As filed with the Securities and Exchange Commission on April 2, 2001

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-K

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(Mark One)

|/x/ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|--- | ------------------------------------------------------------------------------------

For the fiscal year ended December 31, 2000

|/ / | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from  to

Commission file number: 0-22732

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PACIFIC CREST CAPITAL, INC.(Exact name of registrant as specified in its charter)

Delaware(State or other jurisdiction of
incorporation or organization)

95-4437818(I.R.S. Employer
Identification No.)30343 Canwood Street
Agoura Hills, California(Address of principal executive offices)

91301(Zip Code)


Registrant's telephone number, including area code:(818) 865-3300

Securities
registered pursuant to Section 12(b) of the Act:None

Securities
registered pursuant to Section 12(g) of the Act:

Common Stock, $.01 par value

9.375% Cumulative Trust Preferred Securities of PCC Capital I

Guarantee of Pacific Crest Capital, Inc. with respect to the
9.375% Cumulative Trust Preferred Securities of PCC Capital I(Title of Class)

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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes /x/ No / /

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. /x/

At March 16, 2001, the aggregate market value of the voting stock held by
non-affiliates of the registrant, as reported on the Nasdaq National Market, was $38,505,579.

At March 16, 2001, the number of shares outstanding of the registrant's $.01 par value common
stock was 2,483,117.

Documents Incorporated by Reference

Portions of the Definitive Proxy Statement for the Annual Meeting of Shareholders to be held on May 11, 2001 are
incorporated by reference into Part III of this Form 10-K.

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PACIFIC CREST CAPITAL, INC.    2000 ANNUAL REPORT ON FORM 10-K    TABLE OF CONTENTS

|           |  |                                                                                       |  | Page
|---------- |  | ------------------------------------------------------------------------------------- |  | ----
|PART I     |  |                                                                                      
|ITEM 1.    |  | Business                                                                              |  | 1   
|           |  | General                                                                               |  | 1   
|           |  | Loans                                                                                 |  | 2   
|           |  | Non-performing Assets                                                                 |  | 5   
|           |  | Allowance for Loan Losses                                                             |  | 8   
|           |  | Investments                                                                           |  | 10  
|           |  | Deposits                                                                              |  | 12  
|           |  | Borrowings                                                                            |  | 12  
|           |  | Employees                                                                             |  | 13  
|           |  | Regulation                                                                            |  | 13  
|           |  | Risk Factors                                                                          |  | 22  
|ITEM 2.    |  | Properties                                                                            |  | 24  
|ITEM 3.    |  | Legal Proceedings                                                                     |  | 24  
|ITEM 4.    |  | Submission of Matters to a Vote of Security Holders                                   |  | 24  
|ITEM 4(a). |  | Executive Officers of the Registrant                                                  |  | 25  
|PART II    |  |                                                                                      
|ITEM 5.    |  | Market for Registrant's Common Equity and Related Stockholder Matters                 |  | 26  
|ITEM 6.    |  | Selected Financial Data                                                               |  | 27  
|ITEM 7.    |  | Management's Discussion and Analysis of Financial Condition and Results of Operations |  | 30  
|           |  | General                                                                               |  | 30  
|           |  | Results of Operations                                                                 |  | 31  
|           |  | Financial Condition                                                                   |  | 46  
|           |  | Non-performing Assets                                                                 |  | 48  
|           |  | Liquidity                                                                             |  | 49  
|           |  | Dividends                                                                             |  | 49  
|           |  | Capital Resources                                                                     |  | 50  
|           |  | Asset / Liability Management                                                          |  | 51  
|ITEM 7A.   |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 53  
|ITEM 8.    |  | Financial Statements and Supplementary Data                                           |  | 56  
|ITEM 9.    |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure  |  | 91  
|PART III   |  |                                                                                      
|ITEM 10.   |  | Directors and Executive Officers of the Registrant                                    |  | 91  
|ITEM 11.   |  | Executive Compensation                                                                |  | 91  
|ITEM 12.   |  | Security Ownership of Certain Beneficial Owners and Management                        |  | 91  
|ITEM 13.   |  | Certain Relationships and Related Transactions                                        |  | 91  
|PART IV    |  |                                                                                      
|ITEM 14.   |  | Exhibits, Financial Statements and Reports on Form 8-K                                |  | 91  

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PART I

ITEM 1. Business

GENERAL

Pacific Crest Capital, Inc. ("Pacific Crest" or the "Parent") is a bank holding company principally engaged in commercial real estate lending and U.S.
Small Business Administration ("SBA") lending through its wholly owned subsidiary, Pacific Crest Bank (the "Bank"). During the fourth quarter of 1999, Pacific Crest became a bank holding company
regulated by the Board of Governors of the Federal Reserve System (the "Federal Reserve") as part of the conversion of the Bank's charter to that of a California state chartered commercial bank. See
"Pacific Crest Bank" below. Unless the context otherwise indicates, the "Company" refers to Pacific Crest and its wholly owned subsidiaries, Pacific Crest Bank and PCC Capital I.

Forward-Looking Information

Certain matters discussed in this Annual Report on Form 10-K may constitute forward-looking statements under Section 27A of the
Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These statements may involve risks and
uncertainties. These forward-looking statements relate to, among other things, expectations of the business environment in which the Company operates, projections of future performance, perceived
opportunities in the market and statements regarding the Company's mission and vision. Forward-looking statements include, but are not limited to, statements preceded by, followed by or that include
the word "will," "believes," "expects," "anticipates," "intends," "plans," "estimates" or similar expressions. The Company's actual results, performance or achievements may differ significantly from
the results, performance or achievements expressed or implied in such forward-looking statements. For discussion of the factors that might cause such a difference, see "Risk
FactorsBusiness Considerations and Certain Factors that May Affect Future Results of Operations and
Stock Price." Management of the Company believes that these forward-looking statements are reasonable; however, undue reliance should not be placed on such statements, which are based on current
expectations.

Pacific Crest Bank

Pacific Crest Bank is a California state chartered commercial bank that is supervised and regulated by the California Commissioner of Financial Institutions
(the "Commissioner"), the California Department of Financial Institutions (the "Department" or "DFI"), and the Federal Deposit Insurance Corporation ("FDIC"). The Bank's deposits are insured by the
FDIC up to applicable limits. In September of 1999, the Bank filed an application with the DFI to convert from a California state chartered industrial bank to a California state chartered commercial
bank. In December of 1999, the Bank received all of the necessary regulatory approvals, and, on December 15, 1999 completed its conversion from a California state chartered industrial bank to a
California state chartered commercial bank. The Bank converted to a California state chartered commercial bank primarily in order to offer full-service checking accounts and pursue
full-service online banking. The Bank introduced full-service, demand deposit checking accounts to all of its customers in the fourth quarter of 2000. The Bank anticipates that
it will offer full-service online banking within the next two years.

Pacific
Crest Bank is a business bank and concentrates on marketing to and serving the needs of investors, entrepreneurs, and small to medium-sized businesses located primarily in
California, and, to a lesser extent, Arizona, Washington, Oregon, and Texas. The Bank conducts its deposit operations through three branch offices located in Beverly Hills, Encino, and San Diego,
California. The Bank currently offers consumer demand deposit checking accounts, money market checking accounts, savings accounts, and certificates of deposit. However, the Bank does not offer other
traditional banking services such as travelers' checks, money orders, credit cards, safe deposit boxes, or trust services. The

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Bank has focused its lending activities on loans secured by commercial real estate and small business loans under various federal SBA loan programs. The Bank conducts its lending operations in
Southern California through its lending and marketing representatives and through its correspondent loan brokers located in Northern California, Arizona, Washington, Oregon, and Texas.

PCC Capital I

PCC Capital I ("PCC Capital") is a statutory business trust that was created under Delaware law for the exclusive purpose of issuing and selling 9.375%
Cumulative Trust Preferred Securities (the "Trust Preferred Securities").

On
September 22, 1997, PCC Capital completed a $17.25 million public offering of the Trust Preferred Securities and invested the gross proceeds from the offering in
junior subordinated debentures issued by Pacific Crest bearing interest at 9.375%. The junior subordinated debentures were issued concurrent with the issuance of the Trust Preferred Securities. The
interest on the junior subordinated debentures paid by Pacific Crest to PCC Capital represents the sole revenues of PCC Capital and the sole source of dividend distributions to the holders of the
Trust Preferred Securities. Pacific Crest has fully and unconditionally guaranteed all of PCC Capital's obligations under the Trust Preferred Securities.

Pacific
Crest has the right, assuming no default has occurred, to defer payments of interest on the junior subordinated debentures at any time for a period not to exceed 20
consecutive quarters. The Trust Preferred Securities will mature on October 1, 2027, but can be called in part or in total anytime after October 1, 2002 by PCC Capital.

The
Trust Preferred Securities are presented on a separate line on the Consolidated Balance Sheets under the caption "Company obligated mandatorily redeemable preferred securities of
subsidiary trust holding solely junior subordinated debentures." For financial reporting purposes, the Company records the dividend distributions on the Trust Preferred Securities as "Interest
expensetrust preferred securities" on its Consolidated Statements of Income.

LOANS

Lending

The Bank's primary focus in lending activities is the origination of adjustable rate and fixed rate commercial real estate loans and SBA loans. As of
December 31, 2000, the Bank held 542 commercial real estate loans with an average balance of $706,000, as well as 86 SBA loans with an average balance
of $196,000. Loans generally are made for terms from three to 20 years. At December 31, 2000, the Company's loan composition by interest rate repricing index was as follows:



The
Company's adjustable rate loans reprice on either a quarterly, semi-annual or annual basis. A portion of these adjustable rate loans were initially fixed rate for a period of one
to five years, but thereafter will reprice on either a quarterly, semi-annual or annual basis. A number of loans have

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interest rate floors and ceilings that limit the interest rate repricing of the loans. For more information on the Company's loan repricing, see "Item 7A. Quantitative and Qualitative Disclosures
About Market Risk".

Commercial Real Estate Lending

The Bank's loans have been originated primarily through referrals from commercial loan brokers, other banks, realtors, and other third parties for which the
borrower pays a referral fee ranging from 1/2% to 1% of the loan amount. The Bank employs commercial marketing representatives, who maintain
contacts with loan referral sources in California, Arizona, Washington and Oregon, screen referred transactions, and provide customer service. The Bank also uses correspondent loan brokers
(independent contractors who are not Bank employees) who represent the Bank in Sacramento, San Francisco, San Jose, Phoenix, Tucson, Seattle, Portland, Dallas, and Houston.

The
Bank's credit approval process includes an examination of the cash flow and debt service coverage of the property serving as loan collateral, as well as the financial condition
and credit references of the borrower. Following analysis of the borrower's credit, cash flows and collateral, loans are submitted to the Bank's Credit Committee for approval. The Bank's senior
management is actively involved in its commercial lending activities and collateral valuation process. The Bank obtains independent third party appraisals of all properties securing its loans. In
addition, the Bank employs an individual who serves as internal property analyst to inspect properties and review the third party appraisals for the benefit of the Credit Committee.

The
Bank currently offers commercial real estate loans that generally fall within a range of $200,000 to $4.0 million. Management, in consultation with the Bank's Board of
Directors, periodically adjusts and modifies its underwriting criteria and lending and underwriting policies in response to economic conditions and business opportunities.

SBA Lending

During 1997, the Company initiated an SBA 7(a) loan program. Loans made by the Company under this program generally are made to small businesses to provide
working capital or to provide funding for the purchase of businesses, real estate, or machinery and equipment. These loans generally are secured by a combination of assets that may include equipment,
receivables, inventory, business real property, and sometimes a lien on the personal residence of the borrower. SBA 7(a) loans are all variable rate loans based upon theWall
Street Journalprime lending rate. The SBA generally guarantees 75%-85% of the loan balance. Under the SBA 7(a) program, the Company can sell in the secondary
market the guaranteed portion of selected SBA 7(a) loans that it originates and can retain the unguaranteed portion of the loans, as well as the servicing on such loans, for which it is paid a fee.
The loan servicing spread is generally a minimum of 1.00% on all loans. The Company currently offers SBA 7(a) loans within a range of $50,000 to $2.0 million.

During
the fourth quarter of 2000, the Company initiated an SBA 504 loan program. Loans made by the Company under this program generally are made to small businesses to provide
funding for the purchase of real estate. Under this program, the Company generally provides up to 90% financing of the total purchase cost, represented by two loans to the borrower. The first lien
loan is generally a long-term, fully amortizing, fixed rate loan and made in the amount of 50% of the total purchase cost. The second lien loan is a short-term, interest only,
variable rate loan, based upon theWall Street Journalprime lending rate, and made in the amount of 40% of the total purchase cost. The Company's second lien loan serves as an interim bridge loan to the borrower until the Certified Development
Corporation ("CDC") obtains bond funding, pays off the Company's second lien loan, and provides long-term, fixed rate financing directly to the borrower. The CDC pays off the Company's
second lien loan generally within three months after the loan proceeds have been fully disbursed by the Company to the borrower. The CDC is a non-profit corporation established to
contribute to the economic

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development of its community by working together with the SBA and private sector lenders such as the Bank, to provide financing to small businesses. The Company currently offers SBA 504 loans within a
range of $300,000 to $3.0 million.

As
of December 31, 2000, the Company had achieved SBA "Preferred Lender" status in all Southern California counties. Preferred Lender status is the highest designation granted
to lenders by the SBA. In the third quarter of 2000, the SBA awarded Preferred Lender status to the Company for the Orange County, California SBA district. The Orange County SBA district includes
Orange, San Bernardino, and Riverside counties. In April of 2000, the SBA awarded Preferred Lender status to the Company for the Los Angeles SBA district, which covers Los Angeles, Ventura, and Santa
Barbara counties. In October of 1999, the SBA awarded Preferred Lender status to the Company for the San Diego SBA district, which includes San Diego and Imperial counties.

During
June 2000, the Company hired one Senior Vice President and three Vice Presidents in San Diego in order to significantly expand the Company's SBA lending capabilities in
Southern California. All four officers have a minimum of five years experience in the SBA industry and together have a combined 24 years of experience in the industry. During the second half of
2000, the Company hired five additional SBA personnel.

Secondary Market Loan Sales Program

During 1998, the Company initiated a commercial fixed rate real estate loan program designed to originate loans for both the Company's portfolio and for
potential sale in the secondary market. During the first quarter of 1999, the Company established an office in Orange County, California to coordinate and originate loans under this program. The
office was staffed with six employees during 1999. In January of 2000, the Company closed this office, eliminated the personnel associated with this operation, and moved the remaining lending activity
of this program to its headquarters in Agoura Hills, California. This program has been de-emphasized due to substantial reduction of fixed rate lending during the last nine months of 2000.

Loan Portfolio

The following table presents the categories of the Bank's loans at the dates indicated (in thousands):

|                                 |                                 | December 31,      |        
|-------------------------------- | ------------------------------- | ----------------- | -------
|
|Commercial real estate loans     |                                 | $                 | 382,596
|SBA loans:                       |                                 |                   |        
|                                 | Held for sale                   |                   |        
|                                 | Held for investment             |                   |        
|                                 |                                 |                   |        
|                                 |                                 | Total SBA loans   |        
|                                 |                                 |                   |        
|Other loans:                     |                                 |                   |        
|                                 | Construction loans              |                   |        
|                                 | Single-family residential loans |                   |        
|                                 | Commercial business/other loans |                   |        
|                                 |                                 |                   |        
|                                 |                                 | Total other loans |        
|                                 |                                 |                   |        
|Gross loans                      |                                 |                   | 400,263
|Less: deferred loan costs (fees) |                                 |                   | 22     
|Less: allowance for loan losses  |                                 |                   | (7,240 
|                                 |                                 |                   |        
|Net loans                        |                                 | $                 | 393,045
|                                 |                                 |                   |        

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Maturities of Loan Portfolio

The table below sets forth the contractual maturities of the Bank's outstanding gross loans at December 31, 2000. Loans that have adjustable or floating
interest rates are shown as maturing in the period during which the contract is due. The table does not reflect the effects of possible prepayments or enforcement of
due-on-sale clauses (dollars in thousands):

|                                                       |       | Maturity Date |  | Number of Loans |     | Loan Balance
|------------------------------------------------------ | ----- | ------------- |  | --------------- | --- | ------------
|Loans maturing within one year                         |       | 2001          |  | 23              |     | $           
|Loans maturing after one year but within two years     |       | 2002          |  | 10              |     |             
|Loans maturing after two years but within three years  |       | 2003          |  | 6               |     |             
|Loans maturing after three years but within five years |       | 20042005     |  | 30              |     |             
|Loans maturing after five years but within ten years   |       | 20062010     |  | 373             |     |             
|Loans maturing after ten years                         |       | After 2010    |  | 189             |     |             
|                                                       |       |               |  |                 |     |             
|                                                       | Total |               |  |                 | 631 |             
|                                                       |       |               |  |                 |     |             

NON-PERFORMING ASSETS

Non-performing Assets and Restructured Loans

Non-performing assets consist of non-accrual loans and other real estate owned. The following table sets forth
(a) non-accrual loans, (b) other real estate owned, and (c) loans that were classified as "troubled debt restructurings" at the dates indicated (dollars in thousands):

|                                                            |                             | December 31, |  
|----------------------------------------------------------- | --------------------------- | ------------ | -
|
|Non-accrual loans                                           |                             | $            | 
|Other real estate owned                                     |                             |              | 
|                                                            |                             |              |  
|                                                            | Total non-performing assets |              | $
|                                                            |                             |              |  
|Troubled debt restructurings                                |                             | $            | 
|                                                            |                             |              |  
|Non-accrual loans to total loans, net of deferred loan fees |                             |              | 
|Total non-performing assets to total assets                 |                             |              | 
|                                                            |                             |              |  

Non-accrual Loans

Non-accrual loans are loans not classified as "troubled debt restructurings" that show little or no current payment ability. These loans, however,
are backed by collateral or cash flow that supports the collectibility of the Company's remaining book balance. Non-accrual loan balances are net of any prior
write-offs, but any specifically assigned general allowance for loan losses is not deducted from the non-accrual loan balances.

The
Company's general policy is to discontinue the accrual of interest on commercial real estate loans when any installment payment is 61 days or more past due, or when
management otherwise determines the collectibility of principal or interest is unlikely prior to the loan becoming 61 days past due. On the guaranteed portion of SBA 7(a) loans, interest on
delinquent loans is guaranteed by the SBA up to 120 days. The Company's policy is to continue accruing interest up to 120 days, at which time the guaranteed portion of the loan would be
placed on non-accrual status. The unguaranteed portion of the SBA 7(a) loan would be placed on non-accrual status when it becomes 61 days past due.

Interest
income on non-accrual loans is subsequently recognized when the loan becomes contractually current. Accounts that are deemed uncollectible by management are
charged off for the

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amount that exceeds management's estimated net realizable value of the underlying real estate collateral.

The
Company's general policy is to begin initiating foreclosure proceedings when loans become more than 30 days past due. In some instances, loans that are more than
30 days past due are never actually foreclosed upon, because the borrower brings the account current either before a formal notice of default is filed or before the property goes to foreclosure
sale.

On
loans that are more than 60 days past due, an updated third party appraisal generally is ordered to ascertain the current fair market value of the collateral securing the
loan. Between the time that the appraisal is ordered and the time that it is received, (normally about a 60 day period), management evaluates the collateral securing the loan in order to
ascertain the amount of general loan loss reserves that should be allocated to the loan. Upon receipt of the third party appraisal, further general loan loss reserves are allocated, if necessary,
based on the estimated net realizable value of the collateral (which is calculated based on the estimated sales price of the collateral less all selling costs).

The
calculation of the adequacy of the allowance for loan losses is based on a variety of factors, including loan classifications and underlying loan collateral values, and is not
tied directly to the level of non-accrual loans. Therefore, changes in the amount of non-accrual loans will not necessarily result in an associated increase or decrease in the
allowance for loan losses.

The
following table represents the the changes in non-accrual loans for the periods indicated (in thousands):

|                                         |                                  | Years Ended December 31, |     
|---------------------------------------- | -------------------------------- | ------------------------ | ----
|
|Non-accrual loans at beginning of period |                                  | $                        | 210 
|                                         | Additions                        |                          |     
|                                         | Reinstatements to accrual status |                          |     
|                                         | Transfers to OREO                |                          |     
|                                         | Charge-offs                      |                          |     
|                                         | Payments/payoffs/other           |                          |     
|                                         |                                  |                          |     
|Net increase (decrease)                  |                                  |                          | (210
|                                         |                                  |                          |     
|Non-accrual loans at end of period       |                                  | $                        |    
|                                         |                                  |                          |     

Other Real Estate Owned

Assets classified as other real estate owned ("OREO") include foreclosed real estate owned by the Company. The Company records and carries its OREO at the
lower of cost or fair value, which may require the Company to make valuation adjustments to its OREO, based on current collateral appraisal data and other relevant information, which may effectively
reduce the book value of such assets to their estimated fair value less selling cost. The fair value of the real estate takes into account the real estate values net of expenses such as brokerage
commissions, past due property taxes, property repair expenses, and other items. The estimated sale price utilized by the Company to help determine fair value may not necessarily reflect the appraisal
value, which management believes, in some cases, to be higher than what could be realized in a sale of the OREO.

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The following table represents the changes in OREO for the periods indicated (in thousands):

|                                    |                                  | Years Ended December 31, |  
|----------------------------------- | -------------------------------- | ------------------------ | -
|
|OREO balance at beginning of period |                                  | $                        | 
|                                    | Transfers from non-accrual loans |                          |  
|                                    | Write-downs                      |                          |  
|                                    | Payments/other                   |                          |  
|                                    | Sales                            |                          |  
|                                    |                                  |                          |  
|Net decrease                        |                                  |                          | 
|                                    |                                  |                          |  
|OREO balance at end of period       |                                  | $                        | 
|                                    |                                  |                          |  

Troubled Debt Restructurings

A troubled debt restructuring ("TDR") is a loan for which the Company, for reasons related to the borrower's financial difficulties, grants a permanent
concession to the borrower, such as a reduction in the loan's fully-indexed interest rate, a reduction in the face amount of the debt, or an extension of the maturity date of the loan, that the
Company would not otherwise consider. TDR balances are reflected net of any prior write-offs, but any specifically assigned general allowance for loan losses is not deducted from TDR
balances.

The
following table represents the changes in TDRs for the periods indicated (in thousands):

|                                   |                                | Years Ended December 31, |  
|---------------------------------- | ------------------------------ | ------------------------ | -
|
|TDR balance at beginning of period |                                | $                        | 
|                                   | Transfers to accruing loans    |                          |  
|                                   | Transfers to non-accrual loans |                          |  
|                                   | Loan sale/loan payments        |                          |  
|                                   | Charge-offs/other              |                          |  
|                                   |                                |                          |  
|Net (decrease) increase            |                                |                          | 
|                                   |                                |                          |  
|TDR balance at end of period       |                                | $                        | 
|                                   |                                |                          |  

Other Loans of Concern (Potential Problem Loans)

In addition to non-accrual loans and TDRs, as of December 31, 2000, the Company had seven loans with an aggregate outstanding loan balance
of $2.4 million with respect to which known information about the possible credit problems of the borrowers or the cash flows of the properties securing the loans have caused management concern
about the ability of the borrowers to comply with present loan repayment terms and which may result in the future inclusion of such loans in the non-performing loan category. This compares
to three loans with an aggregate outstanding loan balance of $3.2 million at December 31, 1999.

ALLOWANCE FOR LOAN LOSSES

Classified Assets

In connection with examinations of insured institutions, the FDIC and the DFI examiners have the authority to identify problem assets and, if necessary,
require them to be classified. There are three primary classifications for problem assets: "substandard," "doubtful" and "loss." "Substandard" assets are assets that are characterized by the distinct
possibility that the institution will sustain some loss if

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deficiencies are not corrected. "Doubtful" assets have all of the weaknesses inherent in "substandard" loans, but also have the characteristic that, on the basis of existing facts, conditions and
values, collection or liquidation in full is highly questionable and improbable. "Loss" assets are assets that are considered uncollectible. Assets that are classified "loss" require the institution
either to establish a specific reserve in the amount of 100% of the portion of the asset classified "loss" or to charge-off the asset. In addition, the FDIC characterizes certain assets as
"special mention." These are assets that do not currently warrant classification in one of the three problem assets categories but possess weaknesses deserving management's close attention.

In
addition, the Company utilizes an internally developed loan classification and monitoring system in determining the appropriate level of the allowance for loan losses. This system
involves periodic reviews of the entire loan portfolio and loan classifications based on that review.

Allowance for Loan Losses

The Company's allowance for loan losses is established through a provision for loan losses based on management's evaluation of the risk inherent in the loan
portfolio. General loan loss reserves typically are established by assigning all loans to specified risk categories and then determining the appropriate levels of reserve for each risk category. A
special management "Reserve Committee" meets monthly to review the loan portfolio, delinquency trends, collateral value trends, non-performing asset data and other material information.
The amount of the allowance is based upon management's evaluation of numerous factors, including the adequacy of collateral securing the loans in the Company's portfolio, delinquency trends,
historical loan loss experience, and existing economic conditions.

The
full Board of Directors reviews the adequacy of the allowance for loan losses set by management on a quarterly basis. Management utilizes its best judgment in providing for
possible loan losses and establishing the allowance for loan losses. However, the allowance is an estimate, which is inherently uncertain and depends on the outcome of future events. In addition,
regulatory agencies, as an integral part of their examination process, periodically review the Company's allowance for loan losses. Such agencies may require the Company to recognize additions to the
allowance based upon their judgment of the information available to them at the time of their examination.

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Adverse economic conditions or a declining real estate market could adversely affect certain Bank borrowers' abilities to contractually repay their loans. A decline in the economy
could result in deterioration in the quality of the loan portfolio and could result in high levels of non-performing assets and charge-offs, which would adversely affect the
financial condition and results of operations of the Company.

The
following table sets forth certain information with respect to the Company's allowance for loan losses, valuation adjustments to OREO, and asset quality ratios as of the dates or
for the periods indicated (dollars in thousands):

|                                                     |                                                                                            | At or For the Years Ended December 31,                                 |                                          
|---------------------------------------------------- | ------------------------------------------------------------------------------------------ | ---------------------------------------------------------------------- | -----------------------------------------
|
|Allowance for Loan Losses Activity:                  |                                                                                            |                                                                        |                                          
|                                                     | Allowance for loan losses at beginning of period                                           |                                                                        | $                                        
|                                                     |                                                                                            | Provision for loan losses                                              |                                          
|                                                     |                                                                                            | Addition due to loan purchases                                         |                                          
|                                                     |                                                                                            | Net loan (charge-offs) recoveries:                                     |                                          
|                                                     |                                                                                            |                                                                        | Charge-offs: commercial real estate loans
|                                                     |                                                                                            |                                                                        | Charge-offs: commercial business loans   
|                                                     |                                                                                            |                                                                        | Recoveries: commercial real estate loans 
|                                                     |                                                                                            |                                                                        |                                          
|                                                     |                                                                                            |                                                                        |                                          
|                                                     |                                                                                            |                                                                        |                                          
|Allowance for loan losses at end of period           |                                                                                            | $                                                                      | 7,240                                    
|                                                     |                                                                                            |                                                                        |                                          
|Net Loan Charge-offs and OREO Valuation Adjustments: |                                                                                            |                                                                        |                                          
|                                                     | Net loan charge-offs (recoveries)                                                          |                                                                        | $                                        
|                                                     | OREO valuation adjustments                                                                 |                                                                        |                                          
|                                                     |                                                                                            |                                                                        |                                          
|                                                     |                                                                                            | Total net loan charge-offs (recoveries) and OREO valuation adjustments |                                          
|                                                     |                                                                                            |                                                                        |                                          
|Asset Quality Ratios:                                |                                                                                            |                                                                        |                                          
|                                                     | Net loan charge-offs (recoveries) to average loans                                         |                                                                        |                                          
|                                                     | Net loan charge-offs (recoveries) and OREO valuation adjustments to average loans and OREO |                                                                        |                                          
|                                                     | Allowance for loan losses to total loans, net of deferred fees                             |                                                                        |                                          
|                                                     | Allowance for loan losses to non-accrual loans                                             |                                                                        |                                          
|                                                     |                                                                                            |                                                                        |                                          

9

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The
following table sets forth the allocation of the Company's allowance for loan losses among the Company's loan categories as of the dates indicated (dollars in thousands):

|                             |       | Gross
Loans |         | Percent
of Total |      | Allowance |   | Percent
of Total |      
|---------------------------- | ----- | ----------- | ------- | ---------------- | ---- | --------- | - | ---------------- | -----
|December 31, 2000            |       |             |         |                  |      |           |   |                  |      
|Commercial real estate loans |       | $           | 382,596 |                  | 95.6 | %         | $ | 6,978            |      
|SBA loans                    |       |             | 16,853  |                  | 4.2  | %         |   | 262              |      
|Other loans                  |       |             | 814     |                  | 0.2  | %         |   |                 |      
|                             |       |             |         |                  |      |           |   |                  |      
|                             | Total |             | $       | 400,263          |      | 100.0     | % | $                | 7,240
|                             |       |             |         |                  |      |           |   |                  |      
|December 31, 1999            |       |             |         |                  |      |           |   |                  |      
|Commercial real estate loans |       | $           | 357,312 |                  | 97.5 | %         | $ | 6,291            |      
|SBA loans                    |       |             | 6,959   |                  | 1.9  | %         |   | 106              |      
|Other loans                  |       |             | 2,062   |                  | 0.6  | %         |   | 53               |      
|                             |       |             |         |                  |      |           |   |                  |      
|                             | Total |             | $       | 366,333          |      | 100.0     | % | $                | 6,450
|                             |       |             |         |                  |      |           |   |                  |      
|December 31, 1998            |       |             |         |                  |      |           |   |                  |      
|Commercial real estate loans |       | $           | 278,614 |                  | 96.4 | %         | $ | 4,823            |      
|SBA loans                    |       |             | 7,454   |                  | 2.6  | %         |   | 108              |      
|Other loans                  |       |             | 3,000   |                  | 1.0  | %         |   | 93               |      
|                             |       |             |         |                  |      |           |   |                  |      
|                             | Total |             | $       | 289,068          |      | 100.0     | % | $                | 5,024
|                             |       |             |         |                  |      |           |   |                  |      
|December 31, 1997            |       |             |         |                  |      |           |   |                  |      
|Commercial real estate loans |       | $           | 223,902 |                  | 96.5 | %         | $ | 3,936            |      
|SBA loans                    |       |             | 5,711   |                  | 2.5  | %         |   | 110              |      
|Other loans                  |       |             | 2,283   |                  | 1.0  | %         |   | 54               |      
|                             |       |             |         |                  |      |           |   |                  |      
|                             | Total |             | $       | 231,896          |      | 100.0     | % | $                | 4,100
|                             |       |             |         |                  |      |           |   |                  |      
|December 31, 1996            |       |             |         |                  |      |           |   |                  |      
|Commercial real estate loans |       | $           | 206,107 |                  | 97.4 | %         | $ | 3,172            |      
|SBA loans                    |       |             | 2,363   |                  | 1.1  | %         |   | 43               |      
|Other loans                  |       |             | 3,242   |                  | 1.5  | %         |   | 185              |      
|                             |       |             |         |                  |      |           |   |                  |      
|                             | Total |             | $       | 211,712          |      | 100.0     | % | $                | 3,400
|                             |       |             |         |                  |      |           |   |                  |      

INVESTMENTS

The Company's investment portfolio is used for both liquidity purposes and for investment income. The following table sets forth certain information regarding
the Company's investment portfolio as of the dates indicated (in thousands):

|                                                                               |                    | December 31,               
|------------------------------------------------------------------------------ | ------------------ | ---------------------------
|
|U.S. government sponsored agency callable bonds:                               |                    |                            
|                                                                               | Available for sale |                            
|                                                                               | Held to maturity   |                            
|U.S. government sponsored agency mortgage-backed securities available for sale |                    |                            
|Corporate debt securities available for sale                                   |                    |                            
|                                                                               |                    |                            
|                                                                               |                    | Total investment securities
|                                                                               |                    |                            
|Securities purchased under resale agreements                                   |                    | $                          
|                                                                               |                    |                            

10

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Investment Securities

The Company's investment securities portfolio at December 31, 2000 consisted of fixed rate investments in U.S. government sponsored agency callable
bonds and mortgage-backed securities issued by Fannie Mae, Freddie Mac, the Federal Home Loan Bank and the Government National Mortgage Association, as well as variable rate investments in investment
grade corporate debt securities. The callable bonds have call features that allow the issuer to retire (call) an individual security prior to that security's stated maturity date.

