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  June 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 - 7,204,720 shares outstanding at July 30, 2001 .

                              Page 1 of 45
            The Index to the Exhibits is located at Page 25

                                       1
<PAGE>

<TABLE>
<CAPTION>


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

                                                                          June 30,      December 31,
(In thousands, except per share data)                                       2001           2000
                                                                            ----           ----
Assets
<S>                                                                     <C>             <C>
  Cash and due from banks                                                   $ 51,817       $ 51,411
  Federal funds sold                                                          29,324         23,081
                                                                         ------------   ------------
     Total cash and equivalents                                               81,141         74,492

  Available-for-sale securities(amortized cost of $151 at                    151,225        152,276
    June 30, 2001 and $154 at December 31, 2000)

  Loans:
    Commercial                                                               163,288        171,631
    Real estate-construction                                                  81,864         57,780
    Real estate-other                                                        248,991        234,890
    Consumer                                                                  14,915          9,840
    Deferred loan fees, net                                                     (960)          (746)
                                                                         ------------   ------------
        Total loans                                                          508,098        473,395
    Allowance for loan losses                                                 (9,509)        (9,371)
                                                                         ------------   ------------
  Net Loans                                                                  498,589        464,024
                                                                         ------------   ------------

  Premises and equipment, net                                                  3,219          3,735
  Accrued interest receivable and other assets                                11,962         12,166
                                                                         ------------   ------------
Total assets                                                               $ 746,136      $ 706,693
                                                                         ============   ============
Liabilities and Shareholders' Equity
  Deposits:
    Demand, noninterest bearing                                            $ 181,355      $ 207,002
    Demand, interest bearing                                                 101,011         88,285
    Savings                                                                  135,907        110,204
    Time                                                                     254,474        227,719
                                                                         ------------   ------------
        Total Deposits                                                       672,747        633,210
  Accrued interest payable and other liabilities                              11,337         13,629
                                                                         ------------   ------------
Total liabilities                                                            684,084        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: 7,201,625 shares at June 30, 2001
    and 6,721,998 shares at December 31, 2000                                 51,757         44,472
  Shares held in deferred compensation trust (299,048 at June 30, 2001
    and 271,862 at December 31, 2000), net of deferred obligation                  -              -
  Retained earnings                                                           10,425         16,444
  Accumulated other comprehensive loss - net of taxes
    of $139 at June 30, 2001 and $738 at December 31, 2000                      (130)        (1,062)
                                                                         ------------   ------------
Shareholders' equity                                                          62,052         59,854
                                                                         ------------   ------------
Total liabilities and shareholders' equity                                 $ 746,136      $ 706,693
                                                                         ============   ============
See Notes to Consolidated Condensed Financial Statements

</TABLE>

                                       2
<PAGE>

<TABLE>
<CAPTION>


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

                                          Three Months Ended June 30,             Six Months Ended June 30,
(In thousands, except per share data)       2001              2000                2001                 2000
                                            ----              ----                ----                 ----
<S>                                   <C>                <C>               <C>                  <C>
Interest Income
   Loans (including fees)                    $ 10,709          $ 10,150             $ 21,734             $ 19,363
   Investment securities                        2,122             2,197                4,325                4,433
   Other                                          113               271                  305                  387
                                       ---------------    --------------    -----------------    -----------------
       Total interest income                   12,944            12,618               26,364               24,183
                                       ---------------    --------------    -----------------    -----------------
Interest Expense
   Interest on deposits                         4,729             4,365                9,562                8,279
   Other                                           94                72                  187                  220
                                       ---------------    --------------    -----------------    -----------------
       Total interest expense                   4,823             4,437                9,749                8,499
                                       ---------------    --------------    -----------------    -----------------
Net Interest Income                             8,121             8,181               16,615               15,684
Provision for Loan Losses                          75               800                  195                1,326
                                       ---------------    --------------    -----------------    -----------------
Net Interest Income after
   Provision for Loan Losses                    8,046             7,381               16,420               14,358
                                       ---------------    --------------    -----------------    -----------------

Noninterest Income                                775               631                1,425                1,177
                                       ---------------    --------------    -----------------    -----------------

Noninterest Expenses
   Salaries and benefits                        2,869             2,467                5,871                4,847
   Occupancy                                      385               345                  822                  678
   Furniture and equipment                        456               412                  911                  800
   Other                                        1,066             1,112                2,111                2,131
                                       ---------------    --------------    -----------------    -----------------
       Total noninterest expenses               4,776             4,336                9,715                8,456
                                       ---------------    --------------    -----------------    -----------------
Income Before Income Taxes                      4,045             3,676                8,130                7,079
Provision for Income Taxes                      1,522             1,433                3,048                2,760
                                       ---------------    --------------    -----------------    -----------------
       Net Income                            $  2,523          $  2,243             $  5,082             $  4,319
                                       ===============    ==============    =================    =================

