<PAGE>   1
                                  UNITED STATES
                       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


               For the transition period from __________ to __________

               Commission file number 000-23277


                               CITIZENS BANCORP/OR
             (Exact name of registrant as specified in its charter)


              Oregon                             91-1841688
      (State of Incorporation)     (I.R.S. Employer Identification Number)


                           275 Southwest Third Street
                             Corvallis, Oregon 97339
                    (Address of principal executive offices)


                                 (541) 752-5161
              (Registrant's telephone number, including area code)

        Indicate by check mark whether the registrant (1) has filed all reports
        required to be filed by Section 13 or 15(d) of the Securities Exchange
        Act of 1934 during the preceding 12 months (or for such shorter period
        that the registrant was required to file such reports), and (2) has been
        subject to such filing requirements for the past 90 days.


                            YES     X         NO
                                 --------         ------


        Indicate the number of shares outstanding of each of the issuer's
        classes of common stock, as of the latest practicable date.

        4,189,499 shares as of July 31,  2001, no par.


<PAGE>   2

                                CITIZENS BANCORP
                                    FORM 10-Q
                                  JUNE 30, 2001
                                      INDEX


<TABLE>
<CAPTION>
                                                                                        Page
                                                                                      Reference
                                                                                      ---------
<S>                                                                                   <C>
PART I.
  ITEM 1. - FINANCIAL INFORMATION - UNAUDITED

   Condensed Consolidated Balance Sheets as of June 30, 2001 and December 31,
   2000                                                                                   1

   Condensed Consolidated Statements of Income for the three months and the six
   months ended June 30, 2001 and 2000                                                    2


   Condensed Consolidated Statements of Changes in Shareholders' Equity for the
   six months ended June 30, 2001 and 2000                                                3

   Condensed Consolidated Statements of Cash Flows for the six months ended
   June 30, 2001 and 2000                                                                 4

   Notes to Condensed Consolidated Financial Statements                                   5

  ITEM 2. - Management's Discussion and Analysis of Financial Condition                   6


  ITEM 3. - Quantitative and Qualitative Disclosure about Market Risk                    11

PART II. - OTHER INFORMATION

  ITEM 1. - Legal Proceedings                                                            12

  ITEM 2. - Changes in Securities                                                        12

  ITEM 3. - Defaults Upon Senior Securities                                              12

  ITEM 4. - Submission of Matters to a Vote of Security Holders                          12

  ITEM 5. - Other Information                                                            12

  ITEM 6. - Exhibits and Reports on Form 8-K                                             12

  SIGNATURES                                                                             13
</TABLE>


<PAGE>   3

                          PART I FINANCIAL INFORMATION

ITEM 1
CITIZENS BANCORP AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in Thousands)

<TABLE>
<CAPTION>
                                                               JUNE 30, 2001     DECEMBER 31, 2000
                                                               -------------     -----------------
<S>                                                            <C>               <C>
ASSETS
     Cash and due from banks                                       $13,715          $11,218
     Interest bearing deposits in banks                             10,015            5,444
     Securities available for sale                                  48,127           50,575
     Securities held to maturity                                     8,816            8,304
     Federal Home Loan Bank stock                                      818              792
     Loans held for sale                                             2,324            1,136

     Loans                                                         167,547          159,294
     Allowance for credit losses                                    (1,696)          (1,510)
                                                                  --------         --------
     NET LOANS                                                    $165,851         $157,784

     Premises and equipment                                          5,519            5,191
     Foreclosed real estate                                            205              205
     Accrued interest receivable                                     2,164            2,142
     Other assets                                                    1,399            1,589

     TOTAL ASSETS                                                 $258,953         $244,380
                                                                  ========         ========

LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
     Deposits:
        Demand                                                     $33,022          $31,629
        Savings and interest bearing demand                        103,636          105,183
        Time                                                        74,755           64,148
                                                                  --------         --------
     TOTAL DEPOSITS                                               $211,413         $200,960

     Repurchase agreements                                          14,745           13,867
     Other borrowings                                                2,153                0
     Accrued interest payable                                          224              223
     Other liabilities                                                 602            2,267

     TOTAL LIABILITIES                                            $229,137         $217,317
                                                                  --------         --------

SHAREHOLDERS' EQUITY
     Common stock (no par value); authorized 10,000,000
     shares;
     Issued and outstanding:  2001 - 4,189,499;
     2000 - 4,137,630 shares;                                       20,654           20,085
     Retained earnings                                               8,848            6,971
     Accumulated other comprehensive income                            314                7
     TOTAL SHAREHOLDERS' EQUITY                                    $29,816          $27,063
                                                                  --------         --------

     TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                   $258,953         $244,380
                                                                  ========         ========
</TABLE>

See accompanying notes


                                       1
<PAGE>   4

CITIZENS BANCORP AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in thousand, except per share amounts)

<TABLE>
<CAPTION>
                                                           SIX MONTHS ENDED       THREE MONTHS ENDED
                                                                JUNE 30,                JUNE 30,
                                                          ------------------      ------------------
                                                           2001        2000        2001        2000
                                                          ------      ------      ------      ------
<S>                                                       <C>         <C>         <C>         <C>
INTEREST INCOME:
Loans                                                     $7,638      $6,851      $3,823      $3,497
Interest on deposits and federal funds sold                  237         114         136          58
Securities available for sale                              1,346       1,718         667         858
Securities held to maturity                                  213         214         123          58
                                                          ------      ------      ------      ------
TOTAL INTEREST INCOME                                     $9,434      $8,897      $4,749      $4,473

INTEREST EXPENSE:
Deposits                                                   2,907       2,649       1,404       1,340
Borrowed funds                                                24          55          11          19
Repurchase agreements                                        238         278         113         147
                                                          ------      ------      ------      ------
TOTAL INTEREST EXPENSE                                    $3,169      $2,982      $1,528      $1,506

NET INTEREST INCOME                                       $6,265      $5,915      $3,221      $2,967

PROVISIONS FOR CREDIT LOSSES                                (246)       (178)       (123)       (120)

NET INTEREST INCOME AFTER PROVISION FOR CREDIT            $6,019      $5,737      $3,098      $2,847
LOSSES

NON-INTEREST INCOME:
Service charges on deposit accounts                          767         556         382         303
Other                                                        727         719         371         374
                                                          ------      ------      ------      ------
TOTAL NON-INTEREST INCOME                                 $1,494      $1,275        $753        $677

NON-INTEREST EXPENSE:
Salaries and employee benefits                             2,463       2,163       1,180         991
Occupancy and equipment                                      629         595         319         299
Other                                                      1,438       1,403         793         741
                                                          ------      ------      ------      ------
TOTAL NON-INTEREST EXPENSE                                $4,530      $4,161      $2,292      $2,031

INCOME BEFORE INCOME TAXES                                $2,983      $2,851      $1,559      $1,493
                                                          ------      ------      ------      ------

INCOME TAXES                                              (1,106)     (1,013)       (628)       (620)

NET INCOME                                                $1,877      $1,838        $931        $873
                                                          ======      ======      ======      ======

Per share data:
Basic and diluted earnings per share                       $0.45       $0.44       $0.22       $0.21
Weighted average number of common
shares outstanding                                     4,186,060   4,136,886   4,189,499   4,137,630
Return on Average Assets                                    1.48%       1.56%       1.47%       1.48%
</TABLE>

See accompanying notes


                                       2
<PAGE>   5

CITIZENS BANCORP AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS
OF CHANGES IN SHAREHOLDERS' EQUITY

(Unaudited)
(Dollars in Thousands)

<TABLE>
<CAPTION>
                                                      SIX MONTHS ENDED JUNE 30, 2001 AND 2000
                                           ------------------------------------------------------------------
                                                                                      Accumulated
                                            Number of                                    Other
                                             Common         Common                   Comprehensive
                                             Shares         Stock      Retained      Income (Loss)
                                           Outstanding      Amount     Earnings          Total         Total
                                           -----------      -------    --------      -------------    -------
<S>                                        <C>              <C>        <C>           <C>              <C>
BALANCE, AT DECEMBER 31, 1999                4,124,091      $19,868      $4,850           ($375)      $24,343

COMPREHENSIVE INCOME:

Net Income                                          --           --       1,838              --         1,838

Other comprehensive income, net of tax:
  Unrealized loss on securities, net                --           --          --            (124)         (124)
  of reclassification adjustment

COMPREHENSIVE INCOME                                --           --          --              --         1,714

Issuance of common stock                        13,539          217          --              --           217
                                             ---------      -------      ------           -----       -------

BALANCE, AT JUNE 30, 2000                    4,137,630      $20,085      $6,688           ($499)      $26,274

BALANCE, AT DECEMBER 31, 2000                4,137,630      $20,085      $6,971              $7       $27,063

COMPREHENSIVE INCOME:

Net Income                                          --           --       1,877              --         1,877

Other comprehensive income, net of tax:
  Unrealized gain on securities, net                --           --          --             307           307
  of reclassification adjustment

COMPREHENSIVE INCOME                                --           --          --              --         2,184

Issuance of common stock                        51,869          569          --              --           569
                                             ---------      -------      ------           -----       -------

BALANCE, AT JUNE 30, 2001                    4,189,499      $20,654      $8,848            $314       $29,816
</TABLE>

See accompanying notes


                                       3
<PAGE>   6

CITIZENS BANCORP AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited), (Dollars in thousands)

<TABLE>
<CAPTION>
                                                                           SIX MONTHS ENDED
                                                                               JUNE 30,
                                                                         ----------------------
                                                                           2001         2000
                                                                         --------      --------
<S>                                                                      <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income                                                             $  1,877      $  1,838
  Adjustments to reconcile net income to net
   cash provided by operating activities:
    Provision for credit losses                                               246           178
    Depreciation and amortization                                             315           322
    Stock dividends received                                                  (26)          (26)
    Increase in accrued interest receivable                                   (22)         (141)
    Increase (decrease) in accrued interest payable                             1           (31)
    Other                                                                    (137)         (731)
                                                                         --------      --------
  NET CASH PROVIDED BY OPERATING ACTIVITIES                              $  2,254      $  1,409

CASH FLOWS FROM INVESTING ACTIVITIES
  Net (increase) decrease in interest bearing deposits in banks            (4,571)          441
  Proceeds from maturities of available for sale securities                16,000         7,000
  Proceeds from sales of available for sale securities                          0         2,000
  Proceeds from maturities of securities held to maturity                     550           355
  Purchases of securities available for sale                              (13,100)       (6,964)
  Purchases of securities held to maturity                                 (1,055)         (492)
  Increase in loans made to customers, net of principal collections        (9,540)      (13,898)
  Purchases of premises and equipment and other                              (604)         (105)
                                                                         --------      --------
  NET CASH PROVIDED BY INVESTING ACTIVITIES                              ($12,320)     ($11,663)

CASH FLOWS FROM FINANCING ACTIVITIES
  Net increase in deposits                                                 10,453         1,574
  Net increase in repurchase agreements and other borrowings                3,031         1,004
  Payment of dividends, net of dividends reinvested                          (921)       (1,268)
                                                                         --------      --------
  NET CASH USED IN FINANCING ACTIVITIES                                  $ 12,563      $  1,310

  NET DECREASE IN CASH AND DUE FROM BANKS                                $  2,497      ($ 8,944)

CASH AND DUE FROM BANKS
  Beginning of period                                                      11,218        17,990

  END OF PERIOD                                                          $ 13,715      $  9,046
                                                                         ========      ========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
  Interest paid                                                             3,168         3,013
  Income taxes paid                                                         1,106           930
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

  Fair value adjustment of available for sale, net of tax                     307          (124)
  Issuance of common stock through dividend reinvestment plan                 569           217
</TABLE>

See accompanying notes


                                       4
<PAGE>   7

CITIZENS BANCORP
Notes to Condensed Consolidated Financial Statements (unaudited)

1.  BASIS OF PRESENTATION

        The interim condensed consolidated financial statements include the
        accounts of Citizens Bancorp ("Bancorp"), a bank holding company and its
        wholly owned subsidiary, Citizens Bank ("Bank") after elimination of
        intercompany transactions and balances. Substantially all activity of
        Citizens Bancorp is conducted through its subsidiary bank.

        The interim financial statements are unaudited but have been prepared in
        accordance with generally accepted accounting principles for interim
        condensed financial information and with instructions to form 10-Q.
        Accordingly, the condensed interim financial statements do not include
        all of the information and footnotes required by generally accepted
        accounting principles. In the opinion of management, all adjustments
        consisting only of normal recurring accruals necessary for a fair
        presentation for the interim periods included herein have been made.

        The interim condensed consolidated financial statements should be read
        in conjunction with the December 31, 2000 consolidated financial
        statements, including notes there to, included in Bancorp's 2000 Annual
        Report to shareholders. Operating results for the six months ended June
        30, 2001 are not necessarily indicative of the results anticipated for
        the year ending December 31, 2001.

