minimums. The federal
banking agencies have not imposed any quantitative assessment for determining
when these risks are significant, but have identified these issues as important
factors they will review in assessing an individual bank's capital adequacy.
Management of the Company does not believe that the Bank's assets and
activities, as currently structured, would lead the FDIC to require additional
capital under this rule.

         In December 1993, the federal banking agencies issued an interagency
policy statement on the allowance for loan and lease losses (the "ALLL") which
calls for the maintenance of the ALLL at a level at least equal to the
"estimated credit losses" in the bank's loan portfolio. "Estimated credit
losses" are defined as "an estimate of the current amount of the loan and lease
portfolio (net of unearned income) that is not likely to be collected; that is,
net charge-offs that are likely to be realized for a loan or pool of loans given
facts and circumstances as of the evaluation date." The policy statement also
suggests that a test of reasonableness be applied to the ALLL, which test is
satisfied if the ALLL equals or exceeds the sum of (a) assets classified


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loss; (b) 50% of assets classified doubtful; (c) 15% of assets classified
substandard; and (d) estimated credit losses on other assets over the
upcoming twelve months. The Bank believes that its ALLL exceeds the amounts
that would be required under the terms of this policy statement and under
such test of reasonableness. However, this a very subjective matter, and the
Bank cannot assure that any bank examiner would agree with its evaluation, or
that losses ultimately incurred from the Bank's portfolio would not exceed
the amounts so provided.

         Future changes in regulations or practices could further reduce the
amount of capital recognized for purposes of capital adequacy. Such a change
could affect the ability of the Bank to grow and could restrict the amount of
profits, if any, available for the payment of dividends.

         PROMPT CORRECTIVE ACTION AND OTHER ENFORCEMENT MECHANISMS

         Under Section 38 of the FDIA, as added by the Federal Deposit Insurance
Corporation Improvement Act of 1991 ("FDICIA"), each federal banking agency is
required to implement a system of prompt corrective action for institutions
which it regulates. The federal banking agencies have promulgated substantially
similar regulations to implement this system of prompt corrective action. Under
the regulations, an institution shall generally be deemed to be: (i) "well
capitalized" if it has a total risk-based capital ratio of 10.0% or more, has a
Tier I risk-based capital ratio of 6.0% or more, has a Tier I leverage capital
ratio of 5.0% or more and is not subject to specified requirements to meet and
maintain a specific capital level for any capital measure; (ii) "adequately
capitalized" if it has a total risk-based capital ratio of 8.0% or more, a Tier
I risk-based capital ratio of 4.0% or more and a Tier I leverage capital ratio
of 4.0% or more (3.0% under certain circumstances) and does not meet the
definition of "well capitalized;" (iii) "undercapitalized" if it has a total
risk-based capital ratio that is less than 8.0%, a Tier I risk-based capital
ratio that is less than 4.0% or a Tier I leverage capital ratio that is less
than 4.0% (3.0% under certain circumstances); (iv) "significantly
undercapitalized" if it has a total risk-based capital ratio that is less than
6.0%, a Tier I risk-based capital ratio that is less than 3.0% or a Tier I
leverage capital ratio that is less than 3.0%; and (v) "critically
undercapitalized" if it has a ratio of tangible equity to total assets that is
equal to or less than 2.0%.

         Section 38 of the FDIA and the implementing regulations also provide
that a federal banking agency may, after notice and an opportunity for a
hearing, reclassify a well capitalized institution as adequately capitalized and
may require an adequately capitalized institution or an undercapitalized
institution to comply with supervisory actions as if it were in the next lower
category if the institution is in an unsafe or unsound condition or engaging in
an unsafe or unsound practice. (The FDIC may not, however, reclassify a
significantly undercapitalized institution as critically undercapitalized.)

         An institution generally must file a written capital restoration plan
which meets specified requirements, as well as a performance guaranty by each
company that controls the institution, with the appropriate federal banking
agency within 45 days of the date that the institution receives notice or is
deemed to have notice that it is undercapitalized, significantly
undercapitalized or critically undercapitalized. Immediately upon becoming
undercapitalized, an


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institution shall become subject to the provisions of Section 38 of the FDIA,
which sets forth various mandatory and discretionary restrictions on its
operations.

         At December 31, 2000, the Bank met the tests to be categorized as "well
capitalized" under the prompt corrective action regulations of the FDIC.

         SAFETY AND SOUNDNESS STANDARDS

         Federal law requires the federal banking regulatory agencies to
prescribe, by regulation, standards for all insured depository institutions
relating to: (i) internal controls, information systems and internal audit
systems; (ii) loan documentation; (iii) credit underwriting; (iv) interest rate
risk exposure; (v) asset growth; and (vi) compensation, fees and benefits. The
federal banking agencies recently adopted final regulations and Interagency
Guidelines Prescribing Standards for Safety and Soundness ("Guidelines") to
implement safety and soundness standards required by the FDIA. The Guidelines
set forth the safety and soundness standards that the federal banking agencies
use to identify and address problems at insured depository institutions before
capital becomes impaired. The agencies also proposed asset quality and earnings
standards which, if adopted in final, would be added to the Guidelines. Under
the final regulations, if the FDIC determines that the Bank fails to meet any
standard prescribed by the Guidelines, the agency may require the Bank to submit
to the agency an acceptable plan to achieve compliance with the standard, as
required by the FDIA. The final regulations establish deadlines for the
submission and review of such safety and soundness compliance plans.

         PREMIUMS FOR DEPOSIT INSURANCE

         The FDIC adopted regulations implementing a risk-based premium system
required by federal law. Under the regulations which cover the assessment
periods commencing on and after January 1, 1994, insured depository institutions
are required to pay insurance premiums within a range of 23 cents per $100 of
deposits to 31 cents per $100 of deposits depending on their risk
classification. The FDIC, effective September 30, 1995, lowered assessments from
their rates of $.23 to $.31 per $100 of insured deposits to rates of $.04 to
$.31, depending on the health of the bank, as a result of the re-capitalization
of the BIF. The FDIC may alter the existing assessment rate structure for
deposit insurance and may change the base assessment rate (currently, 4 to 31
basis points per year) by rulemaking with notice and comment. Without notice or
comment, the FDIC may increase or decrease the current rate schedule uniformly
by as much as 5 basis points, as deemed necessary to maintain the target
designated reserve ratio 1.25 percent (fund balance to estimated insured
deposits). The insured deposit rates for 2000 were $.00 to $.27, these rates are
projected to continue through the first half of 2001.

         The Financing Corporation (FICO), established by the Competitive
Equality Banking Act of 1987, is a mixed-ownership government corporation whose
sole purpose was to function as the financing vehicle for the Federal Savings &
Loan Insurance Corporation (FSLIC). Effective December 12, 1991, as provided by
the Resolution Trust Corporation Refinancing, Restructuring and Improvement Act
of 1991, the FICO's ability to issue new debt was terminated. Outstanding FICO
bonds, which are 30-year non-callable bonds with a principal amount of
approximately $8.1 billion, mature in 2017 through 2019.


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         The FICO has assessment authority, separate from the FDIC's authority
to assess risk-based premiums for deposit insurance, to collect funds from
FDIC-insured institutions sufficient to pay interest on FICO bonds. The FDIC
acts as collection agent for the FICO. The Deposit Insurance Funds Act of 1996
(DIFA) authorized the FICO to asses both Bank Insurance Fund (BIF) and Savings
Association Insurance Fund (SAIF) insured deposits, and required the BIF rate to
equal one-fifth the SAIF rate through the year 1999, or until the insurance
funds are merged, whichever occurs first. Thereafter, BIF and SAIF insured
deposits will be assessed at the same rate by FICO.

         The FICO assessment rate is adjusted quarterly to reflect changes in
the assessment basis of the respective funds based on quarterly Call Report and
Thrift Financial Report submissions. The FICO quarterly rates for 2000 were
2.12, 2.08, 2.06 and 2.02. The FICO quarterly rate for the first quarter of 2000
is 1.96.

         INTERSTATE BANKING AND BRANCHING

         On September 29, 1994, the President signed into law the Riegle-Neal
Interstate Banking and Branching Efficiency Act of 1994 (the "Interstate Act").
Under the Interstate Act, beginning one year after the date of enactment, a bank
holding company that is adequately capitalized and managed may obtain regulatory
approval to acquire an existing bank located in another state without regard to
state law. A bank holding company would not be permitted to make such an
acquisition if, upon consummation, it would control (a) more than 10% of the
total amount of deposits of insured depository institutions in the United States
or (b) 30% or more of the deposits in the state in which the bank is located. A
state may limit the percentage of total deposits that may be held in that state
by any one bank or bank holding company if application of such limitation does
not discriminate against out-of-state banks. An out-of-state bank holding
company may not acquire a state bank in existence for less than a minimum length
of time that may be prescribed by state law except that a state may not impose
more than a five year existence requirement.

         The Interstate Act also permits, beginning June 1, 1997, mergers of
insured banks located in different states and conversion of the branches of the
acquired bank into branches of the resulting bank. Each state may permit such
combinations earlier than June 1, 1997, and may adopt legislation to prohibit
interstate mergers after that date in that state or in other states by that
state's banks. The same concentration limits discussed in the preceding
paragraph apply. The Interstate Act also permits a national or state bank to
establish branches in a state other than its home state if permitted by the laws
of that state, subject to the same requirement and conditions as for a merger
transaction.

         The Interstate Act is likely to increase competition in the Bank's
market areas especially from larger financial institutions and their holding
companies. It is difficult to asses the impact such likely increased competition
will have on the Bank' operations.

         On October 2, 1995, the "California Interstate Banking and Branching
Act of 1995" (the "1995 Act") became effective. The 1995 Acts generally allows
out-of-state banks to enter


PAGE 12
<PAGE>

California by merging with, or purchasing, a California bank or industrial loan
company which is at least five years old. Also, the 1995 Act repeals the
California Interstate (National) Banking Act of 1986, which previously regulated
the acquisition of California banks by out-of-state bank holding companies. In
addition, the 1995 Act permits California state banks, with the approval of the
Superintendent of Banks, to establish agency relationships with FDIC-insured
banks and savings associations. Finally, the 1995 Act provides for regulatory
relief, including (i) authorization for the Superintendent to exempt banks from
the requirement of obtaining approval before establishing or relocating a branch
office or place of business, (ii) repeal of the requirement of directors' oaths
(Financial Code Section 682), and (iii) repeal of the aggregate limit on real
estate loans (Financial Code Section 1230).

         COMMUNITY REINVESTMENT ACT AND FAIR LENDING DEVELOPMENTS

         The Bank is subject to certain fair lending requirements, reporting
obligations involving home mortgage lending operations and Community
Reinvestment Act (the "CRA"). The CRA generally requires the federal banking
agencies to evaluate the record of financial institutions in meeting the credit
needs of their local community, including low and moderate income neighborhoods.
In addition to substantial penalties and corrective measures that may be
required for a violation of certain fair lending laws, the federal banking
agencies may take compliance with such laws and CRA into account when regulating
and supervising other activities.

         In May, 1995, the federal banking agencies issued final regulations
which change the manner in which they measure a bank's compliance with its CRA
obligations. The final regulations adopt a performance-based evaluation system
which bases CRA ratings on an institutions' actual lending service and
investment performance rather than the extent to which the institution conducts
needs assessments, documents community outreach or complies with other
procedural requirements. In March 1994, the Federal Interagency Task Force on
Fair Lending issued a policy statement on discrimination in lending. The policy
statement describes the three methods that federal agencies will use to prove
discrimination: overt evidence of discrimination, evidence of disparate
treatment and evidence of disparate impact. Management of the Bank believes that
the Bank is in substantial compliance with all requirements under these
provisions. Following the Bank's most recent CRA examination, the Bank's rating
was "satisfactory".

         OTHER REGULATIONS AND POLICIES

         The federal regulatory agencies have adopted regulations that implement
Section 304 of FDICIA which requires federal banking agencies to adopt uniform
regulations prescribing standards for real estate lending. Each insured
depository institution must adopt and maintain a comprehensive written real
estate lending policy, developed in conformance with prescribed guidelines, and
each agency has specified loan-to-value limits in guidelines concerning various
categories of real estate loans.

         Section 24 of the Federal Deposit Insurance Act (the "FDIA"), as
amended by the FDICIA, generally limits the activities and equity investments of
FDIC-insured, state-chartered banks to those that are permissible for national
banks. Under regulations dealing with equity


PAGE 13
<PAGE>

investments, an insured state bank generally may not directly or indirectly
acquire or retain any equity investment of a type, or in an amount, that is not
permissible for a national bank. An insured state bank is not prohibited from,
among other things, (i) acquiring or retaining a majority interest in a
subsidiary, (ii) investing as a limited partner in a partnership the sole
purpose of which is direct or indirect investment in the acquisition,
rehabilitation or new construction of a qualified housing project, provided that
such limited partnership investments may not exceed 2% of the bank's total
assets, (iii) acquiring up to 10% of the voting stock of a company that solely
provides or reinsures directors', trustees' and officers' liability insurance
coverage or bankers' blanket bond group insurance coverage for insured
depository institutions, and (iv) acquiring or retaining the voting shares of a
depository institution if certain requirements are met.

         FDIC regulations implementing Section 24 of the FDIA provide that an
insured state-chartered bank may not, directly, or indirectly through a
subsidiary, engage as "principal" in any activity that is not permissible for a
national bank unless the FDIC has determined that such activities would pose no
risk to the insurance fund of which it is a member and the bank is in compliance
with applicable regulatory capital requirements. Any insured state-chartered
bank directly or indirectly engaged in any activity that is not permitted for a
national bank must cease the impermissible activity.

         REGULATORY ENFORCEMENT POWERS

         Commercial banking organizations, such as the Bank, may be subject to
enforcement actions by the FDIC and the Superintendent for engaging in unsafe or
unsound practices in the conduct of their businesses or for violations of any
law, rule, regulation or any condition imposed in writing by the agency or any
written agreement with the agency. Enforcement actions may include the
imposition of a conservator or receiver, the issuance of a cease-and-desist
order that can be judicially enforced, the termination of insurance of deposits,
the imposition of civil money penalties, the issuance of directives to increase
capital, the issuance of formal and informal agreements, the issuance of removal
and prohibition orders against institution-affiliated parties and the imposition
of restrictions and sanctions under the prompt corrective action provisions of
the FDICIA.

         CALIFORNIA AND FEDERAL BANKING LAW

         The Federal Change in Bank Control Act of 1978 prohibits a person or
group of persons "acting in concert" from acquiring "control" of a bank or
holding company unless the appropriate federal regulatory agency has been given
60 days' prior written notice of such proposed acquisition and, within that time
period, has not issued a notice disapproving the proposed acquisition or
extending for up to another 30 days the period during which such a disapproval
may be issued. An acquisition may be made prior to the expiration of the
disapproval period if the agency issues written notice of its intent not to
disapprove the action. The acquisition of more than 10% of a class of voting
stock of a bank (or holding company) with a class of securities registered under
Section 12 of the Securities Exchange Act of 1934, as amended (such


PAGE 14
<PAGE>

as the Common Stock), is generally presumed, subject to rebuttal. to constitute
the acquisition of control.

                  Under the California Financial Code, no person shall, directly
or indirectly, acquire control of a California licensed bank or a bank holding
company unless the Superintendent has approved such acquisition of control. A
person would be deemed to have acquired control of the Corporation under this
state law if such person, directly or indirectly, has the power (i) to vote 25%
or more of the voting power of the Corporation or (ii) to direct or cause the
direction of the management and policies of the Corporation. For purposes of
this law, a person who directly or indirectly owns or controls 10% or more of
the Common Stock would be presumed to control the Corporation, subject to
rebuttal.

                  In addition, any "company" would be required to obtain the
approval of the Federal Reserve under the Bank Holding Company Act of 1956, as
amended (the "BHC Act"), before acquiring 25% (5% in the case of an acquirer
that is, or is deemed to be, a bank holding company) or more of the outstanding
Common Stock of, or such lesser number of shares as constitute control over, the
Bank or the Corporation.

         The Community Reinvestment Act of 1977 ("CRA") and the related
Regulations of the Comptroller of the Currency, the Board of Governors of the
Federal Reserve and the Federal Deposit Insurance Corporation ("FDIC") are
intended to encourage regulated financial institutions to help meet the credit
needs of their local community or communities, including low and moderate income
neighborhoods, consistent with the safe and sound operation of such financial
institutions. The CRA and such regulations provide that the appropriate
regulatory authority will assess the records of regulated financial institutions
in satisfying their continuing and affirmative obligations to help meet the
credit needs of their local communities as part of their regulatory examination
of the institution. The results of such examinations are made public and are
taken into account upon the filing of any application to establish a domestic
branch, to merge or to acquire the assets or assume the liabilities of a bank.
In the case of a bank holding company, the CRA performance record of the
subsidiary bank(s) involved in the transaction is reviewed in connection with
the filing of an application to acquire ownership or control of shares or assets
of a bank or to merge with any other bank holding company. An unsatisfactory
record can substantially delay or block the transaction.

RESEARCH

         Neither the Corporation nor the Bank makes any material expenditures
for research and development.

DEPENDENCE UPON A SINGLE CUSTOMER

         Neither the Corporation nor the Bank is dependent upon a single
customer or very few customers. The Bank's business is concentrated in, and
largely dependent upon the strength of the local economy in, the Monterey
Peninsula area of Northern California. The local economy is affected by both
national trends and by local factors. Tourism and the activities at the former


PAGE 15
<PAGE>

Fort Ord military base are among the major contributors to the local economy.
The opening of the California State University at Monterey Bay on the former
Fort Ord military base may lessen the impact of the base closure.

ITEM 2. PROPERTIES

         The main office of the Bank, which also serves as the principal office
of the Corporation, is located at 601 Munras Ave., Monterey, California 93940.
This facility contains a lobby, executive and customer service offices, teller
stations, safe deposit boxes and related non-vault area, vault, operations area,
lounge and miscellaneous areas. A drive-through facility and adequate paved
parking are also on the premises. Both the land and all improvements thereto are
owned by the Bank. The Bank currently operates two branch offices in Carmel and
Pacific Grove, California, both within approximately 10 miles from the Bank's
main office. The land and improvements dedicated to the Carmel and Pacific Grove
branch offices are leased. See Footnote 7 to the Corporation's financial
statements included herewith.

         Generally, neither the Bank nor the Corporation may invest in equity
interests in real estate, except for the direct use of the Bank or the
Corporation in their business. The Bank makes and/or purchases loans secured by
real estate, subject to normal banking practices, its own policies and the
restrictions described above under Item 1.

ITEM 3. LEGAL PROCEEDINGS

         In May 1998 Monterey County Bank entered into a settlement agreement
with Monterey Bay Bank, whereby Monterey County Bank agreed to terminate its
trade name infringement litigation against Monterey Bay Bank. Under the terms of
the settlement Monterey County Bank received a lump sum payment in the amount of
$117,100.

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

         None submitted.


PAGE 16

<PAGE>


PART II

ITEM 5. MARKET FOR THE CORPORATION'S COMMON STOCK AND RELATED STOCKHOLDER
        MATTERS.