Subsequent
to December 31, 2000 and through March 22, 2001, $135.2 million of callable bonds were called by the issuers, and an additional $10.0 million of
callable bonds were sold by the Company. This resulted in a total reduction of the callable bond portfolio of $145.2 million. The Company used part of the proceeds from these calls and sale to
purchase approximately $60.0 million of U.S. government sponsored agency mortgage- backed securities. The Bank intends to apply for membership in the Federal Home Loan Bank ("FHLB") system in
2001, and these recently purchased mortgage-backed securities will enable the Bank to meet the FHLB membership test for housing related assets.

The
following table sets forth the composition of the Company's investment securities portfolio at December 31, 2000 (dollars in thousands):

|                                      |                                                 | December 31, 2000                |      
|------------------------------------- | ----------------------------------------------- | -------------------------------- | -----
|
|Callable bonds issued by:             |                                                 |                                  |      
|                                      | Fannie Mae (FNMA)                               |                                  | $    
|                                      | Freddie Mac (FHLMC)                             |                                  |      
|                                      | Federal Home Loan Bank (FHLB)                   |                                  |      
|                                      |                                                 |                                  |      
|                                      |                                                 | Total callable bonds             |      
|                                      |                                                 |                                  |      
|Mortgage-backed securities issued by: |                                                 |                                  |      
|                                      | Fannie Mae (FNMA)                               |                                  |      
|                                      | Government National Mortgage Association (GNMA) |                                  |      
|                                      |                                                 |                                  |      
|                                      |                                                 | Total mortgage-backed securities |      
|                                      |                                                 |                                  |      
|Corporate debt securities             |                                                 |                                  | 4,109
|                                      |                                                 |                                  |      
|                                      |                                                 | Total investment securities      |      
|                                      |                                                 |                                  |      

Securities Purchased Under Resale Agreements

The Company invests excess cash overnight and up to 3 months in securities purchased under resale agreements ("repurchase agreements"). The Company has
master repurchase agreements with several nationally recognized banks and broker-dealers. The maximum investment with one brokerage firm or bank may not exceed $25 million. Collateral securing
the repurchase agreements is limited to U.S. Treasury bonds, notes and bills, and securities issued by either U.S. government agencies or U.S. government sponsored agencies. Collateral securing the
repurchase agreements is restricted to non-derivative types of securities by the aforementioned agencies. Collateral securing the repurchase agreements is held for safekeeping under
third-party custodial agreements and is required to be segregated and separately accounted for from all other securities held by the custodian for its other customers or for its own account.

11

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DEPOSITS

The following table sets forth information regarding the composition of the Company's deposits as of the dates indicated (in thousands):

|                        |                | December 31,
|----------------------- | -------------- | ------------
|
|Money market checking   |                | $           
|Savings accounts        |                |             
|Certificates of deposit |                |             
|                        |                |             
|                        | Total deposits |             
|                        |                |             

The
Company's primary source of funds is FDIC-insured deposits collected by the Bank. The Company has deposit-gathering branches located in Beverly Hills, Encino and San
Diego, California. The Company's headquarters office in Agoura Hills is an administrative office and does not take deposits. The Company's current deposit products include savings accounts, limited
draft money market checking accounts, term certificates of deposit with 30-day to five-year maturities, and demand deposit checking accounts. Included among these deposit
programs are individual retirement accounts and Keogh retirement accounts. The Company also conducts a wholesale deposit operation through which deposits from other financial institutions located
throughout the United States are solicited. Management believes its deposits are a stable and reliable funding source.

BORROWINGS

The following table sets forth information regarding the composition of the Company's borrowings as of the dates indicated (in thousands):

|                                            |                  | December 31,
|------------------------------------------- | ---------------- | ------------
|
|Securities sold under repurchase agreements |                  | $           
|Borrowings from State of California         |                  |             
|Term borrowings                             |                  |             
|Trust preferred securities(1)               |                  |             
|                                            |                  |             
|                                            | Total borrowings |             
|                                            |                  |             

---

Securities Sold Under Repurchase Agreements

A secondary source of funds for the Company consists of short-term borrowings in the form of securities sold under repurchase agreements ("reverse
repurchase agreements"). The Company has set up short-term borrowing relationships with several brokers. The repayment terms on this short-term debt generally range from one
day to up to three months. The interest rate paid can vary daily, but typically approximates the federal funds rate plus 25 basis points. These borrowings are secured by pledging specific amounts of
certain U.S. government sponsored agency securities. The Company utilizes these borrowings to cover short-term financing needs.

Borrowings from State of California

The Bank has a fixed rate borrowing facility with the State of California Treasurer's Office under which the Bank can borrow an amount not to exceed its
unconsolidated total shareholder's equity. Borrowing maturity dates under this program cannot exceed one year. The State of California requires collateral with a value of at least 110% of the
outstanding borrowing amount. The Bank has pledged specific amounts of certain U.S. government sponsored agency securities to meet this collateral

12

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requirement. As of December 31, 2000, the Bank's unconsolidated total shareholder's equity was $46.2 million and the Bank's outstanding borrowings from the State of California totaled
$28.0 million.

Term Borrowings

The Company has a borrowing relationship with one broker, whereby the Company is able to obtain fixed rate, long-term borrowings. This debt is
secured by pledging specific amounts of certain U.S. government sponsored agency securities. In the past, these borrowings had call features that allowed the lender to call the debt prior to the
stated maturity date. The $40.0 million borrowings outstanding at December 31, 2000 have no call features and will mature at various times during 2002.

EMPLOYEES

As of December 31, 2000, the Company employed 70 persons. Management believes that its relations with its employees are good. The Company is not a party
to any collective bargaining agreement.

REGULATION

General

Bank holding companies and banks are extensively regulated under both federal and state law. This regulation is intended primarily for the protection of
depositors and the deposit insurance fund and not for the benefit of stockholders of Pacific Crest. Set forth below is a summary description of the material laws and regulations which relate to the
operations of Pacific Crest and the Bank. The description is qualified in its entirety by reference to the applicable laws and regulations.

Pacific Crest Capital, Inc.

Pacific Crest, as a registered bank holding company, is subject to regulation under the Bank Holding Company Act of 1956, as amended (the "BHCA"). Pacific
Crest is required to file with the Federal Reserve periodic reports and such additional information as the Federal Reserve may require pursuant to the BHCA. The Federal Reserve may conduct
examinations of Pacific Crest and its subsidiaries. Further, Pacific Crest is required by the Federal Reserve to maintain certain minimum levels of capital. See "Capital Standards."

The
Federal Reserve may require that Pacific Crest terminate an activity or terminate control of or liquidate or divest certain subsidiaries or affiliates when the Federal Reserve
believes the activity or the control of the subsidiary or affiliate constitutes a significant risk to the financial safety, soundness or stability of any of its banking subsidiaries. The Federal
Reserve also has the authority to regulate provisions of certain bank holding company debt, including the authority to impose interest ceilings and reserve requirements on such debt. Under certain
circumstances, Pacific Crest must file written notice and obtain approval from the Federal Reserve prior to purchasing or redeeming its equity securities.

The
Company is required to obtain the prior approval of the Federal Reserve for the acquisition of more than 5% of the outstanding shares of any class of voting securities or
substantially all of the
assets of any bank or bank holding company. Prior approval of the Federal Reserve is also required for the merger or consolidation of Pacific Crest and another bank holding company.

Pacific
Crest is prohibited by the BHCA, except in certain statutorily prescribed instances, from acquiring direct or indirect ownership or control of more than 5% of the outstanding
voting shares of any company that is not a bank or bank holding company and from engaging directly or indirectly in activities other than those of banking, managing or controlling banks, or furnishing
services to its subsidiaries. However, Pacific Crest, subject to the prior approval of the Federal Reserve, may engage in any, or acquire shares of companies engaged in, activities that are deemed by
the Federal Reserve to

13

---

be so closely related to banking or managing or controlling banks as to be a proper incident thereto. Pacific Crest may elect to exercise other investment and activity authority pursuant to new
financial service modernization legislation. See "Financial Services Modernization Legislation."

Under
Federal Reserve regulations, a bank holding company is required to serve as a source of financial and managerial strength to its subsidiary banks and may not conduct its
operations in an unsafe or unsound manner. In addition, it is the Federal Reserve's policy that a bank holding company should stand ready to use available resources to provide adequate capital funds
to its subsidiary banks during periods of financial stress or adversity and should maintain the financial flexibility and capital-raising capacity to obtain additional resources for assisting its
subsidiary banks. A bank holding company's failure to meet its obligations to serve as a source of strength to its subsidiary banks will generally be considered by the Federal Reserve to be an unsafe
and unsound banking practice or a violation of the Federal Reserve's regulations or both.

Pacific
Crest is also a bank holding company within the meaning of Section 3700 of the California Financial Code. As such, Pacific Crest and its subsidiaries are subject to
examination by, and may be required to file reports with, the California Department of Financial Institutions.

Pacific
Crest's securities are registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). As such, Pacific
Crest is subject to the information, proxy solicitation, insider trading, and other requirements and restrictions of the Exchange Act.

Pacific Crest Bank

The Bank is a California commercial bank, subject to primary supervision, periodic examination, and regulation by the DFI and the FDIC. In addition, the Bank
is subject to certain regulations promulgated by the Federal Reserve.. If, as a result of an examination of the Bank, the FDIC should determine that the financial condition, capital resources, asset
quality, earnings prospects, management, liquidity, or other aspects of Pacific Crest Bank's operations are unsatisfactory or that Pacific Crest Bank or its management is violating or has violated any
law or regulation, various remedies are available to the FDIC. Such remedies include the power to enjoin "unsafe or unsound" practices, to require affirmative action to correct any conditions
resulting from any violation or practice, to issue an administrative order that can be judicially enforced, to direct an increase in capital, to restrict the growth of Pacific Crest Bank, to assess
civil monetary penalties, to remove officers and directors, and ultimately to terminate Pacific Crest Bank's deposit insurance, which for a California chartered bank would result in a revocation of
Pacific Crest Bank's charter. The Commissioner has many of the same remedial powers.

Various
requirements and restrictions under the laws of the State of California and the United States affect the operations of Pacific Crest Bank. State and federal statutes and
regulations relate to many aspects of the Bank's operations, including reserves against deposits, ownership of deposit accounts, interest rates payable on deposits, loans, investments, mergers and
acquisitions, borrowings, dividends, locations of branch offices, and new products and services. Further, Pacific Crest Bank is also required to maintain certain minimum levels of capital. See
"Capital Standards."

Financial Services Modernization Legislation



On November 12, 1999, President Clinton signed into law the Gramm-Leach-Bliley Act of 1999 (the "Financial Services Modernization Act"). The Financial
Services Modernization Act repeals the two affiliation provisions of the Glass-Steagall Act: Section 20, which restricted the affiliation of Federal Reserve member banks with firms "engaged
principally" in specified securities activities; and

14

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Section 32, which restricts officer, director, or employee interlocks between a member bank and any company or person "primarily engaged" in specified securities activities. In addition, the
Financial
Services Modernization Act also contains provisions that expressly preempt any state law restricting the establishment of financial affiliations, primarily related to insurance. The general effect of
the law is to establish a comprehensive framework to permit affiliations among commercial banks, insurance companies, securities firms, and other financial service providers by revising and expanding
the BHCA framework to permit a bank holding company to engage in a full range of financial activities through a new operating status known as a Financial Holding Company.

The
law also:



Pacific
Crest does not believe that the Financial Services Modernization Act will have a significant effect on its operations in the near-term. However, to the extent that
the Financial Services Modernization Act permits banks, securities firms, and insurance companies to affiliate, the financial services industry may experience further consolidation. The Financial
Services Modernization Act is intended to grant to community banks certain powers as a matter of right that larger institutions have accumulated on an ad hoc basis. Nevertheless, this Act may have the
result of increasing the amount of competition that Pacific Crest and the Bank face from larger institutions and other types of companies offering financial products, many of which may have
substantially more financial resources than Pacific Crest and the Bank.



Bank holding companies that elect to become a financial holding company may affiliate with securities firms and insurance companies and engage in other
activities that are financial in nature or are incidental or complementary to activities that are financial in nature. "Financial in nature" activities include:



15

---



A
bank holding company must meet certain requirements before becoming a financial holding company:



Failure
to comply with the financial holding company requirements could lead to divestiture of subsidiary banks or require all activities of such company to conform to those
permissible for a bank holding company. No prior Federal Reserve approval is required for a financial holding company to acquire a company (other than a bank holding company, bank or savings
association) engaged in activities that are financial in nature or incidental to activities that are financial in nature.

A
bank holding company that is not also a financial holding company can only engage in banking and such other activities determined by the Federal Reserve to be so closely related to
banking or managing or controlling banks as to be a proper incident thereto. Pacific Crest is not currently a Financial Holding Company and Pacific Crest's management has not determined at this time
whether it will seek an election to become a Financial Holding Company.



The Financial Services Modernization Act also permits national banks to engage in expanded activities through the formation of financial subsidiaries. A
national bank may have a subsidiary engaged in any activity authorized for national banks directly or any financial activity, except for insurance underwriting, insurance investments, real estate
investment or development, or merchant banking, which may only be conducted through a subsidiary of a financial holding company. Financial activities include all activities permitted under new
sections of the BHCA or permitted by regulation.

A
national bank seeking to have a financial subsidiary, and each of its depository institution affiliates, must be "well-capitalized," "well-managed" and have
satisfactory or better ratings under the Community Reinvestment Act. The total assets of all financial subsidiaries may not exceed the lesser of 45% of a bank's total assets, or $50 billion.
The largest 100 insured banks must also satisfy certain minimum debt rating requirements. A national bank must exclude from its assets and equity all equity investments, including retained earnings,
in a financial subsidiary. The assets of the subsidiary may not be consolidated with the bank's assets. The financial subsidiary will be treated as an affiliate subject to the restrictions on
transactions between the bank and affiliates imposed by the Federal Reserve Act sections 23A and 23B. The bank must also have policies and procedures to assess financial subsidiary risk and protect
the bank from such risks and potential liabilities.

The
Financial Services Modernization Act also includes a new section of the Federal Deposit Insurance Act governing subsidiaries of state banks that engage in "activities as principal
that would only be permissible" for a national bank to conduct in a financial subsidiary. It expressly preserves the ability of a state bank to retain all existing subsidiaries. Because California law
permits commercial banks chartered by the Commissioner to engage in any activity permissible for national banks, Pacific Crest Bank will be permitted to form subsidiaries to engage in the activities
authorized by the Financial Services Modernization Act, to the same extent as a national bank. In order to form a financial subsidiary, Pacific Crest Bank must be well-capitalized,
and Pacific Crest Bank would be subject to the same capital deduction, risk management and affiliate transaction rules that are applicable to national banks.

16

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Under the Financial Services Modernization Act, federal banking regulators are required to adopt rules that will limit the ability of banks and other financial
institutions to disclose non-public information about consumers to nonaffiliated third parties. These limitations will require disclosure of privacy policies to consumers and, in some
circumstances, will allow consumers to prevent disclosure of certain personal information to a nonaffiliated third party. Federal banking regulators issued final rules on May 10, 2000. Pursuant
to these rules, financial institutions must provide:



The
rules were effective November 13, 2000, but compliance is optional until July 1, 2001. These privacy provisions will affect how consumer information is transmitted
through diversified financial companies and conveyed to outside vendors. It is not possible at this time to assess the impact of the privacy provisions on the Company's financial condition or results
of operations.



In December 2000, pursuant to the requirements of the Financial Services Modernization Act, the federal bank and thrift regulatory agencies adopted
consumer protection rules for the sale of insurance products by depository institutions. The rule is effective on April 1, 2001. The final rule applies to any depository institution or any
person selling, soliciting, advertising, or offering insurance products or annuities to a consumer at an office of the institution or on behalf of the institution. Before an
institution can complete the sale of an insurance product or annuity, the regulation requires oral and written disclosure that such product:



Finally,
the depository institution may not condition an extension of credit:



The
rule also requires formal acknowledgement from the consumer that disclosures were received.

In
addition, to the extent practicable, a depository institution must keep insurance and annuity sales activities physically segregated from the areas where retail deposits are
routinely accepted from the general public.



In January 2000, the banking agencies adopted guidelines requiring financial institutions to establish an information security program to:



17

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Each
institution may implement a security program appropriate to its size and complexity and the nature and scope of its operations.

The
guidelines outline specific security measures that institutions should consider in implementing a security program. A financial institution must adopt those security measures
determined to be appropriate. The guidelines require the board of directors to oversee an institution's efforts to develop, implement, and maintain an effective information security program and
approve written information security policies and programs. The guidelines are effective July 1, 2001.

Dividends and Other Transfers of Funds

Dividends from the Bank constitute the principal source of income to Pacific Crest. Pacific Crest is a legal entity separate and distinct from the Bank. The
Bank is subject to various statutory and regulatory
restrictions on its ability to pay dividends to Pacific Crest. In addition, the Commissioner and the Federal Reserve have the authority to prohibit the Bank from paying dividends, depending upon the
Bank's financial condition, if such payment is deemed to constitute an unsafe or unsound practice.

The
FDIC and the Commissioner also have authority to prohibit the Bank from engaging in activities that, in the opinion of the FDIC or the Commissioner, constitute unsafe or unsound
practices in conducting its business. It is possible, depending upon the financial condition of the bank in question and other factors, that the FDIC and the Commissioner could assert that the payment
of dividends or other payments might, under some circumstances, be such an unsafe or unsound practice. Further, the FDIC has established guidelines with respect to the maintenance of appropriate
levels of capital by banks or bank holding companies under their jurisdiction. Compliance with the standards set forth in such guidelines and the restrictions that are or may be imposed under the
prompt corrective action provisions of federal law could limit the amount of dividends which the Bank or Pacific Crest may pay. An insured depository institution is prohibited from paying management
fees to any controlling persons or, with certain limited exceptions, making capital distributions if after such transaction the institution would be undercapitalized. See "Prompt Corrective Action and
Other Enforcement Mechanisms" and "Capital Standards" for a discussion of these additional restrictions on capital distributions.

The
Bank is subject to certain restrictions imposed by federal law on any extensions of credit to, or the issuance of a guarantee or letter of credit on behalf of, Pacific Crest or
other affiliates, the purchase of, or investments in, stock or other securities thereof, the taking of such securities as collateral for loans, and the purchase of assets of Pacific Crest or other
affiliates. Such restrictions prevent Pacific Crest and such other affiliates from borrowing from the Bank unless the loans are secured by marketable obligations of designated amounts. Further, such
transactions by the Bank with Pacific Crest or any other affiliate are limited, individually, to 10% of the Bank's capital and surplus (as defined by federal regulations), and such transactions are
limited, in the aggregate, to 20% of the Bank's capital and surplus (as defined by federal regulations). California law also imposes certain restrictions with respect to transactions involving the
Company and other controlling persons of the Bank. Additional restrictions on transactions with affiliates may be imposed on the Bank under the prompt corrective action provisions of federal law. See
"Prompt Corrective Action and Other Enforcement Mechanisms."

Capital Standards

The federal banking agencies have adopted risk-based minimum capital guidelines intended to provide a measure of capital that reflects the degree
of risk associated with a banking organization's operations for both transactions reported on the balance sheet as assets and transactions which are recorded as off balance sheet items. Under these
guidelines, nominal dollar amounts of assets and

18

---

credit equivalent amounts of off balance sheet items are multiplied by one of several risk adjustment percentages, which range from 0% for assets with low credit risk to 100% for assets with
relatively high credit risk.

The
guidelines require a minimum ratio of qualifying total capital to risk-adjusted assets of 8% and a minimum ratio of Tier 1 capital to risk-adjusted assets
of 4%. In addition to the risk-based guidelines, federal banking regulators require banking organizations to maintain a minimum amount of Tier 1 capital to total assets, referred to as the
leverage ratio. For a banking organization rated in the highest of the five categories used by regulators to rate banking organizations, the minimum leverage ratio of Tier 1 capital to total assets
must be 3%. In addition to these uniform risk-based capital guidelines and leverage ratios that apply across the industry, the regulators have the discretion to set individual minimum
capital requirements for specific institutions at rates significantly above the minimum guidelines and ratios.

At
December 31, 2000, both Pacific Crest and the Bank exceeded all minimum required capital ratios. See Item 7. "Management's Discussion and Analysis of Financial Condition and
Results of OperationsCapital Resources."

The
federal banking regulators may set capital requirements higher than the minimums described above for holding companies whose circumstances warrant it. For example, a financial
institution experiencing or anticipating significant growth may be expected to maintain capital positions substantially above the minimum supervisory levels without significant reliance on intangible
assets. The Federal Reserve has also indicated that it will consider a "tangible Tier 1 capital leverage ratio" (deducting all intangibles) and other indications of capital strength when evaluating
proposals for expansion or new activities.

Proposed Capital Requirements for Community Institutions

In November 2000 the federal bank and thrift regulatory agencies requested public comment on an advance notice of proposed rulemaking that considers the
establishment of a simplified regulatory capital framework for non-complex institutions.

In
the proposal, the agencies suggested criteria that could be used to determine eligibility for a simplified capital framework, such as the nature of a bank's activities, its asset
size and its risk profile. In the advance notice, the agencies seek comment on possible minimum regulatory capital requirements for non-complex institutions, including a simplified
risk-based ratio, a simple leverage ratio, or a leverage ratio modified to incorporate certain off-balance sheet exposures.

The
advance notice solicits public comment on the agencies' preliminary views. Comments were due on the proposal on February 1, 2001. Given the preliminary nature of the
proposal, it is not possible to predict its impact on the Bank at this time.

Prompt Corrective Action and Other Enforcement Mechanisms

Federal banking agencies possess broad powers to take corrective and other supervisory action to resolve the problems of insured depository institutions,
including but not limited to those institutions that fall below one or more prescribed minimum capital ratios. Each federal banking agency has promulgated regulations defining the following five
categories in which an insured depository institution will be placed, based on its capital ratios: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and
critically undercapitalized. At December 31, 2000, both Pacific Crest and the Bank exceeded the required ratios for classification as well as capitalized. See Item 7. "Management's Discussion
and Analysis of Financial Condition and Results of OperationsCapital Resources."

19

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An institution that, based upon its capital levels, is classified as well capitalized, adequately capitalized, or undercapitalized may be treated as though it were in the next lower
capital category if the appropriate federal banking agency, after notice and opportunity for hearing, determines that an unsafe or unsound condition or an unsafe or unsound practice warrants such
treatment. At each successive lower capital category, an insured depository institution is subject to more restrictions. The federal banking agencies, however, may not treat a significantly
undercapitalized institution as critically undercapitalized unless its capital ratio actually warrants such treatment.

In
addition to measures taken under the prompt corrective action provisions, commercial banking organizations may be subject to potential enforcement actions by the federal regulators
for unsafe or unsound practices in conducting their businesses or for violations of any law, rule, regulation, or any condition imposed in writing by the agency or any written agreement with the
agency.

Safety and Soundness Standards

The federal banking agencies have adopted guidelines designed to assist the federal banking agencies in identifying and addressing potential safety and
soundness concerns before capital becomes impaired. The guidelines set forth operational and managerial standards relating to: (i) internal controls, information systems and internal audit
systems, (ii) loan documentation, (iii) credit underwriting, (iv) asset growth, (v) earnings, and (vi) compensation, fees and benefits. In addition, the federal
banking agencies have also adopted safety and soundness guidelines with respect to asset quality and earnings standards. These guidelines provide six standards for establishing and maintaining a
system to identify problem assets and prevent those assets from deteriorating. Under these standards, an insured depository institution should: (i) conduct periodic asset quality reviews to
identify problem assets, (ii) estimate the inherent losses in problem assets and establish reserves that are sufficient to absorb estimated losses, (iii) compare problem asset totals to
capital, (iv) take appropriate corrective action to resolve problem assets, (v) consider the size and potential risks of material asset concentrations, and (vi) provide periodic
asset quality reports with adequate information for management and the board of directors to assess the level of asset risk. These guidelines also set forth standards for evaluating and monitoring
earnings and for ensuring that earnings are sufficient for the maintenance of adequate capital and reserves.

Premiums for Deposit Insurance

Through the Bank Insurance Fund (BIF), the FDIC insures the deposits of Pacific Crest's depository institution subsidiaries up to prescribed limits for each
depositor. The amount of FDIC assessments paid by each BIF member institution is based on its relative risk of default as measured by regulatory capital ratios and other factors. Specifically, the
assessment rate is based on the institution's capitalization risk category and supervisory subgroup category. An institution's capitalization risk category is based on the FDIC's determination of
whether the institution is well capitalized, adequately capitalized or less than adequately capitalized. An institution's supervisory subgroup category is based on the FDIC's assessment of the
financial condition of the institution and the probability that FDIC intervention or other corrective action will be required.

The
assessment rate currently ranges from zero to 27 cents per $100 of domestic deposits. The FDIC may increase or decrease the assessment rate schedule on a semi-annual
basis. An increase in the assessment rate could have a material adverse effect on Pacific Crest's earnings, depending on the amount of the increase. The FDIC is authorized to terminate a depository
institution's deposit insurance upon a finding by the FDIC that the institution's financial condition is unsafe or unsound or that the institution has engaged in unsafe or unsound practices or has
violated any applicable rule, regulation, order or condition enacted or imposed by the institution's regulatory agency. The termination of deposit insurance for one or more of Pacific Crest's
subsidiary depository institutions

20

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could have a material adverse effect on Pacific Crest's earnings, depending on the collective size of the particular institutions involved.

All
FDIC-insured depository institutions must pay an annual assessment to provide funds for the payment of interest on bonds issued by the Financing Corporation, a federal
corporation chartered under the authority of the Federal Housing Finance Board. The bonds, commonly referred to as FICO bonds, were issued to capitalize the Federal Savings and Loan Insurance
Corporation. The FDIC established the FICO assessment rates effective for the third quarter of 2000 at approximately $.021 per $100 annually for assessable deposits. The FICO assessments are adjusted
quarterly to reflect changes in the assessment bases of the FDIC's insurance funds and do not vary depending on a depository institution's capitalization or supervisory evaluations.

Interstate Banking and Branching

The BHCA permits bank holding companies from any state to acquire banks and bank holding companies located in any other state, subject to certain conditions,
including certain nationwide- and state-imposed concentration limits. Pacific Crest and the Bank have the ability, respectively, subject to certain state law restrictions, to acquire by acquisition or
merger banks or bank branches outside of their home state. The establishment of new interstate branches is also possible in those states with laws that expressly permit it. Interstate branch
operations are subject to certain laws of the states in which they are located. Competition may increase further as banks branch across state lines and enter new markets.

Community Reinvestment Act and Fair Lending Developments

Pacific Crest Bank is subject to certain fair lending requirements and reporting obligations involving home mortgage lending operations and Community
Reinvestment Act ("CRA") activities. The CRA generally requires the federal banking agencies to evaluate the record of a financial institution in meeting the credit needs of its local communities,
including low- and moderate-income neighborhoods. A bank may be subject to substantial penalties and corrective measures for a violation of certain fair lending laws. The federal banking
agencies may take compliance with such laws and CRA obligations into account when regulating and supervising other activities. In December 2000, the federal banking agencies established annual
reporting and public disclosure requirements for certain written agreements that are entered into between insured depository institutions or their affiliates and nongovernmental entities or persons
that are made pursuant to, or in connection with, the fulfillment of the CRA.

A
bank's compliance with its CRA obligations is based a performance-based evaluation system which bases CRA ratings on an institution's lending service and investment performance.
When a bank holding company applies for approval to acquire a bank or other bank holding company, the Federal Reserve Board will review the assessment of each subsidiary bank of the applicant bank
holding company, and such records may be the basis for denying the application. Based on an examination conducted in January of 2000, Pacific Crest Bank was rated "Satisfactory" in complying with its
CRA obligations.

21

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RISK FACTORS

Competition

The banking and financial services industry in California generally, and in Pacific Crest's market areas specifically, is highly competitive. The increasingly
competitive environment is a result primarily of changes in regulation, changes in technology and product delivery systems, and the accelerating pace of consolidation among financial services
providers. The Bank competes for loans, deposits, and customers with other commercial banks, savings and loan associations, securities and brokerage companies, mortgage companies, insurance companies,
finance companies, money market funds, credit unions, and other nonbank financial service providers. Many of these competitors are much larger in total assets and capitalization, have greater access
to capital markets and offer a broader range of financial services than the Bank. In addition, recent federal legislation may have the effect of further increasing the pace of consolidation within the
financial services industry. See "RegulationFinancial Services Modernization Legislation."