Basic Earnings per Share                       $ 0.35            $ 0.29               $ 0.70               $ 0.55
Diluted Earnings per Share                     $ 0.33            $ 0.28               $ 0.66               $ 0.54
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)
Six months ended June 30,                                                       2001                     2000
                                                                                ----                     ----
<S>                                                                         <C>                       <C>
Cash Flows from Operations:
   Net income                                                                     $  5,082                $  4,319
   Reconciliation of net income to net cash provided
   by operating activities:
     Provision for loan losses                                                         195                   1,326
     Net gain on sale of investments                                                    (3)
     Net loss on sale of fixed assets                                                    1                      18
     Depreciation                                                                      690                     592
     Amortization and accretion                                                        193                     102
     Decrease (increase) in accrued interest receivable and other assets              (523)                    544
     Increase (decrease) in accrued interest payable and other liabilities           (2,144)                    528
     Increase in deferred loan fees                                                    214                       8
                                                                           ----------------          --------------
       Net cash provided by operations                                               3,705                   7,437
                                                                           ----------------          --------------
Cash Flows from Investing Activities:
   Purchases of investment securities                                              (88,520)                (10,209)
   Proceeds from maturities of investment securities                                38,223                   7,884
   Proceeds from sale of investment securities                                      52,817                       -
   Net increase in loans                                                           (34,974)                (30,388)
   Purchases of premises and equipment                                                (175)                   (571)
                                                                           ----------------          --------------
       Net cash used in investing activities                                       (32,629)                (33,284)
                                                                           ----------------          --------------
Cash Flows from Financing Activities:
   Net increase in deposit accounts                                                 39,537                  65,762
   Net decrease in short-term borrowings                                                 -                 (12,662)
   Net decrease in long-term borrowings                                               (148)                   (138)
   Proceeds from issuance of stock                                                      67                      58
   Shares repurchased                                                               (3,883)                 (2,654)
                                                                           ----------------          --------------
       Net cash provided by financing activities                                    35,573                  50,366
                                                                           ----------------          --------------
  Net increase in cash and equivalents                                               6,649                  24,519
Cash and equivalents, beginning of period                                           74,492                  39,959
                                                                           ----------------          --------------
Cash and equivalents, end of period                                               $ 81,141                $ 64,478
                                                                           ================          ==============

Other Cash Flow Information:
   Interest paid                                                                   $ 9,642                 $ 8,109
   Income taxes paid                                                                 4,737                   3,410
See Notes to Consolidated Condensed Financial Statements
</TABLE>

                                       4
<PAGE>




                  CENTRAL COAST BANCORP AND SUBSIDIARY
          NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                       June 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
June 30, 2001 and December 31, 2000,  the results of operations  for the
three  and six  month  periods  ended  June  30,  2001 and 2000 and cash
flows for the six month periods ended June 30, 2001 and 2000.

Certain  disclosures  normally  presented in the notes to the  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 six month  periods  ended
June  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.   Material   estimates  that  are  particularly
susceptible  to  significant  changes  in the near  term  relate  to the
determination  of the allowance  for loan losses and the carrying  value
of other real estate  owned.  Management  uses  information  provided by
an   independent   loan   review   service   in   connection   with  the
determination of the allowance for loan losses.

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.


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  $175,572,000
and  standby   letters  of  credit  of  $3,451,000  at  June  30,  2001.
However,  all such commitments will not necessarily  culminate in actual
extensions of credit by the Company during 2001.

Approximately  $44,141,000 of loan  commitments  outstanding at June 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  (7,220,000
and  7,288,000  for the three and six month periods ended June 30, 2001,
and  7,664,000  and  7,720,000 for the three and six month periods ended
June 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 324,000 for
the three and six month  periods  ended June 30,  2001 and  211,000  and
214,000 for the three and six month periods ended June 30, 2000).


4.  COMPREHENSIVE EARNINGS

<TABLE>
<CAPTION>

                                                         Three Months Ended June 30,          Six Months Ended June 30,
(In thousands)                                               2001            2000                 2001            2000
                                                             ----            ----                 ----            ----
<S>                                                     <C>               <C>                 <C>              <C>
Net Earnings                                                   $ 2,523         $ 2,243             $ 5,082          $ 4,319
Other comprehensive income (loss)- Net unrealized
      gain (loss) on available-for-sale securities                (316)            216                 934              160

Reclassification adjustment for gains included in
      income, net of taxes of $2 and $1
      for the three and six month periods ended
      June 30, 2001                                                 (3)              -                  (2)                -
                                                         --------------  --------------       -------------   --------------

Total comprehensive earnings                                   $ 2,204         $ 2,459             $ 6,014          $ 4,479
                                                         ==============  ==============       =============   ==============
</TABLE>


5.      STOCK DIVIDEND

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.

