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

                                   FORM 10-K

[X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE
      ACT OF 1934
      For the Year ended         December  31, 2000
                         ----------------------------------

                                      OR

[ ]   TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR 15(d) OF THE  SECURITIES
      EXCHANGE ACT OF 1934
      For the transition period from             to
                                     -----------

                        Commission file number 0-25418
                                               -------

                             CENTRAL COAST BANCORP
                             ---------------------
            (Exact name of registrant as specified in its charter)

            STATE OF CALIFORNIA                        77-0367061
            -------------------                        ----------
      (State or other jurisdiction of               (I.R.S. Employer
      incorporation or organization)                Identification No.)



301 Main Street, Salinas, California                       93901
-------------------------------------                      -----
(Address of principal executive offices)                 (Zip code)

      Registrant's telephone number, including area code (831) 422-6642
                                                         --------------

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

          Securities registered pursuant to Section 12(g) of the Act:

                              Title of each class
                              -------------------
                                 Common Stock
                                (no par value)


Indicate  by check  mark  whether  the  registrant  (1) has filed  all  reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange Act of
1934  during the  preceding  12 months  (or for such  shorter  period  that the
registrant  was  required to file such  reports),  and (2) has been  subject to
such filing requirements for the past 90 days.  Yes   X    No
                                                    ------    ------

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

The aggregate  market value of the voting stock held by  non-affiliates  of the
registrant at March 7, 2001 was $139,592,259.  As of March 7,  2001, the
registrant  had  7,346,961  shares of  Common  Stock outstanding.

                      DOCUMENTS INCORPORATED BY REFERENCE
The following  documents  are  incorporated  by reference  into this Form 10-K:
Part III,  Items 10 through 13 from  registrant's  definitive  proxy  statement
for the 2001 annual meeting of shareholders.


The Index to Exhibits is located at page 66             Page 1 of 67 Pages



                                       1
<PAGE>




                                 PART I


ITEM 1.  BUSINESS

GENERAL DEVELOPMENT OF BUSINESS.
--------------------------------

Certain  matters  discussed or  incorporated by reference in this Annual Report
on Form 10-K  including,  but not limited to,  matters  described  in "Item 7 -
Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations,"  are  forward-looking  statements  that are  subject  to risks and
uncertainties  that could cause actual results to differ  materially from those
projected.  Changes  to  such  risks  and  uncertainties,  which  could  impact
future  financial   performance,   include,   among  others,   (1)  competitive
pressures  in  the  banking   industry;   (2)  changes  in  the  interest  rate
environment;  (3) general economic  conditions,  nationally,  regionally and in
operating  market  areas,  including  a decline  in real  estate  values in the
Company's  market  areas;  (4)  changes  in  the  regulatory  environment;  (5)
changes in  business  conditions  and  inflation;  (6)  changes  in  securities
markets;  (7) data processing  compliance  problems;  (8) the California  power
crisis;  (9) variances in the actual versus projected  growth in assests;  (10)
return on assets;  (11) loan  losses;  (12)  expenses;  (13)  rates  charged on
loans and earned on securities  investments;  (14) rates paid on deposits;  and
(15) fee and other noninterest  income earned,  as well as other factors.  This
entire Annual Report should be read to put such  forward-looking  statements in
context and to gain a more  complete  understanding  of the  uncertainties  and
risks  involved in the  Company's  business.  Therefore,  the  information  set
forth  therein  should be carefully  considered  when  evaluating  the business
prospects of the Company and the Bank.

Central Coast Bancorp (the "Company") is a California  corporation,  located in
Salinas,  California  and  was  organized  in  1994  to act  as a bank  holding
company  for Bank of  Salinas.  In 1996,  the Company  acquired  Cypress  Bank,
which   was   headquartered   in   Seaside,   California.   Both   banks   were
state-charted  institutions.  In July of 1999,  the Company merged Cypress Bank
into the Bank of Salinas and then  renamed  Bank of Salinas as  Community  Bank
of Central  California (the "Bank").  The Bank is  headquartered in Salinas and
serves   individuals,    merchants,    small   and   medium-sized   businesses,
professionals,  agribusiness  enterprises  and  wage  earners  located  in  the
California Central Coast area.

On February 21, 1997, the former Bank of Salinas  purchased  certain assets and
assumed certain  liabilities of the Gonzales and Castroville  branch offices of
Wells Fargo  Bank.  As a result of the  transaction  the Bank  assumed  deposit
liabilities,  received cash, and acquired  tangible  assets.  This  transaction
resulted  in  intangible  assets,  representing  the excess of the  liabilities
assumed over the fair value of the tangible assets acquired.

In  January  1997,  the  former  Cypress  Bank  opened a new  branch  office in
Monterey,  California,  so that it might better serve  business and  individual
customers  on the  Monterey  Peninsula.  In December  1998,  the former Bank of
Salinas  opened an  additional  new branch  office in Salinas,  California,  to
better provide services to the growing Salinas community.

In June of 2000, the Bank opened a new branch office in  Watsonville,  which is
in Santa  Cruz  County.  In  October of 2000,  another  new  branch  office was
opened in Hollister,  which is in San Benito  County.  The opening of these two
branch  offices  was a first  step in  expanding  the  Bank's  service  area to
include  communities  outside of  Monterey  County.  Both of these  communities
are

                                       2
<PAGE>

of similar  economic  make-up to the  agricultural  based  communities  the
Bank serves in Monterey County.

Other than holding the shares of the subsidiary  Bank, the Company  conducts no
significant  activities.  Although,  it is authorized,  with the prior approval
of the  Board of  Governors  of the  Federal  Reserve  System  (the  "Board  of
Governors"),  the  Company's  principal  regulator,  to engage in a variety  of
activities which are deemed closely related to the business of banking.

The Bank  operates  through its main office in Salinas and through  nine branch
offices  located  in  Castroville,  Hollister,  Gonzales,  King  City,  Marina,
Monterey,  Salinas,  Seaside  and  Watsonville,  California.  The Bank offers a
full  range  of  commercial  banking  services,  including  the  acceptance  of
demand,  savings and time deposits,  and the making of commercial,  real estate
(including  residential  mortgage),  Small Business  Administration,  personal,
home  improvement,  automobile and other  installment and term loans.  The Bank
also  currently  offers  personal  and  business  Visa  credit  cards.  It also
offers  ATM and Visa  debit  cards,  travelers'  checks,  safe  deposit  boxes,
notary public,  customer  courier and other  customary  bank services.  Most of
the  Bank's  offices  are open from  9:00 a.m.  to 5:00  p.m.,  Monday  through
Thursday  and 9:00 a.m.  to 6:00 p.m.  on  Friday.  The  Westridge  and  Marina
branch  offices  are also  open  from 9:00  a.m.  to 1:00  p.m.  on  Saturdays.
Additionally,  on a 24-hour  basis,  customers  can bank by telephone or online
at the Bank's  Internet site,  www.community-bnk.com.  The Bank also operates a
limited   service   facility  in  a   retirement   home   located  in  Salinas,
California.  The  facility is open from 10:00 a.m.  to 12:00 p.m. on  Wednesday
of each week.  The Bank has automated  teller  machines  (ATMs)  located at the
Castroville,   Hollister,  Gonzales,  King  City,  Marina,  Monterey,  Salinas,
Seaside and Watsonville offices,  the Monterey County Fairgrounds,  the Soledad
Correctional  Training Facility Credit Union,  Salinas Valley Memorial Hospital
and Fort  Hunter  Liggett  which is located in Jolon,  California.  The Bank is
insured under the Federal Deposit  Insurance Act and each  depositor's  account
is insured up to the legal limits  thereon.  The Bank is  chartered  (licensed)
by the California  Commissioner of Financial Institutions  ("Commissioner") and
has  chosen  not to become a member of the  Federal  Reserve  System.  The Bank
has no subsidiaries.

The Bank  operates  an on-site  computer  system,  which  provides  independent
processing of its  deposits, loans and financial accounting.

The  Bank  concentrates  its  lending   activities  in  four  principal  areas:
commercial loans (including  agricultural  loans);  consumer loans; real estate
construction  loans  (both  commercial  and  personal)  and  real  estate-other
loans.   At  December   31,  2000,   these  four   categories   accounted   for
approximately 36%, 2%, 12% and 50% of the Bank's loan portfolio, respectively.

The  Bank  concentrates  its  lending   activities  in  four  principal  areas:
commercial loans (including  agricultural  loans);  consumer loans; real estate
construction  loans  (both  commercial  and  personal)  and  real  estate-other
loans.   At  December   31,  2000,   these  four   categories   accounted   for
approximately 36%, 2%, 12% and 50% of the Bank's loan portfolio, respectively.

The Bank's  deposits  are  attracted  primarily  from  individuals,  merchants,
small   and   medium-sized    businesses,    professionals   and   agribusiness
enterprises.  The Bank's  deposits are not received from a single  depositor or
group  of  affiliated  depositors  the loss of any one of  which  would  have a
materially  adverse  effect on the business of the Bank. A material  portion of
the Bank's  deposits is not  concentrated  within a single industry or group of
related industries.

                                       3
<PAGE>

As of  December  31,  2000,  the Bank  served a total  of 26  municipality  and
governmental   agency   depositors   totaling   $48,396,000  in  deposits.   In
connection with the deposits of municipalities or other  governmental  agencies
or entities,  the Bank is  generally  required to pledge  securities  to secure
such  deposits,  except  for the  first  $100,000  of such  deposits  which are
insured by the Federal Deposit Insurance Corporation ("FDIC").

As of  December  31,  2000,  the Bank had total  deposits of  $633,210,000.  Of
this  total,  $207,002,000  represented  noninterest-bearing  demand  deposits,
$88,285,000  represented  interest-bearing  demand  deposits,  and $337,923,000
represented interest-bearing savings and time deposits.

The  principal  sources of the Bank's  revenues  are:  (i) interest and fees on
loans; (ii) interest on investments  (principally government  securities);  and
(iii)  interest on Federal  Funds sold (funds  loaned on a short-term  basis to
other  banks).  For the fiscal year ended  December  31,  2000,  these  sources
comprised 80.5 percent,  17.4 percent,  and 2.1 percent,  respectively,  of the
Bank's total interest income.

SUPERVISION AND REGULATION
--------------------------

The common  stock of the  Company is subject to the  registration  requirements
of the Securities Act of 1933, as amended,  and the qualification  requirements
of the  California  Corporate  Securities  Law of 1968, as amended.  The Bank's
common stock,  however,  is exempt from such requirements.  The Company is also
subject  to  the  periodic   reporting   requirements  of  Section  13  of  the
Securities  Exchange  Act of  1934,  as  amended,  which  include,  but are not
limited to,  annual,  quarterly and other current  reports with the  Securities
and Exchange Commission.

The  Bank  is   licensed   by  the   California   Commissioner   of   Financial
Institutions.  Its deposits  are insured by the FDIC,  and it has chosen not to
become  a member  of the  Federal  Reserve  System.  Consequently,  the Bank is
subject to the supervision of, and is regularly  examined by, the  Commissioner
and the FDIC. Such  supervision and regulation  include  comprehensive  reviews
of all major  aspects of the  Bank's  business  and  condition,  including  its
capital  ratios,   allowance  for  possible  loan  losses  and  other  factors.
However,  no inference  should be drawn that such authorities have approved any
such  factors.  The Company and the Bank are  required to file reports with the
Commissioner,  the FDIC and the Board of Governors and provide such  additional
information as the Commissioner, FDIC and the Board of Governors may require.

The Company is a bank  holding  company  within the meaning of the Bank Holding
Company  Act of 1956,  as amended  (the "Bank  Holding  Company  Act"),  and is
registered  as such  with,  and  subject  to the  supervision  of, the Board of
Governors.  The  Company is  required  to obtain the  approval  of the Board of
Governors before it may acquire all or  substantially  all of the assets of any
bank,  or  ownership  or  control of the  voting  shares of any bank if,  after
giving effect to such  acquisition of shares,  the Company would own or control
more than 5% of the voting  shares of such bank.  The Bank Holding  Company Act
prohibits  the Company  from  acquiring  any voting  shares of, or interest in,
all or  substantially  all of the assets of, a bank  located  outside the State
of California  unless such an  acquisition  is  specifically  authorized by the
laws  of the  state  in  which  such  bank  is  located.  Any  such  interstate
acquisition  is also subject to the  provisions of the  Riegle-Neal  Interstate
Banking and Branching Efficiency Act of 1994.

The  Company,  and any  subsidiaries,  which it may  acquire or  organize,  are
deemed  to be  "affiliates"  of the Bank  within  the  meaning  of that term as
defined in the Federal  Reserve Act.  This means,  for example,  that there are

                                       4
<PAGE>


limitations  (a) on loans by the Bank to affiliates,  and (b) on investments by
the Bank in  affiliates'  stock as collateral  for loans to any  borrower.  The
Company and its  subsidiaries  are also  subject to certain  restrictions  with
respect to  engaging  in the  underwriting,  public  sale and  distribution  of
securities.

In  addition,  regulations  of the Board  of  Governors  promulgated  under the
Federal  Reserve  Act  require  that   reserves  be  maintained  by the Bank in
conjunction  with any  liability of the  Company under any  obligation  (demand
deposits,  promissory note, acknowledgement  of advance, banker's acceptance or
similar  obligation)  with a weighted  average  maturity of less than seven (7)
years to the extent  that the  proceeds of such  obligations  are  used for the
purpose of supplying funds to the Bank for use in its banking business,  or  to
maintain the  availability of such funds.

The  Board  of  Governors  and  the  FDIC  have   adopted   risk-based  capital
guidelines  for  evaluating  the  capital  adequacy  of bank holding  companies
and  banks.   The  guidelines  are  designed   to  make  capital   requirements
sensitive  to  differences  in  risk  profiles  among  banking   organizations,
to  take  into  account  off-balance  sheet exposures and to aid in making  the
definition  of bank  capital  uniform  internationally.  Under the  guidelines,
the  Company  and  the  Bank  are  required  to  maintain capital  equal  to at
least  8.0% of its  assets  and  commitments  to  extend  credit,  weighted  by
risk,  of  which  at   least  4.0%  must  consist  primarily of  common  equity
(including  retained  earnings) and  the  remainder may consist of subordinated
debt,  cumulative  preferred  stock, or a limited amount of loan loss reserves.

Assets,   commitments  to  extend  credit,  and  off-balance  sheet  items  are
categorized  according to risk and certain  assets  considered  to present less
risk than  others  permit  maintenance  of  capital  at less than the 8% ratio.
For example,  most home  mortgage  loans are placed in a 50% risk  category and
therefore  require  maintenance  of capital  equal to 4% of such  loans,  while
commercial  loans are  placed in a 100% risk  category  and  therefore  require
maintenance of capital equal to 8% of such loans.

The  Company  and the Bank are  subject to  regulations  issued by the Board of
Governors  and the  FDIC  which  require  maintenance  of a  certain  level  of
capital.   These  regulations  impose  two  capital  standards:   a  risk-based
capital standard and a leverage capital standard.

Under the Board of Governors' risk-based capital guidelines, assets reported on
an institution's balance sheet and certain off-balance sheet items are assigned
to risk  categories, each of which has an assigned risk weight.  Capital ratios
are  calculated  by dividing  the  institution's  qualifying  capital  by   its
period-end  risk-weighted  assets.  The guidelines establish two categories  of
qualifying  capital:  Tier 1 capital (defined  to include  common shareholders'
equity and noncumulative perpetual preferred  stock) and  Tier 2  capital which
includes, among  other items, limited  life  (and in case of banks, cumulative)
preferred  stock,  mandatory  convertible  securities, subordinated  debt and a
limited  amount of  reserve for loan  losses.  Tier  2 capital may also include
up  to  45% of the  pretax net  unrealized gains  on certain available-for-sale
equity securities having readily determinable fair  values (i.e. the excess, if
any,  of fair  market  value  over the book value  or  historical cost  of  the
investment  security).  The federal  regulatory agencies  reserve  the right to
exclude all or a portion of the unrealized gains upon  a determination that the
equity  securities are  not prudently  valued.  Unrealized  gains and losses on
other  types of  assets,  such as  bank  premises  and available-for-sale  debt
securities, are not  included in Tier 2 capital, but  may be taken into account
in  the  evaluation of  overall capital  adequacy and net  unrealized losses on
available-for-sale  equity securities  will continue to be deducted from Tier 1
capital as a cushion against risk.  Each  institution is required to maintain a
risk-based capital ratio (including  Tier 1 and Tier 2 capital) of 8%, of which
at least half must be Tier 1 capital.

                                       5
<PAGE>


Under the Board of  Governors'  leverage  capital  standard an  institution  is
required  to  maintain  a  minimum  ratio of Tier 1  capital  to the sum of its
quarterly  average total assets and quarterly  average reserve for loan losses,
less  intangibles  not  included  in Tier 1 capital.  Period-end  assets may be
used in place of quarterly  average total assets on a case-by-case  basis.  The
Board of  Governors  and the FDIC have  adopted a  minimum  leverage  ratio for
bank  holding   companies  as  a  supplement  to  the   risk-weighted   capital
guidelines.  The  leverage  ratio  establishes  a  minimum  Tier 1 ratio  of 3%
(Tier 1 capital to total assets) for the highest  rated bank holding  companies
or those that have  implemented  the  risk-based  capital  market risk measure.
All other  bank  holding  companies  must  maintain  a minimum  Tier 1 leverage
ratio of 4% with higher  leverage  capital  ratios  required  for bank  holding
companies that have significant  financial and/or operational  weakness, a high
risk profile, or are undergoing or anticipating rapid growth.

At December  31,  2000,  the Bank and the Company  are in  compliance  with the
risk-based  capital and leverage ratios  described  above. See Item 8 below for
a listing of the Company's  risk-based  capital ratios at December 31, 2000 and
1999.

The Board of Governors and FDIC adopted  regulations  implementing  a system of
prompt  corrective  action  pursuant  to  Section  38 of  the  Federal  Deposit
Insurance  Act and  Section 131 of the Federal  Deposit  Insurance  Corporation
Improvement  Act of 1991  ("FDICIA").  The  regulations  establish five capital
categories  with  the  following  characteristics:  (1)  "Well  capitalized"  -
consisting  of  institutions  with a total  risk-based  capital ratio of 10% or
greater,  a Tier 1  risk-based  capital  ratio of 6% or greater  and a leverage
ratio  of 5% or  greater,  and the  institution  is not  subject  to an  order,
written  agreement,  capital  directive or prompt  corrective action directive;
(2)  "Adequately  capitalized"  -  consisting  of  institutions  with  a  total
risk-based  capital ratio of 8% or greater,  a Tier 1 risk-based  capital ratio
of 4% or greater  and a leverage  ratio of 4% or greater,  and the  institution
does  not  meet  the  definition  of  a  "well  capitalized"  institution;  (3)
"Undercapitalized"  -  consisting  of  institutions  with  a  total  risk-based
capital  ratio  less than 8%, a Tier 1  risk-based  capital  ratio of less than
4%, or a leverage ratio of less than 4%; (4)  "Significantly  undercapitalized"
- consisting  of  institutions  with a total  risk-based  capital ratio of less
than 6%, a Tier 1  risk-based  capital  ratio of less  than 3%,  or a  leverage
ratio of less than 3%; (5)  "Critically  undercapitalized"  - consisting  of an
institution  with a ratio of tangible  equity to total  assets that is equal to
or less than 2%.

The  regulations   established   procedures  for  classification  of  financial
institutions  within  the  capital  categories,  filing and  reviewing  capital
restoration  plans required under the  regulations  and procedures for issuance
of directives by the appropriate  regulatory agency,  among other matters.  The
regulations  impose  restrictions upon all institutions to refrain from certain
actions which would cause an  institution  to be  classified  within any one of
the three  "undercapitalized"  categories,  such as declaration of dividends or
other capital  distributions  or payment of  management  fees, if following the
distribution or payment the institution  would be classified  within one of the
"undercapitalized"   categories.   In   addition,    institutions   which   are
classified  in one of the three  "undercapitalized"  categories  are subject to
certain   mandatory   and   discretionary   supervisory   actions.    Mandatory
supervisory  actions  include  (1)  increased  monitoring  and  review  by  the
appropriate   federal  banking  agency;   (2)   implementation   of  a  capital
restoration  plan;  (3) total asset  growth  restrictions;  and (4)  limitation
upon  acquisitions,  branch  office  expansion,  and  new  business  activities
without   prior   approval  of  the   appropriate   federal   banking   agency.
Discretionary  supervisory  actions  may include  (1)  requirements  to augment
capital;  (2) restrictions upon affiliate  transactions;  (3) restrictions upon
deposit  gathering  activities  and interest  rates paid;  (4)  replacement  of
senior executive  officers and directors;  (5) restrictions  upon activities of

                                       6
<PAGE>

the institution and its  affiliates;  (6) requiring  divestiture or sale of the
institution;  and  (7)  any  other  supervisory  action  that  the  appropriate
federal  banking agency  determines is necessary to further the purposes of the
regulations.  Further,  the federal  banking  agencies may not accept a capital
restoration  plan without  determining,  among other  things,  that the plan is
based on  realistic  assumptions  and is likely to  succeed  in  restoring  the
depository  institution's  capital.  In  addition,  for a  capital  restoration
plan to be acceptable,  the  depository  institution's  parent holding  company
must guarantee that the institution  will comply with such capital  restoration
plan.  The  aggregate  liability  of  the  parent  holding  company  under  the
guaranty  is limited  to the lesser of (i) an amount  equal to 5 percent of the
depository  institution's total assets at the time it became  undercapitalized,
and (ii) the amount that is necessary  (or would have been  necessary) to bring
the  institution  into compliance  with all capital  standards  applicable with
respect to such  institution  as of the time it fails to comply  with the plan.
If a depository  institution  fails to submit an acceptable plan, it is treated
as if it were  "significantly  undercapitalized."  FDICIA  also  restricts  the
solicitation   and  acceptance  of  and  interest  rates  payable  on  brokered
deposits by insured  depository  institutions that are not "well  capitalized."
An  "undercapitalized"  institution  is not  allowed  to  solicit  deposits  by
offering  rates of interest that are  significantly  higher than the prevailing
rates of interest on insured  deposits in the particular  institution's  normal
market areas or in the market areas in which such deposits  would  otherwise be
accepted.

Any   financial    institution    which   is    classified    as    "critically
undercapitalized"  must be placed in conservatorship or receivership  within 90
days  of such  determination  unless  it is also  determined  that  some  other
course  of  action  would  better  serve  the  purposes  of  the   regulations.
Critically  undercapitalized  institutions are also prohibited from making (but
not  accruing)  any  payment of  principal  or interest  on  subordinated  debt
without  the  prior  approval  of  the  FDIC  and  the  FDIC  must  prohibit  a
critically  undercapitalized  institution  from taking  certain  other  actions
without  its  prior   approval,   including  (1)  entering  into  any  material
transaction  other than in the usual course of business,  including  investment
expansion,   acquisition,   sale  of  assets  or  other  similar  actions;  (2)
extending credit for any highly leveraged  transaction;  (3) amending  articles
or bylaws  unless  required  to do so to  comply  with any law,  regulation  or
order;  (4) making any material change in accounting  methods;  (5) engaging in
certain affiliate  transactions;  (6) paying excessive compensation or bonuses;
and (7) paying  interest  on new or renewed  liabilities  at rates  which would
increase the weighted  average  costs of funds beyond  prevailing  rates in the
institution's normal market areas.

Under the FDICIA,  the federal  financial  institution  agencies  have  adopted
regulations   which   require    institutions   to   establish   and   maintain
comprehensive  written  real estate  policies  which  address  certain  lending
considerations,  including loan-to-value limits, loan administrative  policies,
portfolio   diversification   standards,   and   documentation,   approval  and
reporting  requirements.  The FDICIA  further  generally  prohibits  an insured
state bank from engaging as a principal in any activity  that is  impermissible
for a national  bank,  absent FDIC  determination  that the activity  would not
pose a significant  risk to the Bank Insurance  Fund, and that the bank is, and
will   continue  to  be,   within   applicable   capital   standards.   Similar
restrictions  apply to  subsidiaries  of insured state banks.  The Company does
not currently  intend to engage in any activities  which would be restricted or
prohibited under the FDICIA.

