SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549
                            ----------------------

                                   FORM 10-Q

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

For the Quarterly Period Ended        September 30, 2001.
                                      -------------------

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

                        Commission File No. 0-25418.
                                            --------

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


           California                               77-0367061.
           ----------                               -----------
  (State or other jurisdiction of             (IRS Employer ID Number)
  incorporation or organization)


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


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

                                not applicable
                                --------------
(Former name, former address and former fiscal year, if changed since last
report.)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or 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 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 - 7,165,936 shares outstanding at November 7, 2001.

                                 Page 1 of 23


                                       1
<PAGE>



<TABLE>
<CAPTION>
                         PART 1-FINANCIAL INFORMATION
                         Item 1. FINANCIAL STATEMENTS:
                    CENTRAL COAST BANCORP AND SUBSIDIARY
               CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited)

                                                                                  September 30,       December 31,
(Dollars in thousands)                                                                2001                2000
                                                                                      ----                ----
<S>                                                                              <C>                 <C>
Assets
  Cash and due from banks                                                                $ 44,262          $ 51,411
  Federal funds sold                                                                            -            23,081
                                                                                ------------------    --------------
     Total cash and equivalents                                                            44,262            74,492

  Available-for-sale securities (amortized cost of $142,070 at
     September 30,2001 and $154,076 at December 31, 2000)                                 144,166           152,276

  Loans:
    Commercial                                                                            175,401           171,631
    Real estate-construction                                                               76,444            57,780
    Real estate-other                                                                     305,861           234,890
    Consumer                                                                               13,754             9,840
    Deferred loan fees, net                                                                (1,081)             (746)
                                                                                ------------------    --------------
        Total loans                                                                       570,379           473,395
    Allowance for loan losses                                                             (10,224)           (9,371)
                                                                                ------------------    --------------
  Net Loans                                                                               560,155           464,024
                                                                                ------------------    --------------

  Premises and equipment, net                                                               3,089             3,735
  Accrued interest receivable and other assets                                             11,142            12,166
                                                                                ------------------    --------------
Total assets                                                                            $ 762,814         $ 706,693
                                                                                ==================    ==============
Liabilities and Shareholders' Equity
  Deposits:
    Demand, noninterest bearing                                                         $ 179,876         $ 207,002
    Demand, interest bearing                                                               99,444            88,285
    Savings                                                                               135,620           110,204
    Time                                                                                  253,280           227,719
                                                                                ------------------    --------------
        Total Deposits                                                                    668,220           633,210
  Accrued interest payable and other liabilities                                           28,982            13,629
                                                                                ------------------    --------------
Total liabilities                                                                         697,202           646,839
                                                                                ------------------    --------------
Commitments and contingencies (Note 2)

Shareholders Equity:
  Preferred stock-no par value; authorized
    1,000,000 shares; no shares issued
  Common stock - no par value; authorized 25,000,000 shares;
    issued and outstanding: 7,194,221 shares at September 30, 2001
    and 6,721,998 shares at December 31, 2000                                              51,591            44,472
  Shares held in deferred compensation trust (299,048 at September 30, 2001
    and 271,862 at December 31, 2000), net of deferred obligation                               -                 -
  Retained earnings                                                                        12,795            16,444
  Accumulated other comprehensive income (loss) - net of taxes of $870
     at September 30, 2001 and $738 at December 31, 2000                                    1,226            (1,062)
                                                                                ------------------    --------------
Total shareholders' equity                                                                 65,612            59,854
                                                                                ------------------    --------------
Total liabilities and shareholders' equity                                              $ 762,814         $ 706,693
                                                                                ==================    ==============
See Notes to Consolidated Condensed Financial Statements
</TABLE>

                                       2
<PAGE>

<TABLE>
<CAPTION>


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

                                                    Three Months Ended                       Nine Months Ended
                                                      September 30,                            September 30,
(In thousands, except per share data)             2001                 2000                 2001               2000
                                                  ----                 ----                 ----               ----
<S>                                              <C>               <C>                  <C>                 <C>
Interest Income
  Loans (including fees)                       $ 10,916             $ 10,830             $ 32,651            $ 30,193
   Investment securities                          2,042                2,353                6,367               6,785
   Other                                             94                  393                  399                 781
                                                -------              -------              -------             -------
       Total interest income                     13,052               13,576               39,417              37,759
                                                -------              -------              -------             -------
Interest Expense
   Interest on deposits                           4,574                4,834               14,136              13,113
   Other                                            107                   67                  293                 287
                                                -------              -------              -------             -------
       Total interest expense                     4,681                4,901               14,429              13,400
                                                -------              -------              -------             -------

Net Interest Income                               8,371                8,675               24,988              24,359
Provision for Loan Losses                           760                1,530                  955               2,856
                                                -------              -------              -------             -------
Net Interest Income after
   Provision for Loan Losses                      7,611                7,145               24,033              21,503
                                                -------              -------              -------             -------
Noninterest Income                                  927                  672                2,352               1,849
                                                -------              -------              -------             -------

Noninterest Expenses
   Salaries and benefits                          2,907                2,561                8,778               7,408
   Occupancy                                        408                  385                1,230               1,063
   Furniture and equipment                          474                  404                1,386               1,204
   Other                                            960                  948                3,071               3,079
                                                -------              -------              -------             -------
       Total noninterest expenses                 4,749                4,298               14,465              12,754
                                                -------              -------              -------             -------
Income Before Income Taxes                        3,789                3,519               11,920              10,598
Provision for Income Taxes                        1,421                1,266                4,470               4,027
                                                -------              -------              -------             -------
       Net Income                               $ 2,368              $ 2,253              $ 7,450             $ 6,571
                                                =======              =======              =======             =======

Basic Earnings per Share                         $ 0.33               $ 0.30               $ 1.03              $ 0.85
Diluted Earnings per Share                       $ 0.32               $ 0.29               $ 0.98              $ 0.83

See Notes to Consolidated Condensed Financial Statements
</TABLE>

                                       3
<PAGE>

<TABLE>
<CAPTION>
                     CENTRAL COAST BANCORP AND SUBSIDIARY
          CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)

