10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES AND EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2005

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934 (No Fee Required)

For the transition period from                        to                       .

Commission file number 0-25418

CENTRAL COAST BANCORP

(Exact name of registrant as specified in its charter)

California	77-0367061
(State or other jurisdiction of Incorporation or organization)	(I.R.S. Employer Identification No.)

301 Main Street, Salinas, California	93901
(Address of principal executive offices)	(Zip Code)

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

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

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes  x  No  

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

No par value Common Stock - 14,086,613 shares outstanding at July 27, 2005.

The Index to the Exhibits is located at page 31                                                             Page 1 of 34

PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

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

In thousands (except share data)	June 30, 2005		December 31, 2004
Assets
Cash and due from banks	$      48,564		$      49,068
Federal funds sold	68,871		9,029
Total cash and equivalents	117,435		58,097
Available-for-sale securities at fair value (amortized cost of $191,567	191,796		169,151
at June 30, 2005 and $168,052 at December 31, 2004)
Loans:
Commercial	240,351		261,408
Real estate-construction	63,489		61,366
Real estate-other	617,629		594,507
Consumer	13,325		15,463
Deferred loan fees, net	(1,371	)	(1,228	)
Total loans	933,423		931,516
Allowance for loan losses	(17,514	)	(16,270	)
Net Loans	915,909		915,246
Premises and equipment, net	3,643		3,944
Accrued interest receivable and other assets	19,816		18,223
Total assets	$ 1,248,599		$ 1,164,661
Liabilities and Shareholders' Equity
Deposits:
Demand, noninterest bearing	$    293,348		$    344,244
Demand, interest bearing	178,262		141,190
Savings	284,814		259,319
Time	365,120		306,615
Total Deposits	1,121,544		1,051,368
Accrued interest payable and other liabilities	17,782		12,177
Total liabilities	1,139,326		1,063,545
Commitments and contingencies (Note 3)
Shareholders’ Equity:
Preferred stock — no par value; authorized 1,000,000 shares; none outstanding
Common stock — no par value; authorized 39,062,500 shares;
outstanding: 14,063,396 shares at June 30, 2005
and 13,716,168 shares at December 31, 2004	85,599		85,034
Shares held in deferred compensation trust (800,200 at June 30, 2005
and 600,899 as of December 31, 2004), net of deferred obligation	--		--
Retained earnings	23,542		15,439
Accumulated other comprehensive income - net of taxes
of $96 at June 30, 2005 and $456 at December 31, 2004	132		643
Total shareholders' equity	109,273		101,116
Total liabilities and shareholders' equity	$ 1,248,599		$ 1,164,661

See notes to Consolidated Condensed Financial Statements

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

	Three Months Ended June 30,		Six Months Ended June 30,
In thousands (except per share data)	2005	2004	2005	2004
Interest Income
Loans (including fees)	$15,769	$11,547	$30,459	$22,684
Investment securities	1,828	1,674	3,593	3,252
Other	328	15	441	80
Total interest income	17,925	13,236	34,493	26,016
Interest Expense
Interest on deposits	4,039	2,605	7,540	5,252
Other	104	93	176	162
Total interest expense	4,143	2,698	7,716	5,414
Net Interest Income	13,782	10,538	26,777	20,602
Provision for Loan Losses	250	590	1,400	655
Net Interest Income after
Provision for Loan Losses	13,532	9,948	25,377	19,947
Noninterest Income
Service charges on deposits	797	807	1,513	1,547
Other	417	327	755	505
Total noninterest income	1,214	1,134	2,268	2,052
Noninterest Expenses
Salaries and benefits	4,543	3,618	8,667	7,182
Occupancy	792	685	1,560	1,323
Furniture and equipment	640	402	1,172	885
Other	1,818	1,392	3,097	2,743
Total noninterest expenses	7,793	6,097	14,496	12,133
Income Before Provision for
Income Taxes	6,953	4,985	13,149	9,866
Provision for Income Taxes	2,695	1,725	5,046	3,414
Net Income	$  4,258	$  3,260	$  8,103	$  6,452
Basic Earnings per Share	$    0.30	$    0.24	$    0.58	$    0.47
Diluted Earnings per Share	$    0.29	$    0.23	$    0.56	$    0.45

See Notes to Consolidated Condensed Financial Statements

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

	Six months ended June 30,
In thousands	2005		2004
Cash Flows from Operations:
Net income	$     8,103		$     6,452
Reconciliation of net income to net cash provided
by operating activities:
Provision for loan losses	1,400		655
(Gain) loss on sale of investments	(12	)	104
Depreciation	676		569
Net gain on sale of fixed assets	(4	)	(10	)
Amortization and accretion	344		462
(Increase) decrease in accrued interest receivable and other assets	(1,233	)	201
Increase in accrued interest payable and other liabilities	1,551		311
Increase in deferred loan fees	142		46
Net cash provided by operations	10,967		8,790
Cash Flows from Investing Activities:
Proceeds from maturities of available-for-sale securities	10,769		11,268
Purchases of available-for-sale securities	(39,364	)	(51,030	)
Proceeds from sale of available-for-sale securities	4,747		11,461
Net increase in loans	(2,205	)	(17,170	)
Proceeds from sale of equipment	6		14
Purchases of equipment	(377	)	(612	)
Net cash used in investing activities	(26,424	)	(46,069	)
Cash Flows from Financing Activities:
Net increase in deposit accounts	70,176		9,608
Net increase (decrease) in other borrowings	4,696		(33	)
Cash received for stock options exercised	1,161		132
Cash paid for shares repurchased	(1,238	)	(2,502	)
Net cash provided by financing activities	74,795		7,205
Net increase (decrease) in cash and equivalents	59,338		(30,074	)
Cash and equivalents, beginning of period	58,097		101,463
Cash and equivalents, end of period	$ 117,435		$   71,389
Noncash Investing and Financing Activities —
Stock exchanged for option exercise	$     1,151		--
Other Cash Flow Information:
Interest paid	$     6,791		$     5,320
Income taxes paid	$     3,855		$     3,088

See Notes to Consolidated Condensed Financial Statements

CENTRAL COAST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
June 30, 2005 (Unaudited)

NOTE 1. BASIS OF PRESENTATION AND CONSOLIDATED FINANCIAL STATEMENTS

In the opinion of management, the unaudited consolidated condensed financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly Central Coast Bancorp’s (the “Company’s”) consolidated financial position at June 30, 2005, the results of operations for the three and six month periods ended June 30, 2005 and 2004 and cash flows for the six month periods ended June 30, 2005 and 2004.

Certain disclosures normally presented in the notes to the annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted. The interim consolidated condensed financial statements included in this Form 10-Q should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2004 Annual Report to Shareholders. The results of operations for the three and six month periods ended June 30, 2005 and 2004 may not necessarily be indicative of the operating results for the full year.

In preparing such financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period. Actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to significant changes in the near term relate to the determination of the allowance for loan losses.

Management has determined that since all of the commercial banking products and services offered by the Company are available in each branch of the Community Bank of Central California, its bank subsidiary (the “Bank”), all branches are located within the same economic environment and management does not allocate resources based on the performance of different lending or transaction activities, it is appropriate to aggregate the Bank branches and report them as a single operating segment.

Stock split — On January 31, 2005, the Board of Directors declared a five-for-four stock split, which was distributed to shareholders on February 28, 2005. All earnings per share data and share data related to the stock option information have been retroactively adjusted to reflect the stock split.

NOTE 2. STOCK COMPENSATION

The Company accounts for its stock-based awards using the intrinsic value method in accordance with Accounting Principles Board No. 25, Accounting for Stock Issued to Employees and its related interpretations. No compensation expense has been recognized in the financial statements for employee stock arrangements, as the Company’s stock option plans provide for the issuance of options at a price of no less than the fair market value at the date of the grant. Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation, requires the disclosure of pro forma net income and earnings per share had the Company adopted the fair value method of accounting for stock-based compensation. Under SFAS No. 123,the fair value of stock-based awards to employees is calculated through the use of option pricing models, even though such models were developed to estimate the fair value of freely tradable, fully transferable options without vesting restrictions, which significantly differ from the Company’s stock option awards. These models also require subjective assumptions, including future stock price volatility and expected time to exercise, which greatly affect the calculated values. The Company’s calculations were made using the Black-Scholes option pricing model with the following assumptions: expected life five years following vesting; average stock volatility of 15.7% and 15.3% for 2005 and 2004; risk free interest rates ranging from 3.77% to 3.90% for 2005 and 3.77% to 4.11% for 2004; and no cash dividends during the expected term for 2005 and 2004. The Company’s calculations are based on a multiple option valuation approach and forfeitures are recognized as they occur.