Economic Conditions, Government Policies, Legislation, and Regulation

Pacific Crest's profitability, like most financial institutions, primarily depends on interest rate differentials. In general, the difference between the
interest rates paid by the Bank on interest-bearing liabilities, such as deposits and other borrowings, and the interest rates received by the Bank on its interest-earning assets, such as loans
extended to its clients and securities held in its investment portfolio, comprise the major portion of Pacific Crest's earnings. These rates are highly sensitive to many factors that are beyond the
control of Pacific Crest and the Bank, such as inflation, recession and unemployment, and the impact which future changes in domestic and foreign economic conditions might have on Pacific Crest and
the Bank cannot be predicted.

Pacific
Crest's business also is influenced by the monetary and fiscal policies of the federal government and the policies of regulatory agencies, particularly the Federal Reserve.
The Federal Reserve implements national monetary policies (with objectives such as curbing inflation and combating recession) through its open-market operations in U.S. Government
securities by adjusting the required level of reserves for depository institutions subject to its reserve requirements, and by varying the target
federal funds and discount rates applicable to borrowings by depository institutions. The actions of the Federal Reserve in these areas influence the growth of bank loans, investments, and deposits
and also affect interest rates earned on interest-earning assets and paid on interest-bearing liabilities. The nature and impact on Pacific Crest and the Bank of any future changes in monetary and
fiscal policies cannot be predicted.

From
time to time, legislation, as well as regulations, are enacted that have the effect of increasing the cost of doing business, limiting or expanding permissible activities, or
affecting the competitive balance between banks and other financial services providers. Proposals to change the laws and regulations governing the operations and taxation of banks, bank holding
companies, and other financial institutions and financial services providers frequently are made in the U.S. Congress, in the state legislatures, and before various regulatory agencies. Such
legislation and new regulations may change Pacific Crest's operating environment in substantial and unpredictable ways. If enacted, or adopted, such legislation and regulations could increase or
decrease the cost of doing business, limit or expand permissible activities or affect the competitive balance among banks, savings associations, credit unions, and other financial institutions.
Pacific Crest cannot predict whether any of such potential legislation and new regulations will be enacted, and if enacted, the effect that they would have on Pacific Crest's financial condition or
results of operations. See "Regulation."

22

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Business Considerations and Certain Factors that May Affect Future Results of Operations and Stock Price

Certain matters discussed in this Annual Report on Form 10-K may constitute forward-looking statements under Section 27A of the
Securities Act and Section 21E of the Securities Exchange Act. These statements may involve risks and uncertainties. These forward-looking statements relate to, among other things, expectations
of the business environment in which the Company operates in, projections of future performance, perceived opportunities in the market and statements regarding the Company's mission and vision. The
Company's actual results, performance, or achievements may differ significantly from the results, performance, or achievements expressed or implied in such forward-looking statements. The following is
a summary of some of the important factors that could affect the Company's future results of operations and/or stock price, and should be considered carefully.

(1)Economic Conditions. The Company's results are strongly influenced by general economic conditions in its market
areas. Accordingly, a deterioration in these conditions could have a material adverse impact on the quality of the Company's loan portfolio and the demand for its products and services. In particular,
changes in economic conditions in the real estate industry may affect its performance. See "Economic Conditions, Government Policies, Legislation, and Regulation."

(2)Interest Rates. The Company is subject to possible interest rate spread compression, which would adversely impact
net interest income, if interest rates rise. The amount of such interest rate spread compression would depend upon the frequency, magnitude and duration of such interest rate increases. See "Economic
Conditions, Government Policies, Legislation, and Regulation", and Item 7A. "Quantitative and Qualitative Disclosures About Market Risk."

(3)Government Regulation and Monetary Policy. All forward-looking statements presume a continuation of the existing
regulatory environment and United States government monetary policies. The banking industry is subject to extensive federal and state regulations, and significant new laws or changes in, or repeals
of, existing laws may cause results to differ materially. See "Economic Conditions, Government Policies, Legislation, and Regulation," and "Regulation."

(4)Competition. The Company competes with numerous other domestic and foreign financial institutions and
non-depository financial intermediaries. Results of the Company may differ if circumstances affecting the nature or level of competition change, such as the merger of competing financial
institutions or the acquisition of California institutions by out-of-state companies.

(5)Credit Quality. A significant source of risk arises from the possibility that losses will be sustained because
borrowers, guarantors and related parties may fail to perform in accordance with the terms of their loans. The Company has adopted underwriting and credit monitoring procedures and credit policies,
including the establishment and review of the allowance for credit losses, that its management believes are appropriate to minimize this risk by assessing the likelihood of nonperformance, tracking
loan performance and diversifying credit portfolios, but such policies and procedures may not prevent unexpected losses that could materially adversely affect the Company's results. See "Allowance for
Loan Losses."

(6)Dependence on Key Employees. If the Company were to lose key employees temporarily or permanently, particularly if
they went to work for competitors, it could hurt the Company's business. The Company's future success depends on the continued contributions of existing senior management personnel.

(7)Environmental Concerns. The cost of cleaning up or paying damages and penalties associated with environmental
problems could increase operating expenses. When a borrower defaults on a loan secured by real property, the Bank often purchases the property in foreclosure or accepts a deed to the property
surrendered by the borrower. The Bank may also take over the management of commercial properties whose owners have defaulted on loans. The Bank also leases premises where its branches

23

---

and other facilities are located. Although the Company has lending, foreclosure and facilities guidelines intended to exclude properties with an unreasonable risk of contamination, hazardous
substances may exist on some of the properties that the Bank owns, manages or occupies. The Company may face the risk that environmental laws could force it to clean up the properties at its expense.
It may cost much more to clean a property than the property is worth. The Company could also be liable for pollution generated by a borrower's operations if the Bank takes a role in managing those
operations after a default. The Bank also may find it difficult or impossible to sell contaminated properties.

(8)Natural Disasters.The Company's most significant operations are concentrated in Southern California. A major
earthquake could result in material loss to the Company. A significant percentage of the Bank's loans are and will be secured by real estate. California is an earthquake-prone region. The Company has
a disaster-recovery plan with off-site data processing resources located in Costa Mesa, California. Many of the Bank's borrowers could suffer uninsured property damage, experience
interruption of their business or lose their jobs after an earthquake. Those borrowers might not be able to repay their loans, and the collateral for loans could decline significantly in value. Unlike
a bank with operations that are more geographically diversified, the Bank is vulnerable to greater losses if an earthquake, fire, flood or other natural catastrophe occurs in Southern California.

(9)Other Risks.From time to time, the Company details other risks with respect to its businesses and/or its financial
results in its filings with the Securities and Exchange Commission (the "SEC"), the FDIC and the DFI, respectively.

The
Company believes that its assumptions regarding these and other factors on which forward-looking statements are based are reasonable, such assumptions are necessarily speculative
in nature, and actual outcomes can be expected to differ to some degree. Consequently, there can be no assurance that the results described in such forward-looking statements will, in fact, be
achieved.

ITEM 2. Properties

The Company's principal executive offices are located at 30343 Canwood Street, Agoura Hills, California 91301. The Bank conducts its deposit and lending
operations through three branch offices located in Beverly Hills, Encino and San Diego, California. The Company leases all of its offices. Information with respect to the Company's principal executive
and branch offices is as follows:

|Location                                         |  | Floor Space in
Square Feet |  | Annual
Rent |         | Lease Expiration
Date
|------------------------------------------------ |  | -------------------------- |  | ----------- | ------- | ---------------------
|Corporate HeadquartersAgoura Hills, California  |  | 16,361                     |  | $           | 300,027 |                      
|Branch OfficeBeverly Hills, California          |  | 3,102                      |  |             | 74,925  |                      
|Branch OfficeEncino, California                 |  | 3,310                      |  |             | 69,601  |                      
|Branch OfficeSan Diego, California              |  | 4,505                      |  |             | 121,812 |                      
|SBA Loan Production OfficeSan Diego, California |  | 3,176                      |  |             | 66,855  |                      
|                                                 |  |                            |  |             |         |                      

ITEM 3. Legal Proceedings

There are several lawsuits and claims pending against the Company. Management, after review, including consultation with counsel, believes that any ultimate
liability that could arise from these lawsuits and claims would not materially or adversely affect the financial position or liquidity of the Company.

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

Not applicable.

24

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ITEM 4(a).  Executive Officers of the Registrant

The following individuals are executive officers of the Company as of December 31, 2000. Pertinent information relating to these individuals is set
forth below. There are no family relationships between any of the officers. All of the Company's officers hold their respective offices at the pleasure of the Board of Directors, subject to the
rights, if any, of an officer under any contract of employment.



Mr. Wehrle has served as Chairman of the Board of Pacific Crest since October 20, 1993, and President and Chief Executive Officer of Pacific
Crest since September 10, 1993. Mr. Wehrle also has served as President and Chief Executive Officer of the Bank since 1984. Mr. Wehrle served as Executive Vice President of the
Foothill Group, Inc. from 1980 to 1993.



Mr. Dennen has served as Senior Vice President, Chief Financial Officer and Secretary of Pacific Crest since January 1, 1999 and prior to that,
served as Vice President and Chief Financial Officer of Pacific Crest from 1993 to 1999. Mr. Dennen also has served as Senior Vice President and Chief Financial Officer of the Bank since
January 1, 1999 and prior to that, served as Vice President and Chief Financial Officer of the Bank from 1993 to 1999. Prior to that, he served as Vice President and Controller/Treasurer of the
Bank from 1986 to 1993.



Mr. Fernandez has served as Executive Vice President of Pacific Crest since June 20, 1994. Mr. Fernandez also has served as Executive Vice
President of the Bank since June 20, 1994. From May 1988 to June 1994, he served as Senior Vice President of City National Bank.



Ms. Hakes has served as Senior Vice President of the Bank since June 12, 2000. Prior to that, she served as Executive Vice President and Senior Loan
Officer of First International Bank from February 1998 to May 2000, and before that, served as Senior Vice President and SBA Loan Department Manager of First International Bank from June 1994 to
January 1998.



Mr. Lodwick has served as Executive Vice President of Pacific Crest since September 10, 1993. Mr. Lodwick also has served as Executive
Vice President of the Bank since 1992 and, prior to that, served as Senior Vice President of the Bank from 1988 to 1992.



Ms. Reinhart has served as Senior Vice President of the Bank since January 1, 1998 and, prior to that, served as Vice President of the Bank from
1989 to 1997.



Ms. Von Disterlo has served as Senior Vice President of the Bank since January 1, 2000 and, prior to that, served as Vice President of the Bank from
1990 to 1999.

25

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PART II

ITEM 5. Market for Registrant's Common Equity and Related Stockholder Matters

The Company's common stock, $0.01 par value (the "Common Stock") is traded on the Nasdaq National Market under the Nasdaq symbol "PCCI."

There
were approximately 1,700 beneficial owners of the Common Stock as of March 16, 2001.

The
following tables present the high and low Common Stock sales prices as well as the dividends declared and paid during each quarter for the last two years.

|             |  | Year Ended December 31, 2000
|------------ |  | ----------------------------
|
|December 31  |  | $                           
|September 30 |  |                             
|June 30      |  |                             
|March 31     |  |                             
|             |  |                             

|             |  | Year Ended December 31, 1999
|------------ |  | ----------------------------
|
|December 31  |  | $                           
|September 30 |  |                             
|June 30      |  |                             
|March 31     |  |                             
|             |  |                             

The
Company currently plans to declare and pay quarterly dividends during 2001. The Company's ability to pay dividends is subject to restrictions set forth in the
Delaware General Corporation Law. The Delaware General Corporation Law provides that a Delaware corporation may pay dividends either (i) out of the corporation's surplus (as defined by Delaware
law), or (ii) if there is no surplus, out of the corporation's net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. Furthermore, if the Company
were determined to be a quasi-California corporation, the Company would have to comply with California law with respect to, among other things, distributions to shareholders. Under California law, a
corporation is prohibited from paying dividends unless (i) the retained earnings of the corporation immediately prior to the distribution exceed the amount of the distribution, (ii) the
assets of the corporation exceed 11/4 times its liabilities, or (iii) the current assets of the corporation exceed its current liabilities, but if the average pre-tax
net earnings of the corporation before interest expense for the two years preceding the distribution was less than the average interest expense of the corporation for those years, the current assets
of the corporation must exceed 11/4 times its current liabilities.

Management
believes that the Company is not a quasi-California corporation by virtue of the Common Stock being listed on the Nasdaq National Market and the Company having more than
800 holders of its equity securities. However, no assurances can be given that this will continue to be the case in the future. The Company's ability to pay cash dividends to its shareholders in the
future will depend in large part on the Bank's ability to pay dividends on its capital stock to the Parent. The Bank's ability to pay dividends to the Parent is subject to restrictions set forth in
the California Financial Code and the provisions of the California General Corporation Law described above. See Item 1. "BusinessRegulationDividends and Other Transfers of
Funds."

26

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ITEM 6. Selected Financial Data

The following selected consolidated financial data of the Company and its subsidiaries has been derived from and should be read in conjunction with the
Company's audited consolidated financial statements and related notes which are included in this Annual Report on Form 10-K (in thousands, except per share data):

|                    |                                                | December 31,                                              |                                           
|------------------- | ---------------------------------------------- | --------------------------------------------------------- | ------------------------------------------
|
|BALANCE SHEET DATA: |                                                |                                                           |                                           
|                    | Cash                                           |                                                           | $                                         
|                    | Securities purchased under resale agreements   |                                                           |                                           
|                    |                                                |                                                           |                                           
|                    |                                                | Cash and cash equivalents                                 |                                           
|                    |                                                |                                                           |                                           
|                    | Investment securities:                         |                                                           |                                           
|                    |                                                | U.S. agency callable bonds held to maturity               |                                           
|                    |                                                | U.S. agency callable bonds available for sale             |                                           
|                    |                                                | U.S. agency mortgage-backed securities available for sale |                                           
|                    |                                                | Corporate debt securities available for sale              |                                           
|                    |                                                |                                                           |                                           
|                    |                                                |                                                           | Total investment securities               
|                    |                                                |                                                           |                                           
|                    | Loans:                                         |                                                           |                                           
|                    |                                                | Commercial real estate loans                              |                                           
|                    |                                                | SBA loans                                                 |                                           
|                    |                                                | Other loans                                               |                                           
|                    |                                                |                                                           |                                           
|                    |                                                |                                                           | Gross loans                               
|                    |                                                | Less: deferred loan costs (fees)                          |                                           
|                    |                                                | Less: allowance for loan losses                           |                                           
|                    |                                                |                                                           |                                           
|                    |                                                |                                                           | Net loans                                 
|                    |                                                |                                                           |                                           
|                    | Accrued interest receivable and other assets   |                                                           |                                           
|                    | Other real estate owned                        |                                                           |                                           
|                    |                                                |                                                           |                                           
|                    |                                                |                                                           | Total assets                              
|                    |                                                |                                                           |                                           
|                    | Deposits:                                      |                                                           |                                           
|                    |                                                | Money market checking                                     |                                           
|                    |                                                | Savings accounts                                          |                                           
|                    |                                                | Certificates of deposit                                   |                                           
|                    |                                                |                                                           |                                           
|                    |                                                |                                                           | Total deposits                            
|                    |                                                |                                                           |                                           
|                    | Borrowings:                                    |                                                           |                                           
|                    |                                                | Securities sold under repurchase agreements               |                                           
|                    |                                                | Borrowings from State of California                       |                                           
|                    |                                                | Term borrowings                                           |                                           
|                    |                                                | Trust preferred securities                                |                                           
|                    |                                                |                                                           |                                           
|                    |                                                |                                                           | Total borrowings                          
|                    |                                                |                                                           |                                           
|                    | Accrued interest payable and other liabilities |                                                           |                                           
|                    |                                                |                                                           |                                           
|                    |                                                |                                                           | Total liabilities                         
|                    |                                                |                                                           |                                           
|                    | Shareholders' equity:                          |                                                           |                                           
|                    |                                                | Common stock, at par                                      |                                           
|                    |                                                | Additional paid-in capital                                |                                           
|                    |                                                | Retained earnings (deficit)                               |                                           
|                    |                                                | Accumulated other comprehensive income (loss)             |                                           
|                    |                                                | Common stock in treasury, at cost                         |                                           
|                    |                                                |                                                           |                                           
|                    |                                                |                                                           | Total shareholders' equity                
|                    |                                                |                                                           |                                           
|                    |                                                |                                                           | Total liabilities and shareholders' equity
|                    |                                                |                                                           |                                           

27

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|                       |                            | Years Ended December 31,                        
|---------------------- | -------------------------- | ------------------------------------------------
|
|INCOME STATEMENT DATA: |                            |                                                 
|                       | Interest income:           |                                                 
|                       |                            | Loans                                           
|                       |                            | Investment securities                           
|                       |                            | Securities purchased under resale agreements    
|                       |                            |                                                 
|                       |                            |                                                 
|                       |                            |                                                 
|                       | Interest expense:          |                                                 
|                       |                            | Deposits:                                       
|                       |                            |                                                 
|                       |                            |                                                 
|                       |                            |                                                 
|                       |                            |                                                 
|                       |                            |                                                 
|                       |                            |                                                 
|                       |                            | Borrowings:                                     
|                       |                            |                                                 
|                       |                            |                                                 
|                       |                            |                                                 
|                       |                            |                                                 
|                       |                            |                                                 
|                       |                            |                                                 
|                       |                            |                                                 
|                       |                            |                                                 
|                       |                            |                                                 
|                       | Net interest income        |                                                 
|                       | Provision for loan losses  |                                                 
|                       |                            |                                                 
|                       |                            |                                                 
|                       |                            |                                                 
|                       | Non-interest income:       |                                                 
|                       |                            | Loan prepayment and late fee income             
|                       |                            | Gain on sale of commercial real estate loans    
|                       |                            | Gain on sale of SBA loans                       
|                       |                            | Gain on sale of other real estate owned         
|                       |                            | Gain (loss) on sale of investment securities    
|                       |                            | Gain on sale of deposits                        
|                       |                            | Other income                                    
|                       |                            |                                                 
|                       |                            |                                                 
|                       |                            |                                                 
|                       | Non-interest expense:      |                                                 
|                       |                            | Salaries and employee benefits                  
|                       |                            | Net occupancy expenses                          
|                       |                            | Communication and data processing               
|                       |                            | Advertising and promotion                       
|                       |                            | FDIC insurance premiums                         
|                       |                            | Other expenses                                  
|                       |                            |                                                 
|                       |                            |                                                 
|                       |                            | Credit and collection expenses                  
|                       |                            | Other real estate owned expenses                
|                       |                            | Valuation adjustments to other real estate owned
|                       |                            |                                                 
|                       |                            |                                                 
|                       |                            |                                                 
|                       | Income before income taxes |                                                 
|                       | Income tax expense         |                                                 
|                       |                            |                                                 
|                       |                            |                                                 
|                       |                            |                                                 

28

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|                                               |                                                                                            | At or For the Years Ended December 31, |  
|---------------------------------------------- | ------------------------------------------------------------------------------------------ | -------------------------------------- | -
|
|Performance Ratios(1):                         |                                                                                            |                                        |  
|                                               | Return on average shareholders' equity(2)                                                  |                                        |  
|                                               | Return on average total assets(3)                                                          |                                        |  
|                                               | Net interest rate spread(4)                                                                |                                        |  
|                                               | Net interest margin(5)                                                                     |                                        |  
|                                               | Operating expenses to average total assets                                                 |                                        |  
|                                               | Dividend payout ratio(6)                                                                   |                                        |  
|                                               | Average shareholders' equity to average total assets                                       |                                        |  
|                                               |                                                                                            |                                        |  
|Asset Quality Ratios:                          |                                                                                            |                                        |  
|                                               | Non-accrual loans to total loans, net of deferred loan fees                                |                                        |  
|                                               | Total non-performing assets to total assets(7)                                             |                                        |  
|                                               | Allowance for loan losses to total loans, net of deferred loan fees                        |                                        |  
|                                               | Allowance for loan losses to non-accrual loans                                             |                                        |  
|                                               | Allowance for loan losses and OREO valuation allowance to non-performing assets            |                                        |  
|                                               | Net loan charge-offs (recoveries) to average loans                                         |                                        |  
|                                               | Net loan charge-offs (recoveries) and OREO valuation adjustments to average loans and OREO |                                        |  
|                                               |                                                                                            |                                        |  
|Capital RatiosPacific Crest Capital, Inc.(8): |                                                                                            |                                        |  
|                                               | Leverage ratio                                                                             |                                        |  
|                                               | Tier 1 risk-based capital ratio                                                            |                                        |  
|                                               | Total risk-based capital ratio                                                             |                                        |  
|                                               |                                                                                            |                                        |  
|Capital RatiosPacific Crest Bank(8):          |                                                                                            |                                        |  
|                                               | Leverage ratio                                                                             |                                        |  
|                                               | Tier 1 risk-based capital ratio                                                            |                                        |  
|                                               | Total risk-based capital ratio                                                             |                                        |  
|                                               |                                                                                            |                                        |  
|Per Share Data:                                |                                                                                            |                                        |  
|                                               | Diluted earnings per common share                                                          |                                        | $
|                                               | Basic earnings per common share                                                            |                                        |  
|                                               | Dividends declared per common share                                                        |                                        |  
|                                               | Realized shareholders' equity per common share(9)                                          |                                        |  
|                                               | Tangible book value per common share                                                       |                                        |  
|                                               |                                                                                            |                                        |  
|Share Information (in thousands):              |                                                                                            |                                        |  
|                                               | Weighted average basic common shares outstanding                                           |                                        |  
|                                               | Weighted average diluted common shares outstanding                                         |                                        |  
|                                               | Common shares outstanding, net of treasury shares                                          |                                        |  
|                                               |                                                                                            |                                        |  

---

29

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ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

GENERAL

Pacific Crest Capital, Inc. ("Pacific Crest or the "Parent"), a Delaware corporation, is a bank holding company and owns 100% of the stock of Pacific
Crest Bank (the "Bank"), and 100% of the common stock of PCC Capital I ("PCC Capital"). The consolidated financial statements and financial data included herein include the accounts of Pacific Crest
and its wholly owned subsidiaries and are referred to as the consolidated financial statements of the "Company."

The
following discussion should be read in conjunction with the information under Item 6. "Selected Financial Data" and the Company's consolidated financial statements and related
notes contained elsewhere herein. Certain statements under this Item 7 constitute "forward-looking statements" under Section 27A of the Securities Act and Section 21E of the Exchange
Act, which involve risks and uncertainties. The Company's actual results may differ significantly from the results discussed in these forward-looking statements. Factors that might cause such a
difference, include but are not limited to, credit quality, economic conditions, competition in the geographic and business areas in which the Company conducts its operations, fluctuations in interest
rates and government regulation. For additional information concerning these factors, see Item 1. "BusinessRisk Factors."

Capital

As of December 31, 2000, Pacific Crest's leverage ratio, Tier 1 risk-based capital ratio and total risk-based ratio were 7.16%,
10.63% and 13.11%, respectively. The Bank's leverage ratio, Tier 1 risk-based capital ratio and total risk-based capital ratio were 7.36%, 10.82% and 12.07%, respectively.
These ratios placed Pacific Crest and the Bank in the "well-capitalized" category as defined by federal regulations, which require corresponding capital ratios of 5%, 6% and 10%,
respectively, to qualify for that designation.

Dividends

On January 25, 2001, the Company announced that the Board of Directors had declared a $0.08 per common share cash dividend for the first quarter of
2001. The dividend was payable to shareholders of record at the close of business on March 1, 2001 and was paid on March 15, 2001. During the year ended December 31, 2000, the
Company declared and paid total cash dividends of $0.28 per share for a total of $706,000. During the year ended December 31, 1999, the Company declared and paid cash dividends of $0.24 per
share for a total of $636,000.

Stock Repurchase Plan

As of December 31, 2000, the Company had 39,000 remaining shares authorized for repurchase under its common stock repurchase program. During the year
ended December 31, 2000, the Company repurchased 102,000 shares of its common stock. The total cost of the shares purchased in 2000 was approximately $1,149,000, which resulted in an average
cost per share of $11.27. During 2000, the Company utilized repurchased shares for all of its common stock issuances under the Company's employee stock purchase plan, non-employee
directors stock purchase plan and employee stock option plan, which totaled 15,696 shares.

Sale of Interest Rate Cap Agreement

On February 8, 2000, the Company sold its interest rate cap agreement for $2.5 million and recognized a deferred gain of $1.8 million,
which was reported in the Consolidated Balance Sheets under the caption "Accrued interest payable and other liabilities". The interest rate cap agreement had

30

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originally been purchased on June 8, 1998, at a price of $925,000. The deferred gain is being amortized as a credit to "Interest expensedeposits" over the remaining life of the
original interest rate cap agreement, which had a maturity date of June 8, 2003. During the year ended December 31, 2000, the amount of deferred gain amortization totaled $495,000, which
resulted in a reduction in interest expense on deposits. Conversely, during the years ended December 31, 1999 and 1998, the amortization of the purchase price of the interest rate cap totaled
$185,000 and $105,000, respectively, which resulted in an increase in interest expense on deposits. As of December 31, 2000, the remaining unamortized balance of the deferred gain resulting
from the sale of the interest rate cap totaled $1.3 million and will be amortized as follows: $554,000 in 2001, $554,000 in 2002, and $240,000 in 2003.

RESULTS OF OPERATIONS

The following table presents condensed statements of income and related performance data for the periods indicated and the dollar and percentage changes
between the periods (in thousands):

|                                       |                            | Years Ended
December 31, |        | Increase
(Decrease)
2000 vs. 1999 |   | Increase
(Decrease)
1999 vs. 1998 |      
|-------------------------------------- | -------------------------- | ------------------------ | ------ | --------------------------------- | - | --------------------------------- | -----
|
|Net interest income                    |                            |                          | 17,979 |                                   |   | 19,171                            |      
|Provision for loan losses              |                            |                          | 604    |                                   |   | 1,677                             |      
|Non-interest income                    |                            |                          | 1,713  |                                   |   | 2,459                             |      
|Non-interest expense                   |                            |                          | 10,046 |                                   |   | 11,483                            |      
|                                       |                            |                          |        |                                   |   |                                   |      
|                                       | Income before income taxes |                          |        | 9,042                             |   |                                   | 8,470
|Income tax provision                   |                            |                          | 3,772  |                                   |   | 3,415                             |      
|                                       |                            |                          |        |                                   |   |                                   |      
|                                       | Net income                 |                          | $      | 5,270                             |   | $                                 | 5,055
|                                       |                            |                          |        |                                   |   |                                   |      
|Diluted earnings per share             |                            | $                        | 2.01   |                                   | $ | 1.82                              |      
|Return on average shareholders' equity |                            |                          | 15.98  | %                                 |   | 16.65                             | %    
|Return on average assets               |                            |                          | 0.82   | %                                 |   | 0.83                              | %    
|                                       |                            |                          |        |                                   |   |                                   |      

2000 COMPARED WITH 1999

Earnings Performance Summary

Net income was $5.3 million (or $2.01 per common share on a diluted basis) for the year ended December 31, 2000, compared to $5.1 million
(or $1.82 per common share on a diluted basis) for the year ended December 31, 1999. Pre-tax income was $9.0 million compared to $8.5 million for the years
ended December 31, 2000 and 1999, respectively. The $0.5 million increase in pre-tax income reflects the following:



31

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Return
on average shareholders' equity was 15.98% and 16.65% for the years ended December 31, 2000 and 1999, respectively, while return on average total assets was 0.82% and
0.83% for the same periods, respectively.

