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                                 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, 1999

                                      OR

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

                         Commission file number 0-25418

                              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. EmployerIdentification No.)
     incorporation or organization)

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


      Registrant's telephone number, including area code    (408) 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 10, 2000 was $113,029,488.
As of March 10,  2000, the  registrant  had  7,064,343  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 1998 annual meeting of shareholders.


The Index to Exhibits is located at page 66                 Page 1 of 69 Pages




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                                       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 the  operating  market areas of the Company
   and the Bank;  (4) changes in the  regulatory  environment;  (5) changes in
   business conditions and inflation;  (6) changes in securities markets;  and
   (7)  effects  of  Year  2000  problems  discussed  herein.  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 Salinas Valley and the Monterey Peninsula.

         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.

         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




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   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
   seven branch offices located in Castroville,  Gonzales,  King City, Marina,
   Monterey  Salinas,  and Seaside,  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  branches  are also open from 9:00 a.m. to 1:00 p.m.  on  Saturdays.
   Additionally,  customers can bank by telephone on a 24-hour basis. 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,  Gonzales, King City, Marina, Monterey, Salinas
   and  Seaside  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 three areas in which the Bank has directed  virtually  all of its
   lending  activities are: (i) commercial  loans;  (ii) consumer  loans;  and
   (iii)  real  estate  loans  (including  residential  construction  and home
   equity loans).  As of December 31, 1999, these three  categories  accounted
   for approximately 40 percent,  3 percent and 57 percent,  respectively,  of
   the Bank's loan portfolio.

         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.

         As of December 31, 1999,  the Bank served a total of 24  municipality
   and governmental  agency depositors  totaling  $53,373,000 in deposits.  Of
   this amount




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   $20,000,000 is  attributable  to a certificate of deposit for the State of
   California.  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,   1999,   the  Bank  had  total   deposits  of
   $518,189,000.  Of this total, $141,389,000 represented  noninterest-bearing
   demand   deposits,   $100,871,000   represented   interest-bearing   demand
   deposits, and $275,929,000  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,
   1999, these sources comprised 77.6 percent,  22.0 percent, and 0.4 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 State of California  Department of Financial
Institution  Commissioner,  its deposits  are insured by the FDIC,  and it has
chosen not to become a member of the  Federal  Reserve  System.  The Bank does
not have a subsidiary.  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




                                       4
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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  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.






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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  credit
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.

      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, 1999,  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, 1999
and 1998.

      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




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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  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 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




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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
December13,  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
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.





                                       8
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      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 branches 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
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, 1999,  the  competing  commercial  and savings  banks had 42
branches in the cities of Castroville,  Gonzales,  King City, Marina, Salinas,
Seaside  and  Monterey  where the Bank has its eight  branches.  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




                                       9
<PAGE>

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,  1999,
the  Bank's  aggregate  legal  lending  limits to a single  borrower  and such
borrower's   related  parties  were  $9,023,000  on  an  unsecured  basis  and
$15,038,000  on  a  fully  secured  basis  based  on  regulatory   capital  of
$60,151,000.

      The  Bank's  business  is  concentrated  in  its  service  area,   which
primarily  encompasses Monterey County,  including the Salinas Valley area and
to a lesser extent, the contiguous areas of San Benito County,  Southern Santa
Cruz County,  and 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,
19991),  there were 71  operating  commercial  and  savings  bank  branches in
Monterey  County with total deposits of  $3,849,686,000.  This was an increase
of  $193,410,000  over the June 30,  1998  balances.  The Bank held a total of
$504,171,000   in  deposits,   representing   approximately   13.1%  of  total
commercial  and  savings  banks  deposits  in  Monterey  County as of June 30,
1999.

      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  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

--------
1 "FDIC Institution Office Deposits", June 30, 1999





                                       10
<PAGE>

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 2000 from that in 1999.

      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  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.

      On November 12, 1999, President Clinton signed into law The Financial
Services Modernization Act of 1999 (the "FSMA"), which is potentially the
most significant




                                       11
<PAGE>

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
incental 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.





                                       12
<PAGE>

      One further effect of the Act is to require that federal financial
institution and securities regulatory agencies prescribe regulations to
implement the policy that financial institutions must respect the privacy of
their customers and protect the security and confidentiality of customers'
non-public personal information.  Implementing regulations have recently been
issued for comment by all of the federal financial institution regulatory
agencies and the Securities and Exchange Commission.  These regulations will
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 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 eight
banking offices.  Owned and leased facilities are listed below.

301 Main Street                            1658 Fremont Boulevard
Salinas, California                        Seaside, California
Leased-term expired 12/99                  Leased-term expires 2009
Extension under option pending



                                       13
<PAGE>


10601 Merritt Street                       228-C Reservation Road
Castroville, California                    Marina, California
Owned                                      Leased-term expires 2004

400 Alta Street                            599 Lighthouse Avenue
Gonzales, California                       Monterey, California.
Leased-term expires 2003                   Leased-term expires 2004


532 Broadway                               1285 North Davis Road
King City, California                      Salinas, California.
Leased-term expires 2009                   Leased-term expires 2008


      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  herein 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 64.



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 1999.




                                       14
<PAGE>

                                   PART II

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

      (a)  Market Information
           ------------------

      Prior to the second  quarter of 1998,  there was limited  trading in and
no established  public trading  market for the Company's  common stock.  As of
the  second  quarter of 1998,  the  Company's  common  stock was listed on the
Nasdaq National  Market exchange  (trading  symbol:  CCBN).  Sandler O'Neill &
Partners,  L.P. and Hoefer & Arnett,  Incorporated  are  registered  as market
makers in the  Company's  stock.  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 and Hoefer & Arnett
(for those quarters prior to the Company's  Nasdaq  listing).  The prices have
been  restated to reflect the 5-for-4  stock split  effected in February  1999
and the 10% stock dividend paid in February 2000.
<TABLE>
<CAPTION>

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


1999
   First Quarter                     $12.84             $16.73
   Second Quarter                     13.81              14.94
   Third Quarter                      14.20              20.00
   Fourth Quarter                     14.32              19.09

1998
   First Quarter                     $13.23             $17.45
   Second Quarter                     15.00              18.55
   Third Quarter                      12.00              16.82
   Fourth Quarter                     13.09              14.64
</TABLE>

The closing  price for the  Company's  common  stock was $16.00 as of March 9,
2000

      (b)   Holders
            -------

      As of March 9,  2000,  there  wereapproximately  3,100  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




                                       15
<PAGE>

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
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 $20,494,000 as of December 31, 1999.

      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  2000, a  five-for-four
stock split in February  1999 and a ten percent  stock  dividend in 1998.  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.




                                       16
<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.
<TABLE>
<CAPTION>

                                                    As of and for the Year Ended December 31
                                     ------------------------------------------------------------------------
(Dollars amounts in thousands,                 1999           1998          1997           1996          1995
 except per share data)
<S>                                             <C>            <C>           <C>            <C>           <C>

Operating Results
Total Interest Income                      $ 41,517      $ 37,354      $ 33,916       $ 29,301      $ 26,964
Total Interest Expense                       13,648        13,319        12,041          9,859        10,008
                                     ------------------------------------------------------------------------
   Net Interest Income                       27,869        24,035        21,875         19,442        16,956
Provision for Loan Losses                     1,484           159            64            352           695
                                     ------------------------------------------------------------------------
Net Interest Income After
   Provision for Loan Losses                 26,385        23,876        21,811         19,090        16,261
Other Income                                  2,231         2,084         1,765          1,456         1,302
Other Expenses                               16,043        13,859        12,573         11,115        10,263
                                     ------------------------------------------------------------------------
Income before Income Taxes                   12,573        12,101        11,003          9,431         7,300
Income Taxes                                  4,522         4,948         4,500          3,571         2,975
                                     ------------------------------------------------------------------------
Net Income                                  $ 8,051       $ 7,153       $ 6,503        $ 5,860       $ 4,325
-------------------------------------------------------------------------------------------------------------

Basic Earnings Per Share                     $ 1.14        $ 1.08        $ 0.99         $ 0.92        $ 0.68
Diluted Earnings Per Share                     1.10          0.99          0.92           0.86          0.64
-------------------------------------------------------------------------------------------------------------

Financial Condition and
   Capital-Year-End  Balances
Net Loans                                 $ 390,001     $ 307,818     $ 251,271      $ 235,992     $ 191,000
Total Assets                                593,445       543,933       497,674        376,832       357,236
Deposits                                    518,189       489,192       450,301        338,663       326,089
Shareholders' Equity                         53,305        51,199        43,724         36,332        29,916
-------------------------------------------------------------------------------------------------------------

Financial Condition and
   Capital-Average Balances
Net Loans                                 $ 348,086     $ 271,590     $ 238,793      $ 203,117     $ 173,065
Total Assets                                562,073       499,354       441,013        355,386       329,502
Deposits                                    494,266       447,598       396,457        319,110       300,291
Shareholders' Equity                         52,069        47,587        39,969         33,228        27,684
-------------------------------------------------------------------------------------------------------------

Selected Financial Ratios
Rate of Return on:
   Average Total Assets                       1.43%         1.43%         1.47%          1.65%         1.31%
   Average Shareholders' Equity              15.46%        15.03%        16.27%         17.64%        15.62%
Rate of Average Shareholders' Equity
   to Total Average Assets                    9.26%         9.53%         9.06%          9.35%         8.40%
-------------------------------------------------------------------------------------------------------------
</TABLE>






                                       17
<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,  1999 and is hereby  incorporated  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.

(b)   Investment Portfolio

      (1)   The book value of investment securities at December 31, 1999 and
            1998 is set forth in Note 3 of Item 8-"Financial Statements and
            Supplementary Data" included in this report and incorporated
            herein by reference.

      (2)   The book value, maturities and weighted average yields of
            investment securities as of December 31, 1999 are set forth in
            Table Thirteen of Management's Discussion and Analysis included in
            this report and incorporated herein 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 herein by reference.

      (2)   The maturity distribution of the loan portfolio at December 31,
            1999 is summarized in Table Twelve of Management's Discussion and
            Analysis included in this report and is incorporated herein 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




                                       18
<PAGE>

            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.

