REPORT OF SYMONDS, EVANS & COMPANY, P.C.,
                              INDEPENDENT AUDITORS


To the Board of Directors and
Shareholders of Centennial Bancorp


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

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the financial position of Centennial Bancorp
and  subsidiaries  as of December  31,  2000 and 1999,  and the results of their
operations and their cash flows for the three years in the period ended December
31, 2000 in conformity  with  accounting  principles  generally  accepted in the
United States.


/s/ Symonds, Evans & Company, P.C.


Portland, Oregon
January 19, 2001,
except for Note 14, as to
which the date is January 24, 2001


                                       1

<PAGE>
<TABLE>
<CAPTION>

                                         CENTENNIAL BANCORP AND SUBSIDIARIES

                                              CONSOLIDATED BALANCE SHEETS

                                               December 31, 2000 and 1999


                                 ASSETS                                           2000                  1999
                                 ------                                    ------------------    ------------------
<S>                                                                       <C>                   <C>
Cash and cash equivalents:
   Cash and due from banks                                                 $       39,498,282    $       29,934,856
   Federal funds sold                                                               3,465,000                     -
                                                                           ------------------    ------------------

       Total cash and cash equivalents                                             42,963,282            29,934,856

Investment securities available for sale                                           60,362,569            59,358,757
Loans, net                                                                        693,729,855           587,507,784
Mortgage loans held for sale                                                       10,890,003             6,155,343
Federal Home Loan Bank stock                                                        5,832,800             5,468,800
Premises and equipment, net                                                        15,367,393            15,911,497
Accrued interest and other assets                                                  23,829,060            22,400,675
                                                                           ------------------    ------------------

       Total assets                                                        $      852,974,962    $      726,737,712
                                                                           ==================    ==================

               LIABILITIES AND SHAREHOLDERS' EQUITY
               ------------------------------------

Liabilities:
   Deposits:
     Demand                                                                $      130,898,788    $      106,113,028
     Interest-bearing demand                                                      244,647,939           246,690,606
     Savings                                                                       53,878,931            33,320,788
     Time                                                                         267,068,684           186,917,061
                                                                           ------------------    ------------------

       Total deposits                                                             696,494,342           573,041,483

   Short-term borrowings                                                           59,634,083            74,553,967
   Accrued interest and other liabilities                                           6,663,542             4,813,501
                                                                           ------------------    ------------------

       Total liabilities                                                          762,791,967           652,408,951

Shareholders' equity:
   Preferred stock                                                                          -                     -
   Common stock, 22,894,723 and 22,691,004 shares
     issued and outstanding at December 31, 2000
     and 1999, respectively                                                        30,535,794            30,390,824
   Retained earnings                                                               59,826,586            45,624,007
   Accumulated other comprehensive loss                                              (179,385)           (1,686,070)
                                                                           ------------------    ------------------

       Total shareholders' equity                                                  90,182,995            74,328,761
                                                                           ------------------    ------------------

       Total liabilities and shareholders' equity                          $      852,974,962    $      726,737,712
                                                                           ==================    ==================


                                                         See accompanying notes.
</TABLE>


                                        2
<PAGE>
<TABLE>
<CAPTION>


                                        CENTENNIAL BANCORP AND SUBSIDIARIES

                                         CONSOLIDATED STATEMENTS OF INCOME

                                    Years ended December 31, 2000, 1999 and 1998

                                                                 2000                1999                1998
                                                            ---------------     ---------------    ----------------
<S>                                                        <C>                 <C>                <C>
Interest and dividend income:
   Interest and fees on loans                               $    74,847,846     $    54,133,662    $     44,348,206
   Taxable interest on investment securities                      1,904,742           2,227,213           2,723,091
   Nontaxable interest on investment securities                   1,450,290           1,433,205           1,699,128
   Dividends on Federal Home Loan Bank stock                        364,000             385,100             372,600
   Interest on federal funds sold                                    60,728             280,334             691,063
   Deposits with banks                                                7,970               8,303              14,401
                                                            ---------------     ---------------    ----------------
                  Total interest and dividend income             78,635,576          58,467,817          49,848,489

Interest expense:
   Deposits:
     Interest-bearing demand and savings                         11,045,108           7,865,362           6,889,086
     Time                                                        13,772,392           8,596,805           8,184,923
   Short-term borrowings                                          4,163,980           1,405,250             489,595
   Long-term debt                                                         -                   -             272,897
                                                            ---------------     ---------------    ----------------
                  Total interest expense                         28,981,480          17,867,417          15,836,501
                                                            ---------------     ---------------    ----------------

Net interest income                                              49,654,096          40,600,400          34,011,988
Loan loss provision                                               3,800,000           2,300,000           1,500,000
                                                            ---------------     ---------------    ----------------
Net interest income after loan loss provision                    45,854,096          38,300,400          32,511,988

Noninterest income:
   Service charges on deposit accounts                            1,548,647           1,459,402           1,207,782
   Gains on sales of mortgage loans, net                            741,463             995,823           1,752,506
   Gains on sales of investment securities                          268,017             298,625             599,885
   Other                                                          1,208,986             773,432             623,343
                                                            ---------------     ---------------    ----------------
                  Total noninterest income                        3,767,113           3,527,282           4,183,516

Noninterest expense                                              26,715,433          22,801,627          19,348,558
                                                            ---------------     ---------------    ----------------
Income before income taxes                                       22,905,776          19,026,055          17,346,946

Provision for income taxes                                        8,703,197           6,919,290           5,912,400
                                                            ---------------     ---------------    ----------------

Net income                                                  $    14,202,579     $    12,106,765    $     11,434,546
                                                            ===============     ===============    ================

Basic earnings per common share                             $           .62     $           .53    $            .51
                                                            ===============     ===============    ================

Diluted earnings per common share                           $           .61     $           .52    $            .49
                                                            ===============     ===============    ================

Weighted average common shares outstanding:
   Basic                                                         22,783,420          22,642,500          22,443,313
   Diluted                                                       23,306,566          23,372,027          23,471,748


                                                        See accompanying notes.

</TABLE>
                                        3

<PAGE>
<TABLE>
<CAPTION>


                                           CENTENNIAL BANCORP AND SUBSIDIARIES

                                 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

                                        Years ended December 31, 2000, 1999 and 1998


                                                                                    Accumulated
                                           Number                                      other                             Total
                                             of          Common        Retained     comprehensive    Comprehensive   shareholders'
                                           shares         stock        earnings     income (loss)     income (loss)     equity
                                       -------------  -------------   ------------  --------------  ---------------   ------------
<S>                                      <C>          <C>            <C>            <C>            <C>               <C>
Balances at December 31, 1997             22,365,747   $ 29,031,352   $ 22,082,696   $  696,110                       $ 51,810,158


Comprehensive income:
   Net income                                      -              -     11,434,546            -      $  11,434,546      11,434,546
   Other comprehensive income -
    change in unrealized gains on
    investment securities of
    $208,764 (net of income taxes
    of approximately  $115,000),
    net of reclassification
    adjustment for gains on sales
    of investment securities
    included in net income of
    $395,924 (net of income taxes
    of approximately $204,000)                     -              -              -     (187,160)          (187,160)       (187,160)
                                                                                                     -------------

Comprehensive income                               -              -              -            -      $  11,247,386               -
                                                                                                     =============