The  Federal   Financial   Institution   Examination   Counsel   ("FFIEC")   on
December 13,  1996,  approved an updated Uniform Financial  Institutions Rating
System  ("UFIRS").  In addition to the five components  traditionally  included
in the so-called  "CAMEL"  rating system which has been used by bank  examiners
for a number of years to classify  and  evaluate  the  soundness  of  financial

                                       7
<PAGE>

institutions (including capital adequacy, asset quality,  management,  earnings
and liquidity),  UFIRS includes for all bank regulatory  examinations conducted
on or after  January1,  1997, a new rating for a sixth category  identified as
sensitivity  to market risk.  Ratings in this  category are intended to reflect
the  degree  to which  changes  in  interest  rates,  foreign  exchange  rates,
commodity  prices or  equity  prices  may  adversely  affect  an  institution's
earnings  and  capital.   The  revised  rating  system  is  identified  as  the
"CAMELS" system.

The  federal  financial   institution   agencies  have  established  bases  for
analysis  and  standards  for  assessing  a  financial   institution's  capital
adequacy  in  conjunction  with the  risk-based  capital  guidelines  including
analysis of interest rate risk,  concentrations  of credit risk,  risk posed by
non-traditional   activities,   and  factors   affecting   overall  safety  and
soundness.   The  safety  and  soundness   standards   for  insured   financial
institutions  include analysis of (1) internal  controls,  information  systems
and internal audit systems;  (2) loan documentation;  (3) credit  underwriting;
(4) interest  rate  exposure;  (5) asset  growth;  (6)  compensation,  fees and
benefits; and (7) excessive  compensation for executive officers,  directors or
principal  shareholders  which could lead to  material  financial  loss.  If an
agency  determines that an institution  fails to meet any standard,  the agency
may require the  financial  institution  to submit to the agency an  acceptable
plan  to  achieve  compliance  with  the  standard.   If  the  agency  requires
submission of a compliance plan and the  institution  fails to timely submit an
acceptable  plan or to implement an accepted  plan, the agency must require the
institution  to correct  the  deficiency.  The  agencies  may elect to initiate
enforcement  action in  certain  cases  rather  than rely on an  existing  plan
particularly  where  failure  to  meet  one  or  more  of the  standards  could
threaten the safe and sound operation of the institution.

Community  Reinvestment Act ("CRA") regulations  evaluate banks' lending to low
and moderate income  individuals and businesses  across a four-point scale from
"outstanding"  to "substantial  noncompliance,"  and are a factor in regulatory
review of  applications  to merge,  establish  new branch  offices or form bank
holding   companies.    In   addition,   any   bank   rated   in   "substantial
noncompliance"   with  the  CRA  regulations  may  be  subject  to  enforcement
proceedings.

The Bank has a current rating of "satisfactory" or better for CRA compliance.

The  Company's  ability to pay cash  dividends is subject to  restrictions  set
forth in the  California  General  Corporation  Law.  Funds for  payment of any
cash  dividends by the Company would be obtained from its  investments  as well
as  dividends  and/or  management  fees  from the  Bank.  The  payment  of cash

                                       8
<PAGE>

dividends  and/or  management fees by the Bank is subject to  restrictions  set
forth in the California  Financial  Code, as well as  restrictions  established
by the FDIC.  See Item 5 below for further  information  regarding  the payment
of cash dividends by the Company and the Bank.

COMPETITION
-----------

At June 30, 2000,  the  competing  commercial  and savings  banks had 71 branch
offices in the cities of Castroville,  Hollister,  Gonzales, King City, Marina,
Monterey,  Salinas,  Seaside and Watsonville  where the Bank has its ten branch
offices.  Additionally,  the  Bank  competes  with  thrifts  and,  to a  lesser
extent,   credit  unions,   finance   companies  and  other  financial  service
providers for deposit and loan customers.

Larger  banks  may have a  competitive  advantage  because  of  higher  lending
limits  and major  advertising  and  marketing  campaigns.  They  also  perform
services,  such as trust services,  international  banking,  discount brokerage
and  insurance  services,  which the Bank is not  authorized  nor  prepared  to
offer currently.  The Bank has made arrangements  with its correspondent  banks
and with  others to  provide  some of these  services  for its  customers.  For
borrowers  requiring  loans in excess of the Bank's legal lending  limits,  the
Bank  has  offered,  and  intends  to  offer  in the  future,  such  loans on a
participating  basis with its  correspondent  banks and with other  independent
banks,  retaining  the  portion  of such  loans  which is  within  its  lending
limits.  As of December 31, 2000,  the Bank's  aggregate  legal lending  limits
to a single  borrower and such  borrower's  related  parties were $9,929,000 on
an  unsecured  basis  and  $16,549,000  on  a  fully  secured  basis  based  on
regulatory capital of $66,194,000.

The Bank's  business is  concentrated  in its  service  area,  which  primarily
encompasses  Monterey  County,  including  the Salinas  Valley  area.  With the
branch office  expansion in 2000 into Hollister and  Watsonville,  the Bank has
more  actively  expanded  its service area to include San Benito and Santa Cruz
Counties.  The Bank uses  couriers  to service  the  southern  portion of Santa
Clara  County.  The  economy  of the  Bank's  service  area is  dependent  upon
agriculture,  tourism,  retail  sales,  population  growth and smaller  service
oriented businesses.

Based upon  data as of the  most recent  practicable  date (June 30, 2000 [1]),
there  were  73  operating  commercial  and  savings  bank  branch  offices  in
Monterey  County with total  deposits of  $4,065,119,000.  This was an increase
of  $215,433,000  over the June 30,  1999  balances.  The Bank  held a total of
$585,225,000   in   deposits,   representing   approximately   14.4%  of  total
commercial  and  savings  banks  deposits  in  Monterey  County  as of June 30,
2000. In the two new  expansion  areas of Hollister  and  Watsonville,  at June
30,  2000,  there  were  10  and 12  branch  offices  with  total  deposits  of
$472,032,000 and $661,886,000, respectively.

In order to compete  with the major  financial  institutions  in their  primary
service areas,  the Bank uses to the fullest extent  possible,  the flexibility
which is  accorded  by its  independent  status.  This  includes an emphasis on
specialized  services,  local  promotional  activity,  and personal contacts by
the Bank's  officers,  directors and employees.  The Bank also seeks to provide
special  services and programs for  individuals in its primary service area who
are employed in the  agricultural,  professional and business  fields,  such as
loans for  equipment,  furniture,  tools of the trade or expansion of practices
or  businesses.  In the event there are  customers  whose loan  demands  exceed
the  Bank's  lending  limits,  the Bank  seeks to  arrange  for such loans on a

--------
1 "FDIC Institution Office Deposits", June 30, 2000

                                       9
<PAGE>

participation  basis  with  other  financial   institutions.   The  Bank  also
assists those  customers  requiring  services not offered by the Bank to obtain
such services from correspondent banks.

Banking  is  a  business  that  depends  on  interest  rate  differentials.  In
general,  the  difference  between the interest rate paid by the Bank to obtain
their  deposits  and other  borrowings  and the interest  rate  received by the
Bank on loans  extended  to  customers  and on  securities  held in the  Bank's
portfolio comprise the major portion of the Bank's earnings.

Commercial  banks compete with savings and loan  associations,  credit  unions,
other  financial  institutions  and other  entities  for funds.  For  instance,
yields on corporate and government debt securities and other  commercial  paper
affect  the  ability  of  commercial   banks  to  attract  and  hold  deposits.
Commercial  banks also  compete for loans with  savings and loan  associations,
credit  unions,  consumer  finance  companies,  mortgage  companies  and  other
lending institutions.

The interest rate  differentials  of the Bank, and therefore its earnings,  are
affected not only by general  economic  conditions,  both domestic and foreign,
but also by the  monetary  and fiscal  policies of the United  States as set by
statutes  and as  implemented  by federal  agencies,  particularly  the Federal
Reserve Board.  This Agency can and does implement  national  monetary  policy,
such as seeking to curb  inflation  and combat  recession,  by its open  market
operations in United States  government  securities,  adjustments in the amount
of interest  free  reserves  that banks and other  financial  institutions  are
required to maintain,  and  adjustments  to the discount  rates  applicable  to
borrowing  by  banks  from  the  Federal   Reserve  Board.   These   activities
influence  the growth of bank loans,  investments  and deposits and also affect
interest  rates  charged on loans and paid on  deposits.  The nature and timing
of any future  changes in monetary  policies  and their  impact on the Bank are
not predictable.

In 1996,  pursuant to  Congressional  mandate,  the FDIC  reduced  bank deposit
insurance  assessment  rates to a range from $0 to $0.27 per $100 of  deposits,
dependent upon a bank's risk. Based upon the above  risk-based  assessment rate
schedule,  the Bank's  current  capital ratios and the Bank's current levels of
deposits,  the Bank  anticipates no change in the assessment rate applicable to
the Bank during 2001 from that in 2000.

Since 1996,  California law  implementing  certain  provisions of prior federal
law  has   (1) permitted   interstate   merger   transactions;   (2) prohibited
interstate  branching  through the acquisition of a branch office business unit
located in California  without  acquisition  of the whole  business unit of the
California  bank;  and  (3) prohibited  interstate  branching  through  de novo
establishment  of California  branch offices.  Initial entry into California by
an  out-of-state  institution  must be accomplished by acquisition of or merger
with an  existing  whole  bank  which has been in  existence  for at least five
years.

The federal financial  institution  agencies,  especially the OCC and the Board
of  Governors,  have taken steps to increase the types of  activities  in which
national  banks and bank holding  companies  can engage,  and to make it easier
to  engage  in  such  activities.  The OCC has  issued  regulations  permitting
national   banks  to   engage   in  a  wider   range  of   activities   through
subsidiaries.  "Eligible  institutions"  (those  national  banks  that are well
capitalized,  have a high overall  rating and a  satisfactory  CRA rating,  and
are not subject to an  enforcement  order) may engage in activities  related to
banking  through  operating  subsidiaries  subject to an expedited  application
process.  In  addition,  a  national  bank may apply to the OCC to engage in an
activity through a subsidiary in which the bank itself may not engage.

                                       10
<PAGE>

On  November  12,  1999,  President  Clinton  signed  into  law  The  Financial
Services  Modernization  Act of 1999 (the  "FSMA"),  which is  potentially  the
most  significant  banking  legislation in many years. The FSMA eliminates most
of the remaining  depression-era  "firewalls"  between banks,  securities firms
and  insurance  companies  which was  established  by The  Banking Act of 1933,
also  known  as  the  Glass-Steagall  Act   ("Glass-Steagall).   Glass-Steagall
sought to insulate banks as depository  institutions  from the perceived  risks
of  securities  dealing  and  underwriting,  and related  activities.  The FSMA
repeals Section 20 of  Glass-Steagall  which  prohibited banks from affiliating
with securities  firms.  Bank holding  companies that can qualify as "financial
holding  companies"  can  now  acquire  securities  firms  or  create  them  as
subsidiaries,  and  securities  firms can now  acquire  banks or start  banking
activities  through a financial holding company.  The FSMA includes  provisions
which  permit  national  banks  to  conduct  financial   activities  through  a
subsidiary that are  permissible for a national bank to engage in directly,  as
well as certain  activities  authorized  by statute,  or that are  financial in
nature or  incidental  to financial  activities to the same extent as permitted
to a "financial  holding  company" or its affiliates.  This  liberalization  of
United  States  banking  and  financial  services  regulation  applies  both to
domestic  institutions  and  foreign  institutions  conducting  business in the
United States.  Consequently,  the common ownership of banks,  securities firms
and insurance firms is now possible,  as is the conduct of commercial  banking,
merchant   banking,   investment   management,   securities   underwriting  and
insurance  within a single  financial  institution  using a "financial  holding
company" structure authorized by the FSMA.

Prior to the FSMA,  significant  restrictions  existed  on the  affiliation  of
banks with  securities  firms and on the direct  conduct by banks of securities
dealing and underwriting  and related  securities  activities.  Banks were also
(with minor  exceptions)  prohibited  from engaging in insurance  activities or
affiliating   with   insurers.   The  FSMA  removes  these   restrictions   and
substantially  eliminates the  prohibitions  under the Bank Holding Company Act
on affiliations between banks and insurance  companies.  Bank holding companies
which  qualify as financial  holding  companies can now insure,  guarantee,  or
indemnify against loss, harm,  damage,  illness,  disability,  or death;  issue
annuities;  and act as a principal,  agent, or broker  regarding such insurance
services.

In order  for a  commercial  bank to  affiliate  with a  securities  firm or an
insurance  company  pursuant to the FSMA, its bank holding company must qualify
as a financial  holding  company.  A bank  holding  company will qualify if (i)
its banking  subsidiaries  are "well  capitalized"  and "well managed" and (ii)
it files  with the Board of  Governors  a  certification  to such  effect and a
declaration  that  it  elects  to  become  a  financial  holding  company.  The
amendment  of the  Bank  Holding  Company  Act now  permits  financial  holding
companies  to  engage  in  activities,   and  acquire   companies   engaged  in
activities,  that are  financial  in nature  or  incidental  to such  financial
activities.  Financial  holding  companies  are also  permitted  to  engage  in
activities  that are  complementary  to  financial  activities  if the Board of
Governors  determines  that the activity  does not pose a  substantial  risk to
the safety or soundness of depository  institutions or the financial  system in
general.  These standards  expand upon the list of activities  "closely related
to banking"  which have to date  defined  the  permissible  activities  of bank
holding companies under the Bank Holding Company Act.

One further  effect of the Act is to require that financial  institutions  must
respect  the  privacy  of  their   customers   and  protect  the  security  and
confidentiality   of  customers'   non-public   personal   information.   These
regulations  require,  in  general,  that  financial  institutions  (1) may not
disclose non-public personal  information of customers to non-affiliated  third
parties  without  notice  to their  customers,  who must  have  opportunity  to
direct that such  information not be disclosed;  (2) may not disclose  customer

                                       11
<PAGE>

account  numbers  except  to  consumer  reporting  agencies;  and (3) must give
prior  disclosure of their privacy  policies before  establishing  new customer
relationships.

The  Company  and the Bank have not  determined  whether or when either of them
may seek to acquire and exercise new powers or activities  under the FSMA,  and
the  extent to which  competition  will  change  among  financial  institutions
affected by the FSMA has not yet become clear.

Certain  legislative  and  regulatory  proposals that could affect the Bank and
the banking business in general are periodically  introduced  before the United
States  Congress,  the  California  State  Legislature  and  Federal  and state
government  agencies.  It is not  known  to what  extent,  if any,  legislative
proposals  will be enacted and what effect such  legislation  would have on the
structure,    regulation   and   competitive    relationships    of   financial
institutions.  It is likely,  however,  that such legislation could subject the
Company  and  the  Bank  to  increased  regulation,  disclosure  and  reporting
requirements and increase competition and the Bank's cost of doing business.

In addition to legislative  changes,  the various  federal and state  financial
institution  regulatory  agencies  frequently  propose rules and regulations to
implement  and enforce  already  existing  legislation.  It cannot be predicted
whether  or in what form any such rules or  regulations  will be enacted or the
effect that such and regulations may have on the Company and the Bank.


ITEM 2.  PROPERTIES

The headquarters  office and centralized  operations of the Company are located
at  301  Main  Street,  Salinas,   California.  The  Company  owns  and  leases
properties  that house  administrative  and data  processing  functions and ten
banking offices.  Owned and leased facilities are listed below.


301 Main Street                    1658 Fremont Boulevard
Salinas, California                Seaside, California
32,500 square feet                 2,800 square feet
Leased (term expires 2007,         Leased  (term expires 2009
with three 7 1/2 year              with one 10 year renewal
renewal options)                   options)
Current month rent of              Current month rent of
$21,397.08                         $5,483.92

10601 Merritt Street               228 Reservation Road
Castroville, California            Marina, California
2,500 square feet                  3,000 square feet
Owned                              Leased  (term expires 2004
                                   with three 5 year
                                   renewal options)
                                   Current month rent of
                                   $3,120.00

                                       12
<PAGE>

400 Alta Street                    599 Lighthouse Avenue
Gonzales, California               Monterey, California.
5,175 square feet                  2,160 square feet
Leased  (term expires 2003         Leased  (term expires 2004
with three 5 year renewal          with two 10 year renewal
options)                           options)
Current month rent of              Current month rent of
$4,132.00                          $6,312.80

532 Broadway                       155 Westridge Drive
King City, California              Watsonville, California
4,000 square feet                  971 square feet
Leased  (term expires 2009         Leased  (term expires 2003
with two 5 year renewal            with two 3 year renewal
options)                           options)
Current month rent of              Current month rent of
$4,920.00                          $1,204.04

1285 North Davis Road              491 Tres Pinos Road
Salinas, California.               Hollister, California
3,200 square feet                  1,400 square feet
Leased  (term expires 2008         Leased  (term expires 2003
with two 5 year renewal            with two 3 year renewal
options)                           options)
Current month rent of              Current month rent of
$7,728.00                          $2,101.00

The above  leases  contain  options  to  extend  for  three to  fifteen  years.
Included  in the above are two  facilities  leased from  shareholders  at terms
and conditions  which  management  believes are consistent  with the commercial
lease  market.  Rental  rates are  adjusted  annually  for  changes  in certain
economic  indices.  The  annual  minimum  lease  commitments  are set  forth in
Footnote 5 of Item 8 Financial  Statements and  Supplementary  Data included in
this  report  and  incorporated  here  by  reference.   The  foregoing  summary
descriptions  of leased  premises are qualified in their  entirety by reference
to the lease agreements listed as exhibits hereto at page 62.

ITEM 3.  LEGAL PROCEEDINGS

There are no material  proceedings  adverse to the Company or the Bank to which
any  director,  officer,  affiliate  of the  Company or 5%  shareholder  of the
Company  or  the  Bank,  or  any  associate  of  any  such  director,  officer,
affiliate  or 5%  shareholder  of the Company or Bank are a party,  and none of
the above persons has a material interest adverse to the Company or the Bank.

Neither  the  Company  nor  the  Bank  are a  party  to any  pending  legal  or
administrative  proceedings (other than ordinary routine litigation  incidental
to the Company's or the Bank's  business) and no such  proceedings are known to
be contemplated.


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

 No matters  were  submitted  to a vote of security  holders  during the fourth
quarter of 2000.

                                       13
<PAGE>


                               PART II


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

(a)   Market Information

The Company's  common stock is listed on the Nasdaq  National  Market  exchange
(trading  symbol:   CCBN).   Among  the  Company's  market  makers,   the  most
significant  are  Sandler  O'Neill  &  Partners,  L.P.  and  Hoefer  &  Arnett,
Incorporated.  The table  below  presents  the range of high and low prices for
the common stock for the two most recent  fiscal  years  based on  information
provided  to the  Company  from  Nasdaq.  The  prices  have  been  restated  to
reflect the 10% stock dividends paid in February 2000 and 2001.
<TABLE>
<CAPTION>

Calendar Year                                              Low                        High
-------------                                              ---                        ----
<S>                                                       <C>                         <C>

2000
   First Quarter                                         $ 13.02                    $ 15.23
   Second Quarter                                          13.30                      14.55
   Third Quarter                                           13.75                      15.45
   Fourth Quarter                                          15.23                      16.76

1999
   First Quarter                                         $ 11.67                    $ 15.21
   Second Quarter                                          12.55                      13.58
   Third Quarter                                           12.91                      18.18
   Fourth Quarter                                          13.02                      17.35
</TABLE>


The  closing  price for the  Company's  common  stock was $19.00 as of March 7,
2001.

(b)   Holders
      -------

As of March 7,  2001,  there  wereapproximately  3,200  holders  of the common
stock  of  the  Company.   There  are  no  other   classes  of  common   equity
outstanding.

(c)   Dividends
      ---------

The  Company's  shareholders  are  entitled  to receive  dividends  when and as
declared by its Board of Directors,  out of funds legally  available  therefor,
subject to the  restrictions  set forth in the California  General  Corporation
Law (the  "Corporation  Law").  The Corporation Law provides that a corporation
may make a  distribution  to its  shareholders  if the  corporation's  retained
earnings  equal  at  least  the  amount  of  the  proposed  distribution.   The
Corporation Law further  provides that, in the event that  sufficient  retained
earnings are not available  for the proposed  distribution,  a corporation  may
nevertheless   make  a  distribution  to  its  shareholders  if  it  meets  two
conditions,  which  generally  stated  are  as follows:  (1) the  corporation's
assets   equal  at  least   1-1/4   times   its   liabilities;   and   (2)  the
corporation's  current  assets  equal at least its current  liabilities  or, if
the average of the  corporation's  earnings  before  taxes on income and before
interest  expenses  for the two  preceding  fiscal  years  was  less  than  the

                                       14
<PAGE>

average of the  corporation's  interest  expenses for such fiscal  years,  then
the  corporation's  current  assets must equal at least 1-1/4 times its current
liabilities.  Funds for payment of any cash  dividends by the Company  would be
obtained  from its  investments  as well as dividends  and/or  management  fees
from the Bank.

The  payment  of  cash  dividends  by  the   subsidiary   Bank  is  subject  to
restrictions  set  forth  in the  California  Financial  Code  (the  "Financial
Code").  The  Financial  Code  provides  that  a  bank  may  not  make  a  cash
distribution  to its  shareholders  in excess of the  lesser of (a) the  bank's
retained  earnings;  or (b) the bank's  net  income  for its last three  fiscal
years,  less  the  amount  of any  distributions  made  by the  bank  or by any
majority-owned  subsidiary of the bank to the  shareholders  of the bank during
such  period.  However,  a bank may,  with the  approval  of the  Commissioner,
make  a  distribution  to its  shareholders  in an  amount  not  exceeding  the
greater of (a) its  retained  earnings;  (b) its net income for its last fiscal
year;  or (c) its net income for its  current  fiscal  year.  In the event that
the  Commissioner  determines  that  the  shareholders'  equity  of a  bank  is
inadequate  or that the  making of a  distribution  by the bank would be unsafe
or  unsound,  the  Commissioner  may order the bank to  refrain  from  making a
proposed distribution.

The FDIC may also  restrict the payment of  dividends if such payment  would be
deemed  unsafe or unsound or if after the payment of such  dividends,  the bank
would be  included  in one of the  "undercapitalized"  categories  for  capital
adequacy  purposes  pursuant  to  the  Federal  Deposit  Insurance  Corporation
Improvement  Act of 1991.  Additionally,  while the Board of  Governors  has no
general  restriction  with  respect  to the  payment  of cash  dividends  by an
adequately  capitalized  bank to its  parent  holding  company,  the  Board  of
Governors  might,  under  certain  circumstances,  place  restrictions  on  the
ability of a particular  bank to pay dividends  based upon peer group  averages
and  the  performance  and  maturity  of the  particular  bank,  or  object  to
management  fees on the basis that such fees cannot be  supported  by the value
of  the   services   rendered  or  are  not  the  result  of  an  arm's  length
transaction.

Under   these   provisions   and   considering   minimum   regulatory   capital
requirements,  the  amount  available  for  distribution  from  the Bank to the
Company was approximately $16,642,000 as of December 31, 2000.

To date,  the  Company  has not paid a cash  dividend  and  presently  does not
intend  to  pay  cash  dividends  in  the  foreseeable   future.   The  Company
distributed  a ten  percent  stock  dividend in  February  2001,  a ten percent
stock  dividend in 2000 and a  five-for-four  stock split in February 1999. The
Board of  Directors  will  determine  payment of  dividends in the future after
consideration  of various  factors  including  the  profitability  and  capital
adequacy of the Company and the Bank.