2.  USE OF ESTIMATES IN THE PREPARATION OF FINANCIALS

        The preparation of financial statements, in conformity with general
        accounting principles, requires management to make estimates and
        assumptions that affect the reported amounts of assets and liabilities
        and disclosure of contingent assets and liabilities at the date of the
        financial statements and the reported amounts of revenues and expenses
        during the reporting period. Actual results could differ from those
        estimates.

3.  SHAREHOLDERS EQUITY AND NET INCOME PER COMMON SHARE

        The Board of Directors declared a $.36 per share dividend to Bancorp
        shareholders of record on December 19, 2000, payable on January 12,
        2001. Through the Dividend Reinvestment Plan (DRIP) 51,869 shares were
        purchased at a price of $10.96 per share. The DRIP resulted in an
        increase of shares outstanding from 4,137,630 to 4,189,499.

        All per share amounts have been restated to retroactively reflect stock
        dividends, stock purchased and stock splits previously reported.

4.  CONTINGENCIES

        Unfunded loan commitments totaled $27.4 million as of June 30, 2001 and
        $28.4 million as of December 31, 2000.

5.  ACCOUNTING CHANGES

        In June 1998, the Financial Accounting Standards Board issued SFAS No.
        133, Accounting for Derivative Instruments and Hedging Activities. This
        statement establishes accounting and reporting standards for derivative
        instruments, including certain derivative instruments embedded in other
        contracts (collectively referred to as derivatives) and for hedging
        activities. It requires that an entity recognize all derivatives as
        either assets or liabilities in its balance sheet and measure those
        instruments at fair value. Under this statement, an entity that elects
        to apply hedge accounting is required to establish at the inception of
        the hedge the method it will use for assessing the effectiveness of the
        hedging derivative and the measurement approach for determining the
        ineffective aspect of the hedge. Those methods must be consistent with
        the entity's approach to managing risk. This statement is effective for
        all fiscal years beginning after June 15, 2000. The Bank had no
        derivatives as of June 30, 2001 or December 31, 2000, nor does the Bank
        engage in any hedging activities. Accordingly, adoption of SFAS No. 133
        had no effect on the Company's financial position or results of
        operations.


                                       5
<PAGE>   8

ITEM 2

                           MANAGEMENT'S DISCUSSION AND
                         ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

In addition to historical information, this report contains certain "forward
looking statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. This statement is included for the purpose of availing
Bancorp the protection of the safe harbor provisions of this Act. The forward
looking statements contained in this report are subject to factors, risks and
uncertainties that may cause actual results to differ materially from those
projected. Factors that might result in such material difference include, but
are not limited to economic conditions, the regulatory environment, rapidly
changing technology, new legislation, competitive factors, the interest rate
environment and the overall condition of the banking industry. Forward looking
statements can be identified by such words as "estimate", "believe", "expect",
"intend", "anticipate", "should", "may", "will", or other similar words or
phrases. Although Bancorp believes that the expectations reflected in such
forward looking statements are reasonable, it can give no assurances that such
expectations will prove to have been correct. Readers are therefore cautioned
not to place undue reliance on such forward looking statements, which reflect
management's analysis only as of the date of the statement. Bancorp does not
intend to update these forward looking statements other than in its periodic
filings under applicable security laws.

OVERVIEW

Citizens Bank ("the Bank") was chartered October 1, 1957 (charter #333) by the
State of Oregon as a commercial bank. Since its beginning with a single office
in Corvallis, Citizens Bank has expanded to an additional eight locations in the
four counties of Benton, Linn, Lane, and Yamhill. Branches are located in the
communities of Corvallis, Philomath, Albany, Junction City, Veneta, and
McMinnville.

Citizens Bancorp ("Bancorp"), an Oregon Corporation and financial holding
company, was formed in 1996 for the purpose of becoming the holding company of
Citizens Bank. Bancorp is headquartered in Corvallis, Oregon. Its principal
business activities are conducted through its full-service, commercial bank
subsidiary, Citizens Bank.

Bancorp operates through a two-tiered corporate structure. At the holding
company level the affairs of Bancorp are overseen by a Board of Directors
elected by the shareholders of Bancorp at the annual meeting of shareholders.
The business of the Bank is overseen by a Board of Directors elected by Bancorp,
the sole owner of the Bank. As of the date of this Form 10-Q the respective
members of the Board of Directors of the Bank and the Board of Directors of
Bancorp are identical.