(In thousands)
Nine months ended September 30,                                                            2001                    2000
                                                                                           ----                    ----
<S>                                                                                      <C>                       <C>
Cash Flows from Operations:
   Net income                                                                                $ 7,450                $ 6,571
   Reconciliation of net income to net cash provided
   by operating activities:
     Provision for loan losses                                                                   955                  2,856
     Net gain on sale of investments                                                            (168)                     -
     Net loss on sale of fixed assets                                                              3                     21
     Depreciation                                                                              1,035                    871
     Amortization and accretion                                                                  440                    (39)
  Effect of changes in:
    Accrued interest receivable and other assets                                                (785)                 1,428
    Accrued interest payable and other liabilities                                            (1,427)                   807
    Deferred loan fees                                                                           335                     10
                                                                                      ---------------          -------------
       Net cash provided by operations                                                         7,838                 12,525
                                                                                      ---------------          -------------
Cash Flows from Investing Activities:
   Purchases of available-for-sale securities                                               (108,553)               (56,346)
   Proceeds from maturities or calls of avialable-for-sale securities                         42,468                 64,114
   Proceeds from sale of available-for-sale securities                                        78,011                      -
   Net increase in loans                                                                     (97,421)               (44,314)
   Purchases of premises and equipment-net                                                      (392)                  (915)
                                                                                      ---------------          -------------
       Net cash used in investing activities                                                 (85,887)               (37,461)
                                                                                      ---------------          -------------
Cash Flows from Financing Activities:
   Net increase in deposits                                                                   35,010                 57,912
   Net change in short-term borrowings                                                             -                (12,662)
   Net change in long-term borrowings                                                         16,789                   (210)
   Proceeds from stock options exercised                                                         113                     89
   Repurchase of common stock                                                                 (4,093)                (4,394)
                                                                                      ---------------          -------------
       Net cash provided by financing activities                                              47,819                 40,735
                                                                                      ---------------          -------------
   Net increase (decrease) in cash and equivalents                                           (30,230)                15,799
Cash and equivalents, beginning of period                                                     74,492                 39,959
                                                                                      ---------------          -------------
Cash and equivalents, end of period                                                         $ 44,262               $ 55,758
                                                                                      ===============          =============

Other Cash Flow Information:
   Interest paid                                                                            $ 13,991               $ 12,506
   Income taxes paid                                                                        $  6,257               $  4,660
See Notes to Consolidated Condensed Financial Statements
</TABLE>


                                       4
<PAGE>


                     CENTRAL COAST BANCORP AND SUBSIDIARY
             NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                        September 30, 2001 (Unaudited)

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,  2001  and
December  31,  2000,  the  results of  operations  for the three and nine month
periods  ended  September  30,  2001 and 2000 and cash flows for the nine month
periods ended September 30, 2001 and 2000.

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  2000 Annual Report to  Shareholders.  The results of operations  for
the three and nine month  periods  ended  September  30,  2001 and 2000 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.
The material  estimate that is particularly  susceptible to significant  change
in the  near  term  relates  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.

On January  29,  2001,  the Board of  Directors  declared a ten  percent  stock
dividend,  which was  distributed  on February 28,  2001,  to  shareholders  of
record  as of  February  14,  2001.  All  share  and per  share  data have been
retroactively adjusted to reflect the stock dividend.


2. 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  $183,783,000 and standby letters of credit
of $877,000 at  September  30, 2001.  However,  all such  commitments  will not
necessarily  culminate  in actual  extensions  of credit by the Company  during
2001.

Approximately  $49,059,000  of loan  commitments  outstanding  at September 30,
2001 are for real  estate  construction  loans and are  expected to fund within
the  next  twelve  months.  The  remaining   commitments  primarily  relate  to
revolving  lines of credit  or other  commercial  loans,  and many of these 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 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.

                                       5
<PAGE>

3. EARNINGS PER SHARE COMPUTATION

Basic  earnings  per share is computed by dividing  net income by the  weighted
average common shares  outstanding for the period  (7,212,000 and 7,259,000 for
the three and nine month  periods ended  September 30, 2001,  and 7,576,000 and
7,671,000  for the three and nine month  periods  ended  September  30,  2000).
Diluted  earnings per share reflect the potential  dilution that could occur if
outstanding  stock  options  were  exercised.  Diluted  earnings  per  share is
computed  by  dividing  net  income  by  the  weighted  average  common  shares
outstanding  for the period plus the  dilutive  effect of options  (348,000 and
333,000  for the three and nine month  periods  ended  September  30,  2001 and
216,000 and 215,000 for the three and nine month  periods  ended  September 30,
2000).


4.  COMPREHENSIVE INCOME

<TABLE>
<CAPTION>
                                                                       Three Months Ended                    Nine Months Ended
                                                                         September 30,                         September 30,
(In thousands)                                                      2001              2000                2001             2000
                                                                    ----              ----                ----             ----
<S>                                                              <C>                <C>                  <C>              <C>
Net Earnings                                                      $ 2,368           $ 2,253             $ 7,450          $ 6,571
Other comprehensive income (loss)- Net unrealized
      gain (loss) on available-for-sale securities                  1,453             1,210               2,387            1,370

Reclassification adjustment for gains included in
      income, net of taxes of $68 and $69 for the three
       and nine month periods ended September 30, 2001                (97)                -                 (99)               -
                                                                   --------        --------             --------        --------
Total comprehensive earnings                                       $ 3,724          $ 3,463             $ 9,738          $ 7,941
                                                                   ========        ========             ========        ========
</TABLE>



5.  STOCK REPURCHASE PLAN

The  Board of  Directors  authorized  stock  repurchase  programs  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.  As of  September  30, 2001,
approximately  102,846  shares  have been  repurchased  at an  average  cost of
$19.53 per share and  approximately  262,100  shares  remain  under the program
for possible repurchase.



                                       6
<PAGE>



                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.  The  reader of this
report should understand that all such  forward-looking  statements are subject
to various  uncertainties  and risks  that  could  affect  their  outcome.  The
Company's  actual results could differ  materially from those suggested by such
forward-looking  statements.  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,  including the events of
September 11, 2001 and thereafter;  (5) changes in the regulatory  environment;
(6) changes in business  conditions  and  inflation;  (7) changes in securities
markets;  (8) data processing  compliance  problems;  (9) the California  power
crisis;  (10) variances in the actual versus projected  growth in assets;  (11)
return on assets;  (12) loan  losses;  (13)  expenses;  (14)  rates  charged on
loans and earned on securities  investments;  (15) rates paid on deposits;  and
(16) 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, 2000.

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).

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").
Other than its  investment  in the Bank,  the  Company  currently  conducts  no
other significant business  activities,  although it is authorized to engage in
a variety of  activities  which are deemed  closely  related to the business of
banking upon prior  approval of the Board of  Governors of the Federal  Reserve
System (the "FRB"), the Company's principal federal regulator.

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  located in the  counties of  Monterey,  San Benito and Santa Cruz,
which are in the central coastal area of California.

