|SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549   FORM 10-Q  (Mark one)
|---------------------------------------------------------------------------------

|x |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
|- |  | -------------------------------------------------------

| |  | SECURITIES AND EXCHANGE ACT OF 1934
| |  | -----------------------------------




| |  | For the quarterly period endedSeptember 30, 2004
| |  | ------------------------------------------------




| ̈ |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
|- |  | --------------------------------------------------------

| |  | SECURITIES EXCHANGE ACT OF 1934 (No Fee Required)
| |  | -------------------------------------------------




| |  | For the transition period
from    to  .
| |  | ---------------------------------------

|Commission file number  0-25418   CENTRAL COAST BANCORP (Exact name of registrant as specified in its charter)
|--------------------------------------------------------------------------------------------------------------

|California                                                     |  | 77-0367061                          
|-------------------------------------------------------------- |  | ------------------------------------
|(State or other jurisdiction of Incorporation or organization) |  | (I.R.S. Employer Identification No.)

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



|(831) 422-6642(Registrants telephone number, including area code)   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 whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the
Exchange Act). Yes  x  No  Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest
practicable date:  No par value Common Stock - 10,915,173 shares outstanding at November 2, 2004.The Index to the Exhibits is located at page 30                                                             Page 1 of 50
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|PART
1  FINANCIAL INFORMATION

Item
1.  Financial Statements

CENTRAL
COAST BANCORP AND SUBSIDIARY  CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited)
|------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                            | September 30, | December 31, 
|--------------------------------------------------------------------------- | ------------- | -------------
|
|Assets                                                                      |              
|Cash and due from banks                                                     |               | $      46,345
|Federal funds sold                                                          |               | --           
|                                                                           
|Total cash and equivalents                                                  |               | 46,345       
|Available-for-sale securities at fair value (amortized cost of $177,340     |              
|at September 30, 2004 and $151,618 at December 31, 2003)                    |               | 179,322      
|Loans:                                                                      |              
|Commercial                                                                  |               | 230,198      
|Real estate-construction                                                    |               | 41,599       
|Real estate-other                                                           |               | 556,771      
|Consumer                                                                    |               | 13,189       
|Deferred loan fees, net                                                     |               | (1,208       
|                                                                           
|Total loans                                                                 |               | 840,549      
|Allowance for loan losses                                                   |               | (14,779      
|                                                                           
|Net Loans                                                                   |               | 825,770      
|                                                                           
|Premises and equipment, net                                                 |               | 3,313        
|Other real estate owned                                                     |               | 5,250        
|Accrued interest receivable and other assets                                |               | 13,765       
|                                                                           
|Total assets                                                                |               | $ 1,073,765  
|                                                                           
|Liabilities and Shareholders' Equity                                        |              
|Deposits:                                                                   |              
|Demand, noninterest bearing                                                 |               | $    260,703 
|Demand, interest bearing                                                    |               | 137,631      
|Savings                                                                     |               | 259,550      
|Time                                                                        |               | 296,275      
|                                                                           
|Total Deposits                                                              |               | 954,159      
|Accrued interest payable and other liabilities                              |               | 21,856       
|                                                                           
|Total liabilities                                                           |               | 976,015      
|                                                                           
|Commitments and contingencies (Note 3)                                      |              
|ShareholdersEquity:                                                        |              
|Preferred stock-no par value; authorized 1,000,000 shares; none outstanding |              
|Common stock - no par value; authorized 31,250,000 shares;                  |              
|issued and outstanding: 10,886,211 shares at September 30, 2004             |              
|and 9,927,999 shares at December 31, 2003                                   |               | 84,238       
|Shares held in deferred compensation trust (452,310 at September 30, 2004   |              
|and 411,191 as of December 31, 2003), net of deferred obligation            |               | --           
|Retained earnings                                                           |               | 12,353       
|Accumulated other comprehensive income (loss) - net of taxes                |              
|of $822 at September 30, 2004 and $875 at December 31, 2003                 |               | 1,159        
|                                                                           
|Total shareholders' equity                                                  |               | 97,750       
|                                                                           
|Total liabilities and shareholders' equity                                  |               | $ 1,073,765  
|                                                                           

# See
Notes to Consolidated Condensed Financial Statements

|CENTRAL
COAST BANCORP AND SUBSIDIARY CONSOLIDATED CONDENSED STATEMENTS OF INCOME (Unaudited)
|--------------------------------------------------------------------------------------------

|                            | Three Months Ended September 30, | Nine Months Ended September 30,
|--------------------------- | -------------------------------- | -------------------------------
|
|Interest Income             |                                 
|Loans (including fees)      |                                  | $12,180                        
|Investment securities       |                                  | 1,742                          
|Other                       |                                  | 58                             
|                           
|Total interest income       |                                  | 13,980                         
|                           
|Interest Expense            |                                 
|Interest on deposits        |                                  | 2,780                          
|Other                       |                                  | 73                             
|                           
|Total interest expense      |                                  | 2,853                          
|                           
|Net Interest Income         |                                  | 11,127                         
|Provision for Loan Losses   |                                  | 885                            
|                           
|Net Interest Income after   |                                 
|Provision for Loan Losses   |                                  | 10,242                         
|                           
|Noninterest Income          |                                 
|Service charges on deposits |                                  | 799                            
|Other                       |                                  | 286                            
|                           
|Total noninterest income    |                                  | 1,085                          
|                           
|Noninterest Expenses        |                                 
|Salaries and benefits       |                                  | 3,709                          
|Occupancy                   |                                  | 704                            
|Furniture and equipment     |                                  | 465                            
|Other                       |                                  | 1,457                          
|                           
|Total noninterest expenses  |                                  | 6,335                          
|                           
|Income Before Provision for |                                 
|Income Taxes                |                                  | 4,992                          
|Provision for Income Taxes  |                                  | 1,729                          
|                           
|Net Income                  |                                  | $  3,263                       
|                           
|Basic Earnings per Share    |                                  | $    0.30                      
|Diluted Earnings per Share  |                                  | $    0.28                      

# See
Notes to Consolidated Condensed Financial Statements

|CENTRAL
COAST BANCORP AND SUBSIDIARY CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
|------------------------------------------------------------------------------------------------

|In thousands                                                                      |  |            
|--------------------------------------------------------------------------------- |  | -----------
|
|Cash Flows from Operations:                                                       | 
|Net income                                                                        |  | $     9,715
|Reconciliation of net income to net cash provided                                 | 
|by operating activities:                                                          | 
|Provision for loan losses                                                         |  | 1,540      
|Net (gain) loss on sale of investments                                            |  | 116        
|Depreciation                                                                      |  | 837        
|Net gain on sale of fixed assets                                                  |  | (10        
|Amortization and accretion                                                        |  | 635        
|Increase in accrued interest receivable and other assets                          |  | (41        
|Increase in accrued interest payable and other liabilities                        |  | 2,399      
|Increase in deferred loan fees                                                    |  | 94         
|                                                                                 
|Net cash provided by operations                                                   |  | 15,285     
|                                                                                 
|Cash Flows from Investing Activities:                                             | 
|Proceeds from maturities of available-for-sale securities                         |  | 16,545     
|Purchases of available-for-sale securities                                        |  | (59,473    
|Proceeds from sale of available-for-sale securities                               |  | 16,496     
|Net increase in loans                                                             |  | (66,503    
|Proceeds from sale of equipment                                                   |  | 14         
|Purchases of equipment                                                            |  | (1,367     
|                                                                                 
|Net cash used in investing activities                                             |  | (94,288    
|                                                                                 
|Cash Flows from Financing Activities:                                             | 
|Net increase in deposit accounts                                                  |  | 16,049     
|Net increase (decrease) in other borrowings                                       |  | 9,728      
|Cash received for stock options exercised                                         |  | 609        
|Cash paid for shares repurchased                                                  |  | (2,501     
|                                                                                 
|Net cash provided by financing activities                                         |  | 23,885     
|                                                                                 
|Net decrease in cash and equivalents                                              |  | (55,118    
|Cash and equivalents, beginning of period                                         |  | 101,463    
|                                                                                 
|Cash and equivalents, end of period                                               |  | $   46,345 
|                                                                                 
|Noncash Investing and Financing Activities:                                       | 
|                                                                                  | 
|The Company obtained $5,250,000 of real estate (OREO) in the first nine months of | 
|2004 and $2,761,000 in the first nine months of 2003 in connection with           | 
|foreclosures of delinquent loans                                                  | 
|                                                                                  | 
|Other Cash Flow Information:                                                      | 
|Interest paid                                                                     |  | $     7,736
|Income taxes paid                                                                 |  | 5,147      

# See
Notes to Consolidated Condensed Financial Statements

|CENTRAL
COAST BANCORP AND SUBSIDIARYNOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTSSeptember
30, 2004 (Unaudited)

NOTE
1. CONSOLIDATED FINANCIAL STATEMENTS

In
the opinion of management, the unaudited consolidated condensed financial
statements contain all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly Central Coast Bancorps (the
Companys) consolidated financial position at September 30,
2004, the results of operations for the three and nine month periods ended
September 30, 2004 and 2003 and cash flows for the nine month periods ended
September 30, 2004 and 2003.

