CENTENNIAL BANCORP

    NONSTATUTORY (NONQUALIFIED) STOCK OPTION AGREEMENT


EFFECTIVE DATE:   November 22, 1995

BETWEEN:          Centennial Bancorp, an Oregon
                  corporation               (the "Company")

AND:              Richard C. Williams      (the "Optionee")


     Pursuant to the  Company's  1995 Stock  Incentive  Plan (the  "Plan"),  the
Compensation  Committee of the Board of Directors (the  "Committee") has granted
to the Optionee an option to purchase  shares of the Company's  Common Stock, $2
par value (the "Stock"), in the amount indicated below.

     NOW, THEREFORE, the parties agree as follows:

     1.  GRANT;  TERMS OF OPTION.  Subject to the terms and  conditions  of this
Agreement and the Plan,  the Company grants to the Optionee the right and option
(the  "Option") to purchase  any part of an  aggregate  of 60,000  shares of the
Company's  authorized  but  unissued  Stock at a purchase  price of $11.625  per
share,  this  price  being the fair  market  value of the  shares as  determined
pursuant to the Plan on the date of the grant of the Option. It is the intent of
the Committee that the Option be a nonstatutory (nonqualified) stock option and,
therefore,  not qualify as an "incentive  stock option" under the tax laws.  The
Option is granted upon the following terms and conditions:

     (a)  TERM OF OPTION.  Subject to  reductions in the Option term provided in
          subparagraphs  (c) and (g) below,  the Option shall continue in effect
          through November 21, 2015.

     (b)  TIMING OF RIGHT TO EXERCISE.  Except as provided in  subparagraph  (c)
          hereof, the Option may be exercised from time to time over the term of
          the Option by the purchase of shares in the following amounts:

          Prior to September 30, 1996: None

          On September 30, 1996: 20,000 shares

          On September 30, 1997: An additional 20,000 shares



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         On September 30, 1998:     The remaining 20,000
                                    shares subject to the
                                    Option

         If the  Optionee  does not  purchase in any one year the full number of
         shares that he is then  entitled to  purchase,  the  Optionee's  rights
         shall be  cumulative,  and,  subject  to the other  provisions  of this
         Agreement, the Optionee may purchase those shares thereafter during the
         term of the Option.

     (c)  TERMINATION  OF  EMPLOYMENT.  Except as provided in this  subparagraph
          (c),  the  Option  shall not be  exercised  unless at the time of such
          exercise  the  Optionee is in the employ of the Company or a parent or
          subsidiary  corporation  of the  Company  and  shall  have  so  served
          continuously  since the effective date of this  Agreement.  Vesting of
          the  Option  shall  continue  during   approved   absences  or  leaves
          (including  an extended  illness).  If the  employment of the Optionee
          with the Company or a parent or subsidiary  corporation of the Company
          terminates  by reason of the  Optionee's  death or  disability,  or is
          terminated  by  the  Company   without  "cause"  (as  defined  in  the
          Employment  Agreement  between the  Optionee  and the  Company,  dated
          effective  October  1,  1996  (the  "Employment  Agreement")),  or  is
          terminated  by the  Optionee  with "good  reason"  (as  defined in the
          Employment  Agreement),  or terminates  at the end of the  "Employment
          Period" (as defined in the  Employment  Agreement),  the Option  shall
          become fully exercisable as of the date of such  termination,  and the
          Option shall  continue to be  exercisable  during the remainder of its
          term (subject to  subparagraph  (g) below).  If the  employment of the
          Optionee by the Company or a parent or subsidiary  corporation  of the
          Company  terminates for any other reason,  the Option may be exercised
          by the Optionee at any time prior to the expiration date of the Option
          or the expiration of three months after the date of such  termination,
          whichever  is the  shorter  period,  but only if and to the extent the
          Optionee  was  entitled  to  exercise  the  Option at the date of such
          termination.  In such  event,  to the  extent  that the  Option is not
          exercised  within  the  three-month  period,  all  further  rights  to
          purchase  shares  pursuant to the Option shall cease and  terminate at
          the expiration of such period.

     (d)  CERTAIN  TRANSFERS  PERMITTED.  The Option shall not be  assignable or
          transferable  by the Optionee,  either  voluntarily or by operation of
          law,  except as  follows:  (i) by will or by the laws of  descent  and
          distribution of the state or country of the Optionee's domicile at the
          time of death; (ii) pursuant to a qualified


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         domestic relations order; (iii) to members of the Optionee's  immediate
         family (i.e.,  children,  grandchildren and spouse); (iv) to trusts for
         the benefit of such family members;  and (v) to partnerships whose only
         partners are such family members.  The Optionee  understands and agrees
         that: (i) no consideration  may be paid for the transfer of the Option;
         and (ii) the Option, after any permitted transfer, shall continue to be
         subject  to the same terms and  conditions  as were  applicable  to the
         Option  immediately  prior to its transfer and, upon the request of the
         Committee,   the  Optionee   will  obtain  from  the   transferee   the
         transferee's  agreement in writing to be so bound. Once such conditions
         are  satisfied,  the  Optionee  may,  at any time,  effect a  permitted
         transfer. After any permitted transfer, whenever the word "Optionee" is
         used in this Agreement under  circumstances  where the provision should
         logically be construed to apply to the transferee,  the word "Optionee"
         shall be deemed to include such transferee.