Overview
--------

For the third quarter 2001,  Central Coast Bancorp  reported  diluted  earnings
per share of  $0.32,  a 10.3%  increase  over the  $0.29  reported  in the year
earlier  period.  Net income  for the  quarter  ended  September  30,  2001 was
$2,368,000,  which is a 5.1%  increase  over the  $2,253,000  reported  for the
same  period  of 2000.  The  return on  equity  (ROE) and the  return on assets
(ROA) for the third  quarter  2001 were  14.7% and 1.25% as  compared  to 15.8%
and 1.36% for the same period in 2000.

Net  income  for the  nine  months  ended  September  30,  2001  and  2000  was
$7,450,000 and $6,571,000  with diluted  earnings per share of $0.98 and $0.83,
respectively.  For the  first  nine  months  of 2001 ROE was  16.1% and ROA was
1.40%  as  compared  to  15.9%  and  1.40%  for the same  period  in 2000.  The
earnings per share for the 2000  periods  have been  adjusted for the 10% stock
dividend distributed in February 2001.

At September 30, 2001, the Company had assets  totaling  $762,814,000,  another
record  level.  On a year over year basis,  internal  growth has  generated  an
increase  in  assets  of  $119,886,000   (18.6%);   an  increase  in  loans  of
$130,551,000  (29.7%);  and an increase in  deposits  of  $92,119,000  (16.0%).
The  increase in deposits  was in spite of a reduction in the level of State of
California  certificates  of deposit from  $22,000,000 at September 30, 2000 to
$5,000,000  at September 30, 2001.  Replacing  this  difference of  $17,000,000
represents additional growth in the Company's core customer base.

                                       7
<PAGE>

Central  Coast  Bancorp  ended the third  quarter of 2001 with a Tier 1 capital
ratio of 10.2% and a total  risk-based  capital ratio of 11.4% versus 11.8% and
13.0%, respectively, at the end of the third quarter of 2000.

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

<TABLE>
<CAPTION>
Condensed Comparative Income Statement
                                                            Percentage                            Percentage
                                      Three Months Ended      Change        Nine Months Ended       Change
                                         September 30,       Increase         September 30,        Increase
(In thousands, except percentages)     2001        2000     (Decrease)       2001       2000      (Decrease)
                                       ----        ----     ----------       ----       ----      ----------

<S>                                  <C>         <C>               <C>     <C>         <C>               <C>
Interest Income (1)                   $13,333     $13,777          -3%      $40,238     $38,352           5%
Interest Expense                        4,681       4,901          -4%       14,429      13,400           8%
                                     ---------   ---------  -----------    ---------  ----------  -----------
  Net interest income                   8,652       8,876          -3%       25,809      24,952           3%
Provision for Loan Losses                 760       1,530         -50%          955       2,856         -67%
                                     ---------   ---------  -----------    ---------  ----------  -----------
  Net interest income after
    provision for loan losses           7,892       7,346           7%       24,854      22,096          12%
Noninterest Income                        927         672          38%        2,352       1,849          27%
Noninterest Expense                     4,749       4,298          10%       14,465      12,754          13%
                                     ---------   ---------  -----------    ---------  ----------  -----------
  Income before income taxes            4,070       3,720           9%       12,741      11,191          14%
Income Taxes                            1,421       1,266          12%        4,470       4,027          11%
Tax Equivalent Adjustment                 281         201          40%          821         593          38%
                                     ---------   ---------  -----------    ---------  ----------  -----------

  Net income                           $2,368      $2,253           5%       $7,450      $6,571          13%
                                     =========   =========  ===========    =========  ==========  ===========

1) Interest on tax-free securities is reported on tax equivalent basis.
</TABLE>


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.

Net interest  income for the third  quarter of 2001 was  $8,653,000,  which was
$223,000  less than the third  quarter of 2000 and  $250,000  greater  than the
second  quarter of this year.  Interest  income was down  $444,000  (3.2%) from
the third  quarter of 2000 even with an  increase in average  loan  balances of
$106,114,000  (24.9%),  which  added  $2,709,000  to  interest  income.  As  of
September  30,  there had been eight prime rate  decreases  totaling  350 basis
points as a result of actions  taken by the  Federal  Reserve  Board  since the
beginning  of 2001.  Due to the  lower  rates  and the mix  between  fixed  and
variable  rate loans in the  portfolio,  the  average  loan yield for the third
quarter of 2001 was 198 basis points  lower than the average  yield in the year
earlier  quarter  resulting  in a decrease  in interest  income of  $2,623,000.
The  average  balance of  investment  securities  in the third  quarter of 2001
was  $1,005,000  (0.7%)  higher  than  the  third  quarter  of  2000.   Average
balances  for  Federal  funds  sold for the  third  quarter  of 2001  decreased
$15,135,000  to  $9,324,000.  As a  result  of  the  overall  volume  and  rate
decreases  interest income on investments  decreased  $530,000 on a period over
period basis.

Interest  expense  was  $221,000  (4.5%)  lower in the  third  quarter  of 2001
versus  the  prior  year   period.   Average   balances   of   interest-bearing
liabilities  were  higher by  $56,548,000  (12.7%),  which  added  $653,000  to
interest  expense.  The average rate paid on  interest-bearing  liabilities was
3.71% for the  quarter.  This was down 68 basis  points from the third  quarter
of 2000.  The lower rates decreased interest expense by $874,000.

                                       8
<PAGE>

The net interest  margin for the third  quarter of 2001  reflects the declining
interest  rate  environment  and was  4.96%  as  compared  to 5.89% in the year
earlier  period and was down 24 basis points from the second  quarter  2001. As
the Bank's loan assets  reprice more  quickly than do its deposit  liabilities,
a  declining  rate  environment  puts  downward  pressure  on the net  interest
margin.  Additional  rate  decreases  of 75 basis  points  were made during the
third  quarter  of 2001 and  another  decrease  of 50 basis  points was made in
early  October.  These  rate cuts and any  additional  cuts may put  continuing
downward pressure on the net interest margin for the fourth quarter 2001.

For the nine month  period  ending  September  30, 2001,  net  interest  income
increased  $857,000  (3.4%)  over the first nine months of 2000.  The  interest
income  component  increased  $1,886,000 to  $40,238,000.  Average  balances of
earning  assets  were  $84,753,000  (14.9%)  higher in the first nine months of
2001  than  the  same  period  in  2000.  The  average  balance  of  loans  was
$83,912,000  higher,  which provided for $6,188,000 of the increase in interest
income.  The average  yield  received on loans in the first nine months of 2001
of 8.86%  was 100  basis  points  lower  than the  9.86%  received  in the year
earlier  period.  The  lower  yield  on  loans  decreased  interest  income  by
$3,730,000.  The average  balances of investment  securities  and Federal funds
sold in the first nine months of 2001 were  basically  flat to the year earlier
period.  Interest income for these investing  activities  decreased $572,000 on
a  period  over  period  basis   primarily  due  to  the  lower  interest  rate
environment.  In the first  half of 2000,  the prime  interest  rate was raised
three  times  for a total of 100 basis  points.  In the  first  nine  months of
2001  interest  rates  were  lowered  eight  times  for a  total  of 350  basis
points.  The blended  effect of these  changes has resulted in a 78 basis point
decrease in average rates  received on earning  assets in the first nine months
of 2001 versus the yields earned in the same period of 2000.