32

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The following table presents the Company's consolidated average balance sheets, together with the total dollar amounts of interest income and interest expense
and the weighted average interest yields/rates for the periods indicated. All average balances are daily average balances (dollars in thousands):

|                                                                    |                                              | Years Ended December 31,                     |                           
|------------------------------------------------------------------- | -------------------------------------------- | -------------------------------------------- | --------------------------
|
|
|Interest-Earning Assets:                                            |                                              |                                              |                           
|                                                                    | Loans(1)                                     |                                              | $                         
|                                                                    | Securities purchased under resale agreements |                                              |                           
|                                                                    | Investment securities available for sale(2): |                                              |                           
|                                                                    |                                              | U.S. government sponsored agency securities: |                           
|                                                                    |                                              |                                              | Callable bonds(3)         
|                                                                    |                                              |                                              | Mortgage-backed securities
|                                                                    |                                              | Corporate debt securities                    |                           
|                                                                    |                                              |                                              |                           
|                                                                    |                                              |                                              |                           
|                                                                    |                                              |                                              |                           
|                                                                    |                                              |                                              |                           
|                                                                    |                                              |                                              |                           
|Non-interest-earning assets                                         |                                              |                                              | 8,291                     
|Less: allowance for loan losses                                     |                                              |                                              | (6,960                    
|                                                                    |                                              |                                              |                           
|                                                                    |                                              |                                              |                           
|                                                                    |                                              |                                              |                           
|Interest-Bearing Liabilities:                                       |                                              |                                              |                           
|Money market checking                                               |                                              | $                                            | 15,503                    
|Savings accounts                                                    |                                              |                                              | 165,778                   
|Certificates of deposit                                             |                                              |                                              | 313,825                   
|                                                                    |                                              |                                              |                           
|                                                                    | Total deposits                               |                                              |                           
|                                                                    |                                              |                                              |                           
|Securities sold under repurchase agreements                         |                                              |                                              | 31,153                    
|Borrowings from State of California                                 |                                              |                                              | 30,170                    
|Term borrowings                                                     |                                              |                                              | 32,404                    
|Trust preferred securities                                          |                                              |                                              | 17,250                    
|                                                                    |                                              |                                              |                           
|                                                                    | Total borrowings                             |                                              |                           
|                                                                    |                                              |                                              |                           
|                                                                    | Total interest-bearing liabilities           |                                              |                           
|                                                                    |                                              |                                              |                           
|Non-interest-bearing liabilities                                    |                                              |                                              | 9,008                     
|Shareholders' equity                                                |                                              |                                              | 27,291                    
|                                                                    |                                              |                                              |                           
|                                                                    | Total liabilities and shareholders' equity   |                                              | $                         
|                                                                    |                                              |                                              |                           
|Excess of interest-earning assets over interest-bearing liabilities |                                              | $                                            | 34,968                    
|                                                                    |                                              |                                              |                           
|Net interest income                                                 |                                              |                                              |                           
|                                                                    |                                              |                                              |                           
|Net interest rate spread(4)                                         |                                              |                                              |                           
|                                                                    |                                              |                                              |                           
|Net interest margin(5)                                              |                                              |                                              |                           
|                                                                    |                                              |                                              |                           

---

33

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The following table sets forth the composition of average interest-earning assets and average interest-bearing liabilities by category and by the percentage of
each category to the total for the periods indicated, including the change in average balance, composition, and yield/rate between these respective periods (dollars in thousands):

|                                                                    |                                              | Years Ended December 31,                     |                           
|------------------------------------------------------------------- | -------------------------------------------- | -------------------------------------------- | --------------------------
|
|
|Interest-Earning Assets:                                            |                                              |                                              |                           
|                                                                    | Loans                                        |                                              | $                         
|                                                                    | Securities purchased under resale agreements |                                              |                           
|                                                                    | Investment securities available for sale:    |                                              |                           
|                                                                    |                                              | U.S. government sponsored agency securities: |                           
|                                                                    |                                              |                                              | Callable bonds            
|                                                                    |                                              |                                              | Mortgage-backed securities
|                                                                    |                                              | Corporate debt securities                    |                           
|                                                                    |                                              |                                              |                           
|                                                                    |                                              | Total investment securities                  |                           
|                                                                    |                                              |                                              |                           
|Total interest-earning assets                                       |                                              | $                                            | 641,051                   
|                                                                    |                                              |                                              |                           
|Interest-Bearing Liabilities:                                       |                                              |                                              |                           
|                                                                    | Money market checking                        |                                              | $                         
|                                                                    | Savings accounts                             |                                              |                           
|                                                                    | Certificates of deposit                      |                                              |                           
|                                                                    |                                              |                                              |                           
|                                                                    |                                              | Total deposits                               |                           
|                                                                    |                                              |                                              |                           
|                                                                    | Securities sold under repurchase agreements  |                                              |                           
|                                                                    | Borrowings from State of California          |                                              |                           
|                                                                    | Term borrowings                              |                                              |                           
|                                                                    | Trust preferred securities                   |                                              |                           
|                                                                    |                                              |                                              |                           
|                                                                    |                                              | Total borrowings                             |                           
|                                                                    |                                              |                                              |                           
|Total interest-bearing liabilities                                  |                                              | $                                            | 606,083                   
|                                                                    |                                              |                                              |                           
|Excess of interest-earning assets over interest-bearing liabilities |                                              | $                                            | 34,968                    
|                                                                    |                                              |                                              |                           
|Net interest rate spread                                            |                                              |                                              |                           
|Net interest margin                                                 |                                              |                                              |                           
|                                                                    |                                              |                                              |                           

34

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The following table presents the dollar amount of changes in interest income and interest expense due to (i) changes in average balances of
interest-earning assets and interest-bearing liabilities, as well as (ii) changes in interest rates, for the periods indicated. For each category of interest-earning assets and interest-bearing
liabilities, information is provided on changes attributable to: (i) changes in volume (i.e. changes in average balance multiplied by prior period rate) and (ii) changes in rate (i.e.
changes in rate multiplied by prior period average balance). For purposes of this table, changes attributable to both rate and volume which cannot be segregated, have been allocated proportionately
based on the absolute dollar amounts of the changes due to volume and rate (in thousands):

|                  |                                              | Years Ended December 31,                     |                            
|----------------- | -------------------------------------------- | -------------------------------------------- | ---------------------------
|
|
|Interest Income:  |                                              |                                              |                            
|                  | Loans (1)                                    |                                              | $                          
|                  | Securities purchased under resale agreements |                                              |                            
|                  | Investment securities available for sale:    |                                              |                            
|                  |                                              | U.S. government sponsored agency securities: |                            
|                  |                                              |                                              | Callable bonds (2)         
|                  |                                              |                                              | Mortgage-backed securities 
|                  |                                              | Corporate debt securities                    |                            
|                  |                                              |                                              |                            
|                  |                                              |                                              | Total investment securities
|                  |                                              |                                              |                            
|                  |                                              |                                              | Total interest income      
|                  |                                              |                                              |                            
|Interest Expense: |                                              |                                              |                            
|                  | Money market checking                        |                                              |                            
|                  | Savings accounts                             |                                              |                            
|                  | Certificates of deposit                      |                                              |                            
|                  |                                              |                                              |                            
|                  |                                              | Total deposits                               |                            
|                  |                                              |                                              |                            
|                  | Securities sold under repurchase agreements  |                                              |                            
|                  | Borrowings from State of California          |                                              |                            
|                  | Term borrowings                              |                                              |                            
|                  | Trust preferred securities                   |                                              |                            
|                  |                                              |                                              |                            
|                  |                                              | Total borrowings                             |                            
|                  |                                              |                                              |                            
|                  |                                              | Total interest expense                       |                            
|                  |                                              |                                              |                            
|                  |                                              | Net interest income                          |                            
|                  |                                              |                                              |                            

---

35

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Net Interest Income

Interest income and interest expense can fluctuate widely based on changes in the level of interest rates in the economy. The Company attempts to minimize the
effect of interest rate fluctuations on net interest margin by matching a portion of the Company's interest sensitive assets and interest sensitive liabilities.

Net
interest income can also be affected by a change in the composition of assets and liabilities, for example, if higher yielding loans were to replace a like amount of lower
yielding investment securities. Changes in volume and changes in rates also affect net interest income. Volume changes are caused by
differences in the level of interest-earning assets and interest-bearing liabilities. Rate changes result from differences in yields earned on assets and rates paid on liabilities.

Net
interest income decreased by $1.2 million, to $18.0 million, during the year ended December 31, 2000 compared to the same period in 1999. This decrease was
comprised of a $2.1 million decrease attributable to changes in interest rates, partially offset by a $0.9 million increase attributable to changes in volume. This was primarily due to
the reduction in the net interest rate spread of 46 basis points, to 2.48%, partially offset by the $5.5 million increase, to $35.0 million, in the excess of interest-earning assets over
interest-bearing liabilities during the year ended December 31, 2000 compared to the same period in 1999.

The
reduction in the net interest rate spread was principally due to an increase of 62 basis points, to 5.90%, in the rate paid on average total interest-bearing liabilities,
partially offset by an increase of 16 basis points, to 8.38%, in the yield on average total interest-earning assets. The rate paid on average total interest-bearing liabilities increased primarily due
to the rise in interest rates, which started during the second half of 1999. The yield earned on average total interest-earning assets increased principally due to an increase of 11 basis points, to
9.59%, in the yield earned on average loans, as well as to a shift in the mix of average total interest-earning assets to higher yielding loans from lower yielding securities. The growth in the excess
of interest-earning assets over interest-bearing liabilities was primarily due to an increase of $40.2 million, to $641.1 million, in average total interest-earning assets, partially
offset by an increase of $34.7 million, to $606.1 million, in average total interest-bearing liabilities.



Total interest income increased by $4.4 million, to $53.7 million, during the year ended December 31, 2000 compared to the same period in
1999. This was due to the growth in average total interest-earning assets and to the increase in yield earned on these assets, which contributed $3.9 million and $0.4 million,
respectively, to interest income.

The
growth in average total interest-earning assets of $40.2 million during the year ended December 31, 2000 compared to the same period in 1999, was principally due to
an increase in average loans of $41.1 million, to $387.8 million, and an increase in average investment securities of $5.3 million, to $251.2 million, partially offset by a
decrease of $6.2 million, to $2.1 million, in average securities purchased under resale agreements. The growth in loans was funded by deposits and borrowings as well as through
liquidation of securities purchased under resale agreements. The relatively larger growth in average loans compared to that of average investment securities, as well as the reduction in average
securities purchased under resale agreements, resulted in a shift in the mix of average total interest-
earning assets to higher yielding loans from lower yielding securities. The percentage of average loans to average total interest-earning assets increased to 60.5% in 2000 from 57.7% in 1999.

The
yield on average total interest-earning assets increased by 16 basis points, to 8.38%, during the year ended December 31, 2000 compared to the same period in 1999,
primarily due to the above

36

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mentioned shift in the mix of average total interest-earning assets to higher yielding loans from lower yielding securities, as well as to increases of 11 basis points and 144 basis points in the
yields on average loans and average securities purchased under resale agreements, respectively. Partially offsetting these factors was a decrease of 2 basis points in the yield on average investment
securities.

Contributing
to the increase in the yield on average loans was the increase of 75 basis points, to 5.50%, in the federal funds rate by the Board of Governors of the Federal Reserve
System (the "Federal Reserve"), which took place during the second half of 1999, the increase of 50 basis points, to 6.00%, which took place during the first quarter of 2000, and the additional
increase of 50 basis points to 6.50%, which took place during the second quarter of 2000. The impact of these increases in the federal funds rate caused upward repricing on the Company's variable rate
loans, especially those tied to the prime rate. The federal funds rate is the rate at which banks lend to each other in the overnight market. Increases in the federal funds rate generally result in
increases of the prime rates offered by major banks, including Bank of America. The Company's prime rate loans are priced at a margin above either Bank of America's prime lending rate or the published Wall Street
Journalprime lending rate.

On
January 3, 2001, the Federal Reserve reduced the federal funds rate by 50 basis points, and later, on January 31, 2001, the Federal Reserve lowered the federal funds
rate by another 50 basis points. The impact to the Company has been that certain of its fixed rate, U.S. government sponsored agency callable bonds have been called by the issuing agencies. It is
possible that all of these callable bonds may be called, especially if the Federal Reserve makes additional reductions in the federal funds rate. The Company intends to use the proceeds to fund loans,
invest in U.S. government sponsored agency mortgage-backed securities, pay off borrowings, and cover deposit run-off due to the Company's recent reduction in deposit rates (see "Total
Interest Expense" below).



Total interest expense increased by $5.6 million, to $35.7 million, during the year ended December 31, 2000, compared to the same period
in 1999. This was due to the growth in average interest-bearing
liabilities and to the increase in rate on these liabilities, which contributed $3.0 million and $2.6 million, respectively, to interest expense.

The
growth in average total interest-bearing liabilities of $34.7 million during 2000 compared to 1999, was primarily due to an increase in average deposits of
$19.3 million, to $495.1 million, and an increase in average borrowings of $15.4 million, to $111.0 million. The changes in average deposits and average borrowings resulted
in a shift in the mix of average total interest-bearing liabilities to higher rate borrowings from lower rate deposits. The percentage of average borrowings to average total interest-bearing
liabilities increased to 18.3% during 2000 from 16.7% during 1999.

The
increase in average deposits of $19.3 million during the year ended December 31, 2000 compared to the year ended December 31, 1999, was principally due to an
increase in average certificates of deposit of $101.1 million, partially offset by decreases of $75.3 million and $6.5 million in average savings accounts and average money market
checking accounts, respectively.

The
changes in the average balances of the Company's deposit products during the year ended December 31, 2000 compared to the same period in 1999, were primarily attributable
to the Company's deposit strategy which started in the middle of 1999 and continued through the first half of 2000, when short-term interest rates were rising. The Company pursued a
strategy of limiting interest rate increases on its liquid savings accounts, while paying higher market interest rates on its term certificates of deposit. This strategy was intended to better control
total interest costs during a rising interest rate environment as well as to better match fixed rate liabilities with fixed rate assets. As a result, the balances of higher rate certificates of
deposit increased, while the balances of lower rate savings accounts and money market checking accounts decreased, thus changing the mix of deposits. The

37

---

percentage of average certificates of deposit to average total deposits increased to 63.4% during 2000 from 44.7% during 1999.

During
the second half of 2000, the Company started making limited interest rate decreases on its certificate of deposit accounts. In anticipation of the Federal Reserve lowering the
federal funds rate, the Company significantly reduced rates on its certificates of deposit on December 22, 2000, and later, on January 2, 2001, also decreased the rates on its savings
accounts and money market checking accounts. After the Federal Reserve lowered the federal funds rate on January 3, 2001, the Company further reduced the rates on its certificates of deposit on
January 14, 2001. After the Federal Reserve again lowered the federal funds rate on January 31, 2001, the Company further reduced the rates on its savings accounts and money market
checking accounts on February 1, 2001. To cover deposit run-off, the Company has used and intends to use proceeds from the calls of its U.S. government sponsored agency callable
bonds.

The
increase in average borrowings of $15.4 million during the year ended December 31, 2000 compared to the year ended December 31, 1999, was principally due to
increases of $27.4 million and $15.4 million in average borrowings from the State of California and average securities sold under repurchase agreements, respectively, partially offset by
a reduction in average term borrowings of $27.4 million.

The
$15.4 million increase in the average balance of securities sold under repurchase agreements reflected the use of these borrowings primarily to cover deposit
run-off and to fund loans during 2000. The maximum amount outstanding at any month-end during 2000 was $51.1 million at March 31, 2000.

The
$27.4 million increase in the average balance of borrowings from the State of California was attributable to the initial borrowings of $20.0 million obtained during
the fourth quarter of 1999, and the growth in these borrowings up to $33.0 million during 2000, before they were paid down to $28.0 million by December 31, 2000. Thus, the average
balance for these borrowings reflected only one quarter for 1999 versus a higher average balance for an entire year for 2000.

The
$27.4 million decrease in the average balance of term borrowings was due to a higher balance of these borrowings maintained during 1999. The balance of term borrowings at
December 31, 1998 was $79.5 million, and the first reduction of these borrowings in 1999 was a $24.5 million maturity in April, followed by a $5.0 million pay down in the
third quarter of 1999 and a $10.0 million call by the lender in the fourth quarter of 1999, finally resulting in a $40.0 million balance at December 31, 1999. These borrowings
were further reduced in the first quarter of 2000, when the lender called $10.0 million, but the Company borrowed $10.0 million during the fourth quarter of 2000, which resulted in a
$40.0 million balance at December 31, 2000.

The
increase in the rate on average total interest-bearing liabilities of 62 basis points, to 5.90%, during the year ended December 31, 2000 compared to the same period in
1999, was principally due to the following factors:



38

---



The
increase in the rate on average deposits of 66 basis points during 2000 compared to 1999, was primarily due to the following factors:



The
increase in the rate on average borrowings of 33 basis points during the year ended December 31, 2000 compared to the same period in 1999, was primarily due to the
following factors:



39

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Provision for Loan Losses

During 2000, the Company decreased its provision for loan losses by $1.1 million, to $0.6 million, compared to 1999. The Company uses the
provision for loan losses to establish the allowance for loan losses based on management's evaluation of the risk inherent in the loan portfolio. The allowance for loan losses as a percentage of total
loans increased to 1.81% at December 31, 2000 from 1.76% at December 31, 1999. See Item 1. "BusinessAllowance for Loan Losses."

Although
the Company maintains its allowance for loan losses at a level which it considers to be adequate to provide for potential losses, there can be no assurance that any actual
losses will not exceed the estimated amounts, thereby adversely affecting future results of operations. The calculation of the adequacy of the allowance for loan losses is based on a variety of
factors, including adequacy of collateral, which includes an evaluation of loan balance to collateral value, loan debt service coverage ratio and secondary collateral, if applicable. In addition,
management evaluates the following factors: current delinquency trends, historical Company loan loss experience, regional real estate economic conditions and overall economic trends impacting the
Company's real estate lending portfolio.

Non-interest Income

The following table reflects the major components of non-interest income for the periods indicated and the dollar and percentage changes between
the periods (dollars in thousands):

|                                             |                           |   |     |       |   |     |       | Increase (Decrease) |    
|-------------------------------------------- | ------------------------- | - | --- | ----- | - | --- | ----- | ------------------- | ---
|
|
|Loan prepayment and late fee income          |                           | $ | 346 |       | $ | 662 |       | $                   | 788
|Gain on sale of commercial real estate loans |                           |   | 561 |       |   |    |       |                     | 467
|Gain on sale of SBA loans                    |                           |   | 112 |       |   | 250 |       |                     | 254
|Gain on sale of other real estate owned      |                           |   | 115 |       |   | 25  |       |                     | 120
|Gain (loss) on sale of investment securities |                           |   | (2  | )     |   | 661 |       |                     | 252
|Other income                                 |                           |   | 581 |       |   | 861 |       |                     | 597
|                                             |                           |   |     |       |   |     |       |                     |    
|                                             | Total non-interest income |   | $   | 1,713 |   | $   | 2,459 |                     | $  
|                                             |                           |   |     |       |   |     |       |                     |    

Non-interest income for the year ended December 31, 2000 decreased by $0.7 million to $1.7 million, compared
to the same period in 1999. This was primarily due to a decrease in the gains on sales of investment securities and SBA loans and lower loan prepayment and late fee income, partially offset by a gain
on the sale of a commercial real estate loan and an increase in the gain on sale of other real estate owned.

Non-interest Expense

The following table reflects the major components of non-interest expense for the periods indicated and the dollar and percentage changes between
the periods (dollars in thousands):

|                                  |  |   |        |   |   |        |  | Increase (Decrease) |       
|--------------------------------- |  | - | ------ | - | - | ------ |  | ------------------- | ------
|
|
|Salaries and employee benefits    |  | $ | 6,407  |   | $ | 6,652  |  | $                   | 5,822 
|Net occupancy expense             |  |   | 1,422  |   |   | 1,687  |  |                     | 1,616 
|Communication and data processing |  |   | 880    |   |   | 933    |  |                     | 778   
|Advertising and promotion         |  |   | 223    |   |   | 598    |  |                     | 541   
|FDIC insurance premiums           |  |   | 105    |   |   | 54     |  |                     | 43    
|Credit and collections expenses   |  |   | (134   | ) |   | 43     |  |                     | 127   
|OREO expense                      |  |   | (10    | ) |   | 28     |  |                     | 211   
|Valuation adjustments to OREO     |  |   |       |   |   | 43     |  |                     | 50    
|Other expenses                    |  |   | 1,153  |   |   | 1,445  |  |                     | 1,091 
|                                  |  |   |        |   |   |        |  |                     |       
|Total non-interest expense        |  | $ | 10,046 |   | $ | 11,483 |  | $                   | 10,279
|                                  |  |   |        |   |   |        |  |                     |       

40

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Non-interest expense for the year ended December 31, 2000 decreased by $1.4 million, to $10.0 million,
compared to the same period in 1999. This was primarily due to decreases of $245,000, $265,000, $375,000, $177,000, and $292,000 in salaries and employee benefits, net occupancy expense, advertising
and promotion, credit and collection expense, and other expenses, respectively.

Salaries
and employee benefits for the year ended December 31, 2000 decreased by $245,000, to $6.4 million, compared to the same period in 1999, and was primarily due to
the following:



Partially
offsetting the decrease in salaries and employee benefits was the approximate 4% increase to employee base salaries in January 2000, as well as the hiring in
June 2000 of a commercial marketing representative in Laguna Hills, California to handle lending in Orange County and the Inland Empire. Additionally, during the last seven months of 2000, the
Company hired one Senior Vice President, four Vice Presidents and four other personnel in San Diego to expand the Company's SBA lending capabilities in that area.

Net
occupancy expenses for the year ended December 31, 2000, decreased by $265,000, to $1.4 million, compared to the same period in 1999. This decrease was primarily due
to aforementioned closures of the five loan production offices located outside of Southern California as well as the secondary market loan sales office in Orange County. Partially offsetting the
decrease in net occupancy expenses was the opening of an office in Laguna Hills during June 2000 for the recently hired commercial marketing representative, as well as the opening of an office
in San Diego during November 2000 for the new SBA lending personnel.

Credit
and collection expenses for the year ended December 31, 2000, decreased by $177,000, to $(134,000), compared to the same period in 1999 primarily due to a $140,000
recovery of property taxes, which had been paid on behalf of a borrower and expensed by the Company in a prior year.

Other
expenses for the year ended December 31, 2000, decreased by $292,000, to $1.2 million, compared to the same period in 1999 primary due to increased expenses in
1999 relating to loan servicing and the loan application and approval process.

1999 Compared with 1998

Earnings Performance Summary

Net income was $5.1 million (or $1.82 per common share on a diluted basis) for the year ended December 31, 1999, compared to $4.8 million
(or $1.64 per common share on a diluted basis) for the
year ended December 31, 1998. Pre-tax income was $8.5 million compared to $8.0 million for the years ended December 31, 1999 and 1998, respectively. The
increase in pre-tax income of $479,000, or 6.0% was primarily due to an increase of $2.5 million in net interest income, partially offset by increases of $1.2 million and
$0.8 million in non-interest expense and provision for loan losses, respectively.

41

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The following table sets forth the composition of average interest-earning assets and average interest-bearing liabilities by category and by the percentage of
each category to the total for the periods indicated, including the change in average balance, composition, and yield/rate between these respective periods (dollars in thousands):

|                                                                    |  | Years Ended December 31, |        
|------------------------------------------------------------------- |  | ------------------------ | -------
|
|
|Interest-Earning Assets:                                            |  |                          |        
|Loans                                                               |  | $                        | 346,698
|Securities purchased under resale agreements                        |  |                          | 8,303  
|Investment securities:                                              |  |                          |        
|U.S. government sponsored agency securities:                        |  |                          |        
|Available for sale                                                  |  |                          | 242,643
|Held to maturity                                                    |  |                          |       
|Corporate debt securities available for sale                        |  |                          | 3,208  
|                                                                    |  |                          |        
|Total investment securities                                         |  |                          | 245,851
|                                                                    |  |                          |        
|Total interest-earning assets                                       |  | $                        | 600,852
|                                                                    |  |                          |        
|Interest-Bearing Liabilities:                                       |  |                          |        
|Money market checking                                               |  | $                        | 21,955 
|Savings accounts                                                    |  |                          | 241,101
|Certificates of deposit                                             |  |                          | 212,755
|                                                                    |  |                          |        
|Total deposits                                                      |  |                          | 475,811
|                                                                    |  |                          |        
|Securities sold under                                               |  |                          |        
|repurchase agreements                                               |  |                          | 15,741 
|Borrowings from State of California                                 |  |                          | 2,712  
|Term borrowings                                                     |  |                          | 59,829 
|Trust preferred securities                                          |  |                          | 17,250 
|                                                                    |  |                          |        
|Total borrowings                                                    |  |                          | 95,532 
|                                                                    |  |                          |        
|Total interest-bearing liabilities                                  |  | $                        | 571,343
|                                                                    |  |                          |        
|Excess of interest-earning assets over interest-bearing liabilities |  | $                        | 29,509 
|                                                                    |  |                          |        
|Net interest rate spread                                            |  |                          |        
|Net interest margin                                                 |  |                          |        
|                                                                    |  |                          |        

42

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Net Interest Income

Interest income and interest expense can fluctuate widely based on changes in the level of interest rates in the economy. The Company attempts to minimize the
effect of interest rate fluctuations on net interest margin by matching a portion of the Company's interest sensitive assets and interest sensitive liabilities.

Net
interest income can also be affected by a change in the composition of assets and liabilities, for example, if higher yielding loans were to replace a like amount of lower
yielding investment securities. Changes in volume and changes in rates also affect net interest income. Volume changes are caused by differences in the level of interest-earning assets and
interest-bearing liabilities. Rate changes result from differences in yields earned on assets and rates paid on liabilities.

Net
interest income increased by $2.5 million, or 14.8%, to $19.2 million for the year ended December 31, 1999 as compared to the same period in 1998. This was
primarily due to the increase in the Company's average total interest-earning assets of $74.4 million, or 14.1%, during the year ended December 31, 1999 compared to the prior year.
Average total interest-bearing liabilities increased by $67.1 million, or 13.3%, during 1999 compared to 1998.

The
net interest rate spread is defined as the yield earned on average total interest-earning assets less the rate paid on average total interest-bearing liabilities. The Company's
net interest rate spread increased by 1 basis point, to 2.94%, during the year ended December 31, 1999 compared to the prior year. This resulted primarily from a decrease of 38 basis points, to
5.28%, in the rate paid on average total interest-bearing liabilities, partially offset by a decrease of 37 basis points, to 8.22%, in the yield earned on average total interest-earning assets.

The
net interest margin is defined as net interest income divided by average total interest-earning assets. The net interest margin for the years ended December 31, 1999 and
1998, was 3.19% and 3.17%, respectively.



Total interest income increased by $4.1 million, to $49.4 million, during the year ended December 31, 1999 compared to the year ended
December 31, 1998. This was primarily due to the growth in average total interest-earning assets, partially offset by the reduction in yield on these assets. Average total interest-earning
assets increased by $74.4 million, to $600.9 million, which contributed $8.2 million to the increase in total interest income. The yield on the Company's average total
interest-earning assets decreased by 37 basis points, to 8.22%, which reduced total interest income by $4.1 million.

The
growth in average total interest-earning assets in 1999 compared to 1998 was primarily due to an increase in average loans of $107.7 million, to $346.7 million,
partially offset by a decrease in average investment securities of $37.5 million, to $245.9 million. This resulted in a shift in the mix of average total interest-earning assets from
lower yielding investment securities to higher yielding loans. The percentage of average loans to average total interest-earning assets increased to 57.7% in 1999 from 45.4% in 1998.

The
decline in the yield on average total interest-earning assets in 1999 compared to 1998 was primarily due to a decrease in the yield on average loans of 126 basis points, to 9.48%,
and to a decrease in the yield on average investment securities of 29 basis points, to 6.55%. The decline in the yield on average loans in 1999 compared to 1998 was primarily due to the following:



43

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The
decline in the yield on average investment securities in 1999 compared to 1998 was primarily due to the replacement of higher yielding U.S. government sponsored agency securities
that were called and sold in 1999 with lower yielding securities that were purchased. Partially offsetting this factor was the purchase in 1999 of higher yielding corporate debt securities.

Partially
offsetting the decline in the yield on average total interest-earning assets were the following factors, which served to increase the yield on these assets:





Total interest expense increased by $1.7 million, to $30.2 million, during the year ended December 31, 1999 compared to the year ended
December 31, 1998. This was primarily due to the growth in average total interest-bearing liabilities, partially offset by the reduction in rate on these liabilities. Average total
interest-bearing liabilities increased by $67.1 million, to $571.3 million, which contributed $3.5 million to the increase in total interest expense. The rate on the Company's
average total interest-bearing liabilities decreased by 38 basis points, to 5.28%, which reduced total interest expense by $1.8 million.

The
growth in average total interest-bearing liabilities in 1999 compared to 1998 was primarily due to an increase in average deposits of $84.3 million, to
$475.8 million, partially offset by a decrease in average borrowings of $17.3 million, to $95.5 million. This resulted in a shift in the mix of average total interest-bearing
liabilities from higher rate borrowings to lower rate deposits. The percentage of average deposits to average total interest-bearing liabilities increased to 83.3% in 1999 from 77.6% in 1998.

The
decline in the rate on average total interest-bearing liabilities in 1999 compared to 1998 was primarily due to a decrease in the rate on average deposits of 41 basis points, to
5.06%, and the aforementioned shift in the mix of average total interest-bearing liabilities from higher rate borrowings to lower rate deposits, partially offset by an increase in the rate on average
borrowings of 7 basis points, to 6.38%. The decrease in the rate on average deposits in 1999 compared to 1998 was principally due to the rate reduction on the Company's deposit products in the first
quarter of 1999.
Partially offsetting these reasons were the following factors, which served to increase the rate on average deposits:



The
increase in the rate on average borrowings in 1999 compared to 1998 was primarily due to the impact that the higher rate, 9.37%, trust preferred securities had on the lower
balance of average borrowings in 1999 compared to 1998. The percentage of average trust preferred securities to average

44

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borrowings increased to 18.1% in 1999 from 15.3% in 1998. Additionally, the aforementioned changes by the Federal Reserve in the federal funds rate served to raise the rates on the Company's available
borrowing facilities. Partially offsetting these reasons for the increase in the rate on average borrowings was the overall decline in market interest rates between 1999 and 1998 and the Company
obtaining funding at favorable rates under the State of California's fixed rate lending program during the fourth quarter of 1999. The Company intends to pursue additional borrowings under this
program in 2000.

Provision for Loan Losses

During 1999, the Company increased its provision for loan losses by $767,000, or 84.3%, to $1.7 million compared to 1998. The increase in the provision
reflects the growth in the Company's gross loan portfolio of $77.3 million, or 26.7%, to $366.3 million at December 31, 1999, as well as management's evaluation of the loan
portfolio and economic conditions.

Non-Interest Income

Non-interest income for the year ended December 31, 1999 decreased by $19,000, or 0.8%, compared to the same period in 1998. This was
primarily due to a decrease of $467,000 in gain on sale of commercial real estate loans, partially offset by an increase of $409,000 in gain on sale of investment securities.

The
1998 $467,000 gain on sale of commercial real estate loans was produced under the Company's secondary market loan sales program, which was initiated in 1998 with the intent to
generate fixed rate loans for the Company's portfolio and for potential sale in the secondary market. During 1999, there were no loan sales under this program. Although the program was designed in
part to produce recurring gain income for the Company, there can be no assurance that future sales will occur to generate such income.

Non-Interest Expense

Non-interest expense for the year ended December 31, 1999 increased by $1.2 million, or 11.7%, compared to the same period in 1998.
This was primarily due to increases of $830,000, $354,000 and $155,000 in salaries and employee benefits, other expenses and communication and data processing, respectively, partially offset by a
decrease of $183,000 in OREO expense.

Salaries
and employee benefits for the year ended December 31, 1999 increased by $830,000, or 14.3%, compared to the same period in 1998. This was primarily due to an
approximate 4% salary increase to the Company's employee base salaries in January of 1999 and to an increase in overall staffing levels between 1999 and 1998. During the first quarter of 1999, the
Company established an office in Orange County, California to coordinate and originate loans for its secondary market loan sales program. This office was staffed with six employees.

Communication
and data processing expense for the year ended December 31, 1999, increased by $155,000, or 19.9%, compared to the same period in 1998. This increase reflected
the opening of the Company's loan production office in Arizona during the fourth quarter of 1998 and the Company's secondary market loan sales office in Orange County during the first quarter of 1999,
in addition to the installation and upgrading of a portion of the Company's computer hardware and software systems.

OREO
expense for the year ended December 31, 1999, decreased by $183,000, or 86.7%, compared to the same period in 1998 due to the decline in related OREO properties.

Other
expenses for the year ended December 31, 1999, increased by $354,000, or 32.4%, compared to the same period in 1998. This increase was primarily due to increases in loan
origination costs and consulting fees during 1999 versus 1998. The increase in loan origination costs was the direct result of the increase in loan originations of 21.0% from $108.8 million in
1998 to $131.7 million in 1999. Consulting costs increased due to the implementation of internal control reporting provisions of the FDIC Improvement Act of 1991, costs for training and
consulting on SBA lending and costs for auditing the Company's information systems function. Miscellaneous other costs increased as a result of the establishment of the Arizona loan production office
and the Orange County secondary market loan sales office.