A summary of the pro forma effects to reported net income and earnings per share as if the Company had elected to recognize compensation cost based on the fair value of the options granted at the grant date as prescribed by SFAS No. 123 is as follows.

	Three Months Ended June 30,				Six Months Ended June 30,
In thousands (except per share data)	2005		2004		2005		2004
Net Income - As Reported	$      4,258		$      3,260		$      8,103		$      6,452
Compensation expense from amortization of
fair value of stock awards	(41	)	(66	)	(214	)	(134	)
Taxes on compensation expense	17		27		90		55
Pro Forma Net Income	$      4,234		$      3,221		$      7,979		$      6,373
Basic Earnings per Share - As Reported	$             0	.30	$             0	.24	$             0	.58	$             0	.47
Pro Forma Basic Earnings per Share	$             0	.30	$             0	.24	$             0	.57	$             0	.47
Diluted Earnings per Share - As Reported	$             0	.29	$             0	.23	$             0	.56	$             0	.45
Pro Forma Diluted Earnings per Share	$             0	.29	$             0	.22	$             0	.55	$             0	.45

NOTE 3. COMMITMENTS AND CONTINGENCIES

In the normal course of business there are outstanding various commitments to extend credit which are not reflected in the financial statements, including loan commitments of approximately $249,964,000 and standby letters of credit of approximately $9,581,000 at June 30, 2005. However, all such commitments will not necessarily culminate in actual extensions of credit by the Company.

Approximately $33,421,000 of loan commitments outstanding at June 30, 2005 relate to real estate construction loans that are expected to fund within the next twelve months. The remaining commitments primarily relate to commercial revolving lines of credit, other commercial loans and home equity lines of credit. Many of these commitments are expected to expire without being drawn upon. Therefore, the total commitments do not necessarily represent future cash requirements. Each potential borrower and the necessary collateral are evaluated on an individual basis. Collateral varies, but may include real property, bank deposits, debt or equity securities or business assets.

Stand-by letters of credit are commitments written to guarantee the performance of a customer to a third party. These guarantees are issued primarily relating to contract performance or purchases of inventory by commercial customers and are typically short-term in nature. Credit risk is similar to that involved in extending loan commitments to customers and accordingly, evaluation and collateral requirements similar to those for loan commitments are used. Virtually all such commitments are collateralized.

NOTE 4. EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income by the weighted average common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if options or other contracts to issue common stock were exercised and converted into common stock.

There was no difference in the numerator used in the calculation of basic earnings per share and diluted earnings per share. The denominator used in the calculation of basic earnings per share and diluted earnings per share for the three and six-month periods ended June 30 is reconciled and basic anddiluted earnings per share are calculated as follows:

	Three Months Ended June 30,		Six Months Ended June 30,
In thousands (except per share data)	2005	2004	2005	2004
Basic Earnings Per Share
Net income	$  4,258	$  3,260	$  8,103	$  6,452
Weighted average common shares outstanding	14,147	13,550	14,072	13,590
Basic earnings per share	$    0.30	$    0.24	$    0.58	$    0.47
Diluted Earnings Per Share
Net Income	$  4,258	$  3,260	$  8,103	$  6,452
Weighted average common shares outstanding	14,147	13,550	14,072	13,590
Dilutive effect of outstanding options	438	675	488	676
Weighted average common shares outstanding - Diluted	14,585	14,225	14,560	14,266
Diluted earnings per share	$    0.29	$    0.23	$    0.56	$    0.45

NOTE 5. COMPREHENSIVE INCOME

	Three Months Ended June 30,				Six Months Ended June 30,
In thousands	2005		2004		2005		2004
Net income	$ 4,258		$ 3,260		$ 8,103		$ 6,452
Other comprehensive income (loss)- Unrealized
gain (loss) on available-for-sale securities	1,146		(5,868	)	(870	)	(4,113	)
Taxes on unrealized gain (loss)	(482	)	2,467		366		1,729
Reclassification adjustment for gain (loss) included in income	--		--		(12	)	104
Taxes on reclassification adjustment	--		--		5		(43	)
Total other comprehensive income	664		(3,401	)	(511	)	(2,323	)
Total comprehensive income	$ 4,922		$  (141	)	$ 7,592		$ 4,129

NOTE 6. RECENT ACCOUNTING PRONOUNCEMENTS

Share-Based Payments

In December 2004 the FASB issued Statement Number 123 (revised 2004) (FAS 123 (R)), Share-Based Payments. FAS 123 (R) requires all entities to recognize compensation expense in an amount equal to the fair value of share-based payments such as stock options granted to employees. In April 2005, the Securities and Exchange Commission adopted a rule that defers the compliance of FAS 123(R) from the first reporting period beginning after June 15, 2005 to the first fiscal year beginning after June 15, 2005, January 1 2006 for the Company. Management has not completed its evaluation of the effect that FAS 123 (R) will have, but believes that the effect will be consistent with its previous pro forma disclosures.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

In addition to the historical information contained herein, this report on Form 10-Q contains certain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those projected. Changes to such risks and uncertainties, which could impact future financial performance, include, among others, (1) competitive pressures in the banking industry; (2) changes in the interest rate environment; (3) general economic conditions, nationally, regionally and in operating market areas, including a decline in real estate values in the Company’s market areas; (4) the effects of terrorism, the threat of terrorism or the impact of military conflicts; (5) changes in the regulatory environment; (6) changes in business conditions and inflation; (7) changes in securities markets; (8) data processing problems; (9) variances in the actual versus projected growth in assets; (10) return on assets; (11) loan losses; (12) expenses; (13) rates charged on loans and earned on securities investments; (14) rates paid on deposits; and (15) fee and other noninterest income earned, as well as other factors. This entire report should be read to put such forward-looking statements in context. To gain a more complete understanding of the uncertainties and risks involved in the Company’s business this report should be read in conjunction with Central Coast Bancorp’s annual report on Form 10-K for the year ended December 31, 2004 and subsequently filed quarterly reports on Form 10-Q and current reports on Form 8-K.

Critical Accounting Policies

General

Central Coast Bancorp’s financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The financial information contained within our statements is, to a significant extent, financial information that is based on measures of the financial effects of transactions and events that have already occurred. We use historical loss factors as one factor in determining the inherent loss that may be present in our loan portfolio. Actual losses could differ significantly from the historical factors that we use. Other estimates that we use are related to the expected useful lives of our depreciable assets. In addition GAAP itself may change from one previously acceptable method to another method. Although the economics of our transactions would be the same, the timing of events that would impact our transactions could change.

Allowance for Loan Losses

The allowance for loan losses is an estimate of the losses that may be sustained in our loan portfolio. The allowance is based on two basic principles of accounting: (1) Statement of Financial Accountings Standards (“SFAS”) No. 5 “Accounting for Contingencies,” which requires that losses be accrued when they are probable of occurring and estimable and (2) SFAS No. 114, “Accounting by Creditors for Impairment of a Loan,” which requires that losses be accrued based on the differences between the value of collateral, present value of future cash flows or values that are observable in the secondary market and the loan balance.

Our allowance for loan losses has three basic components: the formula allowance, the specific allowance and the unallocated allowance. Each of these components is determined based upon estimates that can and do change when the actual events occur. The formula allowance uses a historical loss view as an indicator of future losses and as a result could differ from the loss incurred in the future. However, since this history is updated with the most recent loss information, the errors that might otherwise occur are mitigated. The specific allowance uses various techniques to arrive at an estimate of the expected loss. Historical loss information and fair market value of collateral are used to estimate those losses. The use of these values is inherently subjective and our actual losses could be greater or less than the estimates. The unallocated allowance addresses losses that are attributable to various factors including economic events, industry or geographic sectors whose impact on the portfolio have occurred, but have yet to be recognized in either the formula or specific allowances. For further information regarding our allowance for loan losses, see “Allowance for Loan Losses” discussion later in this Item 2.

Stock Based Awards

The Company accounts for its stock based awards using the intrinsic value method in accordance with Accounting Principles Board (“APB”) Opinion No. 25 and related interpretations. Since the Company’s stock option plan provides for the issuance of options at a price of no less than the fair market value at the date of the grant, no compensation expense has been recognized in the financial statements. See Note 2 to the consolidated condensed financial statements – STOCK COMPENSATION, for additional information.