Bancorp's culture focuses on the tenets of collaborative leadership, branch
autonomy, assertive business development, a positive working environment, a
commitment to the community, outstanding customer service, and relationship
banking. Management believes that a healthy culture together with a progressive
management style will result in constantly improved shareholder value.

Bancorp's primary goal is to improve shareholder value through increased
earnings while maintaining a high level of safety and soundness. Bancorp is
committed to independence and long-term performance strategies.

The long-term benefit to Bancorp of its cultural and management style is
consistent growth and development of the Bank over time. Risk levels have been
greatly reduced because of expertise in loan, investment, operational, and human
resource management.

Bancorp's primary market focus is to provide commercial bank services to
businesses, professionals, and individuals. Bancorp emphasizes the development
of meaningful customer relationships and a high level of service. Its employees
are well-trained banking professionals who are committed to these objectives.

The Bank offers deposit accounts, safe-deposit boxes, consumer loans, commercial
loans, agricultural loans, and commercial and residential real estate loans.
Commercial loans include operating lines of credit, equipment and real estate
financing, capital needs, and other traditional financing products.

The Bank has a growing emphasis in financing farm operations, equipment, and
property. The Bank has also emphasized loans to professionals with its
professional line of credit products.


                                       6
<PAGE>   9

The Bank's loan portfolio has some concentrations in real estate secured loans,
primarily commercial properties.

Deposit products include regular and "package" checking accounts, savings
accounts, certificates of deposit, money market accounts, and IRA accounts.

The Bank offers debit cards, check guarantee cards, ATM cards as well as
MasterCard and VISA cards as part of its retail banking services. The Bank also
operates a small residential mortgage loan origination department that
originates loans and sells them into the secondary market. The Bank offers
extended banking hours in selected locations as well as Saturday banking. ATM
machines are also available at nine (9) locations offering 24-hour transaction
services, including cash withdrawals, deposits, account transfers, and balance
inquiries. The Bank also offers its customers a 24-hour automated telephone
services that offers account transfers and balance inquiries.

The Bank, in a continuing effort to meet its customer's needs, has successfully
released its new on-line banking product. The on-line banking product offers
services to both individuals and business account customers. Business customers
have a comprehensive cash management option. All online users have the
availability of the "bill payment" feature. The Bank expects to continually
enhance its on-line banking product while maintaining its quality "people to
people" customer service. Citizens on-line banking can be reached at
www.CitizensEBank.com.

Bancorp reported net income of $931,000 in the second quarter ending June 30,
2001, or $.22 per common share, an increase of 6.6 percent from the second
quarter net income of $873,000 in 2000 or $.21 per common share. For the first
six months of 2001, Bancorp earned $1,877,000, or $.45 per common share, an
increase of 2.1 percent from the six month 2000 earnings of $1,838,000 or $.44
per common share. The net increase is primarily attributable to an increase in
interest income from loans due to the growth in total loans.

LOAN PORTFOLIO

The composition of the loan portfolio was as follows (in thousands):

<TABLE>
<CAPTION>
                                           JUNE 30, 2001       DECEMBER 31, 2000
                                           -------------       -----------------
<S>                                        <C>                 <C>
Commercial                                      $28,180              $29,088
Agriculture                                      16,147               14,816
Real Estate
  Construction                                   14,178                8,651
  1-4 Family                                     27,552               29,066
  Other                                          76,985               73,505
Consumer Loans                                    5,086                4,710
                                               --------             --------
                                                168,128              159,836

Less:  net deferred loan fees                      (581)                (542)

TOTAL LOANS                                    $167,547             $159,294

Less:  allowance for credit losses               (1,696)              (1,510)
                                               --------             --------
NET LOANS                                      $165,851             $157,784
                                               ========             ========
</TABLE>



                                       7
<PAGE>   10

Transactions in the allowance for credit losses were as follows for the six
months ended June 30, 2001:

<TABLE>
<CAPTION>
                                                   2001             2000
                                                  ------           ------
<S>                                               <C>              <C>
Balance at beginning of period                    $1,510           $1,071
Provision charged to operations                      246               58
Loans recovered                                        3               62
Loans charged off                                    (63)             (17)
                                                  ------           ------
Balance at end of period                          $1,696           $1,174
                                                  ======           ======
</TABLE>

It is the policy of the Bank to place loans on nonaccrual after they become 90
days past due unless the loans are well secured and in the process of
collection. The Bank may place loans that are not contractually past due or that
are deemed fully collateralized on nonaccrual status as a management tool to
actively oversee specific loans.