45

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FINANCIAL CONDITION

Balance Sheet Analysis

The following table presents condensed balance sheets as of the dates indicated and the dollar and percentage changes between the periods (dollars in
thousands):

|                     |                                               |                                            |   |         |         |   |         | Increase (Decrease) |  
|-------------------- | --------------------------------------------- | ------------------------------------------ | - | ------- | ------- | - | ------- | ------------------- | -
|
|
|Assets               |                                               |                                            |   |         |         |   |         |                     |  
|                     | Cash and cash equivalents                     |                                            | $ | 5,336   |         | $ | 4,783   |                     | $
|                     | Investment securities available for sale      |                                            |   | 234,448 |         |   | 240,760 |                     |  
|                     | Net loans                                     |                                            |   | 393,045 |         |   | 359,502 |                     |  
|                     | Other assets                                  |                                            |   | 15,831  |         |   | 18,215  |                     |  
|                     |                                               |                                            |   |         |         |   |         |                     |  
|                     |                                               | Total assets                               |   | $       | 648,660 |   | $       | 623,260             |  
|                     |                                               |                                            |   |         |         |   |         |                     |  
|Liabilities          |                                               |                                            |   |         |         |   |         |                     |  
|                     | Money market checking                         |                                            | $ | 14,414  |         | $ | 18,783  |                     | $
|                     | Savings accounts                              |                                            |   | 148,347 |         |   | 196,368 |                     |  
|                     | Certificates of deposit                       |                                            |   | 336,076 |         |   | 269,233 |                     |  
|                     |                                               |                                            |   |         |         |   |         |                     |  
|                     |                                               | Total deposits                             |   |         | 498,837 |   |         | 484,384             |  
|                     |                                               |                                            |   |         |         |   |         |                     |  
|                     | Securities sold under repurchase agreements   |                                            |   | 23,500  |         |   | 30,500  |                     |  
|                     | Borrowings from State of California           |                                            |   | 28,000  |         |   | 20,000  |                     |  
|                     | Term borrowings                               |                                            |   | 40,000  |         |   | 40,000  |                     |  
|                     | Trust preferred securities                    |                                            |   | 17,250  |         |   | 17,250  |                     |  
|                     |                                               |                                            |   |         |         |   |         |                     |  
|                     |                                               | Total borrowings                           |   |         | 108,750 |   |         | 107,750             |  
|                     |                                               |                                            |   |         |         |   |         |                     |  
|                     | Total interest-bearing liabilities            |                                            |   | 607,587 |         |   | 592,134 |                     |  
|                     | Other liabilities                             |                                            |   | 7,143   |         |   | 5,577   |                     |  
|                     |                                               |                                            |   |         |         |   |         |                     |  
|                     |                                               | Total liabilities                          |   |         | 614,730 |   |         | 597,711             |  
|                     |                                               |                                            |   |         |         |   |         |                     |  
|Shareholders' Equity |                                               |                                            |   |         |         |   |         |                     |  
|                     | Common stock, at par                          |                                            |   | 30      |         |   | 30      |                     |  
|                     | Additional paid-in capital                    |                                            |   | 27,790  |         |   | 27,885  |                     |  
|                     | Retained earnings                             |                                            |   | 14,542  |         |   | 9,978   |                     |  
|                     | Accumulated other comprehensive income (loss) |                                            |   | (1,532  | )       |   | (6,355  | )                   |  
|                     | Common stock in treasury, at cost             |                                            |   | (6,900  | )       |   | (5,989  | )                   |  
|                     |                                               |                                            |   |         |         |   |         |                     |  
|                     |                                               | Total shareholders' equity                 |   |         | 33,930  |   |         | 25,549              |  
|                     |                                               |                                            |   |         |         |   |         |                     |  
|                     |                                               | Total liabilities and shareholders' equity |   | $       | 648,660 |   | $       | 623,260             |  
|                     |                                               |                                            |   |         |         |   |         |                     |  



Total assets increased by $25.4 million, to $648.7 million, during the year ended December 31, 2000, primarily due to an increase in net
loans of $33.5 million, partially offset by decreases in investment securities and other assets of $6.3 million and $2.4 million, respectively. The increase in net loans was
primarily due to originations of $80.3 million, partially offset by principal payments of $42.8 million and SBA loan sales of $2.6 million. The decrease in investment securities
was primarily

46

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due to the sale in December 2000 of $14.5 million of U.S. government sponsored agency callable bonds, partially offset by an increase in market value of $8.3 million.

Total
liabilities increased by $17.0 million, to $614.7 million, during the year ended December 31, 2000, primarily due to increases in deposits, borrowings, and
other liabilities of $14.5 million, $1.0 million, and $1.5 million, respectively.

The
$14.5 million increase in total deposits during the year ended December 31, 2000 reflected a $66.8 million increase in certificates of deposit, partially
offset by decreases of $48.0 million and $4.4 million in savings accounts and money market checking accounts, respectively. The changes in the balances of the Company's deposit products
during 2000 resulted in a shift in the mix of deposits from lower yielding money market/savings accounts to higher yielding certificates of deposit. The percentage of total certificates of deposit to
total deposits increased to 67.4% at December 31, 2000 from 55.6% at December 31, 1999, and served to increase interest expense during 2000.

The
increase in deposits was primarily due to the Company's strategy during the first half of 2000 of limiting interest rate increases on savings accounts and paying higher market
rates on its certificates of deposit. However, during the second half of 2000, the Company started making limited interest rate decreases on its certificate of deposit accounts, and ultimately, on
December 22, 2000, the Company significantly reduced the rates on this product. This last reduction was in anticipation of a lowering of the federal funds rate by the Federal Reserve, which
occurred on January 3, 2001. During 2000, total deposits reached their highest month-end balance of $518.3 million at August 31, 2000, and then decreased
$19.8 million during the next four months to $498.8 million at December 31, 2000.

The
$1.0 million increase in borrowings during 2000 was primarily due to an $8.0 million increase in borrowings from the State of California, partially offset by a
$7.0 million decrease in securities sold under repurchase agreements.

Shareholders'
equity increased by $8.4 million, to $33.9 million, during the year ended December 31, 2000. Changes to shareholders' equity were due to the
following:





Total assets decreased by $22.0 million, to $623.3 million, during the year ended December 31, 1999, primarily due to decreases in
investment securities and cash and cash equivalents of $80.5 million and $20.9 million, respectively, partially offset by an increase in net loans of $76.0 million. The decreases
in investment securities and cash and cash equivalents were used to funds loans and pay down borrowings. The resulting change in asset composition from lower yielding investments to higher yielding
loans contributed to the increase in net interest income for 1999 compared to 1998. The decrease in investment securities was primarily due to sales of $165.3 million and a decline in fair
value of $13.1 million, partially offset by purchases of $98.0 million. The increase in net loans was primarily

47

---

due to $131.7 million of originations and $9.0 million of purchases, partially offset by $58.8 million in payoffs and $4.7 million in SBA loan sales.

Total
liabilities decreased by $17.5 million, to $597.7 million, during the year ended December 31, 1999, primarily due to a decrease in borrowings of
$19.7 million, partially offset by an increase in deposits of $1.5 million. This resulted in a shift in the mix of total interest-bearing liabilities from higher rate borrowings to lower
rate deposits and contributed to the increase in net interest income for 1999 compared to 1998. Deposits as a percentage of total interest-bearing liabilities increased to 81.8% at December 31,
1999 from 79.1% at December 31, 1998.

The
$19.7 million decrease in borrowings during 1999 was primarily due to a $39.4 million decrease in term borrowings, partially offset by a $20.0 increase in borrowings
from the State of California. The Company utilized the borrowings from the State of California, which generally had a lower cost of funds than term borrowings, to replace a portion of the term
borrowings that were called (matured) during the fourth quarter of 1999. The $20.0 million borrowed under the State of California's fixed rate lending program during the fourth quarter of 1999
had a weighted average rate of 5.57%.

The
$1.5 million increase in deposits during 1999 was primarily due to an increase in certificates of deposit of $86.3 million partially offset by a decrease in savings
accounts and money market checking accounts of $79.6 million and $5.1 million, respectively. Management reduced the rates on all of the Company's deposit products in the beginning of the
first quarter of 1999, and later started raising the rates on its one to five year certificates of deposit beginning in the second quarter of 1999. This strategy served to lock in
long-term deposits with fixed rates while maintaining rates constant on short-term and liquid deposits. This strategy resulted in a shift of funds from the Company's
savings/money market checking accounts into certificates of deposit. The percentage of certificates of deposit to total deposits increased to 55.6% at December 31, 1999 from 37.9% at
December 31, 1998. In February 2000, the Company raised the rates on its savings accounts in response to the overall increase in market interest rates.

Shareholders'
equity decreased by $4.6 million, to $25.5 million, during the year ended December 31, 1999. Changes to shareholders' equity were due to the
following:



NON-PERFORMING ASSETS

Total non-performing assets declined by $210,000, to $0, during the year ended December 31, 2000. The decrease was due to the transfer of a
$210,000 non-accrual loan to other real estate owned, which was then sold for a gain of $115,000. As of December 31, 2000, the Company had seven loans with an aggregate outstanding
loan balances of $2.4 million which management considered to be potential problem loans due to possible credit problems of the borrowers or cash flows of the properties securing the loans. The
minimal balances in non-performing assets was largely due to continued emphasis by management on problem credits, as well as continued favorable economic conditions in the Company's market
areas.

48

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LIQUIDITY

The Company's primary sources of funds are deposits, borrowings, and payments of principal and interest on loans and investment securities. While maturities
and scheduled principal amortization on loans are a reasonably predictable source of funds, deposit flows and mortgage loan prepayments are greatly influenced by the level of interest rates, economic
conditions, and competition. As a measure of protection against these uncertainties, the Company maintains borrowing relationships with several brokers, whereby the Company is able to borrow funds
that are secured by pledging specific amounts of certain U.S. government sponsored agency securities. The Company is generally able to borrow up to 98% of the market value of these securities. As of
December 31, 2000, the market values of U.S. government sponsored agency securities that were available for collateral purposes totaled $121.0 million.

The
Bank also has a fixed rate borrowing facility with the State of California Treasurer's Office under which the Bank can borrow an amount not to exceed its unconsolidated total
shareholder's equity. Borrowing maturity dates under this program cannot exceed one year. As of December 31, 2000, the Bank's unconsolidated total shareholder's equity was $46.2 million
and the Bank's outstanding borrowings from the State of California totaled $28.0 million.

The
Company's primary lending and investment activities have generally been the origination of commercial real estate loans, the purchase of investment securities, and, to a lesser
extent, the purchase of short-term securities purchased under resale agreements. The purchase of investment securities and short-term securities purchased under resale
agreements provides a source of long and short-term liquidity.

The
Company's most liquid assets are cash and securities purchased under resale agreements. The levels of these assets depend on the Company's operating, investing and financing
activities during any given period. Liquidity for the Company is monitored daily and evaluated monthly. Excess funds are invested in short-term securities purchased under resale
agreements.

During
the year ended December 31, 2000, the Company's cash and cash equivalents increased by $0.6 million to $5.3 million. This increase was the result of the
addition of $13.7 million and $6.1 million in cash from financing and operating activities, respectively, partially offset by the use of $19.2 million in cash for investing
activities. The $13.7 million source of cash from financing activities was principally due to an increase in deposits of $14.5 million. The $19.2 million use of cash in investing
activities was primarily the result of $80.3 million in loan originations, partially offset by $42.8 million of principal payments on loans and $14.5 million of proceeds from
sales of investment securities.

DIVIDENDS

As a Delaware corporation, Pacific Crest may pay common dividends out of surplus or, if there is no surplus, from net profits for the current and preceding
fiscal year. Pacific Crest, on an unconsolidated basis, had approximately $3.9 million in cash and investments less current liabilities and short-term debt at December 31,
2000. However, these funds are necessary to pay future operating expenses of Pacific Crest, service all outstanding debt, including the $17.25 million junior subordinated debentures payable to
PCC Capital, and fund possible future capital infusions into the Bank. Without dividends from the Bank, Pacific Crest must rely solely on existing cash, investments and the ability to secure
borrowings. During 2000, the Company declared and paid cash dividends of $0.28 per common share for a total of $706,000. During 1999, the Company paid cash dividends of $0.24 per common share for a
total of $636,000. On January 23, 2001, the Company declared an $0.08 per common share cash dividend for the first quarter of 2001, payable on March 15, 2001 to shareholders of record as
of March 1, 2001. The Company anticipates that it will continue to declare and pay quarterly dividends during the remainder of 2001.

49

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The
Bank's ability to pay dividends to Pacific Crest is restricted by California State law, which requires that sufficient retained earnings be available to pay the dividend. During
2000, the Bank paid $2.2 million cash dividends to Pacific Crest. At December 31, 2000, the Bank had retained earnings of $17.9 million available for dividend payments. On
February 2, 2001, the Bank declared a $600,000 cash dividend for the first quarter of 2001, payable to Pacific Crest on March 15, 2001. The Bank anticipates that it will continue to
declare and pay quarterly dividends to Pacific Crest during 2001.

CAPITAL RESOURCES

The Company's objective is to maintain a level of capital that will support sustained asset growth, provide for anticipated credit risks, and ensure that
regulatory guidelines and industry standards are met.

Pacific
Crest and the Bank are subject to certain leverage and risk-based capital guidelines adopted by the Federal Reserve and the FDIC. Risk-based capital
consists of a core capital component (Tier 1), essentially total shareholders' equity excluding accumulated other comprehensive income (loss), and a supplemental component (Tier 2), which includes the
allowance for loan losses up to 1.25% of risk-weighted assets, and a system for assigning assets and off-balance sheet items to one of four risk-weighted
categories. These capital standards require a minimum Tier 1 risk-based capital ratio of 4.00% and total risk-based capital ratio (Tier 1 plus Tier 2) of 8.00%.

In
addition to the risked-based guidelines, federal banking agencies require banking organizations to maintain a minimum amount of Tier 1 capital to average total assets, referred to
as the leverage ratio. For a banking organization rated in the highest of the five categories used by regulators to rate banking organizations, the minimum leverage ratio of Tier 1 capital to average
total assets must be 3.00%. For all banking organizations not rated in the highest category, the minimum leverage ratio must be at least 100 to 200 basis points above the 3.00% minimum, or 4.00% to
5.00%.

Under
the prompt corrective action provisions, an insured depository institution is placed in one of five categories based on its capital ratios, the highest category being well
capitalized. The minimum required ratios for this well capitalized category are 5.00% leverage, 6.00% Tier 1 risk-based capital and 10.00% total risk-based capital.

At
December 31, 2000 and 1999, Pacific Crest and the Bank were classified as "well capitalized" and were in compliance with all such requirements. The following tables sets
forth the regulatory capital ratios for Pacific Crest and the Bank as of the dates indicated:

|Actual       |                   | Leverage
Ratio              |  | Tier 1
Risk-Based
Capital Ratio |   | Total
Risk-Based
Capital Ratio |  
|------------ | ----------------- | --------------------------- |  | ------------------------------- | - | ------------------------------ | -
|             | December 31, 2000 |                             |  |                                 |   |                                |  
|             |                   | Pacific Crest Capital, Inc. |  | 7.16                            | % | 10.63                          | %
|             |                   | Pacific Crest Bank          |  | 7.36                            | % | 10.82                          | %
|             | December 31, 1999 |                             |  |                                 |   |                                |  
|             |                   | Pacific Crest Capital, Inc. |  | 6.89                            | % | 10.18                          | %
|             |                   | Pacific Crest Bank          |  | 7.19                            | % | 10.38                          | %
|Requirements |                   |                             |  |                                 |   |                                |  
|             |                   | Minimum Well Capitalized    |  | 5.00                            | % | 6.00                           | %
|             |                   | Minimum Capital Adequacy    |  | 4.00                            | % | 4.00                           | %

50

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ASSET/LIABILITY MANAGEMENT

The purpose of asset/liability management is to minimize the risk of loss resulting from changes in interest rates. To the extent consistent with its interest
rate spread objectives, the Company attempts to manage its interest rate risk and has taken actions to minimize the potential negative impact of changing interest rates. In addition to focusing on
making commercial real estate loans which generally provide for quarterly repricing, the Company has written a significant amount of its loans with interest rate floors. Interest rate floors protect
the Company in a declining interest rate environment as affected loans do not reprice downward to their fully indexed rate when interest rates fall. At December 31, 2000, the fully indexed rate
on these loans was generally equal to or in excess of the interest rate floors.

The
Company primarily uses an interest rate shock analysis to evaluate and manage interest rate risk and measure the impact of fluctuations in interest rates on the Company's net
interest income. This analysis is generated from an asset/liability system that reprices loans and deposits utilizing hypothetical market interest rates on the date of repricing.

Another
method of assessing the potential risk associated with changes in interest rates used to a lesser extent by the Company is to examine the extent to which assets and
liabilities are "interest rate sensitive" by monitoring the institution's interest rate sensitivity "gap." An asset or liability is said to be interest rate sensitive within a specific time period if
it will mature or reprice within that time period. The interest rate sensitivity gap is defined as the difference between the amount of interest-earning assets anticipated to mature or reprice within
a specific time period and the amount of interest-bearing liabilities anticipated to mature or reprice within that same time period, based upon certain assumptions. A gap is considered positive when
the amount of interest rate sensitive assets exceeds the amount of interest rate sensitive liabilities. A gap is considered negative when the amount of interest rate sensitive liabilities exceeds the
amount of interest rate sensitive assets. During a period of rising interest rates, a negative gap would generally tend to adversely affect net interest income, while a positive gap would generally
tend to result in an increase in net interest income. During a period of declining interest rates, a negative gap would generally tend to result in increased net interest income, while a positive gap
would generally tend to adversely affect net interest income.

51

---

The following table presents the Company's gap analysis at December 31, 2000 (dollars in thousands):

|December 31, 2000                  |                                              | Total                                        |                                      | Immediate
Through
One Year |         | Over One
Year Through
Four Years |         | Over
Four Years |        
|---------------------------------- | -------------------------------------------- | -------------------------------------------- | ------------------------------------ | -------------------------- | ------- | -------------------------------- | ------- | --------------- | -------
|Interest-Sensitive Assets:         |                                              |                                              |                                      |                            |         |                                  |         |                 |        
|                                   | Securities purchased under resale agreements |                                              | $                                    | 3,017                      |         | $                                | 3,017   |                 | $      
|                                   | Investment securities available for sale:    |                                              |                                      |                            |         |                                  |         |                 |        
|                                   |                                              | U.S. government sponsored agency securities: |                                      |                            |         |                                  |         |                 |        
|                                   |                                              |                                              | Callable bonds                       |                            |         | 227,106                          |         |                 | 227,106
|                                   |                                              |                                              | Mortgage-backed securities           |                            |         | 3,799                            |         |                 |       
|                                   |                                              | Corporate debt securities                    |                                      |                            | 3,543   |                                  |         | 3,543           |        
|                                   | Loans, gross                                 |                                              |                                      | 400,263                    |         |                                  | 209,020 |                 |        
|                                   |                                              |                                              |                                      |                            |         |                                  |         |                 |        
|                                   |                                              | Total interest-sensitive assets              |                                      |                            | 637,728 |                                  | $       | 442,686         |        
|                                   |                                              |                                              |                                      |                            |         |                                  |         |                 |        
|Non-interest-sensitive assets      |                                              |                                              | 18,172                               |                            |         |                                  |         |                 |        
|Less: allowance for loan losses    |                                              |                                              | (7,240                               | )                          |         |                                  |         |                 |        
|                                   |                                              |                                              |                                      |                            |         |                                  |         |                 |        
|                                   |                                              | Total assets                                 |                                      | $                          | 648,660 |                                  |         |                 |        
|                                   |                                              |                                              |                                      |                            |         |                                  |         |                 |        
|Interest-Sensitive Liabilities:    |                                              |                                              |                                      |                            |         |                                  |         |                 |        
|                                   | Money market checking                        |                                              | $                                    | 14,414                     |         | $                                | 14,414  |                 | $      
|                                   | Savings accounts                             |                                              |                                      | 148,347                    |         |                                  | 148,347 |                 |        
|                                   | Certificates of deposit                      |                                              |                                      | 336,076                    |         |                                  | 252,154 |                 |        
|                                   |                                              |                                              |                                      |                            |         |                                  |         |                 |        
|                                   |                                              | Total deposits                               |                                      |                            | 498,837 |                                  |         | 414,915         |        
|                                   |                                              |                                              |                                      |                            |         |                                  |         |                 |        
|                                   | Securities sold under repurchase agreements  |                                              |                                      | 23,500                     |         |                                  | 23,500  |                 |        
|                                   | Borrowings from State of California          |                                              |                                      | 28,000                     |         |                                  | 28,000  |                 |        
|                                   | Term borrowings                              |                                              |                                      | 40,000                     |         |                                  |        |                 |        
|                                   | Trust preferred securities                   |                                              |                                      | 17,250                     |         |                                  |        |                 |        
|                                   |                                              |                                              |                                      |                            |         |                                  |         |                 |        
|                                   |                                              |                                              | Total borrowings                     |                            |         | 108,750                          |         |                 | 51,500 
|                                   |                                              |                                              |                                      |                            |         |                                  |         |                 |        
|                                   |                                              |                                              | Total interest-sensitive liabilities |                            |         | 607,587                          |         | $               | 466,415
|                                   |                                              |                                              |                                      |                            |         |                                  |         |                 |        
|Non-interest-sensitive liabilities |                                              |                                              | 7,143                                |                            |         |                                  |         |                 |        
|Shareholders' equity               |                                              |                                              | 33,930                               |                            |         |                                  |         |                 |        
|                                   |                                              |                                              |                                      |                            |         |                                  |         |                 |        
|                                   |                                              | Total liabilities and shareholders' equity   |                                      | $                          | 648,660 |                                  |         |                 |        
|                                   |                                              |                                              |                                      |                            |         |                                  |         |                 |        
|Gap (1)                            |                                              |                                              |                                      |                            | $       | (23,729                          | )       | $               | 22,061 
|Cumulative gap                     |                                              |                                              |                                      |                            | $       | (23,729                          | )       | $               | (1,668 
|As a percent of total assets       |                                              |                                              |                                      |                            |         | (3.7                             | )%      |                 | (0.3   
|                                   |                                              |                                              |                                      |                            |         |                                  |         |                 |        

---

At
December 31, 2000, based on the above gap analysis table, total interest-bearing liabilities maturing or repricing within one year exceeded total interest-earning assets
repricing or maturing in the same period by $23.7 million, representing a negative one-year gap of 3.7% of total assets.

The
gap analysis table is based on certain assumptions. Except as stated below, the amount of assets and liabilities shown which reprice or mature during a particular period were
determined in accordance with the earlier of the repricing timing or maturity date of the asset or liability. The Company has assumed, for purposes of this gap analysis table, that its money market
checking accounts, savings accounts, and securities sold under repurchase agreements reprice immediately. The Company has also assumed, for purposes of this gap analysis table, that its U.S.
government sponsored

52

---

agency callable bonds mature/reprice at the initial call date, due to the 100 basis point lowering of the federal funds rate by the Federal Reserve in January 2001, and thus the likelihood that
these securities will be called.

Certain
shortcomings are inherent in the method of using gap analysis to evaluate interest rate risk as presented in the following table. For example, gap analysis assumes that when
interest rates change, all rates change by the same amount and at the same time. Although certain assets and liabilities may be available for repricing at the same time, assets and liabilities often
react independently to market interest rate changes, resulting in variable degrees of change dependent on the type of asset or liability. Also, the interest rates on certain types of assets and
liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Additionally, some adjustable rate loans have
features, which restrict changes in interest rates on a short-term basis and over the life of the asset. Loan prepayments and early withdrawal of certificates of deposit could also cause
the interest sensitivities to vary from those reflected in the table. Due to these factors, the gap analysis may not provide a complete or accurate assessment of the Company's exposure to changes in
interest rates.

ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk

The Company's primary market risk is interest rate risk. Interest rate risk is the potential of economic losses due to future interest rate changes. These
economic losses can be reflected as a loss of future net interest income and/or a loss of current fair market values. The objective is to measure the effect on net interest income and to adjust the
balance sheet to minimize the inherent risk while at the same time to maximize income. Management realizes certain risks are inherent and that the goal is to identify and minimize the risks. The
Company's exposure to market risk is reviewed on a regular basis by the Asset/Liability committee. Tools used by management include an interest rate shock analysis and to a lesser extent, the standard
GAP report. The Company has no market risk sensitive instruments held for trading purposes and is not currently engaged in transactions involving derivative financial instruments. Management believes
that the Company's market risk is reasonable at this time. See also Item 7. "Management's Discussion and Analysis of Financial Condition and Results of OperationsAsset/Liability
Management."

53

---

The tables below provide information about the Company's balance sheet non-derivative financial instruments at December 31, 2000 and 1999 that are sensitive to
changes in interest rates. For all outstanding financial instruments, the table presents the outstanding principal balance and the weighted average interest yield/rate of the instruments by either the
date the instrument can be repriced for variable rate financial instruments, or the expected maturity date, for fixed rate financial instruments (dollars in thousands):

|                                     |                                                                                   | Expected maturity date or repricing date |         |        
|------------------------------------ | --------------------------------------------------------------------------------- | ---------------------------------------- | ------- | -------
|
|Interest-Sensitive Assets:           |                                                                                   |                                          |         |        
|                                     | Securities purchased under resale agreements(1)                                   |                                          | $       | 3,017  
|                                     | average yield (variable rate)                                                     |                                          |         | 6.10   
|                                     | U.S. government sponsored agency callable bonds available for sale(2)             |                                          |         | 207,552
|                                     | average yield (fixed rate)                                                        |                                          |         | 6.43   
|                                     | U.S. government sponsored agency mortgage-backed securities available for sale(2) |                                          |         |       
|                                     |                                                                                   | average yield (fixed rate)               |         |        
|                                     | Corporate debt securities available for sale(2)                                   |                                          |         | 3,543  
|                                     |                                                                                   | average yield (variable rate)            |         |        
|                                     | Loans, gross(3)                                                                   |                                          |         | 144,733
|                                     |                                                                                   | average yield                            |         |        
|                                     |                                                                                   |                                          |         |        
|Total interest-sensitive assets      |                                                                                   | $                                        | 358,845 |        
|                                     |                                                                                   |                                          |         |        
|Interest-Sensitive Liabilities:      |                                                                                   |                                          |         |        
|                                     | Money market checking(1)                                                          |                                          | $       | 14,414 
|                                     |                                                                                   | average rates (variable rate)            |         |        
|                                     | Savings accounts(1)                                                               |                                          |         | 148,347
|                                     |                                                                                   | average rates (variable rate)            |         |        
|                                     | Certificates of deposit(4)                                                        |                                          |         | 127,784
|                                     |                                                                                   | average rates (fixed rate)               |         |        
|                                     | Securities sold under repurchase agreements(1)                                    |                                          |         | 23,500 
|                                     |                                                                                   | average rates (variable rate)            |         |        
|                                     | Borrowings from State of California(5)                                            |                                          |         | 28,000 
|                                     |                                                                                   | average rates (fixed rate)               |         |        
|                                     | Term borrowings(5)                                                                |                                          |         |       
|                                     |                                                                                   | average rates (fixed rate)               |         |        
|                                     | Trust preferred securities(2)                                                     |                                          |         |       
|                                     |                                                                                   | average rates (fixed rate)               |         |        
|                                     |                                                                                   |                                          |         |        
|Total interest-sensitive liabilities |                                                                                   | $                                        | 342,045 |        
|                                     |                                                                                   |                                          |         |        

The Company has assumed, for purposes of the above December 31, 2000 "Expected Maturity/Repricing Table", that its U.S. government
sponsored agency callable bonds mature/reprice at the initial call date,
due to the 100 basis point lowering of the federal funds rate by the Federal Reserve in January 2001, and thus the likelihood that these securities will be called.