Interest  expense for the nine month period  increased  $1,029,000  (7.7%) from
the expense for the same period in 2000.  Volume  increases  in deposits  added
$1,752,000   of   interest    expense.    Overall   average   rates   paid   on
interest-bearing  liabilities  in the first nine  months of 2001  decreased  15
basis  points to 4.07%  from the same  period  in 2000.  The  interest  expense
decrease as a result of the lower rates was $766,000.

Net  interest  margin for the first nine months of 2001 was 5.27%  versus 5.85%
in the year earlier period.

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  second  two  tables  set 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.





                                       9
<PAGE>


<TABLE>
<CAPTION>

                                                                                 (Unaudited)
                                                                       Three Months Ended September 30 ,
(Taxable Equivalent Basis)                                      2001                                   2000
                                                 ----------------------------------     --------------------------------
                                                  Avg.                      Avg.          Avg.                      Avg.
(In thousands, except percentages)               Balance      Interest     Yield         Balance     Interest      Yield
                                                 -------      --------     -----         -------     --------      -----
<S>                                            <C>             <C>         <C>         <C>            <C>         <C>
Assets:
Earning Assets
  Loans (1) (2)                                  $ 531,538     $ 10,917      8.15%       $ 425,424     $ 10,830     10.13%
  Taxable investments                              100,899        1,479      5.82%         113,002        1,952      6.87%
  Tax-exempt securities (tax equiv. basis)          49,683          843      6.73%          36,572          602      6.54%
  Federal funds sold                                 9,324           94      4.00%          24,459          393      6.39%
                                               ------------    --------                ------------    --------
Total Earning Assets                               691,444     $ 13,333      7.65%         599,457      $13,777      9.14%
Cash & due from banks                               43,140     --------                     39,561     --------
Other assets                                        14,998                                  16,037
                                               ------------                            ------------
                                                 $ 749,582                               $ 655,055
                                               ============                            ============


Liabilities & Shareholders' Equity:
Interest bearing liabilities:
  Demand deposits                                $ 100,466     $    314      1.24%       $  97,569     $    403      1.64%
  Savings                                          140,387        1,080      3.05%         112,054        1,026      3.64%
  Time deposits                                    251,315        3,180      5.02%         230,299        3,405      5.88%
  Other borrowings                                   8,415          107      5.04%           4,113           67      6.48%
                                               ------------    --------                ------------    --------
Total interest bearing liabilities                 500,583        4,681      3.71%         444,035        4,901      4.39%
Demand deposits                                    177,727     --------                    148,324     --------
Other Liabilities                                    7,546                                   6,004
                                               ------------                            ------------
Total Liabilities                                  685,856                                 598,363
Shareholders' Equity                                63,726                                  56,692
                                               ------------                            ------------
                                                 $ 749,582                               $ 655,055
                                               ============                            ============
Net interest income & margin (3)                               $  8,652      4.96%                     $  8,876      5.89%
                                                               ========     ======                     ========     ======

1.  Loan interest income includes fee income of $346,000 and $271,000 for the three month periods
    ended September 30, 2001 and 2000, respectively.
2.  Includes the average allowance for loan losses of $9,668,000 and $7,460,000 and average deferred
    loan fees of $1,027,000 and $717,000 for the three months ended September 30, 2001 and 2000, respectively.
3.  Net interest margin is computed by dividing net interest income by the total average earning assets.

</TABLE>

                                       10
<PAGE>



<TABLE>
<CAPTION>

                                                                                  (Unaudited)
                                                                        Nine Months Ended September 30,
(Taxable Equivalent Basis)                                        2001                                   2000
                                                     ------------------------------         ------------------------------
                                                      Avg.                     Avg.            Avg.                   Avg.
(In thousands, except percentages)                   Balance      Interest    Yield          Balance     Interest    Yield
                                                     -------      --------    -----          -------     --------    -----
<S>                                                <C>            <C>           <C>         <C>          <C>         <C>
Assets:
Earning Assets
  Loans (1) (2)                                      $ 492,797     $ 32,651     8.86%        $ 408,885    $ 30,193     9.86%
  Taxable investments                                  101,842        4,726     6.20%          107,999       5,602     6.93%
  Tax-exempt securities (tax equiv. basis)              48,367        2,462     6.80%           36,067       1,776     6.58%
  Federal funds sold                                    11,254          399     4.74%           16,556         781     6.30%
                                                   ------------   ----------                -----------  ----------
Total Earning Assets                                   654,260     $ 40,238     8.22%          569,507    $ 38,352     9.00%
Cash & due from banks                                   42,439    ----------                    38,327   ----------
Other assets                                            15,267                                  16,511
                                                   ------------                             -----------
                                                     $ 711,966                               $ 624,345
                                                   ============                             ===========

Liabilities & Shareholders' Equity:
Interest bearing liabilities:
  Demand deposits                                    $  95,876     $    974     1.36%        $  97,338    $  1,200     1.65%
  Savings                                              128,364        3,150     3.28%          104,459       2,757     3.53%
  Time deposits                                        243,402       10,013     5.50%          216,447       9,156     5.65%
  Other borrowings                                       6,911          292     5.65%            6,015         287     6.37%
                                                   ------------   ----------                -----------  ----------
Total interest bearing liabilities                     474,553       14,429     4.07%          424,259      13,400     4.22%
Demand deposits                                        168,309    ----------                   139,590   ----------
Other Liabilities                                        7,181                                   5,466
                                                   ------------                             -----------
Total Liabilities                                      650,043                                 569,315
Shareholders' Equity                                    61,923                                  55,030
                                                   ------------                             -----------
                                                     $ 711,966                               $ 624,345
                                                   ============                             ===========

Net interest income & margin (3)                                   $ 25,809     5.27%                     $ 24,952     5.85%
                                                                  ==========   =======                   ==========   =======



1.  Loan interest income includes fee income of $1,025,000 and $745,000 for the nine month
    periods ended September 30, 2001 and 2000, respectively
2.  Includes the average allowance for loan losses of $9,513,000 and $6,563,000 and average deferred
    loan fees of $957,000 and $714,000 for the nine months ended September 30, 2001 and 2000, respectively.
3.  Net interest margin is computed by dividing net interest income by the total average earning assets.