                                       15
<PAGE>

ITEM  6.  SELECTED FINANCIAL DATA

The  following  table  presents  certain  consolidated   financial  information
concerning  the  business  of  the  Company  and  its  subsidiary   Bank.  This
information  should  be read in  conjunction  with the  Consolidated  Financial
Statements,  the  notes  thereto,  and  Management's  Discussion  and  Analysis
included in this  report.  Earnings  per share  information  has been  adjusted
retroactively for all stock dividends and stock splits.
<TABLE>
<CAPTION>
                                                            As of and for the Year Ended December 31
                                        ------------------------------------------------------------------------
In thousands (except per share data)             2000          1999           1998          1997           1996
<S>                                          <C>           <C>            <C>          <C>             <C>
Operating Results
Total Interest Income                        $ 51,415      $ 41,517       $ 37,354      $ 33,916       $ 29,301
Total Interest Expense                         18,290        13,648         13,319        12,041          9,859
                                        ------------------------------------------------------------------------
   Net Interest Income                         33,125        27,869         24,035        21,875         19,442
Provision for Loan Losses                       3,983         1,484            159            64            352
                                        ------------------------------------------------------------------------
Net Interest Income After
   Provision for Loan Losses                   29,142        26,385         23,876        21,811         19,090
Noninterest Income                              2,433         2,231          2,084         1,765          1,456
Noninterest Expenses                           17,408        16,043         13,859        12,573         11,115
                                        ------------------------------------------------------------------------
Income before Income Taxes                     14,167        12,573         12,101        11,003          9,431
Income Taxes                                    5,241         4,522          4,948         4,500          3,571
                                        ------------------------------------------------------------------------
Net Income                                    $ 8,926       $ 8,051        $ 7,153       $ 6,503        $ 5,860
----------------------------------------------------------------------------------------------------------------
Basic Earnings Per Share                       $ 1.17        $ 1.03         $ 0.98        $ 0.90         $ 0.83
Diluted Earnings Per Share                       1.14          1.00           0.90          0.83           0.78
----------------------------------------------------------------------------------------------------------------

Financial Condition and
   Capital - Year-End  Balances
Net Loans                                   $ 464,024     $ 390,001      $ 307,818     $ 251,271      $ 235,992
Total Assets                                  706,693       593,445        543,933       497,674        376,832
Deposits                                      633,209       518,189        489,192       450,301        338,663
Shareholders' Equity                           59,854        53,305         51,199        43,724         36,332
----------------------------------------------------------------------------------------------------------------

Financial Condition and
   Capital - Average Balances
Net Loans                                   $ 417,075     $ 348,086      $ 271,590     $ 238,793      $ 203,117
Total Assets                                  632,953       562,073        499,354       441,013        355,386
Deposits                                      565,487       494,266        447,598       396,457        319,110
Shareholders' Equity                           55,762        52,069         47,587        39,969         33,228
----------------------------------------------------------------------------------------------------------------

Selected Financial Ratios
Rate of Return on:
   Average Total Assets                         1.41%         1.43%          1.43%         1.47%          1.65%
   Average Shareholders' Equity                16.01%        15.46%         15.03%        16.27%         17.64%
Rate of Average Shareholders' Equity
   to Total Average Assets                      8.81%         9.26%          9.53%         9.06%          9.35%
----------------------------------------------------------------------------------------------------------------
</TABLE>

                                       16
<PAGE>


 (a) (1)   Distribution of Assets, Liabilities and Equity; Interest Rates and
           ------------------------------------------------------------------
           Interest Differential
           ---------------------

           Table One in Management's  Discussion and Analysis  included
           in this  report  sets forth the  Company's  average  balance  sheets
           (based on daily  averages) and an analysis of interest rates and the
           interest  rate  differential  for  each of the  three  years  in the
           period  ended  December  31,  2000  and  is  incorporated   here  by
           reference.

     (2)   Volume/Rate Analysis
           --------------------
           Information  as to the impact of  changes  in average  rates
           and  average  balances  on  interest  earning  assets  and  interest
           bearing  liabilities  is set  forth  in  Table  Two in  Management's
           Discussion and Analysis and is incorporated here by reference.

 (b) Investment Portfolio
     --------------------

      (1)  The book value of investment securities at December 31, 2000 and
           1999 is set  forth  in  Note  3  of  Item 8 - "Financial  Statements
           and Supplementary Data" included in this report and is  incorporated
           here by reference.

      (2)  The  book  value,   maturities   and  weighted   average  yields  of
           investment  securities  as of  December  31,  2000 are set  forth in
           Table Thirteen of Management's  Discussion and  Analysis included in
           this report and is incorporated here by reference.

      (3)  There  were no issuers  of  securities  for which the book value was
           greater  than  10%  of   shareholders'    equity   other  than  U.S.
           Government and U.S. Government Agencies and Corporations.

 (c)  Loan Portfolio
      --------------

      (1)  The  composition  of the loan portfolio is summarized in Table Three
           of Management's  Discussion and Analysis included in this report and
           is incorporated here by reference.

      (2)  The  maturity  distribution  of the loan  portfolio  at December 31,
           2000 is summarized in Table Twelve of  Management's  Discussion  and
           Analysis  included  in  this  report  and is  incorporated  here  by
           reference.

      (3)  Nonperforming Loans
           -------------------

           The Company's  current policy is to cease  accruing  interest when a
           loan becomes 90 days past due as to principal or interest,  when the
           full timely  collection of interest or principal  becomes  uncertain
           or when a portion of the  principal  balance has been  charged  off,
           unless the loan is well  secured and in the  process of  collection.
           When  a loan  is  placed  on  nonaccrual  status,  the  accrued  and
           uncollected   interest  receivable  is  reversed  and  the  loan  is
           accounted for on the cash or cost recovery method thereafter,  until
           qualifying for return to accrual  status.  Generally,  a loan may be
           returned  to  accrual  status  when  all  delinquent   interest  and
           principal  become  current in accordance  with the terms of the loan
           agreement  or when the loan is both well  secured  and in process of
           collection.

                                       17
<PAGE>

           A loan is  considered  to be impaired  when it is probable  that the
           Company  will be unable to pay all of the amounts due  according  to
           the contractual terms of the loan agreement

           For  further  discussion  of  nonperforming  loans,  refer  to  Risk
           Elements  section of  Management's  Discussion  and Analysis in this
           report.

(d)   Summary of Loan Loss Experience
      -------------------------------

     (1)  An analysis of the allowance for loan losses showing  charged off and
          recovery  activity as of December  31,  2000 is  summarized  in Table
          Five of Management's  Discussion and Analysis included in this report
          and  is   incorporated   here   by   reference.   Factors   used   in
          determination  of the  allowance  for loan  losses are  discussed  in
          greater  detail  in  the  "Risk  Elements"  section  of  Management's
          Discussion and Analysis  included in this report and are incorporated
          here by reference.

     (2)  Management   believes  that  any   breakdown  or  allocation  of  the
          allowance  for  possible loan  losses into loan  categories  lends an
          appearance  of  exactness, which does not exist in that the allowance
          is  utilized  as a  single unallocated  allowance  available  for all
          loans.   Further,   management  believes   that  the   breakdown   of
          historical   losses   in  the  preceding   table   is  a   reasonable
          representation  of  management's expectation  of potential  losses in
          the next full  year of  operation.  However, the  allowance  for loan
          losses   should  not  be   interpreted   as  an  indication  of  when
          charge-offs  will  occur  or as an  indication of  future  charge-off
          trends.

(e)   Deposits
      --------

     (1)  Table One in  Management's Discussion  and Analysis  included in this
          report sets forth the distribution of average  deposits for the years
          ended December 31, 2000, 1999 and 1998 and  is incorporated  here  by
          reference.

     (2)  Table Eleven in Management's Discussion and Analysis included in this
          report sets forth the maturities of time  certificates  of deposit of
          $100,000 or more at December 31, 2000  and is  incorporated  here  by
          reference.



(f)   Return on Equity and Assets
      ---------------------------

     (1)  The  Selected Financial  Data table  at page 16 of  this section sets
          forth the  ratios  of  net  income  to  average  assets  and  average
          shareholders' equity, and  average  shareholders' equity  to  average
          assets.  As the Company has never paid a cash dividend, the  dividend
          payout ratio is not indicated.

                                       18
<PAGE>

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

Certain  matters  discussed or  incorporated by reference in this Annual Report
on Form 10-K  including,  but not limited to,  matters  described  in "Item 7 -
Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations,"  are  forward-looking  statements  that are  subject  to risks and
uncertainties  that could cause actual results to differ  materially from those
projected.  Changes  to  such  risks  and  uncertainties,  which  could  impact
future  financial   performance,   include,   among  others,   (1)  competitive
pressures  in  the  banking   industry;   (2)  changes  in  the  interest  rate
environment;  (3) general economic  conditions,  nationally,  regionally and in
operating  market  areas,  including  a decline  in real  estate  values in the
Company's  market  areas;  (4)  changes  in  the  regulatory  environment;  (5)
changes in  business  conditions  and  inflation;  (6)  changes  in  securities
markets;  (7) data processing  compliance  problems;  (8) the California  power
crisis;  (9) variances in the actual versus projected  growth in assests;  (10)
return on assets;  (11) loan  losses;  (12)  expenses;  (13)  rates  charged on
loans and earned on securities  investments;  (14) rates paid on deposits;  and
(15) fee and other noninterest  income earned,  as well as other factors.  This
entire Annual Report should be read to put such  forward-looking  statements in
context and to gain a more  complete  understanding  of the  uncertainties  and
risks  involved in the  Company's  business.  Therefore,  the  information  set
forth  therein  should be carefully  considered  when  evaluating  the business
prospects of the Company and the Bank.

Business Organization

Central Coast Bancorp (the "Company") is a California  corporation,  located in
Salinas,  California and was organized in 1994 to act as a bank holding company
for Bank of Salinas.  In 1996,  the Company  acquired  Cypress  Bank, which was
headquartered   in   Seaside,   California.   Both  banks   were  state-charted
institutions.  In July of 1999, the Company  merged  Cypress Bank into the Bank
of  Salinas  and then  renamed  Bank of  Salinas as  Community  Bank of Central
California  (the  "Bank").  As of  December  31, 2000,  the Bank  operated  ten
full-service  branch offices and one limited-service  branch  office.  The Bank
is  headquartered  in  Salinas  and  serves  individuals,  merchants, small and
medium-sized  businesses,  professionals,   agribusiness  enterprises and  wage
earners located in the tri-county area of Monterey, San Benito and Santa Cruz.

In December  1998,  the former Bank of Salinas  opened an additional new branch
office in  Salinas,  California,  to better  provide  services  to the  growing
Salinas community.

In June of 2000, the Bank opened a new branch office in  Watsonville,  which is
in Santa  Cruz  County.  In  October of 2000,  another  new  branch  office was
opened in Hollister,  which is in San Benito  County.  The opening of these two
branch  offices  was a first  step in  expanding  the  Bank's  service  area to
include  communities  outside of  Monterey  County.  Both of these  communities
are of similar  economic  make up to the  agricultural  based  communities  the
Bank serves in Monterey County.

Other than holding the shares of the subsidiary  Bank, the Company  conducts no
significant  activities.  Although,  it is authorized,  with the prior approval
of the  Board of  Governors  of the  Federal  Reserve  System  (the  "Board  of
Governors"),  the  Company's  principal  regulator,  to engage in a variety  of
activities which are deemed closely related to the business of banking.

The  following  analysis is designed to enhance the reader's  understanding  of
the  Company's  financial  condition  and  the  results  of its  operations  as
reported  in the  Consolidated  Financial  Statements  included  in this Annual
Report.  Reference  should  be  made  to  those  statements  and  the  Selected

                                       19
<PAGE>

Financial  Data  presented  elsewhere  in this report for  additional  detailed
information.  Average  balances,  including  such balances used in  calculating
certain  financial  ratios,  are generally  comprised of average daily balances
for the Company.  Except within the  "overview"  section,  interest  income and
net interest income are presented on a tax equivalent basis.

Overview

For the 17th consecutive  year,  Central Coast Bancorp earned record net income
on a year over year basis.  Net income in 2000  increased  10.9% to  $8,926,000
versus  $8,051,000 in 1999.  Diluted  earnings per share for 2000 was $1.14, up
14.0%  from the $1.00  reported  for 1999.  For 2000,  the  Company  realized a
return on average equity of 16.0% and a return on average  assets of 1.41%,  as
compared  to 15.5%  and 1.43% for  1999.  The  earnings  per share for 2000 and
1999 have been  adjusted  for the 10  percent  stock  dividend  distributed  on
February 28, 2001.

During  2000, total  assets of the Company  increased $113,248,000 (19.1%) to a
total  of  $706,693,000  at  year-end.  At  December  31, 2000,  loans  totaled
$473,395,000,  up  $77,798,000 (19.7%) from the ending balances on December 31,
1999.  Deposit  growth in  2000, net  of  returning  $20,000,000  of  State  of
California  certificates  of  deposit, was  $135,021,000 (27.1%)  resulting  in
ending deposit balances of $633,210,000.

The  Bank's  growth  in total  assets,  loans  and  deposits  reflected  in the
previous  paragraph  came from the hard work and  dedication of our  employees.
In  a  time  when  many  banks  have  been  struggling  to  maintain   customer
relationships  and their  deposit base,  Community  Bank was able to exceed its
growth goals for the year.  Every one of the existing  branch offices  exceeded
their  deposit  growth  goals  for  2000.  Most  of  the  branch  offices  also
exceeded  their  loan  goals.  The two new  branch  offices  in  Hollister  and
Watsonville  have been well  received as their staffs  immersed  themselves  in
exposing those  communities to the benefits of banking with Community  Bank. In
both of the new branch  offices,  deposit and loan growth exceeded the business
plan forecasts.

In its  continuing  quest to offer  products  and services to make banking more
convenient  for  the  customer,   the  Bank  introduced  "Anytime  Online"  its
Internet  banking product in the spring of 2000.  This product  compliments and
expands  on the  functionality  of  "Anytime  Teller",  a 24  hour  banking  by
telephone  product,  which  was  introduced  in 1999.  Both  systems  provide a
quick and easy way for both  business and retail  customers  to check  balances
and account activity,  transfer funds between accounts,  make loan payments and
order  statements.  Online  banking  provides the  functionality  to pay bills,
open accounts,  issue stop payments,  purchase savings bonds and more. "Anytime
Online"  can be viewed at the Bank's web site  address,  www.community-bnk.com.
These  products  along with the VISA Check Card,  which was  introduced in late
1999, have been well received by the Bank's customers.

As Internet  only banks are  discovering,  bricks and mortar are  necessary  to
build  an  effective  franchise.   We  believe  that  branch  offices  are  the
building  blocks of  Community  Bank.  These  business  units with their  front
line  employees  are  critical  in  providing  the  service  that  gives  us  a
competitive  edge against large  impersonal  financial  institutions.  As we go
forward,  a critical  component of our  strategic  plan is to expand our branch
office base.  We believe this strategy  will provide  continued  growth and the
ability to achieve above average returns for our shareholders.

                                       20
<PAGE>




(A)   Results of Operations

Net Interest Income/Net Interest Margin (fully taxable equivalent)

Net  interest  income  represents  the excess of  interest  and fees  earned on
interest-earning  assets  (loans,  securities  and federal funds sold) over the
interest  paid on deposits  and  borrowed  funds.  Net  interest  margin is net
interest income expressed as a percentage of average earning assets.

Net interest income for 2000 was  $33,927,000,  a $5,293,000  (18.5%)  increase
over 1999.  The interest  income  component was up  $9,935,000  to  $52,217,000
(23.5%).  About 65% of the increase was  attributable  to growth in the earning
assets with the  balance due to rates.  Average  outstanding  loan  balances of
$417,075,000  for 2000  reflected a 19.8%  increase  over 1999  balances.  This
increase  contributed an additional  $6,388,000 to interest  income.  From July
1, 1999 through May 15, 2000, the Federal  Reserve Board raised  interest rates
six  times  for a  total  of  175  basis  points.  The  higher  interest  rates
increased the average yield on loans 67 basis  points,  which added  $2,783,000
to  interest  income.  The  securities  portfolio  average  balances  decreased
$12,066,000   (7.8%)  which  offset  the   increases  in  interest   income  by
$757,000.  The average  yield  received on  securities  was up 44 basis  points
and added  $613,000 to interest  income.  Federal  Funds sold  interest  income
increased  $908,000  due to both  higher  average  balances  and higher  rates.
Interest  income on variable rate loans and Federal Funds quickly  reflect rate
changes.  During  January of 2001,  the Federal  Reserve Board twice  decreased
the Federal Funds  interest  rates by 50 basis points for a total  reduction of
1.0%.  This reduction will  negatively  impact  interest  income in 2001 and it
may affect the Bank's ability to attain  interest  income growth rates achieved
in the past two years.

Interest expense  increased  $4,642,000  (34.0%) in 2000 over 1999. The average
balances of interest bearing liabilities  increased  $49,628,000  (13.2%).  The
higher average  balances  resulted from a $58,677,000  (36.8%) increase in time
deposits  offset  in  part  by  an  $8,768,000  decrease  in  interest  bearing
checking  accounts.  At times during 2000,  the Bank had up to  $40,000,000  in
time  deposits  from the State of  California.  This  compares  to a maximum of
$20,000,000  in 1999. In early  November  2000,  the last of the State deposits
matured.  Interest  paid on time  certificates  in 2000  increased  $4,569,000,
which  accounted  for  most  of  the  overall  increase  in  interest  expense.
Interest  expense  attributable  to the  higher  volume  in time  deposits  was
$2,934,000  and the higher rates added  $1,635,000.  Average rates paid on time
certificates  were 75 basis points  higher in 2000.  Rates paid on all interest
bearing  liabilities  were  66  basis  points  higher  in 2000  than  in  1999.
Interest paid on interest  bearing  liabilities  generally  adjusts more slowly
in response to market rate changes as time  deposits and  borrowings  adjust at
maturity.  Net interest margin for 2000 was 5.88% versus 5.65% in 1999.

Net interest income for 1999 was  $28,634,000,  a $4,504,000  (18.7%)  increase
over 1998.  The interest  income  component was up  $4,833,000  to  $42,282,000
(12.9%).  Most of the  increase  was  attributable  to  growth  in the  earning
assets.  Average  outstanding  loan balances of $348,086,000 for 1999 reflected
a 28.2%  increase over 1998 balances.  This increase  contributed an additional
$7,619,000 to interest  income.  However,  due to lower rates in the first half
of the year and  competitive  pressures,  the  average  yield was down 70 basis
points,  which  offset the increase by  $2,422,000.  The  securities  portfolio
average  balances grew  $30,041,000  (24.0%) which added $2,027,000 to interest
income.  The average yield  received on  securities  was up 33 basis points and
added  $297,000  to  interest  income.   Federal  Funds  sold  interest  income
decreased  $2,688,000 as the average balances  decreased  $50,031,000.  Federal
Funds were repositioned into securities and loans during 1999.

                                       21
<PAGE>

Interest  expense  increased  $329,000  (2.5%) in 1999 over 1998.  The  average
balances of interest bearing liabilities  increased  $43,021,000  (12.9%).  The
higher  balances  were  due to  internal  growth  of  deposits,  $8,125,000  of
average  borrowings  (including  Federal  Funds  purchased)  and  approximately
$16,000,000  in  average  balances  of  State  of  California  certificates  of
deposit.  Interest  expense  attributable  to the higher volume was $1,776,000.
Rates paid on all interest  bearing  liabilities  were 36 basis points lower in
1999 than in 1998.  The lower rates  offset the higher  expense by  $1,447,000.
Net interest margin for 1999 was 5.65% versus 5.36% in 1998.

Table One,  Analysis of Net Interest Margin on Earning  Assets,  and Table Two,
Analysis of Volume and Rate Changes on Net Interest  Income and  Expenses,  are
provided to enable the reader to understand  the  components and past trends of
the Banks'  interest  income and  expenses.  Table One  provides an analysis of
net  interest   margin  on  earning  assets   setting  forth  average   assets,
liabilities  and  shareholders'  equity;  interest  income  earned and interest
expense  paid and average  rates earned and paid;  and the net interest  margin
on earning  assets.  Table Two  presents  an analysis of volume and rate change
on net interest income and expense.

                                       22
<PAGE>

<TABLE>
<CAPTION>

Table One:  Analysis of Net Interest Margin on Earning Assets
-----------------------------------------------------------------------------------------------------------
(Taxable Equivalent Basis)           2000                        1999                        1998
                            Avg.              Avg.      Avg.             Avg.      Avg.              Avg.
In thousands (except      Balance  Interest  Yield    Balance  Interest Yield     Balance  Interest Yield
    percentages)          -------  --------  -----    -------  -------- -----     -------  -------- ------
<S>                      <C>       <C>       <C>     <C>       <C>      <C>       <C>       <C>      <C>
Assets:
Earning Assets
  Loans (1) (2)           $417,075  $ 41,405 9.93%   $ 348,086  $32,234  9.26%   $ 271,590  $27,037  9.96%
  Taxable investment       106,754     7,340 6.88%     120,422    7,596  6.31%     121,133    7,282  6.01%
     securities
  Tax-exempt investment     36,601     2,408 6.58%      34,999    2,296  6.56%       4,247      286  6.73%
     securities (3)
  Federal funds sold        16,857     1,064 6.31%       3,153      156  4.95%      53,184    2,844  5.35%
                         ----------  --------        ---------- --------         ---------- --------
Total Earning Assets       577,287  $ 52,217 9.05%     506,660  $42,282  8.35%     450,154  $37,449  8.32%
                                     --------                   --------                    --------
Cash & due from banks       39,432                      42,595                      38,889
Other assets                16,234                      12,818                      10,311
                         ----------                  ----------                  ----------
                          $632,953                   $ 562,073                   $ 499,354
                         ==========                  ==========                  ==========

Liabilities & Shareholders' Equity:
Interest bearing liabilities:
  Demand deposits          $94,948   $ 1,551 1.63%   $ 103,716   $1,792  1.73%    $ 89,637   $1,720  1.92%
  Savings                  107,075     3,820 3.57%     105,000    3,447  3.28%     101,256    3,774  3.73%
  Time deposits            218,330    12,549 5.75%     159,653    7,980  5.00%     142,580    7,825  5.49%
  Other borrowings           5,769       370 6.41%       8,125      429  5.28%           -        -   n/a
                         ---------- ---------        ---------- --------         ---------- --------
Total interest bearing
   liabilities             426,122    18,290 4.29%     376,494   13,648  3.63%     333,473   13,319  3.99%
                                    ---------                   --------                    --------
Demand deposits            145,134                     125,897                     114,125
Other Liabilities            5,935                       7,613                       4,169
                         ----------                  ----------                  ----------
Total Liabilities          577,191                     510,004                     451,767
Shareholders' Equity        55,762                      52,069                      47,587
                         ----------                  ----------                  ----------
                          $632,953                   $ 562,073                   $ 499,354
                         ==========                  ==========                  ==========
Net interest income &               $ 33,927 5.88%              $28,634  5.65%              $24,130  5.36%
    margin (4)                     ================            ================            ================
-----------------------------------------------------------------------------------------------------------
</TABLE>

1. Loans  interest  includes  loan  fees of  $997,000,  $1,096,000,  and
   $951,000 in 2000, 1999 and 1998.
2. Average  balances of loans include  average  allowance for loan losses
   of $7,097,000,   $4,850,000   and  $4,260,000  and  average   deferred
   loan fees of $719,000,  $796,000  and  $587,000  for the  years  ended
   December 31, 2000, 1999 and 1998, respectively.
3. Includes taxable-equivalent  adjustments for income on securities that
   is exempt from federal income taxes. The federal statutory tax rate was
   35% for 2000, 1999, and 1998.
4. Net interest  margin is computed by dividing  net  interest  income by
   total average earning assets.


                                       23
<PAGE>
<TABLE>
<CAPTION>


Table Two: Volume/Rate Analysis
--------------------------------------------------------------------------------------------------------------
(In thousands)Year Ended December 31, 2000 over 1999
Increase (decrease) due to change in:
                                                                                                       Net
Interest-earning assets:                                     Volume              Rate (4)             Change
                                                             ------              --------             ------
<S>                                                     <C>                    <C>                <C>
   Net Loans (1)(2)                                          $ 6,388              $ 2,783             $ 9,171
   Taxable investment securities                                (862)                 606                (256)
   Tax exempt investment securities (3)                          105                    7                 112
   Federal funds sold                                            678                  230                 908
                                                          -----------          -----------         -----------
     Total                                                     6,309                3,626               9,935
                                                          -----------          -----------         -----------

Interest-bearing liabilities:
   Demand deposits                                              (152)                 (89)               (241)
   Savings deposits                                               68                  305                 373
   Time deposits                                               2,934                1,635               4,569
   Other borrowings                                             (124)                  65                 (59)
                                                          -----------          -----------         -----------
     Total                                                     2,726                1,916               4,642
                                                          -----------          -----------         -----------
Interest differential                                        $ 3,583              $ 1,710             $ 5,293
                                                          ===========          ===========         ===========

--------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>

(In thousands) 1999 over 1998
Increase (decrease) due to change in:
                                                                                                       Net
Interest-earning assets:                                    Volume              Rate (4)             Change
                                                            ------              --------             ------
<S>                                                     <C>                   <C>                <C>
   Net Loans (1)(2)                                          $ 7,619             $ (2,422)            $ 5,197
   Taxable investment securities                                 (43)                 357                 314
   Tax exempt investment securities(3)                         2,070                  (60)              2,010
   Federal funds sold                                         (2,677)                 (11)             (2,688)
                                                          -----------          -----------         -----------
     Total                                                     6,969               (2,136)              4,833
                                                          -----------          -----------         -----------

Interest-bearing liabilities:
   Demand deposits                                               270                 (198)                 72
   Savings deposits                                              140                 (467)               (327)
   Time deposits                                                 937                 (782)                155
   Other borrowings                                              429                    -                 429
                                                          -----------          -----------         -----------
     Total                                                     1,776               (1,447)                329
                                                          -----------          -----------         -----------
Interest differential                                        $ 5,193               $ (689)            $ 4,504
                                                          ===========          ===========         ===========
------------------------------------------------------------------------
</TABLE>

1. The average  balance of  non-accruing  loans is  immaterial as a
   percentage of total loans and, as such,  has been included in net
   loans.
2. Loan fees of $997,000,  $1,096,000, and $951,000 for the years ended
   December 31, 2000, 1999, and 1998, respectively,  have been included
   in the interest income computation.
3. Includes  taxable-equivalent  adjustments  for income on securities
   that   is   exempt   from  federal  income   taxes.   The   federal
   statutory tax rate was 35% for 2000, 1999, and 1998.
4. The rate / volume  variance  has been included in the rate variance.