54

---



|                                     |                                                                    | Expected maturity date or repricing date |         |        
|------------------------------------ | ------------------------------------------------------------------ | ---------------------------------------- | ------- | -------
|
|Interest-Sensitive Assets:           |                                                                    |                                          |         |        
|                                     | Securities purchased under resale agreements (1)                   |                                          | $       | 3,501  
|                                     |                                                                    | average yield (variable rate)            |         |        
|                                     | U.S. government sponsored agency securities available for sale (2) |                                          |         |       
|                                     |                                                                    | average yield (fixed rate)               |         |        
|                                     | Corporate debt securities available for sale (2)                   |                                          |         | 3,833  
|                                     |                                                                    | average yield (variable rate)            |         |        
|                                     | Loans, gross (3)                                                   |                                          |         | 150,364
|                                     |                                                                    | average yield                            |         |        
|                                     |                                                                    |                                          |         |        
|Total interest-sensitive assets      |                                                                    | $                                        | 157,698 |        
|                                     |                                                                    |                                          |         |        
|Interest-Sensitive Liabilities:      |                                                                    |                                          |         |        
|                                     | Money market checking (1)                                          |                                          | $       | 18,783 
|                                     |                                                                    | average rates (variable rate)            |         |        
|                                     | Savings accounts (1)                                               |                                          |         | 196,368
|                                     |                                                                    | average rates (variable rate)            |         |        
|                                     | Certificates of deposit (4)                                        |                                          |         | 84,814 
|                                     |                                                                    | average rates (fixed rate)               |         |        
|                                     | Securities sold under repurchase agreements (1)                    |                                          |         | 30,500 
|                                     |                                                                    | average rates (variable rate)            |         |        
|                                     | Borrowings from State of California (5)                            |                                          |         | 5,000  
|                                     |                                                                    | average rates (fixed rate)               |         |        
|                                     | Term borrowings (5)                                                |                                          |         | 10,000 
|                                     |                                                                    | average rates (fixed rate)               |         |        
|                                     | Trust preferred securities (2)                                     |                                          |         |       
|                                     |                                                                    | average rates (fixed rate)               |         |        
|                                     |                                                                    |                                          |         |        
|Total interest-sensitive liabilities |                                                                    | $                                        | 345,465 |        
|                                     |                                                                    |                                          |         |        

---

The fair value balances reflected in the table were derived as follows:

55

---



ITEM 8. Financial Statements and Supplementary Data

Index to Consolidated Financial Statements

|                                                                                                                |  | Page
|--------------------------------------------------------------------------------------------------------------- |  | ----
|Consolidated Balance Sheets at December 31, 2000 and 1999                                                       |  | 57  
|Consolidated Statements of Income for the years ended December 31, 2000, 1999, and 1998                         |  | 58  
|Consolidated Statements of Changes in Shareholders' Equity for the years ended December 31, 2000, 1999 and 1998 |  | 59  
|Consolidated Statements of Cash Flows for the years ended December 31, 2000, 1999 and 1998                      |  | 60  
|Notes to Consolidated Financial Statements                                                                      |  | 61  
|Report of Deloitte & Touche LLP, Independent Auditors                                                           |  | 90  

56

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PACIFIC CREST CAPITAL, INC.        CONSOLIDATED BALANCE SHEETS        (dollars in thousands, except per share data)

|                                     |                                                                                                                    | December 31,                                                                                                                                                   |                                           
|------------------------------------ | ------------------------------------------------------------------------------------------------------------------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------
|
|Assets                               |                                                                                                                    |                                                                                                                                                                |                                           
|                                     | Cash                                                                                                               |                                                                                                                                                                | $                                         
|                                     | Securities purchased under resale agreements                                                                       |                                                                                                                                                                |                                           
|                                     |                                                                                                                    |                                                                                                                                                                |                                           
|                                     |                                                                                                                    | Cash and cash equivalents                                                                                                                                      |                                           
|                                     |                                                                                                                    |                                                                                                                                                                |                                           
|                                     | Investment securities available for sale, at market                                                                |                                                                                                                                                                |                                           
|                                     | Loans:                                                                                                             |                                                                                                                                                                |                                           
|                                     |                                                                                                                    | Commercial real estate loans                                                                                                                                   |                                           
|                                     |                                                                                                                    | SBA loans held for investment                                                                                                                                  |                                           
|                                     |                                                                                                                    | SBA loans held for sale, at lower of cost or market                                                                                                            |                                           
|                                     |                                                                                                                    | Other loans                                                                                                                                                    |                                           
|                                     |                                                                                                                    |                                                                                                                                                                |                                           
|                                     |                                                                                                                    |                                                                                                                                                                | Gross loans                               
|                                     |                                                                                                                    | Less: deferred loan costs (fees)                                                                                                                               |                                           
|                                     |                                                                                                                    | Less: allowance for loan losses                                                                                                                                |                                           
|                                     |                                                                                                                    |                                                                                                                                                                |                                           
|                                     |                                                                                                                    |                                                                                                                                                                | Net loans                                 
|                                     |                                                                                                                    |                                                                                                                                                                |                                           
|                                     | Accrued interest receivable                                                                                        |                                                                                                                                                                |                                           
|                                     | Prepaid expenses and other assets                                                                                  |                                                                                                                                                                |                                           
|                                     | Deferred income taxes, net                                                                                         |                                                                                                                                                                |                                           
|                                     | Premises and equipment                                                                                             |                                                                                                                                                                |                                           
|                                     | Other real estate owned                                                                                            |                                                                                                                                                                |                                           
|                                     |                                                                                                                    |                                                                                                                                                                |                                           
|                                     |                                                                                                                    | Total assets                                                                                                                                                   |                                           
|                                     |                                                                                                                    |                                                                                                                                                                |                                           
|Liabilities                          |                                                                                                                    |                                                                                                                                                                |                                           
|                                     | Deposits:                                                                                                          |                                                                                                                                                                |                                           
|                                     |                                                                                                                    | Money market checking                                                                                                                                          |                                           
|                                     |                                                                                                                    | Savings accounts                                                                                                                                               |                                           
|                                     |                                                                                                                    | Certificates of deposit                                                                                                                                        |                                           
|                                     |                                                                                                                    |                                                                                                                                                                |                                           
|                                     |                                                                                                                    |                                                                                                                                                                | Total deposits                            
|                                     |                                                                                                                    |                                                                                                                                                                |                                           
|                                     | Borrowings:                                                                                                        |                                                                                                                                                                |                                           
|                                     |                                                                                                                    | Securities sold under repurchase agreements                                                                                                                    |                                           
|                                     |                                                                                                                    | Borrowings from State of California                                                                                                                            |                                           
|                                     |                                                                                                                    | Term borrowings                                                                                                                                                |                                           
|                                     |                                                                                                                    | Company obligated mandatorily redeemable preferred securities of subsidiary trust holding solely junior subordinated debentures ("Trust preferred securities") |                                           
|                                     |                                                                                                                    |                                                                                                                                                                |                                           
|                                     |                                                                                                                    |                                                                                                                                                                | Total borrowings                          
|                                     |                                                                                                                    |                                                                                                                                                                |                                           
|                                     |                                                                                                                    |                                                                                                                                                                | Total interest-bearing liabilities        
|                                     | Accrued interest payable and other liabilities                                                                     |                                                                                                                                                                |                                           
|                                     |                                                                                                                    |                                                                                                                                                                |                                           
|                                     |                                                                                                                    |                                                                                                                                                                | Total liabilities                         
|                                     |                                                                                                                    |                                                                                                                                                                |                                           
|Shareholders' Equity                 |                                                                                                                    |                                                                                                                                                                |                                           
|                                     | Common stock, $.01 par value (10,000,000 shares authorized, 2,986,530 shares issued at December 31, 2000 and 1999) |                                                                                                                                                                |                                           
|                                     | Additional paid-in capital                                                                                         |                                                                                                                                                                |                                           
|                                     | Retained earnings                                                                                                  |                                                                                                                                                                |                                           
|                                     | Accumulated other comprehensive loss                                                                               |                                                                                                                                                                |                                           
|                                     | Common stock in treasury, at cost (471,110 shares at December 31, 2000 and 384,806 shares at December 31, 1999)    |                                                                                                                                                                |                                           
|                                     |                                                                                                                    |                                                                                                                                                                |                                           
|                                     |                                                                                                                    |                                                                                                                                                                | Total shareholders' equity                
|                                     |                                                                                                                    |                                                                                                                                                                |                                           
|                                     |                                                                                                                    |                                                                                                                                                                | Total liabilities and shareholders' equity
|                                     |                                                                                                                    |                                                                                                                                                                |                                           
|Tangible book value per common share |                                                                                                                    | $                                                                                                                                                              | 13.49                                     

See accompanying Notes to Consolidated Financial Statements.

57

---



PACIFIC CREST CAPITAL, INC.        CONSOLIDATED STATEMENTS OF INCOME        (dollars in thousands, except per share data)

|                           |                                                  | Years Ended December 31,                           
|-------------------------- | ------------------------------------------------ | ---------------------------------------------------
|
|Interest income:           |                                                  |                                                    
|                           | Loans                                            |                                                    
|                           | Securities purchased under resale agreements     |                                                    
|                           | Investment securities:                           |                                                    
|                           |                                                  | Available for sale                                 
|                           |                                                  | Held to maturity                                   
|                           |                                                  |                                                    
|                           |                                                  |                                                    
|                           |                                                  |                                                    
|                           |                                                  |                                                    
|                           |                                                  |                                                    
|Interest expense:          |                                                  |                                                    
|                           | Deposits:                                        |                                                    
|                           |                                                  | Money market checking                              
|                           |                                                  | Savings accounts                                   
|                           |                                                  | Certificates of deposit                            
|                           |                                                  |                                                    
|                           |                                                  |                                                    
|                           |                                                  |                                                    
|                           | Borrowings:                                      |                                                    
|                           |                                                  | Securities sold under repurchase agreements        
|                           |                                                  | Borrowings from State of California                
|                           |                                                  | Term borrowings                                    
|                           |                                                  | Trust preferred securities                         
|                           |                                                  |                                                    
|                           |                                                  |                                                    
|                           |                                                  |                                                    
|                           |                                                  |                                                    
|                           |                                                  |                                                    
|Net interest income        |                                                  |                                                    
|Provision for loan losses  |                                                  |                                                    
|                           |                                                  |                                                    
|                           |                                                  | Net interest income after provision for loan losses
|                           |                                                  |                                                    
|Non-interest income:       |                                                  |                                                    
|                           | Loan prepayment and late fee income              |                                                    
|                           | Gain on sale of commercial real estate loans     |                                                    
|                           | Gain on sale of SBA loans                        |                                                    
|                           | Gain on sale of other real estate owned          |                                                    
|                           | Gain (loss) on sale of investment securities     |                                                    
|                           | Other income                                     |                                                    
|                           |                                                  |                                                    
|                           |                                                  | Total non-interest income                          
|                           |                                                  |                                                    
|Non-interest expense:      |                                                  |                                                    
|                           | Salaries and employee benefits                   |                                                    
|                           | Net occupancy expenses                           |                                                    
|                           | Communication and data processing                |                                                    
|                           | Advertising and promotion                        |                                                    
|                           | FDIC insurance premiums                          |                                                    
|                           | Credit and collection expenses                   |                                                    
|                           | Other real estate owned expenses                 |                                                    
|                           | Valuation adjustments to other real estate owned |                                                    
|                           | Other expenses                                   |                                                    
|                           |                                                  |                                                    
|                           |                                                  | Total non-interest expense                         
|                           |                                                  |                                                    
|Income before income taxes |                                                  |                                                    
|Income tax provision       |                                                  |                                                    
|                           |                                                  |                                                    
|                           |                                                  | Net income                                         
|                           |                                                  |                                                    
|Earnings per common share: |                                                  |                                                    
|                           | Basic                                            |                                                    
|                           | Diluted                                          |                                                    

See accompanying Notes to Consolidated Financial Statements.

58

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PACIFIC CREST CAPITAL, INC.        CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY        (dollars in thousands, except per share data)

|                                       |                             | Common
Stock                                                                     |                            | Common
Stock in
Treasury |   | Additional
Paid-in
Capital |   | Retained
Earnings |        | Accumulated
Other
Comprehensive
Income (Loss) |      | Total
Shareholders'
Equity |      
|-------------------------------------- | --------------------------- | -------------------------------------------------------------------------------- | -------------------------- | ------------------------ | - | -------------------------- | - | ----------------- | ------ | --------------------------------------------- | ---- | -------------------------- | -----
|Balance at December 31, 1997           |                             | $                                                                                | 30                         |                          | $ | (1,174                     | ) | $                 | 27,914 |                                               | $    | 849                        |      
|                                       |                             |                                                                                  |                            |                          |   |                            |   |                   |        |                                               |      |                            |      
|Comprehensive income:                  |                             |                                                                                  |                            |                          |   |                            |   |                   |        |                                               |      |                            |      
|                                       | Net income                  |                                                                                  |                            |                         |   |                            |  |                   |        |                                              |      |                            | 4,847
|                                       | Other comprehensive income: |                                                                                  |                            |                          |   |                            |   |                   |        |                                               |      |                            |      
|                                       |                             | Unrealized gain on investment securities available for sale, net of income taxes |                            |                          |  |                            |   |                  |        |                                               |     |                            |      
|                                       |                             |                                                                                  |                            |                          |   |                            |   |                   |        |                                               |      |                            |      
|                                       |                             |                                                                                  | Total comprehensive income |                          |   |                            |   |                   |        |                                               |      |                            |      
|Issuances of common stock:             |                             |                                                                                  |                            |                          |   |                            |   |                   |        |                                               |      |                            |      
|                                       |                             | Employee stock purchase plan                                                     |                            |                          |  |                            |   |                  |        |                                               | 63   |                            |      
|                                       |                             | Non-employee directors' stock purchase plan                                      |                            |                          |  |                            |   |                  |        |                                               | 44   |                            |      
|                                       |                             | Employee stock option plan                                                       |                            |                          |  |                            |   |                  |        |                                               | 36   |                            |      
|Purchase of common stock in treasury   |                             |                                                                                  |                           |                          |   | (3,531                     | ) |                   |       |                                               |      |                           |      
|Cash dividends paid ($0.05 per share)  |                             |                                                                                  |                           |                          |   |                           |   |                   |       |                                               |      | (137                       | )    
|                                       |                             |                                                                                  |                            |                          |   |                            |   |                   |        |                                               |      |                            |      
|Balance at December 31, 1998           |                             | $                                                                                | 30                         |                          | $ | (4,705                     | ) | $                 | 28,057 |                                               | $    | 5,559                      |      
|                                       |                             |                                                                                  |                            |                          |   |                            |   |                   |        |                                               |      |                            |      
|Comprehensive income (loss):           |                             |                                                                                  |                            |                          |   |                            |   |                   |        |                                               |      |                            |      
|                                       | Net income                  |                                                                                  |                            |                         |   |                            |  |                   |        |                                              |      |                            | 5,055
|                                       | Other comprehensive loss:   |                                                                                  |                            |                          |   |                            |   |                   |        |                                               |      |                            |      
|                                       |                             | Unrealized loss on investment securities available for sale, net of income taxes |                            |                          |  |                            |   |                  |        |                                               |     |                            |      
|                                       |                             |                                                                                  |                            |                          |   |                            |   |                   |        |                                               |      |                            |      
|                                       |                             |                                                                                  | Total comprehensive loss   |                          |   |                            |   |                   |        |                                               |      |                            |      
|Issuances of common stock in treasury: |                             |                                                                                  |                            |                          |   |                            |   |                   |        |                                               |      |                            |      
|                                       |                             | Employee stock purchase plan                                                     |                            |                          |  |                            |   | 66                |        |                                               | (12  | )                          |      
|                                       |                             | Non-employee directors' stock purchase plan                                      |                            |                          |  |                            |   | 51                |        |                                               |     |                            |      
|                                       |                             | Employee stock option plan                                                       |                            |                          |  |                            |   | 264               |        |                                               | (160 | )                          |      
|Purchase of common stock in treasury   |                             |                                                                                  |                           |                          |   | (1,665                     | ) |                   |       |                                               |      |                           |      
|Cash dividends paid ($0.24 per share)  |                             |                                                                                  |                           |                          |   |                           |   |                   |       |                                               |      | (636                       | )    
|                                       |                             |                                                                                  |                            |                          |   |                            |   |                   |        |                                               |      |                            |      
|Balance at December 31, 1999           |                             | $                                                                                | 30                         |                          | $ | (5,989                     | ) | $                 | 27,885 |                                               | $    | 9,978                      |      
|                                       |                             |                                                                                  |                            |                          |   |                            |   |                   |        |                                               |      |                            |      
|Comprehensive income:                  |                             |                                                                                  |                            |                          |   |                            |   |                   |        |                                               |      |                            |      
|                                       | Net income                  |                                                                                  |                            |                         |   |                            |  |                   |        |                                              |      |                            | 5,270
|Other comprehensive income:            |                             |                                                                                  |                            |                          |   |                            |   |                   |        |                                               |      |                            |      
|                                       |                             | Unrealized gain on investment securities available for sale, net of income taxes |                            |                          |  |                            |   |                  |        |                                               |     |                            |      
|                                       |                             |                                                                                  |                            |                          |   |                            |   |                   |        |                                               |      |                            |      
|                                       |                             |                                                                                  | Total comprehensive income |                          |   |                            |   |                   |        |                                               |      |                            |      
|Issuances of common stock in treasury: |                             |                                                                                  |                            |                          |   |                            |   |                   |        |                                               |      |                            |      
|                                       |                             | Employee stock purchase plan                                                     |                            |                          |  |                            |   | 55                |        |                                               | (14  | )                          |      
|                                       |                             | Non-employee directors' stock purchase plan                                      |                            |                          |  |                            |   | 61                |        |                                               | (11  | )                          |      
|                                       |                             | Employee stock option plan                                                       |                            |                          |  |                            |   | 122               |        |                                               | (70  | )                          |      
|Purchase of common stock in treasury   |                             |                                                                                  |                           |                          |   | (1,149                     | ) |                   |       |                                               |      |                           |      
|Cash dividends paid ($0.28 per share)  |                             |                                                                                  |                           |                          |   |                           |   |                   |       |                                               |      | (706                       | )    
|                                       |                             |                                                                                  |                            |                          |   |                            |   |                   |        |                                               |      |                            |      
|Balance at December 31, 2000           |                             | $                                                                                | 30                         |                          | $ | (6,900                     | ) | $                 | 27,790 |                                               | $    | 14,542                     |      
|                                       |                             |                                                                                  |                            |                          |   |                            |   |                   |        |                                               |      |                            |      

See accompanying Notes to Consolidated Financial Statements.

59

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PACIFIC CREST CAPITAL, INC.        CONSOLIDATED STATEMENTS OF CASH FLOWS        (dollars in thousands)

|                                                     |                                                                        | Years Ended December 31,                            |                                                        
|---------------------------------------------------- | ---------------------------------------------------------------------- | --------------------------------------------------- | -------------------------------------------------------
|
|Operating activities:                                |                                                                        |                                                     |                                                        
|                                                     | Net income                                                             |                                                     | $                                                      
|                                                     | Adjustments to reconcile net income                                    |                                                     |                                                        
|                                                     |                                                                        | to net cash provided by operating activities:       |                                                        
|                                                     |                                                                        |                                                     | Provision for loan losses                              
|                                                     |                                                                        |                                                     | Gain on sale of commercial real estate loans           
|                                                     |                                                                        |                                                     | Gain on sale of SBA loans                              
|                                                     |                                                                        |                                                     | Gain on sale of other real estate owned                
|                                                     |                                                                        |                                                     | (Gain) loss on sale of investment securities           
|                                                     |                                                                        |                                                     | Valuation adjustments to other real estate owned       
|                                                     |                                                                        |                                                     | Depreciation and amortization of premises and equipment
|                                                     |                                                                        |                                                     | Accretion of deferred loan fees                        
|                                                     |                                                                        |                                                     | Accretion of discount on investment securities         
|                                                     |                                                                        |                                                     | Deferred income tax benefit                            
|                                                     |                                                                        |                                                     | Changes in operating assets and liabilities:           
|                                                     |                                                                        |                                                     |                                                        
|                                                     |                                                                        |                                                     |                                                        
|                                                     |                                                                        |                                                     |                                                        
|                                                     |                                                                        |                                                     |                                                        
|                                                     |                                                                        |                                                     |                                                        
|                                                     |                                                                        |                                                     |                                                        
|Investing activities:                                |                                                                        |                                                     |                                                        
|                                                     | Purchases of investment securities available for sale                  |                                                     |                                                        
|                                                     | Proceeds from sales and calls of investment securities:                |                                                     |                                                        
|                                                     |                                                                        | Available for sale                                  |                                                        
|                                                     |                                                                        | Held to maturity                                    |                                                        
|                                                     | Principal payments on investment securities                            |                                                     |                                                        
|                                                     | Loan originations                                                      |                                                     |                                                        
|                                                     | Purchases of loans                                                     |                                                     |                                                        
|                                                     | Proceeds from sales of SBA loans                                       |                                                     |                                                        
|                                                     | Proceeds from sales of commercial real estate loans                    |                                                     |                                                        
|                                                     | Principal payments on loans                                            |                                                     |                                                        
|                                                     | Proceeds from sales of other real estate owned                         |                                                     |                                                        
|                                                     | Purchases of premises and equipment, net                               |                                                     |                                                        
|                                                     |                                                                        |                                                     |                                                        
|                                                     |                                                                        | Net cash used in investing activities               |                                                        
|                                                     |                                                                        |                                                     |                                                        
|Financing activities:                                |                                                                        |                                                     |                                                        
|                                                     | Net (decrease) increase in money market checking                       |                                                     |                                                        
|                                                     | Net (decrease) increase in savings accounts                            |                                                     |                                                        
|                                                     | Net increase in certificates of deposit                                |                                                     |                                                        
|                                                     | Net (decrease) increase in securities sold under repurchase agreements |                                                     |                                                        
|                                                     | Net increase in borrowings from State of California                    |                                                     |                                                        
|                                                     | Net (decrease) increase in term borrowings                             |                                                     |                                                        
|                                                     | Purchases of common stock in treasury, at cost                         |                                                     |                                                        
|                                                     | Cash dividends paid                                                    |                                                     |                                                        
|                                                     | Proceeds from exercise of stock options                                |                                                     |                                                        
|                                                     | Proceeds from employees and directors stock purchase plans             |                                                     |                                                        
|                                                     |                                                                        |                                                     |                                                        
|                                                     |                                                                        | Net cash provided by (used in) financing activities |                                                        
|                                                     |                                                                        |                                                     |                                                        
|Net increase (decrease) in cash and cash equivalents |                                                                        |                                                     | 553                                                    
|Cash and cash equivalents at beginning of period     |                                                                        |                                                     | 4,783                                                  
|                                                     |                                                                        |                                                     |                                                        
|Cash and cash equivalents at end of period           |                                                                        | $                                                   | 5,336                                                  
|                                                     |                                                                        |                                                     |                                                        

See accompanying Notes to Consolidated Financial Statements.

60

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PACIFIC CREST CAPITAL, INC.        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS        December 31, 2000

Note 1. Organization

Pacific
Crest Capital, Inc. ("Pacific Crest" or the "Parent") is a bank holding company principally engaged in commercial real estate lending and Small Business Administration
("SBA") lending through its wholly owned subsidiary, Pacific Crest Bank (the "Bank"). During the fourth quarter of 1999, Pacific Crest became a bank holding company regulated by the Board of Governors
of the Federal Reserve System (the "Federal Reserve") as part of the conversion of the Bank's charter to that of a state commercial bank. Unless the context otherwise indicates, the "Company" refers
to Pacific Crest and its wholly owned subsidiaries, Pacific Crest Bank and PCC Capital I.

Pacific
Crest Bank is a California state chartered commercial bank that is supervised and regulated by the California Commissioner of Financial Institutions (the "Commissioner"), the
California Department of Financial Institutions (the "Department" or "DFI"), and the Federal Deposit Insurance Corporation ("FDIC"). The Bank's deposits are insured by the FDIC up to applicable
limits. In September of 1999, the Bank filed an application with the DFI to convert from a California state chartered industrial bank to a California state chartered commercial bank. In December of
1999, the Bank received all of the necessary regulatory approvals, and, on December 15, 1999 completed its conversion from a California state chartered industrial bank to a California state
chartered commercial bank. The Bank converted to a California state chartered commercial bank primarily in order to offer full-service checking accounts and pursue full-service
online banking. The Bank introduced full-service, demand deposit checking accounts to all of its customers in the fourth quarter of 2000.

Pacific
Crest Bank is a business bank and concentrates on marketing to and serving the needs of investors, entrepreneurs, and small to medium-sized businesses located primarily in
California, and, to a lesser extent, Arizona, Washington, Oregon, and Texas. The Bank conducts its deposit operations through three branch offices located in Beverly Hills, Encino, and San Diego,
California. The Bank currently offers consumer demand deposit checking accounts, money market checking accounts, savings accounts, and certificates of deposit. However, the Bank does not offer other
traditional banking services such as travelers' checks, money orders, credit cards, safe deposit boxes, or trust services. The Bank has focused its lending activities on loans secured by commercial
real estate and small business loans under various federal SBA loan programs. The Bank conducts its lending operations in Southern California through its lending and marketing representatives and
through its correspondent loan brokers located in Northern California, Arizona, Washington, Oregon, and Texas.

PCC
Capital I ("PCC Capital") is a statutory business trust that was created under Delaware law for the exclusive purpose of issuing and selling $17.25 million of 9.375%
Cumulative Trust Preferred Securities (the "Trust Preferred Securities"). The Trust Preferred Securities are presented on a separate line on the Consolidated Balance Sheets under the caption "Company
obligated mandatorily redeemable preferred securities of subsidiary trust holding solely junior subordinated debentures." For
financial reporting purposes, the Company records the dividend distributions on the Trust Preferred Securities as "Interest expensetrust preferred securities" on its Consolidated
Statements of Income.

Note 2. Summary of Significant Accounting Policies



The Consolidated Financial Statements include the accounts of Pacific Crest and its wholly owned subsidiaries, the Bank and PCC Capital. All significant
intercompany transactions have been eliminated.

61

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Certain amounts in the prior years' Consolidated Financial Statements have been reclassified to conform to the current year presentation.

The
Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America. In preparing the Consolidated
Financial Statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheets and revenues and expenses
for the year. Actual results in future years could differ from those estimates by management in the current year. Material estimates that are particularly susceptible to significant change relate to
the determination of the allowance for loan losses and the valuation allowance for other real estate owned.



The Company is organized and operated as a single reporting segment principally engaged in commercial real estate lending and SBA lending. The Company's
lending activities concentrate on marketing to and serving the needs of investors, entrepreneurs, and small to medium-sized businesses located primarily in California, and, to a lesser extent,
Arizona, Washington, Oregon and Texas. The Company conducts its deposit operations through three branch offices, located in Southern California. The Consolidated Financial Statements, as they appear
in this document, represent the grouping of revenue and expense items as they are presented to executive management of the Company, for use in strategically directing the operations of the Company.



For purposes of the Consolidated Balance Sheets and Consolidated Statements of Cash Flows, cash and cash equivalents include cash and securities purchased
under resale agreements which have original maturities of three months or less and are carried at cost.



The Company invests excess cash overnight and up to three months in securities purchased under resale agreements ("repurchase agreements"). Collateral securing
the repurchase agreements is limited to U.S. Treasury bonds, notes and bills, and securities issued by either U.S. government agencies or U.S. government sponsored agencies. Collateral securing the
repurchase agreements is held for safekeeping under third-party custodial agreements and is required to be segregated and separately
accounted for from all other securities held by the custodian for its other customers or for its own account.



The Company invests in U.S. government sponsored agency securities, and to a lesser extent, investment grade corporate debt securities. At the date of
purchase, the Company elects to segregate the security into either the held to maturity portfolio or the available for sale portfolio, depending upon management's ability and intent to hold such
securities to maturity. Debt securities classified as held to maturity are recorded at amortized cost while securities classified as available for sale are recorded at market. Unrealized gains or
losses on securities available for sale are excluded from earnings and reported in "Accumulated other comprehensive income (loss)" as a separate component of Shareholders' Equity, net of tax effect.
Realized gains or losses are recorded using the specific identification method. Purchase premiums and discounts are recognized in interest income using the level yield method.

62

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Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off generally are reported at their
outstanding unpaid principal balances adjusted for charge-offs, the allowance for loan losses, and any deferred fees or costs on originated loans. Interest income is accrued on the unpaid
principal balance. Loan origination fees, net of certain estimated indirect origination costs, are deferred and recognized as an adjustment of the related loan yield using the interest method over the
term of the loan.



SBA loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated market value in the aggregate. Net unrealized
losses, if any, are recognized through a valuation allowance by charges to income.



The Company charges current income in amounts necessary to maintain a general allowance for loan losses deemed adequate to cover potential losses on loans. The
amount of the allowance is based on management's evaluation of numerous factors including adequacy of collateral, which includes loan balance to collateral value, loan debt service coverage ratio and
secondary collateral, if applicable. Other factors include an evaluation of the strengths and weaknesses of the borrower's financial position, and strengths and weaknesses of the tenants in the
properties. In addition, management evaluates current delinquency trends, historical Company loan loss experience, regional real estate economic conditions and overall economic trends impacting the
Company's real estate lending portfolio. The combination of these factors are utilized in establishing the allowance for loan losses.



Assets classified as other real estate owned ("OREO") include foreclosed real estate owned by the Company. The Company records and carries its OREO at the
lower of cost or fair value, which may require the Company to make valuation adjustments to its OREO, based on current collateral appraisal
data and other relevant information, which may effectively reduce the book value of such assets to their estimated fair value less selling cost. The fair value of the real estate takes into account
the real estate values net of expenses such as brokerage commissions, past due property taxes, property repair expenses, and other items. The estimated sale price utilized by the Company to help
determine fair value may not necessarily reflect the appraisal value, which management believes, in some cases, to be higher than what could be realized in a sale of the OREO.



Deferred income tax assets and liabilities are determined using the liability (or balance sheet) method. Under this method, the net deferred tax asset or
liability is determined based on the tax effects of the temporary differences between the financial statement amounts of assets and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable income in the years when those temporary differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

63

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Office furniture, fixtures, equipment, and leasehold improvements are carried at cost, less accumulated depreciation. Depreciation and amortization are
provided principally on the straight-line method over the estimated useful lives of the property. Office furniture, fixtures and equipment are generally estimated to have useful lives of
between three and eight years. Leasehold improvements are amortized over either the useful life or the life of the lease, whichever is shorter.



In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin ("SAB") No. 101,Revenue
Recognition in Financial Statements, effective December 2000. The adoption of this bulletin had no impact on the financial position or results of operations of the
Company.

Statement
of Financial Accounting Standards ("SFAS") No. 133,Accounting for Derivative Instruments and Hedging Activities("SFAS 133"), is effective for all years beginning after June 15, 2000. SFAS 133, as amended, established accounting and reporting standards for derivative instruments, including
certain derivative instruments embedded in other contracts, and for hedging activities. Under SFAS 133, certain contracts that were not formerly considered derivatives may now meet the
definition of a derivative. The Company will adopt SFAS 133 effective January 1, 2001. Management does not expect that the adoption of SFAS 133 will have a material impact on the
financial position or results of operations of the Company.

In
September 2000, SFAS No. 140,Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities("SFAS 140"), was issued and replaced SFAS No. 125,Accounting for Transfers and Servicing of Financial Assets andExtinguishments of Liabilities("SFAS 125"). SFAS 140 revises the standards for accounting for
securitizations and other transfers of
financial assets and collateral and requires certain disclosures, but it carries over most of the provisions of SFAS 125 without reconsideration. SFAS 140 is effective for transfers and
servicing of financial assets and extinguishments of liabilities occurring after March 31, 2001. This statement is effective for recognition and reclassification of collateral and for
disclosures related to securitization transactions and collateral for fiscal years ending after December 15, 2000. It is not expected that the adoption of SFAS 140 will have a material
impact on the Company's results of operations or financial position.

Note 3. Supplemental Disclosure of Cash Flow Information

Supplemental disclosure of cash flow information is as follows for the periods indicated (in thousands):

|                                             |                                                 | Years Ended December 31,
|-------------------------------------------- | ----------------------------------------------- | ------------------------
|
|Cash paid during the year for:               |                                                 |                         
|                                             | Interest                                        |                         
|                                             | Income taxes                                    |                         
|Non-cash investing and financing activities: |                                                 |                         
|                                             | Transfers from loans to other real estate owned |                         
|                                             | Loans made to facilitate the sale of OREO       |                         
|                                             |                                                 |                         

64

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Note 4. Computation of Earnings per Common Share

Basic
and diluted earnings per common share were determined by dividing net income by the applicable basic and diluted weighted average common shares outstanding. For the diluted
earnings per share computation, the weighted average common shares outstanding were adjusted to reflect the number of common stock equivalents outstanding based on the number of outstanding stock
options issued by the Company utilizing the treasury stock method.