Business Organization

Central Coast Bancorp (the “Company”) is a California corporation organized in 1994, and is the parent company for Community Bank of Central California, a state-chartered bank, headquartered in Salinas, California (the “Bank”). Its investment in the Bank comprises the major business activity of the Company. Upon prior notification to the Board of Governors of the Federal Reserve System (“Board of Governors”), the Company is authorized to engage in a variety of activities, which are deemed closely related to the business of banking. The Company is engaged in certain lending activities related to the purchase of certain tax advantaged loans from the Bank.

The Bank offers a full range of commercial banking services, including a diverse range of traditional banking products and services to individuals, merchants, small and medium-sized businesses, professionals and agribusiness enterprises. Its principal markets are located in the counties of Monterey, San Benito, Santa Clara and Santa Cruz, which are in the central coast area of California.

Overview

Central Coast Bancorp reported record quarterly net income of $4,258,000 for the second quarter of 2005. Net income increased 30.6% over the $3,260,000 reported for the second quarter of 2004. Diluted earnings per share for the two quarters were $0.29 and $0.23, respectively. All earnings per share and applicable share data for the 2004 periods have been adjusted for the five-for-four stock split distributed on February 28, 2005. The annualized return on average equity (ROAE) and the return on average assets (ROAA) for the second quarter of 2005 were 15.9% and 1.40% up from 14.3% and 1.27% for the same period in 2004.

Net income for the six months ended June 30, 2005 increased 25.6% to $8,103,000 from $6,452,000 for the six months ended June 30, 2004. Diluted earnings per share increased to $0.56 from $0.45, for the comparative periods. For the first six months of 2005, the annualized ROAE was 15.5% and the ROAA was 1.37% up from 14.2% and 1.27% for the same period in 2004.

The Company experienced continued growth in its balance sheet in the first six months of 2005. At June 30, 2005, total assets were $1,248,599,000, an increase of $80,142,000 (6.9%) from March 31, 2005 and an increase of $83,938,000 (7.2%) from year-end 2004. Most of the asset growth has been deployed into the investment portfolio and Fed Funds Sold as year-to-date loan growth has been relatively flat. Loans at June 30, 2005, totaled $933,423,000, an increase of $5,684,000 (0.6%) from March 31, 2005 and an increase of $1,907,000 (0.2%) from year-end 2004. At June 30, 2005, deposits had grown to $1,121,544,000, an increase of $70,378,000 (6.7%) from March 31, 2005 and an increase of $70,176,000 (6.7%) from year-end 2004. On a year-over-year basis, the Company’s focus on internal growth and de novo branch expansion has generated an increase in total assets of $199,120,000 (19.0%); an increase in loans of $133,571,000 (16.7%); and an increase in deposits of $173,826,000 (18.3%).

The Company provided $250,000 for loan losses in the second quarter of 2005 as compared to $590,000 in the second quarter of 2004. At June 30, 2005, nonperforming and restructured loans totaled $676,000 as compared to $835,000 at December 31, 2004 and $10,570,000 at June 30, 2004. The ratio of the allowance for loan losses to total loans was 1.88% at June 30, 2005, 1.75% at December 31, 2004 and 2.15% at June 30, 2004.

Central Coast Bancorp ended the second quarter of 2005 with a Tier 1 capital ratio of 10.8% and a total risk-based capital ratio of 12.0% compared to 10.7% and 11.9% at the end of the second quarter of 2004.

Within the Management’s Discussion and Analysis, interest income, net interest income, net interest margin and the efficiency ratio are presented on a fully taxable equivalent basis. These items have been adjusted to give effect to $310,000 and $281,000 in taxable equivalent interest income on tax-free investments for the three-month periods ending June 30, 2005 and 2004 and $607,000 and $553,000 for the six-month periods ending June 30, 2005 and 2004.

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

Condensed Comparative Income Statement

	Three Months Ended June 30,		Percentage Change Increase		Six Months Ended June 30,		Percentage Change Increase
In thousands (except percentages)	2005	2004	(Decrease)		2005	2004	(Decrease)
Interest Income (1)	$18,235	$13,517	35	%	$35,100	$26,569	32	%
Interest Expense	4,143	2,698	54	%	7,716	5,414	43	%
Net interest income	14,092	10,819	30	%	27,384	21,155	29	%
Provision for Loan Losses	250	590	-58	%	1,400	655	114	%
Net interest income after
provision for loan losses	13,842	10,229	35	%	25,984	20,500	27	%
Noninterest Income	1,214	1,134	7	%	2,268	2,052	11	%
Noninterest Expense	7,793	6,097	28	%	14,496	12,133	19	%
Income before income taxes	7,263	5,266	38	%	13,756	10,419	32	%
Provision for Income Taxes	2,695	1,725	56	%	5,046	3,414	48	%
Tax Equivalent Adjustment (1)	310	281	10	%	607	553	10	%
Net income	$  4,258	$  3,260	31	%	$  8,103	$  6,452	26	%
1) Interest on tax-free securities is reported on a tax equivalent basis

Net interest income / net interest margin

Net interest income, the difference between interest earned on loans and investments and interest paid on deposits and other borrowings, is the principal component of the Bank’s earnings. Net interest margin is net interest income expressed as a percentage of average earning assets. The first two following tables provide a summary of the components of net interest income and the changes within the components for the periods indicated. The third table sets forth a summary of the changes in interest income and interest expense from changes in average asset and liability balances (volume) and changes in average interest rates for the periods indicated.

	Three months ended June 30,
(Taxable equivalent basis)	2005				2004
In thousands (except percentages)	Average Balance	Interest	Average Yield		Average Balance	Interest	Average Yield
Assets:
Earning Assets
Loans (1) (2)	$   920,210	$  15,769	6	.87%	$775,284	$     11,547	5	.99%
Taxable investments	122,841	1,208	3	.94%	127,636	1,111	3	.50%
Tax-exempt investments (tax equiv.basis)	58,257	930	6	.40%	51,931	844	6	.54%
Federal funds sold	44,868	328	2	.93%	6,121	15	0	.99%
Total Earning Assets	1,146,176	$  18,235	6	.38%	960,972	$  13,517	5	.66%
Cash & due from banks	47,016				53,209
Other assets	23,192				20,395
	$1,216,384				$1,034,576
Liabilities & Shareholders' Equity:
Interest bearing liabilities:
Demand deposits	$   159,667	$       211	0	.53%	$144,725	$       212	0	.59%
Savings	286,270	1,182	1	.66%	250,653	789	1	.27%
Time deposits	360,786	2,646	2	.94%	273,533	1,604	2	.36%
Other borrowings	8,873	104	4	.70%	13,499	93	2	.77%
Total interest bearing liabilities	815,596	4,143	2	.04%	682,410	2,698	1	.59%
Demand deposits	285,046				254,122
Other Liabilities	8,385				6,165
Total Liabilities	1,109,027				942,697
Shareholders' Equity	107,357				91,879
	$1,216,384				$1,034,576
Net interest income & margin (3)		$  14,092	4	.93%		$  10,819		4.53%

(1) Loan interest income includes fee income of $506,000 and $537,000 for the three months ended June 30, 2005 and 2004, respectively.

(2) Includes the average allowance for loan losses of $17,445,000 and $16,800,000 and average deferred loan fees of $1,358,000 and $1,189,000 for the three months ended June 30, 2005 and 2004, respectively.

(3) Net interest margin is computed by dividing net interest income by the total average earning assets.