</TABLE>


                                       11
<PAGE>

<TABLE>
<CAPTION>

Volume/Rate Analysis
(in thousands) Three Months Ended September 30, 2001 over 2000
Increase (decrease) due to change in:
                                                                                      Net
Interest-earning assets:                            Volume           Rate (4)        Change
                                                    ------           --------        ------
<S>                                                <C>             <C>            <C>
   Net Loans (1)(2)                                  $ 2,709        $ (2,623)         $   86
   Taxable investment securities                        (210)           (263)           (473)
   Tax exempt investment securities (3)                  216              26             242
   Federal funds sold                                   (244)            (55)           (299)
                                                  -----------     -----------     -----------
     Total                                             2,471          (2,915)           (444)
                                                  -----------     -----------     -----------

Interest-bearing liabilities:
   Demand deposits                                        12            (101)            (89)
   Savings deposits                                      260            (206)             54
   Time deposits                                         311            (536)           (225)
   Other borrowings                                       70             (30)             40
                                                  -----------     -----------     -----------
     Total                                               653            (873)           (220)
                                                  -----------     -----------     -----------
Interest differential                                $ 1,818        $ (2,042)         $ (224)
                                                  ===========     ===========     ===========

1.  The average balance of non-accruing loans is immaterial as a percentage of
    total loans and, as such, has been included in net loans.
2.  Loan fees of $345,000 and $271,000 for the quarters ended September 30, 2001 and 2000, respectively have
    been included in the interest income computation.
3.  Includes taxable-equivalent adjustments that relate to income on certain securities that is exempt from
    federal income taxes. The effective federal statutory tax rate was 35% for 2001 and 2000.
4.  The rate / volume variance has been included in the rate variance.
</TABLE>

                                       12
<PAGE>


<TABLE>
<CAPTION>

Volume/Rate Analysis
(in thousands) Nine Months Ended September 30, 2001 over 2000
Increase (decrease) due to change in:
                                                                               Net
Interest-earning assets:                          Volume       Rate (4)       Change
                                                  ------       --------       ------
<S>                                            <C>            <C>           <C>
   Net Loans (1)(2)                             $ 6,188       $ (3,730)      $ 2,458
   Taxable investment securities                   (319)          (557)         (876)
   Tax exempt investment securities (3)             605             81           686
   Federal funds sold                              (250)          (132)         (382)
                                              ----------     ----------    ----------
     Total                                        6,224         (4,338)        1,886
                                              ----------     ----------    ----------

Interest-bearing liabilities:
   Demand deposits                                  (18)          (208)         (226)
   Savings deposits                                 631           (238)          393
   Time deposits                                  1,139           (282)          857
   Other borrowings                                  43            (38)            5
                                              ----------     ----------    ----------
     Total                                        1,795           (766)        1,029
                                              ----------     ----------    ----------
Interest differential                           $ 4,429       $ (3,572)      $   857
                                              ==========     ==========    ==========

1. The average balance of non-accruing loans is immaterial as a percentage of total loans and, as such,
   has been included in net loans.
2. Loan fees of $1,025,000  and $745,000 for the nine months ended September 30, 2001 and 2000, respectively, have
   been included in the interest income computation.
3. Includes taxable-equivalent adjustments that relate to income on certain securities that is exempt from
   federal income taxes. The effective federal statutory tax rate was 35% for 2001 and 2000.
4. The rate / volume variance has been included in the rate variance.

</TABLE>


Provision for Loan Losses
-------------------------

The Bank  provided  $760,000  for loan  losses in the third  quarter of 2001 as
compared  to  $1,530,000  in the  third  quarter  of 2000.  For the nine  month
period ended September 30, 2001, the Bank provided  $955,000 versus  $2,856,000
in the  year  earlier  period.  The  provision  for loan  losses  that has been
recorded in 2001 and 2000 is based on factors  which  consider the loan growth,
changing  portfolio mix and prevailing local and national  economic  conditions
to  establish  the  required  level of loan loss  reserves.  The  ratios of the
allowance  for loan  losses to total  loans at each  quarter end were 1.79% and
1.91%,  respectively.  (See the  "Credit  Risk  and  Allowance  for Loan  Loss"
section for additional discussion).

Noninterest Income
------------------

Noninterest  income consists  primarily of service charges on deposit  accounts
and fees for  miscellaneous  services.  Noninterest  income totaled $927,000 in
the third  quarter  of 2001,  which  was up  $255,000  over the same  period in
2000.  The  Bank  realized   $165,000  in  gains  on  the  sale  of  investment
securities  in the  third  quarter  of  2001  versus  none  in the  prior  year
quarter.  Commissions  on  mortgage  originations  were up $60,000  (196.9%) as
refinance  activity   continued  to  be  very  active.   Other  increases  were
generally due to increased activity.

For the first nine months of 2001,  noninterest  income was  $2,352,000  versus
$1,849,000  in the same period  last year.  Service  charges on  deposits  were
up  $136,000  (10.7%)  due to  increased  activity.  Other  fees were  $202,000
(47.3%)  higher  in the first  half of 2001.  Approximately  75% of other  fees
increase  was due to the growth in  commission  on  mortgage  originations.  As
the interest rates declined  during 2001, the activity in residential  mortgage
lending  has  picked  up  significantly.   Gains  on  the  sale  of  investment
securities have added $168,000 to noninterest income in 2001.

                                       13
<PAGE>


Noninterest Expense
-------------------

Noninterest  expenses  increased  $451,000  (10.5%) to a total of $4,749,000 in
the third  quarter of 2001  versus  third  quarter  2000.  Salary and  employee
benefits  expenses  increased  $346,000  (13.5%)  primarily  due to  additional
staff for the new Hollister  branch opened in October  2000,  internal  growth,
higher benefit costs,  and normal salary  increases.  On a quarter over quarter
basis,  premises  and fixed  asset  expenses  were  higher by $93,000  (11.8%).
Costs of the new branch,  higher prices and increased  activity  contributed to
the  increase.  Other  expenses for the third  quarter of 2001 were $960,000 up
slightly from $948,000 in the prior year quarter.  Management  has  implemented
expense  control  measures  in view of the weaker  economy  and lower  interest
rates.  The  efficiency  ratio  for the  two  quarters  was  49.6%  and  45.0%,
respectively.