Stock options exercised                      138,408        267,381              -            -                            267,381
Tax benefit of stock options exercised             -        392,216              -            -                            392,216
                                        ------------  -------------   ------------   ----------                         ----------


Balances at December 31, 1998             22,504,155     29,690,949     33,517,242      508,950                         63,717,141



                                                        See accompanying notes.
</TABLE>
                                        4

<PAGE>
<TABLE>
<CAPTION>


                                               CENTENNIAL BANCORP AND SUBSIDIARIES

                                CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (continued)

                                          Years ended December 31, 2000, 1999 and 1998

                                                                                    Accumulated
                                           Number                                      other                             Total
                                             of          Common        Retained     comprehensive    Comprehensive   shareholders'
                                           shares         stock        earnings     income (loss)     income (loss)     equity
                                       --------------  -------------  ------------  --------------  ---------------   ------------
<S>                                      <C>          <C>            <C>            <C>               <C>             <C>

Comprehensive income:
   Net income                                      -              -     12,106,765            -         12,106,765      12,106,765
   Other comprehensive income -
    change in unrealized losses
    on investment securities of
    $2,005,005 (net of income taxes
    of approximately $1,345,000),
    net  of  reclassification
    adjustment for gains on sales
    of investment securities
    included in net income of
    $190,015 (net of income taxes
    of approximately $109,000)                     -              -              -   (2,195,020)        (2,195,020)     (2,195,020)
                                                                                                     -------------               -

Comprehensive income                               -              -              -            -      $   9,911,745               -
                                                                                                     =============

Stock options exercised                      186,849        383,619              -            -                            383,619
Tax benefit of stock options exercised             -        316,256              -            -                            316,256
                                       -------------   ------------   ------------  -----------                        -----------

Balances at December 31, 1999             22,691,004     30,390,824     45,624,007   (1,686,070)                        74,328,761



                                                        See accompanying notes.
</TABLE>

                                        5

<PAGE>
<TABLE>
<CAPTION>


                                                  CENTENNIAL BANCORP AND SUBSIDIARIES

                                CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (continued)

                                                 Years ended December 31, 2000, 1999 and 1998



                                                                                    Accumulated
                                           Number                                      other                             Total
                                             of          Common        Retained     comprehensive    Comprehensive   shareholders'
                                           shares         stock        earnings     income (loss)     income (loss)     equity
                                       --------------  -------------  ------------  --------------  ---------------   ------------
<S>                                      <C>          <C>            <C>            <C>             <C>              <C>

Comprehensive income:
   Net income                                      -              -     14,202,579            -         14,202,579      14,202,579
   Other comprehensive income -
    change in unrealized losses
    on investment securities of
    $1,673,204 (net of income taxes
    of approximately $1,026,000),
    before reclassification adjustment
    for gains on sales of investment
    securities  included in net income
    of $166,171 (net of income taxes
    of approximately $102,000)                     -              -              -    1,506,685          1,506,685       1,506,685
                                                                                                       -----------

Comprehensive income                               _              _              _            _        $15,709,264               -
                                                                                                       ===========

Stock options exercised                      263,434        495,496              -            -                            495,496
Tax benefit of stock options exercised             -        139,803              -            -                            139,803
Repurchases of common stock                  (59,715)      (490,329)             -            -                           (490,329)
                                        ------------    -----------    -----------   -----------                        ----------

Balances at December 31, 2000             22,894,723    $30,535,794    $ 9,826,586   $  (179,385)                      $90,182,995
                                        ============    ===========    ===========   ===========                       ===========


                                                        See accompanying notes.
</TABLE>

                                        6


<PAGE>
<TABLE>
<CAPTION>


                                         CENTENNIAL BANCORP AND SUBSIDIARIES

                                        CONSOLIDATED STATEMENTS OF CASH FLOWS

                                     Years ended December 31, 2000, 1999 and 1998


                                                                 2000                1999                1998
                                                            ---------------     ---------------    ----------------
<S>                                                        <C>                 <C>                <C>
Cash flows from operating activities:
   Net income                                               $    14,202,579     $    12,106,765    $     11,434,546
   Adjustments to reconcile net income to net cash
     provided by operating activities:
       Gains on sales of mortgage loans and
         investment securities, net                              (1,009,480)         (1,294,448)         (2,352,391)
       Dividends on Federal Home Loan Bank stock                   (364,000)           (385,100)           (372,600)
       Loan loss provision                                        3,800,000           2,300,000           1,500,000
       Deferred income taxes                                     (1,327,747)           (935,809)           (437,882)
       Depreciation and amortization                              2,404,180           2,356,296           1,697,578
       Originations of mortgage loans held for sale            (142,042,227)       (152,458,419)       (213,853,812)
       Proceeds from sales of mortgage loans
         held for sale                                          138,049,027         158,337,944         210,152,220
       Changes in certain assets and liabilities:
         Accrued interest and other assets                       (1,564,213)        (12,391,249)         (1,335,735)
         Accrued interest and other liabilities                   1,850,041             946,919             101,196
                                                            ---------------     ---------------    ----------------
                  Net cash provided by
                    operating activities                         13,998,160           8,582,899           6,533,120

Cash flows from investing activities:
   Investment securities available for sale:
     Purchases                                                  (16,230,725)        (11,202,082)        (31,984,219)
     Maturities                                                   2,626,655           2,312,850          27,624,797
     Proceeds from sales                                         15,278,447          23,071,850          11,754,232
   Loan originations, net                                      (110,022,071)       (173,283,354)        (86,333,031)
   Purchases of premises and equipment, net                      (1,160,182)         (4,901,376)         (3,558,652)
                                                            ---------------     ---------------    ----------------
                  Net cash used in investing activities        (109,507,876)       (164,002,112)        (82,496,873)

Cash flows from financing activities:
   Net increase in deposits                                     123,452,859          89,175,187          64,584,212
   Increase (decrease) in short-term borrowings, net            (14,919,884)         53,953,896          12,884,288
   Payments on long-term debt                                             -                   -         (10,000,000)
   Proceeds from exercise of stock options                          495,496             383,619             267,381
   Repurchases of common stock                                     (490,329)                  -                   -
                                                            ---------------     ---------------    ----------------
                  Net cash provided by
                    financing activities                        108,538,142         143,512,702          67,735,881
                                                            ---------------     ---------------    ----------------

Net increase (decrease) in cash and cash equivalents             13,028,426         (11,906,511)         (8,227,872)

Cash and cash equivalents at beginning of year                   29,934,856          41,841,367          50,069,239
                                                            ---------------     ---------------    ----------------

Cash and cash equivalents at end of year                    $    42,963,282     $    29,934,856    $     41,841,367
                                                            ===============     ===============    ================



                                                         See accompanying notes.
</TABLE>
                                        7

<PAGE>


                       CENTENNIAL BANCORP AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                  Years ended December 31, 2000, 1999 and 1998



     1.     Description of business and summary of significant accounting
            policies
            --------------------------------------------------------------------

            Principles of consolidation
            ---------------------------

            The  accompanying  consolidated  financial  statements  include  the
            accounts of  Centennial  Bancorp,  a bank holding  company,  and its
            wholly-owned subsidiaries, Centennial Bank (the Bank) and Centennial
            Mortgage Co. (Centennial Mortgage)  (collectively,  "Bancorp").  The
            Bank provides commercial financing,  banking and other services, and
            Centennial Mortgage provides a variety of residential and commercial
            real  estate  financing  services.   All  significant   intercompany
            accounts and transactions have been eliminated in consolidation.