                                       24
<PAGE>



Provision for Loan Losses

In  2000,  the  Bank  provided  $3,983,000  for  loan  losses  as  compared  to
$1,484,000  in  1999.  In  providing  for the  allowance  for loan  losses  the
Company   considered   the   significant   growth  in  the  loan  portfolio  of
$77,798,000  (19.7%),  geographic and industry  concentrations,  expansion into
new  geographic  markets,  and  volatility and weaknesses in the local economy,
including  potential  effects of power  shortages,  water supply,  and volatile
market  prices for  agricultural  products.  In  addition,  approximately  $1.2
million  was   provided  as  a  result  of  the  downward   classification   to
substandard  of several  loans to a single  borrower.  At  December  31,  2000,
these loans were  performing  in  accordance  with their terms and  conditions.
The  allowances  for loan losses to total  loans at December  31, 2000 and 1999
were 1.98% and  1.41%,  respectively.  Net loans  charged-off  in 2000  totaled
$208,000 or .05% of average loans outstanding.

In 1999,  $1,058,000  of the  provision  of  $1,484,000  was  required  for the
$77,260,000  loan growth  during the year.  Additional  provision was needed to
replenish the allowance for charged-off  loans.  Net loans  charged-off in 1999
totaled  $240,000  or .07% of average  loans  outstanding.  In 1998,  net loans
charged-off   totaled   $30,000   or  .01%  of   average   loans   outstanding.
Consequently, the Bank made provisions for loan losses of only $159,000.

Service Charges and Fees and Other Income

Noninterest  income  was up  $202,000  (9.1%) in 2000  over the same  period in
1999.   Service  charges  and  fees  related  to  deposit  accounts   increased
$401,000  (29.8%)  due to  higher  volumes,  the full  year  effect of new fees
implemented  in late 1999 and new products.  Noninterest  income was negatively
impacted  in the  fourth  quarter  of  2000  as the  Bank  realized  a loss  of
$194,000 on the sale and  repositioning  of  investment  securities.  In all of
1999,  the Bank  had a  realized  gain of  $45,000  on the  sale of  investment
securities.

Noninterest  income was up $147,000  (7.1%) to $2,231,000 in 1999 from the 1998
level.  Service  charges  and fees made up $113,000  of the  increase.  Several
new fees were  implemented  late in 1999.  These new fees added  about  $40,000
of the  increase.  The  remainder  was  due to  higher  volumes.  Other  income
increased  only  $34,000  (4.0%)  from the 1998 level.  This  change  reflected
some  good  growth in  certain  service  fees that was  offset in part by lower
mortgage  origination  fees  due to the  higher  mortgage  interest  rates  and
reduced up-charges on Bank supplied check stock.

Salaries and Benefits

Salary  and  benefit  expenses  increased  $965,000  (10.6%) in 2000 over 1999.
Salary expenses  related to the staffing of the two new branch  offices opened
in the  second  half  of the  year  accounted  for  $287,000  of the  increase.
Salaries and  benefits  from  continuing  operations  were up $678,000  (7.4%).
Base  salaries   increased   $421,000  (6.2%)  due  to  normal  merit  reviews,
competitive   salary  adjustments  and  staffing  additions  during  the  year.
Benefit costs  increased  commensurate  with the salaries.  At the end of 2000,
the full time equivalent (FTE) staff was 211 versus 204 at the end of 1999.

For 1999,  increases in salaries and benefits  totaled $903,000  (11.0%).  Base
salaries   increased   $644,000  (10.4%)  due  to  normal  merit  reviews,   11
additional  months of operations  for the Westridge  branch office and staffing
additions  during  the year.  Benefit  costs  increased  commensurate  with the
salaries.  At the end of 1999,  the full time  equivalent  (FTE)  staff was 204
versus 197 at the end of 1998.

                                       25
<PAGE>



Occupancy and Furniture and equipment

Occupancy  and fixed assets  expense  increased  $542,000  (20.5%) in 2000 over
1999. The new Hollister and  Watsonville  branch offices  accounted for $81,000
of the  increase.  For the  rest of the  Company  occupancy  and  fixed  assets
expense  increased  $461,000  (17.4%).  Much of the increase is attributable to
the full year effect of the  relocation  of two branch  offices and  remodeling
of one branch office and operations office space during 1999.

Occupancy and fixed assets expense  increased  $585,000  (28.5%) in 1999.  Much
of the increase was  attributable  to the  remodeling of two branch offices and
operations  office  space during the year as well as the full year of Westridge
operations  and  upgrades to the MIS systems and computer  network.  Additional
costs were  incurred for an outside  security  service  during the last quarter
as the Bank  increased its vault cash in preparation  for year 2000  disruption
concerns.

Other Expenses

Other  expenses were down  $142,000  (3.3%) in 2000 from 1999.  Other  expenses
related to the two new branch  offices were $45,000.  Thus,  other expenses for
other  operations  decreased  $187,000  (4.4%).  In  1999,  the  Bank  incurred
one-time  costs of  approximately  $263,000  associated  with the merger of the
Bank  of  Salinas  and  Cypress  Bank  to  form   Community   Bank  of  Central
California.  Normal  price  increases  and  growth  in  the  Bank's  operations
accounted  for the  remaining  higher  expenses.  The  efficiency  ratio (fully
taxable  equivalent),  calculated by dividing noninterest expense by the sum of
net interest income and noninterest  income,  for 2000 was 47.9% as compared to
52.0% in 1999.

In 1999,  other expenses  increased  $696,000  (19.4%).  These include one-time
costs of  approximately  $263,000  associated  with merging Bank of Salinas and
Cypress  Bank.   Also  in  1999,  the  Bank  recorded  a  $73,000   expense  to
write-down  its  former  Gonzales  branch  office  building  to  estimated  net
realizable  value.  Normal price increases and growth in the Bank's  operations
accounted  for the  remaining  higher  expenses.  The  efficiency  ratio (fully
taxable equivalent), for 1999 was 52.0% as compared to 52.9% in 1998.

Provision for Taxes

The  effective  tax rate on income was 37.0%,  36.0%,  and 40.9% in 2000,  1999
and 1998,  respectively.  The  effective  tax rate of the Company was higher in
2000 over 1999 as tax exempt  instruments were a smaller  percentage of earning
assets.  In 1999,  the  effective tax rate of the Company was reduced 4.9% from
the  prior  year as a result of  investments  made in tax  qualified  municipal
bonds.  The  effective  tax rate was  greater  than the federal  statutory  tax
rate due to state tax  expense of  $1,512,000,  $1,326,000  and  $1,292,000  in
these years.  Tax-exempt  income of  $2,082,000,  $1,998,000  and $266,000 from
investment  securities  and loans in these years helped to reduce the effective
tax rate.

(B)  Balance Sheet Analysis

Central  Coast  Bancorp's  total assets at December 31, 2000 were  $706,693,000
compared to  $593,445,000  at December  31, 1999,  representing  an increase of
19.1%.   The  average   balances  of  total  assets  of  $632,953,000  in  2000
represent an increase of $70,880,000 or 12.6% over $562,073,000 in 1999.


                                       26
<PAGE>



Loans

The  Bank  concentrates  its  lending   activities  in  four  principal  areas:
commercial loans (including  agricultural  loans);  consumer loans; real estate
construction  loans  (both  commercial  and  personal)  and  real  estate-other
loans.   At  December   31,  2000,   these  four   categories   accounted   for
approximately   36%,   2%,   12%  and  50%  of  the  Bank's   loan   portfolio,
respectively,  as compared to 40%,  3%, 9% and 48% at December  31,  1999.  The
year  2000 saw  continuing  high  levels of  economic  activity  in the  Bank's
market  area.  Loan demand was strong  throughout  the year and  remained so in
the first months of 2001. All  categories of loans,  except  consumer,  reflect
increased   growth  in  2000.  The  largest  growth  took  place  in  the  real
estate-other  category.  However,  the largest  percentage gain of 63.5% was in
the   real   estate-construction   category.   Table   Three   summarizes   the
composition of the loan portfolio for the past five years as of December 31:

<TABLE>
<CAPTION>
Table Three: Loan Portfolio Composite
----------------------------------------------------------------------------------------------------------
In thousands                        2000            1999             1998            1997            1996
----------------------------------------------------------------------------------------------------------
<S>                            <C>             <C>             <C>              <C>            <C>
Commercial                     $ 171,631       $ 159,385        $ 136,685       $ 124,714       $ 111,545
Real Estate:
   Construction                   57,780          35,330           19,929          14,645          27,997
   Other                         234,890         188,600          144,685         107,354          93,241
Consumer                           9,840          13,003           11,545           9,349           8,230
Deferred Loans Fees                 (746)           (721)            (674)           (568)           (649)
----------------------------------------------------------------------------------------------------------
Total Loans                      473,395         395,597          312,170         255,494         240,364
Allowance for
   Loan Losses                    (9,371)         (5,596)          (4,352)         (4,223)         (4,372)
----------------------------------------------------------------------------------------------------------
Total                          $ 464,024       $ 390,001        $ 307,818       $ 251,271       $ 235,992
==========================================================================================================
</TABLE>

The majority of the Bank's loans are direct  loans made to  individuals,  local
businesses  and  agri-businesses.   The  Bank  relies  substantially  on  local
promotional  activity,  personal  contacts  by  Bank  officers,  directors  and
employees to compete with other  financial  institutions.  The Bank makes loans
to borrowers whose  applications  include a sound purpose,  a viable  repayment
source and a plan of repayment  established  at inception and generally  backed
by a secondary source of repayment.

Commercial  loans  consist  of credit  lines  for  operating  needs,  loans for
equipment   purchases,   working  capital,  and  various  other  business  loan
products.   Consumer  loans  include  a  range  of  traditional  consumer  loan
products  offered  by the Bank such as  personal  lines of credit  and loans to
finance  purchases of autos,  boats,  recreational  vehicles,  mobile homes and
various other consumer items.  The  construction  loans are generally  composed
of  commitments to customers  within the Bank's  service area for  construction
of  both  commercial  properties  and  custom  and  semi-custom  single  family
residences.  Other real estate loans  consist  primarily of loans to the Bank's
depositors   secured  by  first  trust  deeds  on  commercial  and  residential
properties  typically  with  short-term  maturities  and original loan to value
ratios not  exceeding  75%.  In  general,  except in the case of loans with SBA
guarantees,  the Bank does not make  long-term  mortgage  loans;  however,  the
Bank has  informal  arrangements  in place  with  mortgage  lenders  to  assist
customers in securing single-family mortgage financing.

Average  net  loans in 2000  were  $417,075,000  representing  an  increase  of
$68,989,000  or 19.8% over 1999.  The favorable  economic  conditions  provided

                                       27
<PAGE>

the  impetus  for  continuing  loan  growth.  Average  net  loans in 1999  were
$348,086,000 representing an increase of $76,496,000 or 28.2% over 1998.

Risk Elements - The Bank  assesses and manages  credit risk on an ongoing basis
through  stringent  credit  review and approval  policies,  extensive  internal
monitoring and  established  formal lending  policies.  Additionally,  the Bank
contracts  with an outside loan review  consultant  to  periodically  grade new
loans and to review  the  existing  loan  portfolio.  Management  believes  its
ability  to  identify  and  assess  risk  and  return  characteristics  of  the
Company's   loan   portfolio   is  critical  for   profitability   and  growth.
Management  strives to continue the  historically low level of loan  losses  by
continuing  its  emphasis  on  credit  quality  in the loan  approval  process,
active  credit  administration  and  regular  monitoring.  With  this in  mind,
management  has  designed  and  implemented  a  comprehensive  loan  review and
grading system that  functions to  continually  assess the credit risk inherent
in the loan portfolio.

Ultimately,  the  credit  quality  of the  Bank's  loans may be  influenced  by
underlying  trends in the national and local economic and business cycles.  The
Bank's  business  is mostly  concentrated  in  Monterey  County.  The  County's
economy is highly  dependent on the agricultural  and tourism  industries.  The
agricultural  industry is also the major driver of the  economies of San Benito
County  and the  southern  portion of Santa  Cruz  County  where the Bank's two
newest   branches  are  located.   As  a  result,   the  Bank  lends  money  to
individuals  and  companies   dependent  upon  the   agricultural  and  tourism
industries.

The Bank has  significant  extensions  of  credit  and  commitments  to  extend
credit which are secured by real estate,  totaling  approximately  $333 million
at  December  31,  2000.   Although   management   believes  this  real  estate
concentration  has  no  more  that  the  normal  risk  of   collectability,   a
substantial  decline in the  economy in  general,  or a decline in real  estate
values  in the  Bank's  primary  market  areas  in  particular,  could  have an
adverse  impact on the  collectability  of these loans.  The ultimate  recovery
of these loans is generally  dependent  on the  successful  operation,  sale or
refinancing  of the real estate.  The Bank  monitors the effects of current and
expected  market  conditions  and other factors on the  collectability  of real
estate loans.  When, in management's  judgement,  these loans are impaired,  an
appropriate   provision   for  losses  is   recorded.   The  more   significant
assumptions  management  considers involve  estimates of the following:  lease,
absorption  and sale rates;  real estate values and rates of return;  operating
expenses;  inflation;  and  sufficiency  of collateral  independent of the real
estate including, in limited instances,  personal guarantees.  Not withstanding
the  foregoing,  abnormally  high  rates  of  impairment  due to  general/local
economic  conditions  could adversely affect the Company's future prospects and
results of operations.

In extending credit and commitments to borrowers,  the Bank generally  requires
collateral  and/or  guarantees  as  security.  The  repayment  of such loans is
expected  to come  from cash flow or from  proceeds  from the sale of  selected
assets  of  the  borrowers.   The  Bank's  requirement  for  collateral  and/or
guarantees  is  determined  on  a   case-by-case   basis  in  connection   with
management's  evaluation of the  credit-worthiness of the borrower.  Collateral
held varies but may include accounts  receivable,  inventory,  property,  plant
and  equipment,   income-producing   properties,   residences  and  other  real
property.  The Bank  secures  its  collateral  by  perfecting  its  interest in
business assets,  obtaining deeds of trust, or outright  possession among other
means.  Loan  losses  from  lending  transactions  related  to real  estate and
agriculture  compare  favorably  with  the  Bank's  loan  losses  on  its  loan
portfolio as a whole.

Management  believes that its lending policies and underwriting  standards will
tend  to  minimize  losses  in  an  economic  downturn,  however,  there  is no

                                       28
<PAGE>

assurance  that  losses  will not occur  under such  circumstances.  The Bank's
loan policies and underwriting  standards include,  but are not limited to, the
following:  1) maintaining a thorough  understanding of the Bank's service area
and  limiting  investments  outside of this  area,  2)  maintaining  a thorough
understanding   of  borrowers'   knowledge  and  capacity  in  their  field  of
expertise,  3)  basing  real  estate  construction  loan  approval  not only on
salability of the project,  but also on the borrowers'  capacity to support the
project  financially  in the  event  it  does  not  sell  within  the  original
projected  time  period,  and 4)  maintaining  conforming  and prudent  loan to
value and loan to cost  ratios  based on  independent  outside  appraisals  and
ongoing  inspection and analysis by the Bank's  construction  lending officers.
In  addition,   the  Bank  strives  to  diversify  the  risk  inherent  in  the
construction  portfolio by avoiding  concentrations to individual borrowers and
on any one project.

Nonaccrual, Past Due and Restructured Loans

Management  generally  places  loans on  nonaccrual  status when they become 90
days  past  due,  unless  the  loan  is  well  secured  and in the  process  of
collection.  Loans  are  charged  off  when,  in  the  opinion  of  management,
collection  appears  unlikely.  Table Four sets forth nonaccrual  loans,  loans
past due 90 days or more,  and  restructured  loans  performing  in  compliance
with modified terms, for December 31:

<TABLE>
<CAPTION>
Table Four: Non-Performing Loans
------------------------------------------------------------------------------------------------------
In thousands                                         2000       1999       1998       1997       1996
------------------------------------------------------------------------------------------------------
<S>                                                <C>         <C>       <C>         <C>        <C>
Past due 90 days or more and still accruing
   Commercial                                      $  215      $  51     $   73     $   73     $   60
   Real estate                                         10        303      1,174          6         59
   Consumer and other                                   5          -          -          -         90
------------------------------------------------------------------------------------------------------
                                                      230        354      1,247         79        209
------------------------------------------------------------------------------------------------------
Nonaccrual:
   Commercial                                         329         11        333        188        184
   Real estate                                          -      1,565        543        628        419
   Consumer and other                                   -          -          -          -          1
------------------------------------------------------------------------------------------------------
                                                      329      1,576        876        816        604
------------------------------------------------------------------------------------------------------
Restructured (in compliance with modified
   terms)- Commercial                               1,010          -          -          -          -
------------------------------------------------------------------------------------------------------
Total nonperforming loans                         $ 1,569    $ 1,930    $ 2,123      $ 895      $ 813
======================================================================================================
</TABLE>


Interest  due but  excluded  from  interest  income  on  nonaccrual  loans  was
approximately  $64,000 in 2000,  $82,000 in 1999 and  $45,000 in 1998.  In 1999
and 1998,  interest  income  recognized  from  payments  received on nonaccrual
loans was $21,000 and $17,000, respectively (none was recognized in 2000).

At December 31,  2000,  the recorded  investment  in loans that are  considered
impaired was  $1,691,000  of which  $215,000 is included in  nonaccrual  loans,
and  $1,010,000 is included in  restructured  loans above.  Such impaired loans
had a valuation  allowance  of $506,000.  The average  recorded  investment  in
impaired  loans during 2000 was  $2,129,000.  The Company  recognized  interest
income on impaired  loans of  $161,000,  $92,000 and $64,000 in 2000,  1999 and
1998,  respectively  (including  interest  income of  $98,000  on  restructured
loans in 2000).

There were no troubled debt  restructurings  or loan  concentrations  in excess
of 10% of total  loans not  otherwise  disclosed  as a category  of loans as of
December 31, 2000.  Management  is not aware of any  potential  problem  loans,

                                       29
<PAGE>

which were  accruing  and current at December  31, 2000,  where  serious  doubt
exists as to the ability of the  borrower to comply with the present  repayment
terms.

The Company held no real estate acquired by foreclosure at December 31, 2000
or 1999.


Allowance for Loan Losses Activity

The  provision  for loan losses is based upon  management's  evaluation  of the
adequacy of the existing  allowance for loans  outstanding.  This  allowance is
increased  by  provisions  charged to expense and  reduced by loan  charge-offs
net of recoveries.  Management  determines an appropriate  provision based upon
the  interaction of three primary  factors:  (1) the loan  portfolio  growth in
the period,  (2) a  comprehensive  grading  and review  formula for total loans
outstanding, and (3) actual previous charge-offs.

The  allowance  for loan losses  totaled  $9,371,000 or 1.98% of total loans at
December  31, 2000  compared to  $5,596,000  or 1.41% at December  31, 1999 and
$4,352,000  or 1.39% at December  31, 1998.  In 2000,  the  allowance  for loan
losses was increased in  consideration  of the  significant  growth in the loan
portfolio of  $77,798,000  (19.7%),  geographic  and  industry  concentrations,
expansion  into new  geographic  markets,  and volatility and weaknesses in the
local economy,  including  potential effects of power shortages,  water supply,
and  volatile   market   prices  for   agricultural   products.   In  addition,
approximately   $1.2   million  was  provided  as  a  result  of  the  downward
classification  to substandard of several loans to a single borrower.  In 1999,
the loan growth of  $77,260,000  necessitated  an increase of $1,058,000 in the
allowance  for loan  losses.  It is the policy of  management  to maintain  the
allowance  for loan  losses at a level  adequate  for known  and  future  risks
inherent in the loan  portfolio.  Based on information  currently  available to
analyze  loan  loss  potential,  including  economic  factors,  overall  credit
quality,   historical   delinquency  and  a  history  of  actual   charge-offs,
management  believes that the loan loss  provision and allowance is prudent and
adequate.  However,  no prediction  of the ultimate  level of loans charged off
in future years can be made with any certainty.


                                       30
<PAGE>
Table Five summarizes,  for the years indicated,  the activity in the allowance
for loan losses.

<TABLE>
<CAPTION>
Table Five:  Allowance for Loan Losses
--------------------------------------------------------------------------------------------------------
                                       Year Ended   Year Ended   Year Ended    Year Ended    Year Ended
In thousands (except percentages)      12/31/00     12/31/99      12/31/98      12/31/97      12/31/96
--------------------------------------------------------------------------------------------------------
<S>                                    <C>          <C>          <C>            <C>          <C>
Average loans outstanding                $424,891     $353,732     $ 276,437     $ 243,593    $ 208,169
--------------------------------------------------------------------------------------------------------

Allowance for possible loan losses
 at beginning of period                   $ 5,596      $ 4,352       $ 4,223       $ 4,372      $ 4,446

Loans charged off:
   Commercial                                (273)        (333)         (130)         (279)        (391)
   Real estate                                  -          (41)          (16)         (100)        (207)
   Consumer                                  (119)         (26)          (31)          (61)         (22)
--------------------------------------------------------------------------------------------------------
                                             (392)        (400)         (177)         (440)        (620)
--------------------------------------------------------------------------------------------------------
Recoveries of loans previously
 charged off:
   Commercial                                 170          143           116           162          156
   Real estate                                  -            7            20            28           11
   Consumer                                    14           10            11            37           27
--------------------------------------------------------------------------------------------------------
                                              184          160           147           227          194
--------------------------------------------------------------------------------------------------------
Net loans charged off                        (208)        (240)          (30)         (213)        (426)

Additions to allowance charged
  to operating expenses                     3,983        1,484           159            64          352
--------------------------------------------------------------------------------------------------------
Allowance for possible loan
  losses at end of period                 $ 9,371      $ 5,596       $ 4,352       $ 4,223      $ 4,372
--------------------------------------------------------------------------------------------------------

Ratio of net charge-offs to
  average loans outstanding                 0.05%        0.07%         0.01%         0.09%        0.20%

Provision of allowance for possible loan
 losses to average loans outstanding        0.94%        0.42%         0.06%         0.03%        0.17%

Allowance for possible loan losses to loans
 net of deferred fees at year end           1.98%        1.41%         1.39%         1.65%        1.82%
--------------------------------------------------------------------------------------------------------
</TABLE>



                                       31
<PAGE>



As part of its loan  review  process,  management  has  allocated  the  overall
allowance  based on  specific  identified  problem  loans and  historical  loss
data.  Table Six  summarizes the allocation of the allowance for loan losses at
December 31, 2000 and 1999.

<TABLE>
<CAPTION>
Table Six:  Allowance for Loan Losses by Loan Category
----------------------------------------------------------------------------------------

                                     December 31, 2000              December 31, 1999
                                     -----------------              -----------------
                                              Percent of                     Percent of
                                             loans in each                  loans in each
                                              category to                    category to
In thousands (except percentages)  Amount     total loans        Amount      total loans
----------------------------------------------------------------------------------------
<S>                                  <C>           <C>           <C>           <C>

Commercial                           $ 5,602         36%           $ 3,511          40%
Real estate                            2,589         62%               390          57%
Consumer                                 255          2%               215           3%
----------------------------------------------------------------------------------------
Total allocated                        8,446        100%             4,116         100%
Total unallocated                        925                         1,480
----------------------------------------------------------------------------------------
   Total                             $ 9,371                       $ 5,596
----------------------------------------------------------------------------------------
</TABLE>


Other Real Estate Owned

The Company held no real estate  acquired by  foreclosure  at December 31, 2000
or 1999.