6.  STOCK REPRUCHASE 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 June 30,  2001, approximately 272,608 shares are remaining
under  the program.


                                       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) changes in the  regulatory
environment;  (5)  changes in business  conditions  and  inflation;  (6)
changes  in  securities   markets;   (7)  data   processing   compliance
problems;  (8) the California power crisis;  (9) variances in the actual
versus  projected  growth in  assets,  return on  assets,  loan  losses,
expenses,  rates charged on loans and earned on securities  investments,
rates paid on deposits,  and 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 second  quarter 2001,  Central Coast  Bancorp  reported  diluted
earnings per share of $0.33,  a 17.9%  increase over the $0.28  reported
in the year earlier  period.  Net income for the quarter  ended June 30,
2001 was  $2,523,000,  which  is a 12.5%  increase  over the  $2,243,000
reported  for the same  period of 2000.  The return on equity  (ROE) and
the return on assets  (ROA) for the second  quarter  2001 were 16.7% and
1.44% as compared to 16.5% and 1.45% for the same period in 2000.

                                       7
<PAGE>

Net  income  for the six  months  ended  June  30,  2001  and  2000  was
$5,082,000  and $4,319,000  with diluted  earnings per share of $.66 and
$.54,  respectively.  For the  first  six  months  of 2001 ROE was 16.8%
and ROA was 1.48% as  compared  to 16.0%  and 1.42% 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 June 30,  2001,  the  Company  had assets  totaling  $746,136,000,  a
quarter  end  record.  On a year over year  basis,  internal  growth has
generated an increase in assets of $97,319,000  (15.0%);  an increase in
loans  of   $82,025,000   (19.3%);   and  an  increase  in  deposits  of
$88,796,000  (15.2%).   Deposit  balances  at  June  30,  2001  included
$10,000,000  of State  of  California  certificates  of  deposit  versus
$40,000,000   at  June  30,  2000.   This   difference  of   $30,000,000
represents additional growth in the Company's core customer base.

Central  Coast  Bancorp  ended the second  quarter of 2001 with a Tier 1
capital  ratio of 10.6% and a total  risk-based  capital  ratio of 11.9%
versus 11.8% and 13.1%,  respectively,  at the end of the second 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        Six Months Ended      Change
                                              June 30,           Increase         June 30,         Increase
(In thousands, except percentages)       2001        2000       (Decrease)     2001       2000     (Decrease)
                                         ----        ----       ----------     ----       ----     ----------

<S>                                    <C>         <C>        <C>           <C>        <C>        <C>
Interest Income (1)                     $ 13,225    $ 12,815          3%     $ 26,903   $ 24,575         9%
Interest Expense                           4,822       4,437          9%        9,749      8,499        15%
                                       ----------  ----------  ----------    ---------  ---------  ---------
  Net interest income                      8,403       8,378          0%       17,154     16,076         7%
Provision for Loan Losses                     75         800        -91%          195      1,326       -85%
                                       ----------  ----------  ----------    ---------  ---------  ---------
  Net interest income after
    provision for loan losses              8,328       7,578         10%       16,959     14,750        15%
Noninterest Income                           775         631         23%        1,425      1,177        21%
Noninterest Expense                        4,776       4,336         10%        9,715      8,456        15%
                                       ----------  ----------  ----------    ---------  ---------  ---------
  Income before income taxes               4,327       3,873         12%        8,669      7,471        16%
Provision for Income Taxes                 1,522       1,433          6%        3,048      2,760        10%
Tax Equivalent Adjustment                    282         197         43%          539        392        38%
                                       ----------  ----------  ----------    ---------  ---------  ---------

  Net income                             $ 2,523     $ 2,243         12%      $ 5,082     $4,319        18%
                                       ==========  ==========  ==========    =========  =========  =========

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 second  quarter  of 2001 was  $8,403,000,
which was an increase of $25,000  over the second  quarter of 2000.  The
interest  income  component  was  up  $410,000   (3.2%).   Average  loan
balances were  $73,101,000  (17.8%) higher in the second quarter of 2001
versus  the  year  earlier   period.   This  volume   difference   added
$1,808,000  to  interest  income.  Since the  beginning  of 2001,  there
have been six  prime  rate  decreases  totaling  275  basis  points as a
result  of  actions  taken  by the  Federal  Reserve  Board.  Due to the
lower rates and the mix  between  fixed and  variable  rate loans in the
portfolio,  the  average  loan yield for the second  quarter of 2001 was
106  basis  points  lower  than the  average  yield in the year  earlier
quarter.   The  lower   loan   yield   decreased   interest   income  by
$1,249,000.   The  average  balance  of  investment  securities  in  the
second  quarter of 2001 was higher by $4,419,000  (3.0%) over the second
quarter  of 2000.  Average  balances  for  Federal  funds sold for these
two periods  decreased  $5,809,000 to  $10,978,000.  Interest income for
the  investing  activities  decreased  $149,000  on a period over period
basis.