            For further discussion of nonperforming loans, refer to Risk
            Elements section of Management Discussion 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, 1999 is summarized in Table
            Five of Management's Discussion and Analysis included in this
            report and is incorporated herein 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 herein by reference.

      (2)   In evaluating the adequacy of the allowance for loan losses, the
            Company attempts to allocate the allowance for loan losses to
            specific categories of loans.  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,  1999,   1998  and  1997  and  is
           incorporated herein 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, 1999 and is incorporated
           herein by reference.



(f)    Return on Equity and Assets

        (1) The table at page 18 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.



                                       19
<PAGE>



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

In  addition  to the  historical  information  contained  herein,  this Annual
Report  contains  certain  forward-looking  statements.  The  reader  of  this
Annual Report should understand that all such  forward-looking  statements are
subject to various  uncertainties  and risks that could affect their  outcome.
The Company's  actual results could differ  materially from those suggested by
such  forward-looking  statements.  Factors that could cause or  contribute to
such  differences  include,  but are not limited to,  variances  in the actual
versus projected growth in assets,  return on assets,  loan losses,  expenses,
rates  charged on loans and earned on  securities  investments,  rates paid on
deposits,  competition  effects,  fee and  other  noninterest  income  earned,
general  economic  conditions,  nationally,  regionally  and in the  operating
market  areas  of  the  Company  and  the  Bank,  changes  in  the  regulatory
environment,   changes  in  business  conditions  and  inflation,  changes  in
securities  markets,  effects of Year 2000 problems  discussed herein, 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.

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,  1999,  the Bank
operated  eight  full-service branch offices  and  one limited-service  branch
office  in Monterey County,  California.  The Bank is headquartered in Salinas
and serves individuals,  merchants,  small and  medium-sized  businesses,
professionals, agribusiness  enterprises  and wage earners  located in the
Salinas Valley and the Monterey Peninsula.

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.

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
Financial  Data  presented  elsewhere in this report for  additional  detailed
information.  Average  balances,  including  such balances used in calculating
certain financial ratios, are




                                       20
<PAGE>

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

Central Coast Bancorp earned record net income for the 16th  consecutive  year
for the year ended December 31, 1999.  Net income in 1999  increased  12.6% to
$8,051,000 versus  $7,153,000 in 1998.  Diluted earnings per share for the two
years were $1.10 and $0.99,  respectively.  For 1999,  the Company  realized a
return on average equity of 15.5% and a return on average assets of 1.43%,  as
compared  to 15.0% and 1.43% for  1998.  The  earnings  per share for 1999 and
1998 have been  adjusted  for the 10 percent  stock  dividend  distributed  on
February 28, 2000.

During 1999,  total assets of the Company  increased  $49,512,000  (9.1%) to a
total of  $593,445,000  at  year-end.  At December  31,  1999,  loans  totaled
$395,597,000,  up $77,259,000 (24.3%) from the ending balances on December 31,
1998.  Deposit  growth  for  the  year,  including  $20,000,000  of  State  of
California  certificates  of deposit,  was 5.9%  resulting  in ending  deposit
balances  of  $518,189,000.  Central  Coast  Bancorp  ended 1999 with a Tier 1
capital ratio of 12.6% and a total risk-based capital ratio of 13.8%.

During  1999,  much staff and  management  time was  devoted to the  planning,
testing and  preparation  for the century date change on January 1, 2000.  All
systems performed without incident on the date roll over.

As mentioned in the preceding section,  Bank of Salinas and Cypress Bank
were merged together and renamed Community Bank of Central  California in July
1999.  Unifying  the banks  helped  to  create a single  image for the Bank in
Monterey  County.  This  has  improved  customer  recognition.   It  has  also
improved  operating   efficiencies.   The  name  conveys  to  the  public  the
character  of the  institution  and  differentiates  the Bank  from the  large
state/nationwide  banking  institutions.  Merger expenses of approximately
$263,000 for this transaction are included in the 1999 operating income.

Several  upgrades  were made to the  Bank's  physical  facilities  during  the
year. The King City branch was  remodeled;  the Marina branch moved into a new
shopping  center;  and the Monterey  branch moved into a larger more  customer
friendly  location.  Each  of  these  moves  was  made  to  better  serve  our
customers.

The Bank  continues  to expand its  products and services to make banking more
convenient  for  the  customer.   Both  retail  and  business  customers  find
"Anytime Teller",  our new 24 hour banking by telephone,  a quick and easy way
to check balances and account activity,  transfer funds between accounts, make
loan payments,  order  statements  faxed and much more. The VISA Check Card is
another new product  offered in 1999.  It can be used to purchase  merchandise
at any store that  honors  VISA and it  doubles as an ATM card.  The design of
our new web  site and  on-line  banking  product  was  well  along  the way at
year-end.  This  product  should be rolled out to the Bank's  customers in the
second  quarter  of 2000.  Community  Bank of  Central  California's  web site
address is "www.community-bnk.com".

In its June 1999 issue,  U.S.  Banker  magazine  rated the nation's  mid-sized
banks for their  performance,  safety and strength.  Central Coast Bancorp was
rated 7th place overall and number-one in  California.  We are pleased to have
received  such  a high  ranking,  but  the  true  measure  of  success  is the
acceptance by our customers and communities that we serve.





                                       21
<PAGE>

As we  stated  last  year,  "Management's  continuing  goal is for the Bank to
deliver  a  full  array  of  competitive   products  to  its  customers  while
maintaining the  personalized  customer  service of a community bank." We look
to  expanding  both our  products  offered  and the Bank's  service  area.  We
believe  this  strategy  will  provide  continued  growth  and the  ability to
achieve above average returns for our shareholders.

(A)   Results of Operations

Net Interest Income/Net Interest Margin

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 (fully taxable  equivalent) 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.  As a result of the Federal  Reserve  Bank's  actions,  there have
been three 25 basis point increases in the Bank's base lending rate from
August 25, 1999 through February 3, 2000.  These increases will favorably
impact interest income going forward.  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.

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.

Net  interest   income  for  1998  totaled   $24,130,000   and  was  up  10.1%
($2,223,000)  over 1997.  Average earning assets were $450,154,000 in 1998 for
an increase of  $51,738,000  over 1997.  This year over year change was mostly
the  result  of  internal  growth.  In  1998,  interest  income  increased  by
$3,501,000  to  $37,449,000.   The  higher  volume  of  earning  assets  added
$4,681,000  to  interest  income in 1998.  The average  yield  received on all
interest   earning   assets  fell  20  basis   points  to  8.32%.   The  yield
differential reduced interest income by $1,180,000.

Interest  expense  increased  $1,278,000  (10.6%) in 1998 over  1997.  Average
balances  of  interest  bearing  liabilities  increased  $31,307,000  in 1998.
Interest  expense  was  up  $1,787,000  due to the  higher  average  balances.
Changes due to rate  variations  helped  offset the increase by $509,000.  Net
interest margin for 1998 was 5.36% versus 5.50% in 1997.





                                       22
<PAGE>

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.


Table One:  Analysis of Net Interest Margin on Earning Assets
<TABLE>
<CAPTION>

-----------------------------------------------------------------------------------------------------------------------
(Taxable Equivalent Basis)                       1999                      1998                        1997
                                      Avg                Avg      Avg                Avg      Avg                 Avg
(In thousands, except percentages)  Balance    Interest Yield   Balance  Interest   Yield   Balance   Interest   Yield
<S>                                 <C>        <C>      <C>     <C>      <C>        <C>     <C>       <C>        <C>

Assets:
Earning Assets
  Loans (1) (2)                     $348,086   $ 32,234 9.26%   $271,590 $ 27,037   9.96%    $ 238,793 $ 24,828  10.40%
  Taxable investment securities      120,422      7,596 6.31%    121,133    7,282   6.01%       98,493    5,760   5.85%
  Tax-exempt investment securities(3) 34,999      2,296 6.56%      4,247      286   6.73%        1,160            8.19%
  Federal funds sold                   3,153        156 4.95%     53,184    2,844   5.35%       59,970     3,26   5.44%
                                    --------   --------         --------  -------              --------  -------

Total Earning Assets                 506,660   $ 42,282 8.35%    450,154 $ 37,449   8.32%      398,416  $ 33,948  8.52%
                                               --------                   -------                       --------
Cash & due from banks                 42,595                      38,889                        33,144
Other assets                          12,818                      10,311                         9,453
                                    --------                    --------                       -------
                                    $562,073                    $499,354                     $ 441,013
                                    ========                    ========                       =======

Liabilities & Shareholders' Equity:
Interest bearing liabilities:
  Demand deposits                   $103,716    $ 1,792 1.73%   $ 89,637  $ 1,720   1.92%    $ 93,161   $ 1,881  2.02%
  Savings                            105,000      3,447 3.28%    101,256    3,774   3.73%      95,767     3,875  4.05%
  Time deposits                      159,653      7,980 5.00%    142,580    7,825   5.49%     111,370     6,187  5.56%
  Other borrowings                     8,125        429 5.28%         -      -        n/a       1,868            5.25%
                                    --------     ------ -----    -------   ------   -----     -------     ------
Total interest bearing
   liabilities                       376,494     13,648 3.63%    333,473   13,319   3.99%       302,166   12,041 3.98%
                                                 ------                    ------                         ------
Demand deposits                      125,897                     114,125                         96,159
Other Liabilities                      7,613                       4,169                          2,719
                                    --------                    --------                        -------
Total Liabilities                    510,004                     451,767                        401,044
Shareholders' Equity                  52,069                      47,587                         39,969
                                    --------                    --------                        -------
                                                                --------                        -------
                                    $562,073                    $499,354                       $ 441,013
                                    ========                    ========                        ========
Net interest income & margin (3)               $ 28,634 5.65%            $ 24,130   5.36%                $ 21,907  5.50%
                                               ======== ======           ========   =====                 =======  =====
</TABLE>

1. Loans interest includes loan fees of $1,096,000, $951,000
and $1,037,000 in 1999, 1998 and 1997.
2. Average balances of loans include average allowance for loan losses of
$4,850,000, $4,260,000 and $4,229,000, and average deferred
loan fees of $796,000, $587,000 and $571,000 for the years ended December 31,
1999, 1998 and 1997, 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 1999, 1998 and 1997.
4. Net interest margin is computed by dividing net interest income by
total average earning assets.