Deposits

At December 31, 2000,  deposits  totaled  $633,210,000 up from  $518,189,000 at
the end of 1999.  However,  the 1999 ending  balance  included  $20,000,000  in
State of California  time deposits.  These deposits  matured by the end of 2000
and  were no  longer  included  in the  deposit  balances.  Thus,  the  deposit
growth in 2000, net of the  $20,000,000 of State of California  certificates of
deposit,  was  $135,021,000  (27.1%).  Because  there  was a  large  influx  of
demand  deposits  at  year-end,  management  would  expect  that due to  normal
seasonal  variations  deposits  will  decrease  approximately   $30,000,000  to
$50,000,000 in the first quarter of 2001.

Capital Resources

The current  and  projected  capital  position of the Company and the impact of
capital plans and long-term  strategies  is reviewed  regularly by  management.
The Company's  capital  position  represents the level of capital  available to
support continued operations and expansion.

Since  October of 1998 and through  December 31,  2000,  the Board of Directors
of the Company has  authorized  two separate  plans to  repurchase up to 5% (in
each  plan)  of  the  outstanding   shares  of  the  Company's   common  stock.
Purchases  are made  from  time to  time,  in the open  market  and  negotiated
transactions  and are subject to appropriate  regulatory  and other  accounting
requirements.  The Company  acquired  410,894 shares of its common stock in the
open market during 2000,  200,668 in 1999 and 29,645 in 1998 at average  prices
of  approximately  $14.85,  $13.32  and $12.61  per  share,  respectively.  The
Company  completed  repurchases  under the first plan in May 2000.  At December
31, 2000,  there were 112,240 shares  remaining to repurchase  under the second
plan.  The  preceding  common share  amounts and average  prices paid have been
adjusted  for the stock split and stock  dividends  issued from  February  1999
through  February  2001.  These  repurchases  are made  with the  intention  to
lessen the  dilutive  impact of issuing new shares to meet stock  option  plans
as well as for capital management objectives.

                                       32
<PAGE>


The  Company's  primary  capital  resource  is  shareholders'   equity,   which
increased  $6.5  million  or 12.3%  from the  previous  year-end.  The ratio of
total  risk-based  capital to  risk-adjusted  assets was 12.3% at December  31,
2000,  compared to 13.8% at December  31, 1999.  Tier 1  risk-based  capital to
risk-adjusted  assets was 11.1% at  December  31,  2000,  compared  to 12.6% at
December  31,  1999.  The capital  ratios are lower in 2000 as compared to 1999
as risked based assets grew at a higher rate than did capital.

<TABLE>
<CAPTION>

Table Seven: Capital Ratios
                                                        As of December 31,
                                                    ---------------------------

                                                         2000             1999
                                                         ----             ----
<S>                                                    <C>              <C>
Tier 1 Capital                                          11.1%            12.6%
Total Capital                                           12.3%            13.8%
Leverage                                                 9.1%             9.7%
</TABLE>


See the discussion of capital  requirements in "Supervision  and Regulation" on
page 4 and Note 13 in the financial statements included in Item 8.

Inflation

The impact of inflation on a financial  institution differs  significantly from
that  exerted  on  manufacturing,   or  other  commercial  concerns,  primarily
because  its  assets  and  liabilities  are  largely   monetary.   In  general,
inflation  primarily  affects  the  Company  indirectly  through  its effect on
market  rates of  interest,  and thus the  ability of the Bank to attract  loan
customers.  Inflation  affects  the growth of total  assets by  increasing  the
level of loan demand,  and potentially  adversely affects the Company's capital
adequacy  because  loan growth in  inflationary  periods can  increase at rates
higher than the rate that capital  grows  through  retention of earnings  which
the  Company  may  generate  in the  future.  In  addition  to its  effects  on
interest  rates,  inflation  directly  affects  the Company by  increasing  the
Company's  operating  expenses.  Inflation did not have a material  effect upon
the Company's results of operations during the year 2000.

Market Risk Management

Overview.  The goal for managing the assets and  liabilities  of the Bank is to
maximize  shareholder  value and  earnings  while  maintaining  a high  quality
balance  sheet  without  exposing  the Bank to undue  interest  rate risk.  The
Board of Directors has overall  responsibility  for the Company's interest rate
risk  management  policies.  The  Bank has an Asset  and  Liability  Management
Committee  (ALCO)  which  establishes  and monitors  guidelines  to control the
sensitivity of earnings to changes in interest rates.

Asset/Liability    Management.    Activities    involved   in   asset/liability
management  include  but are not  limited to  lending,  accepting  and  placing
deposits,  investing in  securities  and issuing  debt.  Interest  rate risk is
the  primary   market  risk   associated   with   asset/liability   management.
Sensitivity  of earnings to interest rate changes  arises when yields on assets
change  in a  different  time  period  or in a  different  amount  from that of
interest costs on  liabilities.  To mitigate  interest rate risk, the structure
of the  balance  sheet is  managed  with the goal that  movements  of  interest
rates on assets and  liabilities  are  correlated  and  contribute  to earnings
even in periods of volatile  interest  rates.  The  asset/liability  management
policy  sets  limits on the  acceptable  amount  of  variance  in net  interest
margin and market value of equity under  changing  interest  environments.  The

                                       33
<PAGE>

Bank uses  simulation  models to forecast  earnings,  net  interest  margin and
market value of equity.

Simulation of earnings is the primary tool used to measure the  sensitivity  of
earnings to interest rate changes.  Using  computer  modeling  techniques,  the
Company is able to estimate the  potential  impact of changing  interest  rates
on earnings.  A balance sheet  forecast is prepared  quarterly  using inputs of
actual   loan,    securities   and   interest   bearing    liabilities    (i.e.
deposits/borrowings)  positions as the  beginning  base.  The forecast  balance
sheet is  processed  against  three  interest  rate  scenarios.  The  scenarios
include a 200 basis point  rising rate  forecast,  a flat rate  forecast  and a
200 basis point falling rate  forecast  which take place within a one year time
frame.  The net interest  income is measured  during the first year of the rate
changes and in the year  following  the rate changes.  The  Company's  2000 net
interest income,  as forecast below,  was modeled  utilizing a forecast balance
sheet projected from year-end 2000 balances.

The following assumptions were used in the modeling activity:
      Earning asset growth of 7.1% based on ending balances
      Loan growth of 8.3% based on ending balances
      Investment and funds sold growth of 4.0% based on ending balances
      Deposit growth of 3.0% based on ending balances
      Balance sheet target balances were the same for all rate scenarios

The  following  table  summarizes  the effect on net interest  income of a (+/-)
200 basis  point  change  in  interest  rates as  measured  against a flat rate
(no change) scenario.


Table Eight: Interest Rate Risk Simulation of Net Interest Income as of
December 31, 2000
                                               Estimated Impact on
                                                2001 Net Interest
                                                     Income
                                                     ------
                                                 (in thousands)
   Variation from flat rate scenario
    +200                                             $2,731
   - 200                                            ($3,310)

The simulations of earnings do not incorporate  any management  actions,  which
might  moderate  the  negative   consequences  of  interest  rate   deviations.
Therefore,   they  do  not  reflect  likely  actual   results,   but  serve  as
conservative estimates of interest rate risk.

The  Company  also  uses a second  simulation  scenario  that rate  shocks  the
balance  sheet with an  immediate  parallel  shift in interest  rates of +/-200
basis points.  This scenario  provides  estimates of the future market value of
equity  (MVE)  and net  interest  income  (NII).  MVE  measures  the  impact on
equity due to the changes in the market values of assets and  liabilities  as a
result of a change in interest  rates.  The Bank  measures  the  volatility  of
these  benchmarks  using a twelve  month time  horizon.  Using the December 31,
2000  balance  sheet  as the  base  for the  simulation,  the  following  table
summarizes  the effect on net  interest  income of a +/-200  basis point change
in interest rates:

                                       34
<PAGE>



Table Nine: Interest Rate Risk Simulation of NII as of December 31, 2000

                                  % Change               Change
                                   in NII                in NII
                                 from Current          from Current
                               12 Mo. Horizon        12 Month Horizon
                               --------------        ----------------
                                                      (in thousands)
      + 200bp                       16%                   $6,374
      - 200bp                      (17%)                 ($6,618)

These  results  indicate  that  the  balance  sheet is  asset  sensitive  since
earnings  increase  when interest  rates rise.  The magnitude of the NII change
is within the  Company's  policy  guidelines.  The asset  liability  management
policy  limits  aggregate  market  risk,  as  measured in this  fashion,  to an
acceptable level within the context of risk-return trade-offs.

Gap  analysis  provides  another  measure of  interest  rate risk.  The Company
does not  actively  use gap  analysis in  managing  interest  rate risk.  It is
presented  here  for  comparative  purposes.  Interest  rate  sensitivity  is a
function of the  repricing  characteristics  of the Bank's  portfolio of assets
and  liabilities.  These repricing  characteristics  are the time frames within
which the  interest-bearing  assets and  liabilities  are  subject to change in
interest  rates either at  replacement,  repricing or maturity.  Interest  rate
sensitivity  management  focuses on the maturity of assets and  liabilities and
their repricing  during periods of changes in market  interest rates.  Interest
rate  sensitivity is measured as the  difference  between the volumes of assets
and  liabilities in the Bank's current  portfolio that are subject to repricing
at various time horizons.  The  differences  are known as interest  sensitivity
gaps.

As reflected in Table Ten, at December 31,  2000,  the  cumulative  gap through
the  one-year   time  horizon   indicates  a  liability   sensitive   position.
Somewhere  between  one and five years the Bank  moves into an asset  sensitive
position.  This interest rate sensitivity  table  categorizes  interest-bearing
transaction  deposits and savings deposits as repricing  immediately.  However,
as has been observed through interest rate cycles,  the deposit  liabilities do
not reprice  immediately.  Consequently,  the Bank's net interest income varies
as  though  the  Bank is asset  sensitive,  i.e.  as  interest  rates  rise net
interest  income  increases  and vice versa.  This  phenomenon  is validated by
the modeling as presented in Tables Eight and Nine.

                                       35
<PAGE>



<TABLE>
<CAPTION>
Table Ten: Interest Rate Sensitivity
December 31, 2000
----------------------------------------------------------------------------------------------------------------
Assets and Liabilities                                     Over three
which Mature or Reprice:                      Next day     months and      Over one
                                             and within      within       and within        Over
In thousands                Immediately     three months    one year      five years     five years     Total
----------------------------------------------------------------------------------------------------------------
<S>                             <C>            <C>            <C>           <C>            <C>         <C>
Interest earning assets:
Investments                        1,163         10,158           338         14,268        126,349     152,276
Loans, excluding
   nonaccrual loans
   and overdrafts                 13,479        293,668        31,540        101,732         32,437     472,856
----------------------------------------------------------------------------------------------------------------
Total                         $   14,642      $ 303,826     $  31,878      $ 116,000      $ 158,786   $ 625,132
================================================================================================================
Interest bearing
   liabilities:
Interest bearing demand       $   88,285      $       -     $       -      $       -      $       -   $  88,285
Savings                          110,204              -             -              -              -     110,204
Time certificates                      -         62,624       135,179         29,910              6     227,719
Other Borrowings                       -             73           227          2,616          2,290       5,206
----------------------------------------------------------------------------------------------------------------
Total                         $  198,489      $  62,697     $ 135,406      $  32,526      $   2,296   $ 431,414
================================================================================================================
Interest rate
   sensitivity gap            $ (183,847)     $ 241,129     $(103,528)     $  83,474      $ 156,490
Cumulative interest
   rate sensitivity gap       $ (183,847)     $  57,282     $ (46,246)     $  37,228      $ 193,718
----------------------------------------------------------------------------------------------------------------
December 31, 1999
Interest rate
   sensitivity gap            $ (198,061)     $ 172,782     $ (54,472)     $  80,491      $ 147,262
Cumulative interest
   rate sensitivity gap       $ (198,061)     $ (25,279)    $ (79,751)     $     740      $ 148,002
----------------------------------------------------------------------------------------------------------------
</TABLE>


Liquidity

Liquidity  management  refers to the  Company's  ability to provide funds on an
ongoing  basis to meet  fluctuations  in  deposit  levels as well as the credit
needs  and   requirements   of  its  clients.   Both  assets  and   liabilities
contribute  to  the  Company's   liquidity   position.   Federal  funds  lines,
short-term  investments  and  securities,  and loan  repayments  contribute  to
liquidity,  along with  deposit  increases,  while  loan  funding  and  deposit
withdrawals   decrease   liquidity.   The  Bank  assesses  the   likelihood  of
projected  funding  requirements  by  reviewing  historical  funding  patterns,
current and  forecasted  economic  conditions  and  individual  client  funding
needs.  Commitments  to fund loans and  outstanding  standby  letters of credit
at  December  31,  2000,  were   approximately   $145,839,000  and  $4,634,000,
respectively.  Such loans relate  primarily  to  revolving  lines of credit and
other commercial loans, and to real estate construction loans.

The  Company's  sources  of  liquidity  consist  of  overnight  funds  sold  to
correspondent  banks,  unpledged  marketable  investments  and  loans  held for
sale.  On  December  31,  2000,   consolidated  liquid  assets  totaled  $132.0
million  or 18.7% of total  assets as  compared  to $91.1  million  or 15.4% of
total  consolidated  assets  on  December  31,  1999.  In  addition  to  liquid
assets,  the Bank  maintains  short  term  lines of credit  with  correspondent
banks.  At December 31, 2000, the Bank had  $80,000,000  available  under these
credit  lines.  Additionally,  the Bank is a member  of the  Federal  Home Loan
Bank.  At  December  31,  2000,   the  Bank  could  have  arranged  for  up  to
$176,673,000  in secured  borrowings  from the FHLB.  Informal  agreements  are

                                       36
<PAGE>

also in place with  various  other banks to purchase  participations  in loans,
if  necessary.  The  Company  serves  primarily  a  business  and  professional
customer  base and,  as such,  its  deposit  base is  susceptible  to  economic
fluctuations.   Accordingly,   management   strives  to   maintain  a  balanced
position of liquid assets to volatile and cyclical deposits.

Liquidity is also affected by portfolio  maturities  and the effect of interest
rate  fluctuations  on the  marketability  of both assets and  liabilities.  In
1998, the Company adopted  Statement of Financial  Accounting  Standards (SFAS)
No. 133,  "Accounting for Derivative  Instruments and Hedging  Activities".  In
conjunction   with  the  adoption  of  SFAS  133  the  Bank   reclassified  all
securities  into the  available-for-sale  category.  This  enables  the Bank to
sell  any of its  unpledged  securities  to meet  liquidity  needs.  Due to the
rising  interest rate  environment  throughout  most of 1999 and the first half
of 2000, much of the investment  portfolio  experienced  price declines,  which
resulted in  unrealized  losses.  These  unrealized  losses  limited the Bank's
ability to sell these  securities  without  realizing those losses.  Because of
the rapid  decrease in interest  rates at the end of 2000 and  continuing  into
January  2001,  the  unrealized  loss in the  investment  portfolio has greatly
diminished.  Further  declines in the market rates of interest  could result in
net  unrealized  gains in the  portfolio.  These  securities  are  available to
pledge as collateral  for  borrowings  if the need should  arise.  The Bank has
established a master repurchase  agreement with a correspondent  bank to enable
such transactions.

The  maturity  distribution  of  certificates  of deposit in  denominations  of
$100,000 or more is set forth in Table  Eleven.  These  deposits are  generally
more rate sensitive than other deposits and,  therefore,  are more likely to be
withdrawn to obtain higher yields elsewhere if available.

<TABLE>
<CAPTION>
Table Eleven:  Certificates of Deposit in Denominations of $100,000 or More
------------------------------------------------------------------------------------------------
                                                                              December 31, 2000
------------------------------------------------------------------------------------------------
<S>                                                                            <C>
 Three months or less                                                           $47,772,000

 Over three months through six months                                            22,759,000

 Over six months through twelve months                                           70,019,000

 Over twelve months                                                              26,131,000

------------------------------------------------------------------------------------------------
 Total                                                                         $166,681,000
================================================================================================
</TABLE>

                                       37
<PAGE>



Loan demand also affects the Bank's liquidity position.  Table Twelve
presents the maturities of loans for the period indicated.

<TABLE>
<CAPTION>
 Table Twelve:  Loan Maturities - December 31, 2000
------------------------------------------------------------------------------------------
                                         One year
                      One year           through              Over
 In thousands         or less           five years         five years           Total
------------------------------------------------------------------------------------------
<S>                 <C>               <C>                <C>                <C>
  Commercial        $ 87,906,000       $ 57,024,000       $ 26,701,000       $171,631,000

  Real estate -
   construction       35,939,000         12,005,000          9,836,000         57,780,000

  Real estate -
    other             26,784,000         86,275,000        121,831,000        234,890,000

   Consumer            5,633,000          4,042,000            165,000          9,840,000

------------------------------------------------------------------------------------------
  Total             $156,262,000       $159,346,000       $158,533,000       $474,141,000
------------------------------------------------------------------------------------------
</TABLE>


Loans shown above with maturities greater than one year include $235,059,000 of
floating interest rate loans and $82,820,000 of fixed rate loans.


                                       38
<PAGE>

The  maturity   distribution  and  yields  of  the  investment  portfolios  are
presented in Table Thirteen:

<TABLE>
<CAPTION>
Table Thirteen: Securities Maturities and Weighted Average Yields - December 31, 2000 and 1999
-----------------------------------------------------------------------------------------------------------
                                                                                                  Weighted
                                                 Amortized  Unrealized   Unrealized    Market      Average
In thousands (except percentages)                  Cost        Gain         Loss        Value       Yield
-----------------------------------------------------------------------------------------------------------
<S>                                              <C>           <C>        <C>        <C>           <C>
December 31, 2000
Available for sale securities:
U.S. Treasury and agency securities
     Maturing within 1 year                     $     300     $     -      $     -   $     300       5.79%
     Maturing after 1 year but within 5 years      12,963           2           63      12,902       6.28%
     Maturing after 5 years but within 10 years    61,846         167          454      61,559       6.45%
     Maturing after 10 years                       10,480           -          114      10,366       6.42%
State & Political Subdivision
     Maturing within 1 year                           243           -            5         238       3.80%
     Maturing after 1 year but within 5 years       1,356          15            5       1,366       7.92%
     Maturing after 5 year but within 10 Years     16,915           -          353      16,562       6.61%
     Maturing after 10 years                       27,337          78          744      26,671       6.88%
Corporate Debt Securities
     Maturing within 1 year                         9,968           -           11       9,957       8.24%
     Maturing after 10 years                       11,505           -          313      11,192       7.75%
Other                                               1,163           -            -       1,163       0.00%
-----------------------------------------------------------------------------------------------------------
Total investment securities                     $ 154,076     $   262      $ 2,062   $ 152,276       6.70%
===========================================================================================================
December 31, 1999
Available for sale securities:
U.S. Treasury and agency securities
     Maturing within 1 year                     $  12,002     $     -      $    35   $  11,967       6.03%
     Maturing after 1 year but within 5 years       6,462           8          217       6,253       5.62%
     Maturing after 5 years but within 10 years    72,639           -        3,629      69,010       6.24%
     Maturing after 10 years                       12,265           -          625      11,640       6.27%
State & Political Subdivision
     Maturing after 1 year but within 5 years         247           -           25         222       5.70%
     Maturing after 5 year but within 10 Years     11,513           -          888      10,625       6.45%
     Maturing after 10 years                       25,091           -        2,436      22,655       6.73%
Corporate Debt Securities
     Maturing after 10 years                       11,500           -          121      11,379       7.18%
Other                                               1,684           -            -       1,684       0.00%
-----------------------------------------------------------------------------------------------------------
Total investment securities                     $ 153,403     $     8      $ 7,976   $ 145,435       6.36%
===========================================================================================================
</TABLE>


The principal  cash  requirements  of the Company are for expenses  incurred in
the  support  of  administration   and  operations  of  the  Bank.  These  cash
requirements  are funded  through  direct  reimbursement  billings to the Bank.
For  non-banking  functions,  the Company is dependent upon the payment of cash
dividends  by the Bank to service its  commitments.  The Company  expects  that
the cash  dividends  paid by the Bank to the Company will be sufficient to meet
this payment schedule.

Off-Balance Sheet Items

The Bank has certain ongoing  commitments under operating  leases.  (See Note 5
of  the  financial   statements  for  the  terms.)  These  commitments  do  not
significantly impact operating results.

As of December 31, 2000, commitments to extend  credit  were the only financial
instruments  with  off-balance  sheet risk.  The Bank has  not entered into any
contracts for financial derivative instruments such as futures, swaps,

                                       39
<PAGE>

options etc.  Loan and letter  of credit  commitments increased to $150,473,000
from  $131,398,000  at December 31, 1999.  The  commitments  represent 31.8% of
total loans at year-end 2000 versus 33.2% a year ago.

Disclosure of Fair Value

The  Financial  Accounting  Standards  Board  (FASB),  Statement  of  Financial
Accounting  Standards  Number 107,  Disclosures  about Fair Value of  Financial
Statements,   requires  the   disclosure  of  fair  value  of  most   financial
instruments,   whether   recognized   or  not   recognized   in  the  financial
statements.  The intent of presenting the fair values of financial  instruments
is to depict the market's  assessment  of the present  value of net future cash
flows  discounted  to reflect  both  current  interest  rates and the  market's
assessment of the risk that the cash flows will not occur.

In  determining  fair values,  the Company  used the carrying  amount for cash,
short-term  investments,  accrued interest  receivable,  short-term  borrowings
and  accrued  interest  payable as all of these  instruments  are short term in
nature.   Securities  are  reflected  at  quoted  market   values.   Loans  and
deposits   have  a  long  term  time  horizon   which   required  more  complex
calculations   for  fair   value   determination.   Loans  are   grouped   into
homogeneous  categories  and  broken  down  between  fixed  and  variable  rate
instruments.  Loans  with a  variable  rate,  which  reprice  immediately,  are
valued  at  carrying  value.  The  fair  value  of fixed  rate  instruments  is
estimated by  discounting  the future cash flows using  current  rates.  Credit
risk and  repricing  risk  factors  are  included in the  current  rates.  Fair
value for  nonaccrual  loans is reported  at carrying  value and is included in
the  net  loan  total.   Since  the  allowance  for  loan  losses  exceeds  any
potential   adjustment  for   nonaccrual   valuation,   no  further   valuation
adjustment has been made.

Demand  deposits,  savings and certain money market  accounts are short term in
nature so the carrying  value equals the fair value.  For deposits  that extend
over a period  in  excess  of four  months,  the fair  value  is  estimated  by
discounting  the future cash  payments  using the rates  currently  offered for
deposits of similar remaining maturities.

At year-end  2000 and year end 1999,  the fair values  calculated on the Bank's
assets were 0.4% below the carrying values.

Accounting Pronouncements

The Financial  Standards  Accounting Board released for comment on February 14,
2001,  a  revised  proposal  for the  elimination  of  "pooling  of  interests"
accounting.  The FASB  indicated  that it will accept  comments  through  March
16, 2001.  As proposed,  it is currently  anticipated  that the FASB will issue
a final  statement  in June 2001,  which  would  likely  require,  among  other
matters,  that all mergers  initiated after the issuance of the final statement
be  accounted  for  as  "purchase"  transactions.  As  proposed,  a  merger  or
business  combination  would be considered  initiated if the major terms of the
transaction,   including  the  exchange  or  conversion   ratio,  are  publicly
announced or otherwise  disclosed to shareholders  of the combining  companies.
The revised  proposal  contemplates  that  goodwill  will not be  amortized  to
earnings as originally  proposed.  Instead,  goodwill would be recognized as an
asset in the  financial  statements,  measured  as the excess of the cost of an
acquired  entity over the net of the amounts  assigned to  identifiable  assets
acquired and  liabilities  assumed,  and then tested for  impairment  to assess
losses  and  expensed  against  earnings  only  in the  periods  in  which  the
recorded  value  of  goodwill  exceeded  its  implied  fair  value,   based  on
standards to be specified  in the final  statement.  The effect of the proposal
upon  bank  mergers  is  uncertain,   however,   the  goodwill  in  a  purchase
accounting  transaction  may not be included in the  calculation  of regulatory
capital  requirements and some investment  bankers have expressed the view that

                                       40
<PAGE>

the  elimination  of "pooling  of  interests"  accounting  will result in lower
merger  premiums  for  sellers  with  the  possibility  of  fewer  transactions
occurring after the effective date of the final statement.

