<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 March 31, 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 April 30, 2001, no par.

<PAGE>   2
                                CITIZENS BANCORP
                                    FORM 10-Q
                                 MARCH 31, 2001
                                      INDEX

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

   Consolidated Balance Sheets as of March 31, 2001 and December 31, 2000                1

   Consolidated Statements of Income for the three months ended                          2
       March 31, 2001 and 2000

   Consolidated Statements of Changes in Shareholders' Equity                            3

   Consolidated Statements of Cash Flows for three months ended                          4
       March 31, 2001 and 2000

   Notes to Consolidated Financial Statements                                            5

  ITEM 2. -- Management's Discussion and Analysis of Financial Condition
             and Results of Operations                                                 6 -- 11

  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
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in Thousands)

<TABLE>
<CAPTION>
                                                          MARCH 31, 2001   DECEMBER 31, 2000
                                                          --------------   -----------------
<S>                                                       <C>              <C>
ASSETS
     Cash and due from banks                                 $   7,619       $  11,218
     Interest bearing deposits in banks                          9,448           5,444
     Securities available for sale                              46,953          50,575
     Securities held to maturity                                 8,361           8,304
     Federal Home Loan Bank stock                                  804             792
     Loans held for sale                                         2,493           1,136

     Loans                                                     163,997         159,294
     Allowance for credit losses                                (1,611)         (1,510)
                                                             ---------       ---------
     NET LOANS                                               $ 162,386       $ 157,784

     Premises and equipment                                      5,178           5,191
     Foreclosed real estate                                        205             205
     Accrued interest receivable                                 2,384           2,142
     Other assets                                                1,375           1,589

     TOTAL ASSETS                                            $ 247,206       $ 244,380
                                                             =========       =========

LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
     Deposits:
        Demand                                               $  29,056       $  31,629
        Savings and interest bearing demand                    102,164         105,183
        Time                                                    72,343          64,148
                                                             ---------       ---------
     TOTAL DEPOSITS                                          $ 203,563       $ 200,960

     Repurchase agreements                                      13,502          13,867
     Other borrowings                                              295               0
     Accrued interest payable                                      245             223
     Other liabilities                                             788           2,267

     TOTAL LIABILITIES                                       $ 218,393       $ 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                                           7,917           6,971
     Accumulated other comprehensive income                        242               7
     TOTAL SHAREHOLDERS' EQUITY                              $  28,813       $  27,063
                                                             ---------       ---------

     TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY              $ 247,206       $ 244,380
                                                             =========       =========
</TABLE>


See accompanying notes



                                       1
<PAGE>   4
CITIZENS BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in thousand, except per share amounts)

<TABLE>
<CAPTION>
                                                                  THREE MONTHS ENDED
                                                                      MARCH 31,
                                                             ------------------------------
                                                                2001               2000
                                                             -----------        -----------
<S>                                                          <C>                <C>
INTEREST INCOME:
  Loans                                                      $     3,815        $     3,354
  Interest on deposits and federal funds sold                        101                 56
  Securities available for sale                                      679                860
  Securities held to maturity                                         90                156
                                                             -----------        -----------
  TOTAL INTEREST INCOME                                      $     4,685        $     4,424

INTEREST EXPENSE:
  Deposits                                                         1,503              1,309
  Borrowed funds                                                      13                 36
  Repurchase agreements                                              125                131
                                                             -----------        -----------
  TOTAL INTEREST EXPENSE                                     $     1,641        $     1,476

  NET INTEREST INCOME                                        $     3,044        $     2,948

PROVISIONS FOR CREDIT LOSSES                                        (123)               (58)

  NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES      $     2,921        $     2,890

NON-INTEREST INCOME:
  Service charges on deposit accounts                                385                253
  Other                                                              356                345
                                                             -----------        -----------
  TOTAL NON-INTEREST INCOME                                  $       741        $       598

NON-INTEREST EXPENSE:
  Salaries and employee benefits                                   1,283              1,172
  Occupancy and equipment                                            310                296
  Other                                                              645                662
                                                             -----------        -----------
  TOTAL NON-INTEREST EXPENSE                                 $     2,238        $     2,130