Certain
disclosures normally presented in the notes to the annual financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America have been omitted. These interim consolidated condensed
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Companys 2003
Annual Report to Shareholders. The results of operations for the three and nine
month periods ended September 30, 2004 and 2003 may not necessarily be
indicative of the operating results for the full year.

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.

Management
has determined that since all of the commercial banking products and services
offered by the Company are available in each branch of the Community Bank of
Central California, its bank subsidiary (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.

Stock
dividend  On January 26, 2004, the Board of Directors declared a 10% stock
dividend, which was distributed on February 27, 2004, to shareholders of record
as of February 12, 2004. All earnings per share data and share data related to
the stock option information have been retroactively adjusted to reflect the
stock dividend.

NOTE
2. 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,
as the Companys stock option plans provide for the issuance of options at
a price of no less than the fair market value at the date of the grant.
Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for
Stock-Based Compensation, requires the disclosure of pro forma net income
and earnings per share had the Company adopted the fair value method of
accounting for stock-based compensation. Under SFAS No. 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 assumptions: expected life, four years following
vesting; average stock volatility of 16.8% for 2004 and 16.1% and 2003; risk
free interest rates ranging from 3.08% to 4.35% for 2004 and 2.77% to 3.55% for
2003; and no dividends during the expected term for 2004 and 2003. The
Companys calculations are based on a multiple option valuation approach
and forfeitures are recognized as they occur.

A
summary of the pro forma effects to reported net income and earnings per share
as if the Company had elected to recognize compensation cost based on the fair
value of the options granted at grant date as prescribed by SFAS No. 123is as follows.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                          | Three Months Ended September 30, | Nine Months Ended September 30,
|----------------------------------------- | -------------------------------- | -------------------------------
|
|Net Income - As Reported                  |                                  | $      3,263                   
|Compensation expense from amortization of |                                 
|fair value of stock awards                |                                  | (317                           
|Taxes on compensation expense             |                                  | 130                            
|                                         
|Pro Forma Net Income                      |                                  | $      3,076                   
|                                         
|Basic Earnings per Share - As Reported    |                                  | $             0                
|Pro Forma Basic Earnings per Share        |                                  | $             0                
|Diluted Earnings per Share - As Reported  |                                  | $             0                
|Pro Forma Diluted Earnings per Share      |                                  | $             0                
|                                         

|NOTE
3. COMMITMENTS AND CONTINGENCIES


In
the normal course of business there are outstanding various commitments to
extend credit which are not reflected in the financial statements, including
loan commitments of approximately $265,683,000 and standby letters of credit of
approximately $10,568,000 at September 30, 2004. However, all such commitments
will not necessarily culminate in actual extensions of credit by the Company.

Approximately
$42,577,000 of loan commitments outstanding at September 30, 2004 relate to real
estate construction loans that are expected to fund within the next twelve
months. The remaining commitments primarily relate to commercial revolving lines
of credit, other commercial loans and home equity lines of credit. Many of these
commitments are expected to expire without being drawn upon. Therefore, the
total commitments do not necessarily represent future cash requirements. Each
potential borrower and the necessary collateral are evaluated on an individual
basis. Collateral varies, but may include real property, bank deposits, debt or
equity securities or business assets.

Stand-by
letters of credit are commitments written to guarantee the performance of a
customer to a third party. These guarantees are issued primarily relating to
contract performance or purchases of inventory by commercial customers and are
typically short-term in nature. Credit risk is similar to that involved in
extending loan commitments to customers and accordingly, evaluation and
collateral requirements similar to those for loan commitments are used.
Virtually all such commitments are collateralized.

NOTE
4. EARNINGS PER SHARE

Basic
earnings per share is computed by dividing net income by the weighted average
common shares outstanding for the period. Diluted earnings per share reflects
the potential dilution that could occur if options or other contracts to issue
common stock were exercised and converted into common stock.

There
was no difference in the numerator used in the calculation of basic earnings per
share and diluted earnings per share. The denominator used in the calculation of
basic earnings per share and diluted earnings per share for three and nine month
periods ended September 30 is reconciled as follows:
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                     | Three Months Ended September 30, | Nine Months Ended September 30,
|---------------------------------------------------- | -------------------------------- | -------------------------------
|
|Basic Earnings Per Share                             |                                  |                                
|Net income                                           |                                  | $  3,263                       
|Weighted average common shares outstanding           |                                  | 10,863                         
|                                                    
|Basic earnings per share                             |                                  | $    0.30                      
|                                                    
|Diluted Earnings Per Share                           |                                 
|Net income                                           |                                  | $  3,263                       
|Weighted average common shares outstanding           |                                  | 10,863                         
|Dilutive effect of outstanding options               |                                  | 534                            
|                                                    
|Weighted average common shares outstanding - Diluted |                                  | 11,397                         
|                                                    
|Diluted earnings per share                           |                                  | $    0.28                      
|                                                    

# NOTE
5.  COMPREHENSIVE INCOME

|                                                         | Three Months Ended September 30, | Nine Months Ended September 30,
|-------------------------------------------------------- | -------------------------------- | -------------------------------
|
|Net income                                               |                                  | $ 3,263                        
|Other comprehensive income (loss)- Net unrealized        |                                 
|gain (loss) on available-for-sale securities             |                                  | 2,242                          
|Reclassification adjustment for gains included in income |                                  | 12                             
|Taxes on reclassification adjustment                     |                                  | (5                             
|                                                        
|Total other comprehensive income                         |                                  | 2,249                          
|                                                        
|Total comprehensive income                               |                                  | $ 5,512                        
|                                                        

|Item
2.  Management's Discussion and Analysis of Financial Condition and Results of Operations

In
addition to the historical information contained herein, this report on Form
10-Q contains certain forward-looking statements that are subject to risks and
uncertainties that could cause actual results to differ materially from those
projected. Changes to such risks and uncertainties, which could impact future
financial performance, include, among others, (1) competitive pressures in the
banking industry; (2) changes in the interest rate environment; (3) general
economic conditions, nationally, regionally and in operating market areas,
including a decline in real estate values in the Companys market areas;
(4) the effects of terrorism, the threat of terrorism or the impact of military
conflicts; (5) changes in the regulatory environment; (6) changes in business
conditions and inflation; (7) changes in securities markets; (8) data processing
compliance problems; (9) variances in the actual versus projected growth in
assets; (10) return on assets; (11) loan losses; (12) expenses; (13) rates
charged on loans and earned on securities investments; (14) rates paid on
deposits; and (15) fee and other noninterest income earned, as well as other
factors. This entire report should be read to put such forward-looking
statements in context. To gain a more complete understanding of the
uncertainties and risks involved in the Companys business this report
should be read in conjunction with Central Coast Bancorps annual report on
Form 10-K for the year ended December 31, 2003 and quarterly reports on form
10-Q and current reports on form 8-K.


Critical
Accounting Policies

General

Central
Coast Bancorps financial statements are prepared in accordance with
accounting principles generally accepted in the United States of America
(GAAP). The financial information contained within our statements
is, to a significant extent, financial information that is based on measures of
the financial effects of transactions and events that have already occurred. We
use historical loss factors as one factor in determining the inherent loss that
may be present in our loan portfolio. Actual losses could differ significantly
from the historical factors that we use. Other estimates that we use are related
to the expected useful lives of our depreciable assets. In addition GAAP itself
may change from one previously acceptable method to another method. Although the
economics of our transactions would be the same, the timing of events that would
impact our transactions could change.

Allowance
for Loan Losses

The
allowance for loan losses is an estimate of the losses that may be sustained in
our loan portfolio. The allowance is based on two basic principles of
accounting. (1) Statement of Financial Accountings Standards (SFAS)
No. 5 Accounting for Contingencies, which requires that losses be
accrued when they are probable of occurring and estimable and (2) SFAS No. 114,
Accounting by Creditors for Impairment of a Loan, which requires
that losses be accrued based on the differences between the value of collateral,
present value of future cash flows or values that are observable in the
secondary market and the loan balance.