For  additional  discussion  of  accounting  pronouncements,  see Note 1 in the
Consolidated Financial Statements at Item 8.

Other Matters

The State of California is presently  experiencing  serious  periodic  electric
power  shortages.  It is  uncertain  whether  or when these  shortages  will be
discontinued.  The  Company  and the Bank  could be  materially  and  adversely
affected  either  directly or indirectly by a severe electric power shortage if
such a  shortage  caused  any of  its  critical  data  processing  or  computer
systems and related equipment to fail, or if the local  infrastructure  systems
such as  telephone  systems  should  fail,  or the  Company's  and  the  Bank's
significant vendors,  suppliers,  service providers,  customers,  borrowers, or
depositors are adversely  impacted by their internal  systems or those of their
respective   customers  or  suppliers.   Material  increases  in  the  expenses
related to electric  power  consumption  and the related  increase in operating
expense  could  also have an  adverse  effect on the  Company's  and the Bank's
future results of operations.


ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information required by Item 7A of Form 10-K is contained in the Market
Risk Management section of Item 7 - "Management's Discussion and Analysis of
Financial Condition and Results of Operations" on page 33.


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                               Page
                                                               ----
Independent Auditors' Report                                    42

Consolidated Balance Sheets, December 31, 2000 and 1999         43

Consolidated Statements of Income for theyears ended
   December 31, 2000, 1999 and 1998                             44

Consolidated Statements of Cash Flows for the years ended
   December 31, 2000, 1999 and 1998                             45

Consolidated Statements of Shareholders' Equity for the
   years ended December 31, 2000, 1999 and 1998                 46

Notes to Consolidated Financial Statements                   47-60

All schedules  have been omitted since the required  information is not present
in amounts  sufficient  to require  submission  of the  schedule or because the
information  required is included in the Consolidated  Financial  Statements or
notes thereto.

                                       41
<PAGE>


INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders of Central Coast Bancorp:

We have audited the accompanying  consolidated  balance sheets of Central Coast
Bancorp  and  subsidiary  as of  December  31,  2000 and 1999,  and the related
consolidated  statements  of  income,  shareholders'  equity and cash flows for
each  of  the  three  years  in the  period  ended  December  31,  2000.  These
financial  statements are the responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these  financial  statements  based
on our audits.

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

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


DELOITTE & TOUCHE LLP

Salinas, California
January 22, 2001
(February 28, 2001 as to the stock dividend information in Note 1)

                                       42
<PAGE>


<TABLE>
<CAPTION>
Consolidated Balance Sheets
Central Coast Bancorp and Subsidiary
-----------------------------------------------------------------------------------------------------------------
December 31,                                                                         2000                   1999
-----------------------------------------------------------------------------------------------------------------
<S>                                                                         <C>                    <C>
Assets
  Cash and due from banks                                                    $ 51,411,000           $ 39,959,000
  Federal funds sold                                                           23,081,000                      -
-----------------------------------------------------------------------------------------------------------------
    Total cash and equivalents                                                 74,492,000             39,959,000

  Available-for-sale securities                                               152,276,000            145,435,000

  Loans:
    Commercial                                                                171,631,000            159,385,000
    Real estate-construction                                                   57,780,000             35,330,000
    Real estate-other                                                         234,890,000            188,600,000
    Consumer                                                                    9,840,000             13,003,000
    Deferred loan fees, net                                                      (746,000)              (721,000)
-----------------------------------------------------------------------------------------------------------------
    Total loans                                                               473,395,000            395,597,000
    Allowance for loan losses                                                  (9,371,000)            (5,596,000)
-----------------------------------------------------------------------------------------------------------------
  Net Loans                                                                   464,024,000            390,001,000
-----------------------------------------------------------------------------------------------------------------
  Premises and equipment, net                                                   3,735,000              3,888,000
  Accrued interest receivable and other assets                                 12,166,000             14,162,000
-----------------------------------------------------------------------------------------------------------------
Total assets                                                                $ 706,693,000          $ 593,445,000
=================================================================================================================
Liabilities and Shareholders' Equity
  Deposits:
    Demand, noninterest bearing                                             $ 207,002,000          $ 141,389,000
    Demand, interest bearing                                                   88,285,000            100,871,000
    Savings                                                                   110,204,000             97,833,000
    Time                                                                      227,719,000            178,096,000
-----------------------------------------------------------------------------------------------------------------
  Total Deposits                                                              633,210,000            518,189,000
  Accrued interest payable and other liabilities                               13,629,000             21,951,000
-----------------------------------------------------------------------------------------------------------------
Total liabilities                                                             646,839,000            540,140,000
-----------------------------------------------------------------------------------------------------------------
Commitments and contingencies (Notes 5 and 11)
Shareholders' Equity:
  Preferred stock-no par value; authorized
    1,000,000 shares; no shares issued
  Common stock - no par value; authorized 25,000,000 shares;
    issued and outstanding: 6,721,998  shares in 2000
    and 6,440,257  shares in 1999                                              44,472,000             40,223,000
  Shares held in deferred compensation trust (271,862 shares in 2000
    and 247,148 shares in 1999), net of deferred obligation                             -                      -
  Retained earnings                                                            16,444,000             17,784,000
  Accumulated other comprehensive income (loss), net of taxes of
    $738,000 in 2000 and $3,267,000 in 1999                                    (1,062,000)            (4,702,000)
-----------------------------------------------------------------------------------------------------------------
Shareholders' equity                                                           59,854,000             53,305,000
-----------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity                                  $ 706,693,000          $ 593,445,000
=================================================================================================================
</TABLE>
See notes to Consolidated Financial Statements


                                       43
<PAGE>



Consolidated Statements of Income
Central Coast Bancorp and Subsidiary
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
Years Ended December 31,                      2000                1999                    1998
------------------------------------------------------------------------------------------------------------
<S>                                        <C>                  <C>                    <C>
Interest Income
   Loans (including fees)                   $ 41,405,000        $ 32,234,000            $ 27,037,000
   Investment securities                       8,945,000           9,127,000               7,473,000
   Fed funds sold                              1,065,000             156,000               2,844,000
------------------------------------------------------------------------------------------------------------
       Total interest income                  51,415,000          41,517,000              37,354,000
------------------------------------------------------------------------------------------------------------
Interest Expense
   Interest on deposits                       17,921,000          13,218,000              13,319,000
   Other                                         369,000             430,000                       -
------------------------------------------------------------------------------------------------------------
       Total interest expense                 18,290,000          13,648,000              13,319,000
------------------------------------------------------------------------------------------------------------
Net Interest Income                           33,125,000          27,869,000              24,035,000
Provision for Loan Losses                     (3,983,000)         (1,484,000)               (159,000)
------------------------------------------------------------------------------------------------------------
Net Interest Income after
   Provision for Loan Losses                  29,142,000          26,385,000              23,876,000
------------------------------------------------------------------------------------------------------------

Noninterest Income
   Service charges on deposits                 1,749,000           1,348,000               1,235,000
   Other income                                  684,000             883,000                 849,000
------------------------------------------------------------------------------------------------------------
      Total noninterest income                 2,433,000           2,231,000               2,084,000
------------------------------------------------------------------------------------------------------------

Noninterest Expenses
   Salaries and benefits                      10,081,000           9,116,000               8,213,000
   Occupancy                                   1,479,000           1,301,000               1,049,000
   Furniture and equipment                     1,702,000           1,338,000               1,005,000
   Other                                       4,146,000           4,288,000               3,592,000
------------------------------------------------------------------------------------------------------------
     Total noninterest expenses               17,408,000          16,043,000              13,859,000
------------------------------------------------------------------------------------------------------------
Income Before Income Taxes                    14,167,000          12,573,000              12,101,000
Provision for Income Taxes                     5,241,000           4,522,000               4,948,000
------------------------------------------------------------------------------------------------------------
       Net Income                            $ 8,926,000         $ 8,051,000             $ 7,153,000
============================================================================================================

Basic Earnings per Share                          $ 1.17              $ 1.03                  $ 0.98
Diluted Earnings per Share                        $ 1.14              $ 1.00                  $ 0.90
============================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements

                                       44
<PAGE>



Consolidated Statements of Cash Flows
Central Coast Bancorp and Subsidiary
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
Years ended December 31,                                                 2000                1999                1998
----------------------------------------------------------------------------------------------------------------------
<S>                                                              <C>                 <C>                 <C>
Cash Flows from Operations:
   Net income                                                     $ 8,926,000         $ 8,051,000         $ 7,153,000
   Reconciliation of net income to net cash provided
   by operating activities:
     Provision for loan losses                                      3,983,000           1,484,000             159,000
     Depreciation                                                   1,266,000             936,000             656,000
     Amortization and accretion                                         8,000             136,000              (6,000)
     Deferred income taxes                                         (1,852,000)           (871,000)           (333,000)
     Loss (gain) on sale of securities                                194,000             (45,000)            (58,000)
     Net loss on sale of equipment                                     19,000             126,000                   -
     Gain on other real estate owned                                  (67,000)                  -             (20,000)
   Decrease (increase) in accrued interest receivable
    and other assets                                                1,077,000          (2,241,000)            129,000
   Increase in accrued interest payable and other liabilities       3,492,000           2,110,000             364,000
   Increase in deferred loan fees                                      25,000              47,000             106,000
----------------------------------------------------------------------------------------------------------------------
       Net cash provided by operations                             17,071,000           9,733,000           8,150,000
----------------------------------------------------------------------------------------------------------------------
Cash Flows from Investing Activities:
   Proceeds from maturities of available-for-sale securities       70,751,000         100,042,000         107,423,000
   Proceeds from maturities of held-to-maturity securities                  -                   -          20,959,000
   Proceeds from sale of available-for-sale securities             19,806,000           5,988,000           9,119,000
   Purchase of available-for-sale securities                      (91,174,000)        (89,498,000)       (176,593,000)
   Net change in loans held for sale                                        -           6,168,000          (4,837,000)
   Net increase in loans                                          (78,031,000)        (84,049,000)        (56,812,000)
   Proceeds from sale of other real estate owned                            -             387,000             125,000
   Proceeds from sale of equipment                                          -              26,000                   -
   Purchases of equipment                                          (1,132,000)         (2,087,000)         (1,724,000)
----------------------------------------------------------------------------------------------------------------------
       Net cash used in investing activities                      (79,780,000)        (63,023,000)       (102,340,000)
----------------------------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities:
   Net increase in deposit accounts                               115,021,000          28,997,000          38,891,000
   Net increase (decrease) in other borrowings                    (11,744,000)         16,950,000            (289,000)
   Proceeds from sale of stock                                         76,000           1,098,000             264,000
   Shares repurchased                                              (6,111,000)         (2,682,000)           (387,000)
----------------------------------------------------------------------------------------------------------------------
       Net cash provided by financing activities                   97,242,000          44,363,000          38,479,000
----------------------------------------------------------------------------------------------------------------------
  Net increase (decrease) in cash and equivalents                  34,533,000          (8,927,000)        (55,711,000)
Cash and equivalents, beginning of year                            39,959,000          48,886,000         104,597,000
----------------------------------------------------------------------------------------------------------------------
Cash and equivalents, end of year                                $ 74,492,000        $ 39,959,000        $ 48,886,000
======================================================================================================================
Noncash Investing and Financing Activities:
The Company obtained $335,000 of real  estate (OREO) in 1999 in connection  with  forclosures of delinquent loans
(none in 2000 or 1998).  In 2000, 1999 and 1998 stock  option  exercises  and stock repurchases totaling $20,000,
$666,000 and $384,000, respectively were performed through a "stock for stock" exercise under the Company's stock
option and deferred compensation plans (see Note 9).
----------------------------------------------------------------------------------------------------------------------
Other Cash Flow Information:
   Interest paid                                                 $ 17,121,000        $ 13,733,000        $ 13,100,000
   Income taxes paid                                                5,970,000           3,569,000           4,619,000
======================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements

                                       45
<PAGE>






Consolidated Statements of Shareholders' Equity
Central Coast Bancorp and Subsidiary
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
                                                                          Accumulated Other
                                                                            Comprehensive
                                                                           Income (Loss) -
                                                                           Net Unrealized
                                                                             Gain (Loss)
                                                                            on Available-
Years Ended December 31,                     Common Stock        Retained     For-Sale
2000, 1999 and 1998                        Shares     Amount     Earnings    Securities     Total
------------------------------------------------------------------------------------------------------
<S>                                     <C>        <C>          <C>            <C>       <C>
 Balances, January 1, 1998               5,460,586 $ 31,644,000 $11,979,000    $ 101,000 $ 43,724,000
    Net income                                   -            -   7,153,000            -    7,153,000
    Changes in unrealized gains
       on securities available for sale,
       net of taxes of $223,000                  -            -           -      320,000      320,000
    Reclassification adjustment for
       gains included in income,
       net of taxes of $40,000                   -            -           -      (58,000)     (58,000)
                                                                                          ------------
    Comprehensive income                                                                    7,415,000
                                                                                          ------------
    10% stock dividend                     546,059    9,399,000  (9,399,000)           -            -
    Stock options and warrants
      exercised                            153,019      647,000           -            -      647,000
    Shares repurchased                     (47,619)    (770,000)          -            -     (770,000)
    Tax benefit of stock options
      exercised                                  -      183,000           -            -      183,000
------------------------------------------------------------------------------------------------------
 Balances, December 31, 1998             6,112,045   41,103,000   9,733,000      363,000   51,199,000
    Net income                                   -            -   8,051,000            -    8,051,000
    Changes in unrealized gains (losses)
       on securities available for sale,
       net of taxes of $3,502,000                -            -           -   (5,039,000)  (5,039,000)
    Reclassification adjustment for
       gains included in income,
       net of taxes of $19,000                   -            -           -      (26,000)     (26,000)
                                                                                          ------------
    Comprehensive income                                                                    2,986,000
                                                                                          ------------
    Stock options and warrants
      exercised                            534,232    1,764,000           -            -    1,764,000
    Shares repurchased                    (206,020)  (3,348,000)          -            -   (3,348,000)
    Tax benefit of stock options
      exercised                                  -      704,000           -            -      704,000
------------------------------------------------------------------------------------------------------
Balances, December 31, 1999              6,440,257   40,223,000  17,784,000   (4,702,000)  53,305,000
    Net income                                   -            -   8,926,000            -    8,926,000
    Changes in unrealized gains
       on securities available for sale,
       net of taxes of $2,449,000                -            -           -    3,526,000    3,526,000
    Reclassification adjustment for
       gains included in income,
       net of taxes of $80,000                   -            -           -      114,000      114,000
                                                                                          ------------
    Comprehensive income                                                                   12,566,000
                                                                                          ------------
    10% stock dividend                     644,026   10,266,000 (10,266,000)                        -
    Stock options exercised                 12,998       96,000           -            -       96,000
    Shares repurchased                    (375,283)  (6,131,000)                           (6,131,000)
    Tax benefit of stock options
      exercised                                  -       18,000           -            -       18,000
------------------------------------------------------------------------------------------------------
Balances, December 31, 2000              6,721,998 $ 44,472,000 $16,444,000  $(1,062,000)$ 59,854,000
------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements

                                       46
<PAGE>




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Central Coast Bancorp and Subsidiary
Years ended December 31, 2000, 1999 and 1998

Note 1.  Significant  Accounting  Policies and  Operations.  The  consolidated
financial  statements  include  Central Coast Bancorp (the  "Company") and its
wholly-owned  subsidiary,  Community Bank of Central  California (the "Bank").
All  material   intercompany  accounts  and  transactions  are  eliminated  in
consolidation.  The accounting  and reporting  policies of the Company and the
Bank  conform  to  accounting  principles  generally  accepted  in the  United
States of America and prevailing  practices  within the banking  industry.  In
preparing   such  financial   statements,   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  revenues  and  expenses
for  the  period.   Actual  results  could  differ  significantly  from  those
estimates.   Material   estimates   that  are   particularly   susceptible  to
significant  changes  in the near  term  relate  to the  determination  of the
allowance  for  loan  losses  and the  carrying  value of  other  real  estate
owned.  Management  uses  information  provided by an independent  loan review
service  in  connection  with  the  determination  of the  allowance  for loan
losses.

Community  Bank  of  Central  California  operates  ten  full  service  branch
offices in Monterey,  Santa Cruz and San Benito  Counties,  serving  small and
medium sized  business  customers,  as well as  individuals.  The Bank focuses
on business  loans and deposit  services to customers  throughout  its service
area.

Investment  Securities  are  classified  at the time of  purchase  into one of
three   categories:    held-to-maturity,    trading   or   available-for-sale.
Investment   securities   classified  as  held-to-maturity   are  measured  at
amortized  cost based on the  Company's  positive  intent and  ability to hold
such  securities  to  maturity.   Trading   securities  are  bought  and  held
principally  for the purpose of selling  them in the near term and are carried
at market  value with a  corresponding  recognition  of  unrecognized  holding
gain  or  loss  in  the  results  of  operations.   The  remaining  investment
securities  are  classified as  available-for-sale  and are measured at market
value with a  corresponding  recognition  of the  unrealized  holding  gain or
loss (net of tax  effect)  as a separate  component  of  shareholders'  equity
until realized.  Accretion of discounts and  amortization of premiums  arising
at  acquisition  are  included  in  income  using  methods  approximating  the
effective  interest  method.  Gains  and  losses on sales of  investments,  if
any, are determined on a specific identification basis.

Loans  are  stated  at  the  principal  amount  outstanding,  reduced  by  any
charge-offs  or  specific  valuation  allowance.  Loan  origination  fees  and
certain  direct  loan  origination  costs are  deferred  and the net amount is
recognized  using the effective  yield method,  generally over the contractual
life of the loan.

Interest  income is accrued as earned.  The  accrual of  interest  on loans is
discontinued  and any accrued and unpaid  interest is reversed when  principal
or interest  is ninety days past due,  when  payment in full of  principal  or
interest is not expected or when a portion of the  principal  balance has been
charged  off.  Income  on such  loans is then  recognized  only to the  extent
that  cash is  received  and where  the  future  collection  of  principal  is
probable.  Senior  management may grant a waiver from  nonaccrual  status if a
loan  is  well  secured  and in the  process  of  collection.  When a loan  is
placed on nonaccrual  status,  the accrued and unpaid  interest  receivable is
reversed and the loan is  accounted  for on the cash or cost  recovery  method
thereafter,  until  qualifying  for return to  accrual  status.  Generally,  a
loan may be returned  to accrual  status when all  delinquent  interest  and
principal  become  current in accordance  with the original  terms of the loan
agreement or when the loan is both well secured and in process of collection.

                                       47
<PAGE>


The  allowance for loan losses is an amount that  management  believes will be
adequate  to absorb  losses  inherent  in existing  loans and  commitments  to
extend  credit,   based  on  evaluations  of  collectibility  and  prior  loss
experience.  The  allowance  is  established  through a  provision  charged to
expense.  Loans are charged  against the allowance  when  management  believes
that the  collectibility  of the  principal is  unlikely.  In  evaluating  the
adequacy of the  allowance,  management  considers  numerous  factors  such as
changes in the composition of the portfolio,  overall portfolio quality,  loan
concentrations,  specific  problem loans,  and current and  anticipated  local
economic conditions that may affect the borrowers' ability to pay.

A loan is  impaired  when,  based on current  information  and  events,  it is
probable  that  the  Company  will  be  unable  to  collect  all  amounts  due
according  to the  contractual  terms of the loan  agreement.  Impaired  loans
are  measured  based  on the  present  value of  expected  future  cash  flows
discounted  at  the  loan's  effective   interest  rate  or,  as  a  practical
expedient,  at the  loan's  observable  market  price or the fair value of the
collateral if the loan is collateral-dependent.

Real estate and other assets  acquired in  satisfaction  of  indebtedness  are
recorded  at the lower of  estimated  fair  market  value  net of  anticipated
selling costs or the recorded  loan amount,  and any  difference  between this
and the loan  amount is  treated as a loan loss.  Costs of  maintaining  other
real  estate  owned,  subsequent  write  downs  and  gains or  losses on the
subsequent sale are reflected in current earnings.

Premises and equipment are stated at cost less  accumulated  depreciation  and
amortization.  Depreciation  and  amortization are computed on a straight-line
basis  over the lesser of the lease  terms or  estimated  useful  lives of the
assets, which are generally 3 to 30 years.

Intangible  assets  representing  the  excess of the  purchase  price over the
fair  value  of  tangible  net  assets  acquired,  are  being  amortized  on a
straight-line basis over seven years and are included in other assets.

Stock  Compensation.  The Company  accounts for its  stock-based  awards using
the intrinsic  value method in accordance  with  Accounting  Principles  Board
No.  25,   Accounting   for  Stock  Issued  to   Employees   and  its  related
interpretations.   No   compensation   expense  has  been  recognized  in  the
financial   statements  for  employee  stock  arrangements.   Note  9  to  the
Consolidated  Financial  Statements  contains  a  summary  of  the  pro  forma
effects to reported  net income and  earnings  per share as if the Company had
elected  to  recognize  compensation  cost  based  on the  fair  value  of the
options  granted  at  grant  date as  prescribed  by  Statement  of  Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation.

Income taxes are provided  using the asset and  liability  method.  Under this
method,  deferred tax assets and  liabilities  are  recognized  for the future
tax  consequences  of  differences  between the financial  statement  carrying
amounts of existing  assets and  liabilities  and their  respective tax bases.
Deferred tax assets and  liabilities  arise  principally  from  differences in
reporting   provisions  for  loan  losses,   interest  on  nonaccrual   loans,
depreciation,  state  franchise  taxes  and  accruals  related  to the  salary
continuation  plan.  Deferred tax assets and  liabilities  are measured  using
enacted tax rates  expected  to apply to taxable  income in the years in which
those  temporary  differences  are expected to be  recovered  or settled.  The
effect on  deferred  tax  assets and  liabilities  of a change in tax rates is
recognized in income in the period that includes the enactment date.

Earnings  per share.  Basic  earnings  per share is computed  by dividing  net
income by the weighted  average of common  shares  outstanding  for the period
(7,612,000,  7,779,000  and 7,305,000 in 2000,  1999 and 1998,  respectively).
Diluted  earnings per share  reflects the potential  dilution that could occur
if  outstanding  stock options and stock  purchase  warrants  were  exercised.
Diluted  earnings  per  share  is  computed  by  dividing  net  income  by the

                                       48
<PAGE>

weighted  average common shares  outstanding  for the period plus the dilutive
effect of options and warrants  (225,000,  270,000,  and 661,000 in 2000, 1999
and  1998,  respectively).   All  earnings  per  share  information  has  been
adjusted  retroactively  for stock  dividends of 10% in January 2001, 2000 and
1998, and a 5-for-4 stock split in January 1999.

Stock  dividend.  On January  29, 2001 the Board of  Directors  declared a 10%
stock  dividend which was  distributed  on February 28, 2001, to  shareholders
of record as of  February  14,  2001.  All share and per share data  including
stock  option and  warrant  information  have been  retroactively  adjusted to
reflect the stock dividend.

Comprehensive  income.  In 1998 the Company  adopted  Statement  of  Financial
Accounting  Standards (SFAS) No. 130, Reporting  Comprehensive  Income,  which
requires  that an  enterprise  report,  by  major  components  and as a single
total,  the change in net assets  during the  period  from  nonowner  sources.
Such  amounts  have  been   reported  in  the   accompanying   statements   of
shareholders' equity.

Segment   reporting.   In  1998  the  Company  adopted  Financial   Accounting
Standards   Statement  (FAS)  No.  131,   Disclosures  about  Segments  of  an
Enterprise  and  Related  Information,  which  establishes  annual and interim
reporting  standards  for  an  enterprise's  operating  segments  and  related
disclosures  about  its  products,   services,   geographic  areas  and  major
customers.  Management  has  determined  that  since  all  of  the  commercial
banking  products  and services  offered by the Company are  available in each
branch  office of the Bank,  all branch  offices are  located  within the same
economic  environment and management does not allocate  resources based on the
performance   of  different   lending  or   transaction   activities,   it  is
appropriate  to aggregate the Bank branch  offices and report them as a single
operating segment.