            Method of accounting
            --------------------

            Bancorp prepares its consolidated financial statements in conformity
            with accounting  principles  generally accepted in the United States
            and  prevailing  practices  within  the  banking  industry.  Bancorp
            utilizes the accrual method of accounting,  which recognizes  income
            when  earned  and  expenses  when  incurred.   The   preparation  of
            consolidated  financial  statements  in conformity  with  accounting
            principles   generally   accepted  in  the  United  States  requires
            management  to  make  estimates  and  assumptions  that  affect  the
            reported  amounts  of assets  and  liabilities,  the  disclosure  of
            contingent  assets and  liabilities at the date of the  consolidated
            financial  statements,  and  the  reported  amounts  of  income  and
            expenses during the reporting  periods.  Actual results could differ
            from those estimates.

            Cash and cash equivalents
            -------------------------

            For  purposes of  reporting  cash flows,  cash and cash  equivalents
            include  cash on hand,  amounts  due from banks,  and federal  funds
            sold. Generally, federal funds are sold for one-day periods.

            Supplemental disclosures of cash flow information
            -------------------------------------------------

            During  2000,  1999 and 1998,  noncash  transactions  resulted  from
            changes  in  unrealized  gains  (losses)  on  investment  securities
            available for sale, net of income taxes,  and the income tax benefit
            of  stock  options  exercised,  as  disclosed  in  the  accompanying
            consolidated statements of changes in shareholders' equity.

            During 2000, 1999 and 1998, Bancorp paid approximately  $28,200,000,
            $17,647,000 and $15,754,000, respectively, in interest expense.


                                       8
<PAGE>

                       CENTENNIAL BANCORP AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                  Years ended December 31, 2000, 1999 and 1998



     1.    Description of business and summary of significant accounting
           policies (continued)
           ---------------------------------------------------------------------

           Investment securities available for sale
           ----------------------------------------

           Investment  securities  available for sale are reported at fair value
           with changes in  unrealized  gains and losses  excluded from earnings
           and reported in shareholders' equity as other comprehensive income or
           loss, net of income taxes.

           Gains and losses on sales of investment securities available for sale
           are  recognized  on a specific  identification  basis.  Premiums  and
           discounts on investment  securities available for sale are recognized
           in  interest  income  using the  interest  method  over the period to
           maturity.

           Declines in the fair value of  investment  securities  available  for
           sale below their cost that are other than  temporary  would result in
           write-downs  of the  individual  securities to their fair value.  The
           related write-downs would be included in earnings as realized losses.
           Management   believes  that  all  unrealized   losses  on  investment
           securities  available  for sale as of December  31, 2000 and 1999 are
           temporary.

           Loans
           -----

           Loans are reported at their  outstanding  principal  balance less the
           allowance for loan losses and deferred  loan fees.  The allowance for
           loan losses represents management's  recognition of the assumed risks
           of extending  credit and the quality of the existing loan  portfolio.
           The allowance is maintained at a level considered adequate to provide
           for potential loan losses based on management's assessment of various
           factors affecting the portfolio.  Management's periodic evaluation of
           the adequacy of the allowance is based on Bancorp's  historical  loss
           experience,  known  and  inherent  risks  in the  portfolio,  adverse
           situations  that may  affect  a  borrower's  ability  to  repay,  the
           estimated  value of any  underlying  collateral  and  guarantees  and
           current economic conditions. The allowance is based on estimates, and
           ultimate losses may vary from the current estimates.  These estimates
           are reviewed periodically, and, as adjustments become necessary, they
           are  reported in earnings in the periods in which they become  known.
           The  allowance  for loan losses is increased by charges to income and
           decreased by charge-offs, net of recoveries.

           Bancorp's  credit  policies  require an evaluation of each borrower's
           creditworthiness on a case-by-case basis. In the course of evaluating
           a  borrower's  creditworthiness,  management  determines  a requisite
           amount of collateral support. The type of collateral held varies, but
           may  include  real  estate,   equipment,   accounts   receivable  and
           inventories.


                                       9
<PAGE>

                       CENTENNIAL BANCORP AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                  Years ended December 31, 2000, 1999 and 1998



     1.    Description of business and summary of significant accounting
           policies (continued)
           ---------------------------------------------------------------------

           At the discretion of management,  personal guaranties of the borrower
           or  related   persons  may  also  be  obtained  in  addition  to  the
           collateral.   Management   believes   that  the  loan   portfolio  is
           diversified  among  industry  groups  and does not  contain  a direct
           concentration   of  loans  in  a  single  industry  (other  than  the
           construction  industry)  which  exceeds 10% of the  portfolio.  It is
           management's  opinion that the  allowance for loan losses is adequate
           to absorb known and inherent  risks in the loan  portfolio.  However,
           actual results may differ from these estimates.

           Bancorp considers loans to be impaired when management  believes that
           it is probable  that all amounts due will not be collected  according
           to the  contractual  terms. An impaired loan must be valued using the
           present value of expected future cash flows  discounted at the loan's
           effective  interest rate, the loan's  observable  market price or the
           estimated fair value of the loan's  underlying  collateral or related
           guaranty.  Bancorp primarily measures impairment on all large-balance
           nonaccrual  loans  (typically  commercial and commercial  real estate
           loans) based on the estimated fair value of the underlying collateral
           or related guaranty.  In certain other cases,  impairment is measured
           based on the present value of expected  future cash flows  discounted
           at the loan's  effective  interest rate.  Amounts deemed impaired are
           either specifically allocated for in the allowance for loan losses or
           reflected   as  a   partial   charge-off   of   the   loan   balance.
           Smaller-balance  homogeneous loans (typically  installment loans) are
           collectively evaluated for impairment.  Accordingly, Bancorp does not
           separately  identify  individual  installment  loans  for  impairment
           disclosures.

           The accrual of interest on impaired  loans is  discontinued  when the
           repayment of principal and interest is doubtful.  When the accrual of
           interest is  discontinued,  all unpaid accrued  interest is reversed.
           The interest on these loans is accounted for on the cash-basis or the
           cost-recovery method, until the loan qualifies for return to accrual.
           Loans are returned to accrual  status when the principal and interest
           amounts contractually due are brought current and future payments are
           reasonably assured.

           Loan  origination  fees, net of origination  costs,  are deferred and
           recognized as an adjustment of the yield of the related loan.

           Interest  income on all loans is accrued  as earned  using the simple
           interest method.

           Various regulatory agencies, as an integral part of their examination
           process,  periodically  review  Bancorp's  allowance for loan losses.
           Such agencies may require Bancorp to


                                       10
<PAGE>

                       CENTENNIAL BANCORP AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                  Years ended December 31, 2000, 1999 and 1998



     1.    Description of business and summary of significant accounting
           policies (continued)
           ---------------------------------------------------------------------

           recognize  additions to the allowance  based on their judgment of the
           information available to them at the time of their examinations.

           Mortgage loans
           --------------

           Centennial   Mortgage's   activities   include  the   origination  of
           conventional  and federally  insured  residential  mortgage loans for
           resale in the  secondary  market.  Mortgage  loans  are sold  without
           recourse;  however,  the sales of these mortgage loans are subject to
           technical underwriting  exceptions and related repurchase risks. Such
           risks are considered in the  determination  of the allowance for loan
           losses.

           Mortgage  loans  originated  and intended  for sale in the  secondary
           market are carried at the lower of cost or  estimated  market  value.
           Market value is determined on an aggregate loan basis.