Our
allowance for loan losses has three basic components: the formula allowance, the
specific allowance and the unallocated allowance. Each of these components is
determined based upon estimates that can and do change when the actual events
occur. The formula allowance uses an historical loss view as an indicator of
future losses and as a result could differ from the loss incurred in the future.
However, since this history is updated with the most recent loss information,
the errors that might otherwise occur are mitigated. The specific allowance uses
various techniques to arrive at an estimate of the expected loss. Historical
loss information and fair market value of collateral are used to estimate those
losses. The use of these values is inherently subjective and our actual losses
could be greater or less than the estimates. The unallocated allowance addresses
losses that are attributable to various factors including economic events,
industry or geographic sectors whose impact on the portfolio have occurred, but
have yet to be recognized in either the formula or specific allowances. For
further information regarding our allowance for loan losses, see Allowance
for Loan Losses discussion later in this Item.






Stock
Based Awards

The
Company accounts for its stock based awards using the intrinsic value method in
accordance with Accounting Principles Board (APB) Opinion No. 25 and
related interpretations. Since the Companys stock option plan provides for
the issuance of options at a price of no less than the fair market value at the
date of the grant, no compensation expense has been recognized in the financial
statements.


Business
Organization

Central
Coast Bancorp (the Company) is a California corporation organized in
1994, and is the parent company for Community Bank of Central California, a
state-chartered bank, headquartered in Salinas, California (the
Bank). Its investment in the Bank comprises the major business
activity of the Company. Upon prior notification to the Board of Governors of
the Federal Reserve System, the Company is authorized to engage in a variety of
activities, which are deemed closely related to the business of banking. The
Company is engaged in certain lending activities related to the purchase of
certain tax advantaged loans from the Bank.

The
Bank offers a full range of commercial banking services, including a diverse
range of traditional banking products and services to individuals, merchants,
small and medium-sized businesses, professionals and agribusiness enterprises.
Its principal markets are located in the counties of Monterey, San Benito, Santa
Clara and Santa Cruz, which are in the central coast area of California.


Overview

For
the third quarter of 2004, the Company had net income of $3,263,000 as compared
to $2,950,000 reported in the year earlier period. Diluted earnings per share
for the two quarters was $0.28 and $0.25, respectively. The annualized return on
average equity (ROAE) and return on average assets (ROAA) for the third quarter
of 2004 were 13.66% and 1.22% as compared to 13.75% and 1.21% for the same
period in 2003.

Net
income for the nine months ended September 30, 2004 and 2003 was $9,715,000 and
$8,803,000. Diluted earnings per share were $0.85 and $0.76, respectively. For
the first nine months of 2004, ROAE was 13.99% and ROAA was 1.25% as compared to
14.25% and 1.27% for the same period in 2003. The earnings per share for the
2003 periods have been adjusted for the 10% stock dividend distributed in
February 2004.

The
Company continued to experience growth in total assets, loans and deposits
during the third quarter of 2004. The Company ended the quarter with total
assets of $1,073,765,000, an increase of $24,280,000 (2.3%) from the June 30,
2004 balance and a $35,925,000 (3.5%) increase from year-end 2003. Loan demand
picked up in the third quarter as loans increased $40,697,000 (5.1%) from the
June 30, 2004 balance to total $840,549,000 at September 30, 2004. This increase
was net of a $9.0 million nonperforming loan transaction. Loans have increased
$57,808,000 (7.4%) from the year-end 2003. Deposits grew to $954,159,000 at
September 30, 2004, an increase of $6,441,000 (0.7%) from June 30, 2004 and an
increase of $16,049,500,000 (1.7%) from year-end 2003. On a year-over-year
basis, internal growth has generated an increase in assets of $103,882,000
(10.7%); an increase in loans of $92,181,000 (12.3%); and an increase in
deposits of $82,157,000 (9.4%).

At
September 30, 2004, nonperforming assets totaled $7,281,000, which was a
decrease of $3,289,000 from the June 30, 2004 balance of $10,570,000. The
decrease was attributable to the charge-off of one of the two loans related to
the City of King redevelopment project. The second loan moved from nonaccrual
status to OREO in the quarter. (For additional information see Nonaccrual, Past
Due, Restructured Loans and Other Real Estate Owned section of this MD&A and
Part II Items 1 and 6 (b)).

Central
Coast Bancorp ended the third quarter of 2004 with a Tier 1 capital ratio of
10.5% and a total risk-based capital ratio of 11.7% versus 10.5% and 11.8%,
respectively, at the end of the third quarter of 2003.

Within
the Managements Discussion and Analysis, interest income, net interest
income, net interest margin and the efficiency ratio are presented on a fully
taxable equivalent basis (FTE). These items have been adjusted to
give effect to $287,000 and $273,000 in taxable equivalent interest income on
tax-free investments for the three-month periods ended September 30, 2004 and
2003 and $841,000 and $828,000 for the nine-month periods ended September 30,
2004 and 2003.

The
following table provides a summary of the major elements of income and expense
for the periods indicated.


Condensed
Comparative Income Statement
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                           | Three Months Ended September 30, | Percentage Change Increase | Three Months Ended September 30, | Percentage Change Increase
|-------------------------- | -------------------------------- | -------------------------- | -------------------------------- | --------------------------
|
|Interest Income (1)        |                                  | $14,267                    |                                  | $12,776                   
|Interest Expense           |                                  | 2,853                      |                                  | 2,845                     
|                          
|Net interest income        |                                  | 11,414                     |                                  | 9,931                     
|Provision for Loan Losses  |                                  | 885                        |                                  | 630                       
|                          
|Net interest income after  |                                 
|provision for loan losses  |                                  | 10,529                     |                                  | 9,301                     
|Noninterest Income         |                                  | 1,085                      |                                  | 1,538                     
|Noninterest Expense        |                                  | 6,335                      |                                  | 6,027                     
|                          
|Income before income taxes |                                  | 5,279                      |                                  | 4,812                     
|Income Taxes               |                                  | 1,729                      |                                  | 1,589                     
|Tax Equivalent Adjustment  |                                  | 287                        |                                  | 273                       
|                          
|Net income                 |                                  | $  3,263                   |                                  | $  2,950                  
|                          

|(1)
Interest on tax-free securities is reported on tax equivalent basis.












Net
interest income / net interest margin

Net
interest income, the difference between interest earned on loans and investments
and interest paid on deposits and other borrowings, is the principal component
of the Banks earnings. Net interest margin is net interest income
expressed as a percentage of average earning assets. The first two following
tables provide a summary of the components of net interest income and the
changes within the components for the periods indicated. The third table sets
forth a summary of the changes in interest income and interest expense from
changes in average asset and liability balances (volume) and changes in average
interest rates for the periods indicated.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                         | Three Months Ended September 30,
|---------------------------------------- | --------------------------------
|
|
|Assets:                                  |                                 
|Earning Assets                           |                                 
|Loans (1) (2)                            |                                 
|Taxable investments                      |                                 
|Tax-exempt securities (tax equiv. basis) |                                 
|Federal funds sold                       |                                 
|                                        
|Total Earning Assets                     |                                 
|                                        
|Cash & due from banks                    |                                 
|Other assets                             |                                 
|                                        
|                                         |                                 
|                                        
|Liabilities & Shareholders' Equity:      |                                 
|Interest bearing liabilities:            |                                 
|Demand deposits                          |                                 
|Savings                                  |                                 
|Time deposits                            |                                 
|Other borrowings                         |                                 
|                                        
|Total interest bearing liabilities       |                                 
|                                        
|Demand deposits                          |                                 
|Other Liabilities                        |                                 
|                                        
|Total Liabilities                        |                                 
|Shareholders' Equity                     |                                 
|                                        
|                                         |                                 
|                                        
|Net interest income & margin (3)         |                                 
|                                        

|(1)
Loan interest income includes fee income of $416,000 and $427,000 for the three
months ended September 30, 2004 and 2003, respectively.

(2)
Includes the average allowance for loan losses of $17,510,000 and $15,777,000
and average deferred loan fees of $1,127,000 and $1,057,000 for the three months
ended September 30, 2004 and 2003, respectively.