         Neither the Corporation's, which is held by approximately 550 persons,
nor the Bank's, stock has ever been actively traded. To the Corporation's
knowledge no brokers have handled trades in the Bank's stock during the past
four years, and there are no published "bid/asked" quotes for such stock or the
stock of the Corporation. During the same period, no broker acted as a market
maker for the Corporation or Bank's Common Stock. Accordingly, the market price
data contained herein does not represent the value which would be assigned in an
efficient market. The Common Stock is not listed on any securities exchange or
quoted on the National Association of Securities Dealers Automated System.

         The Corporation repurchased 3,754 at prices ranging from $2.70 to $3.00
in 2000, and 11,133 and 3,482 shares of common stock at $3.00 per share in 1999
and 1998, respectively.

         The following table sets forth, according to information known to the
Corporation, the price paid per share in, and volume of, transactions in the
Bank's stock during the quarters ended March 31, 1998 to December 31, 2000.

<TABLE>
<CAPTION>
            QUARTER/YEAR                  PRICE          VOLUME(1)
            ------------                  -----          ---------
<S>                                     <C>                  <C>
       1st quarter of 1998                2.75                 787
       2nd quarter of 1998                3.00                 300
       3rd quarter of 1998                 ---                   0
       4th quarter of 1998              2.75/3.00            6,328

       1st quarter of 1999                3.00               1,482
       2nd quarter of 1999              3.00/3.50            2,173
       3rd quarter of 1999                3.00               8,606
       4th quarter of 1999                3.00               2,287

       1st quarter of 2000                3.00               1,662
       2nd quarter of 2000                3.00               1,256
       3rd quarter of 2000                3.00                 132
       4th quarter of 2000              2.70-3.00            3,918
</TABLE>


(1)  For the period presented, the information indicated might not include
     information on shares which may have been traded directly by shareholders
     or through dealers.


PAGE 17
<PAGE>

         The principal source of cash flow of the Corporation, including cash
flow to pay dividends on its stock or principal and interest on debt, is
dividends from the Bank. There are statutory and regulatory limitations on the
payment of dividends by the Bank to the Corporation, as well as by the
Corporation to its shareholders.

         If in the opinion of the applicable federal and/or state regulatory
authority, a depository institution or holding company is engaged in or is about
to engage in an unsafe or unsound practice (which, depending on the financial
condition of the depository institution or holding company, could include the
payment of dividends), such authority may require, after notice and hear (except
in the case of an emergency proceeding where there in no notice or hearing),
that such institution or holding company cease and desist from such practice.
Moreover, the Federal Reserve and the FDIC have issued policy statements which
provide that bank holding companies and insured depository institutions
generally should only pay dividends out of current operating earnings.

         Under the Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA"), an FDIC insured depository institution may not pay any dividend if
payment would cause it to become undercapitalized or once it is
undercapitalized.

         The Bank's payment of dividends, as a California chartered commercial
banking corporation, is regulated by the California Financial Code. Under the
California Financial Code, funds available for cash dividend payments by the
Bank are restricted to the lessor of: (I) retained earnings; or (ii) the Bank's
net income for its last three fiscal years (less any distributions to the
stockholders made during such period). As of December 31, 2000 the Bank had
$1,744,000 in retained earnings. The Bank's net income for the last three fiscal
years less distributions to stockholders was $1,592,400.

              In December 2000, 1999 and 1998 the Corporation paid a ten (10)
percent stock dividend. The Bank paid dividends totaling $100,000, $50,000 and
$50,000 to the Corporation during 2000, 1999 and 1998, respectively.


PAGE 18
<PAGE>


ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATION

OVERVIEW

         The following discussion reviews and analyzes the operating results and
financial condition of the Corporation, focusing on the Bank. It should be read
in conjunction with the financial statements and the other financial data
presented elsewhere herein.

         Net income for each of the last three years was $736,300 in 2000,
$453,800 in 1999, and $464,200 in 1998. The primary net income per share for
each of the last three years was $.60, $.39, and $.41 respectively. The diluted
net income per share for the same time periods were $.51, $.32 and $.34,
respectively. Return on average shareholders' equity was 16.95%, 12.37% and
14.43% in 2000, 1999 and 1998, respectively. Return on average assets was 1.06%,
 .80%, and .97% in 2000, 1999 and 1998, respectively.

         The increase in earnings in 2000 was due to increases of $596,600 in
net interest income after provision for loan losses and $191,300 in other
income; partially offset by increases of $290,400 in other expense and $214,900
in income tax expense.

         Earnings before extraordinary items increased $54,000 in 1999. The
increase was due primarily to increases of $309,500 in net interest income after
provision for loan losses and $103,500 in other income; partially offset by
increases of $285,900 in operating expenses and $73,100 in income taxes. In 1998
an extraordinary item, litigation settlement, of $64,400 net of income tax
expense of $52,700 was recorded.

         The increase in earnings for 1998 was due to an increase of $191,700 in
net interest income after provision for loan losses, an increase of $76,400 in
other income; an increase of $78,800 in operating expenses, a decrease of
$101,700 in income taxes and an extraordinary item, litigation settlement, of
$64,400 net of income tax expense of $52,700.

              The following table provides a summary of the income statement,
balance sheet, and selected ratios for the last five years. A more detailed
analysis of each component of net income is included under the appropriate
captions, which follows.


PAGE 19
<PAGE>

<TABLE>
<CAPTION>
                                                             AS OF AND FOR THE YEARS ENDED DECEMBER 31,
                                            --------------------------------------------------------------------------
                                             2000               1999              1998          1997             1996
                                            ------             ------            ------        ------           ------
                                                  (Dollars in thousands except per share data)
<S>                                      <C>               <C>               <C>             <C>             <C>
Summary of Operating
Results:

Total interest income                        5,501             4,296             3,757           3,399           3,140
Total interest expense                       2,414             1,761             1,603           1,447           1,334
                                            ------            ------           -------         -------         -------
Net interest income                          3,088             2,535             2,154           1,952           1,807

Provision for possible
   loan losses                                 130               174               130             120              53
                                            ------            ------           -------          ------          ------
Net interest income after
   provision for loan loss                   2,958             2,361             2,024           1,832           1,754

Total other income                           1,446             1,255             1,152           1,074             983
Total other expense                          3,306             3,015             2,585           2,505           2,444
                                            ------            ------           -------          ------          -------
Income (loss) before taxes                   1,098               601               591             402             293
Provision for income tax                       362               147               127             176              80
                                            ------            ------           -------          ------          -------
Net income (loss)                              736               454               464             226             213

Per Common Share Data:

Basic Earnings

Income before extraordinary
item (1)                                      0.60              0.39              0.35            0.20            0.18
Extraordinary Item (1)                         ---               ---              0.06             ---             ---
                                            ------            ------            ------          -------        -------
Net Income (1)                                0.60              0.39              0.39            0.20            0.18

Diluted Earnings
Income before extraordinary
item (2)                                      0.51              0.33              0.29            0.16            0.15
Extraordinary Item (2)                         ---               ---              0.06             ---             ---
                                            ------            ------           -------          ------          -------
Net Income (2)                                0.51              0.33              0.35            0.16            0.15

Book value, end of period                     3.99              3.57              3.30            2.91            2.72
Avg shares outstanding (3)               1,222,822         1,166,134         1,153,070       1,165,964       1,174,829

Balance Sheet Data:

Total loans, net of
   unearned income (4)                      43,239            39,217            28,250          25,606          25,310
Total assets                                83,940            65,214            51,103          46,113          40,799
Total deposits                              72,216            55,563            42,852          39,206          36,167
Stockholders' equity                         4,861             3,993             3,435           3,031           2,898
</TABLE>

PAGE 20
<PAGE>

<TABLE>
<CAPTION>
                                                                AS OF AND FOR THE YEARS ENDED DECEMBER 31,
                                                         -----------------------------------------------------------------
                                                          2000           1999           1998          1997           1996
                                                         ------         ------         ------        ------         ------
<S>                                                     <C>            <C>            <C>           <C>            <C>
Selected Financial Ratios (5):

Return on average assets                                 1.06%          0.80%          0.97%         0.54%          0.56%
Return on average
   stockholders' equity                                 16.95%         12.37%         14.43%         7.34%          7.25%
Net interest spread                                      4.73%          3.88%          4.45%         4.74%          4.91%

Net interest margin                                      5.59%          4.60%          5.20%         5.42%          5.54%

Avg shareholders' equity
   to average assets                                     6.23%          6.48%          6.73%         7.37%          7.72%

Primary capital to assets
   at end of period                                      6.32%          6.70%          7.32%         7.85%          7.68%

Total loans to total deposits
   at end of period                                     59.88%         70.58%         65.92%        65.31%         65.31%

Allowance to total loans
   at end of period                                      1.05%          1.01%          1.18%         1.04%          1.01%

Nonperforming loans to total
   loans at end of period                                0.03%          0.48%          0.25%         0.81%          1.13%

Net charge-offs to
   average loans                                         0.15%          0.32%          0.23%         0.40%          0.10%
</TABLE>

(1)  Primary earnings (loss) per share amounts were computed on the basis of the
     weighted average number of shares of common stock during the year. The
     weighted average number of shares used for this computation was 1,222,781,
     for 2000, 1,166,134 for 1999, 1,153,070 for 1998 and 1,165,964 for 1997 and
     1,174,829 for 1996.

(2)  Fully diluted earnings (loss) per share amounts were computed on the basis
     of the weighted average number of shares of common stock and common stock
     equivalents outstanding during the year. Common stock equivalents include
     employee stock options. The weighted average number of shares used for this
     computation was 1,430,030, 1,399,500, 1,358,169, 1,378,450 and 1,378,316 in
     2000, 1999, 1998, 1997 and 1996, respectively.

(3)  Weighted average common shares.

(4)  Includes loans being held for sale.

(5)  Averages are of daily balances.


PAGE 21
<PAGE>

NET INTEREST INCOME

         Net interest income, the difference between (a) interest and fees
earned on interest-earning assets and (b) interest paid on interest-bearing
liabilities, is the most significant component of the Bank's earnings. Changes
in net interest income from period to period result from increases or decreases
in the average balances of interest earning assets portfolio, the availability
of particular sources of funds and changes in prevailing interest rates.

         The following table summarizes the Bank's net interest income. It is
not presented on a tax equivalent basis, as the Bank's tax-exempt interest
income is insignificant.

<TABLE>
<CAPTION>
                                     YEARS ENDED                     INCREASE (DECREASE)
                                     DECEMBER 31,                      FROM PRIOR YEAR
                             2000      1999        1998        2000/1999              1999/1998
                           ----------------------------     -----------------      ---------------
                                                             AMT          %          AMT       %
                                                (DOLLARS IN THOUSANDS)
<S>                        <C>       <C>         <C>         <C>        <C>          <C>     <C>
Interest Income            5,501     4,296       3,757       1,205      28.05        539     14.35
Interest Expense           2,414     1,761       1,603         653      37.08        158      9.86
                          ------    -------     -------     -------    -------      ------   ------

Net Interest Income        3,087     2,535       2,154         552      21.78        381     17.69
</TABLE>

         Net interest income increased $552,600 (21.80%) from 1999 to 2000.
Average interest bearing assets increased 24.10%, while the average rate earned
increased 38 basis points, resulting in an increase of $1,205,200 in total
interest income. Interest expense increased $652,600 the result of a 20.76%
increase in average interest bearing liabilities and a 34 basis points increase
in the average rate paid. Average interest rates on loans increased 17 basis
points. Of the $11,909,000 increase in average earning assets $7,397,000
(62.11%) was in loans.

         Net interest income increased $83,800 (3.89%) from 1998 to 1999.
Average interest bearing assets increased 19.24%, while the average rate earned
decreased 91 basis points, resulting in an increase of $268,900 in total
interest income. Interest expense increased $185,100 the result of a 11.54%
increase in average interest bearing liabilities and a 31 basis points decrease
in the average rate paid. Average interest rates on loans decreased 136 basis
points. Of the $7,973,300 increase in earning assets $6,697,700 (84%) was in
loans.

         The following table shows the components of the Bank's net interest
income, setting forth, for each of the three years ended December 31, 2000, 1999
and 1998 (i) average assets, liabilities and investments, (ii) interest income
earned on interest-earning assets and interest expense paid on interest-bearing
liabilities, (iii) average yields earned on interest-earning assets and average
rates paid on interest-bearing liabilities, (iv) the net interest spread (i.e.,
the average yield earned on interest-earning assets less the average rate paid
on interest-bearing liabilities) and (v) the net interest yield on average
interest-earning assets (i. e., net interest income divided by average
interest-earning assets). Yields are computed on a tax-equivalent basis,
resulting in


PAGE 22
<PAGE>

adjustments to interest earned on non-taxable securities of $253,700, $158,400
and $130,400 in 2000, 1999 and 1998 respectively. Non-accrual loans and
overdrafts are included in average loan balances. Average loans are presented
net of unearned income.

INTEREST SPREAD ANALYSIS:

<TABLE>
<CAPTION>
                                               2000                       1999                        1998
                                       -------------------       ----------------------      ----------------------
                                               INT     AVG                 INT      AVG                INT      AVG
                                        AVG    EARN     %         AVG      EARN       %       AVG      EARN      %
                                        BAL    PAID    RATE       BAL      PAID     RATE      BAL      PAID     RATE
                                       --------------------      -----------------------     -----------------------
                                                                 (DOLLARS IN THOUSANDS)
<S>                                  <C>        <C>    <C>        <C>       <C>    <C>         <C>       <C>     <C>
Interest Earning Assets:
Int-bearing deposits
  at other banks                        164        10   6.36         183        9   5.08          100       6     5.98
Invest securities - Taxable           5,553       396   7.12       3,434      221   6.45        3,642     250     6.86
Invest securities - Non-Taxable       9,325       746   8.00       6,063      463   7.63        4,518     359     7.95
Federal funds sold                    4,776       303   6.35       5,627      278   4.94        5,771     317     5.49
                                     -----------------------     -----------------------      ------------------------

Total investments                    19,818      1455   7.34      15,307      971   6.35       14,031     932     6.64

Loans

  Construction                        3,147       329  10.45       1,977      202  10.24            0       0     0.00
  Real estate                        25,211     2,451   9.72      18,727    1,825   9.74       14,641   1,516    10.36
  Installment                           511        68  13.30         407       53  13.05          508      61    11.96
  Commercial                         12,643     1,451  11.48      13,004    1,397  10.75       12,268   1,378    11.24
                                     -----------------------      ----------------------      ------------------------

Total loans                          41,512     4,299  10.36      34,115    3,478  10.19       27,417   2,955    10.78

Total Interest
  earning assets                     61,330     5,754   9.38      49,422    4,449   9.00       41,449   3,887     9.38
                                     =======================      ======================      ========================

Interest Bearing Liabilities:
Int-bearing demand                    8,917        89   1.00       7,785       79   1.01        6,206      73     1.17
Money market savings                  1,428        26   1.84       1,634       31   1.88        1,623      38     2.31
Savings deposits                      3,185        63   1.98       3,463       68   1.95        2,846      63     2.22
Time deposits GREATER THAN $100M     13,019       764   5.87       9,404      524   5.57        8,042     471     5.86
Time deposits LESS THAN $100M        19,049     1,105   5.80      14,682      815   5.55       12,049     713     5.92
Other Borrowing                       4,402       280   6.36       4,438      273   6.14        4,008     246     6.13
                                     -----------------------      ----------------------      ------------------------
Total interest
  bearing liabilities                49,998     2,328   4.66      41,404    1,788   4.32       34,773   1,603     4.61
                                     =======================      ======================      ========================

Net interest income                             3,426                       2,661                       2,284
Net interest spread                                     4.73                        4.68                          4.77
Net yield on interest
  earning assets                                        5.59                        5.38                          5.51
</TABLE>

PAGE 23
<PAGE>


INTEREST SPREAD ANALYSIS (CONTINUED):

<TABLE>
<CAPTION>
                                                       2000 VS 1999                         1999 VS 1998
                                                    -----------------                     -----------------
                                                    INCREASE(DECREASE)                    INCREASE(DECREASE)
                                                       DUE TO CHANGES                        DUE TO CHANGES
                                                 ----------------------------             ----------------------------
                                                   AVG        AVG                            AVG      AVG
                                                  VOLUME      RATE       TOTAL             VOLUME     RATE       TOTAL
                                                 -----------------------------            ----------------------------
                                                                      (DOLLARS IN THOUSANDS)
<S>                                                <C>       <C>         <C>              <C>      <C>          <C>
Interest Earning Assets:
Int-bearing deposits
  at other banks                                    (1)        2            1                5       (2)           3
Invest securities - Taxable                         137       38          174             (14)      (14)        (28)
Invest securities - Non-Taxable                     249       34          283              123      (19)         104
Federal funds sold                                 (42)       68           26              (8)      (31)        (39)
                                                 ----------------------------             ---------------------------

Total investments                                   343      141          484              106      (66)          40

Loans

  Construction                                      120        7          127                0       202         202
  Real estate                                       632      (5)          626              423     (115)         308
  Installment                                        14        1           15             (12)         4         (8)
  Commercial                                       (39)       92           53               83      (64)          19
                                                 ----------------------------             ----------------------------

  Total loans                                       726       95          821              494        28         522

Total Interest Earning Assets                      1069      236         1305              599      (38)         562

Interest Bearing Deposits:


Int-bearing demand                                   11      (1)           10               19      (12)           6
Money market savings                                (4)      (1)          (4)                0       (7)         (7)
Savings deposits                                    (5)        1          (4)               14       (9)           4
Time deposits GREATER THAN $100M                    201       39          240               80      (28)          52
Time deposits LESS THAN $100M                       242       48          290              156      (53)         102
Other Borrowing                                     (2)       10            7               26         1          27
                                                 ----------------------------             ----------------------------
Total interest bearing deposits                     444       96          539              294     (109)         185
                                                 ============================             ============================
Net change in net interest                          625      141          766              305        72         377
</TABLE>

PAGE 24
<PAGE>

PROVISION AND ALLOWANCE FOR LOAN LOSSES

         The provision for loan losses is an expense charged against operating
income and added to the allowance for loan losses. The allowance for loan losses
represents amounts which have been set aside for the specific purpose of
absorbing losses which may occur in the Bank's loan portfolio.

         The allowance for loan losses reflects management's ongoing evaluation
of the risks inherent in the loan portfolio both generally and with respect to
specific loans, the state of the economy, and the level of net loan losses
experienced in the past. Management and the Board of Directors review the
results of the State Banking Department and FDIC examinations, independent
accountants' observations, and the Bank 's internal review as additional
indicators to determine if the amount in the allowance for loan losses is
adequate to protect against estimated future losses. It is the Bank 's current
practice, which could change in accordance with the factors mentioned above, to
maintain an allowance which is at least equal to the sum of the following
percentage of loan balances by loan category.