                                       23
<PAGE>

Table Two: Volume/Rate Analysis
<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>

<TABLE>
<CAPTION>
(In thousands) 1998 over 1997
Increase (decrease) due to change in:

                                                                                                         Net
                                                             Volume              Rate (4)             Change
                                                             ------              --------             ------
<S>                                                         <C>                   <C>                 <C>
Interest-earning assets:
   Net Loans (1)(2)                                          $ 3,410              $(1,201)            $ 2,209
   Taxable investment securities                               1,324                  198               1,522
   Tax exempt investment securities(3)                           253                  (62)                191
   Federal funds sold & other                                   (370)                 (51)               (421)
                                                          -----------          -----------         -----------
     Total                                                     4,617               (1,116)              3,501
                                                          -----------          -----------         -----------

Interest-bearing liabilities:
   Demand deposits                                               (71)                 (90)               (161)
   Savings deposits                                              222                 (323)               (101)
   Time deposits                                               1,734                  (96)              1,638
   Other borrowings                                              (98)                   0                 (98)
                                                          -----------          -----------         -----------
     Total                                                     1,787                 (509)              1,278
                                                          -----------          -----------         -----------
Interest differential                                        $ 2,830               $ (607)            $ 2,223
                                                          ===========          ===========         ===========
---------------------------------------------------------------------------------------------------------------
</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 $1,096,000, $951,000 and $1,037,000 for the years ended
December 31, 1999, 1998 and 1997, 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 1999, 1998 and 1997.
4. The rate / volume variance has been included
in the rate variance.








                                       24
<PAGE>

Provision for Loan Losses

The  Bank  provided  $1,484,000  for loan  losses  in  1999.  Of that  amount,
$1,058,000  compensated for the  $77,260,000  loan growth during the year. Net
loans  charged-off  in 1999  totaled  only  $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 Company made  provisions  for
loan losses of only $159,000.  In 1997, the Company provided $64,000.

Service Charges and Fees and Other Income

Noninterest  income was up $147,000 (7.1%) to $2,231,000 in 1999 from the 1998
level.  Service charges and fees related to deposit  accounts made up $113,000
of the increase.  Several new fees were  implemented  late in the year.  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.

For 1998,  noninterest  income was up $319,000  (18.1%)  from 1997  results to
$2,084,000.  Service  charges and fees related to deposit  accounts  accounted
for  $159,000 of the  increase.  The growth came from both higher  volumes and
some  selective fee  increases.  Other income was up $160,000 to $849,000 over
1997  results.  Mortgage  origination  fees  accounted  for  $136,000  of that
increase as mortgage activity was significantly higher in 1998.

Salaries and Benefits

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  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.

Salary and benefits expenses  increased $747,000 (10.0%) to $8,213,000 in 1998
from the level in 1997.  Components  of salaries and benefits  that  increased
significantly   included;   base  salary  and  wages,  $533,000  and  benefits
including employer taxes $214,000.  Part of the higher expense was attributable
to the full year effect in 1998 of the two branch offices purchasedfrom Wells
Fargo Bank in late  February  1997 and the December 1998 opening of the new
Westridge  branch office in Salinas.  Additional staff was added Company wide
due to growth.  The full time equivalent (FTE) staff was up 16 from 181 at
the end of 1997.

Occupancy and Furniture and equipment

Occupancy and fixed assets expense increased $585,000 (28.5%) in 1999.   Much
of the increase is 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 Y2K.

Premises and fixed asset  related  expenses were  $2,054,000 in 1998.  This was
an increase of $281,000 over 1997.  During 1998, the Company  installed a wide
area network,  a Year 2000 compliant  central computer and software system and
upgraded many of its computer workstations.  These  enhancements  provide the
platform for growth, but contributed significantly




                                       25
<PAGE>

to the  increase  in  premises  and fixed  asset  expenses.  There  were  other
significant increases in repairs and maintenance of equipment,  janitorial and
gardening and rent on leased quarters.

Other Expenses

In 1999, other expenses increased $696,000 (19.4%).  These include one-time
costs of approximately $263,000 associated with merging the Bank of Salinas and
Cypress Bank to form the 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 overhead
efficiency ratio, calculated by dividing noninterest expense by the sum of
net interest income and noninterest income, for 1999 was 53.3% as compared to
53.1% in 1998.

Other expenses  increased  $258,000  (7.7%) to $3,592,000 in 1998. ATM expense
was up  $77,000  (51.3%)  as the Bank added more  locations  and  changed  the
service  provider.  Promotional  expenses were up $51,000  (46.3%) as the Bank
increased its advertising  campaign.  Consulting  costs rose $56,000 (155%) as
the Bank  contracted  for a special  project.  Those three  categories saw the
largest  changes from the prior year. The overhead  efficiency  ratio for 1997
was 53.2%.

Provision for Taxes

The effective  tax rate on income was 36.0%,  40.9%,  and 40.9% in 1999,  1998
and 1997,  respectively.  The  effective  tax rate of the  Company in 1999 was
reduced  4.6%  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   $1,326,000,
$1,292,000,  and $1,213,000 in these years.  Tax-exempt  income of $1,998,000,
$266,000  and  $90,000  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, 1999 were $593,445,000
compared to $543,933,000 at December 31, 1998, representing an increase of
9.1%.  The average balances of total assets of $562,073,000 in 1999 represent
an increase of $62,719,000 or 12.6% over $499,354,000 in 1998.

Loans

The Bank concentrates its lending activities in four principal areas:
commercial loans (including agricultural loans); installment loans; real
estate construction loans (both commercial and personal) and real
estate-other loans.  At December 31, 1999, these four categories accounted
for approximately 40%, 3%, 9% and 48% of the Bank's loan portfolio,
respectively, as compared to 44%, 4%, 6% and 46% at December 31, 1998.
Continuing strong economic activity in the Bank's market area coupled with
lower interest rates early in 1999 resulted in some shifting loan demands
during 1999.  While all loan categories reflect year over year growth from
1998 to 1999, the largest growth took place in the real estate-other
category. However, the largest percentage gain of 77% 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:


                                       26
<PAGE>


Table Three: Loan Portfolio Composite

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
In thousands
----------------------------------------------------------------------------------------------------------------
                                    1999             1998             1997             1996            1995
<S>                                 <C>              <C>              <C>              <C>             <C>
Commercial                           $159,385        $ 136,685        $ 124,714       $ 111,545        $ 85,823
Real Estate:
   Construction                        35,330           19,929           14,645          27,997          24,852
   Other                              188,600          144,685          107,354          93,241          79,644
Installment                            13,003           11,545            9,349           8,230           5,677
Deferred Loans Fees                      (721)            (674)            (568)           (649)           (550)
----------------------------------------------------------------------------------------------------------------
Total Loans                           395,597          312,170          255,494         240,364         195,446
Allowance for
   Loan Losses                         (5,596)          (4,352)          (4,223)         (4,372)         (4,446)
----------------------------------------------------------------------------------------------------------------
Total                                $390,001        $ 307,818        $ 251,271       $ 235,992       $ 191,000
----------------------------------------------------------------------------------------------------------------
</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.  Installment  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 1999  were  $348,086,000  representing  an  increase  of
$76,496,000  or 28.2% over 1998. The favorable  economic  conditions and lower
interest rates provided the impetus for  continuing  loan growth.  Average net
loans in 1998 were  $271,590,000  representing  an increase of  $32,797,000 or
13.7% over 1997.

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 credit 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.



                                       27
<PAGE>


Ultimately, credit quality may be influenced by underlying trends in the
economic and business cycles. The Bank's business is concentrated in
Monterey County, California whose economy is highly dependent on the
agricultural industry.  As a result, the Bank lends money to individuals
and companies dependent upon the agricultural industry.  In addition, the
Bank has significant extensions of credit and commitments to extend credit
which are secured by real estate, totaling approximately $263.2 million at
December 31, 1999.  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.

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
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 and loans
past due 90 days or more for December 31:





                                       28
<PAGE>


Table Four: Non-Performing Loans
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
In thousands                                                1999         1998         1997        1996         1995
--------------------------------------------------------------------------------------------------------------------
<S>                                                         <C>         <C>           <C>         <C>          <C>
Past due 90 days or more and still accruing
   Commercial                                               $ 51         $ 73         $ 73        $ 60         $ 35
   Real estate                                               303        1,174            6          59           71
   Consumer and other                                          -            -            -          90            -
--------------------------------------------------------------------------------------------------------------------
                                                             354        1,247           79         209          106
--------------------------------------------------------------------------------------------------------------------
Nonaccrual:
   Commercial                                                 11          333          188         184          194
   Real estate                                             1,565          543          628         419          633
   Consumer and other                                          -            -            -           1           24
--------------------------------------------------------------------------------------------------------------------
                                                           1,576          876          816         604          851
--------------------------------------------------------------------------------------------------------------------
Total nonperforming loans                                $ 1,930      $ 2,123        $ 895       $ 813        $ 957
====================================================================================================================
</TABLE>

Interest  due but  excluded  from  interest  income  on  nonaccrual  loans was
approximately  $82,000 in 1999,  $45,000 in 1998 and $7,000 in 1997.  In 1999,
1998 and 1997 interest income  recognized from payments received on nonaccrual
loans was $21,000, $17,000 and $7,000, respectively.

At December 31, 1999,  the recorded  investment  in loans that are  considered
impaired was  $2,165,000 of which  $1,568,000 is included in nonaccrual  loans
above.  Such  impaired  loans  had a  valuation  allowance  of  $821,000.  The
average  recorded  investment  in impaired  loans during 1999 was  $2,357,000.
The Company recognized  interest income on impaired loans of $92,000,  $64,000
and $33,000 in 1999, 1998 and 1997, respectively.

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, 1999.  Management  is not aware of any potential  problem  loans,
which were  accruing  and current at December 31, 1999,  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, 1999
or 1998.

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  $5,596,000 or 1.41% of total loans at
December  31, 1999  compared to  $4,352,000  or 1.39% at December 31, 1998 and
$4,223,000 or 1.65% at December 31, 1997.  The loan growth of  $77,260,000  in
1999,  necessitated  an increase of $1,058,000 in the allowance for loan loses
to  maintain  the  percentage  at the 1998  level.  Because  of the  generally
strong economic  environment,  it was not necessary to significantly  increase
the  allowance   percentage  above  the  1998  level.  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




                                       29
<PAGE>

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.