	Six months ended June 30,
(Taxable equivalent basis)	2005				2004
In thousands (except percentages)	Average Balance	Interest	Average Yield		Average Balance	Interest	Average Yield
Assets:
Earning Assets
Loans (1) (2)	$   913,541	$  30,459	6	.72%	$762,999	$     22,684	5	.98%
Taxable investments	120,543	2,378	3	.98%	120,400	2,144	3	.58%
Tax-exempt securities (tax equiv. basis)	56,775	1,822	6	.47%	50,675	1,661	6	.59%
Federal funds sold	31,871	441	2	.79%	16,269	80	0	.99%
Total Earning Assets	1,122,730	$  35,100	6	.30%	950,343	$     26,569	5	.62%
Cash & due from banks	45,868				52,290
Other assets	22,697				18,724
	$1,191,295				$1,021,357
Liabilities & Shareholders' Equity:
Interest bearing liabilities:
Demand deposits	$   149,467	$       387	0	.52%	$138,061	$       400	0	.58%
Savings	287,327	2,219	1	.56%	251,590	1,589	1	.27%
Time deposits	349,853	4,934	2	.84%	274,636	3,263	2	.39%
Other borrowings	6,640	176	5	.35%	8,982	162	3	.63%
Total interest bearing liabilities	793,287	7,716	1	.96%	673,269	5,414	1	.62%
Demand deposits	283,801				246,302
Other Liabilities	8,657				10,145
Total Liabilities	1,085,745				929,716
Shareholders' Equity	105,550				91,641
	$1,191,295				$1,021,357
Net interest income & margin (3)		$  27,384	4	.92%		$ 21,155		4.48%

(1) Loan interest income includes fee income of $941,000 and $917,000 for the six months ended June 30, 2005 and 2004, respectively.

(2) Includes the average allowance for loan losses of $17,001,000 and $16,697,000 and average deferred loan fees of $1,290,000 and $1,152,000 for the six months ended June 30, 2005 and 2004, respectively.

(3) Net interest margin is computed by dividing net interest income by the total average earning assets.

Volume/Rate Analysis

Three Months Ended June 30, 2005 over 2004 Increase (decrease) due to change in:

In thousands	Volume		Rate (4)		Net Change
Interest-earning assets:
Net Loans (1)(2)	$ 2,158		$ 2,064		$ 4,222
Taxable investment securities	(42	)	139		97
Tax exempt investment securities (3)	103		(17	)	86
Federal funds sold	95		218		313
Total	2,314		2,404		4,718
Interest-bearing liabilities:
Demand deposits	22		(23	)	(1	)
Savings deposits	112		281		393
Time deposits	512		530		1,042
Other borrowings	(32	)	43		11
Total	614		831		1,445
Interest differential	$ 1,700		$ 1,573		$ 3,273

Six Months Ended June 30, 2005 over 2004 Increase (decrease) due to change in:

In thousands	Volume		Rate (4)		Net Change
Interest-earning assets:
Net Loans (1)(2)	$ 4,477		$ 3,298		$ 7,775
Taxable investment securities	3		231		234
Tax exempt investment securities (3)	200		(39	)	161
Federal funds sold	77		284		361
Total	4,757		3,774		8,531
Interest-bearing liabilities:
Demand deposits	33		(46	)	(13	)
Savings deposits	226		404		630
Time deposits	894		777		1,671
Other borrowings	(42	)	56		14
Total	1,111		1,191		2,302
Interest differential	$ 3,646		$ 2,583		$ 6,229

(1) The average balance of non-accruing loans is not significant as a percentage of total loans and, as such, has been included in net loans.

(2)  Loan interest income includes fee income of $506,000 and $537,000 for the three months ended June 30, 2005 and 2004, and fee income of $941,000 and $917,000 for the six months ended June 30, 2005 and 2004, respectively.

(3)  Includes taxable-equivalent adjustments that relate to income on certain securities that are exempt from federal income taxes. The effective federal statutory tax rate was 35% for 2005 and 2004.

(4) The rate / volume variance has been included in the rate variance.

Net interest income for the second quarter of 2005 was $14,092,000 for an increase of $3,273,000 (30.3%) from the $10,819,000 recorded in the second quarter of 2004. Both interest income and interest expense were higher than prior year levels. The interest income component increased $4,718,000 (34.9%) on a quarter-over-quarter basis as both the volume of earning assets and the rates on earning assets increased. Average loan balances were $144,926,000 (18.7%) higher in the second quarter of 2005 versus the same quarter in the previous year. This volume difference added $2,158,000 to interest income. The average yield earned on loans in the second quarter of 2005 was 6.87%, an increase of 88 basis points from the 5.99% yield earned in the second quarter of 2004. The higher loan yield increased interest income by $2,064,000. The average balance of Fed Funds Sold (FFS) was $44,868,000 in the second quarter of 2005, an increase of $38,747,000 from the average balance in the second quarter of 2004. The increase in volume added $95,000 to interest income. In addition, due to the continuing increases in interest rates, the average yield on FFS in the second quarter of 2005 was 2.93% versus 0.99% in the year earlier period. The higher rates increased interest income $218,000 on a quarter-over-quarter basis.

Interest expense increased $1,445,000 (53.6%) to $4,143,000 in the second quarter of 2005 from $2,698,000 in the second quarter of 2004. The increase was attributable to both increases in the volume and higher rates on the interest-bearing deposit liabilities. Due to the year-long trend of the Federal Reserve Board through its Federal Open Market Committee (FOMC) to raise the short term interest rates, the higher market rates have begun to impact the pricing on the time deposit liabilities. The average rate paid on time deposits increased 58 basis points to 2.94% for the second quarter of 2005. The higher rates on time deposits increased interest expense $530,000. Higher rates on the other interest-bearing liabilities increased interest expense an additional $301,000 in 2005 over the year earlier period. Average balances of interest-bearing liabilities in the second quarter of 2005 increased by $133,186,000 (19.5%) over the prior year period. These higher balances added $614,000 to interest expense.

The net interest margin for the second quarter of 2005 was 4.93% up 40 basis points from to 4.53% in the year earlier period. The net interest margin in the second quarter of 2005 increased 3 basis points from the 4.90% achieved in the first quarter of 2005. Both the average yield received on earning assets and the average rate paid on liabilities increased by 16 basis points from the first quarter 2005 yields and rates. The increase in net interest margin from the first quarter is attributable to a higher level of earning assets over the interest-bearing liabilities.

For the six-month period ending June 30, 2005, net interest income increased $6,229,000 (29.4%) to $27,384,000 from $21,155,000 for the first six months of 2004. The interest income component increased $8,531,000 to $35,100,000. Average balances of earning assets were $172,387,000 (18.1%) higher in the first six months of 2005 than the same period in 2004. The average balance of loans was $150,542,000 higher, which contributed $4,477,000 to interest income. The average yield of 6.72% received on loans in the first six months of 2005 was 74 basis points higher than the 5.98% received in the year earlier period. The higher yield on loans increased interest income by $3,298,000. Interest earned on FFS increased $361,000 in the first six months of which $284,000 was attributable to higher rates.

Interest expense for the six-month period ending June 30, 2005 increased $2,302,000 (42.5%) to $7,716,000 from $5,514,000 for the first six months of 2004. Average interest bearing liability balances in the first six-months of 2005 were $120,018,000 (17.8%) higher than in the year earlier period. The volume increases added $1,111,000 to interest expense. For the first six months of 2005, average rates paid on interest bearing liabilities was 1.96% for an increase of 34 basis points from the rates paid in the first six-months of 2004. The higher rates resulted in a $1,191,000 increase in interest expense in the first six months of 2005 from the prior year period.

The impact of the above changes in volumes and rates for earning assets and interest bearing liabilities for the first six months of 2005 had a positive effect on the net interest margin which increased 44 basis points to 4.92% from 4.48% in the year earlier period.

Provision for Loan Losses

The Company provided $250,000 for loan losses in the second quarter of 2005 as compared to $590,000 in the second quarter of 2004. For the six-month period ended June 30, 2005, the Company provided $1,400,000 compared to $655,000 in the year earlier period. The provision for loan losses that has been recorded is based on factors which consider the growth or decline in the level of loans, changes in the level of nonperforming and classified assets, changing portfolio mix and prevailing local and national economic conditions to establish the required level of loan loss reserves. At June 30, 2005, the ratio of the allowance for loan losses to total loans was 1.88% as compared to 1.75% at December 31, 2004 and 2.15% at June 30, 2004. (See the “Credit Risk” and “Allowance for Loan Losses” sections for additional discussion).

Noninterest Income

Noninterest income consists primarily of service charges on deposit accounts and fees for miscellaneous services. Noninterest income totaled $1,214,000 in the second quarter of 2005, which was up $80,000 (7.1%) from $1,134,000 in the same period in 2004. Service charges on deposit accounts were down slightly as better economic conditions contributed to a reduction in overdraft fees. Other fee income was up due to changes in types and levels of business activity.

For the first six months of 2005, noninterest income increased $216,000 (10.5%) to $2,268,000 compared to $2,052,000 in the same period last year. Service charges on deposit accounts for the first six months of 2005 were consistent with the quarter results as overdraft fees were down on the year-over-year basis. Other income increased in part due to a $12,000 gain on the sale of securities in 2005 versus a loss of $104,000 in 2004.