<TABLE>
<CAPTION>
                               LOAN CATEGORY                       RESERVE%

<S>                                                                   <C>
              Classified Loans:
              Loans classified loss                                   100.00%
              Loans classified doubtful                                50.00%
              Loans classified substandard
                   Real Estate Secured                                  5.00%
                   Non Real Estate Secured                             20.00%

              Unclassified Loans:
              Real Estate - Loan to value 80% or less                   0.10%
              Real Estate - Loan to value over 80%                      0.50%
              Real Estate - Construction                                0.15%
              Loans to Individuals                                      3.00%
              Commercial                                                2.00%
              SBA Loans - Unguaranteed portion                          2.00%
              Unfunded Loan Commitments                                  .25%
              Concentration Risk Factor - Real Estate                    .10%
              Economic Risk Factor                                       .25%
              SBA Loans - Guaranteed portion                            0.00%
              Cash Secured Loans                                        0.00%
</TABLE>

         Although no assurance can be given that actual losses will not exceed
the amount provided for in the allowance, Management believes that the allowance
is adequate to provide for all estimated credit losses in light of all known
relevant factors. At the end of 2000, 1999 and 1998, the Bank's allowance stood
at 1.05 percent, 1. 01 percent, and 1.18 percent of gross loans, respectively.
Provisions were made to the allowance for loan losses in 2000, 1999 and


PAGE 25
<PAGE>

1998 of $130,000, $174,200, and $130,000, respectively. Loans charged off
totaled $68,900 in 2000, $128,600 in 1999, and $75,500 in 1998. Recoveries for
these same periods were $7,400 $18,100, and $12,600.

         The Bank's non performing (delinquent 90 days or more and non-accrual)
loans as a percentage of total loans was .03 percent .48 percent and .42 percent
as of the end of 2000, 1999 and 1998, respectively.

         Based upon statistics released by Federal and state banking authorities
regarding banks of similar size or otherwise located in California, Management
believes that the Bank's ratios of delinquent and non performing loans to total
loans are far better than average. Prudent collection efforts, and tighter
lending controls, are responsible for the Bank's strong performance on these
measures of credit quality. However, no assurance can be given that the Bank's
loan portfolio will continue to measure well against its peers on these ratios
and quality measures, or that losses will not otherwise occur in the future.

NON-INTEREST INCOME

         The following table presents a summary of the Bank's non-interest
income:

<TABLE>
<CAPTION>
                                              YEARS ENDED DECEMBER 31,
                                            2000       1999       1998
                                           ------     ------     ------
                                               (DOLLARS IN THOUSANDS)
<S>                                      <C>         <C>        <C>
Service charges on deposit
    accounts                                 418        389        371
Other service charges, commissions
    and fees                                 633        440        398
Income from sales and servicing
    of SBA loans                             394        425        382
                                         -------    -------    -------

    Total non-interest Income              1,445      1,254      1,151
</TABLE>

         Total non-interest income increased $191,300 (15.26%) in 2000 when
compared with 1999. Service charges on deposit accounts increased $29,100 and
other service charges, commissions and fees increased $193,300; while income
from sales and servicing of SBA loans decreased $31,000.

         Total non-interest income increased $103,500 (8.99%) in 1999 when
compared with 1998. service charges on deposit accounts increased $18,000 and
other service charges, commissions and fees increased $42,500. Merchant credit
card processing income decreased by $13,800 during 1999 compared to 1998.


PAGE 26

<PAGE>

         The sale of Small Business Administration (SBA) guaranteed loans is a
significant contributor to the Bank's income. SBA guaranteed loans yield up to
3 3/4% over the New York prime rate, and the guaranteed portions can be sold at
premiums which vary with market conditions. SBA loans are guaranteed by the full
faith of the United States Government from 70 to 80 percent of the principal
amount. The guaranteed portion has risks comparable for an investor to a U. S.
Government security and can usually be sold in the secondary financial market,
either at a premium or at a yield which allows the Bank to maintain a
significant spread for itself.

         There can be no assurance that the gains on sale will continue at, or
above, the levels realized in the past three years. In addition, increasing
competition among lenders for qualified SBA borrowers makes it difficult for the
Bank to continually expand its program in this area, and may limit the level of
premium that can be earned with regard thereto. Furthermore, the SBA recently
began requiring lenders to share a portion of premiums in excess of 10% earned
on the sale of the guaranteed portions.

     The following table presents a summary of the activity in SBA loans for the
years ended 2000, 1999 and 1998:

<TABLE>
<CAPTION>
                                         2000           1999          1998
                                     ------------   ------------  -------------

<S>                                   <C>            <C>            <C>
SBA loans authorized                  $ 7,083,000    $ 2,458,000    $ 3,551,800
                                     ============   ============  =============
SBA loans sold                        $ 5,357,900    $ 2,811,900    $ 2,524,100
                                     ============   ============  =============

<CAPTION>
SUMMARY OF INCOME FROM SALES AND
   SERVICING OF SBA LOANS

                                         2000           1999          1998
                                     ------------   ------------  -------------
<S>                                   <C>            <C>            <C>
Income from premium                   $ 244,900      $ 267,500      $ 192,100
Income from servicing                   150,100        158,000        191,900
Less loan origination expense            (1,000)        (1,000)        (1,600)
                                     ------------   ------------  -------------
Total income from sales and
   servicing of SBA loans             $ 394,000      $ 424,500      $ 382,400
                                     ============   ============  =============
</TABLE>


PAGE 27
<PAGE>

NON-INTEREST EXPENSE

         The following table presents a summary of the Bank's other non-interest
expense:

<TABLE>
<CAPTION>
                                             YEARS  ENDED  DECEMBER 31,
                                        -----------------------------------
                                             2000        1999        1998
                                           -------      ------      ------
                                                (DOLLARS IN THOUSANDS)
<S>                                         <C>         <C>         <C>
Salaries and benefits                       1,927       1,742       1,499
Occupancy and equipment expense               304         297         281
Professional fees                              91          74         107
Data Processing                               249         202         193
Other expenses                              1,024         822         620
                                           -------      ------      ------

    Total other Expenses                    3,595       3,137       2,700
</TABLE>


         Salary expense increased $184,600 in 2000 as a result of the addition
of three full time equivalent staff positions, merit increases and bonus
payments. Salary expense increased $242,800 in 1999 as a result of the addition
of two positions; a Small Business Administration Lending Officer and a clerical
staff position, employee merit increases and bonus payments. Salary expense
increased $94,000 in 1998 as a result of the addition of Commercial Lending
Officer, employee merit increases and bonus payments

         Occupancy and equipment expenses increased $7,300 in 2000 due to
additional premises rental expense. Occupancy and equipment expenses increased
$15,600 in 1999, with increases of $10,400 in premises rent, $3,900 in
depreciation and $3,700 in equipment rental; while utilities decreased $3,000
and net merchant terminal expense decreased $4,600. Occupancy and equipment
expenses increased $30,300 in 1998, with increases of $9,300 in maintenance and
repairs, $7,400 in depreciation, $6,000 and $4,400 in utilities.

         Data processing expense increased $47,100 in 2000 as the result of
increases in the number of accounts and transaction volumes and the
implementation of a debit card program. Data processing expense increased $9,400
in 1999 as the result of increases in the number of accounts and transaction
volumes and a 2% cost of living adjustment. In 1998 data processing expense
increased $20,300 as the result of increases in the number of accounts and
transaction volumes.

         In 2000 professional fees increased $17,100 due to accounting fees
related to the quarterly review of the Company's Form 10-QSB filings and third
party loan reviews. In 1999 professional fees decreased $32,700 due to a $36,500
decrease in legal fees. The Professional


PAGE 28
<PAGE>

fees increased $21,400 in 1998 when compared to 1997. The Bank recovered
$117,100 in legal fees associated with the Bank's settling its name infringement
lawsuit against Monterey Bay Bank, this settlement is shown as a extraordinary
item on the statement of operations for 1998.

         Other expenses for 2000 totaled $735,300 compared with $671,000 for
1999, an increase of $64,300. Significant changes occurred in the following
categories with in increases advertising ($32,500), director fees ($5,500),
entertainment/meals ($23,200), donations ($6,800), FDIC & State assessments
($14,300), bank fees ($3,600), ATM expense ($3,200), messenger & freight
($3,100), postage ($4,300), operations losses ($11,400); while decreases
occurred in collection expense ($11,300), stationary & supplies ($12,000),
insurance ($18,100).

         Other expenses for 1999 totaled $671,000 compared with $619,600 for
1998, an increase of $52,000. Significant changes occurred in the following
categories with in increases advertising ($10,500), poppy account expense
($2,800), director fees ($2,800), dues and memberships ($1,900), donations
($4,900), loan expense ($10,800), bank fees ($4,800), ATM expense ($6,200),
stationary/supplies ($9,900), telephone ($8,400), travel ($9,000); while
decreases occurred in business development ($5,300), auto expense ($2,000),
entertainment/meals ($13,200), security expense ($9,100), insurance ($2,700),
Year 2000 expense ($15,400).

         Other expenses for 1998 totaled $619,600 compared with $590,700 for
1997. Significant changes occurred in the following categories with in increases
collection expense ($7,000), poppy account expense ($4,600), director fees
($4,700), dues and memberships ($2,500), entertainment and meals ($6,400) loan
expense ($10,800), messenger and freight ($3,800), insurance ($12,000), Year
2000 expense ($28,800)); while decreases occurred in advertising ($3,900),
business development ($18,700), donations ($8,900) FDIC and State assessments
($6,900), SBA loan expense ($22,400), telephone ($7,300), travel expense
($3,000).

INCOME TAXES

         In February 1992, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes," (Statement 109). Under the asset and liability method of Statement 109,
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under Statement 109, the
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date. Deferred
assets are recognized for deductible temporary differences and operating loss
and tax credit carry forwards, and then a valuation allowance is established to
reduce that deferred tax asset if it is "more likely than not" that the related
tax benefits will not be realized. The Bank adopted Statement 109 and has
applied the provisions of the statement as of January 1, 1992.


PAGE 29
<PAGE>

         Allocation of federal and state income taxes between current and
deferred portions is as follows:

<TABLE>
<CAPTION>
                                                    YEARS ENDED DECEMBER 31,
                                                2000        1999           1998
<S>                                        <C>          <C>           <C>
Current tax provision:
  Federal                                  $ 168,000    $  58,600     $  49,600
  State                                      115,600       57,700        43,900
                                          ----------    ---------     ---------
                                             283,600      116,300        93,500
                                          ----------    ---------     ---------

Deferred tax provision (benefit):
  Federal                                     63,400       22,800       (16,800)
  State                                       14,900        7,900        (2,800)
                                          ----------    ---------      ---------
                                              78,300       30,700       (19,600)
                                          ----------    ---------      ---------
                                           $ 361,900    $ 147,000     $  73,900
                                          ==========    =========     ==========
</TABLE>

The reasons for the differences between the statutory federal income tax rate
and the effective tax rates are summarized as follows:

<TABLE>
<CAPTION>
                                            2000       1999         1998
<S>                                        <C>        <C>         <C>
Statutory federal tax rate                 34.00%     39.00%      39.00%
State taxes, net of federal tax benefit     7.20       7.20        7.20
Other, net                                  3.64      (5.10)      (6.16)
                                          -------    -------     --------
     Effective tax rates                   44.84%     41.10%      40.04%
                                          =======    =======     ========
</TABLE>

In addition, the Corporation has applied all unused general business tax credit
carryforwards for financial reporting and income tax purposes.


PAGE 30
<PAGE>



The components of the net deferred tax asset, included in other assets, are as
follows:

<TABLE>
<CAPTION>
                                                      DECEMBER 31,
                                                   2000           1999
<S>                                              <C>            <C>
Deferred tax asset
  Federal                                        $154,200       $189,100
  State                                            36,700         59,800
                                                ---------      ----------
Net deferred tax asset                           $190,900       $248,900
                                                =========      ==========
</TABLE>

The tax effects of each type of income and expense item that give rise to
deferred taxes are as follows:
<TABLE>
<CAPTION>
                                                       DECEMBER 31,
                                                   2000           1999
<S>                                              <C>            <C>
Deferred tax assets (liabilities)
  Accrual to cash adjustments                     $53,500        $95,100
  Investments:
    Net unrealized (gain) loss on securities      (46,200)        14,500
  State franchise tax                              51,800         34,100
  Allowance for loan losses                       155,600        119,100
  Depreciation                                    (23,800)       (13,900)
                                               ----------      ----------
    Net deferred tax asset                       $190,900       $248,900
                                               ==========      ==========
</TABLE>

As of December 31, 2000 and 1999, management expects all temporary differences
to be offset against future taxable income, and no valuation reserve was deemed
necessary.

LOANS

         Loans, the largest component of earning assets, represented 67.69% of
average earning assets, and 59.76% of average total assets during 2000, compared
with 69.03% and 52.30%, respectively during 1999. In 2000, average loans
increased 21.68% from $34,114,800 in 1999 to $41,512,100. Average real estate
loans increased $6,483,900 (34.62%), average installment loans increased
$103,700 (25.48%) and average construction loans increased $1,170,400 (59.20%);
while average commercial loans decreased $360,600 (2.77%).

         Loan policies and procedures provide the overall direction to the
administration of the loan portfolio. The Bank's loan underwriting process is
intended to encourage sound and consistent credit decisions are made. Emphasis
is placed upon credit quality, the borrower's ability to repay through cash
flow, secondary, and (occasionally, tertiary) repayment sources, and the value
of collateral.


PAGE 31
<PAGE>

         The Bank's commercial and industrial loans are generally made for the
purpose of providing working capital, financing the purchase of equipment or
inventory, and other business purposes. Such loans generally have maturities
ranging from one year to several years. Short-term business loans are generally
intended to finance current transactions and typically provide for monthly
interest payments with principal being payable at maturity or at 90-day
intervals. Term loans (usually for a term of two to five years) normally provide
for monthly installments of principal and interest. The Bank from time to time
utilizes accounts receivable and inventory as security for loans.

         The Bank is the recognized leader for Small Business Administration
lending in Monterey County, and holds SBA's coveted Preferred Lender Status.
Generally, SBA loans are guaranteed by the SBA for 70 to 80 percent of their
principal amount, which can be retained in portfolio or sold to investors. Such
loans are made at floating interest rates, but generally for longer terms (up to
25 years) than are available on a conventional basis to small businesses. The
unguaranteed portion of the loans, although generally supported by collateral,
is considered to be more risky than conventional commercial loans because they
may be based upon credit standards the Bank would not otherwise apply, such as
lower cash flow coverage, or longer repayment terms.

         The Bank's real estate loan portfolio consists both of real estate
construction loans and real estate mortgage loans. The Bank has initiated a
program to generate more commercial and industrial real estate loans, which
generally yield higher returns than normal commercial loans. The Bank has also
developed a broker program for generating residential real estate loans. The
Bank does not make real estate development loans. Real estate construction loans
are made for a much shorter term, and often at higher interest rates, than
conventional single-family residential real estate loans. The cost of
administering such loans is often higher than for other real estate loans, as
principal is drawn on periodically as construction progresses.

         The Bank also makes real estate loans secured by a first deed of trust
on single family residential properties and commercial and industrial real
estate. California commercial banks are permitted, depending on the type and
maturity of the loan, to lend up to 90 percent of the fair market value of real
property (or more if the loan is insured either by private mortgage insurers or
governmental agencies). In certain instances, the appraised value may exceed the
actual amount which could be realized on foreclosure, or declines in market
value subsequent to making the loan can impair the Bank's security.

         Consumer loans are made for the purpose of financing the purchase of
various types of consumer goods, home improvement loans, auto loans and other
personal loans. Consumer installment loans generally provide for monthly
payments of principal and interest, at a fixed rate. Most of the Bank's consumer
installment loans are generally secured by the personal property being
purchased. The Bank generally makes consumer loans to those customers with a
prior banking relationship with the Bank.


PAGE 32
<PAGE>


         The following table presents the composition of the loan portfolio,
including loans held for sale, at December 31 for the last five years.

<TABLE>
<CAPTION>
                                                    YEARS ENDED DECEMBER 31,
                                     ---------------------------------------------------
                                       2000       1999       1998       1997       1996
                                     ---------------------------------------------------
                                                   (DOLLARS IN THOUSANDS)
<S>                                  <C>        <C>        <C>        <C>        <C>
Commercial and industrial            12,988     11,441     12,084     10,843     10,120
Real estate, construction             2,314      3,459        356        347        ---
Real estate, mortgage                27,802     23,788     15,294     13,921     14,336
Installment                             518        435        390        520        583
Government guaranteed
     loans purchased                    139        145        159        284        307
                                     ---------------------------------------------------
                                     43,760     39,267     28,282     25,914     25,346
Less:
Allowance for possible loan losses     (468)      (400)      (336)      (269)      (254)
Deferred origination fees, net          (41)       (49)       (32)       (40)       (37)
                                     ---------------------------------------------------

     Net Loans                       43,251     38,817     27,914     25,606     25,056
                                     ===================================================
</TABLE>


PAGE 33
<PAGE>


NON-PERFORMING AND NON-ACCRUAL LOANS

         The Bank's present policy is to cease accruing interest on loans which
are past due as to principal or interest 90 days or more, except for loans which
are well secured or when collection of interest and principal is deemed likely.
When a loan is placed on non-accrual, previously accrued and unpaid interest is
generally reversed out of income unless adequate collateral from which to
collect the principal of, and interest on, the loan appears to be available.

         The following table presents information with respect to loans which,
as of the dates indicated, were past due 90 days or more or were placed on
non-accrual status (referred to collectively as "non-performing loans"):

<TABLE>
<CAPTION>
                                                            AS OF DECEMBER 31,
                                       ---------------------------------------------------------
                                          2000        1999        1998        1997        1996
                                         ------      ------      ------      ------      ------
                                                         (DOLLARS IN THOUSANDS)
<S>                                     <C>         <C>       <C>           <C>         <C>
Accruing,
PAST DUE 90 DAYS OR MORE:

Real Estate                                  0          63          63         134         209
Commercial                                   0           0           0           0          14
Installment                                  0           0           0           0           0
                                         ------      ------      ------     -------     -------
    Total accruing                           0          63          63         134         223


NONACCRUAL LOANS:

Real Estate                                  0           0           0           0           0
Commercial                                  15         125          57          55          35
Installment                                  0           0           0          21          23
                                         -----       -----       ------     -------     -------
    Total nonaccrual                        15         125          57          76          58

    Total nonperforming                     15         188         120         210         281

Total loans end of period               43,748      39,267      28,282      25,914      25,346

Ratio of nonperforming loans
    to total loans at end of period       0.03%       0.48%       0.42%       0.81%       1.11%
</TABLE>


PAGE 34

<PAGE>

         The low level of non-performing loans is the result of underwriting
criteria intended to be conservative, frequent review of new and delinquent
loans and a firm collection policy (with the assistance of outside legal
counsel). The Bank does not have any foreign loans or loans for highly leveraged
transactions.