     (e)  MANNER OF  EXERCISE.  Shares may be  purchased  pursuant to the Option
          only upon  receipt by the Company of written  notice from the Optionee
          of the Optionee's desire to purchase,  specifying the number of shares
          the  Optionee  desires to purchase  and the date on which the Optionee
          desires to complete the purchase.  The Option may not be exercised for
          a fraction  of a share.  If  required  to comply  with any  applicable
          federal or state  securities  laws,  the notice  also shall  contain a
          representation  that it is the  Optionee's  intention  to acquire  the
          shares for  investment  and not for resale.  On the date specified for
          completion of the purchase of the shares,  the Optionee  shall pay the
          Company the full purchase price of the shares in cash or by such other
          method of payment as shall be  approved  by the  Committee.  No shares
          shall be issued  until full  payment has been made,  and the  Optionee
          shall  have  none of the  rights of a  shareholder  until  shares  are
          issued.

     (f)  WITHHOLDING OBLIGATIONS.  The Optionee shall, upon notification of the
          amount  due  and  prior  to  or  concurrently  with  delivery  of  the
          certificate  representing  the shares,  pay to the Company any amounts
          necessary  to  satisfy  applicable   federal,   state  and  local  tax
          withholding  requirements.  If  additional  withholding  is or becomes
          required   beyond  any  amount   deposited   before  delivery  of  the
          certificates,  the  Optionee  shall pay such  amount to the Company on
          demand.

     (g)  CHANGES IN CAPITAL STRUCTURE. Except as provided in the final sentence
          of this subparagraph (g), if the


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         outstanding  shares of Stock are increased or decreased or changed into
         or  exchanged  for a  different  number  or kind  of  shares  or  other
         securities  of the Company or of another  corporation  by reason of any
         reorganization,    merger,    consolidation,    plan    of    exchange,
         recapitalization,  reclassification,  stock  split-up,  combination  of
         shares  or  dividend  payable  in  shares,  the  Committee  shall  make
         appropriate adjustment in the number and kind of shares as to which the
         Option, or portion thereof then unexercised,  shall be exercisable,  in
         order that the Optionee's proportionate interest shall be maintained as
         before the  occurrence  of such event.  Such  adjustment  in the Option
         shall be made  without  change in the  total  price  applicable  to the
         unexercised  portion of the Option and with a corresponding  adjustment
         in the  option  price  per  share.  Any  such  adjustment  made  by the
         Committee  shall be conclusive.  In the event of the dissolution of the
         Company  or a  merger,  consolidation,  plan  of  exchange  or  similar
         transaction  affecting the Company,  in lieu of adjusting the Option as
         described above,  the Committee may, in its sole discretion,  provide a
         30-day period immediately prior to such event during which the Optionee
         shall have the right to exercise the Option in whole or in part without
         any limitation on exercisability.

     2. CONDITIONS. The obligations of the Company under this Agreement shall be
subject to: (i) the approval of such state or federal authorities or agencies as
may have  jurisdiction  in the matter;  and (ii) the approval of the Plan by the
Company's  shareholders.  The  Company  shall use its best  efforts to take such
steps as may be  required  by state or federal  law or  applicable  regulations,
including rules and regulations of the Securities and Exchange  Commission,  any
quotation system on which the Stock may then be traded and any stock exchange on
which the Stock may then be listed,  in connection  with the issuance or sale of
any shares acquired pursuant to this Agreement or the trading or listing of such
shares on any such system or  exchange.  The Company  shall not be  obligated to
issue or  deliver  shares  under this  Agreement  if,  upon  advice of its legal
counsel,  such issuance or delivery  would  violate state or federal  securities
laws.  The Option shall not be  exercisable  until the Plan has been approved by
the Company's  shareholders;  and, if the Plan terminates as a result of failure
to receive shareholder approval, the Option shall be null and void.

     3. LEGENDS.  Certificates representing the shares subject to this Agreement
shall bear such  legends as the Company  shall deem  appropriate  to reflect any
restrictions on transfer imposed by federal or applicable state securities laws.



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     4. CONTINUING RELATIONSHIP.  Nothing in the Plan or in this Agreement shall
confer upon the  Optionee any right to continue as an employee of the Company or
any parent or subsidiary corporation of the Company or interfere in any way with
the right of the Company or parent or  subsidiary  to terminate  the  Optionee's
employment at any time for any reason.

     5. BINDING EFFECT.  This Agreement shall be binding upon and shall inure to
the benefit of any successor of the Company,  but except as provided above,  the
Option shall not be assigned or otherwise disposed of by the Optionee.

     6. THE PLAN. The Option is subject to the terms and conditions of the Plan.
In the event of a conflict between the Plan and this Agreement, the terms of the
Plan shall control. The Optionee agrees to be bound by the rules and regulations
for the  administration  of the  Plan,  as  presently  prescribed  or  hereafter
amended,  and by any  amendment,  construction  or  interpretation  of the  Plan
properly adopted by the Company's Board of Directors or by the Committee.

     7. NOTICES.  Parties to this Agreement  shall give all notices to the other
parties  concerning  this  Agreement by personal  delivery,  by telecopier or by
registered or certified mail, return receipt requested, addressed as follows:

     If to the Company:    Centennial Bancorp
                           675 Oak Street
                           Eugene, Oregon 97440
                           Attention: Chairman

     If to Optionee:       Richard C. Williams
                           2060 Graham Drive
                           Eugene, Oregon  97405

Any party may, by written notice to the other  parties,  designate a new address
to which notices shall thereafter be delivered. Notice hereunder shall be deemed
effective  upon the earlier of actual  receipt or three days after being sent by
registered or certified mail.



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     IN WITNESS WHEREOF,  the parties have executed this Agreement  effective as
of the date stated above.

                           CENTENNIAL BANCORP



                           By  /s/Cordy H. Jensen
                             ---------------------------------
                             Cordy H. Jensen
                             Director and Secretary


                               /s/Richard C. Williams
                             ---------------------------------
                             Richard C. Williams
                             Address:  2060 Graham Drive
                                       Eugene, Oregon  97405