The
table below presents the basic and diluted earnings per share computations for the periods indicated (in thousands, except per share data):

|                                                   |         | Years Ended December 31,
|-------------------------------------------------- | ------- | ------------------------
|
|Net income                                         |         | $                       
|                                                   |         |                         
|Basic weighted average common shares outstanding   |         |                         
|Dilutive effect of stock options                   |         |                         
|                                                   |         |                         
|Diluted weighted average common shares outstanding |         |                         
|                                                   |         |                         
|Earnings per common share:                         |         |                         
|                                                   | Basic   |                         
|                                                   | Diluted |                         
|                                                   |         |                         

Note 5. Computation of Book Value per Common Share

Book
value per common share was calculated by dividing total shareholders' equity by the number of common shares issued less common shares held in treasury. The table below presents
the computation of book value per common share as of the dates indicated (in thousands, except per share data):

|                                     |  | December 31, |          
|------------------------------------ |  | ------------ | ---------
|
|Total shareholders' equity           |  | $            | 33,930   
|                                     |  |              |          
|Common shares issued                 |  |              | 2,986,530
|Less: common shares held in treasury |  |              | (471,110 
|                                     |  |              |          
|Common shares outstanding            |  |              | 2,515,420
|                                     |  |              |          
|Tangible book value per common share |  | $            | 13.49    
|                                     |  |              |          

65

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Note 6. Investment Securities

The
Company's investment securities have been classified in the Consolidated Balance Sheets according to management's intent and ability. The following table presents the amortized
cost and estimated fair values of the Company's investment securities available for sale as of the dates indicated (dollars in thousands):

|                                          |                                              | December 31, 2000          |                            
|----------------------------------------- | -------------------------------------------- | -------------------------- | ---------------------------
|
|
|
|Investment securities available for sale: |                                              |                            |                            
|                                          | U.S. government sponsored agency securities: |                            |                            
|                                          |                                              | Callable bonds             |                            
|                                          |                                              | Mortgage-backed securities |                            
|                                          | Corporate debt securities                    |                            |                            
|                                          |                                              |                            |                            
|                                          |                                              |                            | Total investment securities
|                                          |                                              |                            |                            

|                                          |                                              | December 31, 1999          |                            
|----------------------------------------- | -------------------------------------------- | -------------------------- | ---------------------------
|
|
|
|Investment securities available for sale: |                                              |                            |                            
|                                          | U.S. government sponsored agency securities: |                            |                            
|                                          |                                              | Callable bonds             |                            
|                                          |                                              | Mortgage-backed securities |                            
|                                          | Corporate debt securities                    |                            |                            
|                                          |                                              |                            |                            
|                                          |                                              |                            | Total investment securities
|                                          |                                              |                            |                            

The
Company's investment securities portfolio at December 31, 2000 consisted of fixed rate investments in U.S. government sponsored agency callable bonds and mortgage-backed
securities issued by Fannie Mae, Freddie Mac, the Federal Home Loan Bank and the Government National Mortgage Corporation, as well as variable rate investments in investment grade corporate debt
securities. The callable bonds have call features that allow the issuer to retire (call) an individual security prior to that security's stated maturity date. The corporate debt securities are
variable rate instruments whose index is based upon the Three Month London Interbank Offered Rate ("LIBOR") and whose rate reprices on a quarterly basis.

U.S.
government sponsored agency securities with market values totaling $109.9 million and $98.7 million were pledged to secure borrowings aggregating
$91.5 million and $90.5 million at December 31, 2000 and 1999, respectively.

66

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The following table reflects the scheduled maturities in the Company's investment securities portfolio at December 31, 2000 (dollars in thousands):

|                                       |  | December 31, 2000 |        
|-------------------------------------- |  | ----------------- | -------
|
|Due in one year or less                |  | $                 |       
|Due after one year through five years  |  |                   | 76,360 
|Due after five years through ten years |  |                   | 152,820
|Due after ten years                    |  |                   | 7,909  
|                                       |  |                   |        
|Total investment securities            |  | $                 | 237,089
|                                       |  |                   |        

The
following table presents gross realized gains and losses on sales of investment securities and proceeds from sales and calls of investment securities for the periods indicated (in
thousands):

|                                          |                 | Years Ended December 31, |       
|----------------------------------------- | --------------- | ------------------------ | ------
|
|Gross realized gains                      |                 | $                        |      
|Gross realized losses                     |                 |                          | (2    
|                                          |                 |                          |       
|                                          | Net gain (loss) |                          | $     
|                                          |                 |                          |       
|Applicable income tax benefit (provision) |                 | $                        | 1     
|                                          |                 |                          |       
|Proceeds from sales and calls             |                 | $                        | 14,453
|                                          |                 |                          |       

Note 7. Loans

The Company is engaged primarily in commercial real estate term lending in the state of California. Loans are principally secured by commercial real estate and
are generally contractually due over periods of up to ten years.

The
activities in the allowance for loan losses for the periods indicated are presented in the table below (in thousands):

|                                                 |             | Years Ended December 31,          |      
|------------------------------------------------ | ----------- | --------------------------------- | -----
|
|Allowance for loan losses at beginning of period |             | $                                 | 6,450
|Provision for loan losses                        |             |                                   | 604  
|Net loan (charge-offs) recoveries:               |             |                                   |      
|                                                 | Charge-offs |                                   |      
|                                                 | Recoveries  |                                   |      
|                                                 |             |                                   |      
|                                                 |             | Net loan (charge-offs) recoveries |      
|                                                 |             |                                   |      
|Allowance for loan losses at end of period       |             | $                                 | 7,240
|                                                 |             |                                   |      

67

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Accounts which are deemed uncollectible by management or for which no payment has been received for five consecutive months are charged-off for the amount that is not
collateralized by the estimated fair value less selling costs of the underlying real estate collateral.



It is the Company's policy to suspend the recognition of income on any loan when any installment payment is 61 days or more contractually delinquent or
when management otherwise determines that collectibility of principal or interest is unlikely prior to the loan becoming 61 days past due. Recognition of income generally is resumed, and
suspended income is recognized, when the loan becomes contractually current. At December 31, 2000, 1999 and 1998, the Company had non-accrual loans totaling $0, $210,000 and $0,
respectively, which were 61 days or more contractually delinquent. The amounts of contractual interest, interest recognized and interest foregone on these non-accrual loans for the
periods indicated are presented in the table below (in thousands):

|                   |                           | Years Ended December 31,
|------------------ | ------------------------- | ------------------------
|
|Non-accrual loans: |                           |                         
|                   | Contractual interest      |                         
|                   | Less: interest recognized |                         
|                   |                           |                         
|                   |                           | Interest foregone       
|                   |                           |                         



The Company classifies certain loans as impaired. A loan is considered impaired when, based on current information and events, it is probable that the Company
will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment
include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment
shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into
consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower's prior payment record, and the amount of the
shortfall in relation to the principal and interest owed. Impaired loans are generally measured by the Company based on the present value of expected future cash flows discounted at the loan's
effective rate unless the loan is fully collateralized. The table below summarizes loan impairment data as of the dates or for the periods indicated (in thousands):

|                                              |  | At or For the Years Ended December 31,
|--------------------------------------------- |  | --------------------------------------
|
|Investment in impaired loans                  |  | $                                     
|Valuation reserveimpaired loans              |  |                                       
|Average recorded investment in impaired loans |  |                                       
|                                              |  |                                       

68

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During 1998, the Company initiated a commercial real estate loan program designed to produce fixed rate loan product for both the Company's portfolio and for
potential sale in the secondary market. During the first quarter of 1999, the Company established an office in Orange County, California to
coordinate and originate loans under this program. In January of 2000, the Company closed this office, eliminated the personnel associated with this operation, and moved the remaining lending activity
of this program to its headquarters in Agoura Hills, California. There were no loan sales under this program in 2000 and 1999, compared to sales of eight loans with a principal balance of
$9.5 million for a total gain of $467,000 in 1998.



During 1997, the Company initiated an SBA 7(a) loan program. Loans made under this program generally are made to small businesses to provide working capital or
to provide funding for the purchase of businesses, real estate, or machinery and equipment. SBA 7(a) loans are all variable rate based upon theWall Street
Journalprime lending rate. The SBA generally guarantees 75%85% of the loan balance. Under the SBA 7(a) program, the Company can sell in the secondary market the
guaranteed portion of selected SBA loans that it originates and can retain the unguaranteed portion of the loans, as well as the servicing on the loans, for which it is paid a fee. The loan servicing
spread is generally a minimum of 1.00% on all loans.

During
the fourth quarter of 2000, the Company initiated an SBA 504 loan program. Loans made by the Company under this program generally are made to small businesses to provide
funding for the purchase of real estate. Under this program, the Company generally provides up to 90% financing of the total purchase cost, represented by two loans to the borrower. The first lien
loan is generally a long-term, fixed rate loan and made in the amount of 50% of the total purchase cost. The second lien loan is a short-term, variable rate loan, based upon
theWall Street Journalprime lending rate, and made in the amount of 40% of the total purchase cost. The Company's second lien loan serves as an
interim bridge loan to the borrower until the Certified Development Corporation ("CDC") obtains bond funding, pays off the Company's second lien loan, and provides long-term, fixed rate
financing directly to the borrower. The CDC pays off the Company's second lien loan generally within three months after the loan proceeds have been fully disbursed by the Company to the borrower. The
CDC is a non-profit corporation established to contribute to the economic development of its community by working together with the SBA and private sector lenders such as the Bank, to
provide financing to small businesses.

The
table below presents information related to SBA loan sales for the periods indicated (dollars in thousands):

|                       |  | Years Ended December 31,
|---------------------- |  | ------------------------
|
|Number of loans sold   |  |                         
|Principal balance sold |  | $                       
|Gain on sale           |  | $                       
|                       |  |                         

69

---

As of December 31, 2000, the Company had $10.9 million of SBA loans in its loan portfolio that were designated as held for sale, which consisted of $8.8 million
of the guaranteed portion of 7(a) loans and $2.1 million of 504 loans. As of December 31, 1999, the Company had $3.3 million of SBA loans held for sale which consisted entirely of
the guaranteed portion of 7(a) loans.

The
guaranteed portion of SBA loans that the Company had sold and was servicing for others at December 31, 2000 and 1999 was $8.5 million and $7.5 million,
respectively. These balances were not included in the Consolidated Balance Sheets.

Note 8. Other Real Estate Owned

Other real estate owned is included in the Consolidated Balance Sheets at the lower of cost or fair value less estimated selling costs and the associated
valuation allowance. The following tables reflect the balance of the Company's OREO, as well as changes in the valuation allowance for OREO as of the dates or for the periods indicated (in thousands):

|                               |                              | December 31, |  
|------------------------------ | ---------------------------- | ------------ | -
|
|Other real estate owned, gross |                              | $            | 
|Less: valuation allowance      |                              |              | 
|                               |                              |              |  
|                               | Other real estate owned, net |              | $
|                               |                              |              |  

|                                                |                                           | Years Ended December 31, |  
|----------------------------------------------- | ----------------------------------------- | ------------------------ | -
|
|OREO valuation allowance at beginning of period |                                           | $                        | 
|Valuation adjustments                           |                                           |                          | 
|Net charge-offs                                 |                                           |                          | 
|                                                |                                           |                          |  
|                                                | OREO valuation allowance at end of period |                          | $
|                                                |                                           |                          |  

Note 9. Premises and Equipment

Premises and equipment of the Company is presented in the table below as of the dates indicated (in thousands):

|                                                |                               | December 31, |       
|----------------------------------------------- | ----------------------------- | ------------ | ------
|
|Office furniture, fixtures and equipment        |                               | $            | 2,386 
|Leasehold improvements                          |                               |              | 885   
|                                                | Premises and equipment, gross |              |       
|                                                |                               |              |       
|Less: accumulated depreciation and amortization |                               |              | (1,959
|                                                |                               |              |       
|                                                | Premises and equipment, net   |              | $     
|                                                |                               |              |       

Depreciation
expense for the years ended December 31, 2000, 1999 and 1998 amounted to $326,000, $329,000, and $275,000, respectively.

70

---

Note 10. Deposits

Savings accounts and money market checking accounts have no contractual maturity. Certificates of deposit have maturities ranging from 30 days to five
years. The approximate remaining maturities of certificates of deposit in amounts less than $100,000 and $100,000 or more as of December 31, 2000 were as follows (in thousands):

|                                        |       | Certificates of Deposit
|--------------------------------------- | ----- | -----------------------
|
|Three months or less                    |       | $                      
|Over three months through twelve months |       |                        
|Over one year through three years       |       |                        
|Over three years through five years     |       |                        
|                                        |       |                        
|                                        | Total |                        
|                                        |       |                        

Note 11. Securities Sold Under Repurchase Agreements

Securities sold under repurchase agreements are summarized as follows as of the dates or for the periods indicated (dollars in thousands):

|                                                    |  | At or For the Years Ended December 31, |       
|--------------------------------------------------- |  | -------------------------------------- | ------
|
|Balance at year-end                                 |  | $                                      | 23,500
|Average amount outstanding during the year          |  |                                        | 31,153
|Maximum amount outstanding at any month-end         |  |                                        | 51,100
|Weighted average interest rate during the year      |  |                                        | 6.49  
|Weighted average interest rate on year-end balances |  |                                        | 6.61  
|                                                    |  |                                        |       

The
Company has short-term borrowing relationships with several brokers. The repayment terms on this short-term debt range from one day to three months. The
interest rate paid can vary daily, but typically approximates the federal funds rate plus 25 basis points. These borrowings are secured by pledging specific amounts of certain U.S. government
sponsored agency securities. The Company utilizes these borrowings to cover short-term financing needs.

Note 12. Borrowings from State of California

The Bank has a fixed rate borrowing facility with the State of California Treasurer's Office under which the Bank can borrow an amount not to exceed its
unconsolidated total shareholder's equity. Borrowing maturity dates under this program cannot exceed one year. The State of California requires collateral with a market value of at least 110% of the
outstanding borrowing amount. The Bank has pledged specific amounts of certain U.S. government sponsored agency securities to meet this collateral requirement. As of December 31, 2000, the
Bank's total unconsolidated shareholder's equity was $46.2 million and the Bank's outstanding borrowings from the State of California totaled $28.0 million.

71

---

The tables below describe the attributes of the Bank's borrowings from the State of California as of the dates indicated (dollars in thousands):

|              |                                      | December 31, 2000
|------------- | ------------------------------------ | -----------------
|
|October 2000  |                                      | $                
|August 2000   |                                      |                  
|October 2000  |                                      |                  
|December 2000 |                                      |                  
|              |                                      |                  
|              | Total State of California borrowings |                  
|              |                                      |                  

|              |                                      | December 31, 1999
|------------- | ------------------------------------ | -----------------
|
|October 1999  |                                      | $                
|October 1999  |                                      |                  
|November 1999 |                                      |                  
|December 1999 |                                      |                  
|              |                                      |                  
|              | Total State of California borrowings |                  
|              |                                      |                  

Note 13. Term Borrowings

The
Company had fixed rate, long-term borrowings through one broker at December 31, 2000 and 1999. This debt is secured by pledging specific amounts of certain U.S.
government sponsored agency securities. In the past, these borrowings had call features that allowed the lender to call the debt prior to the stated maturity. The $40.0 million borrowings
outstanding at December 31, 2000 have no call features and will mature at various times during 2002.

The
tables below describe the attributes of the Company's term borrowings as of the dates indicated (dollars in thousands):

|               |                       | December 31, 2000
|-------------- | --------------------- | -----------------
|
|October 2000   |                       | $                
|September 2000 |                       |                  
|October 2000   |                       |                  
|               |                       |                  
|               | Total term borrowings |                  
|               |                       |                  

|               |                       | December 31, 1999
|-------------- | --------------------- | -----------------
|
|January 1998   |                       | $                
|September 1999 |                       |                  
|October 1999   |                       |                  
|               |                       |                  
|               | Total term borrowings |                  
|               |                       |                  

72

---

Note 14. Company Obligated Mandatorily Redeemable Preferred Security of Subsidiary of Trust Holding Solely Junior Subordinated Debentures

On
September 22, 1997, PCC Capital completed a $17.25 million public offering of the Trust Preferred Securities and invested the gross proceeds from the offering in junior subordinated
debentures issued by Pacific Crest bearing interest at 9.375%. The junior subordinated debentures were issued concurrent with the issuance of the Trust Preferred Securities. The interest on the junior
subordinated debentures paid by Pacific Crest to PCC Capital represents the sole revenues of PCC Capital and the sole source of dividend distributions to the holders of the Trust Preferred Securities.
Pacific Crest has fully and unconditionally guaranteed all of PCC Capital's obligations under the Trust Preferred Securities. Pacific Crest has the right, assuming no default has occurred, to defer
payments of interest on the junior subordinated debentures at any time for a period not to exceed 20 consecutive quarters. The Trust Preferred Securities will mature on October 1, 2027, but can
be called in part or in total anytime after October 1, 2002 by PCC Capital.

Note 15. Income Taxes

The income tax provision for the periods indicated is presented in the table below (in thousands):

|                     |         | Years Ended December 31,     |      
|-------------------- | ------- | ---------------------------- | -----
|
|Current:             |         |                              |      
|                     | Federal |                              | $    
|                     | State   |                              |      
|                     |         |                              |      
|                     |         | Current income tax provision |      
|                     |         |                              |      
|Deferred:            |         |                              |      
|                     | Federal |                              |      
|                     | State   |                              |      
|                     |         |                              |      
|                     |         | Deferred income tax benefit  |      
|                     |         |                              |      
|Income tax provision |         | $                            | 3,772
|                     |         |                              |      

The
income tax effects of temporary differences that give rise to significant portions of the deferred income tax assets and liabilities as of the dates indicated are
presented in the table below (in thousands):

|                                 |                                                             | December 31,                         |      
|-------------------------------- | ----------------------------------------------------------- | ------------------------------------ | -----
|
|Deferred income tax assets:      |                                                             |                                      |      
|                                 | Unrealized loss on investment securities available for sale |                                      | $    
|                                 | Allowance for loan losses                                   |                                      |      
|                                 | Deferred gain on interest rate cap sale                     |                                      |      
|                                 | Reserves, accruals and state taxes                          |                                      |      
|                                 |                                                             |                                      |      
|                                 |                                                             | Total deferred income tax assets     |      
|                                 |                                                             |                                      |      
|Deferred income tax liabilities: |                                                             |                                      |      
|                                 | State taxes and other                                       |                                      |      
|                                 |                                                             |                                      |      
|                                 |                                                             | Total deferred income tax liablities |      
|                                 |                                                             |                                      |      
|Net deferred income tax asset    |                                                             | $                                    | 6,235
|                                 |                                                             |                                      |      

73

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The table below presents a reconciliation of the provision for income taxes at the federal income tax rate of 35% to the effective income tax rate for the periods
indicated:

|                                                    |                           | Years Ended December 31, |      
|--------------------------------------------------- | ------------------------- | ------------------------ | -----
|
|Income tax based on statutory tax rate              |                           | 35.00                    | %    
|State franchise tax expense, net of federal benefit |                           | 7.07                     | %    
|Valuation allowance                                 |                           | (0.63                    | )%   
|Other, net                                          |                           | (0.35                    | )%   
|                                                    |                           |                          |      
|                                                    | Effective income tax rate |                          | 41.72
|                                                    |                           |                          |      

Note 16. Common Stock

The following table presents the activity in the number of shares of common stock and common stock in treasury for the periods indicated:

|                                      |                                        | Common
Stock                                |   | Common
Stock in
Treasury |          | Total(1)  |         
|------------------------------------- | -------------------------------------- | ------------------------------------------- | - | ------------------------ | -------- | --------- | --------
|Number of shares at December 31, 1997 |                                        | 2,971,946                                   |   | (85,000                  | )        | 2,886,946 |         
|                                      |                                        |                                             |   |                          |          |           |         
|                                      | Issuances of common stock:             |                                             |   |                          |          |           |         
|                                      |                                        | Employee stock purchase plan                |   | 5,874                    |          |          |         
|                                      |                                        | Non-employee directors' stock purchase plan |   | 2,185                    |          |          |         
|                                      |                                        | Employe stock option plan                   |   | 6,525                    |          |          |         
|                                      | Purchases of common stock in treasury  |                                             |  |                          | (210,500 | )         | (210,500
|                                      |                                        |                                             |   |                          |          |           |         
|Number of shares at December 31, 1998 |                                        | 2,986,530                                   |   | (295,500                 | )        | 2,691,030 |         
|                                      |                                        |                                             |   |                          |          |           |         
|                                      | Issuances of common stock in treasury: |                                             |   |                          |          |           |         
|                                      |                                        | Employee stock purchase plan                |   |                         |          | 4,132     |         
|                                      |                                        | Non-employee directors' stock purchase plan |   |                         |          | 3,392     |         
|                                      |                                        | Employe stock option plan                   |   |                         |          | 16,670    |         
|                                      | Purchases of common stock in treasury  |                                             |  |                          | (113,500 | )         | (113,500
|                                      |                                        |                                             |   |                          |          |           |         
|Number of shares at December 31, 1999 |                                        | 2,986,530                                   |   | (384,806                 | )        | 2,601,724 |         
|                                      |                                        |                                             |   |                          |          |           |         
|                                      | Issuances of common stock in treasury: |                                             |   |                          |          |           |         
|                                      |                                        | Employee stock purchase plan                |   |                         |          | 3,520     |         
|                                      |                                        | Non-employee directors' stock purchase plan |   |                         |          | 4,096     |         
|                                      |                                        | Employe stock option plan                   |   |                         |          | 8,080     |         
|                                      | Purchases of common stock in treasury  |                                             |  |                          | (102,000 | )         | (102,000
|                                      |                                        |                                             |   |                          |          |           |         
|Number of shares at December 31, 2000 |                                        | 2,986,530                                   |   | (471,110                 | )        | 2,515,420 |         
|                                      |                                        |                                             |   |                          |          |           |         

---

74

---

Note 17. Dividends

As a Delaware corporation, Pacific Crest may pay common dividends out of surplus or, if there is no surplus, from net profits for the current and preceding
fiscal year. Pacific Crest, on an unconsolidated basis, had approximately $3.9 million in cash and investments less current liabilities and short-term debt at December 31,
2000. However, these funds are necessary to pay future operating expenses of Pacific Crest, service all outstanding debt, including the $17.25 million junior subordinated debentures payable to
PCC Capital, and fund possible future capital infusions into the Bank. Without dividends from the Bank, Pacific Crest must rely solely on existing cash, investments and the ability to secure
borrowings. During 2000, the Company declared and paid cash dividends of $0.28 per common share for a total of $706,000. During 1999, the Company paid cash dividends of $0.24 per common share for a
total of $636,000. On January 23, 2001, the Company declared an $0.08 per common share cash dividend for the first quarter of 2001, payable on March 15, 2001 to shareholders of record as
of March 1, 2001.

The
Bank's ability to pay dividends to Pacific Crest is restricted by California State law, which requires that sufficient retained earnings are available to pay the dividend. During
2000, the Bank paid $2.2 million cash dividends to Pacific Crest. At December 31, 2000, the Bank had retained earnings of $17.9 million available for dividend payments. On
February 2, 2001, the Bank declared a $600,000 cash dividend for the first quarter of 2001, payable to Pacific Crest on March 15, 2001.

Note 18. Accumulated Other Comprehensive Income (Loss)

The following table presents accumulated other comprehensive income (loss) and the components of other comprehensive income (loss) for the periods indicated
(in thousands):

|                                                                     |                                                                                | Years Ended December 31,                                                           |                                                             
|-------------------------------------------------------------------- | ------------------------------------------------------------------------------ | ---------------------------------------------------------------------------------- | ------------------------------------------------------------
|
|Accumulated other comprehensive income (loss) at beginning of period |                                                                                | $                                                                                  | (6,355                                                      
|Other comprehensive income (loss), net of income taxes:              |                                                                                |                                                                                    |                                                             
|                                                                     | Unrealized holding gains (losses) on investment securities available for sale: |                                                                                    |                                                             
|                                                                     |                                                                                | Unrealized holding gains (losses) arising during the period                        |                                                             
|                                                                     |                                                                                | Reclassification of realized net (gains) losses included in net income             |                                                             
|                                                                     |                                                                                |                                                                                    |                                                             
|                                                                     |                                                                                |                                                                                    | Total other comprehensive income (loss), before income taxes
|                                                                     |                                                                                | Income tax (expense) benefit on unrealized holding gains (losses)                  |                                                             
|                                                                     |                                                                                | Income tax expense (benefit) on realized net (gains) losses included in net income |                                                             
|                                                                     |                                                                                |                                                                                    |                                                             
|                                                                     |                                                                                |                                                                                    |                                                             
|                                                                     |                                                                                |                                                                                    |                                                             
|Accumulated other comprehensive income (loss) at end of period       |                                                                                | $                                                                                  | (1,532                                                      
|                                                                     |                                                                                |                                                                                    |                                                             

75

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Note 19. Regulatory Capital Requirements

Pacific Crest is subject to legal and regulatory requirements of the Federal Reserve, while the Bank is subject to legal and regulatory requirements of the
California Financial Code, California General Corporation Law and the FDIC. These legal and regulatory requirements specify certain minimum capital ratios and place limits on the size and type of
loans that may be made.

The
Bank may establish and maintain capital, surplus and undivided profits accounts and may from time to time allocate its shareholder's equity among such accounts so long as no part
of its contributed capital is allocated to the undivided profits account and the undivided profits account never exceeds the Bank's retained earnings.

Both
Pacific Crest and the Bank are subject to various regulatory capital requirements administered by the Federal Reserve and the FDIC. Failure to meet minimum capital requirements
can initiate certain mandatory and possibly additional discretionary actions by the regulators that, if undertaken, could have a direct material effect on Pacific Crest's and the Bank's financial
statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, both Pacific Crest and the Bank must meet specific capital guidelines that involve quantitative
measures of assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. Capital amounts and classification are also subject to qualitative
judgments by the regulators about components, risk weightings and other factors.

Quantitative
measures established by regulation to ensure capital adequacy require both Pacific Crest and the Bank to maintain minimum amounts and ratios as set forth in the table
below of total and Tier 1 capital to risk-weighted assets and Tier 1 capital to average quarterly assets. Management believes that both Pacific Crest and the Bank met all capital adequacy
requirements to which they were subject as of December 31, 2000 and 1999.

As
of December 31, 2000 and 1999, both Pacific Crest and the Bank maintained capital ratios that categorized them as "well capitalized" under the regulatory framework for
prompt corrective action. To be categorized as well capitalized, a company must maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in
the table below. There are no conditions known to management that would have changed either institution's category.

76

---

The following tables present the amounts of regulatory capital and capital ratios for Pacific Crest and the Bank compared to their minimum well capitalized requirements and minimum
capital adequacy requirements as of the dates indicated (dollars in thousands):

|                                 |                                          | Actual                      |  | Minimum
Well Capitalized
Requirements |         | Minimum
Capital Adequacy
Requirements |      
|-------------------------------- | ---------------------------------------- | --------------------------- |  | ------------------------------------- | ------- | ------------------------------------- | -----
|
|December 31, 2000                |                                          |                             |  |                                       |         |                                       |      
|Leverage ratio                  |                                          |                             |  |                                       |         |                                       |      
|                                 | (Tier 1 capital to average total assets) |                             |  |                                       |         |                                       |      
|                                 |                                          | Pacific Crest Capital, Inc. |  | $                                     | 47,263  |                                       | 7.16 
|                                 |                                          | Pacific Crest Bank          |  | $                                     | 47,704  |                                       | 7.36 
|Tier 1 risk-based capital ratio |                                          |                             |  |                                       |         |                                       |      
|                                 | (Tier 1 capital to risk-weighted assets) |                             |  |                                       |         |                                       |      
|                                 |                                          | Pacific Crest Capital, Inc. |  | $                                     | 47,263  |                                       | 10.63
|                                 |                                          | Pacific Crest Bank          |  | $                                     | 47,704  |                                       | 10.82
|Total risk-based capital ratio  |                                          |                             |  |                                       |         |                                       |      
|                                 | (Total capital to risk-weighted assets)  |                             |  |                                       |         |                                       |      
|                                 |                                          | Pacific Crest Capital, Inc. |  | $                                     | 58,270  |                                       | 13.11
|                                 |                                          | Pacific Crest Bank          |  | $                                     | 53,238  |                                       | 12.07
|Average total assets            |                                          |                             |  |                                       |         |                                       |      
|                                 |                                          | Pacific Crest Capital, Inc. |  | $                                     | 659,899 |                                       |      
|                                 |                                          | Pacific Crest Bank          |  | $                                     | 648,488 |                                       |      
|Risk-weighted assets            |                                          |                             |  |                                       |         |                                       |      
|                                 |                                          | Pacific Crest Capital, Inc. |  | $                                     | 444,524 |                                       |      
|                                 |                                          | Pacific Crest Bank          |  | $                                     | 441,009 |                                       |      
|December 31, 1999                |                                          |                             |  |                                       |         |                                       |      
|Leverage ratio                  |                                          |                             |  |                                       |         |                                       |      
|                                 | (Tier 1 capital to average total assets) |                             |  |                                       |         |                                       |      
|                                 |                                          | Pacific Crest Capital, Inc. |  | $                                     | 42,539  |                                       | 6.89 
|                                 |                                          | Pacific Crest Bank          |  | $                                     | 43,586  |                                       | 7.19 
|Tier 1 risk-based capital ratio |                                          |                             |  |                                       |         |                                       |      
|                                 | (Tier 1 capital to risk-weighted assets) |                             |  |                                       |         |                                       |      
|                                 |                                          | Pacific Crest Capital, Inc. |  | $                                     | 42,539  |                                       | 10.18
|                                 |                                          | Pacific Crest Bank          |  | $                                     | 43,586  |                                       | 10.38
|Total risk-based capital ratio  |                                          |                             |  |                                       |         |                                       |      
|                                 | (Total capital to risk-weighted assets)  |                             |  |                                       |         |                                       |      
|                                 |                                          | Pacific Crest Capital, Inc. |  | $                                     | 54,391  |                                       | 13.02
|                                 |                                          | Pacific Crest Bank          |  | $                                     | 48,848  |                                       | 11.64
|Average total assets            |                                          |                             |  |                                       |         |                                       |      
|                                 |                                          | Pacific Crest Capital, Inc. |  | $                                     | 617,669 |                                       |      
|                                 |                                          | Pacific Crest Bank          |  | $                                     | 606,604 |                                       |      
|Risk-weighted assets            |                                          |                             |  |                                       |         |                                       |      
|                                 |                                          | Pacific Crest Capital, Inc. |  | $                                     | 417,788 |                                       |      
|                                 |                                          | Pacific Crest Bank          |  | $                                     | 419,747 |                                       |      

77

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Note 20. Stock Option Plan and Stock Purchase Plans



The 1993 Equity Incentive Plan (the "Plan") is designed to promote and advance the interests of the Company and its shareholders by enabling the Company to
attract, retain and reward key employees. The Plan offers stock and cash incentive awards, as well as stock options. The maximum number of shares of common stock with respect to which awards may be
granted under the Plan was initially 150,000 shares as of December 1993. The number of shares under the Plan are to be increased by two percent (2%) of the total issued and outstanding shares
of the Company's common stock as of the first day of each year, beginning on January 1, 1995. The 2% per year increase of shares available under the Plan continues through the term of the Plan,
which expires on December 31, 2002.