SUMMARY OF LOAN LOSS EXPERIENCE

<TABLE>
<CAPTION>

                                                 FOR THE YEARS ENDED DECEMBER 31,
                                                 --------------------------------
                                       2000        1999        1998        1997       1996
                                     --------    --------    --------    --------   --------
                                                     (Dollars in thousands)
<S>                                  <C>         <C>         <C>         <C>        <C>
Average loans
    outstanding                        41,552      34,115      27,414      26,042     24,647

Allowance, beginning
    of period                             400         336         269         254        225

Loans charged off during period:
    Commercial                             67         128          69         101         39
    Installment                             2           0           5           5          5
    Real Estate                             0           0           2           0          0
    Other                                   0           1           0           0          1
                                       ------      ------      ------      ------     ------
    Total charge offs                      69         129          75         106         45

Recoveries during period:
    Commercial                              7          13          12           1          8
    Installment                             0           5           1           1         13
    Other                                   0           0           0           0          0
                                       ------      ------      ------      ------     ------
    Total recoveries                        7          18          13           2         21

Net Loans charged off
    during the period                      62         111          63         104         24

Additions to allowance for
    possible loan losses                  130         174         130         120         53

Allowance, end of period                  468         400         336         269        254

Ratio of net loans charged
    off to average Loans
    outstanding during the
    period                               0.15%       0.32%       0.23%       0.40%      0.10%

Ratio of allowance to total
    at end of period                     1.05%       1.01%       1.18%       1.04%      1.01%

</TABLE>

PAGE 35

<PAGE>

FUNDING SOURCES

         Average deposits increased 23.44% to $59,229,400 in 2000 from
$47,982,000 in 1999. In 2000 average certificates of deposit increased
33.14%, average demand deposits increased 23.75% and average interest
checking, money market and savings accounts as a group increased 5.03%.
Average certificates of deposit represented 54.14% of average deposits in
2000 compared with 50.20% in 1999. Average interest checking, money market
and savings accounts as a group were 22.84% of average deposits in 2000
compared with 26.85% in 1999. Average demand deposits represented 23.02% of
average deposits in 2000 compared with 22.96% in 1999.

         The Company has a $200,000 revolving line of credit and an $800,000
term loan with the Pacific Coast Bankers' Bank which mature in May 2001 and
May 2005, respectively. The interest rates are floating rates based on the
prime lending rate plus seventy five (75) basis points. At December 31, 2000
the Company had drawn $75,000 under the line of credit.

         The Bank has lines of credit from the Federal Reserve Bank of San
Francisco, the Federal Home Loan Bank of San Francisco and Pacific Coast
Bankers' Bank with maximum borrowing limits on December 31, 2000 of
$8,457,400, $5,253,700 and $1,000,000, respectively. The Federal Reserve Bank
line of credit is secured by certain of the Bank's commercial and real estate
loans and municipal securities. The Federal Home Loan Bank line of credit is
secured by certain of the Bank's real estate secured loans and investment
securities. At December 31, 2000 the Bank had five $1,000,000 advances from
the Federal Home Loan Bank, which bear interest at 4.83%, 6.81% and 6.86% and
7.71%, respectively. The advances mature in October 2003, June 2004, August
2005, January 2028 and June 2030, respectively. The Pacific Coast Bankers'
Bank line of credit is unsecured. The Bank did not utilize any short term
borrowings in 2000, 1999 or 1998.

CAPITAL RESOURCES

         The Corporation maintains capital to comply with legal requirements,
to provide a margin of safety for its depositors and stockholders, and to
provide for future growth and the ability to pay dividends. At December 31,
2000, stockholders' equity was $4,861,300 versus $3,993,000 at December 31,
1999. The Corporation issued 10% stock dividends in 2000, 1999 and 1998. The
Bank paid cash dividends totaling $100,000, $50,000, and $50,000, to the
Corporation in 2000, 1999 and 1998, respectively.

         The FDIC and Federal Reserve Board have adopted capital adequacy
guidelines for use in their examination and regulation of banks and bank
holding companies. If the capital of a bank or bank holding company falls
below the minimum levels established by these guidelines, it may be denied
approval to acquire or establish additional banks or non-bank businesses, or
the FDIC or Federal Reserve Board may take other administrative actions. The
guidelines employ two measures of capital: (1) risk-based capital and (2)
leverage capital.


PAGE 36

<PAGE>

         In general, the risk-based capital guidelines provide detailed
definitions of which obligations will be treated as capital, and assign
different weights to various assets and off-balance sheet items, depending
upon the perceived degree of credit risk associated with each asset. Each
asset is assigned to one of four risk-weighted categories. For example, 0
percent for cash and unconditionally guaranteed government securities; 20
percent for deposits with other banks and fed funds; 50 percent for state
bonds and certain residential real estate loans; and 100 percent for
commercial loans and other assets. Capital is categorized as either Tier 1
capital, consisting of common stock and retained earnings (or deficit), or
Tier 2 capital, which includes limited-life preferred stock and allowance for
loan losses (subject to certain limitations). The guidelines also define and
set minimum capital requirements (risk-based capital ratios), which increased
over a transition period, ended December 31, 1992. Under the final 1992
rules, all banks were required to maintain Tier 1 capital of at least 4
percent and total capital of 8.0% of risk-adjusted assets. The Bank had a
Tier 1 capital ratio of 10.33% and 9.75% at December 31, 2000 and 1999,
respectively, and a total risk-based capital ratio of 11.25% and 10.62% at
December 31, 2000 and 1999, respectively.

         The leverage capital ratio guidelines require a minimum leverage
capital ratio of 3% of Tier 1 capital to total assets less goodwill. The Bank
had a leverage capital ratio of 7.17% and 7.14% at December 31, 2000 and
1999, respectively.

LIQUIDITY

         Liquidity represents a bank's ability to provide sufficient cash
flows or cash resources in a manner that enables it to meet obligations in a
timely fashion and adequately provides for anticipated future cash needs. For
the Bank, liquidity considerations involve the capacity to meet expected and
potential requirements of depositors seeking access to balances and to
provide for the credit demands of borrowing customers. In the ordinary course
of the Bank's business, funds are generated from the repayment of loans,
maturities within the investment securities portfolio and the acquisition of
deposit balances and short-term borrowings. In addition, the Bank has lines
of credit from the Federal Reserve Bank of San Francisco of approximately
$8,457,400, the Federal Home Loan Bank of San Francisco of approximately
$5,253,700 and a $1,000,000 federal funds line of credit with the Pacific
Coast Bankers' Bank to meet temporary liquidity requirements.

         As a matter of policy, the Bank seeks to maintain a level of liquid
assets, including marketable investment securities, equal to a least 15
percent of total assets ("primary liquidity"), while maintaining sources of
secondary liquidity (borrowing lines from other institutions) equal to at
least an additional 10 percent of assets. In addition, it seeks to generally
limit loans to not more than 90 percent of deposits. Within these ratios, the
Bank generally has excess funds available to sell as federal funds on a daily
basis, and is able to fund its own liquidity needs without the need of
short-term borrowing. The Bank's primary liquidity at December 31, 2000, 1999
and 1998 was 27.85 percent, 22.32 percent, and 23.92 percent respectively,
while its average loan to deposit ratio for such years was 70.09 percent,
71.10 percent and 68.61 percent respectively. On December 29, 2000 the Bank
received wire transfers totaling $10,030,000 for credit to two demand deposit
accounts. These deposits were temporary in nature, remaining on


PAGE 37

<PAGE>

deposit until January 12, 2001. These temporary deposits inflated the Bank's
primary liquidity ratio, adjusting for these deposits the Bank's primary
liquidity ratio would have been 18.03%.

         Brokered deposits are deposit instruments, such as certificates of
deposit, deposit notes, bank investment contracts and certain municipal
investment contracts that are issued through brokers and dealers who then offer
and/or sell these deposit instruments to one or more investors. Additionally,
deposits on which a financial institution pays an interest rate significantly
higher than prevailing rates are considered to be brokered deposits. Federal law
and regulation restricts banks from soliciting or accepting brokered deposits,
unless the bank is well capitalized under Federal guidelines. The Bank does not
have any brokered deposits.

         Management of interest rate sensitivity (asset/liability management)
involves matching and repricing rates of interest-earning assets with
interest-bearing liabilities in a manner designed to optimize net interest
income within the constraints imposed by regulatory authorities, liquidity
determinations and capital considerations. The Bank instituted formal
asset/liability policies at the end of 1989.

         The purpose for asset/liability management is to provide stable net
interest income growth by protecting the Bank's earnings from undue interest
rate risk. The Bank expects to generate earnings from increasing loan volume,
appropriate loan pricing and expense control and not from trying to accurately
forecast interest rates. Another important function of asset/liability
management is managing the risk/return relationships between interest rate risk,
liquidity, market risk and capital adequacy. The Bank gives priority to
liquidity concerns followed by capital adequacy, then interest rate risk and
market risk in the investment portfolio. The policy of the Bank will be to
control the exposure of the Bank's earnings to changing interest rates by
generally maintaining a position within a narrow range around an "earnings
neutral position." An earnings neutral position is defined as the mix of assets
and liabilities that generate a net interest margin that is not affected by
interest rate changes. However, Management does not believe that the Bank can
maintain a totally earnings neutral position. Further, the actual timing of
repricing of assets and liabilities does not always correspond to the timing
assumed by the Bank for analytical purposes. Therefore, changes in market rates
of interest will generally impact on the Bank's net interest income and net
interest margin for long or short periods of time.

         The Bank monitors its interest rate risk on a quarterly basis through
the use of a model which calculates the effect on earnings of changes in the fed
funds rate. The model converts a fed funds rate change into rate changes for
each major class of asset and liability, then simulates the bank's net interest
margin based on the bank's actual repricing over a one year period, assuming
that maturities are reinvested in instruments identical to those maturing during
the period. At December 31, 2000 the affect of a 2% increase in the fed funds
rate, expressed as a percentage of equity a positive 5.1%, while a 2% decrease
in the fed funds rate was a negative 6.2% of equity. The $10,030,000 deposited
on December 29th skewed the models interest rate risk projections, since the
temporary deposits were withdrawn on January 12th. A revised projection,
eliminating these funds, resulted in a 1.8% positive affect for a 2% increase in
the fed funds rate and a 2.9% negative affect for a 2% decrease in the fed funds
rate.


PAGE 38

<PAGE>

         The Corporation's sources of revenues and liquidity are the dividends,
tax equalization payments or management fees from the Bank, gains on securities
held in a trading account and the line of credit from the Pacific Coast Bankers'
Bank. The ability of the Bank to pay such items to the Corporation is subject to
limitations under state and Federal law.

INVESTMENT SECURITIES

         The Corporation maintains a trading account, at fair value, consisting
of marketable securities. At December 31, 2000 the account value was $168,000.
In addition the Corporation has a $40,000 investment in the Community Bank
Insurance Agency, LLC which provides various services to Community Banks and
their customers.

         The following table sets forth the book and market value of the Bank's
investment securities as of December 31, 2000 and 1999:

<TABLE>
<CAPTION>
                                           INVESTMENT PORTFOLIO MIX
                                            (Dollars in thousands)
                                         2000                   1999
                                   -----------------     -----------------
                                   Book       Market     Book       Market
                                   value      value      value      value
                                   ------     ------     ------     ------
<S>                                <C>        <C>        <C>        <C>
Available for sale:
Federal Home Loan Bank Stock          269        269        406        406
Pacific Coast Bankers'
     Bank Stock                       350        350        350        350
State/Local Agencies                4,548      4,745        ---        ---
U.S. Government Agencies            1,963      1,982      1,000        967
                                   ------     ------     ------     ------

Total                               7,130      7,346      1,756      1,723
                                   ======     ======     ======     ======
Held to maturity:
State and Local Agencies            9,052      9,194      6,791      6,194
U.S. Government Agencies            1,999      1,969      2,499      2,383
                                   ------     ------     ------     ------

Total                              11,051     11,163      9,290      8,577
                                   ======     ======     ======     ======
</TABLE>


PAGE 39

<PAGE>

         The following table summarizes the maturity of the Bank's investment
securities at December 31, 2000:

<TABLE>
<CAPTION>
                                                INVESTMENT PORTFOLIO MATURITIES
                                                     (Dollars in thousands)
                                       Available for Sale              Held to Maturity
                                    ------------------------      -------------------------
                                    Amortized        Fair          Amortized        Fair
                                      Cost           Value           Cost           Value
                                    ---------      ---------      ----------     ----------
<S>                                 <C>            <C>            <C>            <C>
Due between five and ten years      1,962,400      1,982,300       1,999,200      1,969,200

U.S. Government Agencies            4,458,600      4,744,800       9,051,700      9,193,500
                                    ---------      ---------      ----------     ----------
                                    6,511,000      6,727,100      11,050,900     11,162,700
</TABLE>

YEAR 2000

         The Corporation did not experience any disruptions associated with the
century date change. Management feels that the extensive testing of hardware and
mission critical systems and the monitoring of borrowers' Year 2000 readiness
limited its exposure to potential disruptions. The Corporation's Year 2000
expenses were $1,300 in 2000, $13,400 in 1999 and $28,800 in 1998.


PAGE 40

<PAGE>

ITEM 7. FINANCIAL STATEMENTS

        The following consolidated financial statements included in the
Consolidated Financial Report issued by Hutchinson and Bloodgood LLP,
Certified Public Accountants at the pages indicated are incorporated herein
by reference:

<TABLE>
<S>                                                                   <C>
Independent Auditors' Report on the Financial Statements                 1

Consolidated Balance Sheets at December 31, 2000 and 1999                2

Consolidated Statements of Operations for each of the three years
in the period ended December 31, 2000                                  3-4

Consolidated Statements of Changes in Stockholders' Equity for
each of the three years in the period ended December 31, 2000            5

Consolidated Statements of Cash Flows for each of the three years
in the period ended December 31, 2000                                  6-7

Notes to Consolidated Financial Statements                            8-33

</TABLE>

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND
        FINANCIAL DISCLOSURE

         The Company had no disagreements with its independent accountants on
any matter of accounting principles, practices or financial statement disclosure
during 2000, 1999 or 1998.


PAGE 41

<PAGE>

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT

         The name, age, title and five-year business background of each
director, executive officer and significant employee of the Corporation
(including the Bank) as of December 31, 2000, are as follows:

<TABLE>
<CAPTION>

Name & Position with Bank               Age     Principal Occupation During Past Five Years
-------------------------               ---     -------------------------------------------
<S>                                     <C>     <C>
Charles T. Chrietzberg, Jr.             59      Chairman of the Board & Chief Executive Officer of
  Director since 1985,                          Monterey County Bank since 3/87
  Chairman of the Board, President
  & Chief Executive Officer

Sandra G. Chrietzberg                   57      Formerly President and CEO Queen of Chardonnay, Inc.,
  Director, 1988 to 1994 and                    dba La Reina Winery 8/84-12/93
  since 1995

Peter J. Coniglio, Esq.                 71      Partner - Hudson, Martin, Ferrante & Street, Monterey
  Director since 1976

Carla S. Hudson, CPA                    47      Partner - Huey and Hudson, Certified Public Accountants
  Director since 1994

John M. Lotz                            59      President and Chief Executive Officer, of Couroc of Monterey
  Director since 1991                           since 1996.  Real estate developer 1991 - 1996.

Lori L. Arnold                          43      Senior Vice President, Chief Lending Officer of Monterey
  Senior Vice President,                        County Bank since 9/00.  Senior Vice President, Manager
  Chief Lending Officer                         SBA Department of Monterey County Bank 3/99 - 9/00.  Vice
                                                President of Strategic Finance Group 1/98 - 3/99.
                                                Vice President, SBA Department Manager of
                                                Monterey County Bank 9/94 - 1/98.

Bruce N. Warner                         53      Senior Vice President, Chief Financial Officer and Chief
  Senior Vice President,                        Operating Officer of Monterey County Bank since 1993;
  Chief Financial Officer
  and Chief Operating Officer


PAGE 42

<PAGE>

Andre G. Herrera                        36      Vice President, Corporate Secretary of  Northern California
  Vice President,                               Bancorp, Inc. and Corporate Secretary of Monterey County
  Corporate Secretary                           Bank and since 1/96; Vice President, Manager Management
                                                Information Systems and Merchant Services since 2/94.

Mary Ellen Stanton                      63      Senior Vice President, Loan Administration, Monterey County
  Senior Vice President                         Since 10/98.
                                                Vice President, Loan Administration, Monterey County
                                                Bank 10/88.

</TABLE>

     Directors of the Corporation serve in similar capacities with the Bank.
Executive officers of the Bank serve in similar capacities with the Corporation,
although the limited operations of the Corporation do not require significant
amounts of their time. There are no family relationships among the persons
listed above, except that Mr. and Mrs. Chrietzberg are spouses and Mr. Herrera
is Mr. and Mrs. Chrietzberg's son-in-law.

     Based solely upon a review of the relevant forms furnished to the Bank and
the Corporation, except as disclosed below, the Corporation believes that all
officers, directors and principal shareholders filed appropriate forms as
required by Section 16(a) of the Exchange Act, and related regulations, during
2000.


PAGE 43

<PAGE>

ITEM 10. EXECUTIVE COMPENSATION

         The following tables sets forth certain information regarding the
compensation paid to the officers of the Corporation/Bank whose salary and bonus
exceeded $100,000 for 2000.

<TABLE>
<CAPTION>

                                   Annual Compensation                  Long Term Compensation Awards
                                   -------------------      -----------------------------------------------------
                                                               Other      Restricted   Securities
                                                               Annual       Stock      Underlying      All Other
Name & Principal Position               Salary      Bonus   Compensation    Awards    Options/SARs   Compensation
-----------------------------------------------------------------------------------------------------------------
<S>                             <C>    <C>        <C>       <C>           <C>         <C>            <C>
Charles T. Chrietzberg, Jr      2000   $187,713   $160,000   $2,670 (1)      None        10,000       $11,541 (2)
  Chairman, President & CEO     1999   $156,769    160,000    3,578 (1)      None          None        13,109 (2)
                                1998   $156,020    160,000    5,343 (1)      None        25,000        11,776 (2)

Bruce N. Warner                 2000   $ 86,461     49,317   None            None         7,000       None
  Senior Vice President,        1999   $ 78,765     25,888   None            None          None       None
  Chief Financial Officer       1998   $ 74,254     28,385   None            None         5,000       None
  Chief Operating Officer

Andre G. Herrera                2000     94,606     19,726   None            None         5,000       None
  Vice President, Information   1999     86,240     10,355   None            None          None       None
   and Merchant Services        1998     83,650      5,000   None            None         5,000       None

</TABLE>

(1)  Represents personal use of company.

(2)  Represents the expense accrued in the Salary Continuation Plan as more
     fully described in the Long Term Incentive Plan Table.

         Until June 1, 1990 the Bank furnished certain executive officers with a
taxable car allowance. The Bank discontinued car allowances on June 1, 1990 and
purchased a bank owned automobile for the use of its Chief Executive Officer
(the value of his personal use of the automobile is included above). The Bank
furnishes, on a non-discriminatory basis, to the employees: (i) insurance
benefits; and (ii) other benefits. The value of these benefits (excluding
non-discriminatory plan benefits) was less than the lesser of $50,000 or ten
percent of the compensation shown above for the respective persons or group, and
is not included in the table.

         The Board of Directors authorized the Bank to enter into a three year
employment contract with Mr. Chrietzberg, effective January 1, 2000. It provides
for a base salary of $180,000 per year, a Bank furnished automobile or
automobile allowance, and a bonus based on profits. The bonus, not to exceed
$160,000 annually, will equal $10,000 for each 0.1 percent that the Bank's
profits exceed 1.0 percent return on average assets plus $10,000 for each 1
percent that the Bank's return on equity exceeds 10.0 percent. Under the terms
of the contract, if Mr. Chrietzberg is terminated other than for cause (as
defined in the contract), he is entitled to severance compensation for his
monthly salary plus a pro rated incentive bonus for the greater of 24 months or
the remaining term of his contract (which ends in December, 2002); however, if
the termination follows within twelve (12) months after a change in control
transaction (as


PAGE 44

<PAGE>

defined in the contract), he is entitled to such severance compensation for the
greater of 24 months or the remainder of the term of the contract.