                                       8
<PAGE>

Interest  expense was $385,000  (8.7%)  higher in the second  quarter of
2001   versus   the   prior   year   period.    Average    balances   of
interest-bearing  liabilities were higher by $51,360,000 (12.1%),  which
added   $588,000   to   interest   expense.   Average   rates   paid  on
interest-bearing  liabilities  were  down 14 basis  points  on a quarter
over  quarter  basis.  The lower  rates  decreased  interest  expense by
$203,000.

The net  interest  margin  for the  second  quarter of 2001 was 5.20% as
compared  to 5.85% in the year  earlier  period.  As compared to the net
interest  margin for the first  quarter 2001,  the second  quarter's net
interest  margin was down 49 basis  points.  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.  As 125
basis  points of the 2001  decreases  were made  throughout  the  second
quarter,  the full  effect of these rate cuts will be  reflected  in the
net interest margin for the third quarter 2001.

For the  six-month  period  ending June 30, 2001,  net  interest  income
increased  $1,078,000  (6.7%)  over the  first six  months of 2000.  The
interest   income   component   increased   $2,328,000  to  $26,903,000.
Average  balances of earning assets were  $72,918,000  (12.9%) higher in
the  first  six  months  of 2001  than the  same  period  in  2000.  The
average  balance of loans was  $72,580,000  higher,  which accounted for
$3,498,000  of the  increase  in  interest  income.  The  average  yield
received  on loans in the first six  months of 2001 was 46 basis  points
lower than the 9.72%  received  in the year  earlier  period.  The lower
yield on loans  decreased  interest  income by  $1,127,000.  The average
balances of  investment  securities  and Federal funds sold in the first
six  months  of 2001 were  basically  flat to the year  earlier  period.
Interest income for these investing  activities  decreased  $43,000 on a
period over period basis  because of lower  rates.  In the first half of
2000,  the prime  interest  rate was raised  three  times for a total of
100  basis  points.  In the  first  half of  2001  interest  rates  were
lowered six times for a total of 275 basis  points.  The blended  effect
of these  changes has  resulted in a 24 basis point  decrease in average
rates  received  on earning  assets in the first half of 2001 versus the
yields earned in the same period of 2000.

Interest expense for the six-month period increased  $1,250,000  (14.7%)
from  the  expense  in  the  same  2000  period.   Volume  increases  in
deposits added  $1,160,000 of interest  expense.  Overall  average rates
paid on  interest-bearing  liabilities  in the first six  months of 2001
increased  13 basis  points to 4.26% from the same  period in 2000.  The
interest  expense   increase   attributable  to  the  higher  rates  was
$116,000.   Lower  volume  in  borrowings  in  2001  decreased  interest
expense $26,000.

Net  interest  margin for the first six months of 2001 was 5.44%  versus
5.74% 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 June 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)                                  $ 484,536     $ 10,709      8.86%       $ 411,435      $10,150      9.92%
  Taxable investments                              102,866        1,558      6.08%         112,353        1,805      6.46%
  Tax-exempt securities (tax equiv. basis)          49,706          845      6.81%          35,800          588      6.61%
  Federal funds sold                                10,978          113      4.13%          16,787          272      6.52%
                                               ------------  -----------               ------------ ------------
Total Earning Assets                               648,086     $ 13,225      8.18%         576,375      $12,815      8.94%
                                                             -----------                            ------------
Cash & due from banks                               42,500                                  38,201
Other assets (4)                                    14,249                                   7,615
                                               ------------                            ------------
                                                 $ 704,835                               $ 622,191
                                               ============                            ============

Liabilities & Shareholders' Equity:
Interest bearing liabilities:
  Demand deposits                                 $ 98,440        $ 332      1.35%         $97,755        $ 392      1.61%
  Savings                                          123,679          984      3.19%          99,037          856      3.48%
  Time deposits                                    245,628        3,412      5.57%         221,695        3,117      5.65%
  Other borrowings                                   6,581           94      5.73%           4,481           72      6.46%
                                               ------------  -----------               ------------ ------------
Total interest bearing liabilities                 474,328        4,822      4.08%         422,968        4,437      4.22%
                                                             -----------                            ------------
Demand deposits                                    163,370                                 139,707
Other Liabilities                                    6,183                                   5,028
                                               ------------                            ------------
Total Liabilities                                  643,881                                 567,703
Shareholders' Equity                                60,954                                  54,488
                                               ------------                            ------------
                                                 $ 704,835                               $ 622,191
                                               ============                            ============
Net interest income & margin (3)                                $ 8,403      5.20%                      $ 8,378      5.85%
                                                             ===========  =========                 ============  =========