Table Five summarizes,  for the years indicated, the activity in the allowance
for loan losses.

Table Five:  Allowance for Loan Losses
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
                                        Year Ended    Year Ended     Year Ended    Year Ended   Year Ended
In thousands(except percentages)          12/31/99      12/31/98       12/31/97      12/31/96     12/31/95
-------------------------------------------------------------------------------------------------------------
<S>                                      <C>           <C>            <C>           <C>          <C>

Average loans outstanding                 $ 353,732     $ 276,437      $ 243,593     $ 208,169     $ 178,012
-------------------------------------------------------------------------------------------------------------

Allowance for possible loan losses
 at beginning of period                     $ 4,352       $ 4,223        $ 4,372       $ 4,446       $ 4,068

Loans charged off:
   Commercial                                  (333)         (130)          (279)         (391)         (302)
   Real estate                                  (41)          (16)          (100)         (207)          (52)
   Installment                                  (26)          (31)           (61)          (22)          (80)
-------------------------------------------------------------------------------------------------------------
                                               (400)         (177)          (440)         (620)         (434)
-------------------------------------------------------------------------------------------------------------
Recoveries of loans previously
 charged off:
   Commercial                                   143           116            162           156            88
   Real estate                                    7            20             28            11             -
   Installment                                   10            11             37            27            29
-------------------------------------------------------------------------------------------------------------
                                                160           147            227           194           117
-------------------------------------------------------------------------------------------------------------
Net loans charged off                          (240)          (30)          (213)         (426)         (317)

Additions to allowance charged
  to operating expenses                       1,484           159             64           352           695
-------------------------------------------------------------------------------------------------------------
Allowance for possible loans
  losses at end of period                   $ 5,596       $ 4,352        $ 4,223       $ 4,372       $ 4,446
-------------------------------------------------------------------------------------------------------------

Ratio of net charge-offs to
  average loans outstanding                   0.07%         0.01%          0.09%         0.20%         0.18%

Provision of allowance for possible loan
 losses to  average loans outstanding         0.42%         0.06%          0.03%         0.17%         0.39%

Allowance for possible loan losses to loans
 net of deferred fees at year end             1.41%         1.39%          1.65%         1.82%         2.27%

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








                                       30
<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, 1999 and 1998.


Table Six:  Allowance for Loan Losses by Loan Category
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
                                   December 31, 1999                 December 31, 1998
                                      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                         $ 3,511           40%              $ 3,416           44%
Real estate                            390           57%                  678           52%
Consumer                               215            3%                  139            4%
--------------------------------------------------------------------------------------------
Total allocated                      4,116          100%                4,233          100%
Total unallocated                    1,480                                119
--------------------------------------------------------------------------------------------
   Total                           $ 5,596                            $ 4,352
--------------------------------------------------------------------------------------------
</TABLE>

Other Real Estate Owned

The Company held no real estate  acquired by  foreclosure at December 31, 1999
or 1998.

Deposits

During 1999, deposits  increased  $28,997,000  (5.9%) to total  $518,189,000 at
year-end.   State  of  California   certificates  of  deposit   accounted  for
$20,000,000 of the deposit growth.  Management  believes that depressed prices
in the vegetable  markets played a significant  role in slowing deposit growth
in 1999.  Deposits  at  December  31, 1998  totaled  $489,192,000  and were up
$38,891,000  (8.6%)  over the 1997  year-end  balances  of  $450,301,000.  The
increase in year-end  total  deposits is  attributable  to internal  growth in
noninterest-bearing demand,  interest-bearing demand, savings and time deposit
categories.

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, 1999, the Board of Directors of
the Company has authorized the repurchase of up to 5% of outstanding  shares of
the Company's common stock from time to time, subject to appropriate regulatory
and other accounting requirements. The Company acquired  approximately  182,000
shares of its common  stock in the open market during  1999  and
approximately   27,000  in  1998  at  an  average  price  of approximately
$14.66 and $13.87 per share, respectively.  These repurchases were made
periodically  in the open market with the intention to lessen the dilutive
impact  of  issuing  new  shares  to  meet  stock  performance,  options  plans,
acquisitions and other requirements.

The Company's primary capital resource is shareholders'  equity, which increased
$2.1 million or 4.1% from the previous  year end. The ratio of total  risk-based
capital to  risk-adjusted  assets was 13.8% at December  31,  1999,  compared to
14.8% at December 31, 1998. Tier 1 risk-based  capital to  risk-adjusted  assets
was 12.6% at December 31, 1999, compared to 13.6% at December 31, 1998.

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

                                        1999      1998
                                        ----      ----
Tier 1 Capital                          12.6%     13.6%
Total Capital                           13.8%     14.8%
Leverage                                 9.7%      9.9%

See "Supervision and Regulation" on page 4 and Note 13 in the financial
statements included in Item 8 for more information.

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.


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




                                       31
<PAGE>

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 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 1999 balances.

The following assumptions were used in the modeling activity:
      Earning asset growth of 8.1% based on ending balances
      Loan growth of 4.6% based on ending balances
      Investment and funds sold growth of 13.2% based on ending balances
      Deposit growth of 6.9% 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, 1999

                                        Estimated Impact on
                                         2000 Net Interest
                                             Income
                                             ------
                                         (in thousands)

Variation from flat rate scenario
     +200                                   $1,841
     -200                                  ($2,337)

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,
1999 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:




                                       32
<PAGE>


Table Nine:  Interest Rate Risk Simulation of NII as of December 31, 1999

                                        % Change          Change
                                          in NII          in NII
                                      from Current     from Current
                                    12 Mo. Horizon   12 Month Horizon
                                    --------------   ----------------
                                                        (in thousands)
        + 200bp                         11.1%              $3,497
         -200bp                       ( 13.7%)            ($4,294)


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, 1999,  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.



                                       33
<PAGE>

Table Ten:  Interest Rate Sensitivity December 31, 1999
<TABLE>
<CAPTION>

---------------------------------------------------------------------------------------------------------------------
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:
Investment securities           $  1,684          $  3,996      $  7,971       $  6,475      $ 125,309    $ 145,435
Loans, excluding
   nonaccrual loans
   and overdrafts                 11,635           243,402        24,323         92,125         24,833      396,318
---------------------------------------------------------------------------------------------------------------------
Total                           $ 13,319         $ 247,398       $32,294        $98,600      $ 150,142    $ 541,753
=====================================================================================================================
Interest bearing
   liabilities:
Interest bearing demand        $ 100,871                $-            $-             $-             $-    $ 100,871
Savings                           97,833                 -             -              -              -       97,833
Time certificates                     14            74,547        86,553         16,781            201      178,096
Other Borrowings                  12,662                69           213          1,328          2,679       16,951
---------------------------------------------------------------------------------------------------------------------
Total                          $ 211,380          $ 74,616       $86,766        $18,109        $ 2,880    $ 393,751
=====================================================================================================================
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
---------------------------------------------------------------------------------------------------------------------
December 31, 1998
Interest rate
   sensitivity gap            $ (186,856)        $ 193,845      $(61,972)       $94,883      $ 110,623
Cumulative interest
   rate sensitivity gap       $ (186,856)          $ 6,989      $(54,983)       $39,900      $ 150,523
---------------------------------------------------------------------------------------------------------------------
</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 assess 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,  1999,   were   approximately   $128,867,000   and   $2,530,000,
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, 1999,  consolidated  liquid assets totaled $91.1 million
or 15.4% of total  assets  as  compared  to $153.5  million  or 28.2% of total
consolidated  assets on December 31, 1998. In addition to liquid  assets,  the
Bank  maintains  short  term  lines of credit  with  correspondent  banks.  At
December  31,  1999,  the Bank had  $67,338,000  available  under these credit
lines.  Additionally,  the Bank is a member of the Federal Home Loan Bank.  At
December 31, 1999, the Bank could have arranged for up to




                                       34
<PAGE>

$148,000,000  in secured  borrowings  from the FHLB.  Informal  agreements are
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 the last half of 1999,  much of
the investment  portfolio has experienced  price declines,  which has resulted
in unrealized  losses.  These  unrealized  losses limit the Bank's  ability to
sell  these  securities  without  realizing  those  losses.   However,   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 Eleven:  Certificates of Deposit in Denominations of $100,000 or More
<TABLE>
<CAPTION>

--------------------------------------------------------------------
                                                           Year
                                                           Ended
                                                          12/31/99
--------------------------------------------------------------------
<S>                                                      <C>

 Three months or less                                    $59,494,000

 Over three months through six months                     20,469,000

 Over six months through twelve months                    35,732,000

 Over twelve months                                       12,619,000

--------------------------------------------------------------------
 Total                                                  $128,314,000
====================================================================
</TABLE>

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



                                       35
<PAGE>

Table Twelve:  Loan Maturities-December 31, 1999
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
                                                 One year
                          One year               through                 Over
 In thousands             or less               five years            five years             Total
---------------------------------------------------------------------------------------------------------
<S>                      <C>                    <C>                  <C>                   <C>

  Commercial,
   financial and
   agricultural           $ 85,237,000           $ 55,147,000         $ 19,001,000         $ 159,385,000

  Real estate -
   construction             32,529,000              2,078,000              723,000            35,330,000

  Real estate -
    other                   20,546,000             62,213,000          105,841,000           188,600,000

  Installment                8,329,000              4,219,000              455,000            13,003,000

---------------------------------------------------------------------------------------------------------
  Total                  $ 146,641,000          $ 123,657,000        $ 126,020,000         $ 396,318,000
---------------------------------------------------------------------------------------------------------
</TABLE>

Loans shown above with maturities greater than one year include $177,584,000
of floating interest rate loans and $72,093,000 of fixed rate loans.