Noninterest  expenses for the nine month period ending  September 30, 2001 were
$14,465,000  versus  $12,754,000  for the same  period  in 2000.  Salaries  and
benefits  increased  $1,370,000  (18.5%) and premises and fixed asset  expenses
were  up  $349,000  (15.4%)  due  to the  factors  discussed  in  the  previous
paragraph  plus the  additional  costs of  operating  the  Watsonville  branch,
which was opened in June 2000.  Other  expenses were  essentially  flat between
the two  periods.  The  efficiency  ratio for the first nine months of 2001 was
51.4% as compared to 47.6% in the same period of 2000.

Provision for Income Taxes
--------------------------

The  effective  tax rate for the third  quarter  and first nine  months of 2001
was 37.5% for both  periods,  versus  36.0% and 38.0% for the same  periods  of
2000,  respectively.  The  year-to-date  estimated tax rate in 2001 is lower as
tax exempt loans and  investment  securities  represent a higher  percentage of
income.

Securities
----------

At September  30,  2001,  available-for-sale  securities  had a market value of
$144,166,000  with an  amortized  cost basis of  $142,071,000.  The  unrealized
gain  of  $2,095,000  at  September  30,  2001   represented   an  increase  of
$2,364,000  from  the  unrealized  loss of  $269,000  at  June  30,  2001.  The
unrealized  gain was the result of the  changes  in the yield  curve and market
spreads in the securities markets in the third quarter.

Loans
-----

Ending loan  balances at  September  30, 2001 were  $570,379,000,  which was an
increase of  $96,984,000  (20.5%) from year-end 2000 balances and  $119,886,000
(18.6%) from September 30, 2000  balances.  All categories of loans were higher
on a year over year  basis.  The real  estate-other  category  had the  highest
growth in  outstanding  balances  as it  increased  $74,479,000  (32.2%).  Real
estate  construction has also shown strong growth of $38,297,000  (100.4%) over
September  30,  2000  balances.   The  construction   projects  cover  a  broad
spectrum  of  economic  activity  in the Bank's  market  including  the tourism
industry,  agricultural  industry,  other  commercial  enterprises  as  well as
residential  construction.  Loan  demand was very  strong in the third  quarter
as over  half of the year over  year  growth  occurred  during  the past  three
months.  Management  does not expect  such  vigorous  growth to continue in the
fourth quarter.

Nonperforming Assets
--------------------

Non-performing  assets are  comprised of loans  delinquent 90 days or more with
respect to interest or  principal,  loans for which the accrual of interest has
been  discontinued,  and other real  estate,  which has been  acquired  through
foreclosure and is awaiting disposition.

Unless  well  secured  and in the  process of  collection,  loans are placed on
nonaccrual  status  when a loan  becomes  90 days  past due as to  interest  or
principal,  when the payment of interest or  principal in  accordance  with the
contractual  terms of the  loan  becomes  uncertain  or when a  portion  of the
principal  balance has been  charged off.  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.

                                       14
<PAGE>

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

The following is a summary of nonperforming assets:

<TABLE>
<CAPTION>
(In thousands, except percentages)                                  September 30,          June 30,          December 31,
                                                                        2001                 2001                2000
                                                                        ----                 ----                ----
<S>                                                               <C>                  <C>                  <C>
Past due 90 days or more and still accruing :
   Real estate                                                             $   450             $ 3,055               $  10
   Commercial                                                                  245                 721                 215
   Consumer and other                                                            -                   1                   5
                                                                   ----------------     ---------------      --------------
                                                                               695               3,777                 230
                                                                   ----------------     ---------------      --------------
Nonaccrual:
   Real estate                                                                 592                 101                   -
   Commercial                                                                  214                 109                 329
   Consumer and other                                                           14                  15                   -
                                                                   ----------------     ---------------      --------------
                                                                               820                 225                 329
                                                                   ----------------     ---------------      --------------
Total nonperforming loans                                                  $ 1,515             $ 4,002               $ 559
                                                                   ================     ===============      ==============

Allowance for loan losses as a percentage of nonperforming loans              675%                238%               1676%
Nonperforming loans to total loans                                           0.27%               0.79%               0.12%
</TABLE>


Nonperforming  loans  decreased  $2,487,000  during  the third  quarter of 2001
compared  to June 30,  2001  primarily  as a result  of a single  loan for $2.8
million,  which  was no  longer  classified  as 90 days  past due at the end of
third quarter.  Excluding that loan, the net increase was $313,000.  On October
1, a real  estate  loan in the  amount of  $450,000  listed in past due 90 days
was brought current.  Adjusting for that payment,  the  nonperforming  loans to
total  loans  would  have been  0.19%.  While the  agricultural  economy in the
Bank's  service area has seemingly  not been affected by the national  economic
slow down,  tourism in the  Monterey  area has seen a  reduction  in  occupancy
rates and general  level of  activity.  Management  is closely  monitoring  the
loan  portfolio for any  indications  of weakness that could manifest into loan
problems.  At quarter end, the  nonperforming  loans were 0.20% of total assets
and 0.27% of total  loans.  This  compared  to 0.54% and 0.79% at June 30, 2001
and 0.08% and 0.12% at December 31, 2001.

At September 30, 2001,  the recorded  investment  in loans that are  considered
impaired  under SFAS No. 114 was  $1,228,000  of which  $45,000 are included in
nonaccrual  loans above.  Valuation  allowances  were  computed on all impaired
loans  and  totaled   $353,000  based  on  the  estimated  fair  value  of  the
collateral.   At  December  31,  2000,   the  recorded   investment   in  loans
considered  impaired was  $1,691,000,  including  $215,000 of nonaccrual  loans
above and  $1,010,000 of  restructured  loans  performing  in  compliance  with
modified  terms.  Management  is not  aware  of any  potential  problem  loans,
other  than the  impaired  loans  disclosed  above,  which  were  accruing  and
current at September  30, 2001,  where  serious  doubt exists as to the ability
of the borrower to comply with the present repayment terms.

                                       15
<PAGE>

Credit Risk and Allowance for Loan Losses
-----------------------------------------

The Company  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 Company contracts
with an outside loan review  consultant to periodically  grade new loans and to
review  the  existing  loan  portfolio.  Management  believes  its  ability  to
identify  and assess  risk and return  characteristics  of the  Company's  loan
portfolio  is critical  for  profitability  and growth.  Management  strives to
continue  the   historically   low  level  of  credit  losses   experienced  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,  credit quality may be influenced by underlying  trends in economic
and business cycles.  The Company's  business is concentrated in Monterey,  San
Benito and Santa Cruz  counties  in  California.  These  counties  are  heavily
dependent on  agriculture  and tourism  industries as their main economic base.
As a result,  the Company lends money to  individuals  and companies  dependent
upon  these  two   industries.   In  addition,   the  Company  has  significant
extensions of credit and  commitments  to extend  credit,  which are secured by
real estate.  At September 30, 2001,  the Company had  outstanding  real estate
and real estate  construction  loans totaling  $382,305,000,  which represented
67.0%  of the  loan  portfolio.  Approximately  8.7%  of the  portfolio  is for
loans for hotels and motels.  Although  management  believes the  concentration
does not have  more  than the  normal  risk of  collectibility,  a  substantial
decline  in the  national  or local  economy in  general,  or a decline in real
estate values in the Company's  primary market areas in particular,  could have
an  adverse  impact on the  collectibility  of these  loans.  Adverse  economic
conditions  could  require  an  increase  in the  provision  for loan and lease
losses,  which in turn could adversely affect the Company's  future  prospects,
results of operations, profitability and stock price.