           At December 31, 2000, 1999 and 1998, Bancorp held servicing rights to
           approximately $42,638,000, $36,842,000 and $38,611,000, respectively,
           in mortgage loans which had been sold into the secondary market. Such
           mortgage  loans are not  included  in the  accompanying  consolidated
           balance  sheets.  The net amount of  capitalized  mortgage  servicing
           rights (approximately  $386,000 and $366,000 at December 31, 2000 and
           1999,  respectively) is included in accrued interest and other assets
           in the accompanying consolidated balance sheets.

           Federal Home Loan Bank stock
           ----------------------------

           Bancorp's  investment  in  Federal  Home  Loan Bank  (FHLB)  stock is
           carried at par value,  which  approximates fair value. As a member of
           the FHLB system,  Bancorp is required to maintain a minimum  level of
           investment  in  FHLB  stock  based  on  specific  percentages  of its
           outstanding mortgages, total assets or FHLB advances. At December 31,
           2000,   Bancorp   exceeded  its  minimum   required   investment   of
           approximately $2,325,000. Bancorp may request redemption at par value
           of any FHLB stock in excess of the minimum required investment. Stock
           redemptions are at the discretion of FHLB.

           Premises and equipment
           ----------------------

           Premises  and  equipment  are  stated  at  cost,   less   accumulated
           depreciation  and  amortization.  Depreciation  and  amortization are
           computed principally using the straight-line method over


                                       11
<PAGE>

                       CENTENNIAL BANCORP AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                  Years ended December 31, 2000, 1999 and 1998



     1.    Description of business and summary of significant accounting
           policies (continued)
           ---------------------------------------------------------------------

           the shorter of the  estimated  useful lives of the assets or terms of
           the leases.  Amortization  of leasehold  improvements  is included in
           depreciation   and   amortization   expense   in   the   accompanying
           consolidated financial statements.

           Goodwill
           --------

           Goodwill  is the  excess of the cost over  fair  value of net  assets
           acquired  in  business   combinations.   It  is   amortized   on  the
           straight-line  method over periods ranging from 15 to 20 years. It is
           Bancorp's policy to review goodwill for impairment whenever events or
           changes  in  circumstances   indicate  that  its  investment  in  the
           underlying  businesses  that  gave rise to such  goodwill  may not be
           recoverable.   Should  such  an  evaluation   of  impairment   become
           necessary,  Bancorp will  evaluate the  performance  of such acquired
           businesses on an  undiscounted  basis. At December 31, 2000 and 1999,
           accrued interest and other assets includes  goodwill of approximately
           $8,146,000   and   $8,834,000,   respectively,   net  of  accumulated
           amortization.   Amortization   of  goodwill  in  2000  and  1999  was
           approximately  $688,000 and $487,000,  respectively.  Amortization of
           goodwill in 1998 was  insignificant to the accompanying  consolidated
           financial statements.

           Advertising
           -----------

           Advertising costs are generally charged to expense during the year in
           which they are incurred.

           Income taxes
           ------------

           Deferred  tax assets  and  liabilities  are  reflected  at  currently
           enacted  income  tax  rates  applicable  to the  period  in which the
           deferred  tax assets or  liabilities  are  expected to be realized or
           settled.  As changes in tax laws or rates are  enacted,  deferred tax
           assets and liabilities are adjusted  through the provision for income
           taxes.

           Recently issued accounting standards
           ------------------------------------

           In June 1999, the Financial  Accounting Standards Board (FASB) issued
           Statement  of  Financial   Accounting   Standards   (SFAS)  No.  137,
           "Accounting     for     Derivative     Instruments     and    Hedging
           Activities--Deferral  of the Effective  Date of FASB  Statement  133"
           (SFAS 137), an amendment of SFAS 133,  which  establishes  accounting
           and  reporting  standards  for  derivative  instruments  and  hedging
           activities and requires that an entity  recognize all  derivatives as
           either assets or liabilities in the balance sheet and measure those


                                       12
<PAGE>

                       CENTENNIAL BANCORP AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                  Years ended December 31, 2000, 1999 and 1998



     1.     Description of business and summary of significant accounting
            policies (continued)
            --------------------------------------------------------------------

            instruments  at fair  value.  In June 2000,  FASB  issued  SFAS 138,
            "Accounting for Certain  Derivative  Instruments and Certain Hedging
            Activities--an  amendment of SFAS 133." SFAS 133, as amended by SFAS
            137 and  SFAS  138,  is  effective  for  all  quarterly  and  annual
            financial  statements of fiscal years beginning after June 15, 2000.
            Bancorp had no significant  derivatives as of December 31, 2000, nor
            does Bancorp engage in any hedging activities.  Accordingly, Bancorp
            does not  anticipate  that the  adoption  of SFAS 133, as amended by
            SFAS  137  and  SFAS  138,  will  have  a  material  effect  on  its
            consolidated financial position or results of operations.

            Reclassifications
            -----------------

            Certain  amounts in 1999 and 1998 have been  reclassified to conform
            with the 2000  presentation.  Net income was not  affected  by these
            reclassifications.

     2.     Investment securities available for sale
            ----------------------------------------

            Investment securities available for sale consisted of the following
            at December 31, 2000 and 1999:
<TABLE>
<CAPTION>

                                                                         Gross             Gross           Estimated
                                                   Amortized         unrealized         unrealized           fair
           2000                                      cost               gains             losses             value
           ----                                ----------------  -----------------  ----------------   ----------------
           <S>                                <C>               <C>                <C>                <C>
           U.S. Treasury securities            $        499,783  $               -  $            173   $        499,610
           U.S. Government and
              agency securities                      38,157,018              1,709           343,069         37,815,658
           Obligations of state and
              political subdivisions                 16,216,658            168,118           125,476         16,259,300
           Corporate bonds                            2,061,947                  -            29,478          2,032,469
           Mortgage-backed securities                 3,202,684                  -             3,402          3,199,282
           Equity securities                            513,261             46,189             3,200            556,250

              Total                            $     60,651,351  $         216,016  $        504,798   $     60,362,569

           1999
           ----
           U.S. Treasury securities            $      1,400,808  $           4,759  $          6,325   $      1,399,242
           U.S. Government and
              agency securities                      27,988,761                  -         1,454,349         26,534,412
           Obligations of state and
              political subdivisions                 28,468,534             79,235         1,232,228         27,315,541
           Corporate bonds                            2,284,118                120            79,123          2,205,115
           Mortgage-backed securities                 1,936,017                  -            31,570          1,904,447

              Total                            $     62,078,238  $          84,114  $      2,803,595   $     59,358,757
                                               ================  =================  ================   ================

</TABLE>


                                       13
<PAGE>

                       CENTENNIAL BANCORP AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                  Years ended December 31, 2000, 1999 and 1998



     2.    Investment securities available for sale (continued)
           ---------------------------------------------------

           The amortized cost and estimated fair value of investment  securities
           available for sale at December 31, 2000, by contractual maturity, are
           shown  below.   Expected  maturities  will  differ  from  contractual
           maturities,  because  borrowers  may have the right to call or prepay
           obligations  with  or  without  call  or  prepayment  penalties.   In
           addition, the contractual  maturities for mortgage-backed  securities
           were allocated assuming no prepayments.