<TABLE>
<CAPTION>
Table Thirteen: Securities Maturities and Weighted Average Yields-December 31, 1999 and 1998
---------------------------------------------------------------------------------------------------
                                                                                          Weighted
                                                Amortized Unrealized Unrealized  Market   Average
In thousands(except percentages)                Cost       Gain      Losses     Value    Yield
---------------------------------------------------------------------------------------------------
<S>                                             <C>            <C>      <C>     <C>        <C>

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       -
---------------------------------------------------------------------------------------------------
Total investment securities                      $153,403       $ 8   $ 7,976 $ 145,435    6.36%
===================================================================================================
December 31, 1998
Available for sale securities:
U.S. Treasury and agency securities
     Maturing within 1 year                      $ 13,976     $ 119       $-   $ 14,095    6.16%
     Maturing after 1 year but within 5 years      27,248       239        -     27,487    6.16%
     Maturing after 5 years but within 10 years    20,037        15        -     20,052    6.27%
     Maturing after 10 years                       48,655        41        -     49,066    6.15%
State & Political Subdivision
     Maturing after 5 year but within 10 Years      3,159         9        14     3,154    6.09%
     Maturing after 10 years                       25,562        59       219    25,402    6.30%
Corporate Debt Securities
    Maturing within 1 year                         29,608         -         2    29,606    5.92%
Other                                               1,525         -         -     1,525      -
--------------------------------------------------------------------------------------------------
Total investment securities                      $169,770     $ 852      $ 23 $ 170,387    6.15%
===================================================================================================
</TABLE>





                                       36
<PAGE>

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  nonbanking  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, 1999,  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,
options etc. Loan commitments  increased to $128,867,000  from $122,423,000 at
December  31,  1998.  The  commitments  represent  32.6%  of  total  loans  at
year-end 1999 versus 39.1% 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 1999, the fair values calculated on the Bank's assets are 0.4%
below the carrying values versus .09% above the carrying values at year-end
1998.  The change in the calculated fair value percentage relates to the loan
category and is the result of changes in interest rates in 1999 (see Note 10
of the financial statements).



                                       37
<PAGE>

Year 2000

During  1998  and 1999,  Management  of the  Company  focused  the  appropriate
resources to address the  potential  problems  that could arise  regarding the
Year 2000 (Y2K) century date change.  The Company's  mission  critical systems
were  evaluated,  modified as  required  and  contingency  plans were put into
place should the systems have  experienced any failures.  The Y2K readiness of
vendors and  customers  was also  evaluated  and  monitored.  The century date
change  passed  without any  operational  difficulties  for the  Company,  its
vendors or its  customers.  There are certain  dates within the year 2000 that
have been identified as critical  processing  dates. The first was January 31,
the end of the first  month of the year.  The second  was  February  29,  leap
year day.  The Company did not  experience  any  processing  problems on those
dates.  Upcoming  dates  during  the year are March  31,  the end of the first
quarter,  October 10, the first date to require an 8-digit field  (10/10/2000)
and December  31, the end of the year.  Those dates were tested as part of the
Y2K project.  The Company does not anticipate  having any processing  problems
on those dates, however, failure by third  parties  adequately  to  remediate
Y2K issues could have an impact upon Central Coast Bancorp which is impossible
to quantify.  Nevertheless, the Company currently expects that its Y2K
compliance  efforts will be successful without material adverse effects on
its business.

Accounting Pronouncements

The Financial Standards Accounting Board has proposed the elimination of
"pooling of interests" accounting by December 31, 2000.  The result of this
accounting change will be that all mergers consummated after December 31,
2000 will be accounted for as "purchase" transactions, resulting in the
amortization of goodwill in any merger where the purchase price exceeds the
asset value of the acquired company.  The goodwill amortization will reduce
future reported income of the merged companies.  Additionally, in bank
mergers, the goodwill in a purchase accounting transaction will not be
included in the calculation of regulatory capital requirements.  Some
investment bankers have expressed the view that the elimination of "pooling
of interests" accounting will result in lower merger premiums for sellers
with the possibility of fewer transactions occurring after December 31, 2000.

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




ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information required by Item 7A of Form 10-K is contained in Item 7-
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."



                                       38
<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
                                                                      Page
Independent Auditors' Report                                          40

Consolidated Balance Sheets, December 31, 1999 and 1998               41

Consolidated Statements of Income for theyears ended
   December 31, 1999, 1998 and 1997                                   42

Consolidated Statements of Cash Flows for the years ended
   December 31, 1999, 1998 and 1997                                   43

ConsolidatedStatements of Shareholders' Equity for the
  years ended December 31, 1999, 1998 and 1997                        44

Notes to Consolidated Financial Statements                            45-60

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.



                                       39
<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,  1999 and 1998,  and the related
consolidated  statements of income,  shareholders'  equity and cash flows for
each  of the  three  years  in the  period  ended  December  31,  1999.  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  generally  accepted  auditing
standards.  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, 1999 and 1998,  and the results
of their  operations  and their cash flows for each of the three  years in the
period  ended  December  31,  1999  in  conformity  with  generally   accepted
accounting principles.


DELOITTE & TOUCHE LLP

Salinas, California
January 24, 2000
  (February 28, 2000 as to the stock dividend information in Note 1)


                                       40
<PAGE>
CONSOLIDATED BALANCE SHEETS
CENTRAL COAST BANCORP AND SUBSIDIARY
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
December 31,                                                                           1999                         1998
-------------------------------------------------------------------------------------------------------------------------
<S>                                                                            <C>                          <C>
ASSETS
  Cash and due from banks                                                      $ 39,959,000                 $ 44,684,000
  Federal funds sold                                                                     -                     4,202,000
-------------------------------------------------------------------------------------------------------------------------
    Total cash and equivalents                                                   39,959,000                   48,886,000

  Available-for-sale securities                                                 145,435,000                  170,387,000

  Loans held for sale                                                                    -                     6,168,000

  Loans:
    Commercial                                                                  159,385,000                  136,685,000
    Real estate-construction                                                     35,330,000                   19,929,000
    Real estate-other                                                           188,600,000                  144,685,000
    Consumer                                                                     13,003,000                   11,545,000
    Deferred loan fees, net                                                        (721,000)                    (674,000)
-------------------------------------------------------------------------------------------------------------------------
    Total loans                                                                 395,597,000                  312,170,000
    Allowance for loan losses                                                    (5,596,000)                  (4,352,000)
-------------------------------------------------------------------------------------------------------------------------
  Net Loans                                                                     390,001,000                  307,818,000
-------------------------------------------------------------------------------------------------------------------------
  Premises and equipment, net                                                     3,888,000                    3,069,000
  Accrued interest receivable and other assets                                   14,162,000                    7,605,000
-------------------------------------------------------------------------------------------------------------------------
Total assets                                                                  $ 593,445,000                $ 543,933,000
=========================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
  Deposits:
    Demand, noninterest bearing                                               $ 141,389,000                $ 149,757,000
    Demand, interest bearing                                                    100,871,000                   98,226,000
    Savings                                                                      97,833,000                  104,447,000
    Time                                                                        178,096,000                  136,762,000
-------------------------------------------------------------------------------------------------------------------------
  Total Deposits                                                                518,189,000                  489,192,000
  Accrued interest payable and other liabilities                                 21,951,000                    3,542,000
-------------------------------------------------------------------------------------------------------------------------
Total liabilities                                                               540,140,000                  492,734,000
-------------------------------------------------------------------------------------------------------------------------
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: 6,440,257  shares in 1999
     and 6,112,045  shares in 1998                                               40,223,000                   41,103,000
  Shares held in deferred compenstion trust ( 247,148 shares in 1999
    and 71,949 shares in 1998), net of deferred obligation                               -                           -
  Retained earnings                                                              17,784,000                    9,733,000
  Accumulated other comprehensive income (loss), net of taxes of
    $3,267,000 in 1999 and $254,000 in 1998                                      (4,702,000)                     363,000
-------------------------------------------------------------------------------------------------------------------------
Shareholders' equity                                                             53,305,000                   51,199,000
-------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity                                    $ 593,445,000                $ 543,933,000
=========================================================================================================================
</TABLE>
See notes to Consolidated Financial Statements


                                       41
<PAGE>

CONSOLIDATED STATEMENTS OF INCOME
CENTRAL COAST BANCORP AND SUBSIDIARY
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
Years Ended December 31,                                    1999                   1998                    1997
--------------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>                    <C>                     <C>
Interest Income
   Loans (including fees)                              $ 32,234,000           $ 27,037,000            $ 24,828,000
   Investment securities                                  9,127,000              7,473,000               5,823,000
   Fed funds sold                                           156,000              2,844,000               3,265,000
--------------------------------------------------------------------------------------------------------------------------
       Total interest income                             41,517,000             37,354,000              33,916,000
--------------------------------------------------------------------------------------------------------------------------
Interest Expense
   Interest on deposits                                  13,218,000             13,319,000              11,943,000
   Other                                                    430,000                     -                   98,000
--------------------------------------------------------------------------------------------------------------------------
       Total interest expense                            13,648,000             13,319,000              12,041,000
--------------------------------------------------------------------------------------------------------------------------
Net Interest Income                                      27,869,000             24,035,000              21,875,000
Provision for Loan Losses                                (1,484,000)              (159,000)                (64,000)
--------------------------------------------------------------------------------------------------------------------------
Net Interest Income after
   Provision for Loan Losses                             26,385,000             23,876,000              21,811,000
--------------------------------------------------------------------------------------------------------------------------

Noninterest Income
   Service charges on deposits                            1,348,000              1,235,000               1,076,000
   Other income                                             883,000                849,000                 689,000
--------------------------------------------------------------------------------------------------------------------------
      Total noninterest income                            2,231,000              2,084,000               1,765,000
--------------------------------------------------------------------------------------------------------------------------

Noninterest Expenses
   Salaries and benefits                                  9,116,000              8,213,000               7,466,000
   Occupancy                                              1,301,000              1,049,000                 973,000
   Furniture and equipment                                1,338,000              1,005,000                 800,000
   Other                                                  4,288,000              3,592,000               3,334,000
--------------------------------------------------------------------------------------------------------------------------
     Total noninterest expenses                          16,043,000             13,859,000              12,573,000
--------------------------------------------------------------------------------------------------------------------------
Income Before Income Taxes                               12,573,000             12,101,000              11,003,000
Provision for Income Taxes                                4,522,000              4,948,000               4,500,000
--------------------------------------------------------------------------------------------------------------------------
       Net Income                                       $ 8,051,000            $ 7,153,000             $ 6,503,000
==========================================================================================================================