The
maximum number of shares of common stock to which awards may be granted under the Plan at December 31, 2000 was 453,912, of which 439,815 stock options have been issued
through December 31, 2000. The number of common shares added under the Plan on January 1, 2001 was 50,308, increasing the cumulative number of shares that may be awarded under the Plan
to 504,220 after January 1, 2001.

The
table below summarizes the activity of the Plan for the periods indicated:

|                                 |                   | Number of
Option
Shares |         | Range of
Exercise
Prices |             | Weighted
Average
Exercise
Price
|-------------------------------- | ----------------- | ----------------------- | ------- | ------------------------ | ----------- | -------------------------------
|Outstanding at December 31, 1997 |                   | 285,643                 |         | $                        | 3.50-$12.50 |                                
|                                 |                   |                         |         |                          |             |                                
|                                 | Options granted   |                         | 63,600  |                          |             | 15.00-20.25                    
|                                 | Options cancelled |                         | (2,150  | )                        |             | 7.75-18.00                     
|                                 | Options exercised |                         | (6,525  | )                        |             | 6.00-7.56                      
|                                 |                   |                         |         |                          |             |                                
|Outstanding at December 31, 1998 |                   | 340,568                 |         | $                        | 3.50-$20.25 |                                
|                                 |                   |                         |         |                          |             |                                
|                                 | Options granted   |                         | 56,050  |                          |             | 13.75-15.00                    
|                                 | Options cancelled |                         | (25,755 | )                        |             | 7.50-18.00                     
|                                 | Options exercised |                         | (16,670 | )                        |             | 3.50-12.00                     
|                                 |                   |                         |         |                          |             |                                
|Outstanding at December 31, 1999 |                   | 354,193                 |         | $                        | 3.50-$20.25 |                                
|                                 |                   |                         |         |                          |             |                                
|                                 | Options granted   |                         | 73,150  |                          |             | 10.39-12.75                    
|                                 | Options cancelled |                         | (13,186 | )                        |             | 7.56-18.00                     
|                                 | Options exercised |                         | (8,080  | )                        |             | 3.50-12.00                     
|                                 |                   |                         |         |                          |             |                                
|Outstanding at December 31, 2000 |                   | 406,077                 |         | $                        | 3.50-$20.25 |                                
|                                 |                   |                         |         |                          |             |                                

78

---

The
following table presents information on outstanding and exercisable stock options at December 31, 2000:

|            |  |           |  | Stock Options
Outstanding |  | Stock Options
Exercisable
|----------- |  | --------- |  | ------------------------- |  | -------------------------
|
|$3.50$4.00 |  | 4.1 years |  | 5,300                     |  | $                        
|4.016.00   |  | 3.3 years |  | 105,567                   |  |                          
|6.018.00   |  | 4.6 years |  | 76,269                    |  |                          
|10.0012.00 |  | 7.5 years |  | 117,392                   |  |                          
|12.0114.00 |  | 9.2 years |  | 11,500                    |  |                          
|14.0116.00 |  | 7.9 years |  | 39,950                    |  |                          
|16.0118.00 |  | 6.9 years |  | 48,099                    |  |                          
|18.0120.25 |  | 7.1 years |  | 2,000                     |  |                          
|            |  |           |  |                           |  |                          
|            |  | 5.9 years |  | 406,077                   |  | $                        
|            |  |           |  |                           |  |                          

The
Company applies Accounting Principles Board Opinion No. 25,Accounting for Stock Issued to Employees("APB
25"), in accounting for the Plan, whereby compensation cost is measured as the excess, if any, of the quoted market price of the stock at the grant date
over the amount an employee must pay to acquire the stock. Stock options issued under the Plan have no intrinsic value at the grant date, and accordingly, under APB 25, no compensation cost is
recognized for them. Had compensation cost for the Plan been determined based on the fair value at the grant dates for awards under the Plan, consistent with the method prescribed by SFAS
No. 123,Accounting for Stock-based Compensation, the Company's net income and earnings per share would have been reduced to the pro forma
amounts

79

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indicated in the table below for the periods presented (dollars and shares in thousands, except per share data):

|                                            |                         | Years Ended December 31, |  
|------------------------------------------- | ----------------------- | ------------------------ | -
|
|Net income:                                 |                         |                          |  
|                                            | As reported             |                          | $
|                                            | Pro forma               |                          | $
|Basic earnings per common share:            |                         |                          |  
|                                            | As reported             |                          | $
|                                            | Pro forma               |                          | $
|Diluted earnings per common share:          |                         |                          |  
|                                            | As reported             |                          | $
|                                            | Pro forma               |                          | $
|Weighted average common shares outstanding: |                         |                          |  
|                                            | Basic                   |                          |  
|                                            | Diluted                 |                          |  
|                                            |                         |                          |  
|Assumptions:                                |                         |                          |  
|                                            | Dividend yield          |                          |  
|                                            | Expected volatility     |                          |  
|                                            | Risk free interest rate |                          |  
|                                            | Expected life           |                          |  
|                                            |                         |                          |  

The
estimated weighted average fair value of stock options granted during 2000 and 1999 was $4.00 and $5.68 per share, respectively.



The Company maintains an Employee Stock Purchase Plan ("ESPP") which allows employees to purchase shares of the Company's common stock at the lower of fair
value at the beginning of the plan year, or 90% of fair value at the end of the plan year. Employees' purchases may not exceed the lesser of $25,000 or 15% of their annual base compensation. Shares of
common stock purchased under the ESPP are not issuable until the end of the year. The maximum number of shares of common stock that may be issued under the ESPP is 75,000 shares, of which 3,520
treasury shares, for a value of $41,000, were issued in January of 2000. The Company issued 4,237 treasury shares for a value of approximately $55,000 in January of 2001 for employees participating in
the ESPP during the year ended December 31, 2000. There are 41,674 shares available for issuance under the ESPP for 2001.



The Company maintains a Non-Employee Directors' Stock Purchase Plan (the "Directors' Plan"). The Directors' Plan allows the directors to purchase
the stock of the Company from proceeds of their directors' fees. The directors purchased 4,096, 3,392 and 2,185 shares of common stock for a value of $50,000, $51,000 and $44,000 during the years
ended December 31, 2000, 1999, and 1998, respectively, under this plan.

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Note 21. Retirement Savings and Supplemental Benefit Plans

Company employees participate in the Company's 401(k) Plan (the "Retirement Plan"). The Retirement Plan covers substantially all employees. Employees may
contribute up to 15% of their salary up to a maximum of $10,500 for 2000, $10,000 for 1999, and $10,000 for 1998. The Company matches employee contribution amounts equal to 100% of the first 6% of
compensation contributed by each participant. Amounts charged to expense under the Retirement Plan for these matching contributions were $233,000, $243,000, and $219,000 for the years ended
December 31, 2000, 1999, and 1998, respectively.

At
December 31, 2000, four executive officers of the Company participated in the Company's Supplemental Executive Retirement Plan (the "Executive Retirement Plan"). The
Executive Retirement Plan provides for annual retirement benefits that would be payable to the executives on their normal retirement date. The Executive Retirement Plan provides for the offset for
social security benefits and matching 401(k) contributions made under the Retirement Plan. Offsets for social security and 401(k) matching contributions may be substantial.

The
following table presents activity in the Executive Retirement Plan for the periods indicated:

|                                                         |                                               | Years Ended December 31, |       
|-------------------------------------------------------- | --------------------------------------------- | ------------------------ | ------
|
|Change in Benefit Obligation                             |                                               |                          |       
|                                                         | Benefit obligation at beginning of the period |                          | $     
|                                                         | Service cost                                  |                          |       
|                                                         | Interest cost                                 |                          |       
|                                                         | Actuarial (gain) loss                         |                          |       
|                                                         |                                               |                          |       
|                                                         | Benefit obligation at end of the period       |                          |       
|                                                         |                                               |                          |       
|Change in Plan Assets                                    |                                               |                          |       
|Fair value of plan assets at beginning and end of period |                                               |                          |      
|                                                         |                                               |                          |       
|Funded Status                                            |                                               |                          | (1,071
|Unrecognized prior service cost                          |                                               |                          | 175   
|Unrecognized net actuarial (gain) loss                   |                                               |                          | (26   
|                                                         |                                               |                          |       
|Accrued pension cost                                     |                                               | $                        | (922  
|                                                         |                                               |                          |       

The
following table presents the components of net periodic pension cost for the periods indicated:

|                                   |                           | Years Ended December 31,
|---------------------------------- | ------------------------- | ------------------------
|
|Service cost                       |                           | $                       
|Interest cost                      |                           |                         
|Amortization of prior service cost |                           |                         
|                                   |                           |                         
|                                   | Net periodic pension cost |                         
|                                   |                           |                         

81

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Accrued
benefit cost was reported in the Consolidated Balance Sheets under the caption "Accrued interest payable and other liabilities". Net periodic pension cost was reported in the
Consolidated Statements of Income under the caption "Salaries and employee benefits".

Note 22. Commitments and Contingencies



The Company leases its office facilities. Future minimum rental payments required under operating leases that have initial and remaining
non-cancelable terms in excess of one year are approximately as indicated in the table below as of December 31, 2000 (in thousands):

|Year ended December 31, |            |      
|----------------------- | ---------- | -----
|                        | 2001       |      
|                        | 2002       |      
|                        | 2003       |      
|                        | 2004       |      
|                        | 2005       |      
|                        | Thereafter |      
|                        |            |      
|                        |            | Total
|                        |            |      

Certain
leases contain rental escalation clauses based on increases in the Consumer Price Index and renewal options, which may be exercised by the Company. Rent expense for the years
ended December 31, 2000, 1999 and 1998 totaled $743,000, $829,000, and $780,000, respectively.



The Bank makes unfunded commitments with its commercial real estate term lending activities for building improvements to property. At December 31, 2000
and 1999, the Bank had unfunded commitments to fund loans secured by commercial real estate of $1.8 million and $2.3 million, respectively. The Bank's unfunded commercial real estate
loan commitments may involve to varying degrees, elements of credit and interest rate risk that are not recognized in the Consolidated Balance Sheets. The Company's exposure to credit loss is
represented by the contractual amount of these
commitments. These risks are generally mitigated by the real estate collateral securing the commercial real estate loan commitments and the SBA guarantee on SBA loan commitments.



There are several lawsuits and claims pending against the Company. Management, after review, including consultation with counsel, believes that any ultimate
liability that could arise from these lawsuits and claims would not materially or adversely affect the financial position or liquidity of the Company.

Note 23. Estimated Fair Value of Financial Instruments

The fair value of a financial instrument is the current amount that would be exchanged between willing parties, other than in a forced liquidation. Fair value
is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company's

82

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various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are
significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of
the instrument. SFAS No. 107,Disclosures About Fair Value of Financial Instruments, excludes certain financial instruments and all
non-financial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company.

Because
no conventional market exists for a significant portion of the Company's financial instruments, and because of the inherent imprecision of estimating fair values for financial
instruments for which no conventional trading market exists, management believes that the fair market value estimates should be viewed as only approximate values that the Company would receive if the
Company's assets and liabilities were sold.

The
following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments:



The carrying amounts of cash and cash equivalents approximate their fair values.



Fair value is based on the quoted market price of these securities by broker dealers making a market for these securities on a national exchange.



The Company established the fair market value of the loan portfolio by segregating the loan portfolio into categories by utilizing selected factors (i.e.,
payment history, collateral values, risk classification, cash flows) and then forecasting an estimated fair market value sale price for each of the established loan categories. The estimated market
value of the loan portfolio includes categories of loans the Company believes would sell at a premium between 0% and 3.0%, and categories of loans that would sell at a discount between 0% and 25%. A
significant number of the Company's variable rate loans contain "floors" or minimum interest rates. The Company's variable rate loans generally reprice on a quarterly basis. Many of these same loans
also contain covenants requiring penalties for early repayment. The Company believes that loans with these characteristics, as well as being well collateralized, with no history of delinquencies,
would sell at a premium. On the other hand, loans on a non-accrual basis, or loans that have been classified due to an identified weakness, even though fully secured, could normally only
be sold for a discount depending on the anticipated level of ultimate recovery upon liquidation of the collateral. Fair value then, is based upon the estimated sales prices less cost of sales of these
loans.



Fair value of the Company's fixed maturity deposits are estimated using rates currently offered for deposits of similar remaining maturities. The fair value of
deposits with no stated maturity such as savings accounts and money market checking accounts are disclosed as the amount payable on demand.

83

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The carrying amounts of securities sold under repurchase agreements approximate their fair value due to the short maturity of these borrowings.



The fair values of the Company's debt are estimated using discounted cash flow analysis based on the Company's current incremental borrowing rates for similar
types of borrowing arrangements.



Fair value is based on the quoted market price of these securities by broker dealers making a market for these securities on a national exchange.



The carrying amounts of accrued interest receivable and payable approximate their fair value.



The fair value of the interest rate cap is estimated, using dealer quotes, as the amount that the Company would pay to execute a new agreement with terms
identical to those remaining on the current agreement, considering current interest rates.

84

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The carrying amounts and estimated fair values for certain of the Company's financial instruments as of the dates indicated are summarized in the following table (in thousands):

|                                        |                                                | December 31, 2000                           |                  | December 31, 1999
|--------------------------------------- | ---------------------------------------------- | ------------------------------------------- | ---------------- | -----------------
|
|Assets                                  |                                                |                                             |                  |                  
|                                        | Cash and cash equivalents                      |                                             | $                | 5,336            
|                                        | Investment securities available for sale       |                                             |                  | 234,448          
|                                        | Loans, net                                     |                                             |                  | 393,045          
|                                        | Accrued interest receivable                    |                                             |                  | 6,582            
|Liabilities                             |                                                |                                             |                  |                  
|                                        | Deposits:                                      |                                             |                  |                  
|                                        |                                                | Money market checking                       |                  |                  
|                                        |                                                | Savings accounts                            |                  |                  
|                                        |                                                | Certificates of deposit                     |                  |                  
|                                        |                                                |                                             |                  |                  
|                                        |                                                |                                             | Total deposits   |                  
|                                        |                                                |                                             |                  |                  
|                                        | Borrowings:                                    |                                             |                  |                  
|                                        |                                                | Securities sold under repurchase agreements |                  |                  
|                                        |                                                | Borrowings from State of California         |                  |                  
|                                        |                                                | Term borrowings                             |                  |                  
|                                        |                                                | Trust preferred securities                  |                  |                  
|                                        |                                                |                                             |                  |                  
|                                        |                                                |                                             | Total borrowings |                  
|                                        |                                                |                                             |                  |                  
|                                        | Accrued interest payable                       |                                             |                  | 1,613            
|Off-balance sheet financial instruments |                                                |                                             |                  |                  
|                                        | Interest rate cap$100 million notional amount |                                             |                  | N/A              
|                                        |                                                |                                             |                  |                  

Note 24. Interest Rate Cap

On February 8, 2000, the Company sold its interest rate cap agreement for $2.5 million and recognized a deferred gain of $1.8 million,
which is reported in the Consolidated Balance Sheets under the caption, "Accrued interest payable and other liabilities". The interest rate cap agreement had originally been purchased on
June 8, 1998, at a price of $925,000. The deferred gain is being amortized as a credit to "Interest expensedeposits" over the remaining life of the original interest rate cap
agreement, which had a maturity date of June 8, 2003. During the year ended December 31, 2000, the amount of deferred gain amortization totaled $495,000, which resulted in a reduction in
interest expense on deposits. Conversely, during the years ended December 31, 1999 and 1998, the amortization of the purchase price of the interest rate cap totaled $185,000 and $105,000,
respectively, which resulted in an increase in interest expense on deposits. As of December 31, 2000, the remaining unamortized balance of the deferred gain resulting from the sale of the
interest rate cap totaled $1.3 million.

85

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Note 25. Parent Company Financial Information

The following table represents the condensed balance sheets of Pacific Crest Capital, Inc. (Parent company only) as of the dates indicated (in
thousands):

|                     |                                                     | December 31,                               |  
|-------------------- | --------------------------------------------------- | ------------------------------------------ | -
|
|Assets               |                                                     |                                            |  
|                     | Cash and cash equivalents                           |                                            | $
|                     | Investment securities available for sale, at market |                                            |  
|                     | Other assets                                        |                                            |  
|                     | Investment in Pacific Crest Bank                    |                                            |  
|                     | Investment in PCC Capital I                         |                                            |  
|                     |                                                     |                                            |  
|                     |                                                     | Total assets                               |  
|                     |                                                     |                                            |  
|Liabilities          |                                                     |                                            |  
|                     | Securities sold under repurchase agreements         |                                            | $
|                     | Subordinated debentures                             |                                            |  
|                     | Other liabilities                                   |                                            |  
|                     |                                                     |                                            |  
|                     |                                                     | Total liabilities                          |  
|                     |                                                     |                                            |  
|Shareholders' Equity |                                                     |                                            |  
|                     | Common stock, at par                                |                                            |  
|                     | Additional paid-in capital                          |                                            |  
|                     | Retained earnings                                   |                                            |  
|                     | Accumulated other comprehensive loss                |                                            |  
|                     | Common stock in treasury, at cost                   |                                            |  
|                     |                                                     |                                            |  
|                     |                                                     | Total shareholders' equity                 |  
|                     |                                                     |                                            |  
|                     |                                                     | Total liabilities and shareholders' equity |  
|                     |                                                     |                                            |  

The
following table presents the condensed statements of income of Pacific Crest Capital, Inc. (Parent company only) for the periods indicated (in thousands):

|                                      |                            | Years Ended December 31, |       
|------------------------------------- | -------------------------- | ------------------------ | ------
|
|Net interest expense                  |                            | $                        | (1,540
|Equity incomePacific Crest Bank      |                            |                          | 6,338 
|Dividend incomePCC Capital I         |                            |                          | 50    
|Loss on sale of investment securities |                            |                          |      
|Other income                          |                            |                          | 2     
|Non-interest expense                  |                            |                          | (340  
|                                      |                            |                          |       
|                                      | Income before income taxes |                          |       
|Income tax benefit                    |                            |                          | 760   
|                                      |                            |                          |       
|Net income                            |                            | $                        | 5,270 
|                                      |                            |                          |       

86

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The
following table presents the condensed statements of cash flows of Pacific Crest Capital, Inc. (Parent company only) for the periods indicated (in thousands):

|                                                     |                                                                               | Years Ended December 31,                            |                                      
|---------------------------------------------------- | ----------------------------------------------------------------------------- | --------------------------------------------------- | -------------------------------------
|
|Operating activities:                                |                                                                               |                                                     |                                      
|                                                     | Net income                                                                    |                                                     | $                                    
|                                                     | Adjustments to reconcile net income to net cash used in
operating activities: |                                                     |                                      
|                                                     |                                                                               | Loss on sale of investment securities               |                                      
|                                                     |                                                                               | Equity incomePacific Crest Bank                    |                                      
|                                                     |                                                                               | Net change to other assets and other liabilities    |                                      
|                                                     |                                                                               |                                                     |                                      
|                                                     |                                                                               |                                                     | Net cash used in operating activities
|                                                     |                                                                               |                                                     |                                      
|Investing activities:                                |                                                                               |                                                     |                                      
|                                                     | Purchase of investment securities                                             |                                                     |                                      
|                                                     | Proceeds from sales of investment securities                                  |                                                     |                                      
|                                                     | Dividends received from Pacific Crest Bank                                    |                                                     |                                      
|                                                     |                                                                               |                                                     |                                      
|                                                     |                                                                               | Net cash provided by investing activities           |                                      
|                                                     |                                                                               |                                                     |                                      
|Financing activities:                                |                                                                               |                                                     |                                      
|                                                     | Increase (decrease) in securities sold under repurchase agreements            |                                                     |                                      
|                                                     | Increase (decrease) in term borrowings                                        |                                                     |                                      
|                                                     | Proceeds from issuance of common stock                                        |                                                     |                                      
|                                                     | Purchase of common stock in treasury, at cost                                 |                                                     |                                      
|                                                     | Cash dividends paid                                                           |                                                     |                                      
|                                                     |                                                                               |                                                     |                                      
|                                                     |                                                                               | Net cash (used in) provided by financing activities |                                      
|                                                     |                                                                               |                                                     |                                      
|Net increase (decrease) in cash and cash equivalents |                                                                               |                                                     | 43                                   
|Cash and cash equivalents at beginning of period     |                                                                               |                                                     | 184                                  
|                                                     |                                                                               |                                                     |                                      
|                                                     |                                                                               | Cash and cash equivalents at end of period          |                                      
|                                                     |                                                                               |                                                     |                                      

87

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Note 26. Selected Quarterly Financial Data (Unaudited)

The following table presents selected quarterly financial data for the periods indicated (in thousands, except per share data):

|                           |                                                     | Year Ended December 31, 2000
|-------------------------- | --------------------------------------------------- | ----------------------------
|
|Interest income            |                                                     | $                           
|Interest expense           |                                                     |                             
|                           |                                                     |                             
|                           | Net interest income                                 |                             
|Provision for loan losses  |                                                     |                             
|                           |                                                     |                             
|                           | Net interest income after provision for loan losses |                             
|Non-interest income        |                                                     |                             
|                           |                                                     |                             
|Non-interest expense:      |                                                     |                             
|                           | Salaries and employee benefits                      |                             
|                           | Net occupancy expenses                              |                             
|                           | Other operating expenses                            |                             
|                           |                                                     |                             
|                           |                                                     | Total operating expenses    
|                           | OREO and collection expense                         |                             
|                           |                                                     |                             
|                           |                                                     | Total non-interest expense  
|                           |                                                     |                             
|Income before income taxes |                                                     |                             
|Income tax provision       |                                                     |                             
|                           |                                                     |                             
|                           | Net income                                          |                             
|                           |                                                     |                             
|Earnings per common share: |                                                     |                             
|                           | Basic                                               |                             
|                           | Diluted                                             |                             
|                           |                                                     |                             

88

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|                           |                                                     | Year Ended December 31, 1999
|-------------------------- | --------------------------------------------------- | ----------------------------
|
|Interest income            |                                                     | $                           
|Interest expense           |                                                     |                             
|                           |                                                     |                             
|                           | Net interest income                                 |                             
|Provision for loan losses  |                                                     |                             
|                           |                                                     |                             
|                           | Net interest income after provision for loan losses |                             
|Non-interest income        |                                                     |                             
|                           |                                                     |                             
|Non-interest expense:      |                                                     |                             
|                           | Salaries and employee benefits                      |                             
|                           | Net occupancy expenses                              |                             
|                           | Other operating expenses                            |                             
|                           |                                                     |                             
|                           |                                                     | Total operating expenses    
|                           | OREO and collection expense                         |                             
|                           |                                                     |                             
|                           |                                                     | Total non-interest expense  
|                           |                                                     |                             
|Income before income taxes |                                                     |                             
|Income tax provision       |                                                     |                             
|                           |                                                     |                             
|                           | Net income                                          |                             
|                           |                                                     |                             
|Earnings per common share: |                                                     |                             
|                           | Basic                                               |                             
|                           | Diluted                                             |                             
|                           |                                                     |                             

89

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INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders
Pacific Crest Capital, Inc.

We have audited the accompanying consolidated balance sheets of Pacific Crest Capital, Inc. and subsidiaries (the "Company") as of December 31,
2000 and 1999, and the related consolidated statements of income, changes in shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2000. These
consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We
conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In
our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Pacific Crest Capital, Inc. and subsidiaries at
December 31, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States of America.

DELOITTE &
TOUCHE LLP

Los
Angeles, California
January 25, 2001

90

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ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

PART III

ITEM 10. Directors and Executive Officers of the Registrant

Incorporated herein by reference is the information from the section entitled "Election of Directors" from the Company's definitive Proxy Statement, to be
filed with the SEC within 120 days after December 31, 2000. Reference is also made in connection with the list of Executive Officers which is provided under Item 4(a), "Executive
Officers of the Registrant."

ITEM 11. Executive Compensation

Incorporated herein by reference is the information from the sections entitled "Election of DirectorsCompensation of Board of Directors,"
"Executive Compensation" and "Compensation Committee Interlocks and Insider Participation" from the Company's definitive Proxy Statement, to be filed with the SEC within 120 days after
December 31, 2000.

ITEM 12. Security Ownership of Certain Beneficial Owners and Management

Incorporated herein by reference is the information from the section entitled "Beneficial Ownership of Principal Stockholders and Management" from the
Company's definitive Proxy Statement, to be filed with the SEC within 120 days after December 31, 2000.

ITEM 13. Certain Relationships and Related Transactions

Incorporated herein by reference is the information from the section entitled "Certain Transactions" from the Company's definitive Proxy Statement, to be filed
with the SEC within 120 days after December 31, 2000.

PART IV

ITEM 14. Exhibits, Financial Statements, Schedules, and Reports on Form 8-K



|Number  |  | Description                                                                                                                                       
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------
|3(i).1  |  | Amended and restated Certificate of Incorporation(1)                                                                                              
|3(ii).1 |  | Amended and restated Bylaws of Pacific Crest Capital, Inc.(1)                                                                                     
|4.1     |  | Subordinated Indenture dated as of September 22, 1997, by and between Pacific Crest Capital and Wilmington Trust Company, as indenture trustee(11)

91

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|4.2     |  | Officers' Certificate and Company Order dated September 22, 1997(11)                                                                                                                        
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.3     |  | Certificate of Trust of PCC Trust I dated August 18, 1997(11)                                                                                                                               
|4.4     |  | Trust Agreement of PCC Trust I dated as of August 18, 1997(11)                                                                                                                              
|4.5     |  | Certificate of Amendment to Certificate of Trust of PCC Trust I dated August 20, 1997(11)                                                                                                   
|4.6     |  | Amended and Restated Trust Agreement of PCC Capital I, dated as of September 22, 1997(11)                                                                                                   
|4.7     |  | Form of Trust Preferred Certificate of PCC Capital I (included as an exhibit to exhibit 4.6)(11)                                                                                            
|4.8     |  | Form of Common Securities Certificate of PCC Capital I (included as an exhibit to exhibit 4.6)(11)                                                                                          
|4.9     |  | Guarantee Agreement dated as of September 22, 1997(11)                                                                                                                                      
|4.10    |  | Agreement as to Expenses and Liabilities(11)                                                                                                                                                
|10.1    |  | Form of Indemnification Agreement(3)*                                                                                                                                                       
|10.2    |  | Pacific Crest Capital, Inc. 1993 Equity Incentive Plan(4)(5)*                                                                                                                               
|10.3    |  | Pacific Crest Capital, Inc. Retirement Plan and Trust(3)*                                                                                                                                   
|10.4    |  | 1993 Employee Stock Purchase Plan(3)(6)*                                                                                                                                                    
|10.5    |  | Form of Split Dollar Agreement(3)*                                                                                                                                                          
|10.6    |  | Pacific Crest Capital, Inc. Supplemental Executive Retirement Plan(3)*                                                                                                                      
|10.7    |  | Form of Distribution Agreement(1)                                                                                                                                                           
|10.8    |  | Form of Tax Sharing Agreement between Pacific Crest Capital, Inc. and The Foothill Group, Inc.(3)                                                                                           
|10.9    |  | Office Lease by and between Wilshire Masterpiece, Inc. and Pacific Crest Bank, dated October 31, 1990 (Beverly Hills Branch)(7)                                                             
|10.10   |  | Office Lease between Fifth and Beech Associates and Pacific Crest Bank (San Diego Branch)(7)                                                                                                
|10.11   |  | Shopping Center Lease dated April 18, 1978, between Frances Robert Sarno, as Trustees, and Le Chateau Boutiques, Inc. (Encino Branch)(7)                                                    
|10.11.1 |  | Assignment, Assumption and Consent to Assignment of Lease dated October 16, 1980, between Pacific Crest Bank, Frances Sarno and Robert Sarno, as Trustees, and Le Chateau Boutiques, Inc.(7)
|10.11.2 |  | Exercise of Option to Renew Lease dated January 23, 1990(7)                                                                                                                                 
|10.12   |  | Lease dated April 22, 1992, between The Klussman Family Trust and Pacific Crest Bank (Agoura Hills Office)(7)                                                                               
|10.14.1 |  | Employment Agreement between the Company and Gary Wehrle(4)*                                                                                                                                
|10.14.2 |  | Employment Agreement between the Company and Barry Otelsberg(4)*                                                                                                                            
|10.14.3 |  | Employment Agreement between the Company and Lyle Lodwick(4)*                                                                                                                               
|10.14.4 |  | Employment Agreement between the Company and Robert J. Dennen(4)*                                                                                                                           
|10.14.5 |  | Employment Agreement between the Company and Gonzalo Fernandez(8)*                                                                                                                          
|10.14.6 |  | Employment Agreement between the Company and Joseph Finci(12)*                                                                                                                              
|10.14.7 |  | Employment Agreement between the Company and M. Carolyn Reinhart(12)*                                                                                                                       

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|10.15 |  | 1996 Non-Employee Directors' Stock Plan(9)*                                                                                                  
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------
|21.1  |  | Subsidiaries of the Registrant(2)                                                                                                            
|23.1  |  | Consent of Independent Auditors(2)                                                                                                           
|25.1  |  | Form T-1 Statement of Eligibility of Wilmington Trust Company to act as Trustee under the Subordinated Indenture(10)                         
|25.2  |  | Form T-1 Statement of Eligibility of Wilmington Trust Company to act as Trustee under the Amended and Restated Trust Agreement(10)           
|25.3  |  | Form T-1 Statement of Eligibility of Wilmington Trust Company to act as Trustee under the Trust Preferred Securities Guarantee Agreements(10)

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

| |  | PACIFIC CREST CAPITAL, INC.
| |  | ---------------------------
| |  | By:                        

Date: March 30, 2001

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated:

|Signature                               |  | Title                                                                                                     |  | Date          
|--------------------------------------- |  | --------------------------------------------------------------------------------------------------------- |  | --------------
|                                        |  |                                                                                                           |  |               
|/s/GARY WEHRLEGary Wehrle               |  | Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer)                |  | March 30, 2001
|/s/ROBERT J. DENNENRobert J. Dennen     |  | Senior Vice President, Chief Financial Officer and Secretary (Principal Financial and Accounting Officer) |  | March 30, 2001
|/s/RUDOLPH I. ESTRADARudolph I. Estrada |  | Director                                                                                                  |  | March 30, 2001
|/s/MARTIN J. FRANKMartin J. Frank       |  | Director                                                                                                  |  | March 30, 2001
|/s/RICHARD S. ORFALEARichard S. Orfalea |  | Director                                                                                                  |  | March 30, 2001
|/s/STEVEN J. ORLANDOSteven J. Orlando   |  | Director                                                                                                  |  | March 30, 2001

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