Noninterest Expense

Noninterest expenses increased $1,696,000 (27.8%) to $7,793,000 in the second quarter of 2005 as compared to $6,097,000 in the second quarter 2004. Salary and benefit expenses increased $925,000 (25.6%) to $4,543,000 in the second quarter of 2005 as compared to $3,618,000 in the prior year quarter. Costs increased due to normal salary increases, higher staffing levels, the two new branches opened in the second half of 2004 and higher benefit costs. Health insurance costs increased $190,000 (84.2%). Other noninterest expenses were generally higher due to higher business volumes, the two new branches and normal cost increases. The efficiency ratio for the quarter ended June 30, 2004 was 50.9% consistent with the 51.0%, in the year earlier period.

Noninterest expenses for the six-month period ending June 30, 2005 increased $2,363,000 (19.5%) to $14,496,000 compared to $12,133,000 for the same period in 2004. Salary and benefit expenses increased $1,485,000 (20.7%) to $8,667,000 in the first six months of 2005 versus $7,182,000 in the first six months of 2004. The increase was due to additional staffing, the two new branches, higher benefit costs and normal salary increases. Health insurance costs accounted for $372,000 of the increase. The Company is changing its health insurance provider in the third quarter, which is anticipated to have a positive impact on these cost increases. Other expenses were up due to business volumes, the two new branches and cost increases. The efficiency ratio for the first six months of 2005 improved to 48.9% from 52.3% for the same period of 2004 due to the growth in income outpacing growth in noninterest expenses.

Provision for Income Taxes

The Company recorded income tax expense of $2,695,000 and $5,046,000 for the quarter and six-month periods ending June 30, 2005 as compared to $1,725,000 and $3,414,000 for the same periods in 2004. The effective tax rates, considering state and federal taxes, and tax exempt income, for the second quarter and first six months of 2005 were 38.8% and 38.4% compared to 34.6% for both periods in 2004. The effective tax rate was higher in both periods of 2005 as the fully taxable income grew at a faster rate than tax exempt income. Also, in 2004 the Company revised the calculation of deferred tax assets for a change in the tax rate, which resulted in a lower effective tax rate.

Securities

At June 30, 2005, available-for-sale securities had a market value of $191,796,000 with an amortized cost basis of $191,567,000. On an amortized cost basis, the investment portfolio increased by $11,218,000 from the balance at March 31, 2005 and increased $23,744,000 from the balance at December 31, 2004. The pretax unrealized gain of $228,000 at June 30, 2005 represented an increase in market value of $1,155,000 from the unrealized loss of $927,000 at March 31, 2005 and a decrease of $871,000 from the unrealized gain of $1,099,000 at December 31, 2004. The change from the unrealized gain at December 31, 2004 to an unrealized loss at March 31, 2005 and back to an unrealized gain on the portfolio at June 30, 2005 reflects the uncertainty in the markets regarding long-term interest rates even as the FOMC continued to raise the short-term rates.

Loans

The ending loan balance at June 30, 2005 was $933,423,000, which was an increase of $5,684,000 (0.6%) from the March 31, 2005 balance, an increase of $1,907,000 (0.2%) from the year-end 2004 balance and an increase of $133,571,000 (16.7%) from the June 30, 2004 balance. During the second quarter, real estate-other and consumer loans increased while commercial and construction loans decreased from March 31, 2005 balances. The most significant changes occurred in the real estate-other and construction categories. The increase in real estate-other loans in the second quarter was due to strong demand for term fixed rate commercial real estate loans. The decrease in construction loans was due to the completion of several large construction projects. Within its primary market area, the Bank has diversified its risk both as to property type and location. See “Credit Risk” below for a discussion regarding real estate risk.

Credit Risk

The Bank assesses and manages credit risk on an ongoing basis through stringent credit review and approval policies, extensive internal monitoring and established formal lending policies. Additionally, the Bank contracts with an outside loan review consultant to periodically examine new loans and to review the existing loan portfolio. Management believes its ability to identify and assess risk and return characteristics of the Company’s loan portfolio is critical for profitability and growth. Management strives to continue the historically low level of loan losses by continuing its emphasis on credit quality in the loan approval process, active credit administration and regular monitoring. With this in mind, management has designed and implemented a comprehensive loan review and grading system that functions to continually assess the credit risk inherent in the loan portfolio.

Ultimately, the credit quality of the Bank’s loans may be influenced by underlying trends in the national and local economic and business cycles. The Bank’s business is mostly concentrated in Monterey County. The County’s economy is highly dependent on the agricultural and tourism industries. The agricultural industry is also a major driver of the economies of San Benito County and the southern portions of Santa Cruz and Santa Clara Counties, which represent the additional market areas for the Bank. As a result, the Bank lends money to individuals and companies dependent upon the agricultural and tourism industries.

The Company has significant extensions of credit and commitments to extend credit which are secured by real estate, totaling approximately $710 million at June 30, 2005. Although management believes this real estate concentration has no more than the normal risk of collectibility, a substantial decline in the economy in general, or a decline in real estate values in the Bank’s primary market areas in particular, could have an adverse impact on the collectibility of these loans. The ultimate recovery of these loans is generally dependent on the successful operation, sale or refinancing of the real estate. The Bank monitors the effects of current and expected market conditions and other factors on the collectibility of real estate loans. When, in management’s judgment, these loans are impaired, an appropriate provision for losses is recorded. The more significant assumptions management considers involve estimates of the following: lease, absorption and sale rates; real estate values and rates of return; operating expenses; inflation; and sufficiency of collateral independent of the real estate including, in limited instances, personal guarantees. Notwithstanding the foregoing, abnormally high rates of impairment due to general or local economic conditions could adversely affect the Company’s future prospects and results of operations.

In extending credit and commitments to borrowers, the Bank generally requires collateral and/or guarantees as security. The repayment of such loans is expected to come from cash flow or from proceeds from the sale of selected assets of the borrowers. The Bank’s requirement for collateral and/or guarantees is determined on a case-by-case basis in connection with management’s evaluation of the creditworthiness of the borrower. Collateral held varies but may include accounts receivable, inventory, property, plant and equipment, income-producing properties, residences and other real property. The Bank secures its collateral by perfecting its interest in business assets, obtaining deeds of trust, or outright possession among other means. Loan losses from lending transactions related to real estate and agriculture compare favorably with the Bank’s loan losses on its loan portfolio as a whole.

Management believes that its lending policies and underwriting standards will tend to mitigate losses in an economic downturn; however, there is no assurance that losses will not occur under such circumstances. The Bank’s loan policies and underwriting standards include, but are not limited to, the following: 1) maintaining a thorough understanding of the Bank’s service area and limiting investments outside of this area, 2) maintaining a thorough understanding of borrowers’ knowledge and capacity in their field of expertise, 3) basing real estate construction loan approval not only on salability of the project, but also on the borrowers’ capacity to support the project financially in the event it does not sell within the original projected time period, and 4) maintaining conforming and prudent loan to value and loan to cost ratios based on independent outside appraisals and ongoing inspection and analysis by the Bank’s construction lending officers. In addition, the Bank strives to diversify the risk inherent in the construction portfolio by avoiding concentrations to individual borrowers and on any one project.

Nonaccrual, Past Due and Restructured Loans

Management generally places loans on nonaccrual status when they become 90 days past due, unless the loan is well secured and in the process of collection. When a loan is placed on nonaccrual status, the accrued and unpaid interest receivable is reversed and the loan is accounted for on the cash or cost recovery method thereafter, until qualifying for return to accrual status. Generally, a loan may be returned to accrual status when all delinquent interest and principal become current in accordance with the terms of the loan agreement and remaining principal is considered collectible or when the loan is both well secured and in the process of collection. Loans are charged off when, in the opinion of management, collection appears unlikely. The following table sets forth nonaccrual loans, loans past due 90 days or more and restructured loans performing in compliance with modified terms at June 30, 2005 and December 31, 2004:

In thousands (except percentages)	June 30, 2005		December 31, 2004
Past due 90 days or more and still accruing interest:
Commercial	$  --		$  --
Real estate	--		--
Consumer and other	--		--
	--		--
Nonaccrual:
Commercial	--		102
Real estate	--		--
Consumer and other	--		--
	--		102
Restructured (in compliance with modified terms) - Commercial	676		733
Total nonperforming and restructured loans	$676		$835
Allowance for loan losses as a percentage of
nonperforming and restructured loans	2591	%	1949	%
Nonperforming and restructured loans to total loans	0.07	%	0.09	%
Nonperforming assets to total assets	0.05	%	0.07	%

Nonperforming assets, which includes nonperforming and restructured loans and other real estate owned (OREO), decreased $159,000 from the December 31, 2004 balance. At June 30, 2005, nonperforming and restructured loans were 0.07% of total loans, which was down from 0.11% at March 31, 2005 and 0.09% at December 31, 2004. The ratio of nonperforming assets to total assets was 0.05% at June 30, 2005, 0.09% at March 31, 2005 and 0.07% at December 31, 2004. The Company did not have any OREO at June 30, 2005 or December 31, 2004.