Basic Earnings per Share                                     $ 1.14                 $ 1.08                  $ 0.99
Diluted Earnings per Share                                   $ 1.10                 $ 0.99                  $ 0.92
==========================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements







                                       42
<PAGE>

CONSOLIDATED STATEMENTS OF CASH FLOWS
CENTRAL COAST BANCORP AND SUBSIDIARY
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
Years ended December 31,                                                 1999                1998                1997
----------------------------------------------------------------------------------------------------------------------
<S>                                                               <C>                 <C>                 <C>
Cash Flows from Operations:
   Net income                                                     $ 8,051,000         $ 7,153,000         $ 6,503,000
   Reconciliation of net income to net cash provided
   by operating activities:
     Provision for loan losses                                      1,484,000             159,000              64,000
     Depreciation                                                     936,000             656,000             513,000
     Amortization and accretion                                       136,000              (6,000)           (369,000)
     Deferred income taxes                                           (871,000)           (333,000)             31,000
     Gain on sale of securities                                       (45,000)            (58,000)                  -
     Net (gain) loss on sale of equipment                             126,000                   -             (19,000)
     Gain on sale of other real estate owned                               -              (20,000)            (21,000)
   Decrease (increase) in accrued interest receivable
     and other assets                                              (2,241,000)            129,000          (1,779,000)
   Increase in accrued interest payable and other liabilities       2,110,000             364,000           1,939,000
   Increase (decrease) in deferred loan fees                           47,000             106,000             (81,000)
----------------------------------------------------------------------------------------------------------------------
       Net cash provided by operations                              9,733,000           8,150,000           6,781,000
----------------------------------------------------------------------------------------------------------------------
Cash Flows from Investing Activities:
   Net decrease in interest-bearing
     deposits in financial institutions                                    -                    -             999,000
   Proceeds from maturities of investment securities
        Available-for-sale                                        100,042,000         107,423,000          63,750,000
        Held-to-maturity                                                   -           20,959,000          41,882,000
   Proceeds from sale of available-for-sale securities              5,988,000           9,119,000                   -
   Purchase of investment securities
        Available-for-sale                                        (89,498,000)       (176,593,000)       (154,353,000)
        Held-to-maturity                                                   -                    -         (10,181,000)
   Net change in loans held for sale                                6,168,000          (4,837,000)           (884,000)
   Net increase in loans                                          (84,049,000)        (56,812,000)        (15,723,000)
   Proceeds from sale of other real estate owned                      387,000             125,000             725,000
   Proceeds from sale of equipment                                     26,000                  -               31,000
   Purchases of equipment                                          (2,087,000)         (1,724,000)         (1,386,000)
----------------------------------------------------------------------------------------------------------------------
       Net cash used in investing activities                      (63,023,000)       (102,340,000)        (75,140,000)
----------------------------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities:
   Net increase in deposit accounts                                28,997,000          38,891,000         111,638,000
   Net increase (decrease) in short-term borrowings                12,662,000            (289,000)            289,000
   Net increase in long-term borrowings                             4,288,000                  -                  -
   Proceeds from sale of stock                                      1,098,000             264,000             380,000
   Shares repurchased under stock repurchase plan                  (2,674,000)           (374,000)                  -
   Fractional shares repurchased                                       (8,000)            (13,000)             (8,000)
----------------------------------------------------------------------------------------------------------------------
       Net cash provided by financing activities                   44,363,000          38,479,000         112,299,000
----------------------------------------------------------------------------------------------------------------------
  Net increase (decrease) in cash and equivalents                  (8,927,000)        (55,711,000)         43,940,000
Cash and equivalents, beginning of year                            48,886,000         104,597,000          60,657,000
----------------------------------------------------------------------------------------------------------------------
Cash and equivalents, end of year                                $ 39,959,000         $48,886,000        $104,597,000
======================================================================================================================
Noncash Investing and Financing Activities:
The Company obtained $335,000 in 1999 and $461,000 in 1997 of real estate (OREO) in connection with forclosures of delinquent
loans (none 1998).  In 1999 and 1998 stock option exercises and stock repurchases totalling $666,000 and  $384,000, respectively
were performed through a "stock for stock" exercise under the Company's deferred compensation plan (see Note 9).
----------------------------------------------------------------------------------------------------------------------
Other Cash Flow Information:
   Interest paid                                                 $ 13,733,000         $13,100,000        $ 11,367,000
   Income taxes paid                                                3,569,000           3,497,000           4,063,000
======================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements




                                       43
<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
1999, 1998 and 1997                           Shares       Amount       Earnings      Securities        Total
------------------------------------------------------------------------------------------------------------------
<S>                                       <C>          <C>            <C>             <C>            <C>

 Balances, January 1, 1997                 5,341,534 $ 30,856,000   $  5,476,000    $         -     $ 36,332,000
    Net income                                    -             -      6,503,000              -        6,503,000
    Changes in unrealized gains
       on securities available for sale,
        net of taxes of $71,000                   -             -              -        101,000          101,000
                                                                                                     --------------
    Comprehensive income                                                                               6,604,000
                                                                                                     --------------
    Shares repurchased                         (434)       (8,000)             -              -           (8,000)
    Stock options and warrants
      exercised                             119,486       380,000              -              -          380,000
    Tax benefit of stock options
      exercised                                   -       416,000              -              -          416,000
------------------------------------------------------------------------------------------------------------------
 Balances, December 31, 1997              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
------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements



                                       44
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CENTRAL COAST BANCORP AND SUBSIDIARY
Years ended December 31, 1999, 1998 and 1997

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").  On July 9,  1999,  Cypress  Bank,  a
wholly  owned  subsidiary  of the  Company,  was merged  into the Bank of
Salinas  whose  name  was  then  changed  to  Community  Bank of  Central
California.  All  material  intercompany  accounts and  transactions  are
eliminated in  consolidation.  The accounting  and reporting  policies of
the  Company  and the  Bank  conform  to  generally  accepted  accounting
principles  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  eight  full  service
branches in the Salinas  Valley and on the  Monterey  Peninsula,  serving
small and medium sized business  customers,  as well as individuals.  The
Bank  focuses  on  business  loans  and  deposit  services  to  customers
throughout Monterey County.

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




                                       45
<PAGE>

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.

Loans held for sale are stated at the lower of cost or  aggregate  market
value.

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




                                       46
<PAGE>

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
(7,072,000,   6,641,000   and   6,563,000   in  1999,   1998  and   1997,
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  weighted  average  common  shares
outstanding  for the  period  plus the  dilutive  effect of  options  and
warrants   (245,000,   601,000  and  533,000  in  1999,  1998  and  1997,
respectively).  All  earnings  per share  information  has been  adjusted
retroactively  for stock  dividends  of 10% in January  2000 and  January
1998,  a 3-for-2  stock split in March 1997 and a 5-for-4  stock split in
January 1999.

Stock dividend.
On  January  31,  2000  the  Board  of  Directors  declared  a 10%  stock
dividend which was  distributed on February 28, 2000, to  shareholders of
record as of February  14, 2000.  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 of the Bank,  all  branches 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  branches and report them as a single
operating segment.




                                       47
<PAGE>

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.

Reclassifications.
Certain  prior  year  amounts  have been  reclassified  to conform to the
financial   statement    presentation   for   the   current   year.   The
reclassifications   had  no   impact  on   results   of   operations   or
shareholders' equity.

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,  1999  the  Company
maintained  reserves of approximately  $109,000 in the form of vault cash
and balances at the Federal Reserve to satisfy regulatory requirements.

Note 3. Securities.
The Company's investment securities portfolio as of December 31, 1999 and 1998
consisted of the following:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------

                                         Amortized Unrealized Unrealized Market
In thousands                               Cost       Gain    Losses     Value
--------------------------------------------------------------------------------
<S>                                      <C>            <C>   <C>      <C>
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
================================================================================
December 31, 1998
Available for sale securities:
U.S. Treasury and agency securities       $ 109,916    $ 784      $-  $ 110,700
State & Political Subdivision                28,721       68      233    28,556
Corporate Debt Securities                    29,608       -         2    29,606
Other                                         1,525       -        -      1,525
--------------------------------------------------------------------------------
Total investment securities               $ 169,770    $ 852    $ 235  $170,387
================================================================================
</TABLE>

At  December  31,  1999  and  1998,  securities  with  a  book  value  of
$80,593,000  and  $56,936,000  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  $6,033,000  and
$9,119,000 and an amortized  cost of $5,988,000 and $9,061,000  were sold
during   the   fiscal   years   ended   December   31,   1999  and  1998,
respectively.  There were no sales of securities in 1997.



                                       48
<PAGE>


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  $263 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.

The activity in the allowance for loan losses is summarized as follows:
<TABLE>
<CAPTION>
In thousands                                            1999                     1998                   1997
--------------------------------------------------------------------------------------------------------------
<S>                                                  <C>                      <C>                    <C>

   Balances, beginning of year                       $ 4,352                  $ 4,223                $ 4,372
   Provision charged to expense                        1,484                      159                     64
   Loans charged off                                    (400)                    (177)                  (440)
   Recoveries                                            160                      147                    227
--------------------------------------------------------------------------------------------------------------

   Balance, end of year                              $ 5,596                  $ 4,352                $ 4,223
==============================================================================================================
</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.



                                       49
<PAGE>


Management  believes  that the  allowance for loan losses at December 31,
1999  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.

Nonperforming loans at December 31 are summarized below:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
In thousands                                                                           1999                      1998
----------------------------------------------------------------------------------------------------------------------
<S>                                                                                   <C>                     <C>
Past due 90 days or more and still accruing:
   Real estate                                                                        $ 303                   $ 1,174
   Commercial                                                                            51                        73
   Consumer and other                                                                    -                         -
----------------------------------------------------------------------------------------------------------------------
                                                                                        354                     1,247
----------------------------------------------------------------------------------------------------------------------
Nonaccrual:
   Real estate                                                                        1,565                       543
   Commercial                                                                            11                       333
   Consumer and other                                                                    -                         -
----------------------------------------------------------------------------------------------------------------------
                                                                                      1,576                       876
----------------------------------------------------------------------------------------------------------------------
Total nonperforming loans                                                           $ 1,930                   $ 2,123
======================================================================================================================
</TABLE>

Interest due but excluded  from interest  income on nonaccrual  loans was
approximately  $82,000,  $45,000  and  $7,000  in  1999,  1998  and  1997
respectively.  In 1999, 1998 and 1997,  interest  income  recognized from
payments  received on nonaccrual  loans was $21,000,  $17,000 and $7,000,
respectively.