     The following tables set forth certain information regarding the long term
incentive plans provided for Mr. Chrietzberg.

<TABLE>
<CAPTION>

                                            Performance or                      Estimated Future Payouts under
                  Number of                 Other Period                         Non-Stock Price-Based Plans
                  Shares, Units             Until                                ---------------------------
                  or Other Rights           Maturation or                      Threshold     Target     Maximum
Name                   (#)                  Payment                             ($ or #)    ($ or #)    ($ or #)
----                   ---                  -------                             --------    --------    --------
<S>               <C>                       <C>                                <C>          <C>        <C>
Charles T.        Salary                    Retirement at age 65, subject        None         None     75,000/yr.
Chrietzberg, Jr   Continuation              to provisions for earlier payout                           lifetime
                  Agreement                 described below

</TABLE>

         In December, 1993, the Board of Directors approved a Salary
Continuation Agreement for the benefit of Mr. Chrietzberg that provided for
payments of $75,000 per year, for 15 years, if he remains with the Bank until
normal retirement, commencing age 65. After consideration of the impact of such
an agreement on the Bank's income, the Bank amended the Agreement to provide for
one half the original benefit amounts, but adopted Surviving Income Agreements
which provide benefits upon the death of the executive to his beneficiary in a
single payment, in an amount equal to the retirement benefit. The Salary
Continuation Agreement provides for lesser payments in the event of early
retirement, generally designated to coincide with increases in the anticipated
surrender value for the life insurance policies described below.

         In August, 1999, the Board of Directors amended the Salary Continuation
Agreement for the benefit of Mr. Chrietzberg which was approved in December,
1993. The amended Salary Continuation Agreement provides for payments of $75,000
per year, for Mr. Chrietzberg's lifetime. The amended Salary Continuation
Agreement provides the following with regard to the division of death proceeds
should Mr. Chrietzberg die before his sixty-fifth (65th) birthday; his
beneficiary(ies) shall be entitled to an amount equal to $1,440,000 or the net
at risk insurance portion of the proceeds, whichever amount is less. The net at
risk insurance portion is the total proceeds less the cash value of the policy.
Should Mr. Chrietzberg die on or subsequent to his sixty-fifth (65th) birthday,
his beneficiary(ies) shall be entitled to an amount equal to $1,000,000 or the
net at risk insurance portion of the proceeds, whichever is less, and the Bank
shall be entitled to the remainder of such proceeds.

         The Bank's obligations under the Salary Continuation Agreement are not
secured by any segregated amounts, but are informally funded by the purchase of
single-premium life insurance policies. The salary continuation expense accrued
in 2000, 1999 and 1998 was $11,500, $13,100, and $2,199, respectively. Based
upon the current projected earnings of the insurance used to informally fund the
Bank's obligations under the Agreement, and the anticipated salary continuation
expense to be booked, net of tax benefits, the Bank anticipates (based upon
current tax laws and assumptions regarding the yield on alternative
investment(s) that the cost of the benefits to be provided under the agreement
will not have a material adverse impact on the


PAGE 45

<PAGE>

Bank's net income after taxes in the future, although no assurance can be given
in this regard. The Surviving Income Agreement was terminated upon adoption of
the amended Salary Continuation Agreement.

         The following table sets forth certain information concerning the grant
of stock options under the Corporation's' 1998 Amended Stock Option Plan to the
named executive officer during the year ended December 31, 2000.

                      Option/SAR Grants in Last fiscal Year


<TABLE>
<CAPTION>

                              Number of       Percent of
                              Securities    total options/
                              Underlying     SARs granted    Exercise or
                             Options/Sars    to employees    base price    Expiration
          Name               granted (#)    in fiscal year     ($/Sh)         date
--------------------------   ------------   --------------   -----------   ----------
<S>                          <C>            <C>              <C>           <C>
Charles T. Chrietzberg, Jr     10,000           25.64%          3.30        3/16/05
Bruce N. Warner                 7,000           17.95%          3.00        3/16/05
Loreen L. Arnold                5,000           12.82%          3.00        3/16/05

</TABLE>

         The following table sets forth the number of shares of Common Stock
acquired by each of the named executive officers upon exercise of stock options
during 2000, the net value realized upon exercise, the number of shares of
common Stock represented by outstanding stock options held by each of the named
executive officers as of December 31, 2000 and the value of such options based
on the last transaction in 2000, which the Corporation has knowledge of, and
certain information concerning unexercised options under the 1998 Stock Option
Plan.

               Aggregated Option/Sar Exercises in Last Fiscal Year
                          and FY-End Options/Sar Values


<TABLE>
<CAPTION>

                                                                                             Value of
                                                               Number of                    Unexercised
                                                              Unexercised                  in-the-Money
                            Shares                          Options/SARs at               Options/SARs at
                         Acquired on       Value               FY-End(#)                     FY-End ($)
        Name             Exercise (#)   Received ($)   Exercisable  Unexercisable    Exercisable  Unexercisable
----------------         ------------   ------------   -----------  -------------    -----------  -------------
<S>                      <C>            <C>            <C>          <C>              <C>          <C>
Charles T.
Chrietzberg, Jr.             None           None          44,275        None            24,825        None
Bruce N. Warner              None           None          27,665        None            19,495        None
Loreen L. Arnold             None           None           5,500        None             1,500        None

</TABLE>

     In 2000, each director received a standard fee of $500 per regular board
meeting attended and $150 for each committee meeting attended.


PAGE 46

<PAGE>

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         To the knowledge of the management of the Company, the following
shareholders own more than five percent (5%) of the outstanding common stock of
the Company, its only class of voting securities.

<TABLE>
<CAPTION>

                                  Amount and Nature of        Percent of
  Name and Address                Beneficial Ownership          Class
---------------------------       --------------------          -----
<S>                               <C>                         <C>
Charles T. Chrietzberg, Jr.             559,506 (1)             44.37
P.O. Box 1344
Carmel, CA  93921

David S. Lewis, Trust                   127,160                 10.45
30500 Aurora del Mar
Carmel, CA  93923

</TABLE>

(1)  Includes 44,275 shares subject to employee stock options and 15,221 shares
     held beneficially for Mr. Chrietzberg and Mrs. Chrietzberg in Individual
     Retirement Accounts where voting power is shared with the custodian of the
     account. 316,000 shares of the Common Stock owned by Mr. Chrietzberg are
     pledged to secure a loan from an unaffiliated bank.


PAGE 47

<PAGE>

     The following table sets forth similar information regarding the beneficial
ownership, both by numerical holding and percentage interest of each of the
Company's directors and all of its directors and executive officers as a group.
All addresses are in care of the Corporation at 601 Munras Ave. Monterey, CA
93940.

<TABLE>
<CAPTION>

                                Amount and                           Shares
                                Nature of                          Subject to       Percent of
                                Beneficial       Percent of         Purchase       Class without
         Name                   Ownership          Class            Options        Option Shares
--------------------------     -------------     ----------        ----------      -------------
<S>                            <C>               <C>               <C>             <C>
Charles T. Chrietzberg, Jr     559,506(1)(2)(3)    44.37%            44,275           42.35%
Sandra G. Chrietzberg          559,506(2)(3)       44.37%            44,275           42.35%
Peter J. Coniglio               57,734(4)(5)        4.64%            28,820            2.38%
Carla S. Hudson                 24,298(6)           1.97%            18,838            0.45%
John M. Lotz                    15,510(7)           1.26%            12,183            0.27%

All Directors and Executive
  Officers as a group          707,714             52.48%           131,781           47.34%

</TABLE>

(1)  Includes 44,275 shares subject to his employee stock options. 316,000
     shares of the common Stock owned by Mr. Chrietzberg are pledged to secure a
     loan from an unaffiliated bank. Should he default under such credit, the
     shares could be acquired by the lender, or sold pursuant to applicable
     terms of the Uniform Commercial Code, in a transaction that could result in
     a change of control of the Corporation. Such transaction may require
     approval under provisions of Federal and California change in bank control
     laws.

(2)  The shares include an aggregate of 15,221 shares held beneficially by Mr.
     Chrietzberg and Mrs. Chrietzberg in Individual Retirement Accounts, where
     voting power is also shared with the custodian of the account.

(3)  Includes shares of spouse pursuant to California's community property laws.

(4)  Sole voting power.

(5)  Includes 28,820 shares subject to the respective director's stock options.
     Of the remaining shares 21,927 are held in a family trust controlled by Mr.
     Coniglio, as to which he has sole voting and investment power, while 6,987
     shares are held by Hudson, Martin, Ferrante & Street, a partnership of
     which Mr. Coniglio is the managing partner, with voting and investment
     power.

(6)  Includes 18,838 shares subject to the respective director's stock options.
     The remaining shares are held jointly with family members, other than 1,331
     shares held in a corporate pension, as to which Ms. Hudson has voting and
     investment power.

(7)  Includes 12,183 shares subject to the respective director's stock options.
     The remaining shares are held jointly with family members, with shared
     voting and investment power.

(8)  Includes all options included above, plus 27,665 shares subject to options
     held by executive officers who are not also directors.


PAGE 48

<PAGE>

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The Bank has had, and expects to have in the future, banking
transactions in the ordinary course of its business with directors, officers,
principal shareholders and their associates. Management of the Bank believes
that these transactions have been (and those in the future are intended to be)
on substantially the same terms, including interest rates, collateral and
repayment terms on extensions of credit, as those prevailing at the same time
for comparable transactions with others and did not involve more than the normal
risk of collectibility or present other unfavorable features. Management does
not believe that any such loans are outside the ordinary course of business. The
following table sets forth information on extensions of credit to directors and
to directors, principal shareholders and officers.

<TABLE>
<CAPTION>

                                                                   Outstanding as of
                                         Maximum                   December 31, 2000
                                         -------                   -----------------
                                                Percent of                    Percent of
                                                  Equity                        Equity
         Name                     Amount          Capital        Amount         Capital
---------------------------     ----------      ----------     ----------     ----------
<S>                             <C>             <C>            <C>            <C>
Charles T. Chrietzberg, Jr.       4,150            0.09%             0           0.00%
Peter J. Coniglio               916,779(1)        18.97%       916,779(1)       18.97%
Carla S. Hudson                   1,950            0.05%             0           0.00%
John M. Lotz                      2,220            0.06%         2,220           0.04%
David S. Lewis                        0            0.00%             0               0

Directors, Principal
Shareholder, and Officers
as a Group (6 in number)        925,099           19.14%       918,999          19.01%

</TABLE>

(1)  Included in the extensions of credit to Mr. Coniglio is a loan to the
     Coniglio Family Partnership, which had an outstanding balance of $883,665
     on December 31, 2000.


PAGE 49

<PAGE>

ITEM 13. EXHIBITS AND REPORTS

A.  EXHIBITS

<TABLE>
<CAPTION>

   Item    Description
   ----    -----------
<S>        <C>
       2   Plan of Merger and Meger Agreement, Monterey County Bank with
           Monterey County Merger Corporation un the Charter of Monterey
           County Bank under the Title of Monterey County Bank, joined in by
           Northern California Bancorp, Inc. dated November 1, 1995.

           Filed as exhibit to Form 10KSB dated December 31, 1995.

    3(i)   Articles of Incorporation
           Filed as exhibit to Form 10KSB dated December 31, 1995.

   3(ii)   Bylaws
           Filed as exhibit to Form 10KSB dated December 31, 1995.

  10(i)D   Lease agreement Carmel Branch Office
           Filed as exhibit to Form 10KSB dated December 31, 1995.

 10(ii)A   (1) Employment Contract of Charles T. Chrietzberg, Jr., dated
           January 1, 2000
           Filed as exhibit to Form 10KSB dated December 31, 1999.

           (2) Deferred Compensation Agreement, dated December 31, 1993
           Filed as exhibit to Form 10KSB dated December 31, 1995.

           (3) Northern California Bancorp, Inc. 1998 Stock Option Plan and
           Stock Option Agreements
           Filed as exhibit to Form 10KSB dated December 31, 1998.

           (4) Amendment to the Salary Continuation Agreement Dated
           December 31, 1993
           Filed as exhibit to Form 10KSB dated December 31, 1999.

           (5) Life Insurance Endorsement Method Split Dollar Plan Agreement
           Filed as exhibit to Form 10KSB dated December 31, 1999.

      11   Statement Reference Computation of Per Share Earnings

      21   Subsidiaries

</TABLE>

B.  REPORTS

    None


PAGE 50

<PAGE>

                                  SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                       NORTHERN CALIFORNIA BANCORP, INC.

Date:  March 15, 2001                  By: /s/ Charles T. Chrietzberg, Jr.
                                           -------------------------------------
                                               Charles T. Chrietzberg, Jr.
                                               Chief Executive Officer
                                               and President

Date:  March 15, 2001                  By: /s/ Bruce N. Warner
                                           -------------------------------------
                                               Bruce N. Warner
                                               Chief Financial Officer
                                               and Principal Accounting Officer

In accordance with the Exchange Act, this report has been signed by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.

<TABLE>
<CAPTION>

Name                                   Position                 Date
----                                   --------                 ----
<S>                                    <C>                 <C>
/s/ Charles T. Chrietzberg, Jr.                            March 15, 2001
-------------------------------
Charles T. Chrietzberg, Jr.
Director

/s/ Sandra G. Chrietzberg                                  March 15, 2001
-------------------------------
Sandra G. Chrietzberg
Director

/s/ Peter J. Coniglio                                      March 15, 2001
-------------------------------
Peter J. Coniglio
Director

/s/ Carla S. Hudson                                        March 15, 2001
-------------------------------
Carla S. Hudson
Director

/s/ John M. Lotz                                           March 15, 2001
-------------------------------
John M. Lotz
Director

</TABLE>


PAGE 51

<PAGE>

                   NORTHERN CALIFORNIA BANCORP, INC.
                            AND SUBSIDIARY

                     CONSOLIDATED FINANCIAL REPORT

                YEARS ENDED DECEMBER 31, 2000 AND 1999

<PAGE>

                           TABLE OF CONTENTS
<TABLE>
<CAPTION>

                                                                       PAGE
<S>                                                             <C>
INDEPENDENT AUDITORS' REPORT ON THE FINANCIAL
    STATEMENTS                                                         FS-1


FINANCIAL STATEMENTS

    Consolidated Balance Sheets                                        FS-2
    Consolidated Statements of Operations                       FS-3 - FS-4
    Consolidated Statements of Changes in Shareholders' Equity         FS-5
    Consolidated Statements of Cash Flows                       FS-6 - FS-7
    Notes to Consolidated Financial Statements                  FS-8 - FS-33

</TABLE>

<PAGE>

                              [LETTERHEAD]

                     INDEPENDENT AUDITORS' REPORT

To the Board of Directors
Northern California Bancorp, Inc.
Monterey, California

We have audited the accompanying consolidated balance sheets of Northern
California Bancorp, Inc. and its wholly owned subsidiary, as of December 31,
2000 and 1999 and the related consolidated statements of operations, changes in
shareholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 2000. These consolidated financial statements are the
responsibility of the Corporation's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Northern California
Bancorp, Inc. and its wholly owned subsidiary, as of December 31, 2000 and 1999,
and the results of their operations and their cash flows for each of the years
in the three-year period ended December 31, 2000 in conformity with generally
accepted accounting principles.


                                  /s/ Hutchinson and Bloodgood LLP

February 10, 2001


                                     FS-1

<PAGE>

                      NORTHERN CALIFORNIA BANCORP, INC.
                                AND SUBSIDIARY

                         CONSOLIDATED BALANCE SHEETS
                          DECEMBER 31, 2000 AND 1999

<TABLE>
<CAPTION>
                          ASSETS                                                       2000            1999
<S>                                                                               <C>              <C>
Cash and due from banks (Note 2)                                                  $  4,306,200     $ 10,745,200
Federal funds sold                                                                  13,050,000               --
                                                                                  ------------     ------------
      Cash and cash equivalents                                                     17,356,200       10,745,200
Time deposits with other financial institutions                                        200,000          200,000
Trading assets (Note 3)                                                                168,000          135,000
Securities available for sale (Note 4)                                               7,346,100        1,723,100
Securities, held to maturity (Note 4)                                               11,050,900        9,290,300
Other investments                                                                       40,000           40,000
Loans, held for sale                                                                 2,549,500          665,300
Loans, net (Notes 6 and 14)                                                         40,701,900       38,152,100
Bank premises and equipment, net (Note 7)                                            1,773,200        1,849,100
Interest receivable and other assets                                                 2,685,700        2,414,300
                                                                                  ------------     ------------

                      Total assets                                                $ 83,871,500     $ 65,214,400
                                                                                  ============     ============

           LIABILITIES AND SHAREHOLDERS' EQUITY

Deposits
      Non interest-bearing demand                                                 $ 25,311,200     $ 11,792,700
      Interest-bearing demand                                                       10,651,600        9,519,200
      Savings                                                                        2,963,400        2,470,900
      Time                                                                          18,145,100       19,143,100
      Time in denominations of $100,000 or more                                     15,147,000       12,636,700
                                                                                  ------------     ------------

                      Total deposits                                                72,218,300       55,562,600

Short-term borrowing (Note 8)                                                           75,000          750,000
Long-term debt (Note 8)                                                                800,000               --
Federal Home Loan Bank borrowed funds (Note 9)                                       5,000,000        4,000,000
Interest payable and other liabilities                                                 916,900          908,800
                                                                                  ------------     ------------

                      Total liabilities                                             79,010,200       61,221,400
                                                                                  ------------     ------------

Commitments (Note 11)

Shareholders' equity (Notes 12 and 13)
      Common stock, no stated par value, authorized: 2,500,000 shares
           issued and outstanding: 1,219,671 in 2000 and 1,112,641 in 1999           3,716,700        3,395,400
      Retained earnings                                                              1,054,600          659,600
      Accumulated other comprehensive income (loss)                                     90,000          (62,000)
                                                                                  ------------     ------------

                      Total shareholders' equity                                     4,861,300        3,993,000
                                                                                  ------------     ------------

                      Total liabilities and shareholders' equity                  $ 83,871,500     $ 65,214,400
                                                                                  ============     ============
</TABLE>


THE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE
STATEMENTS.