The allowance for loan losses  reflects  management's  judgment as to the level
considered   adequate  to  absorb   probable   losses   inherent  in  the  loan
portfolio.  The  allowance is increased  by  provisions  charged to expense and
reduced  by  loan  charge-offs  net of  recoveries.  Management  determines  an
appropriate  allowance based upon  information  currently  available to analyze
loan loss  potential,  including (1) the loan portfolio  balance in the period;
(2) a comprehensive  grading and review of new and existing loans  outstanding;
(3) actual previous charge-offs; and, (4) changes in economic conditions.

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

Management  believes  that the  allowance for loan losses at September 30, 2001
is  adequate,   based  on  information   currently   available.   However,   no
prediction  of the ultimate  level of loans  charged off in future years can be
made with any certainty.

                                       16
<PAGE>



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

<TABLE>
<CAPTION>

                                       Three months ended             Nine months ended
                                          September 30,                 September 30,
(In thousands, except percentages)     2001           2000          2001           2000
                                       ----           ----          ----           ----

<S>                              <C>            <C>            <C>           <C>
Beginning balance                    $  9,509        $ 7,018       $  9,371      $  5,596
   Provision charged to expense           760          1,530            955         2,856
   Loans charged off                      (62)          (181)          (166)         (200)
   Recoveries                              17             22             64           137
                                     ---------       --------      ---------     ---------
Ending balance                       $ 10,224        $ 8,389       $ 10,224      $  8,389
                                     =========       ========      =========     =========

Ending loan portfolio                                              $ 570,379     $ 439,838
                                                                   =========     =========

Allowance for loan losses as percentage of ending loan portfolio       1.79%         1.91%

</TABLE>

Liquidity
---------

Liquidity  management  refers to the  Company's  ability to provide funds on an
ongoing  basis to meet  fluctuations  in  deposit  levels as well as the credit
needs  and   requirements   of  its  clients.   Both  assets  and   liabilities
contribute  to  the  Company's   liquidity   position.   Federal  funds  lines,
short-term  investments  and  securities,  and loan  repayments  contribute  to
liquidity,  along with  deposit  increases,  while  loan  funding  and  deposit
withdrawals   decrease   liquidity.   The  Bank  assesses  the   likelihood  of
projected  funding  requirements  by  reviewing  historical  funding  patterns,
current and  forecasted  economic  conditions  and  individual  client  funding
needs.  Commitments  to fund loans and  outstanding  standby  letters of credit
at  September   30,  2001  were   approximately   $183,783,000   and  $877,000,
respectively.  Such loans relate  primarily  to  revolving  lines of credit and
other commercial loans, and to real estate construction loans.

The  Company's  sources  of  liquidity  consist  of  overnight  funds  sold  to
correspondent banks, unpledged short-term marketable  investments,  and salable
SBA loans.  On September 30, 2001  consolidated  liquid assets  totaled  $107.6
million  or 14.1% of total  assets as  compared  to $140.0  million or 19.8% of
total  consolidated  assets  on  December  31,  2000.  In  addition  to  liquid
assets, the Bank maintains lines of credit with  correspondent  banks for up to
$80,000,000  available on a short-term basis.  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  $65,612,000  at September 30,
2001 compared to $59,854,000 at December 31, 2000.

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  actual capital  amounts and ratios at
September  30,  2001  and  December  31,  2000 as well as the  minimum  capital
ratios for capital adequacy under the regulatory framework:

                                       17
<PAGE>

<TABLE>
<CAPTION>

                                                                                          For Capital
                                                           Actual                      Adequacy Purpose:
Company                                             Amount         Ratio             Amount         Ratio
-------                                             ------         -----             ------         -----
As of September 30, 2001:
-------------------------
<S>                                             <C>                <C>           <C>                 <C>
Total Capital (to Risk Weighted Assets):        $ 71,631,000       11.4%         $ 50,143,558        8.0%
Tier 1 Capital (to Risk Weighted Assets):         63,767,000       10.2%           25,071,779        4.0%
Tier 1 Capital (to Average Assets):               63,767,000        8.5%           29,983,263        4.0%

As of December 31, 2000:
------------------------
Total Capital (to Risk Weighted Assets):          66,892,000       12.3%           43,490,000        8.0%
Tier 1 Capital (to Risk Weighted Assets):         60,098,000       11.1%           21,745,000        4.0%
Tier 1 Capital (to Average Assets):               60,098,000        9.1%           26,344,000        4.0%

</TABLE>

<TABLE>
<CAPTION>
                                                                                          For Capital
                                                           Actual                      Adequacy Purpose:
Community Bank                                      Amount         Ratio             Amount         Ratio
--------------                                      ------         -----             ------         -----
As of September 30, 2001:
-------------------------
<S>                                             <C>                <C>           <C>                 <C>
Total Capital (to Risk Weighted Assets):        $ 62,014,000       10.1%         $ 49,354,263        8.0%
Tier 1 Capital (to Risk Weighted Assets):         54,272,000        8.8%           24,677,132        4.0%
Tier 1 Capital (to Average Assets):               54,272,000        7.3%           29,764,634        4.0%

As of December 31, 2000:
------------------------
Total Capital (to Risk Weighted Assets):          63,866,000       11.8%           43,273,000        8.0%
Tier 1 Capital (to Risk Weighted Assets):         57,073,000       10.6%           21,637,000        4.0%
Tier 1 Capital (to Average Assets):               57,073,000        8.7%           26,251,000        4.0%

</TABLE>



                        Item 3. MARKET RISK MANAGEMENT

Overview
--------

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

Asset/Liability Management
--------------------------

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

                                       18
<PAGE>

Simulation of earnings is the primary tool used to measure the  sensitivity  of
earnings to interest rate changes.  Using  computer  modeling  techniques,  the
Company is able to estimate the  potential  impact of changing  interest  rates
on  earnings.  A balance  sheet  forecast  is prepared  using  inputs of actual
loan,  securities and interest bearing  liabilities (i.e.  deposits/borrowings)
positions  as the  beginning  base.  The  forecast  balance  sheet is processed
against  three  interest  rate  scenarios.  The  scenarios  include a 200 basis
point  rising  rate  forecast,  a flat  rate  forecast  and a 200  basis  point
falling rate  forecast  which take place within a one year time frame.  The net
interest  income is measured  during the first year of the rate  changes and in
the year  following  the rate changes.  The latest  simulation  forecast  using
May  31,  2001  balances  and  measuring   against  a  flat  rate  environment,
calculated  that in a one-year  horizon an increase  in  interest  rates of 200
basis  points  would  result  in an  increase  of  $2,869,000  in net  interest
income.  Conversely,  a 200 basis point  decrease would result in a decrease of
$3,451,000  in net interest  income.  The basic  structure of the balance sheet
has not changed significantly from the last simulation run.