At December  31, 1999 and 1998,  the  recorded  investment  in loans that
are  considered  impaired  under SFAS No. 114 was $2,165,000 and $727,000
of which  $1,568,000  and  $335,000  are  included  as  nonaccrual  loans
above. Such impaired loans had valuation  allowances  totalling  $821,000
and $164,000  based on the estimated fair values of the  collateral.  The
average  recorded  investment in impaired  loans during 1999 and 1998 was
$2,357,000  and  $776,000.  The  Company  recognized  interest  income on
impaired loans of $92,000 and $64,000 in 1999 and 1998, respectively.

The Company held no real estate acquired by foreclosure at December 31,
1999 or 1998.

Note 5. Premises and equipment.
Premises and equipment at December 31 are summarized as follows:
<TABLE>
<CAPTION>
In thousands                                                                           1999                      1998
----------------------------------------------------------------------------------------------------------------------
<S>                                                                                   <C>                       <C>
Land                                                                                  $ 121                     $ 145
Building                                                                                215                       460
Furniture and equipment                                                               5,982                     5,641
Leasehold improvement                                                                 2,067                     1,310
----------------------------------------------------------------------------------------------------------------------
                                                                                      8,385                     7,556
Accumulated depreciation and amortization                                            (4,497)                   (4,487)
----------------------------------------------------------------------------------------------------------------------
Premises and equipment, net                                                         $ 3,888                   $ 3,069
----------------------------------------------------------------------------------------------------------------------
</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




                                       50
<PAGE>

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  $565,000,  $456,000
and  $422,000,  including  lease  expense to  shareholders  of  $121,000,
$134,000 and $152,000 in 1999,  1998 and 1997  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>
     2000                                                                                        $ 595
     2001                                                                                          595
     2002                                                                                          595
     2003                                                                                          558
     2004                                                                                          542
     Thereafter                                                                                  949
-------------------------------------------------------------------------------------------------------
Total                                                                                          $ 3,834
-------------------------------------------------------------------------------------------------------
</TABLE>


Note 6. Income Taxes.
The provision for income taxes is as follows:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
In thousands                                      1999                  1998                  1997
-----------------------------------------------------------------------------------------------------
<S>                                            <C>                   <C>                   <C>

   Current:
     Federal                                   $ 3,863               $ 3,946               $ 3,255
     State                                       1,530                 1,335                 1,214
-----------------------------------------------------------------------------------------------------
     Total                                       5,393                 5,281                 4,469
-----------------------------------------------------------------------------------------------------
   Deferred:
     Federal                                      (667)                 (290)                   32
     State                                        (204)                  (43)                   (1)
-----------------------------------------------------------------------------------------------------
     Total                                        (871)                 (333)                   31
-----------------------------------------------------------------------------------------------------
   Total                                       $ 4,522               $ 4,948               $ 4,500
-----------------------------------------------------------------------------------------------------
</TABLE>

A  reconciliation  of the Federal  income tax rate to the  effective  tax
rate is as follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
                                                          1999               1998               1997
---------------------------------------------------------------------------------------------------------
<S>                                                         <C>                <C>                <C>

   Statutory Federal income tax rate                         35.0%              35.0%              35.0%
   State uncome taxes (net of
     Federal income tax benefit)                              7.0%               7.1%               7.2%
   Tax exempt interest income                                (5.4%)             (0.8%)             (0.8%)
   Other                                                     (0.6%)             (0.4%)             (0.5%)
---------------------------------------------------------------------------------------------------------
   Effective tax rate                                        36.0%              40.9%              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, 1999 and 1998, respectively, are presented below:



                                       51
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
In thousands                                                         1999                       1998
----------------------------------------------------------------------------------------------------------
<S>                                                                   <C>                         <C>
Deferred Tax assets (liabilities):
   Unrealized (gain) loss on available for sale securities             $ 3,267                     $ (253)
   Provision for loan losses                                             2,287                      1,680
   Salary continuation plan                                                438                        265
   Depreciation and amortization                                           308                        254
   State income taxes                                                      196                        263
   Excess serving rights                                                    74                         86
   Interest on nonaccrual loans                                             72                         35
   Accrual to cash adjustments                                              15                         30
   Other                                                                    33                          1
----------------------------------------------------------------------------------------------------------
Net deferred tax asset                                                 $ 6,690                    $ 2,361
----------------------------------------------------------------------------------------------------------
</TABLE>


Note 7.  Detail of Other  Expense.
Other  expense  for the years  ended  December  31,  1999,  1998 and 1997
consists of the following:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
In thousands                                                 1999                   1998                    1997
----------------------------------------------------------------------------------------------------------------------
<S>                                                         <C>                   <C>                      <C>
   Professional fees                                        $ 452                  $ 461                   $ 358
   Customer expenses                                          398                    431                     340
   Data processing                                            306                    386                     334
   Marketing                                                  475                    335                     302
   Stationary and supplies                                    444                    326                     466
   Shareholder and director                                   250                    262                     249
   Amortization of intangibles                                257                    257                     209
   Insurance                                                  180                    196                     180
   Dues and assessments                                       139                    109                     123
   Other                                                    1,387                    829                     773
----------------------------------------------------------------------------------------------------------------------
Total                                                     $ 4,288                $ 3,592                 $ 3,334
----------------------------------------------------------------------------------------------------------------------
</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,  1998 and 1997,  respectively  145,313 , 17,454 and 6,463  warrants
were exercised. During 1999, 6,481 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  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:




                                       52
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
                                                                                                        Weighted
                                                                                                         Average
                                                            Shares             Price per share            Price
--------------------------------------------------------------------------------------------------------------------
<S>                                                        <C>               <C>             <C>             <C>
   Balances, January 1, 1997                               1,351,662         $ 1.29   -     9.48           $ 5.14
     Granted (wt. avg. fair value $3.15 per share)            41,593           9.04   -    15.00            10.33
     Canceled                                               (105,311)          2.11   -     8.93             7.61
     Exercised                                              (138,113)          1.29   -     5.61             2.59
--------------------------------------------------------------------------------------------------------------------
   Balances, December 31, 1997                             1,149,831           2.11   -    15.00             5.40
     Granted (wt. avg. fair value $5.09 per share)            74,937          14.00   -    17.09            15.19
     Expired                                                 (24,200)          8.92   -     8.92             8.92
     Exercised                                              (150,865)          2.11   -     8.93             3.85
--------------------------------------------------------------------------------------------------------------------
   Balances, December 31, 1998                             1,049,703           2.32   -    17.09             6.24
     Granted (wt. avg. fair value $5.06 per share)            20,831          15.09   -    15.09            15.09
     Expired                                                 (11,570)          8.93   -     8.93             8.93
     Exercised                                              (442,340)          2.11   -     8.93             2.74
--------------------------------------------------------------------------------------------------------------------
   Balances, December 31, 1999                               616,624         $ 4.29   -    17.09           $ 9.00
--------------------------------------------------------------------------------------------------------------------
</TABLE>


Additional  information  regarding options outstanding as of December 31,
1999 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>

          $4.29 -    5.61           153,833              5.7             $5.38              143,065            $5.41
           7.31 -    9.04           361,728              7.9              8.78              361,728             8.78
          14.00     17.09           101,063              9.3             15.28               36,089            15.26
-----------------------------------------------------------------------------------------------------------------------
         $ 2.11 -   17.09           616,624              6.1             $9.00              540,882            $8.32
-----------------------------------------------------------------------------------------------------------------------
</TABLE>

At December 31, 1999,  1,314,920  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 20%
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  1999,  1998 and 1997  which are
funded currently, totaled $94,000, $68,000 and $56,000, respectively.

Salary Continuation Plan

In 1996  the  Company  established  a salary  continuation  plan for five
officers  which  provides for  retirement  benefits upon reaching age 63.
During 1997 two of such officers  terminated  their  employment  with the
Company   without   vesting  in  the  plan.  The  Company   accrues  such
post-retirement  benefits  over  the  vesting  periods  (of  five  or ten
years) based on a discount rate of




                                       53
<PAGE>

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  $256,000,  $225,000  and  $117,000  in 1999,  1998 and 1997,
respectively.    Accrued    compensation   payable   under   the   salary
continuation  plan  totaled  $848,000  and  $592,000 at December 31, 1999
and 1998, respectively.

Deferred Compensation Plan

In 1998 the  Company  established  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,  43,728 and 24,673  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,
1999,  247,148 shares (with a fair value of  approximately  $4,078,000 at
December 31, 1999) 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 14.9%;  risk free interest  rates ranging from 4.52% to 5.77%;  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 1999,
1998 and 1997  awards  had been  amortized  to expense  over the  vesting
period of the  awards,  pro forma net income  would have been  $7,939,000
($1.12  basic and $1.09  diluted  earnings per share,  $6,957,000  ($1.05
basic and $0.96 diluted  earnings per share) and $6,345,000  ($0.97 basic
and  $0.90  diluted  per  share) in 1999,  1998 and  1997,  respectively.
However,  the impact of  outstanding  non-vested  stock  options  granted
prior to 1995




                                       54
<PAGE>

has  been  excluded  from the pro  forma  calculation;  accordingly,  the
1999,  1998 and 1997 pro forma  adjustments  are not indicative of future
period  pro forma  adjustments,  when the  calculation  will apply to all
applicable stock options.