                                     FS-2

<PAGE>

                      NORTHERN CALIFORNIA BANCORP, INC.
                                AND SUBSIDIARY

                    CONSOLIDATED STATEMENTS OF OPERATIONS
                YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998

<TABLE>
<CAPTION>
                                                                       2000           1999            1998
<S>                                                                <C>            <C>             <C>
Interest income
      Loans                                                        $ 4,284,800    $ 3,474,100     $ 2,940,300
      Time deposits with other financial institutions                   10,500          9,300           6,000
      Investment securities                                            902,700        534,500         496,500
      Federal funds sold                                               303,300        277,800         314,100
                                                                   -----------    -----------     -----------
              Total interest income                                  5,501,300      4,295,700       3,756,900
                                                                   -----------    -----------     -----------
Interest expense
      Interest-bearing transaction accounts                            115,600        109,700         110,300
      Savings and time deposit accounts                              1,168,300        882,600         778,700
      Time deposits in denominations of $100,000 or more               763,900        523,500         468,700
      Federal Home Loan Bank and Pacific Coast Bankers' Bank           361,800        272,600         245,600
                                                                   -----------    -----------     -----------
              Total interest expense                                 2,409,600      1,788,400       1,603,300
                                                                   -----------    -----------     -----------

              Net interest income                                    3,091,700      2,507,300       2,153,600
Provision for loan losses (Note 6)                                     130,000        174,200         130,000
                                                                   -----------    -----------     -----------
              Net interest income, after provision for loan losses   2,961,700      2,333,100       2,023,600
                                                                   -----------    -----------     -----------
Other income
      Service charges on deposit accounts                              418,000        388,900         371,000
      Income from sales and servicing of SBA loans (Note 5)            394,000        424,500         382,400
      Other income                                                     633,300        440,600         397,100
                                                                   -----------    -----------     -----------
              Total other income                                     1,445,300      1,254,000       1,150,500
                                                                   -----------    -----------     -----------
Operating expense
      Salaries and employee benefits                                 1,926,700      1,741,900       1,499,100
      Occupancy and equipment expense                                  304,400        297,000         281,300
      Professional fees                                                 91,200         74,100         107,800
      Data processing                                                  249,100        202,300         192,600
      Other general and administrative                                 737,400        671,000         619,600
                                                                   -----------    -----------     -----------
              Total operating expenses                               3,308,800      2,986,300       2,700,400
                                                                   -----------    -----------     -----------
Income before tax provision                                          1,098,200        600,800         473,700
              Income tax provision (Note 10)                           361,900        147,000          73,900
                                                                   -----------    -----------     -----------
          Income before extraordinary item                             736,300        453,800         399,800
          Extraordinary item - litigation settlement
              (net of income tax expense of $52,700) (Note 18)              --             --          64,400
                                                                   -----------    -----------     -----------

Net Income                                                         $   736,300    $   453,800     $   464,200
                                                                   ===========    ===========     ===========
</TABLE>


                                  (Continued)


THE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE
STATEMENTS.


                                     FS-3

<PAGE>

                        NORTHERN CALIFORNIA BANCORP, INC.
                                 AND SUBSIDIARY

                CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
                  YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998

<TABLE>
<CAPTION>
                                                                       2000           1999            1998
<S>                                                                <C>            <C>             <C>
Earnings per common share

      Basic
        Income before extraordinary item                           $      0.60    $      0.39     $      0.34
        Extraordinary item                                                  --             --            0.06
                                                                   -----------    -----------     -----------
        Net income                                                 $      0.60    $      0.39     $      0.40
                                                                   ===========    ===========     ===========

      Diluted
        Income before extraordinary item                           $      0.51    $      0.32     $      0.29
        Extraordinary item                                                  --             --            0.05
                                                                   -----------    -----------     -----------
        Net income                                                 $      0.51    $      0.32     $      0.34
                                                                   ===========    ===========     ===========
</TABLE>


THE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE
STATEMENTS.


                                     FS-4

<PAGE>

                        NORTHERN CALIFORNIA BANCORP, INC.
                                 AND SUBSIDIARY

          CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                 YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998

<TABLE>
<CAPTION>
                                                                                      ACCUMULATED
                                                                                      OTHER COMPRE-
                                              NUMBER OF     COMMON        RETAINED   HENSIVE INCOME
                                               SHARES        STOCK        EARNINGS        (LOSS)          TOTAL
                                            ------------  -----------    ----------- --------------    -----------
<S>                                         <C>           <C>            <C>         <C>               <C>
Balance at December 31, 1997                   858,526    $ 2,716,800    $   296,700    $    16,700    $ 3,030,200
                                                                                                       -----------

    Comprehensive income:
       Net income for the year                    --             --          464,200           --          464,200
       Change in net unrealized loss
          on securities and other assets
          net of tax effects                      --             --             -           (48,700)       (48,700)
                                                                                                       -----------
             Total comprehensive income                                                                    415,500
                                                                                                       -----------

    10% common stock dividend                   85,278        255,800       (256,500)          --             (700)
    Repurchase of common stock                  (3,482)       (10,400)          --             --          (10,400)
                                            ------------  -----------    ----------- --------------    -----------

Balance at December 31, 1998                   940,322      2,962,200        504,400        (32,000)     3,434,600
                                                                                                       -----------

    Comprehensive income:
       Net income for the year                    --             --          453,800           --          453,800
       Change in net unrealized loss
          on securities and other assets
          net of tax effects                      --             --             --          (30,000)       (30,000)
                                                                                                       -----------
             Total comprehensive income                                                                    423,800
                                                                                                       -----------

    10% common stock dividend                   99,302        297,900       (298,600)          --             (700)
    Repurchase of common stock                 (11,133)       (34,200)          --             --          (34,200)
    Exercise of stock options                   84,150        169,500           --             --          169,500
                                            ------------  -----------    ----------- --------------    -----------

Balance at December 31, 1999                 1,112,641      3,395,400        659,600        (62,000)     3,993,000
                                                                                                       -----------

    Comprehensive income:
       Net income for the year                    --             --          736,300           --          736,300
       Change in net unrealized gain
          on securities and other assets
          net of tax effects                      --             --             --          152,000        152,000
                                                                                                       -----------
             Total comprehensive income                                                                    888,300
                                                                                                       -----------

    10% common stock dividend                  110,784        332,300       (332,900)          --             (600)
    Repurchase of common stock                  (3,754)       (11,000)          --             --          (11,000)
    Repurchase of stock options                   --             --           (8,400)          --           (8,400)
                                            ------------  -----------    ----------- --------------    -----------

Balance at December 31, 2000                 1,219,671    $ 3,716,700    $ 1,054,600    $    90,000    $ 4,861,300
                                            ============  ===========    =========== ==============    ===========
</TABLE>


THE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE
STATEMENTS.


                                     FS-5

<PAGE>

                        NORTHERN CALIFORNIA BANCORP, INC.
                                 AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                  YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998

<TABLE>
<CAPTION>
                                                                       2000            1999             1998
<S>                                                                <C>             <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES
    Net income                                                     $    736,300    $    453,800     $    464,200
    Adjustments to reconcile net income to net cash
        provided by operating activities:
    Depreciation and amortization expense                               126,900         144,000          139,100
    Amortization of discounts on investment securities                     (700)         (2,800)          (2,300)
    Provision for loan losses                                           130,000         174,200          130,000
    Amortization of deferred servicing premium                            7,400          18,100           13,200
    Amortization of deferred gains on SBA loans                          (1,600)         (3,000)          (4,200)
    Increase in trading assets                                          (33,000)       (135,000)            --
    Increase (decrease) in other liabilities                            (55,800)          3,100          (81,100)
    Increase in other assets                                           (174,300)       (409,700)        (373,100)
    (Increase) decrease in deferred tax asset                            41,200         (16,900)         (19,600)
    Increase in interest payable                                         63,900          88,600           25,600
    Increase in interest receivable                                    (164,400)       (152,100)         (28,200)
                                                                   ------------    ------------     ------------
        Net cash provided by operating activities                       675,900         162,300          263,600
                                                                   ------------    ------------     ------------

CASH FLOWS FROM INVESTING ACTIVITIES
    Purchase of time deposits                                              --          (100,000)            --
    Proceeds from maturity of investment securities                   6,246,500       1,208,400        3,995,000
    Purchase of investments                                         (13,587,700)     (5,522,700)      (4,977,300)
    Net increase in loans                                            (2,549,800)    (11,189,900)      (2,030,100)
    (Increase) decrease in loans held for sale                       (1,884,200)        286,300         (408,200)
    Proceeds from sale of equipment                                        --             1,800             --
    Additions to Bank premises and equipment                            (50,300)       (126,400)        (108,700)
                                                                   ------------    ------------     ------------
        Net cash used by investing activities                       (11,825,500)    (15,442,500)      (3,529,300)
                                                                   ------------    ------------     ------------

CASH FLOWS FROM FINANCING ACTIVITIES
    Net increase in deposits                                         16,655,700      12,710,900        3,646,100
    Proceeds from borrowings                                          1,125,000         750,000        1,000,000
    Proceeds from exercise of stock options                                  --         169,500             --
    Repurchase of common stock and stock options                        (19,400)        (34,200)         (10,400)
    Cash dividends paid on common stock                                    (700)           (700)            (700)
                                                                   ------------    ------------     ------------
        Net cash provided by financing activities                    17,760,600      13,595,500        4,635,000
                                                                   ------------    ------------     ------------

        Net increase (decrease) in cash and cash equivalents          6,611,000      (1,684,700)       1,369,300

CASH AND CASH EQUIVALENTS, BEGINNING                                 10,745,200      12,429,900       11,060,600
                                                                   ------------    ------------     ------------

CASH AND CASH EQUIVALENTS, ENDING                                  $ 17,356,200    $ 10,745,200     $ 12,429,900
                                                                   ============    ============     ============
</TABLE>


THE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE
STATEMENTS.


                                     FS-6

<PAGE>

                        NORTHERN CALIFORNIA BANCORP, INC.
                                 AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                  YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998

<TABLE>
<CAPTION>
                                                                       2000            1999             1998
<S>                                                                <C>             <C>              <C>
OTHER CASH FLOW INFORMATION

     Interest paid                                                 $ 2,163,300     $ 1,609,000      $ 1,421,600
                                                                   ============    ============     ============

     Income taxes paid                                             $   325,200     $   110,200      $   241,500
                                                                   ============    ============     ============
</TABLE>


THE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE
STATEMENTS.


                                     FS-7

<PAGE>

                NORTHERN CALIFORNIA BANCORP, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2000 AND 1999


NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

        BASIS OF PRESENTATION AND CONSOLIDATION

        The consolidated financial statements include the accounts of
        Northern California Bancorp, Inc. (the "Corporation") and its
        wholly-owned subsidiary, Monterey County Bank (the "Bank"). All
        significant intercompany balances and transactions have been
        eliminated in consolidation.

        USE OF ESTIMATES

        In preparing consolidated financial statements in conformity with
        generally accepted accounting principles, management is required to
        make estimates and assumptions that affect the reported amounts of
        assets and liabilities as of the date of the balance sheet and
        reported amounts of revenues and expenses during the reporting
        period. Actual results could differ from those estimates. Material
        estimates that are particularly susceptible to significant change in
        the near term relate to the determination of the allowance for loan
        losses, the valuation of foreclosed real estate, and the valuation of
        deferred tax assets.

        BUSINESS

        The Bank provides a variety of financial services to individuals and
        small businesses through its three offices on the Monterey Peninsula.
        Its primary deposit products are demand and term certificate
        accounts. Its primary lending products are residential, commercial,
        and SBA loans.

        CASH AND CASH EQUIVALENTS

        Cash and cash equivalents include amounts due from banks and federal
        funds sold on a daily basis.

        TIME DEPOSITS WITH OTHER FINANCIAL INSTITUTIONS

        Interest-bearing deposits in banks mature within one year and are
        carried at cost.

        TRADING ACTIVITIES

        The Corporation engages in trading activities for its own account.
        Securities that are held principally for resale in the near term are
        recorded in the trading assets account at fair value with changes in
        fair value recorded in earnings. Interest and dividends are included
        in net interest income.

        Quoted market prices, when available, are used to determine the fair
        value of trading instruments. If quoted market prices are not
        available, then fair values are estimated using pricing models,
        quoted prices of instruments with similar characteristics, or
        discounted cash flows.


                                     FS-8

<PAGE>

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

        INVESTMENT SECURITIES

        Investments in debt securities that management has the positive
        intent  and ability to hold to maturity are classified as "held to
        maturity" and reflected at cost, adjusted for amortization of
        premiums and accretion of discounts, which are recognized as
        adjustments to interest income. Other marketable securities are
        classified as "available for sale" and are reflected at fair value,
        with unrealized gains and losses excluded from earnings and reported
        in other comprehensive income. Federal Home Loan Bank and Pacific
        Coast Bankers' Bank stocks are reflected at cost. Gains and losses on
        disposition are generally recognized on the trade date, based on the
        net proceeds and the adjusted carrying amount of the securities sold
        using the specific identification method.

        SALES AND SERVICING OF SBA LOANS

        The Bank originates loans to customers under the Small Business
        Administration (SBA) program that generally provides for SBA
        guarantees of 70% to 80% of each loan. The Bank generally sells the
        guaranteed portion of each loan to a third party and retains only the
        unguaranteed portion in its own portfolio. A gain is recognized on
        these loans through collection on sale of a premium over the adjusted
        carrying value, or through retention of an ongoing rate differential
        less a normal service fee between the rate paid by the borrower to
        the Bank and the rate paid by the Bank to the purchaser (excess
        servicing fee). In calculating the gain, the Bank assumes that the
        loans sold will be outstanding for one-half of their contractual
        lives.

        The Bank's investment in an SBA loan is allocated among the retained
        portion of the loan, excess servicing retained, and the sold portion
        of the loan, based on the relative fair market value of each portion
        at the time of loan origination, adjusted for payments and other
        activities. Since the portion retained does not carry an SBA
        guarantee, part of the gain recognized on the sold portion of the
        loan is deferred and amortized as a yield enhancement on the retained
        portion of the loan. Excess servicing fees are reflected as an asset
        which is amortized over an assumed half life; in the event future
        prepayments are significant and future expected cash flows are
        inadequate to cover the unamortized excess servicing asset,
        additional amortization is recognized.


                                     FS-9

<PAGE>

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

        LOANS HELD FOR SALE

        Loans held for sale consist of the portion of loans which are
        guaranteed  by the SBA and are carried at the lower of cost or
        market. Market value for loans guaranteed by the SBA is generally
        determined based on the price at which the loans were committed to be
        sold on the trade date. Direct loan origination costs are recorded at
        settlement as an adjustment to gain or loss on sale.

        LOANS AND LOAN FEES

        The Bank grants mortgage, commercial, and consumer loans to
        customers. A substantial portion of the loan portfolio is represented
        by mortgage loans on the Monterey Peninsula. The ability of the
        Bank's debtors to honor their contracts is dependent upon the real
        estate and general economic sectors in the area.

        Loans, as reported, have been reduced by undisbursed loan funds, net
        deferred loan fees, and the allowance for loan losses.

        ALLOWANCE FOR LOAN LOSSES

        The allowance for loan losses is established through a provision for
        loan losses charged to earnings and is maintained at a level
        considered adequate to provide for reasonably foreseeable loan losses.

        The provision and the level of the allowance are evaluated on a
        regular  basis by management and are based upon management's periodic
        review of the collectibility of the loans in light of historical
        experience, known and inherent risks in the nature and volume of the
        loan portfolio, adverse situations that may affect the borrower's
        ability to repay, estimated value of any underlying collateral, and
        prevailing economic conditions. This evaluation is inherently
        subjective as it requires estimates that are susceptible to
        significant change. In addition, various regulatory agencies, as an
        integral part of their examination process, periodically review the
        Bank's allowance for losses on loans and other real estate owned.

        Such agencies may require the Bank to recognize additions to the
        allowance based on their judgment of information available to them at
        the time of their examination. Ultimately, losses may vary from
        current estimates and future additions to the allowance may be
        necessary.

        Loan losses are charged against the allowance when management
        believes the collectibility of the loan balance is unlikely.
        Subsequent recoveries, if any, are credited to the allowance.


                                     FS-10

<PAGE>

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

        ALLOWANCE FOR LOAN LOSSES (CONTINUED)

        A loan is considered impaired when, based on current information and
        events, it is probable that a creditor will be unable to collect the
        scheduled payments of principal or interest when due according to the
        contractual terms of the loan agreement. Factors considered by
        management in determining impairment include payment status,
        collateral value, and the probability of collecting scheduled
        principal and interest payments when due. Loans that experience
        insignificant payment delays and payment shortfalls generally are not
        classified as impaired. Management determines the significance of
        payment delays and payment shortfalls on a case-by-case basis, taking
        into consideration all of the circumstances surrounding the loan and
        the borrower, including the length of the delay, the reasons for the
        delay, the borrower's prior payment record, and the amount of the
        shortfall in relation to the principal and interest owed. Impairment
        is measured on a loan-by-loan basis by either the present value of
        expected future cash flows discounted at the loan's effective
        interest rate, the loan's obtainable market price, or the fair value
        of the collateral if the loan is collateral dependent. Substantially
        all of the Bank's loans which have been identified as impaired have
        been measured by the fair value of existing collateral.

        Large groups of smaller balance homogeneous loans are collectively
        evaluated for impairment. Accordingly, the Bank does not separately
        identify individual consumer loans for impairment disclosures.

        LOAN SERVICING

        The Bank has adopted Statement of Financial Accounting Standards
        ("SFAS") No. 122, "Accounting for Mortgage Servicing Rights," as
        superseded by SFAS No. 125, "Accounting for Transfers and Servicing
        of Financial Assets and Extinguishments of Liabilities," whereby
        rights to service mortgage loans for others are capitalized as
        separate assets, whether acquired through purchase or origination, if
        such loans are sold or securitized with servicing rights retained.
        Accordingly, the total cost of the mortgage loan is allocated to the
        related servicing right and to the loan based on the relative fair
        values if it is practicable to estimate those fair values.

        The Bank estimates fair value based on the present value of estimated
        expected future cash flows using prepayment speeds and discount rates
        commensurate with the risks involved, and servicing costs determined
        on an incremental cost basis. Prior to the adoption of SFAS No. 122,
        the capitalization of originated mortgage servicing rights was not
        allowed under generally accepted accounting principles.


                                     FS-11
<PAGE>

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

        LOAN SERVICING (CONTINUED)

        Capitalized mortgage servicing rights are amortized to servicing
        revenue  in proportion to, and over the period of, estimated net
        servicing revenues. Impairment of mortgage servicing rights is
        assessed based on the fair value of those rights. For purposes of
        measuring impairment, the rights are stratified based on the
        following predominant risk characteristics of the underlying loans:
        loan type, size, note rate, date of origination, term, and geographic
        location. Impairment is recognized through a valuation allowance for
        an individual stratum, to the extent that fair value is less than the
        capitalized amount for the stratum.

        BANKING PREMISES AND EQUIPMENT

        Land is carried at cost. Buildings and equipment are carried at cost,
        less accumulated depreciation computed on the straight-line method
        over the estimated useful lives of the assets.

        It is general practice to charge the cost of maintenance and repairs
        to earnings when incurred; major expenditures for betterments are
        capitalized and depreciated.

        INCOME TAXES

        Deferred tax assets and liabilities are reflected at currently
        enacted income tax rates applicable to the period in which the
        deferred tax assets or liabilities are expected to be realized or
        settled. As changes in tax laws or rates are enacted, deferred tax
        assets and liabilities are adjusted accordingly through the provision
        for income taxes.