Loans on nonaccrual status as of June 30, 2001 and December 31, 2000 were
approximately $106,000 and $1,117,000 respectively. Loans past due 90 days or
more on which the Bank continued to accrue interest were approximately $277,000
at June 30, 2001 and $0 at December 31, 2000. There were no loans with modified
terms as of June 30, 2001.

INVESTMENT SECURITIES

The amortized cost and estimated book value of the investment securities held by
the Bank, including unrealized gains and losses, at June 30, 2001 and December
31, 2000, are as follows (in thousands):

<TABLE>
<CAPTION>
June 30, 2001                                      Amortized Cost     Estimated Fair Value   Unrealized Gain, net
                                                   --------------     --------------------   --------------------
<S>                                                <C>                <C>                    <C>
AVAILABLE FOR SALE
U.S. Treasury Securities
  (Including securities of government agencies
  and corporations)                                    $47,614               $48,127                  $513

 HELD TO MATURITY
 Obligations of State and Political Subdivisions        $8,816                $9,036                  $220
</TABLE>


<TABLE>
<CAPTION>
December 31, 2000                                  Amortized Cost     Estimated Fair Value   Unrealized Gain, net
                                                   --------------     --------------------   --------------------
<S>                                                <C>                <C>                    <C>
AVAILABLE FOR SALE
U.S. Treasury Securities
  (Including securities of government
  agencies and corporations)                           $50,563               $50,575                   $12

HELD TO MATURITY
Obligations of State and Political Subdivisions         $8,304                $8,336                   $32
</TABLE>





                                       8
<PAGE>   11

MATERIAL CHANGES IN FINANCIAL CONDITION

At June 30, 2001 total assets increased 6.0% or approximately $14.6 million from
total assets at December 31, 2000. Major components of the change in total
assets were:

     -    $8.2 million increase in total loans
     -    $1.9 million decrease in investments
     -    $7.1 million increase in cash and cash equivalents
     -    $10.4 million increase in total deposits

The increase in loans was primarily a result of the emphasis on increased
business development by the Bank's loan officers and marketing of the Bank's
personalized loan services. Total loans increased from $159.3 million at
December 31, 2000 to $167.5 million for the six-month period ending June 30,
2001. An increase of $8.2 million or 5.1 percent.

The decrease in investments was a result of management's decision to use the
funds to finance the growth in the loan portfolio. The timing of the maturities
in the investment portfolio are determined by using the Bank's asset/liability
model.

At June 30, 2001 and December 31, 2000 the Bank kept its liquid funds in an
interest bearing demand account held at the Federal Home Loan Bank of Seattle
(FHLB). The balance at the FHLB at June 30, 2001 was $9.7 million. This account
balance can fluctuate widely on a day to day basis.

The Bank experienced a net increase in total deposits to $211.4 million at June
30, 2001 from $201.0 million at December 31, 2000 which represents an increase
of $10.4 million or 5.2 percent. The net increase in total deposits was the
result of an overall increase in the number of account relationships and
increases in the balances in demand and time deposits. The increase in new
account relationships is a result of the Bank's business development activities.

Long-term borrowings from the FHLB are from time to time utilized to fund and
match large long-term commercial loans. As of June 30, 2001 the Bank currently
had no borrowings from the FHLB.

MATERIAL CHANGES IN RESULTS OF OPERATIONS

The Company reported net income of approximately $1,877,000 or $.45 net income
per common share, for the six months ended June 30, 2001, compared to net income
of approximately $1,838,000 or $.44 net income per common share, for the same
period in 2000. This represents an increase in net income of 2.1 percent. Net
income for the quarter ended June 30, 2001, was approximately $931,000 or $.22
net income per common share, compared to net income of approximately $873,000,
or $.21 net income per common share, for the same period in 2000. This
represents an increase in net income of 6.6 percent. The increase during these
periods were primarily attributable to strong growth in the Bank's loan
portfolio resulting in an increase in net interest income.

Total interest income increased approximately $537,000 or 6.0% for the six
months and $276,000 or 6.2% for the three months ended June 30, 2001 as compared
to the same periods in 2000. These increases for both the six-month and
three-month periods were primarily the result of an increase in loan volume
compared to the same periods in 2000.

Total interest expense increased approximately $187,000 or 6.3 percent for the
six months and $22,000 or 1.5 percent for the three months ended June 30, 2001
as compared to the same periods in 2000. The increases in interest expense for
these periods were the result of volume increases.