---------------------------------------------------------------------------------------------------------------------------

(1)  Loan interest income includes fee income of $347,000 and  $238,000 for the three month periods
     ended June 30, 2001 and 2000, respectively.
(2)  Includes the average allowance for loan losses of $9,455,000 and $6,422,000 and average deferred
     loan fees of $966,000 and $738,000 for the three months ended June 30, 2001 and 2000, respectively.
(3)  Net interest margin is computed by dividing net interest income by the total average earning assets.
(4)  Includes the unrealized loss on available-for-sale securities.
</TABLE>


                                       10
<PAGE>



<TABLE>
<CAPTION>

                                                                                (Unaudited)
                                                                          Six months ended June 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)                                       $473,106     $21,734     9.26%          $400,526     $19,363    9.72%
  Taxable investments                                  103,173       3,247     6.35%           114,387       3,650    6.42%
  Tax-exempt securities (tax equiv. basis)              47,697       1,617     6.84%            35,813       1,175    6.60%
  Federal funds sold                                    12,229         305     5.03%            12,561         387    6.20%
                                                   ------------  ----------                ------------ -----------
Total Earning Assets                                   636,205     $26,903     8.53%           563,287     $24,575    8.77%
                                                                 ----------                             -----------
Cash & due from banks                                   42,089                                  37,704
Other assets (4)                                        14,552                                   7,829
                                                   ------------                            ------------
                                                      $692,846                                $608,820
                                                   ============                            ============

Liabilities & Shareholders' Equity:
Interest bearing liabilities:
  Demand deposits                                      $93,543       $ 660     1.42%           $97,221       $ 797    1.65%
  Savings                                              122,253       2,069     3.41%           100,620       1,731    3.46%
  Time deposits                                        239,380       6,833     5.76%           209,445       5,751    5.52%
  Other borrowings                                       6,147         187     6.13%             6,976         220    6.34%
                                                   ------------  ----------                ------------ -----------
Total interest bearing liabilities                     461,323       9,749     4.26%           414,262       8,499    4.13%
                                                                 ----------                             -----------
Demand deposits                                        163,521                                 135,172
Other Liabilities                                        6,952                                   5,192
                                                   ------------                            ------------
Total Liabilities                                      631,796                                 554,626
Shareholders' Equity                                    61,050                                  54,194
                                                   ------------                            ------------
                                                      $692,846                                $608,820
                                                   ============                            ============
Net interest income & margin (3)                                   $17,154     5.44%                       $16,076    5.74%
                                                                 ==========  ========                   =========== ========

----------------------------------------------------------------------------------------------------------------------------

(1)  Loan interest income includes fee income of $679,000 and $474,000 for the six month
     periods ended June 30, 2001 and 2000, respectively
(2)  Includes the average allowance for loan losses of $9,434,000 and $6,110,000 and average deferred
     loan fees of $921,000 and $712,000 for the six months ended June 30, 2001 and 2000, respectively.
(3)  Net interest margin is computed by dividing net interest income by the total average earning assets.
(4)  Includes the unrealized loss on available-for-sale securities.
</TABLE>

                                       11
<PAGE>

<TABLE>
<CAPTION>

Volume/Rate Analysis
(in thousands) Three Months Ended June 30, 2001 over 2000
Increase (decrease) due to change in:
                                                                                                     Net
Interest-earning assets:                                     Volume            Rate (5)            Change
                                                             ------            --------            ------
<S>                                                         <C>                <C>              <C>
   Net Loans (1)(2)                                            $ 1,808            $(1,249)             $ 559
   Taxable investment securities                                  (153)               (94)              (247)
   Tax exempt investment securities (4)                            229                 28                257
   Federal funds sold                                              (94)               (65)              (159)
                                                          -------------      -------------      -------------
     Total                                                       1,790             (1,380)               410
                                                          -------------      -------------      -------------

Interest-bearing liabilities:
   Demand deposits                                                   3                (63)               (60)
   Savings deposits                                                214                (86)               128
   Time deposits                                                   337                (42)               295
   Other borrowings                                                 34                (12)                22
                                                          -------------      -------------      -------------
     Total                                                         588               (203)               385
                                                          -------------      -------------      -------------
Interest differential                                          $ 1,202            $(1,177)              $ 25
                                                          =============      =============      =============

(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 $347,000 and $238,000 for the quarters ended June 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 34% 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) Six Months Ended June 30, 2001 over 2000
Increase (decrease) due to change in:
                                                                                                     Net
Interest-earning assets:                                     Volume            Rate (5)            Change
                                                             ------            --------            ------
<S>                                                       <C>                <C>                <C>
   Net Loans (1)(3)                                            $ 3,498            $(1,127)           $ 2,371
   Taxable investment securities                                  (357)               (46)              (403)
   Tax exempt investment securities (4)                            389                 53                442
   Federal funds sold                                              (10)               (72)               (82)
                                                          -------------      -------------      -------------
     Total                                                       3,520             (1,192)             2,328
                                                          -------------      -------------      -------------