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, 1999                        December 31, 1998
                                                Carrying       Estimated                 Carrying       Estimated
In thousands                                     Amount        Fair Value                 Amount        Fair Value
------------------------------------------------------------------------------------------------------------------
<S>                                             <C>             <C>                      <C>             <C>
Financial Assets
Cash and equivalents                            $ 39,959        $ 39,959                 $ 48,886        $ 48,886
Securities                                       145,435         145,435                  170,387         170,387
Loans held for sale                                   -               -                     6,168           6,208
Loans, net                                       390,001         387,581                  307,818         308,253

Financial Liabilities
Demand deposits                                  242,260         242,260                  247,983         247,983
Time Deposits                                    178,096         178,147                  136,762         137,559
Savings                                           97,833          97,833                  104,447         104,447
Other borrowings                                  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 credit 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




                                       55
<PAGE>

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  off-balance  sheet  instruments  were not  significant at
December  31,  1999 and 1998 and,  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  $128,867,000
and standby  letters of credit and financial  guarantees of $2,530,000 at
December 31, 1999.  The Bank does not  anticipate  any losses as a result
of these transactions.

Approximately  $17,021,000  of loan  commitments  outstanding at December
31, 1999  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.




                                       56
<PAGE>

An  analysis  of  changes  in  related  party  loans  for the year  ended
December 31, 1999 is as follows:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
      Beginning Balance         Additions              Repayments          Ending Balance
-----------------------------------------------------------------------------------------
          <S>                  <C>                    <C>                    <C>
          $ 6,208,000          $ 6,480,000            $ 5,716,000            $ 6,972,000
-----------------------------------------------------------------------------------------
</TABLE>

Committed lines of credit, undisbursed loans and standby letters of
credit to directors and officers at December 31, 1999 were
approximately $3,137,000.

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.

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, 1999 that
the  Company  meets  all  capital  adequacy  requirements  to which it is
subject.

As of December  31, 1999 and 1998,  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:



                                       57
<PAGE>
<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, 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%

As of December 31, 1998:
Total Capital (to Risk Weighted Assets):
   Company                                      53,588,000        14.8%    29,004,000        8.0%           N/A
   Community Bank                               51,200,000        14.2%    28,745,000        8.0%    35,931,000         10.0%
Tier 1 Capital (to Risk Weighted Assets)
   Company                                      49,326,000        13.6%    14,502,000        4.0%           N/A
   Community Bank                               46,938,000        13.1%    14,373,000        4.0%    21,559,000          6.0%
Tier 1 Capital (to Risk Average Assets)
   Company                                      49,326,000         9.9%    19,935,000        4.0%           N/A
   Community Bank                               46,938,000         9.2%    20,314,000        4.0%    25,392,000          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 $20,494,000 as of December 31, 1999.

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  $5,140,000 at December 31,
1999.  No such advances were made during 1999 or 1998.

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



                                       58
<PAGE>

Condensed Balance Sheets
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
December 31,                                                         1999                     1998
---------------------------------------------------------------------------------------------------
<S>                                                               <C>                     <C>
Assets:
   Cash-interest bearing account with Bank                          $ 893                  $ 2,339
   Investment in Bank                                              51,403                   48,629
   Premises and equipment, net                                      1,896                    1,506
   Other Assets                                                       518                      549
---------------------------------------------------------------------------------------------------
     Total assets                                                $ 54,710                 $ 53,023
===================================================================================================
Liabilities and Shareholders' Equity
   Liabilities                                                    $ 1,405                  $ 1,824
   Shareholders' Equity                                            53,305                   51,199
---------------------------------------------------------------------------------------------------
     Total liabilities and shareholders' equity                  $ 54,710                 $ 53,023
===================================================================================================
</TABLE>


Condensed Income Statements
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
Years ended December 31,                                    1999               1998               1997
-------------------------------------------------------------------------------------------------------
<S>                                                      <C>                <C>                <C>
   Management fees                                       $ 7,704            $ 5,957            $ 3,624
   Other income                                               14                  1                 11
   Cash dividends received from the Bank                     500              1,500              2,000
-------------------------------------------------------------------------------------------------------
     Total income                                          8,218              7,458              5,635
   Operating expenses                                      8,212              7,435              6,386
-------------------------------------------------------------------------------------------------------
   Income(loss) before income taxes and equity
      in undistributed net income of Bank                      6                 23               (751)
   Provision (credit) for income taxes                      (206)              (604)            (1,125)
   Equity in undistributed
     net income of Bank                                    7,839              6,526              6,129
-------------------------------------------------------------------------------------------------------
   Net income                                              8,051              7,153              6,503
  Other comprehensive income (loss)                       (5,065)               262                101
-------------------------------------------------------------------------------------------------------
  Comprehensive income                                   $ 2,986            $ 7,415            $ 6,604
=======================================================================================================
</TABLE>





                                       59
<PAGE>


Condensed Statements of Cash Flows
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
Years ended December 31,                                         1999           1998          1997
---------------------------------------------------------------------------------------------------
<S>                                                           <C>            <C>           <C>
Increase (decrease) in cash:
Operations:
   Net income                                                 $ 8,051        $ 7,153       $ 6,503
   Adjustments to reconcile net
     income to net cash provided
     by operations:
     Equity in undistributed
       net income of Bank                                      (7,839)        (6,526)       (6,129)
     Depreciation                                                 546            213            71
     Gain on sale of assets                                       (10)            -            -
     (Increase) decrease in other assets                           31          1,367          (656)
     Increase (decrease) in liabilities                           285          1,292           450
---------------------------------------------------------------------------------------------------
     Net cash provided by operations                            1,064          3,499           239
---------------------------------------------------------------------------------------------------
Investing Activities -
   Proceeds from sale of property                                  18             -            -
   Purchases of equipment                                        (944)        (1,228)         (494)
---------------------------------------------------------------------------------------------------
     Net cash used by investing activities                       (926)        (1,228)         (494)
---------------------------------------------------------------------------------------------------
Financing Activities:
   Stock repurchases                                           (2,682)          (387)           (8)
   Stock options and warrants exercised                         1,098            264           380
---------------------------------------------------------------------------------------------------
     Net cash provided (used) by financing activities          (1,584)          (123)          372
---------------------------------------------------------------------------------------------------
     Net increase (decrease) in cash                           (1,446)         2,148           117
   Cash balance, beginning of year                              2,339            191            74
---------------------------------------------------------------------------------------------------
   Cash balance, end of year                                    $ 893        $ 2,339         $ 191
===================================================================================================
</TABLE>


Note 15. Selected Quarterly Information (unaudited)
<TABLE>
<CAPTION>
In thousands (except per share data)
--------------------------------------------------------------------------------------------------------
                                              1999                                   1998
                               -------------------------------------  ----------------------------------
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                 $11,269  $ 10,755 $ 10,031 $ 9,462    $ 9,498 $ 9,583 $ 9,281  $ 8,992
Interest expense                   3,681     3,525    3,329   3,113      3,211   3,358   3,415    3,335
--------------------------------------------------------------------------------------------------------
Net interest revenue               7,588     7,230    6,702   6,349      6,287   6,225   5,866    5,657
Provision for loan losses            529       418      410     127         78      40      24       17
--------------------------------------------------------------------------------------------------------
Net interest revenue after
  provision for loan losses        7,059     6,812    6,292   6,222      6,209   6,185   5,842    5,640
Total noninterest revenues           569       529      591     542        670     490     530      394
Total noninterest expenses         4,285     4,111    3,824   3,823      3,635   3,314   3,458    3,452
--------------------------------------------------------------------------------------------------------
Income before taxes                3,343     3,230    3,059   2,941      3,244   3,361   2,914    2,582
Income taxes                       1,014     1,227    1,065   1,216      1,284   1,391   1,205    1,068
--------------------------------------------------------------------------------------------------------
Net income                         2,329     2,003    1,994   1,725      1,960   1,970   1,709    1,514
--------------------------------------------------------------------------------------------------------
Per common share:
   Basic earnings per share       $ 0.33    $ 0.28   $ 0.28  $ 0.25     $ 0.29  $ 0.30  $ 0.25   $ 0.23
   Dilutive earnings per share      0.32      0.27     0.27    0.24       0.27    0.27    0.24     0.21
--------------------------------------------------------------------------------------------------------


</TABLE>

The principal market on which the company's common stock is
traded is Nasdaq.

The earnings per share in the preceding table have been adjusted retroactively
for stock dividends of 10% in January 1998 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 2000 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 2000  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 2000  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 2000  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.
                  <TABLE>
                  <C>   <S>
                  (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 4.8 to  Registration  Statement  on
                        Form   S-8,   No.   33-89948,   filed   with  the
                        Commission on March 3, 1995.

                  (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 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    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.



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<PAGE>



                *(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.

                *(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.




                                       63
<PAGE>

                (10.17) Purchase  and   Assumption   Agreement   for  the
                        Acquisition   of  Wells   Fargo  Bank   Branches,
                        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.

                (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

                 (27.1) Financial Data Schedule
</TABLE>


*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, 1999, and
Notice of Annual Meeting and Proxy Statement for the Company's 2000
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 16, 2000   By: /S/ NICK VENTIMIGLIA
                          -------------------------
                          Nick Ventimiglia, President and Chief
                          Executive Officer (Principal Executive Officer)

Date: March 16, 2000   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.
<TABLE>
<CAPTION>

Signature                          Title                        Date
----------                          -----                        ----
<S>                                <C>                           <C>
/S/ C. EDWARD BOUTONNET             Director                      3/16/00
-----------------------
(C. Edward Boutonnet)

-----------------------             Director                      3/16/00
(Bradford G. Crandall)

/S/ ALFRED P. GLOVER                Director                      3/16/00
-----------------------
(Alfred P. Glover)

/S/ MICHAEL T. LAPSYS               Director                      3/16/00
-----------------------
(Michael T. Lapsys)

/S/ ROBERT M. MRAULE                Director                      3/16/00
-----------------------
(Robert M. Mraule)

/S/ DUNCAN L. MCCARTER              Director                      3/16/00
-----------------------
(Duncan L. McCarter)

/S/ LOUIS A. SOUZA                  Director                      3/16/00
-----------------------
(Louis A. Souza)

                                    Director                      3/16/00
-----------------------
(Mose E. Thomas)

/S/ NICK VENTIMIGLIA                Chairman,President            3/16/00
--------------------                and CEO
(Nick Ventimiglia)
</TABLE>



                                       65
<PAGE>


                              EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit                                                     Sequential
Number                        Description                  Page Number
------                        -----------                  -----------
<C>         <S>                                                <C>
23.1        Independent auditors' consent.                      67

27.1        Financial Data Schedule                             68
</TABLE>














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