                                                                   Estimated
                                                 Amortized           fair
                                                   cost              value
                                            ----------------   ----------------
           Due in 1 year or less            $      2,767,368   $      2,775,710
           Due after 1 through 5 years            33,190,232         33,119,376
           Due after 5 through 10 years           11,046,433         10,807,136
           Due after 10 years                     13,134,057         13,104,097
           Equity securities                         513,261            556,250

              Total                         $     60,651,351   $     60,362,569
                                            ================   ================

           At December 31, 2000,  investment  securities available for sale with
           an estimated fair value of approximately  $23,880,000  (approximately
           $12,329,000  at  December  31,  1999) were  pledged to secure  public
           deposits,  and  investment  securities  available  for  sale  with an
           estimated  fair  value of  approximately  $29,235,000  (approximately
           $10,061,000  at December 31, 1999) were pledged to secure  short-term
           borrowings (see Note 6).

           During  the years  ended  December  31,  2000,  1999 and 1998,  gross
           realized gains on sales of investment  securities  available for sale
           and the  related  proceeds  on those  sales are as  disclosed  in the
           accompanying  consolidated  statements  of  income  and  cash  flows,
           respectively.  There  were no  gross  realized  losses  on  sales  of
           investment  securities  available  for sale  during  the years  ended
           December 31, 2000, 1999 and 1998.



                                       14
<PAGE>

                       CENTENNIAL BANCORP AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                  Years ended December 31, 2000, 1999 and 1998




3.     Loans
       -----

       Loans consisted of the following at December 31, 2000 and 1999:
<TABLE>
<CAPTION>

                                                                                      2000               1999
                                                                                ----------------  -----------------
      <S>                                                                      <C>               <C>
       Real estate - mortgage                                                   $    147,737,507  $     129,220,429
       Real estate - construction                                                    261,726,951        227,387,353
       Commercial                                                                    273,866,755        219,588,355
       Installment                                                                     9,379,311          8,409,380
       Lease financing                                                                 4,606,838          4,867,834
       Other                                                                           5,562,841          4,198,940
                                                                                ----------------  -----------------

                                                                                     702,880,203        593,672,291
       Less allowance for loan losses                                                 (9,150,348)        (6,164,507)
                                                                                ----------------  -----------------

           Loans, net                                                           $    693,729,855  $     587,507,784
                                                                                ================  =================
</TABLE>


       Bancorp is located - and conducts its  business  primarily  within - Lane
       County, Oregon; the greater Portland metropolitan area; and Clark County,
       Washington.  The result of doing business in these  geographic  areas has
       been growth in loan demand. A substantial  portion of Bancorp's loans are
       secured by real estate in these  geographic areas and,  accordingly,  the
       ultimate  collectability  of a  substantial  portion  of  Bancorp's  loan
       portfolio is susceptible to changes in the local market conditions.

<TABLE>
<CAPTION>

       Transactions in the allowance for loan losses for the years ended December 31, 2000, 1999 and 1998 were as follows:

                                                                    2000              1999               1998
                                                             ----------------   ----------------  -----------------

      <S>                                                   <C>                <C>               <C>
       Balance at beginning of year                          $      6,164,507   $      4,450,614  $       3,348,914
       Loan loss provision                                          3,800,000          2,300,000          1,500,000
       Loans charged-off                                             (906,319)          (671,827)          (452,100)
       Recoveries of loans previously charged-off                      92,160             85,720             53,800
                                                             ----------------   ----------------  -----------------

       Balance at end of year                                $      9,150,348   $      6,164,507  $       4,450,614
                                                             ================   ================  =================

</TABLE>

                                       15

<PAGE>


                       CENTENNIAL BANCORP AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                  Years ended December 31, 2000, 1999 and 1998


3.     Loans (continued)
       ----------------

       At December 31, 2000 and 1999, Bancorp had approximately  $15,367,000 and
       $5,833,000,  respectively,  in impaired  loans.  The  specific  valuation
       allowance   related  to  these  impaired   loans  totaled   approximately
       $2,253,000 and $465,000 at December 31, 2000 and 1999, respectively.  The
       average  recorded  investment  in  impaired  loans  for the  years  ended
       December 31, 2000, 1999 and 1998 was approximately $9,518,000, $5,525,000
       and  $2,968,000,  respectively.  Interest  income  recognized on impaired
       loans for the years ended  December  31, 2000 and 1999 was  approximately
       $595,000  and  $417,000,  respectively.  Interest  income  recognized  on
       impaired loans for the year ended December 31, 1998 was insignificant.

       Loans on  nonaccrual  status at  December  31,  2000  were  approximately
       $7,268,000  ($579,000 at December 31, 1999).  Interest income which would
       have been realized on such nonaccrual loans  outstanding at year-end,  if
       they had remained  current,  was  approximately  $1,226,000,  $97,000 and
       $273,000  during  the  years  ended  December  31,  2000,  1999 and 1998,
       respectively.  Loans  contractually  past  due 90 days  or more on  which
       Bancorp   continued  to  accrue   interest  at  December  31,  2000  were
       approximately $529,000 ($2,163,000 at December 31, 1999).

4.     Premises and equipment
       ----------------------
<TABLE>
<CAPTION>

       Premises and  equipment  consisted of the  following at December 31, 2000 and 1999:

                                                                                      2000               1999
                                                                                ----------------  -----------------

      <S>                                                                      <C>               <C>
       Land                                                                     $      2,948,046  $       2,375,046
       Buildings and leasehold improvements                                           13,123,772         13,278,013
       Furniture and equipment                                                         9,919,282          9,185,477
                                                                                ----------------  -----------------
                                                                                      25,991,100         24,838,536
       Less accumulated depreciation and amortization                                (10,623,707)        (8,927,039)
                                                                                ----------------   ----------------

           Premises and equipment, net                                          $     15,367,393   $     15,911,497
                                                                                ================   =================
</TABLE>


                                       16

<PAGE>

                       CENTENNIAL BANCORP AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                  Years ended December 31, 2000, 1999 and 1998



5.     Time deposits
       -------------

       Time certificates of deposit in excess of $100,000 aggregated
       approximately $112,358,000 and $79,425,000 at December 31, 2000 and 1999,
       respectively.

       At December 31, 2000, the scheduled annual maturities of all time
       certificates of deposit were approximately as follows:
<TABLE>
<CAPTION>

      <S>                                                                                       <C>
       2001                                                                                       $     233,325,000
       2002                                                                                              31,892,000
       2003                                                                                               1,290,000
       2004                                                                                                 213,000
       2005                                                                                                 244,000
       Thereafter                                                                                           105,000
                                                                                                  -----------------

                                                                                                  $     267,069,000
</TABLE>


6.     Short-term borrowings
       ---------------------

       Short-term borrowings consisted of the following at December 31, 2000 and
       1999:
<TABLE>
<CAPTION>

                                                                                    2000               1999
                                                                                ------------      -------------

      <S>                                                                      <C>               <C>
       Securities sold under agreement to repurchase                            $  4,134,083      $   8,213,967
       Federal funds purchased                                                     9,000,000         19,600,000
       FHLB cash management advance program                                       22,600,000         25,740,000
       FHLB borrowings under promissory note agreements                           23,900,000         21,000,000
                                                                                ------------      -------------

                                                                                $ 59,634,083      $  74,553,967
                                                                                ============      =============

</TABLE>

       Securities sold under agreement to repurchase are due on demand. The
       weighted average interest rate on such borrowings was 6.30% and 5.42% at
       December 31, 2000 and 1999, respectively.