Interest-bearing liabilities:
   Demand deposits                                                 (30)              (107)              (137)
   Savings deposits                                                371                (33)               338
   Time deposits                                                   819                263              1,082
   Other borrowings                                                (26)                (7)               (33)
                                                          -------------      -------------      -------------
     Total                                                       1,134                116              1,250
                                                          -------------      -------------      -------------
Interest differential                                          $ 2,386            $(1,308)           $ 1,078
                                                          =============      =============      =============

(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 $347,000 and $238,000 for the quarters ended June 30, 2001 and 2000, respectively, have
    been included in the interest income computation.
(3) Loan fees of $679,000 and $474,000 for the six months ended June 30, 2001 and 2000, respectively, have
    been included in the interest income computation.
(4) 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 34% for 2001 and 2000.
(5) The rate / volume variance has been included in the rate variance.
</TABLE>


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

The Bank  provided  $75,000  for loan  losses in the  second  quarter of
2001 as  compared to  $800,000  in the second  quarter of 2000.  For the
six-month  period  ended  June  30,  2001,  the Bank  provided  $195,000
versus  $1,326,000  in the  year  earlier  period.  Due to loan  growth,
changing  portfolio  mix and  prevailing  local  economic  conditions in
2000,  the Bank modified its factors used in  determining  its allowance
for  loan   losses.   These   changes   resulted  in  higher  loan  loss
provisions  than had been  required  previously.  The provision for loan
losses  that has been  recorded  in 2001 has been based on  factors  and
methodologies  consistent  with  those  used in 2000.  The ratios of the
allowance  for loan  losses  to total  loans  at each  quarter  end were
1.87% and 1.65%, respectively.

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

Noninterest  income  consists  primarily  of service  charges on deposit
accounts  and  fees  for  miscellaneous  services.   Noninterest  income
totaled  $775,000 in the second  quarter of 2001,  which was up $144,000
(22.8%)  over the  same  period  in 2000.  Service  charges  on  deposit
accounts  were  up  $45,000  due to  volume  increases.  Commissions  on
mortgage  originations  were up $75,000  (175.7%) as refinance  activity
continued to be very  active.  Other  increases  were  generally  due to
higher business volumes.


                                       13
<PAGE>

For the first  six-months  of 2001,  noninterest  income was  $1,425,000
versus  $1,177,000  in the same  period  last year.  Service  charges on
deposits  were up  $110,000  (13.9%) due to higher  volumes.  Other fees
were  $135,000  (48.2%)  higher in the first half of 2001.  Most of this
increase  was  due  to  the  significantly  higher  volume  of  mortgage
originations.  As the  interest  rates  decreased  during the first half
of  2001,  the  activity  in  residential  mortgage  lending  picked  up
significantly.

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

Noninterest   expenses   increased   $440,000  (10.1%)  to  a  total  of
$4,776,000  in the second  quarter of 2001 versus  second  quarter 2000.
Salary and  employee  benefits  increased  $402,000  (16.3%)  because of
additional  staff due to the two new branches  opened in 2000,  internal
growth,  higher  benefit  costs,  and  normal  salary  increases.  On  a
quarter  over quarter  basis,  premises  and fixed asset  expenses  were
higher  by  $84,000  (11.1%).   Costs  of  the  two  new  branches,  the
California  energy shortage and higher  business  volume  contributed to
the  increase.  Other  expenses  for the  second  quarter  of 2001  were
$1,066,000  down from  $1,112,000 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 52.0% and 48.1%, respectively.

Noninterest  expenses  for the  six-month  period  ending  June 30, 2001
were  $9,715,000   versus  $8,456,000  for  the  same  period  in  2000.
Salaries  and  benefits  increased  $1,024,000  (21.1%)  due to the same
factors  discussed in the previous  paragraph.  Premises and fixed asset
expenses  were up  $255,000  (17.3%) due to the items as detailed in the
previous  paragraph.   Other  expenses  decreased  $20,000  (0.9%).  The
efficiency  ratio  for  the  first  six-months  of  2001  was  52.3%  as
compared to 49.0% in the same period of 2000.

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

The  effective tax rate for the second  quarter and first  six-months of
2001 was 37.6% and 37.5,  respectively,  versus  39.0% for both  periods
of  2000.  The  estimated  tax  rates in 2001  are  lower as tax  exempt
loans and investment securities are a higher percentage of income.

Securities
----------

At June 30, 2001,  available-for-sale  securities  had a market value of
$151,225,000   with  an  amortized  cost  basis  of  $151,494,000.   The
unrealized  loss of $269,000 at June 30, 2001  represented a decrease of
$545,000  from the  unrealized  gain of $276,000 at March 31, 2001.  The
unrealized  loss was the result of the  changes  in the yield  curve and
market spreads in the securities markets in the second quarter.