A loan is impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. Impaired loans are measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate or, as a practical expedient, at the loan’s observable market price or the fair value of the collateral if the loan is collateral-dependent.

At June 30, 2005, the recorded investment in loans that were considered impaired under SFAS No. 114 was $676,000. The total impaired loans consist solely of restructured loans. Impaired loans had valuation allowances totaling $291,000.

At December 31, 2004, the recorded investment in loans considered impaired was $835,000 of which $102,000 was included in nonaccrual loans and $733,000 was included in restructured loans. Impaired loans had valuation allowances totaling $323,000.

Other than for the impaired loans disclosed above, management is not aware of any other potential problem loans, which were accruing and current at June 30, 2005, where serious doubt exists as to the ability of the borrower to comply with the present repayment terms.

Allowance for Loan Losses

The Bank maintains an allowance for loan losses to absorb losses inherent in the loan portfolio. The allowance is based on our regular assessments of the probable estimated losses inherent in the loan portfolio and to a lesser extent, unused commitments to provide financing. Determining the adequacy of the allowance is a matter of careful judgment, which reflects consideration of all significant factors that affect the collectibility of the portfolio as of the evaluation date. Our methodology for measuring the appropriate level of the allowance relies on several key elements, which include the formula allowance, specific allowances for identified problem loans and the unallocated reserve. The unallocated allowance contains amounts that are based on management’s evaluation of conditions that are not directly measured in the determination of the formula and specific allowances.

The formula allowance is calculated by applying loss factors to outstanding loans and certain unused commitments, in each case based on the internal risk grade of such loans and commitments. Changes in risk grades of both performing and nonperforming loans affect the amount of the formula allowance. Loss factors are based on our historical loss experience and may be adjusted for significant factors that, in management’s judgment, affect the collectibility of the portfolio as of the evaluation date. At June 30, 2005, the formula allowance was $14,374,000 compared to $13,898,000 at March 31, 2005 and $11,620,000 at December 31, 2004. The increase in the formula allowance in the second quarter was primarily a result of an increase in the allocation factor for commercial real estate loans which considers a higher risk of losses on the Company’s increased concentration of commercial real estate loans in the current economic environment offset in part by a reduction in classified loans.

In addition to the formula allowance calculated by the application of the loss factors to the standard loan categories, certain specific allowances may also be calculated. Quarterly, all significant classified and criticized loans are analyzed individually based on the source and adequacy of repayment and specific type of collateral, and an assessment is made of the adequacy of the formula reserve relative to the individual loan. A specific allocation either higher or lower than the formula reserve will be calculated based on the higher/lower-than-normal probability of loss and the adequacy of the collateral. At June 30, 2005, the specific allowance was $1,041,000 compared to $2,603,000 at March 31, 2005 and $2,671,000 at December 31, 2004. Loans subject to specific reserves decreased by $15,757,000 in the quarter ended June 30, 2005 from the March 31, 2005 balances due to the upgrading and pay-off of certain large classified loans.

The unallocated allowance contains amounts that are based on management’s evaluation of conditions that are not directly measured in the determination of the formula and specific allowances. The evaluation of the inherent loss with respect to these conditions is subject to a higher degree of uncertainty because they are not identified with specific problem loans or portfolio segments. At June 30, 2005, the unallocated allowance was $2,099,000 compared to $780,000 at March 31, 2005 and $1,979,000 at December 31, 2004. The conditions evaluated in connection with the unallocated allowance include the following at the balance sheet date:

o The current national and local economic and business conditions, trends and developments, including the condition of various market segments within our lending area;

o Changes in lending policies and procedures, including underwriting standards and collection, charge-off, and recovery practices;

o Changes in the nature, mix, concentrations and volume of the loan portfolio;

o The effect of other external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in the Bank’s current portfolio.

There can be no assurance that the adverse impact of any of these conditions on the Bank will not be in excess of the unallocated allowance as determined by management at June 30, 2005 and set forth in the preceding paragraph.

The allowance for loan losses totaled $17,514,000 or 1.88% of total loans at June 30, 2005 compared to $17,281,000 or 1.86% at March 31, 2005 and $16,270,000 or 1.75% at December 31, 2004. At these dates, the allowance represented 2591%, 1660% and 1949% of nonperforming loans.

It is the policy of management to maintain the allowance for loan losses at a level adequate for risks inherent in the loan portfolio. Based on information currently available to analyze loan loss potential, including economic factors, overall credit quality, historical delinquency and a history of actual charge-offs, management believes that the loan loss provision and allowance are adequate. However, no prediction of the ultimate level of loans charged off in future years can be made with any certainty.

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

	Three months ended June 30,				Six months ended June 30,
In thousands (except percentages)	2005		2004		2005		2004
Beginning balance	$ 17,281		$ 16,654		$ 16,269		$ 16,590
Provision charged to expense	250		590		1,400		655
Loans charged off	(23	)	(84	)	(172	)	(101	)
Recoveries	6		72		17		88
Ending balance	$ 17,514		$ 17,232		$ 17,514		$ 17,232
Ending loan portfolio					$ 933,423		$ 799,852
Allowance for loan losses as percentage of ending loan portfolio					1.88%		2.15%

Liquidity

Liquidity management refers to the Company’s ability to provide funds on an ongoing basis to meet fluctuations in deposit levels as well as the credit needs and requirements of its clients. Both assets and liabilities contribute to the Company’s liquidity position. Federal Funds lines, short-term investments and securities, and loan repayments contribute to liquidity, along with deposit increases, while loan funding and deposit withdrawals decrease liquidity. The Bank assesses the likelihood of projected funding requirements by reviewing historical funding patterns, current and forecasted economic conditions and individual client funding needs. Commitments to fund loans and outstanding standby letters of credit at June 30, 2005 were approximately $249,964,000 and $9,581,000, respectively. Such loans relate primarily to revolving lines of credit and other commercial loans, and to real estate construction loans.

The Company’s sources of liquidity consist of overnight funds sold to correspondent banks, unpledged marketable investments, loans pledged to the Federal Home Loan Bank of San Francisco (“FHLB-SF”) and sellable SBA loans. On June 30, 2005, liquid assets totaled $207.2 million or 16.6% of total assets as compared to $158.6 million or 13.6% of total assets on December 31, 2004. In addition to liquid assets, the Bank maintains short-term lines of credit with correspondent banks. At June 30, 2005, the Bank had $90,000,000 available under these credit lines. Informal agreements are also in place with various other banks to purchase participations in loans, if necessary. The Company serves primarily a business and professional customer base and, as such, its deposit base is susceptible to economic fluctuations. Accordingly, management strives to maintain a balanced position of liquid assets to volatile and cyclical deposits.

Capital Resources

The Company’s total shareholders’ equity was $109,273,000 at June 30, 2005 compared to $101,116,000 at December 31, 2004. The increase in capital reflects the year-to-date earnings of $8.1 million, exercise of stock options totaling $1.7 million, a $0.5 million decrease in the market value of available-for-sale investment securities and the effect of the stock repurchases of $1.2 million in the first half of 2005.

The Company and the Bank are subject to regulations issued by the Board of Governors and the FDIC which require maintenance of a certain level of capital. Under the regulations, capital requirements are based upon the composition of an institution’s asset base and the risk factors assigned to those assets. The guidelines characterize an institution’s capital as being “Tier 1” capital (defined to be principally shareholders’ equity less intangible assets) and “Tier 2” capital (defined to be principally the allowance for loan losses, limited to one and one-fourth percent of gross risk weighted assets). The guidelines require the Company and the Bank to maintain a risk-based capital target ratio of 8%, one-half or more of which should be in the form of Tier 1 capital.