       Federal funds purchased are due on demand. The weighted average interest
       rate on such borrowings was 6.40% and 4.65% at December 31, 2000 and
       1999, respectively.

       Amounts owed under the FHLB cash management advance program are due
       within one year and bear interest at 6.83% and 5.70% at December 31, 2000
       and 1999, respectively.


                                       17
<PAGE>

                       CENTENNIAL BANCORP AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                  Years ended December 31, 2000, 1999 and 1998



6.     Short-term borrowings (continued)
       --------------------------------

       FHLB borrowings  under promissory note agreements are due within one year
       and bear  interest  at 6.43% and  5.90% at  December  31,  2000 and 1999,
       respectively.

       As of December 31, 2000, Bancorp has remaining available  borrowings from
       the FHLB of approximately  $10,500,000.  In addition,  Bancorp  maintains
       federal  funds  lines  with  correspondent  banks as a backup  source  of
       liquidity. At December 31, 2000, Bancorp had approximately $35,000,000 of
       federal funds lines available to draw against on an unsecured basis.

7.     Off-balance-sheet financial instruments
       ---------------------------------------

       In  the  ordinary  course  of  business,   Bancorp  enters  into  various
       transactions,  which include commitments to extend credit and standby and
       commercial  letters of credit,  that are not included in the accompanying
       consolidated balance sheets. Bancorp applies the same credit standards to
       these commitments as it uses in all of its lending processes and includes
       these commitments in its lending risk  evaluations.  At December 31, 2000
       and 1999,  Bancorp had no  commitments  to extend credit at  below-market
       interest rates and held no derivative financial instruments.

       Bancorp's  exposure to credit loss in the event of  nonperformance by the
       other party to the financial  instrument for commitments to extend credit
       and  standby  and  commercial  letters  of credit is  represented  by the
       contractual  amount of those  instruments.  Bancorp  uses the same credit
       policies in making commitments and conditional obligations as it does for
       on-balance-sheet  instruments.  The distribution of commitments to extend
       credit approximates the distribution of loans outstanding.

       Bancorp's  off-balance-sheet  financial  instruments at December 31, 2000
       and 1999 were approximately as follows:

                                                      2000             1999
                                                  --------------  --------------

       Commitments to extend credit                $236,915,000     $276,852,000
       Standby and commercial letters of credit       6,330,000       11,108,000



                                       18
<PAGE>

                       CENTENNIAL BANCORP AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                  Years ended December 31, 2000, 1999 and 1998



7.     Off-balance-sheet financial instruments (continued)
       ---------------------------------------------------

       Commitments to extend credit are  agreements to lend to customers.  These
       commitments  have  specified  interest  rates and  generally  have  fixed
       expiration  dates but may be terminated by Bancorp if certain  conditions
       of the contract are violated. Although subject to drawdown, many of these
       commitments  are  expected  to  expire  or  terminate   without  funding.
       Therefore,  the total  commitment  amounts do not  necessarily  represent
       future  cash  requirements.  Collateral  relating  to  these  commitments
       varies,  but  may  include  cash,   accounts   receivable,   inventories,
       equipment, securities and real estate.

       Standby  and  commercial  letters of credit are  conditional  commitments
       issued by Bancorp to guarantee the  performance  of a customer to a third
       party. Credit risk arises in these transactions from the possibility that
       a customer may not be able to repay Bancorp upon default of  performance.
       Collateral  for standby and  commercial  letters of credit is based on an
       individual  evaluation  of  each  customer's  creditworthiness,  but  may
       include cash, accounts receivable, inventories, equipment, securities and
       real estate.

8.     Estimated fair value of financial instruments
       ---------------------------------------------

       Bancorp  primarily uses quoted market prices or present value  techniques
       to estimate the fair value of its fixed-rate financial  instruments.  The
       carrying amounts of variable- and administered-rate financial instruments
       are  considered  reasonable  estimates of fair value.  Valuation  methods
       require considerable  judgment, and the resulting estimates of fair value
       can be  significantly  affected by the assumptions made and methods used.
       Accordingly,  the estimates  provided herein do not necessarily  indicate
       amounts that could be realized in a current market exchange.

       In  addition,  as Bancorp  normally  intends to hold the  majority of its
       financial  instruments until maturity, it does not expect to realize many
       of the estimated amounts  disclosed.  The disclosures also do not include
       estimated  fair value amounts for items that are not defined as financial
       instruments  but  which  have  significant   value.  These  include  such
       off-balance-sheet  items as core  deposit  intangibles.  Bancorp does not
       believe that it would be practicable to estimate a representational  fair
       value for these types of items at December 31, 2000 and 1999.

       Because the estimated fair value  disclosures  exclude certain  financial
       instruments and all nonfinancial instruments, any aggregation of the fair
       value  amounts  presented  would not represent  the  underlying  value of
       Bancorp.


                                       19
<PAGE>

                       CENTENNIAL BANCORP AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                  Years ended December 31, 2000, 1999 and 1998



8.     Estimated fair value of financial instruments (continued)
       ---------------------------------------------------------

       Bancorp used the following  methods and  assumptions to estimate the fair
       value of its financial instruments:

           CASH AND CASH  EQUIVALENTS:  The  carrying  amount  approximates  the
           estimated fair value.

           INVESTMENT SECURITIES AVAILABLE FOR SALE: The estimated fair value is
           based on quoted  market  prices or the market  values for  comparable
           securities.

           LOANS:  The estimated fair value of fixed-rate  loans is estimated by
           discounting  the  contractual  cash flows of the loans using December
           31,  2000 and 1999  origination  rates.  The  resulting  amounts  are
           adjusted  to  estimate  the  effects of changes in credit  quality of
           borrowers since the loans were originated.

           MORTGAGE LOANS HELD FOR SALE: The estimated fair value represents the
           anticipated proceeds from the sale of the loans.

           FHLB STOCK:  The carrying  amount  approximates  the  estimated  fair
           value.

           DEPOSITS: The estimated fair value of demand deposits,  consisting of
           checking,   savings  and  certain   interest-bearing  demand  deposit
           accounts,  is  represented  by the  amounts  payable on  demand.  The
           estimated  fair value of time deposits is  calculated by  discounting
           the  scheduled  cash flows using the December 31, 2000 and 1999 rates
           offered on these instruments.

           SHORT-TERM BORROWINGS: The carrying amount approximates the estimated
           fair value.

           OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS:  The estimated fair value of
           off-balance-sheet  financial  instruments  (primarily  commitments to
           extend  credit  and  standby  and  commercial  letters  of credit) is
           determined based on fees currently  charged for similar  commitments.
           Management  estimates  that these  fees  approximate  $1,332,000  and
           $1,440,000 at December 31, 2000 and 1999, respectively.