Loans
-----

Ending loan  balances at June 30, 2001 were  $508,098,000,  which was an
increase  of   $34,703,000   (7.3%)  from  year-end  2000  balances  and
$82,025,000  (19.3%)  from June 30, 2000  balances.  All  categories  of
loans were  higher on a year over year basis.  Real estate  construction
has been  particularly  strong with growth of $44,435,000  (118.7%) over
June  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 has  remained  brisk
into the third quarter,  however,  the continuing effects of the general
economy on loan demand are uncertain.

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

                                       14
<PAGE>

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.

Real estate and other assets  acquired in  satisfaction  of indebtedness
are  recorded  at the  lower  of  estimated  fair  market  value  net of
anticipated   selling  costs  or  the  recorded  loan  amount,  and  any
difference  between  this and the  amount  is  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)                                                      June 30,               December 31,
                                                                                          2001                     2000
                                                                                   -------------------       ------------------
<S>                                                                                <C>                      <C>
Past due 90 days or more and still accruing :
   Real estate                                                                                $ 3,055                    $  10
   Commercial                                                                                     721                      215
   Consumer and other                                                                               1                        5
                                                                                   -------------------       ------------------
                                                                                                3,777                      230
                                                                                   -------------------       ------------------
Nonaccrual:
   Real estate                                                                                    101                        -
   Commercial                                                                                     109                      329
   Consumer and other                                                                              15                        -
                                                                                   -------------------       ------------------
                                                                                                  225                      329
                                                                                   -------------------       ------------------
Total nonperforming assets                                                                    $ 4,002                    $ 559
                                                                                   ===================       ==================

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


Nonperforming  loans increased  $3,527,000  during the second quarter of
2001. A single loan  accounted  for 80% of the  increase.  Subsequent to
quarter  end, a payment  was  received on that loan,  which  brought the
loan  under 90 days past due.  Management  is closely  monitoring  these
past  due  loans  and  is  actively  pursuing  collection  of  them.  At
quarter  end,  the  nonperforming  assets were 0.54% of total assets and
0.79% of total  loans.  This  compared  to 0.07%  and 0.10% at March 31,
2001.

At June 30, 2001,  the recorded  investment in loans that are considered
impaired  under  SFAS  No.  114 was  $1,347,000  of  which  $45,000  are
included in nonaccrual  loans above.  Valuation allowances were computed
on all impaired loans  and  totled $366,000  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 June 30, 2001,  where serious
doubt  exists as to the  ability  of the  borrower  to  comply  with the
present repayment terms.

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 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.

                                       15
<PAGE>

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
June 30, 2001, the Company had  outstanding  real estate and real estate
construction   loans   totaling   approximately   $330,855,000,    which
represented  65% of the loan  portfolio.  Although  management  believes
the   concentration   to  have  no  more   than  the   normal   risk  of
collectibility,  a substantial  decline in the economy in general,  or a
decline in real estate values in the 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  judgement 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  provision 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 provision for estimated  losses related to specific
major 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 June 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 June 30,            Six months ended June 30,
(In thousands, except percentages)            2001               2000                 2001               2000
                                              ----               ----                 ----               ----
<S>                                       <C>                <C>                 <C>                <C>
 Beginning balance                              $ 9,427           $ 6,136              $ 9,371            $ 5,596
   Provision charged to expense                      75               800                  195              1,326
   Loans charged off                                (17)               (3)                (104)               (19)
   Recoveries                                        24                85                   47                115
                                          --------------     -------------        -------------      -------------
Ending balance                                  $ 9,509           $ 7,018              $ 9,509            $ 7,018
                                          ==============     =============        =============      =============

Ending loan portfolio                                                                 $508,098           $426,073
                                                                                  =============      =============

Allowance for loan losses as percentage of
   ending loan portfolio                                                                 1.87%              1.65%
</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 June 30, 2001 were
approximately  $175,572,000  and  $3,451,000,  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  June  30,  2001  consolidated   liquid  assets
totaled  $135.5  million or 18.2% 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  $62,052,000 at June 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.