Reclassification  of  investment  securities.   Effective  July  1,  1998  the
Company adopted  Statement of Financial  Accounting  Standards (SFAS) No. 133,
"Accounting  for  Derivative   Instruments  and  Hedging  Activities",   which
establishes  accounting  and reporting  standards for  derivative  instruments
and  hedging  activities.  In  connection  with the  adoption  of SFAS 133 the
Company   reclassified   certain   securities   with  an  amortized   cost  of
$18,085,000  and  a  fair  value  of  $18,202,000  from   held-to-maturity  to
available-for-sale.  Adoption  of  this  statement  did  not  have  any  other
impact on the Company's  consolidated  financial position and had no impact on
the Company's results of operations or cash flows.


Note 2. Cash and Due from Banks.  The  Company,  through its bank  subsidiary,
is required to  maintain  reserves  with the  Federal  Reserve  Bank.  Reserve
requirements  are based on a  percentage  of  deposits.  At December  31, 2000
the  Company  maintained  reserves  of  approximately  $703,000 in the form of
vault  cash  and  balances  at  the  Federal  Reserve  to  satisfy  regulatory
requirements.

                                       49
<PAGE>

Note 3. Securities.  The Company's investment securities portfolio as of
December 31, 2000 and 1999 consisted of the following:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
                                           Amortized    Unrealized    Unrealized     Market
In thousands                                  Cost         Gain          Loss        Value
---------------------------------------------------------------------------------------------
<S>                                        <C>              <C>         <C>        <C>
December 31, 2000
Available for sale securities:
U.S. Treasury and Agency securities        $  85,589         $ 169      $   631    $  85,127
State & Political Subdivision                 45,851            93        1,107       44,837
Corporate Debt Securities                     21,473             -          324       21,149
Other                                          1,163             -            -        1,163
---------------------------------------------------------------------------------------------
Total investment securities                $ 154,076         $ 262      $ 2,062    $ 152,276
=============================================================================================
December 31, 1999
Available for sale securities:
U.S. Treasury and Agency securities        $ 103,368         $   8      $ 4,506    $  98,870
State & Political Subdivision                 36,851             -        3,349       33,502
Corporate Debt Securities                     11,500             -          121       11,379
Other                                          1,684             -            -        1,684
---------------------------------------------------------------------------------------------
Total investment securities                $ 153,403         $   8      $ 7,976    $ 145,435
=============================================================================================
</TABLE>

At December  31,  2000 and 1999,  securities  with a book value of  $95,908,000
and  $80,593,000  were pledged as  collateral  for deposits of public funds and
other purposes as required by law or contract.

U.S.  Treasury  Securities with a market value of  $19,806,000,  $6,033,000 and
$9,119,000,  and an amortized  cost of  $20,000,000,  $5,988,000 and $9,061,000
were sold  during the fiscal  years ended  December  31,  2000,  1999 and 1998,
respectively.  In 2000,  such  sales  resulted  in  gross  realized  losses  of
$194,000  and  no  gross  unrealized  gains.  In  1999  and  1998,  such  sales
resulted in gross  realized gains of $45,000 and $58,000,  respectively  and no
gross unrealized losses.

Note 4.  Loans  and  allowance  for  loan  losses.  The  Company's  business is
concentrated   in  Monterey   County,   California  whose  economy   is  highly
dependent  on  the  agricultural  industry.  As  a result,  the  Company  lends
money  to  individuals   and  companies   dependent   upon   the   agricultural
industry.  In  addition,  the  Company has  significant  extensions  of  credit
and  commitments  to  extend  credit  which  are  secured by real  estate,  the
ultimate  recovery  of  which  is   generally   dependent   on  the  successful
operation,  sale or refinancing of  real  estate,  totaling  approximately $333
million.  The Company  monitors  the  effects  of current and  expected  market
conditions  and  other  factors on  the  collectibility  of real estate  loans.
When,  in   management's  judgment,  these  loans   are  impaired,  appropriate
provisions  for  losses   are  recorded.  The   more  significant   assumptions
management  considers involve  estimates  of the following:  lease,  absorption
and sale rates; real estate values  and  rates of return;  operating  expenses;
inflation;  and  sufficiency  of  collateral  independent  of  the  real estate
including, in limited instances, personal guarantees.

In  extending  credit and  commitments  to  borrowers,  the  Company  generally
requires  collateral  and/or  guarantees  as security.  The  repayment  of such
loans is  expected to come from  cash  flow or from  proceeds  from the sale of
selected  assets of the  borrowers.  The  Company's  requirement for collateral
and/or  guarantees is  determined  on a case-by-case  basis in connection  with
management's   evaluation   of   the  credit   worthiness   of  the   borrower.
Collateral  held   varies  but  may  include  accounts  receivable,  inventory,
property, plant  and  equipment,  income-producing  properties,  residences and
other  real  property.  The Company  secures its  collateral by perfecting  its
interest  in   business   assets,   obtaining   deeds  of  trust,  or  outright
possession   among   other  means.   Loan  losses  from  lending   transactions
related to  real  estate and agriculture  compare  favorably with the Company's
loan losses on its loan portfolio as a whole.

                                       50
<PAGE>

The activity in the allowance for loan losses is summarized as follows:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
In thousands                                            2000                     1999                   1998
-------------------------------------------------------------------------------------------------------------
<S>                                                  <C>                      <C>                    <C>
   Balances, beginning of year                       $ 5,596                  $ 4,352                $ 4,223
   Provision charged to expense                        3,983                    1,484                    159
   Loans charged off                                    (392)                    (400)                  (177)
   Recoveries                                            184                      160                    147
-------------------------------------------------------------------------------------------------------------
   Balance, end of year                              $ 9,371                  $ 5,596                $ 4,352
=============================================================================================================
</TABLE>

In  determining  the provision for estimated  losses  related to specific major
loans,  management  evaluates  its  allowance  on  an  individual  loan  basis,
including  an  analysis  of the credit  worthiness,  cash  flows and  financial
status  of the  borrower,  and the  condition  and the  estimated  value of the
collateral.  Specific  valuation  allowances  for secured loans are  determined
by the excess of recorded  investment  in the loan over the fair  market  value
or net realizable value where  appropriate,  of the collateral.  In determining
overall  general  valuation  allowances  to be  maintained  and the  loan  loss
allowance ratio,  management  evaluates many factors  including  prevailing and
forecasted  economic  conditions,  regular  reviews  of the  quality  of loans,
industry  experience,  historical loss  experience,  composition and geographic
concentrations  of the loan  portfolio,  the  borrowers'  ability  to repay and
repayment performance and estimated collateral values.

Management  believes  that the  allowance for loan losses at December 31, 2000
is  prudent  and  warranted,   based  on  information   currently   available.
However,  no prediction  of the ultimate  level of loans charged off in future
years can be made with any certainty.

Non-performing loans at December 31 are summarized below:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
In thousands                                                                2000                      1999
-----------------------------------------------------------------------------------------------------------
<S>                                                                      <C>                        <C>
Past due 90 days or more and still accruing:
   Real estate                                                           $    10                   $   303
   Commercial                                                                215                        51
   Consumer and other                                                          5                         -
-----------------------------------------------------------------------------------------------------------
                                                                             230                       354
-----------------------------------------------------------------------------------------------------------
Nonaccrual:
   Real estate                                                                 -                     1,565
   Commercial                                                                329                        11
   Consumer and other                                                          -                         -
-----------------------------------------------------------------------------------------------------------
                                                                             329                     1,576
-----------------------------------------------------------------------------------------------------------
Restructured (in compliance with modified
   terms)- Commercial                                                      1,010                         -
-----------------------------------------------------------------------------------------------------------
Total nonperforming loans                                                $ 1,569                   $ 1,930
===========================================================================================================
</TABLE>

Interest  due but  excluded  from  interest  income  on  nonaccrual  loans was
approximately   $64,000,   $82,000,   and  $45,000  in  2000,  1999  and  1998
respectively.  In 1999 and 1998,  interest  income  recognized  from  payments
received on nonaccrual loans was $21,000 and $17,000,  respectively  (none was
recognized in 2000).

At December 31, 2000,  the recorded  investment  in loans that are  considered
impaired  under SFAS No. 114 was  $1,691,000 of which $215,000 are included as
nonaccrual  loans above,  and  $1,010,000 are included as  restructured  loans
above.  At  December  31,  1999,  the  recorded  investment  in loans that are
considered  impaired  was  $2,165,000  of which  $1,568,000  are  included  as
nonaccrual  loans  above.   Such  impaired  loans  had  valuation   allowances
totalling  $809,000 and  $821,000,  in 2000 and 1999,  respectively,  based on

                                       51
<PAGE>

the  estimated   fair  values  of  the   collateral.   The  average   recorded
investment  in  impaired  loans  during  2000 and  1999,  was  $2,129,000  and
$2,357,000,   respectively.   The  Company   recognized   interest  income  on
impaired  loans of  $161,000,  $92,000  and  $64,000  in 2000,  1999 and 1998,
respectively  (including  interest income of $98,000 on restructured  loans in
2000).

The Company held no real estate acquired by foreclosure at December 31, 2000
or 1999.

Note 5.  Premises and  equipment.  Premises  and  equipment at December 31 are
summarized as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
In thousands                                                                           2000                    1999
--------------------------------------------------------------------------------------------------------------------
<S>                                                                                   <C>                     <C>
Land                                                                                $   121                 $   121
Building                                                                                260                     215
Furniture and equipment                                                               6,390                   5,982
Leasehold improvement                                                                 2,223                   2,067
--------------------------------------------------------------------------------------------------------------------
                                                                                      8,994                   8,385
Accumulated depreciation and amortization                                            (5,259)                 (4,497)
--------------------------------------------------------------------------------------------------------------------
Premises and equipment, net                                                         $ 3,735                 $ 3,888
--------------------------------------------------------------------------------------------------------------------
</TABLE>

The  Company's  facilities  leases  expire in March 2003 through  October 2009
with  options  to  extend  for  five  to  fifteen  years.  These  include  two
facilities  leased from  shareholders at terms and conditions which management
believes are consistent  with the market.  Rental rates are adjusted  annually
for changes in certain  economic  indices.  Rental  expense was  approximately
$634,000,  $565,000 and $456,000,  including  lease expense to shareholders of
$122,000,  $121,000  and  $134,000 in 2000,  1999 and 1998  respectively.  The
minimum  annual  rental   commitments   under  these  leases,   including  the
remaining rental commitment under the leases to shareholders, are as follows:

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
                                                                                             Operating
In thousands                                                                                   Leases
---------------------------------------------------------------------------------------------------------
       <S>                                                                                         <C>
       2001                                                                                        $ 665
       2002                                                                                          665
       2003                                                                                          607
       2004                                                                                          573
       2005                                                                                          467
       Thereafter                                                                                  1,111
---------------------------------------------------------------------------------------------------------
Total                                                                                            $ 4,088
---------------------------------------------------------------------------------------------------------
</TABLE>


Note 6. Income Taxes.  The provision for income taxes is as follows:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
In thousands                                      2000                  1999                  1998
-----------------------------------------------------------------------------------------------------
<S>                                           <C>                   <C>                   <C>
   Current:
     Federal                                   $ 5,160               $ 3,863               $ 3,946
     State                                       1,933                 1,530                 1,335
-----------------------------------------------------------------------------------------------------
     Total                                       7,093                 5,393                 5,281
-----------------------------------------------------------------------------------------------------
   Deferred:
     Federal                                    (1,432)                 (667)                 (290)
     State                                        (420)                 (204)                  (43)
---------------------------------------------------------------------------------------------------
     Total                                      (1,852)                 (871)                 (333)
---------------------------------------------------------------------------------------------------
   Total                                       $ 5,241               $ 4,522               $ 4,948
-----------------------------------------------------------------------------------------------------
</TABLE>

                                       52
<PAGE>

A  reconciliation  of the Federal  income tax rate to the effective tax rate is
as follows:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
                                                             2000                1999               1998
----------------------------------------------------------------------------------------------------------
<S>                                                          <C>                 <C>                <C>
   Statutory Federal income tax rate                         35.0%               35.0%              35.0%
   State income taxes (net of
     Federal income tax benefit)                              7.1%                7.0%               7.1%
   Tax exempt interest income                                (5.0%)              (5.4%)             (0.8%)
   Other                                                     (0.1%)              (0.6%)             (0.4%)
----------------------------------------------------------------------------------------------------------
   Effective tax rate                                        37.0%               36.0%              40.9%
----------------------------------------------------------------------------------------------------------
</TABLE>


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

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
In thousands                                                              2000                       1999
----------------------------------------------------------------------------------------------------------
<S>                                                                   <C>                        <C>
Deferred Tax assets (liabilities):
   Provision for loan losses                                           $ 4,053                    $ 2,287
   Unrealized (gain) loss on available for sale securities                 738                      3,267
   Salary continuation plan                                                618                        438
   Depreciation and amortization                                           258                        308
   State income taxes                                                      251                        196
   Excess serving rights                                                    15                         74
   Interest on nonaccrual loans                                             51                         72
   Accrual to cash adjustments                                               -                         15
   Other                                                                    26                         33
----------------------------------------------------------------------------------------------------------
Net deferred tax asset                                                 $ 6,010                    $ 6,690
----------------------------------------------------------------------------------------------------------
</TABLE>

Note  7.  Detail  of  Other  Expense.  Other  expense  for  the  years  ended
December 31, 2000, 1999 and 1998 consists of the following:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
In thousands                                                 2000                   1999                    1998
-----------------------------------------------------------------------------------------------------------------
<S>                                                         <C>                    <C>                     <C>
   Marketing                                                $ 644                  $ 475                   $ 335
   Professional fees                                          430                    452                     461
   Customer expenses                                          413                    398                     431
   Stationary and supplies                                    377                    444                     326
   Data processing                                            314                    306                     386
   Amortization of intangibles                                257                    257                     257
   Shareholder and director                                   253                    250                     262
   Insurance                                                  216                    180                     196
   Dues and assessments                                       179                    139                     109
   Other                                                    1,063                  1,387                     829
-----------------------------------------------------------------------------------------------------------------
Total                                                     $ 4,146                $ 4,288                 $ 3,592
-----------------------------------------------------------------------------------------------------------------
</TABLE>

Note 8.  Stock  Purchase  Warrants.  During  1995  and  1994,  warrants  were
issued in connection  with the sale of the  Company's  common stock at a rate
of one warrant for every share of stock  purchased.  The warrants  expired on
June 30,  1999.  During  1999  and  1998,  respectively  159,845  and  19,200
warrants were exercised. During 1999, 7,129 options expired.

Note 9.  Employee  Benefit  Plans.  The  Company has two stock  option  plans
under which  incentive  stock  options or  nonqualified  stock options may be
granted to certain key  employees or directors  to purchase  authorized,  but

                                       53
<PAGE>

unissued,  common  stock.  Shares may be  purchased  at a price not less than
the fair  market  value of such  stock on the  date of  grant.  Options  vest
over  various  periods  not in  excess  of ten  years  from date of grant and
expire not more than ten years from date of grant.

Activity  under the stock option plans  adjusted for stock  dividends and stock
splits is as follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
                                                                                            Weighted
                                                                                             Average
                                                        Shares        Price per share         Price
------------------------------------------------------------------------------------------------------
<S>                                                  <C>            <C>          <C>          <C>
   Balances, January 1, 1998                          1,264,814      $ 1.92  -  13.64        $ 4.91
     Granted (wt. avg. fair value $4.63 per share)       82,430       12.73  -  15.54         13.81
     Canceled                                           (26,620)       8.12  -   8.12          8.12
     Exercised                                         (165,951)       1.92  -   8.12          3.50
------------------------------------------------------------------------------------------------------
   Balances, December 31, 1998                        1,154,673        1.92  -  15.54          5.67
     Granted (wt. avg. fair value $4.60 per share)       22,914       13.72  -  13.72         13.72
     Expired                                            (12,727)       8.12  -   8.12          8.12
     Exercised                                         (486,574)       1.92  -   8.12          2.49
------------------------------------------------------------------------------------------------------
   Balances, December 31, 1999                          678,286        3.90  -  15.54          8.18
     Granted (wt. avg. fair value $5.28 per share)      192,775       14.55  -  16.36         14.63
     Expired                                             (6,600)      14.55  -  14.55         14.55
     Exercised                                          (14,297)       3.90  -   8.22          6.67
------------------------------------------------------------------------------------------------------
   Balances, December 31, 2000                          850,164      $ 3.90  -  16.36        $ 9.62
------------------------------------------------------------------------------------------------------
</TABLE>

Additional information regarding options outstanding as of December 31, 2000
is as follows:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
                              Options Outstanding                      Options Exercisable
                       ---------------------------------            -------------------------
                                Weighted Average
                                   Remaining      Weighted                        Weighted
       Range of         Number    Contractual      Average           Number        Average
    Exercise Prices  Outstanding  Life (years)  Exercise Price    Exercisable  Exercise Price
----------------------------------------------------------------------------------------------
<S><C>        <C>     <C>            <C>           <C>             <C>           <C>
   $ 3.90  -  6.65     203,941        4.1           $ 5.26          201,526       $ 5.27
     8.12  -  8.22     348,879        5.9             8.13          348,879         8.13
    12.73  - 16.36     297,344        8.5            14.36           76,885        13.89
----------------------------------------------------------------------------------------------
   $ 3.90  - 16.36     850,164        6.4           $ 9.62          627,290       $ 7.92
----------------------------------------------------------------------------------------------
</TABLE>

At December 31, 2000, 1,433,399 shares were available for additional grants.

401(k) Savings Plan

The Company has a 401(k)  Savings  Plan under which  eligible  employees  may
elect to make tax  deferred  contributions  from their  annual  salary,  to a
maximum  established  annually  by the IRS.  The  Company  matches 25% of the
employees'  contributions.  The Company may make additional  contributions to
the  plan  at the  discretion  of  the  Board  of  Directors.  All  employees
meeting age and service  requirements  are  eligible  to  participate  in the
Plan.  Company   contributions  vest  after  3  years  of  service.   Company
contributions  during  2000,  1999  and  1998  which  are  funded  currently,
totaled $114,000, $94,000 and $68,000, respectively.

                                       54
<PAGE>

Salary Continuation Plan

The Company has a salary  continuation  plan for three  officers which provides
for  retirement  benefits  upon  reaching  age 63.  The  Company  accrues  such
post-retirement  benefits  over the  vesting  periods  (of  five or ten  years)
based on a  discount  rate of 7.5%.  In the event of a change in control of the
Company,   the  officers'  benefits  will  fully  vest.  The  Company  recorded
compensation  expense of  $292,000,  $256,000  and  $225,000 in 2000,  1999 and
1998   respectively.    Accrued   compensation   payable   under   the   salary
continuation  plan  totaled  $1,140,000  and  $848,000 at December 31, 2000 and
1999, respectively.

Deferred Compensation Plan

The  Company has a deferred  compensation  plan for the benefit of the Board of
Directors and certain  officers.  In addition to the deferral of  compensation,
the plan allows  participants  the  opportunity to defer taxable income derived
from the exercise of stock  options.  The  participant's  may,  after making an
election  to defer  receipt of the  option  shares  for a  specified  period of
time, use a  "stock-for-stock"  exercise to tender to the Company mature shares
with  a  fair  value  equal  to  the  exercise   price  of  the  stock  options
exercised.  The Company  simultaneously  delivers new shares to the participant
equal  to the  value of  shares  surrendered  and the  remaining  shares  under
option are placed in a trust  administered  by the Company,  to be  distributed
in accordance with the terms of each  participant's  election to defer.  During
1999 and 1998,  respectively,  48,101  and 27,140  shares  with a fair value of
approximately  $666,000  and  $384,000  were  tendered to the  Company  using a
"stock-for-stock"  exercise and, at December 31, 2000,  271,862  shares (with a
fair value of  approximately  $4,861,000 at December 31, 2000) were held in the
Deferred Compensation Trust.

Additional Stock Plan Information

As  discussed in Note 1, the Company  continues to account for its  stock-based
awards  using  the  intrinsic   value  method  in  accordance  with  Accounting
Principles  Board No. 25,  Accounting  for Stock  Issued to  Employees  and its
related  interpretations.  No  compensation  expense has been recognized in the
financial statements for employee stock arrangements.

Statement  of  Financial   Accounting   Standards  No.  123,   Accounting   for
Stock-Based  Compensation,  (SFAS 123) requires the disclosure of pro forma net
income and  earnings  per share had the Company  adopted the fair value  method
as of the  beginning  of  fiscal  1995.  Under  SFAS  123,  the  fair  value of
stock-based  awards  to  employees  is  calculated  through  the use of  option
pricing  models,  even though such models were  developed  to estimate the fair
value  of  freely  tradable,   fully   transferable   options  without  vesting
restrictions,  which  significantly  differ  from the  Company's  stock  option
awards.  These models also require  subjective  assumptions,  including  future
stock price  volatility  and expected time to exercise,  which  greatly  affect
the  calculated  values.  The  Company's   calculations  were  made  using  the
Black-Scholes   option  pricing  model  with  the  following  weighted  average
assumptions:  expected  life,  four  years  following  vesting;  average  stock
volatility  of 15.3%;  risk free  interest  rates  ranging from 4.52% to 6.57%;
and no dividends  during the expected  term.  The  Company's  calculations  are
based on a multiple  option  valuation  approach and forfeitures are recognized
as they occur.  If the computed  fair values of the 2000,  1999 and 1998 awards
had been  amortized  to expense  over the  vesting  period of the  awards,  pro
forma  net  income  would  have  been  $8,548,000  000  ($1.12  basic and $1.09
diluted  earnings  per  share),  $7,939,000  ($1.02  basic  and  $0.99  diluted
earnings  per share) and  $6,957,000  ($0.95 basic and $0.87  diluted  earnings
per share) in 2000,  1999 and 1998,  respectively.  The  impact of  outstanding
non-vested  stock options  granted prior to 1995 has been excluded from the pro
forma calculation;  accordingly,  the 2000, 1999 and 1998 pro forma adjustments
are  not  indicative  of  future  period  pro  forma   adjustments,   when  the
calculation will apply to all applicable stock options.

                                       55
<PAGE>


Note  10.   Disclosures  About  Fair  Value  of  Financial   Instruments.   The
following  disclosure of the estimated  fair value of financial  instruments is
made in accordance with the  requirements of SFAS No. 107,  "Disclosures  About
Fair Value of Financial  Instruments".  The  estimated  fair value amounts have
been  determined  by  using  available   market   information  and  appropriate
valuation  methodologies.   However,   considerable  judgment  is  required  to
interpret  market data to develop  the  estimates  of fair value.  Accordingly,
the  estimates  presented  are not  necessarily  indicative of the amounts that
could be realized in a current  market  exchange.  The use of different  market
assumptions  and/or  estimation  techniques  may have a material  effect on the
estimated fair value amounts.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
                                                   December 31, 2000                         December 31, 1999
                                               Carrying        Estimated                Carrying        Estimated
In thousands                                    Amount        Fair Value                 Amount        Fair Value
------------------------------------------------------------------------------------------------------------------
<S>                                           <C>              <C>                     <C>              <C>
Financial Assets
Cash and equivalents                           $ 74,492         $ 74,492                $ 39,959         $ 39,959
Securities                                      152,276          152,276                 145,435          145,435
Loans, net                                      464,024          461,060                 390,001          387,581

Financial Liabilities
Demand deposits                                 295,287          295,287                 242,260          242,260
Time Deposits                                   227,719          228,724                 178,096          178,147
Savings                                         110,204          110,204                  97,833           97,833
Other borrowings                                  5,206            5,206                  16,950           16,950
------------------------------------------------------------------------------------------------------------------
</TABLE>

The following  estimates and  assumptions  were used to estimate the fair value
of the financial instruments.

Cash and  equivalents  - The carrying  amount is a reasonable  estimate of fair
value.

Securities - Fair values of  securities  are based on quoted  market  prices or
dealer  quotes.  If a quoted  market  price was not  available,  fair value was
estimated using quoted market prices for similar securities.

Loans,  net - Fair  values  for  certain  commercial,  construction,  revolving
customer  credit and other loans were estimated by discounting  the future cash
flows using  current  rates at which  similar  loans would be made to borrowers
with  similar  credit  ratings  and  similar   maturities,   adjusted  for  the
allowance for loan losses.