                                     FS-12

<PAGE>

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

        STOCK COMPENSATION PLANS

        Statement of Financial Accounting Standards ("SFAS") No. 123,
        "Accounting for Stock-Based Compensation," encourages all entities to
        adopt a fair value based method of accounting for employee stock
        compensation plans, whereby compensation cost is measured at the
        grant date based on the value of the award and is recognized over the
        service period, which is usually the vesting period. However, it also
        allows an entity to continue to measure compensation cost for those
        plans using the intrinsic value based method of accounting prescribed
        by Accounting Principles Board ("APB") Opinion No. 25, "Accounting
        for Stock Issued to Employees," whereby compensation cost is the
        excess, if any, of the quoted market price of the stock at the grant
        date (or other measurement date) over the amount an employee must pay
        to acquire the stock. Stock options issued under the Corporation's
        stock option plan have no intrinsic value at the grant date, and
        under Opinion No. 25 no compensation cost is recognized for them.
        Under the Corporation's employee stock purchase plan, compensation
        cost is recognized to the extent that the quoted market price of the
        stock on the date of grant exceeds the amount that the employee is
        required to pay. The Corporation has elected to continue with the
        accounting methodology in Opinion No. 25 and, as a result, has
        provided pro forma disclosures of net income, earnings per share, and
        other disclosures, as if the fair value based method of accounting
        had been applied. The pro forma disclosures include the effects of
        all awards granted on or after January 1, 1995. (See Note 13.)

        EARNINGS PER SHARE

        Basic earnings per share represents income available to common
        shareholders divided by the weighted-average number of common shares
        outstanding during the period. Diluted earnings per share reflects
        additional common shares that would have been outstanding if dilutive
        potential common shares had been issued, as well as any adjustment to
        income that would result from the assumed issuance. Potential common
        shares that may be issued by the Corporation relate solely to
        outstanding stock options, and are determined using the treasury
        stock method. The weighted average number of shares used in the
        computation of basic earnings per share was 1,222,822 for 2000,
        1,166,134 for 1999, and 1,153,070 for 1998. The weighted average
        number of shares used in the computation of earnings per share
        assuming dilution of stock options was 1,430,071 for 2000, 1,399,500
        for 1999, and 1,358,169 for 1998. The 10% stock dividend was
        retroactively reflected in the 1999 and 1998 weighted shares.


                                     FS-13

<PAGE>

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

        RECENT ACCOUNTING PRONOUNCEMENTS

        In June 1998, the FASB issued SFAS No. 133, "Accounting for
        Derivative Instruments and Hedging Activities," which as amended by
        SFAS No. 137, is effective for fiscal years beginning after June 15,
        2000. This Statement establishes accounting and reporting standards
        for derivative instruments and hedging activities, including certain
        derivative instruments embedded in other contracts, and requires that
        an entity recognize all derivatives as assets or liabilities in the
        balance sheet and measure them at fair value. Management evaluated
        the impact of adopting this Statement on the consolidated financial
        statements, and determined there was no material impact.

        COMPREHENSIVE INCOME

        Accounting principles generally require that recognized revenue,
        expenses, gains, and losses be included in net income. Although
        certain changes in assets and liabilities, such as unrealized gains
        and losses on available-for-sale securities, are reported as a
        separate component of the equity section of the balance sheet, such
        items, along with net income, are components of comprehensive income.

        The components of other comprehensive income and related tax effects are
        as follows:

<TABLE>
<CAPTION>
                                                                        2000            1999             1998
                                                                      --------        ---------        --------
        <S>                                                           <C>             <C>              <C>
        Unrealized holding gains (losses) on available-for-sale
          securities and other assets                                 $277,900        $ (54,600)       $(88,500)
        Tax effect                                                    (125,900)          24,600          39,800
                                                                      --------        ---------        --------

        Net-of-tax amount                                             $152,000        $ (30,000)       $(48,700)
                                                                      ========        =========        ========
</TABLE>

NOTE 2. CASH AND DUE FROM BANKS

        Aggregate reserves (in the form of cash and deposits with the Federal
        Reserve Bank) of $429,000 were maintained to satisfy federal
        regulatory requirements at December 31, 2000.

NOTE 3. TRADING ASSETS

        At December 31, 2000 and 1999, trading assets, at fair value,
        consisted of marketable equity securities in the amount of $168,000
        and $135,000, respectively.


                                     FS-14

<PAGE>

NOTE 4. INVESTMENT SECURITIES

        The amortized cost and fair value of investment securities, with
        gross unrealized gains and losses, follows:

<TABLE>
<CAPTION>
                                                                GROSS          GROSS
                                            AMORTIZED         UNREALIZED     UNREALIZED           FAIR
                                              COST              GAINS          LOSSES             VALUE

                                           -----------------------DECEMBER 31, 2000------------------------
<S>                                        <C>                <C>             <C>              <C>
SECURITIES AVAILABLE FOR SALE
  State and Local agencies                 $ 4,548,600         $196,200       $   --           $ 4,744,800
  U.S. Government Agencies                   1,962,400           19,900                          1,982,300
  Federal Home Loan Bank                       269,100             --             --               269,100
  Pacific Coast Banker's
     Bank Stock                                349,900             --             --               349,900
                                           -----------         --------       --------         -----------
       Total securities available
           for sale                        $ 7,130,000         $216,100       $   --           $ 7,346,100
                                           ===========         ========       ========         ===========

SECURITIES HELD TO MATURITY
  State and Local agencies                 $ 9,051,700         $141,800           --           $ 9,193,500
  U.S. Government agencies                   1,999,200             --           30,000           1,969,200
                                           -----------         --------       --------         -----------

       Total securities held to
           maturity                        $11,050,900         $141,800       $ 30,000         $11,162,700
                                           ===========         ========       ========         ===========

<CAPTION>

                                           -----------------------DECEMBER 31, 1999-----------------------
<S>                                        <C>                <C>             <C>              <C>
SECURITIES AVAILABLE FOR SALE
  U.S. Government Agencies                 $ 1,000,000         $   --         $ 32,400         $   967,600
  Federal Home Loan Bank                       405,600             --             --               405,600
  Pacific Coast Banker's
     Bank Stock                                349,900             --             --               349,900
                                           -----------         --------       --------         -----------

       Total securities available
           for sale                        $ 1,755,500         $   --         $ 32,400         $ 1,723,100
                                           ===========         ========       ========         ===========

SECURITIES HELD TO MATURITY
  State and Local agencies                 $ 6,790,900         $   --         $596,800         $ 6,194,100
  U.S. Government agencies                   2,499,400             --          116,700           2,382,700
                                           -----------         --------       --------         -----------

       Total securities held to
           maturity                        $ 9,290,300         $   --         $713,500         $ 8,576,800
                                           ===========         ========       ========         ===========
</TABLE>


                                     FS-15

<PAGE>

NOTE 4. INVESTMENT SECURITIES (CONTINUED)

        The Bank's investment in Federal Home Loan Bank stock is required as
        part of a borrowing agreement. The stock will be redeemed at par
        value.

        The amortized cost and fair value of debt securities by contractual
        maturity at December 31, 2000 are shown below. Expected maturities
        will differ from contractual maturities because borrowers may have
        the right to call or prepay obligations with or without call or
        prepayment penalties.

<TABLE>
<CAPTION>
                                            AVAILABLE FOR SALE           HELD TO MATURITY
                                         -------------------------   -------------------------
                                          AMORTIZED       FAIR        AMORTIZED       FAIR
                                             COST         VALUE          COST         VALUE
                                         -----------   -----------   -----------   -----------
        <S>                              <C>           <C>           <C>           <C>
        Due between five and ten years   $ 1,962,400   $ 1,982,300   $ 1,999,200   $ 1,969,200

        Due after ten years                4,548,600     4,744,800     9,051,700     9,193,500
                                         -----------   -----------   -----------   -----------

                                         $ 6,511,000   $ 6,727,100   $11,050,900   $11,162,700
                                         ===========   ===========   ===========   ===========
</TABLE>

Proceeds from maturity and sales of investment securities during 2000 and 1999,
respectively, were $6,246,500 and $1,208,400. Realized gains during 2000 and
1999, respectively, were $74,700 and $600.


                                     FS-16

<PAGE>

NOTE 5. SALES AND SERVICING OF SBA LOANS

        A summary of the activity of SBA loans follows:

<TABLE>
<CAPTION>
                                                             YEARS ENDED DECEMBER 31,
                                                      2000              1999              1998
           <S>                                     <C>               <C>               <C>
           SBA loans authorized                    $8,125,000        $7,083,000        $2,458,000
                                                   ==========        ==========        ==========

           SBA loans sold                          $4,205,300        $5,357,900        $2,811,900
                                                   ==========        ==========        ==========
</TABLE>

        A summary of income from SBA loans sold is as follows:

<TABLE>
<CAPTION>
                                                              YEARS ENDED DECEMBER 31,
                                                      2000              1999              1998
           <S>                                     <C>               <C>               <C>
           Income from premiums                    $  244,900        $  267,500        $  192,100
           Income from servicing                      150,100           158,000           191,900
           Less loan origination expense               (1,000)           (1,000)           (1,600)
                                                   ----------        ----------        ----------
              Total SBA sales and service income   $  394,000        $  424,500        $  382,400
                                                   ==========        ==========        ==========
</TABLE>


                                     FS-17

<PAGE>

NOTE 6. LOANS AND ALLOWANCE FOR LOAN LOSSES

        A summary of the balances of loans follows:

<TABLE>
<CAPTION>
                                                                    DECEMBER 31,
                                                             2000                 1999
             <S>                                          <C>                  <C>
             Commercial and industrial                    $10,438,600          $10,718,500
             Construction                                   2,313,800            3,459,000
             Real estate, mortgage                         27,801,600           23,787,600
             Installment                                      518,500              491,500
             Government guaranteed loans purchased            139,000              144,900
                                                          -----------          -----------
                                                           41,211,500           38,601,500
             Allowance for loan losses                       (468,500)            (400,000)
             Deferred origination fees, net                   (41,100)             (49,400)
                                                          -----------          -----------

                       Loans, net                         $40,701,900          $38,152,100
                                                          ===========          ===========
</TABLE>

        The maturities of total loans follows:

<TABLE>
<CAPTION>
                                                                    DECEMBER 31,
                                                             2000                 1999
             <S>                                          <C>                  <C>
             Loans with a fixed rate:
               Due within one year                        $ 2,691,300          $ 2,467,800
               Due one to five years                       18,898,200           15,286,700
               Due over five years                          3,211,200            2,814,900
                                                          -----------          -----------
                                                           24,800,700           20,569,400
             Loans with a variable rate                    16,410,800           18,032,100
                                                          -----------          -----------

                      Total loans                         $41,211,500          $38,601,500
                                                          ===========          ===========
</TABLE>


                                     FS-18

<PAGE>

NOTE 6. LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)

        An analysis of the allowance for loan losses follows:

<TABLE>
<CAPTION>
                                                        YEARS ENDED DECEMBER 31,
                                                2000              1999              1998
               <S>                            <C>              <C>                <C>
               Beginning balance              $400,000         $ 336,200          $269,100
               Recoveries                        7,400            18,100            12,600
               Loans charged off               (68,900)         (128,500)          (75,500)
               Provision for loan losses       130,000           174,200           130,000
                                              --------         ---------          --------
                 Ending balance               $468,500         $ 400,000          $336,200
                                              ========         =========          ========
</TABLE>

        As of December 31, 2000 and 1999, the recorded investment in impaired
        loans totaled $981,100 and $610,800 with corresponding valuation
        allowances of $59,800 and $39,700, respectively. No additional
        amounts are committed to be advanced in connection with impaired
        loans.

        For the years ended December 31, 2000 and 1999, the average recorded
        investment in impaired loans amounted to approximately $409,700 and
        $176,400, respectively. Non-accrual loans totaled $15,400 and
        $124,700 at December 31, 2000 and 1999, respectively. If interest on
        non-accrual loans had been accrued, such income would have
        approximated $1,100 and $3,900 for 2000 and 1999, respectively.

NOTE 7. BANKING PREMISES AND EQUIPMENT

        A summary of the cost and accumulated depreciation of banking
        premises and equipment and their estimated useful lives follows:

<TABLE>
<CAPTION>
                                                       DECEMBER 31,              ESTIMATED
                                                 2000               1999        USEFUL LIVES
              <S>                             <C>                <C>            <C>
              Building and land               $   915,400        $   915,400      40 years
              Building improvements               400,200            400,200      40 years
              Leasehold improvements              471,000            469,800     Lease term
              Furniture and equipment           1,297,300          1,351,300     3-8 years
                                              -----------        -----------
                                                3,083,900          3,136,700
              Accumulated depreciation         (1,310,700)        (1,287,600)
                                              -----------        -----------
                                              $ 1,773,200        $ 1,849,100
                                              ===========        ===========
</TABLE>

        Depreciation expense of $126,900, $144,000, and $139,100 was included
        in occupancy and equipment expense for the years ended 2000, 1999,
        and 1998, respectively.


                                     FS-19

<PAGE>

NOTE 8. SHORT-TERM BORROWING AND LONG-TERM DEBT

        The Corporation's $1,000,000 revolving line of credit borrowing
        agreement with Pacific Coast Bankers' Bank matured on May 1, 2000.
        The outstanding balance on the line of credit, $800,000, was
        converted to a term note, which matures May 1, 2005. The note
        requires annual principal payments of $80,000 plus quarterly interest
        payments, and a final payment of $480,000 is due at maturity. The
        $200,000 which was available under the $1,000,000 revolving line of
        credit was renewed for one year, with interest due quarterly. Both
        the term note and the credit line are secured by 611,953 shares of
        Monterey County Bank stock. The rate of interest is the prime rate as
        published in the Wall Street Journal (the "Index") plus .750
        percentage points over the Index. At December 31, 2000, the interest
        rate was 10.25% for both loans, and the outstanding principal
        balances on the term note and line of credit were $800,000 and
        $75,000, respectively.

NOTE 9. FEDERAL HOME LOAN BANK BORROWINGS

        The Bank entered into an advance and security agreement with the
        Federal  Home Loan Bank of San Francisco on January 21, 1993. At
        December 31, 2000, the Bank has five $1,000,000 advances, which bear
        interest at 4.83%, 6.81%, 6.36%, 6.86%, and 7.71%, respectively. The
        advances are secured by pledged loan principal in the amount of
        $7,768,000 and investment securities totaling $2,961,500. The
        advances mature in October 2003, June 2004, August 2005, January
        2028, and June 2030, respectively.


                                     FS-20

<PAGE>

NOTE 10. INCOME TAXES

         Allocation of federal and state income taxes between current and
         deferred portions is as follows:

<TABLE>
<CAPTION>
                                                              YEARS ENDED DECEMBER 31,
                                                          2000          1999          1998
               <S>                                      <C>           <C>           <C>
               Current tax provision:
                 Federal                                $168,000      $ 58,600      $ 49,600
                 State                                   115,600        57,700        43,900
                                                        --------      --------      --------
                                                         283,600       116,300        93,500
                                                        --------      --------      --------

               Deferred tax provision (benefit):
                 Federal                                  63,400        22,800       (16,800)
                 State                                    14,900         7,900        (2,800)
                                                        --------      --------      --------
                                                          78,300        30,700       (19,600)
                                                        --------      --------      --------
                                                        $361,900      $147,000      $ 73,900
                                                        ========      ========      ========
</TABLE>

         The reasons for the differences between the statutory federal income
         tax rate and the effective tax rates are summarized as follows:

<TABLE>
<CAPTION>
                                                         2000          1999          1998
               <S>                                      <C>           <C>          <C>
               Statutory federal tax rate               34.00%        34.00%        34.00%
               State taxes, net of federal tax benefit    7.20          7.20          7.20
               Other, net                                 7.95         (8.80)       (25.60)
                                                        ------        ------        -------
                    Effective tax rates                 49.15%        32.40%        15.60%
                                                        ======        ======        =======
</TABLE>

         In addition, the Corporation has applied all unused general business
         tax credit carryforwards for financial reporting and income tax
         purposes.


                                     FS-21
<PAGE>

NOTE 10. INCOME TAXES (CONTINUED)

         The components of the net deferred tax asset, included in other assets,
         are as follows:
<TABLE>
<CAPTION>

                                                                  December 31,
                                                            2000                 1999
<S>                                                   <C>                  <C>
         Deferred tax asset
           Federal                                    $  154,200           $  189,100
           State                                          36,700               59,800
                                                      -----------          -----------
         Net deferred tax asset                       $  190,900           $  248,900
                                                      ===========          ===========
</TABLE>

         The tax effects of each type of income and expense item that give rise
         to deferred taxes are as follows:

<TABLE>
<CAPTION>

                                                                  December 31,
                                                             2000                 1999
<S>                                                   <C>                  <C>
         Deferred tax assets (liabilities)
           Accrual to cash adjustments                $    53,500          $    95,100
           Investments:
             Net unrealized (gain) loss on securities     (46,200)              14,500
           State franchise tax                             51,800               34,100
           Allowance for loan losses                      155,600              119,100
           Depreciation                                   (23,800)             (13,900)
                                                      ------------         ------------
             Net deferred tax asset                   $   190,900          $   248,900
                                                      ============         ============
</TABLE>

         As of December 31, 2000 and 1999, management expects all temporary
         differences to be offset against future taxable income, and no
         valuation resrve was deemed necessary.


                                      FS-22
<PAGE>

NOTE 11. COMMITMENTS AND CONTINGENCIES

         In the normal course of business, there are outstanding commitments and
         contingencies which are not reflected in the consolidated financial
         statements.

         OPERATING LEASE COMMITMENTS

         The Bank leases its branch buildings in Carmel and Pacific Grove. The
         Carmel building has a twenty-five year lease which commenced in March
         1981 and may be adjusted annually for changes in the Consumer Price
         Index. The Pacific Grove building has a five year lease with five,
         five-year options and commenced in April 1997. The Bank also leases
         certain equipment used in the normal course of business.

         Rent expense for operating leases is included in occupancy and
         equipment expense and amounted to approximately $80,200, $72,400, and
         $83,800 in 2000, 1999, and 1998, respectively.

         At December 31, 2000, approximate future minimum rental commitments for
         all noncancelable operating leases are as follows:

<TABLE>

<S>                              <C>
                     2001        $150,300
                     2002         141,300
                     2003         114,400
                     2004          98,700
                     2005          97,000
                  Thereafter       14,900
                                ----------
                                 $616,600
                                ==========
</TABLE>

         LOAN COMMITMENTS

         The Bank is a party to financial instruments with off-balance-sheet
         risk in the normal course of business to meet the financing needs of
         its customers. These financial instruments include commitments to
         extend credit. Such commitments involve, to varying degrees, elements
         of credit and interest rate risk in excess of the amount recognized in
         the consolidated balance sheets.

         The Bank's exposure to credit loss is represented by the contractual
         amount of these commitments. The Bank uses the same credit policies in
         making commitments as it does for on-balance-sheet instruments.

         At December 31, 2000 and 1999, such commitments to extend credit were
         approximately $7,702,700 and $7,711,000, respectively, of undisbursed
         lines of credit and undisbursed loans in process.


                                     FS-23
<PAGE>

NOTE 12. SHAREHOLDERS' EQUITY

         MINIMUM REGULATORY REQUIREMENTS

         The Corporation (on a consolidated basis) and the Bank are subject to
         various regulatory capital requirements administered by the federal
         banking agencies. Failure to meet minimum capital requirements can
         initiate certain mandatory and possibly additional discretionary
         actions by regulators that, if undertaken, could have a direct material
         effect on the Corporation's and Bank's financial statements. Under
         capital adequacy guidelines and the regulatory framework for prompt
         corrective action, the Corporation and the Bank must meet specific
         capital guidelines that involve quantitative measures of their assets,
         liabilities, and certain off-balance-sheet items as calculated under
         regulatory accounting practices. The capital amounts and
         classifications are also subject to qualitative judgements by the
         regulators about components, risk weightings, and other factors. Prompt
         corrective action provisions are not applicable to bank holding
         companies.