                                       17
<PAGE>

The  following  table shows the  Company's  actual  capital  amounts and
ratios at June 30,  2001 and  December  31,  2000 as well as the minimum
capital ratios for capital adequacy under the regulatory framework:

<TABLE>
<CAPTION>

                                                                                                 For Capital
                                                                  Actual                       Adequacy Purpose:
Company                                                   Amount          Ratio            Amount          Ratio
-------                                                   ------          -----            ------          -----
<S>                                                       <C>                <C>          <C>                  <C>
As of June 30, 2001:
-------------------
Total Capital (to Risk Weighted Assets):                  68,702,000         11.9%        46,110,232           8.0%
Tier 1 Capital (to Risk Weighted Assets):                 61,498,000         10.6%        23,055,000           4.0%
Tier 1 Capital (to Average Assets):                       61,498,000          8.7%        28,193,000           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
--------------                                            ------          -----            ------          -----
<S>                                                       <C>                <C>          <C>                  <C>
As of June 30, 2001:
--------------------
Total Capital (to Risk Weighted Assets):                  66,563,000         11.6%        45,925,000           8.0%
Tier 1 Capital (to Risk Weighted Assets):                 59,358,000         10.3%        22,962,000           4.0%
Tier 1 Capital (to Average Assets):                       59,358,000          8.5%        28,109,000           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.  Based  on a
forecast  using May 31, 2001 balances and measuring  against a flat rate
environment,  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 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  is  presently   experiencing   serious
periodic  electric  power  shortages.  It is  uncertain  whether or when
these  shortages will be  discontinued.  However,  conservation  efforts
and  unanticipated  cooler  weather  conditions  through  the end of the
second  quarter of 2001 have  resulted in lower  demand for  electricity
throughout  California.  California  has 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.  Despite
these  efforts  and the fact that  during  the  second  quarter of 2001,
wholesale  prices for  electricity  supplied to California  declined and
electricity  in excess of current  needs was available for sale to other
states,  it is  currently  anticipated  that an  increase  in demand for
electricity  and  concomitant  power  shortages  will  occur  during the
months of August and  September if customary  weather  patterns  prevail
resulting  in  higher   temperatures   and  greater  reliance  upon  air
conditioning  in certain  regions of  California.  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  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
is 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

                                       19
<PAGE>

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 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.


                                       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.

            THE FOLLOWING ARE THE VOTING RESULTS OF THE REGISTRANTS'S ANNUAL
            MEETING OF THE SHAREHOLDERS HELD ON JUNE 11, 2001:

PROPOSAL NO. 1
------------------------------


AMENDMENT OF THE ARTICLES AND BYLAWS TO PROVIDE FOR
THE CLASSIFICATION OF THE BOARD OF DIRECTORS.

      FOR      3,776,209             AGAINST  195,046   ABSTAIN  32,749

PROPOSAL NO. 2
------------------------------


AMENDMENT OF THE ARTICLES AND BYLAWS TO ELIMINATE CUMULATIVE
VOTING IN THE ELECTION OF DIRECTORS.


      FOR      3,886,116             AGAINST   71,917   ABSTAIN  45,971



PROPOSAL NO. 3
------------------------------


ELECTION OF DIRECTORS

                                             AFFIRMATIVE
NOMINEE                                         VOTES
----------                                   ----------

C. EDWARD BOUTONNET (Class 3)                5,572,727

BRADFORD G. CRANDALL (Class 3)               5,572,753

ALFRED P. GLOVER (Class 1)                   5,578,777

MICHAEL T. LAPSYS (Class 2)                  5,578,711

DUNCAN L. McCARTER (Class 2)                 5,572,753

ROBERT M. MRAULE, D.D.S., M.D. (Class 3)     5,578,711

LOUIS A. SOUZA (Class 1)                     5,578,711

MOSE E. THOMAS, JR. (Class 1)                5,572,753

NICK VENTIMIGLIA (Class 2)                   5,577,743


                                       21
<PAGE>

PROPOSAL NO.4
------------------------------


APPROVAL OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS
INDEPENDENT PUBLIC ACCOUNTANTS FOR THE 2001 FISCAL YEAR.


      FOR      5,579,984             AGAINST   6,723    ABSTAIN  21,426


Item 5.     Other information.

                None.

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

(a)   Exhibits
      (2.1)  Agreement  and Plan of  Reorganization  and  Merger  by and
             between  Central  Coast  Bancorp,  CCB Merger  Company  and
             Cypress   Coast   Bank  dated  as  of   December 5,   1995,
             incorporated  by  reference  from  Exhibit 99.1 to Form 8-K
             filed with the Commission on December 7, 1995.

      (3.1)  Articles of Incorporation, as amended.

      (3.2)  Bylaws, as amended.


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

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

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

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

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

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

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

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

                                       22
<PAGE>

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

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

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

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

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

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

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

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

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

     (10.17) 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 June 18, 2001 to report the results of the
      shareholder vote on amending the Company's articles and bylaws,
      the election of directors and approval of the independent
      auditors.  The results of the vote are reported in Item 4 above.


                                       23
<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.


July 30, 2001                       CENTRAL COAST BANCORP


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

                                       24
<PAGE>


                                 EXHIBIT INDEX

Exhibit
Number                          Description                     Page
------                          -----------                     ----
3.1                             Articles of Incorporation       26

3.2                             Bylaws                          29




                                       25
<PAGE>