The following table shows the Company’s and the Bank’s actual capital amounts and ratios at June 30, 2005 and December 31, 2004 as well as the minimum capital ratios for capital adequacy under the regulatory framework:

	Actual:			Minimum Capital Requirement:			Minimum To Be Well Capitalized Under Prompt Corrective Action Provisions:
In thousands (except percentages)	Amount	Ratio		Amount	Ratio		Amount		Ratio
Company
As of June 30, 2005:
Total Capital (to Risk Weighted Assets):	$121,886	12	.0%	$81,150	8	.0%		N/A
Tier 1 Capital (to Risk Weighted Assets):	109,141	10	.8%	40,575	4	.0%		N/A
Tier 1 Capital (to Average Assets):	109,141	9	.0%	48,656	4	.0%		N/A
As of December 31, 2004:
Total Capital (to Risk Weighted Assets):	$113,111	11	.2%	$80,589	8	.0%		N/A
Tier 1 Capital (to Risk Weighted Assets):	100,473	10	.0%	40,295	4	.0%		N/A
Tier 1 Capital (to Average Assets):	100,473	9	.1%	44,365	4	.0%		N/A
Community Bank
As of June 30, 2005:
Total Capital (to Risk Weighted Assets):	$113,708	11	.3%	$80,405	8	.0%	$100,506		10	.0%
Tier 1 Capital (to Risk Weighted Assets):	101,077	10	.1%	40,203	4	.0%	60,304		6	.0%
Tier 1 Capital (to Average Assets):	101,077	8	.4%	48,381	4	.0%	60,476		5	.0%
As of December 31, 2004:
Total Capital (to Risk Weighted Assets):	$105,234	10	.6%	$79,809	8	.0%	$  99,762		10	.0%
Tier 1 Capital (to Risk Weighted Assets):	92,716	9	.3%	39,905	4	.0%	59,857		6	.0%
Tier 1 Capital (to Average Assets):	92,716	8	.4%	44,105	4	.0%	55,132		5	.0%

The Bank meets the “well capitalized” ratio measures at both June 30, 2005 and December 31, 2004.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Overview

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

Asset/Liability Management

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

Simulation of earnings is one of the tools used to measure the sensitivity of earnings to interest rate changes. Using computer modeling techniques, the Company is able to estimate the potential impact of changing interest rates on earnings. A balance sheet forecast is prepared using inputs of actual loan and interest bearing liability (i.e. deposits/borrowings) positions as the beginning base.

The Company measures the interest rate risk embedded in its current portfolio based on interest rates evolving over time along four forecast paths. Net interest margin and net interest income are calculated as the forecast balance sheet is processed against these four interest rate scenarios. One scenario is a flat rate based on the current rate environment. One scenario is an economic forecast, based on underlying economic and financial sector modeling. The other two are a rising and declining scenario based on gradual rate ramps which embody rate relationships. The nature of the specified rate tests is a gradual but significant change in interest rates projected to evolve over 12 months. The interest rate risk modeling is a useful tool, but there are certain limits to the rate forecast estimates. Actual rate changes rarely follow any given forecast, asset-liability pricing and other model inputs usually do not remain constant in their historic relationships as new rate environments evolve. However, holding these assumptions constant through the modeling horizon helps to appropriately emphasize specific repricing/mismatch points and their performance implications.

A one year projection of net interest income, as forecast below, was modeled utilizing a forecast balance sheet projected from May 31, 2005 balances.

The following table summarizes the effect on net interest income of three rate scenarios as measured against a most likely rate scenario.

Interest Rate Risk Simulation of Net Interest Income

In thousands	Estimated Impact on One Year Projection of Net Interest Income
Variation from flat rate scenario
Most likely rates	$ 1,800
Declining rates	(4,204	)
Rising rates	2,979

The Company also estimates rate risk through the use of rate shock analysis. The model calculates both the percent and dollar changes in net interest income (NII) and market value of equity (MVE) projected to occur should the yield curve instantaneously shift up or down in a parallel fashion from its beginning position. MVE measures the impact on equity due to the changes in the market values of assets and liabilities as a result of a change in interest rates. In the rate shock analysis, the forecast balance sheet is processed against seven interest rate scenarios. These seven interest rate scenarios include the flat rate scenario described above, and six additional rate shock scenarios ranging from +300 to -300 basis points around the flat scenario in 100 basis point increments. These rate shock scenarios assume that interest rates increase or decrease immediately and remain at the new level in the future. The Company measures the volatility of these benchmarks using a twelve-month time horizon. Using the May 31, 2005 balance sheet as the base for the simulation, the following table summarizes the effect on net interest income of a +/-200 and +/-100 basis point change in interest rates. Due to the current low level of interest rates, the potential for interest bearing deposit accounts to respond to further changes in projected rates is limited, therefore calculations for rate decreases greater than 200 basis points are misleading and have not been presented.

Interest Rate Risk Simulation of NII

In thousands (except percentages)	% Change in NII from Current 12 Mo. Horizon		Change in NII from Current 12 Month Horizon
+ 300bp	17	.0%	$ 8,797
+ 200bp	11	.4%	5,887
+ 100bp	5	.7%	2,968
- 100bp	(7	.2%)	(3,717	)
- 200bp	(14	.0%)	(7,224	)

These results indicate that the balance sheet is asset sensitive since earnings increase when interest rates rise. The magnitude of the NII change is within the Company’s policy guidelines. The asset liability management policy limits aggregate market risk, as measured in this fashion, to an acceptable level within the context of risk-return trade-offs.

The simulations of earnings do not incorporate any management actions, which might moderate the negative consequences of interest rate deviations. Therefore, they do not reflect likely actual results, but serve as conservative estimates of interest rate risk. The risk profile of the Company has not changed materially from that at year-end 2004.

ITEM 4. CONTROLS AND PROCEDURES

(a) Disclosure Controls and Procedures: An evaluation of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) was carried out under the supervision and with the participation of the Company’s Chief Executive Officer, Chief Financial Officer and other members of the Company’s senior management as of the end of the Company’s fiscal quarter ended June 30, 2005. The Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures as currently in effect are effective in ensuring that the information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is (i) accumulated and communicated to the Company’s management (including the Chief Executive Officer and Chief Financial Officer) to allow timely decisions regarding required disclosure, and (ii) recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms.

(b) Internal Control Over Financial Reporting: An evaluation of any changes in the Company’s internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), that occurred during the Company’s fiscal quarter ended June 30, 2005, was carried out under the supervision and with the participation of the Company’s Chief Executive Officer, Chief Financial Officer and other members of the Company’s senior management. The Company’s Chief Executive Officer and Chief Financial Officer concluded that no change identified in connection with such evaluation has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

OTHER MATTERS

Change of Accountants

On June 21, 2005, the Company filed a Form 8-K to announce a change in the accounting firm that audits the Company’s financial statements. The Company selected Perry-Smith LLP to be the successor accountant to Deloitte & Touche LLP. The change was effective as of June 16, 2005.

Terrorist Acts

The terrorist actions on September 11, 2001 and thereafter had significant adverse effects upon the United States economy. Whether the terrorist activities in the future and the actions of the United States and its allies in combating terrorism on a worldwide basis, including the current military action in Iraq, will adversely impact the Company and the extent of such impact is uncertain. However, such events have had and could in the future have an adverse effect on the economy in the Company’s market areas. Such adverse impact could affect the Company’s future results of operations by, among other matters, reducing the demand for loans and other products and services offered by the Company, increasing nonperforming loans and the amounts reserved for loan losses, and causing a decline in the Company’s stock price.

Off-Balance Sheet Items

The Company has certain ongoing commitments under operating leases. These commitments do not significantly impact operating results. As of June 30, 2005 and December 31, 2004, commitments to extend credit and letters of credit were the only financial instruments with off-balance sheet risk (See Note 3 to the consolidated condensed financial statements — Commitments and Contingencies). The Company has not entered into any contracts for financial derivative instruments such as futures, swaps, options or similar instruments.

Certain financial institutions have elected to use special purpose vehicles (“SPV”) to dispose of problem assets. A SPV is typically a subsidiary company with an asset and liability structure and legal status that makes it obligations secure even if the parent corporation goes bankrupt. Under such circumstances, these financial institutions may exclude the problem assets from their reported impaired and non-performing assets. The Company does not use SPV or other structures to dispose of problem assets.