  INCOME BEFORE INCOME TAXES                                 $     1,424        $     1,358
                                                             -----------        -----------

INCOME TAXES                                                        (478)              (393)

  NET INCOME                                                 $       946        $       965
                                                             ===========        ===========

Earnings per share:
Basic and diluted                                            $      0.23        $      0.23

Average number of shares outstanding                           4,159,860          4,127,096

Return on average assets                                            1.54%              1.58%
</TABLE>



See accompanying notes



                                       2
<PAGE>   5
CITIZENS BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS
OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
(Dollars in Thousands)

<TABLE>
<CAPTION>
                                                                    THREE MONTHS ENDED MARCH 31, 2001 AND 2000
                                               -----------------------------------------------------------------------------
                                                NUMBER OF                                         ACCUMULATED
                                                 COMMON         COMMON                              OTHER
                                                 SHARES          STOCK           RETAINED       COMPREHENSIVE
                                               OUTSTANDING       AMOUNT          EARNINGS        INCOME (LOSS)         TOTAL
                                               -----------       ------          --------        -------------         -----
<S>                                            <C>              <C>              <C>            <C>                 <C>
BALANCE, AT DECEMBER 31, 1999                  4,124,091        $  19,868        $   4,849        ($    375)        $  24,342

COMPREHENSIVE INCOME:

Net Income                                            --               --              965               --               965

Other comprehensive income, net of tax:
  Unrealized loss on                                  --               --               --             (216)             (216)
  securities, net of
  reclassification adjustment

COMPREHENSIVE INCOME                                  --               --               --               --               749

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

BALANCE, AT MARCH 31, 2000                     4,137,630        $  20,085        $   5,815        ($    591)        $  25,309

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

COMPREHENSIVE INCOME:

Net Income                                            --               --              946               --               946

Other comprehensive income, net of tax:
  Unrealized loss on                                  --               --               --              235               236
  securities, net of
  reclassification adjustment

COMPREHENSIVE INCOME                                  --               --               --               --             1,181

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

BALANCE, AT MARCH 31, 2001                     4,189,499        $  20,654        $   7,917        $     242         $  28,813
</TABLE>

See accompanying notes



                                       3
<PAGE>   6
CITIZENS BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited), (Dollars in thousands)

<TABLE>
<CAPTION>
                                                                               THREE MONTHS ENDED
                                                                                     MARCH 31,
                                                                            -------------------------
                                                                              2001             2000
                                                                            --------         --------
<S>                                                                         <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income                                                                $    946         $    965
  Adjustments to reconcile net income to net
   Cash provided by operating activities:
    Provision for credit losses                                                  123               58
    Depreciation and amortization                                                158              161
    Stock dividends received                                                     (12)             (14)
    Increase in accrued interest receivable                                     (242)            (171)
    Increase (decrease)  in accrued interest payable                              22              (24)
    Other                                                                         95              771
                                                                            --------         --------
  NET CASH PROVIDED BY OPERATING ACTIVITIES                                 $  1,090         $    204

CASH FLOWS FROM INVESTING ACTIVITIES
  Net (increase) decrease in interest bearing deposits in banks               (4,004)            (641)
  Proceeds from maturities of available for sale securities                    9,000            5,000
  Proceeds from maturities of securities held to maturity                        455              115
  Purchases of securities available for sale                                  (5,011)          (5,973)
  Purchases of securities held to maturity                                      (511)               0
  Increase in loans made to customers, net of principal collections           (6,085)          (4,750)
  Purchases of premises and equipment and other                                 (145)             (39)
                                                                            --------         --------
  NET CASH PROVIDED BY INVESTING ACTIVITIES                                 ($ 6,301)        ($ 6,288)

CASH FLOWS FROM FINANCING ACTIVITIES
  Net increase (decrease) in deposits                                          2,603              861
  Net decrease in repurchase agreements and other borrowings                     (70)          (2,536)
  Payment of dividends, net of dividends reinvested                             (921)          (1,268)
                                                                            --------         --------
  NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                       $  1,612         ($ 2,943)