Total non-interest income increased approximately $219,000 or 17.2% for the six
months and $76,000 or 11.2 percent for the three months ended June 30, 2001 as
compared to the same periods in 2000. The primary increases were a result of an
increase in overdraft fees as a result of the new bounce protection overdraft
program on individual checking accounts and the growth of service charge income
due to volume increases in deposit accounts.

Total non-interest expense increased $369,000 or 8.9 percent for the six months
and $261,000 or 12.9 percent for the three months ended June 30, 2001, as
compared to the same periods in 2000. Non-interest expense


                                       9
<PAGE>   12

increased as a result of routine adjustments in staff salaries, and expenses
associated with technology enhancements, products and occupancy.

CREDIT LOSS PROVISION

The Bank maintains an allowance for credit losses on loans that occur from time
to time as an incidental part of the business of banking. Loans are charged
against this allowance for credit losses which is adjusted periodically to
reflect changing loan volumes, risk potential in the portfolio and general
economic conditions. Additions to the allowance for credit losses are made
through a charge against income.

During the first six months ended June 30, 2001, the Bank funded the allowance
for credit losses $246,000 from operations as compared to $178,000 for the same
six month period in 2000. For the three month period ending June 30, 2001, the
Bank funded the allowance for credit losses $123,000 as compared to $120,000 for
the same three month period in 2000. The increase in the Bank's monthly
provision for credit losses is primarily in correlation to the growth in the
loan portfolio.

The provision for credit losses represents charges made to operating expenses to
maintain an appropriate allowance for credit losses. Management considers
various factors in establishing an appropriate allowance. These factors include
an assessment of the financial condition of the borrower, a determination of the
borrower's ability to service the debt from cash flow, a conservative assessment
of the value of the underlying collateral, the condition of the specific
industry of the borrower, the economic health of the local community, a
comprehensive analysis of the levels and trends of loan types, and a review of
past due and classified loans.

It is Bank policy that once each quarter, Bank management makes recommendations
to the Board regarding the adequacy of the Bank's allowance for credit losses
and the amount of the provision that should be charged against earnings for the
next three months. Management's recommendations are based on an internal loan
review process to determine specific potential loss factors on classified loans,
risk factor of loan grades, historical loss factors derived from actual net
charge-off experience, trends in non-performing loans and other potential risks
in the loan portfolio such as industry concentration, the local economy and the
volume of loans.

Management uses a loan grading system wherein loan officers assign a risk grade
to each of their loans at inception and at intervals based on receipt of
financial information, renewal, or when there is an indication that a credit may
have improved or weakened. The risk grades in the loan portfolio are used in
determining a factor that is used in analyzing the adequacy of the reserve for
credit losses.

The Bank's policy is to charge off loans when, in management's opinion, the loan
or a portion of the loan is deemed uncollectible following a concerted
collection effort. Management continues to pursue collection after a loan is
charged-off until all possibilities for collection have been exhausted.

LIQUIDITY AND CAPITAL RESOURCES

Bancorp's subsidiary, the Bank, has adopted policies to maintain a relatively
liquid position to enable it to respond to changes in the Bank's financial
environment. Generally, the Bank's major sources of liquidity are customer
deposits, sales and maturities of securities, the use of borrowing lines with
correspondent banks including Federal Home Loan bank borrowings, loan repayments
and net cash provided by operating activities.

The analysis of liquidity should also include a review of the changes that
appear in the consolidated statement of cash flows for the first six months of
2001. The statement of cash flows includes operating, investing and financing
categories. Operating activities include net income which is adjusted for
non-cash items and increases or decreases in cash due to certain changes in
assets and liabilities. Investing activities consist primarily of both proceeds
from maturities and purchases of securities, and the net growth in loans.
Financing activities present the cash flows associated with the Bank's deposit
accounts.

Management believes that the Bank's existing sources of liquidity will enable
the Bank to fund its requirements in the normal course of business.

As of June 30, 2001, shareholders' equity totaled $29,816,000 as compared to
$27,063,000 at December 31, 2000, an increase of 10.2%. This increase in equity
was primarily due to the Company's net income.


                                       10
<PAGE>   13

The total number of shares of Bancorp's common stock that may be issued upon the
exercise of all options granted under the Incentive Stock Option Plan may not
exceed in the aggregate four percent (4%) of Bancorp's issued and outstanding
shares of common stock. As of July 31, 2001 Bancorp's issued and outstanding
shares totaled 4,189,499, so the maximum number of shares issuable under the
Incentive Stock Option Plan was 167,579 on that date. As of July 31, 2001,
options for 46,000 shares had been granted and none exercised under this Plan.
The exercise price of all options granted exceeded the average market price of
the Company's stock for the periods ended June 30, 2001 and 2000.