                                       20
<PAGE>

                       CENTENNIAL BANCORP AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                  Years ended December 31, 2000, 1999 and 1998



8.     Estimated fair value of financial instruments (continued)
       --------------------------------------------------------

       The estimated fair value of Bancorp's significant on-balance-sheet
       financial instruments at December 31, 2000 and 1999 were approximately as
       follows:

<TABLE>
<CAPTION>

                                                                    2000                          1999
                                                       -----------------------------  -----------------------------
                                                                         Estimated                      Estimated
                                                          Carrying         fair          Carrying         fair
                                                            value          value           value          value
                                                       --------------  -------------  -------------  --------------
      <S>                                             <C>             <C>           <C>             <C>
       Financial assets:
         Cash and cash equivalents                     $   42,963,000  $  42,963,000  $  29,935,000  $   29,935,000
         Investment securities available for sale          60,363,000     60,363,000     59,359,000      59,359,000
         Loans and mortgage loans held for sale, net      704,620,000    700,265,000    593,663,000     589,678,000
         FHLB stock                                         5,833,000      5,833,000      5,469,000       5,469,000

       Financial liabilities:
         Deposits                                         696,494,000    697,573,000    573,041,000     572,746,000
         Short-term borrowings                             59,634,000     59,634,000     74,554,000      74,554,000
</TABLE>

9.     Commitments and contingencies
       -----------------------------

       Bancorp leases certain land and facilities under noncancelable operating
       leases, generally for terms of five to 50 years, some of which include
       renewal options and escalation clauses. At December 31, 2000, the
       aggregate minimum rental commitments under operating leases that have
       initial or remaining noncancelable lease terms in excess of one year were
       approximately as follows:
<TABLE>
<CAPTION>

          <S>                                                                  <C>
           2001                                                                 $      1,298,000
           2002                                                                        1,121,000
           2003                                                                        1,000,000
           2004                                                                          966,000
           2005                                                                          990,000
           Thereafter                                                                  8,159,000
                                                                                ----------------

                Total minimum lease payments                                    $     13,534,000
                                                                                ================

</TABLE>
       Total rent expense was approximately $1,709,000, $1,213,000 and $750,000
       in 2000, 1999 and 1998, respectively.

                                       21
<PAGE>


                       CENTENNIAL BANCORP AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                  Years ended December 31, 2000, 1999 and 1998


9.     Commitments and contingencies (continued)
       ----------------------------------------

       In the ordinary course of business, litigation arises from normal banking
       activities.  In the opinion of management,  the ultimate outcome of these
       matters will not have a material adverse effect on Bancorp's consolidated
       financial position, results of operations or cash flows.

10.    Noninterest expense
       -------------------

       Noninterest expense consisted of the following for the years ended
       December 31, 2000, 1999 and 1998:
<TABLE>
<CAPTION>

                                                                    2000             1999            1998
                                                                ------------     ------------    ------------

      <S>                                                      <C>               <C>                <C>
       Salaries and employee benefits                           $ 16,585,759     $ 14,293,013    $ 12,834,456
       Premises and equipment                                      4,075,364        3,315,826       2,644,173
       Advertising                                                   992,994          830,097         801,135
       Legal and professional                                        770,639          657,816         843,890
       Data processing                                               685,479          665,704         252,570
       Other                                                       3,605,198        3,039,171       1,972,334
                                                                ------------      -----------    ------------

           Total noninterest expense                            $ 26,715,433     $ 22,801,627    $ 19,348,558
                                                                ============     ============    ============
</TABLE>

11.    Income taxes
       ------------

       The  provision  (credit) for income taxes  consisted of the following for
       the years ended December 31, 2000, 1999 and 1998:
<TABLE>
<CAPTION>

                                                                 2000            1999           1998
                                                             -------------   -------------  -------------
      <S>                                                  <C>              <C>            <C>
       Current:
         Federal                                             $   8,223,672   $   6,482,551  $   5,098,082
         State                                                   1,807,272       1,372,548      1,252,200
       Deferred                                                 (1,327,747)       (935,809)      (437,882)
                                                             -------------   -------------  -------------

           Provision for income taxes                        $   8,703,197   $   6,919,290  $   5,912,400
                                                             =============   =============  =============

</TABLE>

                                       22
<PAGE>

                       CENTENNIAL BANCORP AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                  Years ended December 31, 2000, 1999 and 1998



11.    Income taxes (continued)
       -----------------------

       The provision for income taxes results in effective tax rates that are
       different than the federal income tax statutory rate. The nature of the
       differences for the years ended December 31, 2000, 1999 and 1998 were as
       follows:
<TABLE>
<CAPTION>

                                                                 2000             1999           1998
                                                             -------------   -------------  --------------
      <S>                                                  <C>              <C>            <C>
       Expected federal income tax provision
         at statutory rates                                  $   8,017,022   $   6,659,004  $    6,041,839
       State income tax, net of federal effect                   1,006,825         843,341         763,479
       Tax exempt interest income                                 (498,153)       (478,504)       (577,312)
       Other, net                                                  177,503        (104,551)       (315,606)
                                                             -------------   -------------  --------------

           Provision for income taxes                        $   8,703,197   $   6,919,290  $    5,912,400
                                                             =============   =============  ==============
</TABLE>

       The components of the net deferred tax assets at December 31, 2000 and
       1999 were as follows:
<TABLE>
<CAPTION>

                                                                                      2000               1999
                                                                                ----------------  -----------------
      <S>                                                                      <C>               <C>
       Deferred tax assets:
         Nonqualified benefit plans                                             $        716,865  $         745,362
         Allowance for loan losses                                                     3,446,345          2,001,389
         Net unrealized losses on investment securities                                  126,076          1,033,402
         Other, net                                                                      769,293            659,516
                                                                                ----------------  -----------------
              Total deferred tax assets                                                5,058,579          4,439,669
       Deferred tax liabilities:
         Mortgage servicing rights                                                       151,795            140,392
         FHLB stock dividends                                                          1,006,887            843,966
         Other, net                                                                      371,711            347,546
                                                                                ----------------  -----------------

              Total deferred tax liabilities                                           1,530,393          1,331,904
                                                                                ----------------  -----------------

              Net deferred tax assets                                           $      3,528,186  $       3,107,765
                                                                                ================  =================

</TABLE>

       Management believes, based upon Bancorp's historical performance, that
       the net deferred tax assets will be recognized in the normal course of
       operations and, accordingly, management has not reduced net deferred tax
       assets by a valuation allowance.


                                       23
<PAGE>

                       CENTENNIAL BANCORP AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                  Years ended December 31, 2000, 1999 and 1998



11.    Income taxes (continued)
       -----------------------

       The exercise of nonstatutory stock options, which have been granted under
       Bancorp's  stock option plans (see Note 13),  gives rise to  compensation
       that is included in the taxable  income of the  applicable  directors  or
       employees  and is  deductible by Bancorp for federal and state income tax
       purposes.  Such  compensation  results from  increases in the fair market
       value of Bancorp's  common stock  subsequent  to the date of grant of the
       applicable  stock  options.  In  accordance  with  accounting  principles
       generally  accepted  in  the  United  States,  such  compensation  is not
       recognized  as an expense  for  financial  accounting  purposes,  and the
       related tax benefits are recorded as an increase to common stock.

       Bancorp's  provision  for income  taxes for the years ended  December 31,
       2000,  1999  and  1998  included  approximately  $102,000,  $109,000  and
       $204,000,   respectively,   related  to  gains  on  sales  of  investment
       securities.

       During the years ended  December  31, 2000,  1999 and 1998,  Bancorp paid
       approximately  $9,708,000,  $8,443,000 and $6,056,000,  respectively,  in
       income taxes.