(3)
Net interest margin is computed by dividing net interest income by the total
average earning assets.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                         | Nine Months Ended September 30,
|---------------------------------------- | -------------------------------
|
|
|                                         |                                
|Assets:                                  |                                
|Earning Assets                           |                                
|Loans (1) (2)                            |                                
|Taxable investments                      |                                
|Tax-exempt securities (tax equiv. basis) |                                
|Federal funds sold                       |                                
|                                        
|Total Earning Assets                     |                                
|                                        
|Cash & due from banks                    |                                
|Other assets                             |                                
|                                        
|                                         |                                
|                                        
|Liabilities & Shareholders' Equity:      |                                
|Interest bearing liabilities:            |                                
|Demand deposits                          |                                
|Savings                                  |                                
|Time deposits                            |                                
|Other borrowings                         |                                
|                                        
|Total interest bearing liabilities       |                                
|                                        
|Demand Deposits                          |                                
|Other Liabilities                        |                                
|                                        
|Total Liabilities                        |                                
|Shareholders' Equity                     |                                
|                                        
|                                         |                                
|                                        
|Net interest income & margin (3)         |                                
|                                        

|(1)
Loan interest income includes fee income of $1,333,000 and $1,251,000 for the
nine months ended September 30, 2004 and 2003, respectively

(2)
Includes the average allowance for loan losses of $16,971,000 and $15,493,000
and average deferred loan fees of $1,143,000 and $1,010,000 for the nine months
ended September 30, 2004 and 2003, respectively.

(3)
Net interest margin is computed by dividing net interest income by the total
average earning assets.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Volume/Rate Analysis                 |  |         |   |         
|------------------------------------ |  | ------- | - | --------
|
|
|
|
|                                    
|Net Loans (1)(2)                     |  | $ 1,235 |   | $  (141 
|Taxable investment securities        |  | 300     |   | 95      
|Tax exempt investment securities (3) |  | 83      |   | (41     
|Federal funds sold                   |  | (56     | ) | 16      
|                                    
|Total                                |  | 1,562   |   | (71     
|                                    
|Interest-bearing liabilities:        | 
|Demand deposits                      |  | 21      |   | (13     
|Savings deposits                     |  | 92      |   | (42     
|Time deposits                        |  | 108     |   | (129    
|Other borrowings                     |  | (16     | ) | (13     
|                                    
|Total                                |  | 205     |   | (197    
|                                    
|Interest differential                |  | $ 1,357 |   | $    126
|                                    
|                                    
|
|
|
|                                    
|Net Loans (1)(2)                     |  | $ 2,856 |   | $  (968 
|Taxable investment securities        |  | 1,485   |   | 6       
|Tax exempt investment securities (3) |  | 141     |   | (100    
|Federal funds sold                   |  | (122    | ) | --      
|                                    
|Total                                |  | 4,360   |   | (1,062  
|                                    
|Interest-bearing liabilities:        | 
|Demand deposits                      |  | 87      |   | (71     
|Savings deposits                     |  | 424     |   | (511    
|Time deposits                        |  | 113     |   | (520    
|Other borrowings                     |  | 61      |   | (141    
|                                    
|Total                                |  | 685     |   | (1,243  
|                                    
|Interest differential                |  | $ 3,675 |   | $    181
|                                    

|(1)
The average balance of non-accruing loans is not significant as a percentage of  total
loans and, as such, has been included in net loans.

(2)  Loan
fees of $416,000 and $427,000 for the quarters ended September 30, 2004 and  2003, and
loan fees of $1,333,000  and $1,251,000 for the nine months ended  September 30, 2004 and
2003, respectively, have  been included in the interest income computation.

(3)  Includes
taxable-equivalent adjustments that relate to income on certain  securities that are
exempt from Federal  income taxes. The effective Federal  statutory tax rate was 35% for
2004 and 2003.

(4)
The rate / volume variance has been included in the rate variance.

Net
interest income for the third quarter of 2004 was $11,414,000, which was an
increase of $1,483,000 (14.9%) from the $9,931,000 recorded in the third quarter
of 2003. Both interest income and interest expense increased from their prior
year levels. The interest income component increased $1,491,000 (11.7%) on a
quarter-over-quarter basis as due to the large increase in earning assets.
Average loan balances were $80,472,000 (11.1%) higher in the third quarter of
2004 versus the same quarter in the previous year. This volume difference added
$1,094,000 to interest income. However, the average yield earned on loans in the
third quarter of 2004 was 6.04%, a decrease of 5 basis points from the yield
earned in the third quarter of 2003. The lower loan yield decreased interest
income by $141,000. The average balance of taxable investment securities in the
third quarter of 2004 was $34,573,000 (38.8%) higher than it was in the third
quarter of 2003. The higher balances added $300,000 to interest income. The
rates received on those investments increased 32 basis points between the two
periods. The higher rates increased interest income $95,000 on a
quarter-over-quarter basis. The average balance of the Companys portfolio
of tax-exempt securities increased $4,887,000 (10.1%) from the third quarter of
2003 to the third quarter of 2004. The tax equivalent yield decreased 29 basis
points to 6.43% during that period. The higher balance and lower rate combined
to increase interest income $42,000.

Interest
expense had a slight increase of only $8,000 to $2,853,000 in the third quarter
of 2004 as compared to the third quarter of 2003. The average rate paid on
interest-bearing liabilities declined 14 basis points to 1.62% for the third
quarter of 2004 as compared to 1.76% in the year earlier period. This decrease
in rates reduced interest expense by $197,000. Average balances of
interest-bearing liabilities in the third quarter of 2004 increased by
$56,656,000 (8.8%) over the prior year period. These higher balances added
$205,000 to interest expense.

The
net interest margin for the third quarter of 2004 was 4.56% as compared to 4.39%
in the year earlier period. The net interest margin in the third quarter of 2004
increased 4 basis points from 4.52% in the second quarter of 2004. The increase
in net interest margin from the second quarter is primarily a result of slightly
higher yields on loans and taxable investment securities as compared to a
smaller increase in rates paid on deposit liabilities.

For
the nine-month period ending September 30, 2004, net interest income increased
$3,856,000 (13.4%) over the first nine months of 2003. The interest income
component increased $3,298,000 to $40,864,000. Average balances of earning
assets were $104,839,000 (12.2%) higher in the first nine-months of 2004 than
the same period in 2003. The average balance of loans was $61,667,000 higher,
which contributed $2,856,000 to interest income. The average yield received on
loans in the first nine-months of 2004 was 17 basis points lower than the 6.17%
received in the year earlier period. The lower yield on loans decreased interest
income by $968,000. The average balance of taxable investment securities was
$54,797,000 (80.1%) higher in the first nine-months of 2004 than in the year
earlier period. The higher balances in taxable investments increased interest
income $1,485,000.

Interest
expense for the nine-month period ending September 30, 2004 decreased $558,000
(6.3%) from the first nine-months of 2003. Average balances of interest bearing
liabilities in the first nine-months of 2004 were $61,523,000 9.9%) higher than
in the year earlier period. These volume increases added $685,000 to interest
expense. For the first nine-months of 2004, average rates paid on interest
bearing liabilities was 1.62% for a decline of 28 basis points from the rates
paid in the first nine-months of 2003. The lower rates resulted in a $1,243,000
decrease in interest expense in the first nine-months of 2004 from the prior
year period.

The
impact of the above changes in volumes and rates for earning assets and interest
bearing liabilities for the first nine-months of 2004 resulted in a 5 basis
point increase in the net interest margin to 4.50% from 4.45% in the year
earlier period.


Provision
for Loan Losses

The
Bank provided $885,000 for loan losses in the third quarter of 2004 as compared
to $630,000 in the third quarter of 2003. For the nine-month period ended
September 30, 2004, the Bank provided $1,540,000 compared to $930,000 in the
year earlier period. The provision for loan losses that has been recorded is
based on factors which consider the growth or decline in the level of loans,
changes in the level of nonperforming and classified assets, changing portfolio
mix and prevailing local and national economic conditions to establish the
required level of loan loss reserves. At September 30, 2004, the ratio of the
allowance for loan losses to total loans was 1.76% as compared to 2.12% at
December 31, 2003 and 2.17% at September 30, 2003. (See the Credit
Risk and Allowance for Loan Losses sections for additional
discussion).


Noninterest
Income

Noninterest
income consists primarily of service charges on deposit accounts and fees for
miscellaneous services. Noninterest income decreased $453,000 (29.5%) to
$1,085,000 in the third quarter of 2004 as compared to $1,538,000 in the third
quarter of 2003. Most of the decrease was related to two significant changes. In
the third quarter of 2003, the Company recorded operating income of $260,000
from its OREO property and it realized a gain of $176,000 on the sale of
investment securities. During the third quarter of this year, the Company did
not have any revenue from OREO or gains on the sale of securities.