         Quantitative measures established by regulation to ensure capital
         adequacy require the Corporation and the Bank to maintain minimum
         amounts and ratios (set forth in the following table) of total and Tier
         1 capital (as defined in the regulations) to risk-weighted assets (as
         defined) and of Tier 1 capital (as defined) to average assets (as
         defined). Management believes, as of December 31, 2000 and 1999, that
         the Corporation and the Bank met all capital adequacy requirements to
         which they are subject.

         As of December 31, 2000, the most recent notification from the Federal
         Deposit Insurance Corporation categorized the Bank as well capitalized
         under the regulatory framework for prompt corrective action. To be
         categorized as well capitalized, an institution must maintain minimum
         total risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as set
         forth in the following tables. There are no conditions or events since
         the notification that management believes have changed the Bank's
         category. The Corporation's and the Bank's actual capital amounts and
         ratios as of December 31, 2000 and 1999 are also presented in the
         tables.


                                     FS-24
<PAGE>

NOTE 12. SHAREHOLDERS' EQUITY (CONTINUED)

<TABLE>
<CAPTION>

                                DECEMBER 31, 2000


                                                                                                       Minimum To Be Well
                                                                                Minimum                 Capitalized Under
                                                                                Capital                 Prompt Corrective
                                                           Actual              Requirement              Action Provisions
                                                      -----------------     ------------------        ---------------------
                                                       Amount    Ratio       Amount     Ratio          Amount        Ratio
                                                      -----------------     ------------------        ---------------------
                                                                               (All dollars in thousands)
<S>                                                    <C>        <C>        <C>         <C>           <C>           <C>
         Total Capital to Risk Weighted Assets:
           Consolidated                                $5,330     10.4%      $4,097      8.0%             N/A           N/A
           Monterey County Bank                         5,692     11.2%       4,074      8.0%          $5,093         10.0%

         Tier 1 Capital to Risk Weighted Assets:
           Consolidated                                 4,861      9.5%       2,048      4.0%             N/A           N/A
           Monterey County Bank                         5,224     10.3%       2,037      4.0%           3,056          6.0%

         Tier 1 Capital to Average Assets:
           Consolidated                                 4,861      9.5%       2,047      4.0%             N/A           N/A
</TABLE>


<TABLE>
<CAPTION>

                                DECEMBER 31, 1999


                                                                                                       Minimum To Be Well
                                                                                Minimum                 Capitalized Under
                                                                                Capital                 Prompt Corrective
                                                           Actual              Requirement              Action Provisions
                                                      -----------------     ------------------        ---------------------
                                                       Amount    Ratio       Amount     Ratio          Amount        Ratio
                                                      -----------------     ------------------        ---------------------
                                                                               (All dollars in thousands)
<S>                                                <C>        <C>        <C>         <C>          <C>             <C>
         Total Capital to Risk Weighted Assets:
           Consolidated                            $4,393      9.5%      $3,701      8.0%             N/A              N/A
           Monterey County Bank                     4,892     10.6%       3,686      8.0%          $4,608            10.0%

         Tier 1 Capital to Risk Weighted Assets:
           Consolidated                             3,993      8.6%       1,851      4.0%             N/A             N/A
           Monterey County Bank                     4,492      9.7%       1,843      4.0%           2,765            6.0%

         Tier 1 Capital to Average Assets:
           Consolidated                             3,993      7.3%       2,185      4.0%             N/A             N/A
           Monterey County Bank                     4,492      7.9%       2,182      4.0%           2,727            5.0%
</TABLE>


                                     FS-25
<PAGE>

NOTE 13. STOCK OPTIONS AND STOCK DIVIDENDS

         On June 12, 1998, the 1998 Stock Option Plan was approved by the
         shareholders. Under the Plan, options may be granted to officers, key
         employees, and directors of the Corporation and its subsidiaries, so
         long as a majority of the equity interests of such subsidiary are owned
         by the Corporation. Incentive Stock Options may be granted at prices
         not lower than 100% of the fair market value of the common stock on the
         date of grant. However, an incentive stock option granted to an
         individual owning 10% or more of the Corporation's stock after such
         grant must have an exercise price of at least 110% of such fair market
         value and an exercise period of not more than five years. Non-qualified
         stock options may be granted at prices not lower than 85% of the fair
         market value of the common stock on the date of grant. The Board of
         Directors is authorized to determine when options become exercisable
         within a period not extending 10 years from the date of grant. The
         maximum number of shares available for issuance under the Plan is
         250,000 shares subject to adjustment for stock dividends and stock
         buy-backs.

         The Corporation applies APB Opinion 25 and related Interpretations in
         accounting for the plan. Accordingly, no compensation cost has been
         recognized. Had compensation cost for the Corporation's stock-based
         compensation plan been determined based on the fair value at the grant
         date for awards under the plan consistent with the method prescribed by
         SFAS No. 123, the Corporation's net income and earnings per share would
         have been adjusted to the pro forma amounts indicated below:

<TABLE>
<CAPTION>

                                                                 December 31,
                                                       2000          1999          1998
<S>                                                <C>           <C>           <C>
         Net income:
              As reported                          $736,300      $453,800      $464,200
              Pro forma                             719,000       453,800       450,700

         Earnings per share:
              As reported                          $   0.60      $   0.39      $   0.40
              Pro forma                                0.59          0.39          0.39

         Earnings per share,
          assuming dilution for stock options:
              As reported                          $   0.51      $   0.32      $   0.34
              Pro forma                                0.50          0.32          0.33
</TABLE>


                                     FS-26
<PAGE>

NOTE 13. STOCK OPTIONS AND STOCK DIVIDENDS (CONTINUED)

         The fair value of these options was estimated at the grant date using
         the Black-Scholes option pricing model with the following
         weighted-average assumptions for 2000 and 1999: risk-free interest
         rates of 6.21 percent; dividend yield of 4.0 to 4.8 percent; expected
         option life of 6 years; and volatility of 30 percent.

         At December 31, 2000, options for the purchase of 207,891 shares of the
         Corporation's common stock were outstanding and exercisable at prices
         ranging from $1.88 to $3.00. The status of all optioned shares is as
         follows:

<TABLE>
<CAPTION>

                                                 Shares   Price Range     Weighted Average
                                                                              Remaining
                                                                          contractual Life
                                              ---------- --------------- ------------------
<S>                                            <C>        <C>               <C>
         Outstanding at December 31, 1998       240,350   $2.00 - $3.00     3.6 Years
           Increase due to stock dividend        16,665   $2.07 - $2.48
           Exercised                            (84,150)  $2.00 - $2.07
           Cancelled                            (13,750)  $2.50 - $2.73
                                              ---------
         Outstanding at December 31, 1999       159,115   $2.07 - $2.48     4.3 Years
           Granted                               49,500   $2.73 - $3.00
           Increase due to stock dividend        18,899   $1.88 - $3.00
           Cancelled                            (19,623)  $2.07 - $2.48
                                              ---------
         Outstanding at December 31, 2000       207,891                     3.7 Years
                                              =========
</TABLE>


                                     FS-27
<PAGE>

NOTE 14. RELATED PARTY TRANSACTIONS

         The Corporation has, and expects to have in the future, banking
         transactions in the ordinary course of its business with directors,
         officers, principal shareholders, and their associates. These
         transactions, including loans and deposits, are granted on
         substantially the same terms, including interest rates and collateral
         on loans, as those prevailing at the same time for comparable
         transactions with others and do not involve more than the normal risk
         of collectibility or present other unfavorable features.

         Aggregate loan transactions with related parties are approximately as
         follows:

<TABLE>

<S>                                                    <C>
         Balance as of December 31, 1998               $  166,800
           New loans                                      895,200
           Repayments                                    (164,500)
                                                      ------------
         Balance as of December 31, 1999               $  897,500
           New loans                                       50,000
           Repayments                                     (28,500)
                                                      ------------
         Balance as of December 31, 2000               $  919,000
                                                      ============
</TABLE>

         Related party deposits totaled approximately $173,900 and $196,000 at
         December 31, 2000 and 1999, respectively.

NOTE 15. EMPLOYEE BENEFIT PLANS

         During 1995, the Corporation established an employee stock ownership
         plan (ESOP) to invest in the Corporation's common stock for the benefit
         of eligible employees. The Corporation's contribution to the plan is
         determined by the Board of Directors. Shares in the plan generally vest
         after seven years. The Corporation did not make a contribution to the
         ESOP trust in 2000, 1999, or 1998.

         The Bank has a salary reduction plan under Section 401(K) of the
         Internal Revenue Code. The plan covers substantially all full-time
         employees who have completed one year of service with the Bank.
         Employees are allowed to defer up to 15% of their compensation subject
         to certain limits based on federal tax laws. Under the provisions of
         the plan, the Bank's contribution policy is discretionary. No
         contributions were made by the Bank in 2000, 1999, or 1998.


                                     FS-28
<PAGE>

NOTE 16. REGULATORY MATTERS

         The Corporation is subject to regulation by the Board of Governors of
         the Federal Reserve System under the Bank Holding Corporation Act. The
         Bank is subject to regulation, supervision, and regular examination by
         the California State Banking Department and the FDIC. The regulations
         of these agencies affect most aspects of the Corporation's business and
         prescribe permissible types of loans and investments, the amount of
         required reserves, requirements for branch offices, the permissible
         scope of the Corporation's activities, and various other requirements.
         The Corporation is also subject to certain regulations of the Federal
         Reserve Bank dealing primarily with check clearing activities,
         establishment of banking reserves, Truth-in-Lending (Regulation Z), and
         Equal Credit Opportunity (Regulation B).

NOTE 17. FAIR VALUE OF FINANCIAL INSTRUMENTS

         SFAS No. 107, "Disclosures about Fair Value of Financial Instruments"
         requires disclosure of estimated fair values of all financial
         instruments where it is practicable to estimate such values. In cases
         where quoted market prices are not available, fair values are based on
         estimates using present value or other valuation techniques. Those
         techniques are significantly affected by the assumptions used,
         including the discount rate and estimates of future cash flows.
         Accordingly, the derived fair value estimates cannot be substantiated
         by comparison to independent markets and, in many cases, could not be
         realized in immediate settlement of the instrument. Statement No. 107
         excludes certain financial instruments and all nonfinancial instruments
         from its disclosure requirements. Accordingly, the aggregate fair value
         amounts presented do not represent the underlying value of the
         Corporation.

         The following methods and assumptions were used by the Corporation in
         estimating fair value disclosures for financial instruments:

                  CASH AND CASH EQUIVALENTS: The carrying amounts of cash and
                  short-term instruments approximate fair values.

                  INVESTMENT SECURITIES: Fair values for investment securities,
                  excluding Federal Home Loan Bank stock, are based on quoted
                  market prices. The carrying value of Federal Home Loan Bank
                  stock approximates fair value based on the redemption
                  provisions of the Federal Home Loan Bank.


                                     FS-29
<PAGE>

NOTE 17. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

                  LOANS: For variable-rate loans that reprice frequently and
                  with no significant change in credit risk, fair values are
                  based on carrying values. The fair value of performing
                  fixed-rate loans is estimated by discounting future cash
                  flows using the Corporation's current offering rate for loans
                  with similar characteristics. The fair value of performing
                  adjustable-rate loans is considered to be the same as book
                  value. The fair value of nonperforming loans is estimated at
                  the fair value of the related collateral or, when in
                  management's opinion foreclosure upon the collateral is
                  unlikely, by discounting future cash flows using rates which
                  take into account management's estimate of credit risk.

                  COMMITMENTS TO EXTEND CREDIT AND STANDBY LETTERS OF CREDIT:
                  The Corporation does not generally enter into long-term fixed
                  rate commitments or letters of credit. These commitments are
                  generally priced at current prevailing rates. These rates are
                  generally variable and, therefore, there is no interest rate
                  exposure. Accordingly, the fair market value of these
                  instruments is equal to the carrying value amount of their net
                  deferred fees. The net deferred fees associated with these
                  instruments are not material. The Corporation has no unusual
                  credit risk associated with these instruments.

                  DEPOSIT LIABILITIES: The fair values disclosed for demand
                  deposits (e.g., interest and non-interest checking, savings,
                  and certain types of money market accounts) are, by
                  definition, equal to the amount payable on demand at the
                  reporting date (i.e., their carrying amounts). Fair values for
                  fixed-rate certificates of deposit are estimated using a
                  discounted cash flow calculation that applies interest rates
                  currently being offered on certificates to a schedule of
                  aggregated expected monthly maturities on time deposits.

                  ACCRUED INTEREST: The carrying amounts of accrued interest
                  approximate fair value.

                  SHORT-TERM BORROWINGS: The carrying amounts of federal funds
                  purchased, borrowings under repurchase agreements, and other
                  short-term borrowings maturing within ninety days approximate
                  their fair values. Fair values of other short-term borrowings
                  are estimated using discounted cash flow analyses based on the
                  Corporation's current incremental borrowing rates for similar
                  types of borrowing arrangements.


                                     FS-30
<PAGE>

NOTE 17. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

         The estimated fair values, and related carrying amounts, of the
         Corporation's financial instruments as of December 31, 2000 and 1999
         are as follows:

<TABLE>
<CAPTION>

                                                             December 31,
                                                   2000                        1999
                                           Carrying       Fair        Carrying        Fair
                                            Amount        Value        Amount         Value
                                        ------------- ------------- ------------- --------------
<S>                                      <C>           <C>           <C>           <C>
         Financial Assets:
           Cash and cash equivalents     $17,356,200   $17,356,200   $10,745,200   $10,745,200
           Time deposits                     200,000       200,000       200,000       200,000
           Trading assets                    168,000       168,000       135,000       135,000
           Investment securities,
             available for sale            7,346,100     7,346,100     1,723,100     1,723,100
           Investment securities,
             held to maturity             11,050,900    11,162,700     9,290,300     8,576,800
           Other investments                  40,000        40,000        40,000        40,000
           Loans, held for sale            2,549,500     2,549,500       665,300       665,300
           Loans, net                     40,701,900    39,783,700    38,152,100    37,165,700
           Accrued interest receivable       458,100       458,100       439,800       439,800

         Financial Liabilities:
           Deposits                       72,218,300    72,266,600    55,562,600    55,639,600
           Short-term borrowings              75,000        75,000       750,000       750,000
           Long-term debt                  5,800,000     5,810,200     4,000,000     3,954,000
           Accrued interest payable          534,000       534,000       470,100       470,100
</TABLE>


NOTE 18.  EXTRAORDINARY ITEM - LITIGATION SETTLEMENT

         In May 1998, Monterey County Bank entered into a settlement agreement
         with Monterey Bay Bank, whereby Monterey County Bank agreed to
         terminate its trade name infringement litigation against Monterey Bay
         Bank. Under the terms of the settlement Monterey County Bank received a
         lump sum payment in the amount of $117,100.

NOTE 19.  SUBSEQUENT EVENTS

         On December 29, 2000, the Bank received wire transfers totaling $10.3
         million for credit to two demand deposit accounts. These deposits were
         temporary in nature, remaining on deposit until January 12, 2001.


                                     FS-31
<PAGE>

NOTE 20. NORTHERN CALIFORNIA BANCORP, INC. (PARENT CORPORATION ONLY)

         The following are the financial statements of Northern California
         Bancorp, Inc. (Parent Corporation only) as of December 31, 2000 and
         1999:

<TABLE>
<CAPTION>

                       BALANCE SHEETS

                                                   2000               1999
<S>                                                <C>          <C>
         ASSETS
           Cash and due from banks                 $   50,900   $   49,800
           Organization costs                            --          1,600
           Investment securities - trading account    168,000      135,000
           Investment in Community Bankers'
             Insurance Agency, LLC                     40,000       40,000
           Deferred tax asset                          73,700       13,200
           Investment in common stock of
             Monterey County Bank                   5,415,300    4,505,700
                                                  ------------ ------------
               Total assets                        $5,747,900   $4,745,300
                                                  ============ ============
         LIABILITIES AND SHAREHOLDERS' EQUITY
           Accounts payable and accrued expenses      $ 8,900   $      200
           Dividend payable                             2,700        2,100
           Note payable                               875,000      750,000
                                                  ------------ ------------
               Total liabilities                      886,600      752,300
           Shareholders' equity                     4,861,300    3,993,000
                                                  ------------ ------------
                                                   $5,747,900   $4,745,300
                                                  ============ ============
</TABLE>


                                     FS-32
<PAGE>

NOTE 20. NORTHERN CALIFORNIA BANCORP, INC. (PARENT CORPORATION ONLY)

<TABLE>
<CAPTION>

               STATEMENTS OF INCOME                                 2000         1999         1998
<S>                                                            <C>          <C>          <C>
         Equity in income of subsidiary                        $ 780,900    $ 483,100    $ 485,300
         Gain on sale of securities                               34,000        9,500           --
         Miscellaneous income                                      4,000          500           --
         Operating expenses                                      118,300       55,200       29,700
         Applicable taxes (benefit)                              (35,700)     (15,900)      (8,600)
                                                              -----------  -----------  -----------
                   Net income                                  $ 736,300    $ 453,800    $ 464,200
                                                              ===========  ===========  ===========

<CAPTION>

                      STATEMENTS OF CASH FLOWS

                                                                    2000         1999         1998
<S>                                                            <C>          <C>          <C>
         Cash flows from operating activities:

           Net income                                          $ 736,300    $ 453,800    $ 464,200
           Adjustments to reconcile net income to
             net cash used by operating activities:
           Equity in undistributed income of
             Monterey County Bank                               (780,900)    (483,100)    (485,300)
           (Increase) decrease in other assets                   (61,100)       1,500        1,500
           Increase (decrease) in accrued expenses                 8,700         (600)        (700)
           Increase (decrease) in other liabilities                  600       (3,800)      (6,700)
                                                              -----------  -----------  -----------
                   Net cash used by operating activities         (96,400)     (32,200)     (27,000)
                                                              -----------  -----------  -----------
         Cash flows from financing activities:

           Cash dividends received from subsidiary               100,000       50,000       50,000
           Increase in borrowed funds                            125,000      750,000           --
           Cash dividends paid on common stock                      (700)        (700)        (700)
           Increase in investments                              (115,800)    (899,700)          --
           Exercise of stock options                                  --      169,500           --
           Stock repurchase                                      (11,000)     (34,200)     (10,400)
                                                              -----------  -----------  -----------
                   Net cash provided by financing activities      97,500       34,900       38,900
                                                              -----------  -----------  -----------
         Net change in cash and cash equivalents                   1,100        2,700       11,900

         Cash and cash equivalents, beginning of year             49,800       47,100       35,200
                                                              -----------  -----------  -----------
         Cash and cash equivalents, end of year                $  50,900    $  49,800    $  47,100
                                                              ===========  ===========  ===========
</TABLE>

         The ability of the Corporation to pay dividends will largely depend
         upon the dividends paid to it by the Bank. There are legal limitations
         on the ability of the Bank to provide funds to the Corporation in the
         form of loans, advances, or dividends.


                                     FS-33