Website Access

Information on the Company and its subsidiary Bank may be obtained from the Company’s website www.community-bnk.com. Copies of the Company’s annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments thereto are available free of charge on the website as soon as they are filed with the SEC. To access these reports through a link to the Edgar reporting system simply select the “Central Coast Bancorp – Corporate Profile” menu item, then click on the “Central Coast Bancorp SEC Filings” link. Section 16 insider filings can also be accessed through the website. Follow the same instructions and select “Central Coast Bancorp SEC Section 16 Reports.”

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

At June 30, 2005, the Company had pending legal proceedings related to the City of King dispute discussed in the Company’s Form 10-K filed with the Securities and Exchange Commission on March 1, 2004, and the Forms 10-Q and 8-K referenced therein. The Company has appealed an adverse Judgment of a lower court as described in those filings and has charged off the outstanding balance of $3.3 million related to the CD secured loan in dispute.

The outcome of the dispute regarding the CD secured loan continues to be uncertain at the present time; however, the Bank intends to vigorously defend its rights in respect of the certificate of deposit on appeal of the Judgment.

Except as disclosed above, there are no material pending legal proceedings, other than ordinary routine litigation incidental to the Company’s business, to which the Company or the Bank is a party or as to which any of their property is subject.

ITEM 2. UNREGISTERED SALES OF EQUITIY SECURITIES AND USE OF PROCEEDS

The Board of Directors has authorized a stock repurchase program under which repurchases will be made from time to time by the Company in the open market, or in block purchases, or in privately negotiated transactions, in compliance with Securities and Exchange Commission rules. During the second quarter of 2005, the Company spent $364,000, to repurchase 21,487 shares. Year-to-date through June 30, 2005, the Company has repurchased 71,102 shares at a total cost of $1,238,000. The following table summarizes repurchase activity during the second quarter.

Purchases of Central Coast Bancorp Stock

Period	Total Number of Shares Purchased	Average Price Per Share		Shares Purchased as Part of Publicly Announced Plan	Shares Remaining to Purchase Under the Plan
April 1-30, 2005	--	--		--	197,749
May 1-31, 2005	6,300	16	.97	6,300	191,449
June 1-30, 2005	15,187	16	.96	15,187	176,272
Total	21,487	$     16	.96	21,487

1) The Repurchase Plan ("Plan') was announced on February 28, 2001. There is no stated expiration date for the Plan.

2) The Plan approved repurchase of 365,000 (5%) of the outstanding shares as of February 28, 2001. The approved shares equate to 690,077 shares as adjusted for the subsequent stock splits and stock dividends.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The following are the voting results of the registrants’s annual meeting of the shareholders held on May 19, 2005:

Proposal No. 1: Election Of Directors

Nominee	Affirmative Votes	Votes Withheld
Mose E. Thomas, Jr. (Class 1)	10,691,586	234,150
Louis A. Souza (Class 1)	10,776,650	149,086
F. Warren Wayland (Class 1)	10,832,012	93,724

In addition, the following directors continue in office as members of the class designated and were not subject to shareholder election at the annual meeting:

Michael T. Lapsys (Class 2)

Duncan L. Mccarter (Class 2)

Nick Ventimiglia (Class 2)

C. Edward Boutonnet (Class 3)

Donald D. Chapin, Jr. (Class 3)

Bradford G. Crandall (Class 3)

Robert M. Mraule, D.D.S., M.D. (Class 3)

Proposal No.2: Approval Of The Appointment Of Deloitte & Touche LLP As Independent Public Accountants For The 2005 Fiscal Year:

For 10,842,481 Against 39,629 Abstain 43,626

Total Number Of Shares Voted At The Meeting: 10,925,736

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

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

(3.1) Articles of Incorporation, as amended, incorporated by reference from Exhibit 3.1 to the Registrant’s 2004 Annual Report on Form 10-K filed with the Commission on March 14, 2005.

(3.2) Bylaws, as amended, incorporated by reference from Exhibit 3.2 to the Registrant’s Quarterly Report on Form 10-Q filed with the Commission on November 8, 2004.

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

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

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

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

*(10.4) 1994 Stock Option Plan, as amended and restated, incorporated by reference from Exhibit 99 to Registration Statement on Form S-8, No. 33-89948, filed with the Commission on November 15, 1996.

*(10.5) Form of Nonstatutory Stock Option Agreement under the 1994 Stock Option Plan incorporated by reference from Exhibit 99 to Registration Statement on Form S-8, No. 33-89948, filed with Commission on November 15, 1996.

*(10.6) Form of Incentive Stock Option Agreement under the 1994 Stock Option Plan incorporated by reference from Exhibit 99 to Registration Statement on Form S-8, No. 33-89948, filed with the Commission on November 15, 1996.

*(10.7) Form of Director Nonstatutory Stock Option Agreement under the 1994 Stock Option Plan incorporated by reference from Exhibit 99 to Registration Statement on Form S-8, No. 33-89948, filed with the Commission on November 15, 1996.

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

*(10.9) 401(k) Pension and Profit Sharing Plan Summary Plan Description incorporated by reference from Exhibit 10.8 to Registration Statement on Form S-4, No. 33-76972, filed with the Commission on March 28, 1994.

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

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

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

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

(10.14) Lease agreement dated November 27, 2001 related to 491 Tres Pinos Road, Hollister, California incorporated by reference from Exhibit 10.17 to the Registrant’s 2001 Annual Report on Form 10-K filed with the Commission on March 26, 2002.

(10.15) Lease agreement dated February 11, 2002, related to 761 First Street, Gilroy, California incorporated by reference from Exhibit 10.18 to the Registrant’s 2001 Annual Report on Form 10-K filed with the Commission on March 26, 2002.

(10.16) Lease agreement dated November 18, 2002, related to 439 Alvarado Street, Monterey, California incorporated by reference from Exhibit 10.16 to the Registrant’s 2002 Annual Report on Form 10-K filed with the Commission on March 20, 2003.

*(10.17)2004 Stock Option Plan and Forms of Incentive and Nonstautory Stock Option Agreement incorporated by reference from Exhibit 99.1 to Registration Statement on Form S-8, No. 333-117043, filed with the Commission on June 30, 2004.

(14.1) Code of Ethics, incorporated by reference from Exhibit 14.1 to the Registrant’s 2004 Annual Report on Form 10-K filed with the Commission on March 1, 2004.

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

(31.1) Certifications of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

(31.2) Certifications of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

(32.1) Certification of Central Coast Bancorp by its Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*Denotes management contracts, compensatory plans or arrangements.

SIGNATURES

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

July 27, 2005	CENTRAL COAST BANCORP
	By: /s/NICK VENTIMIGLIA
	Nick Ventimiglia
	(Chief Executive Officer)
	By: /s/ ROBERT STANBERRY
	Robert M. Stanberry
	(Chief Financial Officer,
	Principal Financial and Accounting Officer)

EXHIBIT INDEX

Exhibit Number	Description	Sequential Page Number
31.1	Certifications of Chief Executive Officer pursuant	32
	to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certifications of Chief Financial Officer pursuant	33
	to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certifications of Chief Executive Officer and Chief	34
	Financial Officer pursuant to Section 906 of the
	Sarbanes-Oxley Act of 2002

EX-31

EXHIBIT 31.1

CERTIFICATIONS UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
REGARDING THE QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2005

I, Nick Ventimiglia, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Central Coast Bancorp;

2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.  Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors :

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 27, 2005	/s/ NICK VENTIMIGLIA
	Nick Ventimiglia, Chief Executive Officer

EX-31

EXHIBIT 31.2

CERTIFICATIONS UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
REGARDING THE QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2005

I, Robert M. Stanberry, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Central Coast Bancorp;

2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.  Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors :

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 27, 2005	/s/ ROBERT M. STANBERRY
	Robert M. Stanberry, Chief Financial Officer

EX-32

EXHIBIT 32.1

Certification of
Central Coast Bancorp
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Regarding Quarterly Report on Form 10-Q for the Quarter Ended June 30, 2005

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), each of the undersigned officers of Central Coast Bancorp, a California corporation (the “Company”), does hereby certify that:

1. The Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005 (the “Form 10-Q”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. Information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated:	July 27, 2005	/s/ NICK VENTIMIGLIA
		Nick Ventimiglia
		Chief Executive Officer
Dated:	July 27, 2005	/s/ ROBERT M. STANBERRY
		Robert M. Stanberry
		Senior Vice President and
		Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to Central Coast Bancorp and will be retained by Central Coast Bancorp and furnished to the Securities and Exchange Commission or its staff upon request.