For
the first nine-months of 2004, noninterest income decreased $1,021,000 (24.7%)
to $3,110,000 compared to $4,131,000 in the same period last year. Service
charges on deposits increased to $2,346,000 from $2,330,000 in 2003. In the
first nine-months of 2004, other fee income was $764,000, a decrease of
$1,037,000 from the $1,801,000 earned in the same period last year. Within other
fees there were three significant changes. Mortgage origination fees decreased
$155,000 due to lower volume of home refinancing in 2004. The Company did not
have any income from OREO in 2004 as compared to $383,000 in 2003. The Company
realized losses of $116,000 on the sale of securities in 2004 as compared to
gains of $430,000 in 2003.


Noninterest
Expense

Noninterest
expenses increased $308,000 (5.1%) to $6,335,000 in the third quarter of 2004 as
compared to $6,027,000 in the third quarter 2003. Salary and employee benefits
increased $302,000 (8.9%) to $3,709,000 because of additional staffing for the
new Santa Cruz and Soledad branches, internal growth, higher benefit costs, and
normal salary increases. On a quarter-over-quarter basis, occupancy and fixed
asset expenses increased $108,000 (10.2%) from $1,061,000 in 2003 to $1,169,000
in 2004. Costs related to the new Santa Cruz and Soledad branches and higher
business volume contributed to the increase. Other expenses for the third
quarter of 2004 was $1,457,000, a decrease of $102,000 (6.5%) from the prior
year quarter. In the third quarter of 2003, the Company incurred $293,000 in
OREO expense as compared to none in 2004. Increase in business volumes, higher
audit fees due to compliance with Sarbanes-Oxley internal control requirements
and increased promotional costs contributed to offsetting some of the favorable
impact of the lower OREO expense. The efficiency ratio for the quarter ended
September 30, 2004 was 50.7% as compared to 52.6%, in the year earlier period.

Noninterest
expenses for the nine-month period ending September 30, 2004 increased $896,000
(5.1%) to a total of $18,468,000 compared to $17,572,000 for the same period in
2003. Salary and benefit expenses increased $854,000 (8.5%) to $10,891,000 in
2004 versus $10,037,000 in the first nine-months of 2003. The increase was due
to the additional staffing for the new Santa Cruz and Soledad branches, higher
benefit costs and normal salary increases. For the first nine-months of 2004,
occupancy and fixed asset expenses increased $135,000 (4.2%) to $3,377,000
compared to $3,242,000 in the same period last year. Costs related to the two
new branches and higher business volume contributed to the increase. Other
expenses decreased $93,000 (2.2%) to $4,200,000 for the nine-month period ended
September 30, 2004. OREO expenses decreased $546,000 as the Company sold the
property in 2003. The same factors discussed in the preceding paragraph
contributed to offsetting some of the favorable impact of the lower OREO
expense. The efficiency ratio for the first nine-months of 2004 was 51.7% as
compared to 53.5% for the same period of 2003.


Provision
for Income Taxes

The
Company recorded income tax expense of $1,729,000 and $5,143,000 for the quarter
and nine-month periods ending September 30, 2004 as compared to $1,589,000 and
$4,739,000 for the same periods in 2003. The effective tax rates, considering
state and federal taxes, and tax exempt income, for the third quarter and first
nine-months of 2004 were 34.6% compared to 35.0% for the same periods in 2003.
The effective tax rate was lower in both periods of 2004 as the Company revised
the calculation of deferred tax assets for a change in the tax rate.


Securities

At
September 30, 2004, available-for-sale securities had a market value of
$179,322,000 with an amortized cost basis of $177,340,000. On an amortized cost
basis, the investment portfolio decreased by $2,055,000 from the balance at June
30, 2004 and increased $25,722,000 from the balance at December 31, 2003. The
pretax unrealized gain of $1,982,000 at September 30, 2004 represented an
increase of $3,845,000 from the unrealized loss of $1,863,000 at June 30, 2004
and a decrease of $127,000 from the unrealized gain of $2,109,000 at December
31, 2003. The change from an unrealized loss to an unrealized gain position on
the portfolio was the result of the change in interest rates during the third
quarter of 2004 as the investment markets reacted to slower economic growth.


Loans

The
ending loan balance at September 30, 2004 was $840,549,000, which was an
increase of $40,697,000 (5.1%) from the June 30, 2004 balance, an increase of
$57,808,000 (7.4%) from the year-end 2003 balance and an increase of $92,181,000
(12.3%) from the September 30, 2003 balance. During the third quarter all loan
categories increased from June 30, 2004 balances. The most significant loan
growth in the quarter was in the real estate  other category, which
increased $31,760,000 (6.0%). Construction loans increased $5,665,000 (2.5%).
Commercial loans increased $2,393,000 (6.1%) and Consumer loans increased
$927,000 (7.6%). Within its primary market area, the Bank has diversified its
risk both as to property type and location. See Credit Risk below
for a discussion regarding real estate risk.


Credit
Risk

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 examine new loans and to review
the existing loan portfolio. Management believes its ability to identify and
assess risk and return characteristics of the Companys loan portfolio is
critical for profitability and growth. Management strives to continue the
historically low level of loan losses by continuing its emphasis on credit
quality in the loan approval process, active credit administration and regular
monitoring. With this in mind, management has designed and implemented a
comprehensive loan review and grading system that functions to continually
assess the credit risk inherent in the loan portfolio.

Ultimately,
the credit quality of the Banks loans may be influenced by underlying
trends in the national and local economic and business cycles. The Banks
business is mostly concentrated in Monterey County. The Countys economy is
highly dependent on the agricultural and tourism industries. The agricultural
industry is also a major driver of the economies of San Benito County and the
southern portions of Santa Cruz and Santa Clara Counties, which represent the
additional market areas for the Bank. As a result, the Bank lends money to
individuals and companies dependent upon the agricultural and tourism
industries.

The
Company has significant extensions of credit and commitments to extend credit
which are secured by real estate, totaling approximately $698 million at
September 30, 2004. Although management believes this real estate concentration
has no more than the normal risk of collectibility, a substantial decline in the
economy in general, or a decline in real estate values in the Banks
primary market areas in particular, could have an adverse impact on the
collectibility of these loans. The ultimate recovery of these loans is generally
dependent on the successful operation, sale or refinancing of the real estate.
The Bank monitors the effects of current and expected market conditions and
other factors on the collectibility of real estate loans. When, in
managements judgment, 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. Notwithstanding the foregoing, abnormally high
rates of impairment due to general or local economic conditions could adversely
affect the Companys future prospects and results of operations.

In
extending credit and commitments to borrowers, the Bank generally requires
collateral and/or guarantees as security. The repayment of such loans is
expected to come from cash flow or from proceeds from the sale of selected
assets of the borrowers. The Banks requirement for collateral and/or
guarantees is determined on a case-by-case basis in connection with
managements evaluation of the creditworthiness 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
mitigate 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, Restructured Loans and Other Real Estate Owned (OREO)

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. 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 terms of the loan agreement and remaining
principal is considered collectible or when the loan is both well secured and in
the process of collection. Loans are charged off when, in the opinion of
management, collection appears unlikely. The following table sets forth
nonaccrual loans, loans past due 90 days or more, restructured loans performing
in compliance with modified terms and OREO at September 30, 2004 and December
31, 2003:
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|In thousands (except percentages)                   | September 30, 2004 | December 31, 2003
|--------------------------------------------------- | ------------------ | -----------------
|
|Commercial                                          |                    | $   118          
|Real estate                                         |                    | 237              
|Consumer and other                                  |                    | --               
|                                                   
|                                                    |                    | 355              
|                                                   
|Nonaccrual:                                         |                   
|Commercial                                          |                    | 875              
|Real estate                                         |                    | 49               
|Consumer and other                                  |                    | --               
|                                                   
|                                                    |                    | 924              
|                                                   
|Restructured (in compliance with modified           |                   
|terms)- Commercial                                  |                    | 752              
|                                                   
|Total nonperforming and restructured loans          |                    | 2,031            
|                                                   
|Other real estate owned                             |                    | 5,250            
|                                                   
|Total nonperforming assets                          |                    | $7,281           
|                                                   
|Allowance for loan losses as a percentage of        |                   
|nonperforming and restructured  loans               |                    | 728              
|Nonperforming and restructured loans to total loans |                    | 0.25             
|Allowance for loan losses to nonperforming assets   |                    | 203              
|Nonperforming assets to total assets                |                    | 0.68             

|Nonperforming
and restructured loans decreased from $10,570,000 at June 30, 2004 to $2,031,000
at September 30, 2004. Approximately $9.0 million of the nonperforming balance
at June 30, 2004 pertained to loans for a commercial and retail redevelopment
project in the City of King. During the third quarter of 2004, the Company
charged-off a balance of $3.3 million on one of these loans and foreclosed on
the other loan. At September 30, 2004, the property was recorded as other real
estate owned (OREO) at a value of $5,250,000. (For additional information see
Part II Items 1 and 6 (b)). As a result of the aforementioned charge-off,
nonperforming assets decreased $3,289,000 from the June 30, 2004 balance.
Consequently, the ratio of the allowance for loan losses to nonperforming and
restructured loans increased to 728% at September 30, 2004 as compared to 159%
at December 31, 2003 and 146% at September 30, 2003. The ratio of the allowance
for loan losses to total loans was 1.76% at September 30, 2004 as compared to
2.12% at December 31, 2003 and 2.17% at September 30, 2003. The Company had OREO
of $5,250,000 at September 30, 2004, which consisted of the redevelopment
project as mentioned above. The Company did not have any OREO properties at
December 31, 2003.