  NET DECREASE IN CASH AND DUE FROM BANKS                                   ($ 3,599)        ($ 9,027)

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

  END OF PERIOD                                                             $  7,619         $  8,963
                                                                            ========         ========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
  Interest paid                                                                1,619            1,500
  Income taxes paid                                                                               325
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
  Foreclosed real estate acquired in settlement of loans                          --              205
  Fair value adjustment of available for sale, net of tax                        235             (216)
  Issuance of common stock through dividend reinvestment plan                    569              217
</TABLE>


See accompanying notes


                                       4
<PAGE>   7
CITIZENS BANCORP
Notes to 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.

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 $27.5 million as of March 31, 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 March 31, 2001, 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.




                                       6
<PAGE>   9
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.

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
service 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 $946,000, or $.23 per share for the three months
ending March 31, 2001, compared to net income of $965,000, or $.23 per share for
the same period in 2000. The net decrease is primarily attributable to an
increase in the tax provision expense.

LOAN PORTFOLIO

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

<TABLE>
<CAPTION>
                                         MARCH 31, 2001  DECEMBER 31, 2000
                                         --------------  -----------------
<S>                                       <C>               <C>
Commercial                                $  29,740         $  29,088
Agriculture                                  14,432            14,816
Real Estate
  Construction                               11,205             8,651
  1-4 Family                                 39,430            29,066
  Other                                      65,121            73,505
Consumer Loans                                4,589             4,710
                                          ---------         ---------
                                            164,517           159,836

Less:  net deferred loan fees                  (520)             (542)

TOTAL LOANS                               $ 163,997         $ 159,294

Less:  allowance for credit losses           (1,611)           (1,510)

                                          ---------         ---------
NET LOANS                                 $ 162,386         $ 157,784
                                          =========         =========
</TABLE>



                                       7
<PAGE>   10
Transactions in the allowance for credit losses were as follows for the three
months ended March 31, 2001:

<TABLE>
<CAPTION>
                                        2001            2000
                                       -------         -------
<S>                                    <C>             <C>
Balance at beginning of period         $ 1,510         $ 1,071
Provision charged to operations            123              58
Loans recovered                              3              62
Loans charged off                          (25)            (17)
                                       -------         -------
Balance at end of period               $ 1,611         $ 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 March 31, 2001 and December 31, 2000 were
approximately $636,000 and $1,117,000 respectively. Loans past due 90 days or
more on which the Bank continued to accrue interest were approximately $632,000
at March 31, 2001 and $0 at December 31, 2000. Of the $636,000 on non-accrual,
$453,000 is the government guaranteed portion on one commercial loan. The Bank
charged off its portion of the loan in 1999. The Bank is actively pursuing all
avenues of collection on its collateral of inventory, accounts receivable and
real estate. Payment of the guaranteed portion is expected by year end 2001.
There were no loans with modified terms as of March 31, 2001.

INVESTMENT SECURITIES

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

<TABLE>
<CAPTION>
                                                                     Estimated
                                                      Amortized         Fair         Unrealized
March 31, 2001                                            Cost          Value         Gain, net
--------------                                        ----------     ---------       -----------
<S>                                                   <C>            <C>             <C>
AVAILABLE FOR SALE
U.S. Treasury Securities
  (Including securities of government agencies
  and corporations)                                     $46,555        $46,953         $   398
                                                        -------        -------         -------
TOTAL                                                   $46,555        $46,953         $   398

 HELD TO MATURITY
 Obligations of State and Political Subdivisions        $ 8,361        $ 8,549         $   188
</TABLE>

<TABLE>
<CAPTION>
                                                                      Estimated
                                                      Amortized         Fair         Unrealized
December 31, 2000                                        Cost           Value         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
                                                        -------        -------        -------
TOTAL                                                   $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 March 31, 2001 total assets increased 1.2% or approximately $2.8 million from
total assets at December 31, 2000. Major components of the change in total
assets were:

        -       $4.6 million increase in total loans

        -       $3.6 million decrease in investments

        -       $.4 million increase in cash and cash equivalents

        -       $2.6 million increase in total deposits

The increase in loans was primarily due to loan demand as a result of the
emphasis on increased business development by the Bank's loan officers and
marketing of the Bank's personalized loan services. Net loans increased from
$157.8 million at December 31, 2000 to $162.4 million for the three-month period
ending March 31, 2001. An increase of $4.6 million or 2.92 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 March 31, 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 March 31, 2001 was $9.1 million. This account
balance can fluctuate widely on a day to day basis.

The Bank experienced a net increase in total deposits to $203.6 million at March
31, 2001 from $200.1 million at December 31, 2000 which represents an increase
of $2.6 million or 1.30 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 interest bearing demand accounts. The increase in
new account relationships is a result of the Bank's business development
activities.

Long-term borrowings from the FHLB are utilized to fund and match large
long-term commercial loans. As of March 31, 2001 the Bank currently had no
borrowings from the FHLB.

MATERIAL CHANGES IN RESULTS OF OPERATIONS

The Company reported net income of approximately $946,000 or $.23 per common
share, for the three months ended March 31, 2001, compared to net income of
approximately $965,000 or $.23 per common share, for the same period in 2000.
This represents an decrease in net income of 2.0 percent. The decrease during
this period was primarily attributable to an increase in the tax provision
expense.

Total interest income increased approximately $261,000 or 5.9% for the three
months ended March 31, 2001 as compared to the same period in 2000. The
increases for the three-month period was primarily the result of an increase in
loan volume.

Total interest expense increased approximately $165,000 or 11.2 percent for the
three months ended March 31, 2001 as compared to the same periods in 2000. The
increases in interest expense for these periods were primarily a result of
volume increases.

Total non-interest income increased approximately $143,000 or 23.9% for the
three months ended March 31, 2001 as compared to the same period in 2000. The
primary increases were due to an increase in overdraft fees as a result of the
new bounce protection overdraft program on individual checking accounts.

Total non-interest expense increased $108,000 or 5.1 percent for the three
months ended March 31, 2001, as compared to the same period in 2000.
Non-interest expense increased as a result of routine adjustments in staff
salaries, and benefits along with expenses associated with technology
enhancements and products.



                                       9
<PAGE>   12
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 three months ended March 31, 2001 the Bank funded the allowance
for credit losses $123,000 from operations as compared to $58,000 for the same
three-month period of 2000. The Bank is increasing the monthly provision for
credit losses to match the increased loan growth. The Bank experienced $25,000
in credit losses and $3,000 in recoveries for the three months ended March 31,
2001 and $45,000 in net recoveries for the same period ended March 31, 2000.
Historically, the Bank's loan charge-off levels have been very low compared to
its peers. Management believes that the allowance for credit losses at March 31,
2001 of $1,611,000 or .99% of total loans is adequate.

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 three 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 March 31, 2001, shareholders' equity totaled $28,813,000 as compared to
$27,063,000 at December 31, 2000, an increase of 6.46%. 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 April 30, 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 April 30, 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 quarters ended March 31, 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 April 30, 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
April 30, 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     March 31, 2001    December 31, 2000
                                  ---------    ---------     --------------    -----------------
<S>                              <C>           <C>           <C>               <C>
Tier 1 Leverage Ratio                4%           5%             11.60%             10.96%
Tier 1 Risk Based Capital Ratio      4%           6%             17.02%             15.77%
Total Risk Based Capital Ratio       8%           10%            17.71%             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

             None

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:  May 11, 2001          /s/ William V. Humphreys
                                        ----------------------------------------
                                    By: William V. Humphreys
                                        President and
                                        Chief Executive Officer

           Date:  May 11, 2001          /s/ Lark E. Wysham
                                        ----------------------------------------
                                    By: Lark E. Wysham
                                        Senior Vice President and
                                        Chief Financial Officer



                                       13