The total number of shares of Bancorp's common stock that may be issued under
the Stock Bonus Plan may not exceed in the aggregate one percent (1%) of
Bancorp's issued and outstanding shares of common stock. As of July 31, 2001
Bancorp's issued and outstanding shares totaled 4,189,499, so the maximum number
of shares issuable under the Stock Bonus Plan was 41,895 on that date. As of
July 31, 2001 no stock had been issued under this Plan.

Capital ratios for the Company were as follows as of the dates indicated:

<TABLE>
<CAPTION>
                                    Adequately        Well                   Bancorp
                                   Capitalized    Capitalized   ----------------------------------
                                     Standards     Standards    June 30, 2001    December 31, 2000
                                   -----------    -----------   -------------    -----------------
<S>                                <C>            <C>           <C>              <C>
Tier 1 Leverage Ratio                    4%            5%           11.56%             10.96%
Tier 1 Risk Based Capital Ratio          4%            6%           16.09%             15.77%
Total Risk Based Capital Ratio           8%           10%           17.02%             16.67%
</TABLE>


ITEM 3.  QUANTITATIVE & QUALITATIVE ANALYSIS ABOUT MARKET RISK

Interest rate, credit, and operations risks are the most significant market
risks impacting the Bank's performance. The Bank relies on loan review, prudent
loan underwriting standards and an adequate allowance for credit losses to
mitigate credit risk.

The Bank uses an asset/liability management simulation model to measure interest
rate risk. The model quantifies interest rate risk through simulating forecasted
net interest income over a 12 month time period under various rate scenarios, as
well as monitoring the change in the present value of equity under the same rate
scenarios. The present value of equity is defined as the difference between the
market value of current assets less current liabilities. By measuring the change
in the present value of equity under different rate scenarios, management is
able to identify interest rate risk that may not be evident in simulating
changes in forecasted net interest income.

The Bank is currently slightly asset sensitive, meaning that interest earning
assets mature or reprice more quickly than interest-bearing liabilities in a
given period. An increase or decrease in market rates of interest will not
materially impact net interest income.

It should be noted that the simulation model does not take into account future
management actions that could be undertaken if there were a change in actual
market interest rate during the year. Also, certain assumptions are required to
perform modeling simulations that my have significant impact on the results.
These include assumptions regarding the level of interest rates and balance
changes on deposit products that do not have stated maturities. These
assumptions have been developed through a combination of industry standards and
future expected pricing behavior. The model also includes assumptions about
changes in the composition or mix of the balance sheet. The results derived from
the simulation model could vary significantly by external factors such as
changes in the prepayment assumptions, early withdrawals of deposits and
competition. Management has assessed these risks and believes that there has
been no material change since December 31, 2000.


                                       11
<PAGE>   14

                           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 VOTE OF SECURITY HOLDERS

     (a)     April 19, 2001, Annual Meeting

     (b)     Need not be completed

     (c)     The following matters were voted upon at the Annual Meeting of
             Shareholders on April 19, 2001

             (1) The re-election of one (1) Director for terms expiring in 2004
                 or until their successors have been elected and qualified.

                 Director:

                 William V. Humphreys
                      Votes cast for:          3,065,002
                      Votes withheld:             48,038

                 Directors continuing in office are Rosetta C. Venell (term
                 expires 2002), Scott A. Fewel (term expires 2002), Duane L.
                 Sorensen (term expires 2002), Eric Thompson (term expires
                 2003), James E. Richards (term expires 2003), and Jock Gibson
                 (term expires 2003).

ITEM 5.  OTHER INFORMATION

             None

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

     (a)     Exhibits

             None

     (b)     Reports on Form 8-K

             None





                                       12
<PAGE>   15

                                                 SIGNATURES

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

                     Date:  August 10, 2001       /s/ William V. Humphreys
                                                  -----------------------------
                                              By: William V. Humphreys
                                                  President and
                                                  Chief Executive Officer

                     Date:  August 10, 2001       /s/ Lark E. Wysham
                                                  -----------------------------
                                              By: Lark E. Wysham
                                                  Senior Vice President and
                                                  Chief Financial Officer




                                       13