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.

At
September 30, 2004, the recorded investment in loans that are considered
impaired under SFAS No. 114 was $1,717,000. The total impaired loans include
$924,000 of nonaccrual loans, $752,000 of restructured loans and $41,000 in
other loans identified as impaired. The impaired loans had related valuation
allowances totaling $563,000.

At
December 31, 2003, the recorded investment in loans considered impaired was
$10,694,000, of which $9,606,000 was included in nonaccrual loans, $835,000 was
included in restructured loans and $253,000 in other loans identified as
impaired. The impaired loans had valuation allowances totaling $2,516,000.

Other
than for the impaired loans disclosed above, management is not aware of any
other potential problem loans, which were accruing and current at September 30,
2004, where serious doubt exists as to the ability of the borrower to comply
with the present repayment terms.


Allowance
for Loan Losses

The
Bank maintains an allowance for loan losses to absorb losses inherent in the
loan portfolio. The allowance is based on our regular assessments of the
probable estimated losses inherent in the loan portfolio and to a lesser extent,
unused commitments to provide financing. Determining the adequacy of the
allowance is a matter of careful judgment, which reflects consideration of all
significant factors that affect the collectibility of the portfolio as of the
evaluation date. Our methodology for measuring the appropriate level of the
allowance relies on several key elements, which include the formula allowance,
specific allowances for identified problem loans and the unallocated reserve.
The unallocated allowance contains amounts that are based on managements
evaluation of conditions that are not directly measured in the determination of
the formula and specific allowances.

The
formula allowance is calculated by applying loss factors to outstanding loans
and certain unused commitments, in each case based on the internal risk grade of
such loans and commitments. Changes in risk grades of both performing and
nonperforming loans affect the amount of the formula allowance. Loss factors are
based on our historical loss experience and may be adjusted for significant
factors that, in managements judgment, affect the collectibility of the
portfolio as of the evaluation date. At September 30, 2004, the formula
allowance was $10,590,000 compared to $12,400,000 at June 30, 2004 and
$12,236,000 at December 31, 2003. The decrease in the formula allowance in the
third quarter was primarily a result of a decrease in the balances of supervised
loans and a reduction in the factor applied to one classification of supervised
loans.

In
addition to the formula allowance calculated by the application of the loss
factors to the standard loan categories, certain specific allowances may also be
calculated. Quarterly, all significant classified and criticized loans are
analyzed individually based on the source and adequacy of repayment and specific
type of collateral, and an assessment is made of the adequacy of the formula
reserve relative to the individual loan. A specific allocation either higher or
lower than the formula reserve will be calculated based on the
higher/lower-than-normal probability of loss and the adequacy of the collateral.
At September 30, 2004, the specific allowance was $2,485,000 on a loan base of
$20,907,000 compared to a specific allowance of $2,810,000 on a loan base of
$31,537,000 at June 30, 2004 and a specific allowance of $3,059,000 on a loan
base of $40,545,000 at December 31, 2004. The decrease in the specific allowance
in the third quarter of 2004 was due to the decrease in the level of loans
requiring specific valuation allowances coupled with changes of the level of
specific allowance applied to several loans.

The
unallocated allowance contains amounts that are based on managements
evaluation of conditions that are not directly measured in the determination of
the formula and specific allowances. The evaluation of the inherent loss with
respect to these conditions is subject to a higher degree of uncertainty because
they are not identified with specific problem loans or portfolio segments. At
September 30, 2004, the unallocated allowance was $1,703,000 compared to
$2,022,000 at June 30, 2004 and $1,294,000 at December 31, 2003. The conditions
evaluated in connection with the unallocated allowance include the following at
the balance sheet date:

o
The current national and local economic and business conditions, trends and
developments, including the condition of various market segments within our
lending area;

o
Changes in lending policies and procedures, including underwriting standards and
collection, charge-off, and recovery practices;

o
Changes in the nature, mix, concentrations and volume of the loan portfolio;

o
The effect of other external factors such as competition and legal and
regulatory requirements on the level of estimated credit losses in the
Banks current portfolio.

There
can be no assurance that the adverse impact of any of these conditions on the
Bank will not be in excess of the unallocated allowance as determined by
management at September 30, 2004 and set forth in the preceding paragraph.

The
allowance for loan losses totaled $14,779,000 or 1.76% of total loans at June
30, 2004 compared to $17,232,000 or 2.15% at June, 2004, $16,590,000 or 2.12% at
December 31, 2003 and $16,272,000 or 2.17% at September 30, 2003. At these
dates, the allowance represented 728%, 163%, 159% and 146% of nonperforming
loans.

It
is the policy of management to maintain the allowance for loan losses at a level
adequate for risks inherent in the loan portfolio. Based on information
currently available to analyze loan loss potential, including economic factors,
overall credit quality, historical delinquency and a history of actual
charge-offs, management believes that the loan loss provision and allowance are
adequate. However, no prediction of the ultimate level of loans charged off in
future years can be made with any certainty.

The
following table summarizes activity in the allowance for loan losses for the
periods indicated:
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                 | Three months ended | Nine months ended
|---------------------------------------------------------------- | ------------------ | -----------------
|
|
|Beginning balance                                                |                    | $ 17,232         
|Provision charged to expense                                     |                    | 885              
|Loans charged off                                                |                    | (3,394           
|Recoveries                                                       |                    | 56               
|                                                                
|Ending balance                                                   |                    | $ 14,779         
|                                                                
|Ending loan portfolio                                            |                    |                  
|                                                                
|Allowance for loan losses as percentage of ending loan portfolio |                    |                  

|Liquidity

Liquidity
management refers to the Companys ability to provide funds on an ongoing
basis to meet fluctuations in deposit levels as well as the credit needs and
requirements of its clients. Both assets and liabilities contribute to the
Companys liquidity position. Federal funds lines, short-term investments
and securities, and loan repayments contribute to liquidity, along with deposit
increases, while loan funding and deposit withdrawals decrease liquidity. The
Bank assesses the likelihood of projected funding requirements by reviewing
historical funding patterns, current and forecasted economic conditions and
individual client funding needs. Commitments to fund loans and outstanding
standby letters of credit at September 30, 2004 were approximately $265,583,000
and $10,568,000, respectively. Such loans relate primarily to commercial
revolving lines of credit, real estate construction loans, other commercial
loans and home equity lines of credit.

The
Companys sources of liquidity consist of overnight funds sold to
correspondent banks, unpledged marketable investments, loans pledged to the
Federal Home Loan Bank of San Francisco (FHLB-SF) and sellable SBA
loans. On September 30, 2004, liquid assets totaled $174.0 million or 16.2% of
total assets as compared to $208.3 million or 20.1% of total assets on December
31, 2003. In addition to liquid assets, the Bank maintains short-term lines of
credit with correspondent banks. At September 30, 2004, the Bank had $90,000,000
available under these credit lines. 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.


Capital
Resources

The
Companys total shareholders equity was $97,750,000 at September 30,
2004 compared to $89,595,000 at December 31, 2003.

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. Under the
regulations, capital requirements are based upon the composition of an
institutions asset base and the risk factors assigned to those assets. The
guidelines characterize an institutions capital as being Tier
1 capital (defined to be principally shareholders equity less
intangible assets) and Tier 2 capital (defined to be principally the
allowance for loan losses, limited to one and one-fourth percent of gross risk
weighted assets). The guidelines require the Company and the Bank to maintain a
risk-based capital target ratio of 8%, one-half or more of which should be in
the form of Tier 1 capital.