Certain  adjustable  rate loans have been valued at their carrying  values,  if
no significant  changes in credit standing have occurred since  origination and
the interest rate adjustment  characteristics  of the loan  effectively  adjust
the  interest  rate to maintain a market rate of return.  For  adjustable  rate
loans  which have had changes in credit  quality,  appropriate  adjustments  to
the fair value of the loans are made.

Demand, time and savings deposits - The fair value of  noninterest-bearing  and
adjustable  rate deposits and savings is the amount  payable upon demand at the
reporting  date.  The fair value of fixed-rate  interest-bearing  deposits with
fixed maturity  dates was estimated by  discounting  the cash flows using rates
currently offered for deposits of similar remaining maturities.

Off-balance  sheet  instruments  - The fair  value  of  commitments  to  extend
credit is  estimated  using the fees  currently  charged to enter into  similar
agreements,  taking into account the remaining  terms of the agreements and the
present  credit-worthiness  of the  counterparties.  The fair values of standby
and  commercial  letters  of credit  are based on fees  currently  charged  for
similar  agreements  or on the  estimated  cost to terminate  them or otherwise
settle  the  obligations  with  the  counterparties.  The fair  values  of such

                                       56
<PAGE>

off-balance  sheet  instruments  were not  significant at December 31, 2000 and
1999, therefore, have not been included in the table above.

Note 11.  Commitments  and  Contingencies.  In the  normal  course of  business
there  are  various  commitments  outstanding  to extend  credit  which are not
reflected  in  the  financial   statements,   including  loan   commitments  of
approximately   $145,839,000  and  standby  letters  of  credit  and  financial
guarantees  of $4,634,000  at December 31, 2000.  The Bank does not  anticipate
any losses as a result of these transactions.

Approximately  $27,223,000  of loan  commitments  outstanding  at December  31,
2000  relate to  construction  loans and are  expected  to fund within the next
twelve  months.  The remainder  relate  primarily to revolving  lines of credit
or other  commercial  loans.  Many of these loan  commitments  are  expected to
expire  without  being  drawn  upon.  Therefore  the total  commitments  do not
necessarily represent future cash requirements.

Stand-by  letters  of credit are  commitments  written by the Bank to guarantee
the  performance  of a customer to a third party.  These  guarantees are issued
primarily   relating  to  purchases  of  inventory  by  the  Bank's  commercial
customers,   are  typically   short-term  in  nature  and  virtually  all  such
commitments are collateralized.

Most of the  outstanding  commitments  to extend  credit are at variable  rates
tied to the Bank's  reference  rate of  interest.  The  Company's  exposure  to
credit  loss  in  the  event  of  nonperformance  by  the  other  party  to the
financial  instrument for  commitments to extend credit and standby  letters of
credit  issued is the  contractual  amount of those  instruments.  The  Company
uses  the  same  credit   policies  in  making   commitments   and  conditional
obligations  as  it  does  for   on-balance-sheet   instruments.   The  Company
controls  the  credit  risk  of the  off-balance  sheet  financial  instruments
through the normal credit approval and monitoring process.

Note  12.  Related  Party  Loans.  The  Company  makes  loans to  officers  and
directors  and  their  associates   subject  to  loan  committee  approval  and
ratification   by  the  Board  of   Directors.   These   transactions   are  on
substantially  the same terms as those  prevailing  at the time for  comparable
transactions  with  unaffiliated  parties and do not  involve  more than normal
risk of  collectibility.  An  analysis  of changes in related  party  loans for
the year ended December 31, 2000 is as follows:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
  Beginning Balance             Additions             Repayments           Ending Balance
-----------------------------------------------------------------------------------------
<S>       <C>                  <C>                    <C>                    <C>
          $ 6,972,000          $ 7,067,000            $ 9,157,000            $ 4,882,000
-----------------------------------------------------------------------------------------
</TABLE>

Committed lines of credit, undisbursed loans and standby letters of credit to
directors and officers at December 31, 2000 were approximately $2,461,000.

Note 13.  Regulatory  Matters.  The  Company is  subject to various  regulatory
capital  requirements  administered  by federal  banking  agencies.  Failure to
meet  minimum  capital   requirements  can  initiate   certain   mandatory  and
possibly,  additional  discretionary actions by regulators that, if undertaken,
could have a direct  material  effect on the  Company's  financial  statements.
Capital   adequacy   guidelines  and  the   regulatory   framework  for  prompt
corrective  action  require that the Company  meet  specific  capital  adequacy
guidelines  that  involve  quantitative   measures  of  the  Company's  assets,
liabilities   and  certain   off-balance   sheet  items  as  calculated   under
regulatory   accounting   practices.   The   Company's   capital   amounts  and
classifications  are also subject to  qualitative  judgments by the  regulators
about components, risk weighting and other factors.

                                       57
<PAGE>

Quantitative  measures  established  by regulation to ensure  capital  adequacy
require  the  Company to  maintain  minimum  ratios of total and Tier 1 capital
(as defined in the  regulations)  to  risk-weighted  assets (as  defined) and a
minimum  leverage  ratio of Tier 1 capital  to  average  assets  (as  defined).
Management  believes,  as of  December  31,  2000  that the  Company  meets all
capital adequacy requirements to which it is subject.

As of  December  31,  2000 and 1999,  the most  recent  notifications  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  the Bank  must  maintain  minimum  total
risk-based,  Tier 1 risk-based  and Tier 1 leverage  ratios as set forth in the
table.  There  are  no  conditions  or  events  since  that  notification  that
management believes have changed the institution's category.

The following  table shows the Company's and the Bank's actual capital  amounts
and  ratios  at  December  31,  as well as the  minimum  capital  ratios  to be
categorized as "well capitalized" under the regulatory framework:

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
                                                                                                           To Be Categorized
                                                                                                         Well Capitalized Under
                                                                                    For Capital            Prompt Corrective
                                                            Actual              Adequacy Purposes:        Action Provisions:
                                                            ------              ------------------        ------------------
                                                     Amount          Ratio     Amount         Ratio      Amount          Ratio
                                                     ------          -----     ------         -----      ------          -----
<S>                                                  <C>             <C>       <C>             <C>       <C>             <C>
As of December 31, 2000:
Total Capital (to Risk Weighted Assets):
   Company                                        $  66,892,000        12.3%  $ 43,490,000       8.0%            N/A
   Community Bank                                    63,866,000        11.8%    43,273,000       8.0%   $ 54,092,000      10.0%
Tier 1 Capital (to Risk Weighted Assets)
   Company                                           60,098,000        11.1%    21,745,000       4.0%            N/A
   Community Bank                                    57,073,000        10.6%    21,637,000       4.0%     32,455,000       6.0%
Tier 1 Capital (to Risk Average Assets)
   Company                                           60,098,000         9.1%    26,344,000       4.0%            N/A
   Community Bank                                    57,073,000         8.7%    26,251,000       4.0%     32,814,000       5.0%

As of December 31, 1999:
Total Capital (to Risk Weighted Assets):
   Company                                           62,489,000        13.8%    36,125,000       8.0%            N/A
   Community Bank                                    60,151,000        13.3%    36,173,000       8.0%     45,216,000      10.0%
Tier 1 Capital (to Risk Weighted Assets)
   Company                                           56,938,000        12.6%    18,062,000       4.0%            N/A
   Community Bank                                    54,600,000        12.1%    18,086,000       4.0%     27,130,000       6.0%
Tier 1 Capital (to Risk Average Assets)
   Company                                           56,938,000         9.7%    23,593,000       4.0%            N/A
   Community Bank                                    54,600,000         9.2%    23,686,000       4.0%     29,608,000       5.0%
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

The ability of the  Company to pay cash  dividends  in the future will  largely
depend  upon  the  cash  dividends  paid to it by its  subsidiary  Bank.  Under
State and Federal law regulating  banks,  cash dividends  declared by a Bank in
any calendar  year  generally  may not exceed its net income for the  preceding
three  fiscal  years,  less  distributions  to the  Company,  or  its  retained
earnings.  Under these provisions,  and considering  minimum regulatory capital
requirements,  the  amount  available  for  distribution  from  the Bank to the
Company was approximately $16,642,000 as of December 31, 2000.

                                       58
<PAGE>

The Bank is subject to certain  restrictions  under the  Federal  Reserve  Act,
including   restrictions   on  the  extension  of  credit  to  affiliates.   In
particular,  the Bank is  prohibited  from  lending to the  Company  unless the
loans are secured by specified  types of  collateral.  Such  secured  loans and
other  advances from the Bank is limited to 10% of Bank  shareholders'  equity,
or a maximum of  $5,682,000  at December 31, 2000.  No such  advances were made
during 2000 or 1999.

Note 14. Central Coast Bancorp (Parent Company Only)
The  condensed  financial  statements  of  Central  Coast  Bancorp  follow  (in
thousands):

Condensed Balance Sheets
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
December 31,                                                         2000                     1999
---------------------------------------------------------------------------------------------------
<S>                                                              <C>                      <C>
Assets:
   Cash - interest bearing account with Bank                     $  1,944                 $    893
   Investment in Bank                                              56,823                   50,906
   Premises and equipment, net                                      1,730                    1,896
   Other Assets                                                     1,142                     1015
---------------------------------------------------------------------------------------------------
     Total assets                                                $ 61,639                 $ 54,710
===================================================================================================
Liabilities and Shareholders' Equity
   Liabilities                                                   $  1,785                 $  1,405
   Shareholders' Equity                                            59,854                   53,305
---------------------------------------------------------------------------------------------------
     Total liabilities and shareholders' equity                  $ 61,639                 $ 54,710
===================================================================================================
</TABLE>

<TABLE>
<CAPTION>
Condensed Income Statements
------------------------------------------------------------------------------------------------------
Years ended December 31,                                    2000               1999              1998
------------------------------------------------------------------------------------------------------
<S>                                                      <C>                <C>               <C>
   Management fees                                       $ 8,700            $ 7,704           $ 5,957
   Other income                                                -                 14                 1
   Cash dividends received from the Bank                   7,000                500             1,500
------------------------------------------------------------------------------------------------------
     Total income                                         15,700              8,218             7,458
   Operating expenses                                      9,257              8,212             7,435
------------------------------------------------------------------------------------------------------
   Income(loss) before income taxes and equity
      in undistributed net income of Bank                  6,443                  6                23
   Provision (credit) for income taxes                      (206)              (206)             (604)
   Equity in undistributed
     net income of Bank                                    2,277              7,839             6,526
------------------------------------------------------------------------------------------------------
   Net income                                              8,926              8,051             7,153
   Other comprehensive income (loss)                       3,640             (5,065)              262
------------------------------------------------------------------------------------------------------
   Comprehensive income                                 $ 12,566            $ 2,986           $ 7,415
======================================================================================================
</TABLE>


                                       59
<PAGE>



<TABLE>
<CAPTION>
Condensed Statements of Cash Flows
---------------------------------------------------------------------------------------------------
Years ended December 31,                                         2000           1999          1998
---------------------------------------------------------------------------------------------------
<S>                                                          <C>            <C>           <C>
Increase (decrease) in cash:
Operations:
   Net income                                                 $ 8,926        $ 8,051       $ 7,153
   Adjustments to reconcile net
     income to net cash provided
     by operations:
     Equity in undistributed
       net income of Bank                                      (2,277)        (7,839)       (6,526)
     Depreciation                                                 778            546           213
     Gain on sale of equipment                                      -            (10)            -
     (Increase) decrease in other assets                         (127)            31         1,367
     Increase (decrease) in liabilities                           380            285         1,292
---------------------------------------------------------------------------------------------------
     Net cash provided by operations                            7,680          1,064         3,499
---------------------------------------------------------------------------------------------------
Investing Activities:
   Proceeds from sale of equipment                                  -             18             -
   Purchases of equipment                                        (612)          (944)       (1,228)
---------------------------------------------------------------------------------------------------
     Net cash used by investing activities                       (612)          (926)       (1,228)
---------------------------------------------------------------------------------------------------
Financing Activities:
   Stock repurchases                                           (6,111)        (2,682)         (387)
   Stock options and warrants exercised                            94          1,098           264
---------------------------------------------------------------------------------------------------
     Net cash used by financing activities                     (6,017)        (1,584)         (123)
---------------------------------------------------------------------------------------------------
     Net increase (decrease) in cash                            1,051         (1,446)        2,148
   Cash balance, beginning of year                                893          2,339           191
---------------------------------------------------------------------------------------------------
   Cash balance, end of year                                  $ 1,944          $ 893       $ 2,339
===================================================================================================
</TABLE>

Note 15. Selected Quarterly Information (unaudited)
In thousands (except pershare data)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
                                                  2000                                 1999
                                  -----------------------------------    ---------------------------------
Three months ended                 Dec.31    Sep.30  June 30   Mar.31     Dec.31  Sep.30  June 30  Mar.31
----------------------------------------------------------------------------------------------------------
<S>                              <C>       <C>       <C>      <C>        <C>     <C>      <C>     <C>
Interest revenue                 $ 13,656  $ 13,576  $12,618  $11,565    $11,269 $10,755  $10,031 $ 9,462
Interest expense                    4,890     4,901    4,437    4,062      3,681   3,525    3,329   3,113
----------------------------------------------------------------------------------------------------------
Net interest revenue                8,766     8,675    8,181    7,503      7,588   7,230    6,702   6,349
Provision for loan losses           1,127     1,530      800      526        529     418      410     127
----------------------------------------------------------------------------------------------------------
Net interest revenue after
  provision for loan losses         7,639     7,145    7,381    6,977      7,059   6,812    6,292   6,222
Total noninterest revenues            584       672      631      546        569     529      591     542
Total noninterest expenses          4,654     4,298    4,336    4,120      4,285   4,111    3,824   3,823
----------------------------------------------------------------------------------------------------------
Income before taxes                 3,569     3,519    3,676    3,403      3,343   3,230    3,059   2,941
Income taxes                        1,215     1,266    1,433    1,327      1,014   1,227    1,065   1,216
----------------------------------------------------------------------------------------------------------
Net income                       $  2,354  $  2,253  $ 2,243  $ 2,076    $ 2,329 $ 2,003  $ 1,994 $ 1,725
==========================================================================================================
Per common share:
   Basic earnings per share        $ 0.32    $ 0.30   $ 0.29   $ 0.26     $ 0.31  $ 0.26   $ 0.25  $ 0.22
   Dilutive earnings per share       0.31      0.29     0.28     0.26       0.29    0.25     0.25    0.21
----------------------------------------------------------------------------------------------------------
</TABLE>
The principal market on which the company's common stock is traded is Nasdaq.


The  earnings  per share  amounts in the  preceding  table  have been  adjusted
retroactively  for stock  dividends  of 10% in  January  2001 and  2000,  and a
5-for-4 stock split in January 1999.

                                       60
<PAGE>

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

        Not applicable.


                                   PART III


ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

           The information required by Item 10 of  Form 10-K is incorporated by
reference to  the  information contained in  the  Company's Proxy Statement for
the  2001  Annual  Meeting  of  Shareholders  which  will be  filed pursuant to
Regulation 14A.


ITEM 11.  EXECUTIVE COMPENSATION

The  information  required by Item 11 of Form 10-K is incorporated by reference
to the  information  contained in the  Company's  Proxy  Statement for the 2001
Annual Meeting of Shareholders which will be filed pursuant to Regulation 14A.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The  information  required by Item 12 of Form 10-K is incorporated by reference
to the  information  contained in the  Company's  Proxy  Statement for the 2001
Annual Meeting of Shareholders which will be filed pursuant to Regulation 14A.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The  information  required by Item 13 of Form 10-K is incorporated by reference
to the  information  contained in the  Company's  Proxy  Statement for the 2001
Annual Meeting of Shareholders which will be filed pursuant to Regulation 14A.


                                       61
<PAGE>


                                   PART IV


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

           (a)(1)    Financial  Statements.  Listed  and  included  in Part II,
                     Item 8.

              (2)Financial Statement Schedules.  Not applicable.

              (3)Exhibits.

               (2.1) Agreement  and Plan of  Reorganization  and  Merger by and
                     between  Central  Coast  Bancorp,  CCB Merger  Company and
                     Cypress   Coast  Bank  dated   as  of   December5,   1995,
                     incorporated  by reference  from Exhibit 99.1 to Form 8-K,
                     filed with the Commission on December 7, 1995.

               (3.1) Articles of Incorporation,  incorporated by reference from
                     Exhibit 4.8 to  Registration  Statement  on Form S-8,  No.
                     33-89948, filed with the Commission on March 3, 1995.

               (3.2) Bylaws, as amended, incorporated by reference from Exhibit
                     3.2  to the Company's 1999  Annual Report  on  Form  10-K,
                     filed with the commission on March 28, 2000.

               (4.1) Specimen form of Central Coast Bancorp stock  certificate,
                     incorporated  by reference  from the Company's 1994 Annual
                     Report on Form 10-K,  filed with the  Commission  on March
                     31, 1995.

              (10.1) Lease  agreement  dated  December  12,  1994,  related  to
                     301  Main  Street, Salinas,  California,  incorporated  by
                     reference from the Company's 1994  Annual Report  on  Form
                     10K, filed with the Commission on March 31, 1995.

              (10.2) King  City  Branch Office Lease, incorporated by reference
                     from Exhibit 10.3  to Registration  Statement on Form S-4,
                     No. 33-76972, filed with the Commission on March 28, 1994.

              (10.3) Amendment to King City Branch Office  Lease,  incorporated
                     by reference from Exhibit 10.4 to  Registration  Statement
                     on Form S-4, No.  33-76972,  filed with the  Commission on
                     March 28, 1994.

             *(10.4) 1982  Stock  Option  Plan,  as  amended,  incorporated  by
                     reference  from  Exhibit  4.2 to Registration Statement on
                     Form S-8,  No. 33-89948,  filed  with  the  Commission  on
                     March 3, 1995.

             *(10.5) Form of  Nonstatutory  Stock  Option  Agreement  under the
                     1982 Stock Option  Plan,  incorporated  by reference  from
                     Exhibit 4.6 to  Registration  Statement  on Form S-8,  No.
                     33-89948, filed with the Commission on March 3, 1995.

             *(10.6) Form of Incentive  Stock Option  Agreement  under the 1982
                     Stock Option Plan,  incorporated by reference from Exhibit
                     4.7 to Registration  Statement on Form S-8, No.  33-89948,
                     filed with the Commission on March 3, 1995.

                                       62
<PAGE>


             *(10.7) 1994 Stock Option  Plan,  incorporated  by reference  from
                     Exhibit 4.1 to  Registration  Statement  on Form S-8,  No.
                     33-89948, filed with the Commission on March 3, 1995.

             *(10.8) Form of  Nonstatutory  Stock  Option  Agreement  under the
                     1994 Stock Option  Plan,  incorporated  by reference  from
                     Exhibit 4.3 to  Registration  Statement  on Form S-8,  No.
                     33-89948, filed with Commission on March 3, 1995.

             *(10.9) Form of Incentive  Stock Option  Agreement  under the 1994
                     Stock Option Plan,  incorporated by reference from Exhibit
                     4.4 to Registration  Statement on Form S-8, No.  33-89948,
                     filed with the Commission on March 3, 1995.

            *(10.10) Form  of  Director  Nonstatutory  Stock  Option  Agreement
                     under  the  1994  Stock  Option  Plan,   incorporated   by
                     reference  from Exhibit 4.5 to  Registration  Statement on
                     Form S-8,  No.  33-89948,  filed  with the  Commission  on
                     March 3, 1995.

            *(10.11) Form of  Bank of  Salinas  Indemnification  Agreement  for
                     directors  and   executive   officers,   incorporated   by
                     reference   from  Exhibit  10.9  to  Amendment  No.  1  to
                     Registration  Statement on Form S-4, No.  33-76972,  filed
                     with the Commission on April 15, 1994.

            *(10.12) 401(k)  Pension  and  Profit  Sharing  Plan  Summary  Plan
                     Description,  incorporated  by reference from Exhibit 10.8
                     to  Registration  Statement  on Form  S-4,  No.  33-76972,
                     filed with the Commission on March 28, 1994.

            *(10.13) Form of Employment  Agreement,  incorporated  by reference
                     from Exhibit 10.13 to the Company's  1996 Annual Report on
                     Form 10-K, filed with the Commission on March 31, 1997.

            *(10.14) Form   of   Executive   Salary   Continuation   Agreement,
                     incorporated  by  reference  from  Exhibit  10.14  to  the
                     Company's 1996 Annual Report on Form 10-K,  filed with the
                     Commission on March 31, 1997.

            *(10.15) 1994  Stock  Option  Plan,  as  amended,  incorporated  by
                     reference  from  Exhibit  A to the Proxy  Statement  filed
                     with the  Commission  on September 3, 1996,  in connection
                     with Central  Coast  Bancorp's  1996 Annual  Shareholders'
                     Meeting held on September 23, 1996.

             (10.16) Form  of   Indemnification   Agreement,   incorporated  by
                     reference  from  Exhibit  D to the Proxy  Statement  filed
                     with the  Commission  on September 3, 1996,  in connection
                     with Central  Coast  Bancorp's  1996 Annual  Shareholders'
                     Meeting held on September 23, 1996.

             (10.17) Purchase and Assumption  Agreement for the  Acquisition of
                     Wells  Fargo  Bank   Branch   Offices,   incorporated   by
                     reference  from Exhibit 10.17 to the Company's 1996 Annual
                     Report on Form 10-K,  filed with the  Commission  on March
                     31, 1997.

             (10.18) Employee  Stock   Ownership  Plan  and  Trust   Agreement,
                     incorporated  by  reference  from  Exhibit  10.18  to  the
                     Company's 1996 Annual Report on Form 10-K,  filed with the
                     Commission on March 31, 1997.

                                       63
<PAGE>

             (10.19) Lease  agreement  dated  March  7,  1997,  related  to 484
                     Lighthouse Avenue, Monterey,  California,  incorporated by
                     reference  from Exhibit 10.19 to the Company's 1997 Annual
                     Report on Form 10-K,  filed with the  Commission  on March
                     27, 1998.

              (21.1) The  Registrant's  only  subsidiary  is Community  Bank of
                     Central  California (the successor  entity  resulting from
                     the  merger  of  Registrant's  wholly-owned  subsidiaries,
                     Bank  of  Salinas  and  Cypress  Bank,  as  referenced  in
                     Exhibit 2.1 above).

              (23.1) Independent auditors' consent



              *Denotes management contracts, compensatory plans or arrangements.


           (b)  Reports on Form 8-K.  Not Applicable.



      An Annual Report for the  fiscal year ended December 31, 2000, and Notice
of Annual  Meeting  and  Proxy  Statement for the Company's 2001 Annual Meeting
will be mailed to  security  holders  subsequent  to  the  date  of filing this
Report.  Copies  of  said  materials  will  be  furnished  to the Commission in
accordance with the Commission's Rules and Regulations.

                                       64
<PAGE>



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

                                             CENTRAL COAST BANCORP

Date: March 15, 2001            By: /S/ NICK VENTIMIGLIA
                                    ------------------------
                                    Nick Ventimiglia, President and Chief
                                    Executive Officer (Principal Executive
                                    Officer)

Date: March 15, 2001            By: /S/  ROBERT STANBERRY
                                    ------------------------
                                    Robert Stanberry, Chief Financial Officer
                                    (Principal Financial and Accounting Officer)



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

Signature                         Title                     Date
---------                         -----                     ----


/S/ C. EDWARD BOUTONNET          Director                  3/15/01
-----------------------
(C. Edward Boutonnet)

/S/ BRADFORD G. CRANDALL         Director                  3/15/01
------------------------
(Bradford G. Crandall)

/S/ ALFRED P. GLOVER             Director                  3/15/01
--------------------
(Alfred P. Glover)

/S/ MICHAEL T. LAPSYS
---------------------            Director                  3/15/01
(Michael T. Lapsys)

/S/ ROBERT M. MRAULE             Director                  3/15/01
--------------------
(Robert M. Mraule)

/S/ DUNCAN L. MCCARTER           Director                  3/15/01
----------------------
(Duncan L. McCarter)

/S/ LOUIS A. SOUZA               Director                  3/15/01
------------------
(Louis A. Souza)

/S/ MOSE E. THOMAS               Director                  3/15/01
------------------
(Mose E. Thomas)

/S/ NICK VENTIMIGLIA             Chairman, President       3/15/01
--------------------
(Nick Ventimiglia)               and CEO


                                       65
<PAGE>







                         EXHIBIT INDEX
                         -------------


Exhibit                                            Sequential
Number                    Description             Page Number
------                    -----------             -----------


23.1       Independent auditors' consent.             67



                                       66
<PAGE>