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 Bank
has not changed materially from that at year-end 2000.

                                 OTHER MATTERS

California Power Crisis
-----------------------

      The State of California has recently  experienced periodic electric power
shortages.  It is uncertain  whether these shortages will  continued.  However,
conservation  efforts and  unanticipated  cooler  weather during the second and
third  quarters  of  2001  have  resulted  in  lower  demand  for   electricity
throughout  California and an electricity  surplus.  California  also initiated
action  to  supplement  conservation  efforts  including  acceleration  of  the
approval  process  for  development  of new energy  production  facilities  and
entering into  long-term  energy  contracts for the supply of  electricity.  If
electric   power   shortages   occur  in  the  future,   the  Company  and  its
subsidiaries  could be materially  and adversely  affected  either  directly or
indirectly by a severe  electric power  shortage if such a shortage  caused any
of its critical data  processing or computer  systems and related  equipment to
fail, or if the local  infrastructure  systems such as telephone systems should
fail, or the Company's and its subsidiaries'  significant  vendors,  suppliers,
service providers,  customers,  borrowers, or depositors are adversely impacted
by  their  internal  systems  or  those  of  their   respective   customers  or
suppliers.  Material  increases  in the  expenses  related  to  electric  power
consumption  and the related  increase in operating  expense could also have an
adverse effect on the Company's future results of operations.

Accounting Pronouncements
-------------------------

The  Financial  Standards   Accounting  Board  ("FASB")  adopted  Statement  of
Financial  Accounting   Standards  (SFAS)  No.  141,  "Business   Combinations"
covering elimination of pooling accounting  treatment in business  combinations
and  financial  accounting  and  reporting  for  acquired  goodwill  and  other
intangible  assets at  acquisition.  SFAS No. 141  supersedes  APB  Opinion No.
16, "Business  Combinations"  and SFAS No. 38,  "Accounting for  Preacquisition
Contingencies  of  Purchased  Enterprises"  and is effective  for  transactions
initiated  after June 30,  2001.  Under SFAS No. 141,  all mergers and business
combinations  initiated  after  the  effective  date must be  accounted  for as
"purchase"  transactions.  A merger  or  business  combination  was  considered
initiated  if the major terms of the  transaction,  including  the  exchange or
conversion   ratio,   were  publicly   announced  or  otherwise   disclosed  to
shareholders   of  the  combining   companies  prior  to  the  effective  date.
Goodwill in any merger or business  combination  which was not initiated  prior
to the  effective  date  will  be  recognized  as an  asset  in  the  financial
statements,  measured as the excess of the cost of an acquired  entity over the
net of the amounts  assigned to  identifiable  assets  acquired and liabilities
assumed,  and then tested for impairment to assess losses and expensed  against
earnings only in the periods in which the recorded  value of goodwill  exceeded
its  implied  fair  value.  The  FASB   concurrently   adopted  SFAS  No.  142,
"Goodwill and Other  Intangible  Assets" to address  financial  accounting  and
reporting for acquired  goodwill and other intangible  assets at acquisition in
transactions  other than  business  combinations  covered by SFAS No. 141,  and
the  accounting  treatment  of  goodwill  and  other  intangible  assets  after
acquisition  and initial  recognition  in the  financial  statements.  SFAS No.
142  supersedes APB Opinion No. 17,  "Intangible  Assets" and is required to be



                                       19
<PAGE>

applied at the  beginning of an entity's  fiscal year to all goodwill and other
intangible  assets  recognized  in its financial  statements at that date,  for
fiscal  years  beginning  after  December  15,  2001.  It is not  certain  what
effect  SFAS  No.  141 and  SFAS No.  142 may  have  upon the pace of  business
combinations  in the  banking  industry  in  general or upon  prospects  of any
merger or  business  combination  opportunities  involving  the  Company in the
future.  The  Company is required  to adopt SFAS No. 142  beginning  January 1,
2002.  Early  adoption  is not  permitted.  The  Company  does not  expect  the
adoption of SFAS No. 142 to have a material  effect on its financial  position,
results of  operations,  or cash flows as the  Company  had no  goodwill  as of
September  30, 2001 and all of the  Company's  intangible  assets at  September
30, 2001 will continue to be amortized.

Effects of Terrorism
--------------------

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 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.


                                       20
<PAGE>




                          PART II - OTHER INFORMATION

Item 1.    Legal proceedings.

                None.

Item 2.     Changes in securities.

                None.

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,  incorporated by reference from Exhibit
             3.1 to Form 10-Q, filed with the Commission on August 13, 2001.

      (3.2)  Bylaws,  as amended, incorporated by reference from Exhibit 3.2 to
             Form 10-Q, filed with the Commission on August 13, 2001.

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

                                       21
<PAGE>

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

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

     *(10.7) 1994  Stock  Option  Plan,   as  amended  and   restated,
             incorporated   by  reference  from  Exhibit  99  to   Registration
             Statement on Form S-8, No.  333-16257,  filed with the  Commission
             on November 15, 1996.

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

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

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

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

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

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

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

    *(10.15) 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.

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

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

      *Denotes management contracts, compensatory plans or arrangements.

(b)   Reports on Form 8-K -  A current report on Form 8-K was filed with the
      Commission on October 29, 2001 reporting a press release dated October
      18, 2001 regarding the Company's operating results for the quarter and
      nine month periods ended September 30, 2001.


                                       22
<PAGE>


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.


Novemer 7, 2001                          CENTRAL COAST BANCORP


                                    By: /s/ ROBERT M. STANBERRY
                                        ---------------------------------
                                          Robert M. Stanberry
                                          (Chief Financial Officer, Principal
                                          Financial and Accounting Officer)



                                       23