The
following table shows the Companys and the Banks actual capital
amounts and ratios at September 30, 2004 and December 31, 2003 as well as the
minimum capital ratios for capital adequacy under the regulatory framework:
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                          | Actual | For Capital Adequacy Purposes: | To Be Categorized Well Capitalized Under Prompt Corrective Action Provisions
|----------------------------------------- | ------ | ------------------------------ | ----------------------------------------------------------------------------
|
|
|Total Capital (to Risk Weighted Assets):  |        | $108,158                       |                                                                             
|Tier 1 Capital (to Risk Weighted Assets): |        | 96,590                         |                                                                             
|Tier 1 Capital (to Average Assets):       |        | 96,590                         |                                                                             
|                                         
|
|Total Capital (to Risk Weighted Assets):  |        | $  99,038                      |                                                                             
|Tier 1 Capital (to Risk Weighted Assets): |        | 88,321                         |                                                                             
|Tier 1 Capital (to Average Assets):       |        | 88,321                         |                                                                             
|                                         
|
|
|                                         
|Total Capital (to Risk Weighted Assets):  |        | $102,855                       |                                                                             
|Tier 1 Capital (to Risk Weighted Assets): |        | 91,396                         |                                                                             
|Tier 1 Capital (to Average Assets):       |        | 91,396                         |                                                                             
|                                         
|
|Total Capital (to Risk Weighted Assets):  |        | $  92,172                      |                                                                             
|Tier 1 Capital (to Risk Weighted Assets): |        | 81,563                         |                                                                             
|Tier 1 Capital (to Average Assets):       |        | 81,563                         |                                                                             

|The
Bank meets the well capitalized ratio measures at both September 30,
2004 and December 31, 2003.

Item
3.  Quantitative and Qualitative Disclosures about Market Risk


Overview

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


Asset/Liability
Management

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

Simulation
of earnings is one of the tools 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 using inputs of actual loan and interest
bearing liability (i.e. deposits/borrowings) positions as the beginning base.

The
Company measures the interest rate risk embedded in its current portfolio based
on interest rates evolving over time along four forecast paths. Net interest
margin and net interest income are calculated as the forecast balance sheet is
processed against these four interest rate scenarios. One scenario is a flat
rate based on the current rate environment. One scenario is an economic
forecast, based on underlying economic and financial sector modeling. The other
two are a rising and declining scenario based on gradual rate ramps which embody
rate relationships. The nature of the specified rate tests is a gradual but
significant change in interest rates projected to evolve over 12 months. The
interest rate risk modeling is a useful tool, but there are certain limits to
the rate forecast estimates. Actual rate changes rarely follow any given
forecast, asset-liability pricing and other model inputs usually do not remain
constant in their historic relationships as new rate environments evolve.
However, holding these assumptions constant through the modeling horizon helps
to appropriately emphasize specific repricing/mismatch points and their
performance implications.

A
one year projection of net interest income, as forecast below, was modeled
utilizing a forecast balance sheet projected from August 31, 2004 balances.

The
following table summarizes the effect on net interest income of three rate
scenarios as measured against a most likely rate scenario.


Interest
Rate Risk Simulation of Net Interest Income
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|In thousands                       | Estimated Impact on One Year Projection of Net Interest Income
|---------------------------------- | --------------------------------------------------------------
|Variation from flat rate scenario: |                                                               
|Most likely rates                  |                                                               
|Declining rates                    |                                                               
|Rising rates                       |                                                               

|The
Company also estimates rate risk through the use of rate shock analysis. The
model calculates both the percent and dollar changes in net interest income
(NII) and market value of equity (MVE) projected to occur should the yield curve
instantaneously shift up or down in a parallel fashion from its beginning
position. 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. In
the rate shock analysis, the forecast balance sheet is processed against seven
interest rate scenarios. These seven interest rate scenarios include the flat
rate scenario described above, and six additional rate shock scenarios ranging
from +300 to -300 basis points around the flat scenario in 100 basis point
increments. These rate shock scenarios assume that interest rates increase or
decrease immediately and remain at the new level in the future. The Company
measures the volatility of these benchmarks using a twelve-month time horizon.
Using the August 31, 2004 balance sheet as the base for the simulation, the
following table summarizes the effect on net interest income of a +200 and
+/-100 basis point change in interest rates. Due to the current historic low
level of interest rates, the potential for interest bearing deposit accounts to
respond to further changes in projected rates is limited, therefore calculations
for rate decreases greater than 100 bp are misleading and have not been
presented.


Interest
Rate Risk Simulation of NII
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|In thousands (except percentages) | % Change in NII from Current 12 Mo. Horizon | Change in NII from Current 12 Mo. Horizon
|--------------------------------- | ------------------------------------------- | -----------------------------------------
|+ 200bp                           |                                             | 12                                       
|+ 100bp                           |                                             | 6                                        
|- 100bp                           |                                             | (6                                       

|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.

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 risk profile of the Company has not changed materially
from that at year-end 2003.

Item
4. Controls and Procedures

(a)
Disclosure Controls and Procedures: An evaluation of the Companys
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) was carried out under the supervision and with the participation
of the Companys Chief Executive Officer, Chief Financial Officer and other
members of the Companys senior management as of the end of the
Companys fiscal quarter ended September 30, 2004. The Companys Chief
Executive Officer and Chief Financial Officer concluded that the Companys
disclosure controls and procedures as currently in effect are effective in
ensuring that the information required to be disclosed by the Company in the
reports it files or submits under the Exchange Act is (i) accumulated and
communicated to the Companys management (including the Chief Executive
Officer and Chief Financial Officer) to allow timely decisions regarding
required disclosure, and (ii) recorded, processed, summarized and reported
within the time periods specified in the Commissions rules and forms.

(b)
Internal Control Over Financial Reporting: An evaluation of any changes in the
Companys internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)), that occurred during the Companys
fiscal quarter ended September 30, 2004, was carried out under the supervision
and with the participation of the Companys Chief Executive Officer, Chief
Financial Officer and other members of the Companys senior management. The
Companys Chief Executive Officer and Chief Financial Officer concluded
that no change identified in connection with such evaluation has materially
affected, or is reasonably likely to materially affect, the Companys
internal control over financial reporting.


OTHER
MATTERS


Terrorist
Acts

The
terrorist actions on September 11, 2001 and thereafter have had significant
adverse effects upon the United States economy. Whether the terrorist activities
in the future and the actions of the United States and its allies in combating
terrorism on a worldwide basis, including the current military action in Iraq,
will adversely impact the Company and the extent of such impact is uncertain.
However, such events have had and may continue to have an adverse effect on the
economy in the Companys market areas. Such continued economic
deterioration could adversely affect the Companys future results of
operations by, among other matters, reducing the demand for loans and other
products and services offered by the Company, increasing nonperforming loans and
the amounts reserved for loan losses, and causing a decline in the
Companys stock price.


Off-Balance
Sheet Items

The
Company has certain ongoing commitments under operating leases. These
commitments do not significantly impact operating results. As of September 30,
2004 and December 31, 2003, commitments to extend credit and letters of credit
were the only financial instruments with off-balance sheet risk (See Note 3 to
the consolidated condensed financial statements  Commitments and
Contingencies). The Company has not entered into any contracts for financial
derivative instruments such as futures, swaps, options or similar instruments.

Certain
financial institutions have elected to use special purpose vehicles
(SPV) to dispose of problem assets. A SPV is typically a subsidiary
company with an asset and liability structure and legal status that makes it
obligations secure even if the parent corporation goes bankrupt. Under such
circumstances, these financial institutions may exclude the problem assets from
their reported impaired and non-performing assets. The Company does not use SPV
or other structures to dispose of problem assets.


Website
Access

Information
on the Company and its subsidiary Bank may be obtained from the Companys
website www.community-bnk.com. Copies of the Companys annual report
on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and
all amendments thereto are available free of charge on the website as soon as
they are filed with the SEC. To access these reports through a link to the Edgar
reporting system simply select the Central Coast Bancorp  Corporate
Profile menu item, then click on the Central Coast Bancorp SEC
Filings link. Section 16 insider filings can also be accessed through the
website. Follow the same instructions and select Central Coast Bancorp SEC
Section 16 Reports.







PART
II  OTHER INFORMATION

Item
1.  Legal proceedings.

At
June 30, 2004, the Bank held approximately $9.0 million of nonperforming loans
pertaining to a commercial and retail redevelopment project in the City of King.
During the third quarter of 2004, the Company charged-off a balance of $3.3
million on one of these loans and foreclosed on the other loan. At September 30,
2004, the property was recorded as other real estate owned (OREO) at a value of
$5,250,000. The foreclosure proceedings are separate and apart from the
Banks actions related to the City of King regarding the CD secured loan in
the approximate amount of $4.4 million. Details of these loans have been
disclosed on Forms 8-K and Forms 10-Q filed with the Securities and Exchange
Commission (SEC) during 2003 as reflected in Form 10-K for the period ended
December 31, 2003, filed with the SEC on March 1, 2004.

The
outcome of the dispute regarding the above discussed CD secured loan continues
to be uncertain at the present time; however, the Bank intends to vigorously
defend its rights in respect of the certificate of deposit on appeal of the
Judgment.

Except
as disclosed above, there are no material pending legal proceedings, other than
ordinary routine litigation incidental to the Companys business, to which
the Company or the Bank is a party or as to which any of their property is
subject.

Item
2.  Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities.

The
Board of Directors has authorized a stock repurchase program under which
repurchases will be made from time to time by the Company in the open market, or
in block purchases, or in privately negotiated transactions, in compliance with
Securities and Exchange Commission rules. During the third quarter of 2004, the
Company did not repurchase any shares. Year-to-date through September 30, 2004,
the Company has repurchased 140,792 shares at a total cost of $2,501,000. During
the fourth quarter, the Company intends to continue to repurchase shares up to
the remaining 197,891 shares authorized for repurchase under the Plan. The
following table summarizes repurchase activity during the third quarter.


Purchases
of Central Coast Bancorp Stock
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Period               | Total Number of Shares Purchased | Average Price Per Share | Shares Purchased as Part of Publicly Announced Plan | Shares Remaining to Purchase Under the Plan
|-------------------- | -------------------------------- | ----------------------- | --------------------------------------------------- | -------------------------------------------
|July 1-31, 2004      |                                  | 0                       |                                                     |                                            
|August 1-31, 2004    |                                  | 0                       |                                                     |                                            
|September 1-30, 2004 |                                  | 0                       |                                                     |                                            
|                    
|Total                |                                  | 0                       |                                                     |                                            
|                    

|Item
3.  Defaults upon senior securities.

None.

Item
4.  Submission of matters to a vote of security holders.

None.

Item
5.  Other information.

None.

Item
6.  Exhibits and reports on Form 8-K.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (a)
Exhibits
| | ------------

|(2.1) | Agreement
and Plan of Reorganization and Merger by and between Central Coast  Bancorp,  CCB Merger
Company and Cypress Coast Bank dated as of December 5,  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, as amended, incorporated by reference from Exhibit  10.18 to  the
Registrants 2001 Annual Report on Form 10-K filed with the  Commission on March
26, 2002.
|----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3.2) | Bylaws,
as amended.
|----- | -------------------

|(4.1) | Specimen
form of Central Coast Bancorp stock certificate, incorporated by  reference from  the
Registrant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 Registrants 1994 Annual  Report on Form 10-K
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) | 1994 Stock Option Plan, as amended and restated, incorporated by reference from  Exhibit 99 to
Registration Statement on Form S-8, No. 33-89948, filed with the  Commission on November
15, 1996.
|------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|*(10.5) | Form of Nonstatutory Stock Option Agreement under the 1994 Stock Option Plan  incorporated by
reference from Exhibit 99 to Registration Statement on Form S-8,  No. 33-89948, filed
with Commission on November 15, 1996.
|------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|*(10.6) | Form of Incentive Stock Option Agreement under the 1994 Stock Option Plan  incorporated by
reference from Exhibit 99 to Registration Statement on Form S-8,  No. 33-89948, filed
with the Commission on November 15, 1996.
|------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|*(10.7) | Form of Director Nonstatutory Stock Option Agreement under the 1994 Stock Option Plan
incorporated by reference from Exhibit 99 to Registration Statement on Form S-8,  No.
33-89948, filed with the Commission on November 15, 1996.
|------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|*(10.8) | 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.
|------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|*(10.9) | 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.
|------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|*(10.10) | Form of
Executive 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.
|-------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|*(10.11) | 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.
|-------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|*(10.12) | 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 Registrants
1996 Annual Shareholders Meeting held on September  23, 1996.
|-------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(10.13) | Purchase and
Assumption Agreement for the Acquisition of Wells Fargo Bank Branches  incorporated  by
reference from Exhibit 10.17 to the Registrants 1996  Annual Report on Form 10-K
filed with the Commission on March 31, 1997.
|------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(10.14) | Lease
agreement dated November 27, 2001 related to 491 Tres Pinos Road,  Hollister,  California
incorporated by reference from Exhibit 10.17 to the  Registrants 2001  Annual
Report on Form 10-K filed with the Commission on  March 26, 2002.
|------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(10.15) | Lease
agreement dated February 11, 2002, related to 761 First Street, Gilroy,  California
incorporated by reference from Exhibit 10.18 to the Registrants  2001 Annual Report
on Form 10-K filed with the Commission on March 26, 2002.
|------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(10.16) | Lease
agreement dated November 18, 2002, related to 439 Alvarado Street,  Monterey,  California
incorporated by reference from Exhibit 10.16 to the  Registrants 2002  Annual
Report on Form 10-K filed with the Commission on  March 20, 2003.
|------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|*(10.17) | 2004 Stock Option Plan and Forms of Incentive and Nonstautory Stock Option Agreement incorporated by reference from Exhibit 99.1 to Registration Statement on Form S-8, No. 333-117043, filed with the Commission on June 30, 2004.
|-------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(14.1) | Code of Ethics, incorporated by reference from Exhibit 14.1 to the Registrant's 2004 Annual Report on Form 10-K filed with the Commission on March 1, 2004.
|------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------

|(21.1) | The
Registrant's only subsidiary is its wholly owned subsidiary, Community Bank of  Central
California.
|------ | -------------------------------------------------------------------------------------------------------

|(31.1) | Certifications
of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley  Act of 2002.
|------ | -----------------------------------------------------------------------------------------------------

|(31.2) | Certifications
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley  Act of 2002.
|------ | -----------------------------------------------------------------------------------------------------

|(32.1) | Certification
of Central Coast Bancorp by its Chief Executive Officer and Chief  Financial Officer
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------

| | *Denotes
management contracts, compensatory plans or arrangements.
| | ------------------------------------------------------------------

| | (b)
Reports on Form 8-K.
| | ------------------------

| | A
report of Form 8-K was filed with the Commission on August 26, 2004 reporting  that as of
August 12, 2004, the Registrants subsidiary, Community Bank of  Central California,
had taken possession through foreclosure of real estate  collateral to offset outstanding
loans and other costs related to $9.0 million  of nonperforming loans. The loans for a
commercial/retail redevelopment project  in the City of King which were secured by real
estate and certificate of deposit  collateral.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | A
second report on Form 8-K was filed with the Commission on October 4, 2004,  reporting a
change in directors and an amendment to the Companys By-Laws.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------

| | A
third report on Form 8-K was filed with the Commission on October 22, 2004,  reporting a
press release dated October 19, 2004 regarding the Companys  operating results for
the quarter ended September 30, 2004.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | A
fourth report on Form 8-K was filed with the Commission on November 1, 2004  reporting an
amendment to the Companys By-Laws.
| | -------------------------------------------------------------------------------------------------------------------------------

---

|SIGNATURES




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

|                 | 
|---------------- | 
|November 2, 2004 | 
|                 | 
|                 | 
|                 | 
|                 | 
|                 | 
|                 | 
|                 | 
|                 | 
|                 | 
|                 | 

|EXHIBIT
INDEX
|-------------

|Exhibit Number | Description | Sequential Page Number                             
|-------------- | ----------- | ---------------------------------------------------
|3.2            |             | By-Laws, as amended                                
|              
|31.1           |             | Certifications of Chief Executive Officer pursuant 
|               |             | to Section 302 of the Sarbanes-Oxley Act of 2002   
|               |            
|31.2           |             | Certifications of Chief Financial Officer pursuant 
|               |             | to Section 302 of the Sarbanes-Oxley Act of 2002   
|               |            
|32.1           |             | Certifications of Chief Executive Officer and Chief
|               |             | Financial Officer pursuant to Section 906 of the   
|               |             | Sarbanes-Oxley Act of 2002