12.    Transactions with related parties
       ---------------------------------

       Activity  with  respect  to  loans to  directors,  their  affiliates  and
       executive officers of Bancorp for the year ended December 31, 2000 was as
       follows:

       Balance at January 1, 2000                          $   7,622,391
       Additions or renewals                                   9,553,954
       Amounts collected or renewed                          (10,333,684)
                                                           -------------

       Balance at December 31, 2000                        $   6,842,661
                                                           =============

       In  addition,  included  in  commitments  in  Note  7  are  approximately
       $1,401,000 of commitments to extend credit to directors, their affiliates
       and  executive  officers of Bancorp at December 31, 2000  ($1,887,000  at
       December 31, 1999).

13.    Stock options
       -------------

       Bancorp has two Non-employee Director Stock Option Plans (Director Plans)
       - 1988 and 1993; a 1993 Incentive Stock Option Plan (Incentive Plan); and
       a 1995 Stock Incentive Plan (Option Plan).


                                       24
<PAGE>

                       CENTENNIAL BANCORP AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                  Years ended December 31, 2000, 1999 and 1998



13.    Stock options (continued)
       ------------------------

       Director Plans
       --------------

       Under  the  Director  Plans,  shares of common  stock  are  reserved  for
       issuance at their fair market value at the date of grant to  non-employee
       directors  of Bancorp and its  subsidiaries.  Generally,  options  become
       exercisable  over a period  of three  years of  subsequent  service.  The
       options  expire in a  maximum  of ten  years  from the date of grant.  At
       December  31,  2000,  194,294 of the  201,381  options  outstanding  were
       exercisable, and 147,306 shares were reserved for future grant.

       Incentive Plan
       --------------

       Under the Incentive Plan, officers of Bancorp and its subsidiaries may be
       granted options to purchase  shares of common stock.  The option price is
       the fair market  value at the date of grant.  Generally,  options  become
       exercisable  over a period  of five  years  of  subsequent  service.  The
       options  expire in a  maximum  of ten  years  from the date of grant.  At
       December  31,  2000,  170,947 of the  182,581  options  outstanding  were
       exercisable, and 1,139 shares were reserved for future grant.

       Option Plan
       -----------

       Under the Option Plan, Bancorp  employees,  directors and consultants may
       be granted  nonstatutory  stock options or restricted  stock awards,  and
       Bancorp  employees may be granted  incentive stock options.  The exercise
       prices  of  nonstatutory  stock  options  and the  price  to be paid  for
       restricted  stock is  established  by a committee of  Bancorp's  Board of
       Directors (the Board). The exercise price of incentive stock options must
       be no less than the fair  market  value of the  underlying  shares on the
       date of grant.  Options granted under the Option Plan expire on such date
       as  established  by a committee of the Board.  However,  incentive  stock
       options  expire in a maximum of ten years from the date of grant.  During
       the year ended December 31, 1998, the shareholders of Bancorp approved an
       amendment to the Option Plan, which resulted in Bancorp reserving 833,541
       additional  shares for future  grant.  At December  31,  2000,  1,146,433
       options were  outstanding  under the Option Plan,  consisting  of 516,715
       incentive  stock  options  and 629,718  nonstatutory  stock  options.  At
       December  31, 2000,  a total of 717,986 of the options  outstanding  were
       exercisable,  and 543,736 shares were reserved for future grant.  Bancorp
       has not granted any restricted stock awards under the Option Plan.


                                       25
<PAGE>

                       CENTENNIAL BANCORP AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                  Years ended December 31, 2000, 1999 and 1998



13.    Stock options (continued)
       ------------------------

       Transactions involving option activity for the years ended December 31,
       2000, 1999 and 1998 are summarized as follows:
<TABLE>
<CAPTION>

                                                2000                      1999                       1998
                                      ------------------------  ------------------------  -------------------------
                                                    Weighted-                  Weighted-                 Weighted-
                                                     average                    average                   average
                                        Options     exercise       Options     exercise      Options     exercise
                                      outstanding     price      outstanding     price     outstanding     price
                                      -----------  -----------  ------------ -----------  ------------  -----------
      <S>                              <C>        <C>            <C>        <C>            <C>         <C>
       Balance at beginning of year     1,641,422  $      5.11    1,590,638  $      4.02    1,431,044   $      2.46
       Granted                            166,442         7.63      245,063        10.10      335,563         10.05
       Forfeited                          (14,042)        7.78       (7,430)       12.09      (37,561)         6.37
       Exercised                         (263,427)        1.88     (186,849)        2.05     (138,408)         1.94
                                      -----------               -----------               -----------

       Balance at end of year           1,530,395  $      5.92    1,641,422  $      5.11    1,590,638   $      4.02
                                      ===========  ===========  ===========  ===========  ===========   ===========
</TABLE>

       Information regarding the number, weighted-average remaining contractual
       life and weighted-average exercise price of options by range of exercise
       price at December 31, 2000 is as follows:
<TABLE>
<CAPTION>

                                                             Options outstanding                  Options exercisable
                                                   -------------------------------------  ----------------------------------
                                                                 Weighted-
                                                                  average        Weighted-                       Weighted-
            Range of                                             remaining        average                         average
            exercise                                Number      contractual      exercise       Number            exercise
             price                                 of options   life (years)      price        of options           price
          ---------------                          -----------  -------------    -------      ------------      ------------
         <S>                                        <C>               <C>       <C>             <C>              <C>
          Under $5.00                                  785,201          4.6      $  2.61          758,520        $      2.58
          $5.01-$10.00                                 558,095          9.7         8.65          257,878               9.01
          $10.01-$15.00                                187,099          8.1        11.68           66,829              11.66
                                                   -----------                                -----------

                                                     1,530,395          7.5         5.92        1,083,227               4.67
                                                   ===========                                ===========
</TABLE>

       Exercisable options as of December 31, 1999 and 1998 totaled 1,084,008
       and 1,098,383, respectively.

       No compensation cost has been recognized for the options issued under the
       stock option plans, as Bancorp adopted the disclosure-only provisions of
       SFAS No. 123, "Accounting for Stock-Based Compensation." Had compensation
       cost been determined based on the fair value of the options at the date
       of grant, consistent with the provisions of SFAS


                                       26

<PAGE>

                       CENTENNIAL BANCORP AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                  Years ended December 31, 2000, 1999 and 1998



13.    Stock options (continued)
       ------------------------

       No. 123, Bancorp's pro forma net income and pro forma earnings per common
       share would have been as follows for the years ended December 31,
       2000,1999 and 1998:
<TABLE>
<CAPTION>

                                                                    2000              1999               1998
                                                             ----------------   ----------------  -----------------
        <S>                                                <C>                 <C>               <C>
         Net income:
                        - as reported                        $     14,202,579   $     12,106,765  $      11,434,546
                        - pro forma                                13,550,176         11,753,038         11,360,952

         Basic earnings per common share:
                        - as reported                        $            .62   $            .53  $             .51
                        - pro forma                                       .59                .52                .51

         Diluted earnings per common share:
                        - as reported                        $            .61   $            .52  $             .49
                        - pro forma                                       .58                .50                .48
</TABLE>

       The pro forma effect on net income for 2000, 1999 and 1998 is not
       representative of the pro forma effect in future years, because
       compensation expense related to grants made prior to December 31, 1994 -
       and which vest in subsequent years - is not considered. For purposes of
       the above pro forma information, the fair value of each option grant was
       estimated at the date of grant using the Black-Scholes option pricing
       model with the following weighted average assumptions:
<TABLE>
<CAPTION>
                                                                    2000              1999               1998
                                                             ----------------   ----------------  -----------------

        <S>                                                     <C>                <C>                <C>
         Risk-free interest rate                                  5.0%               6.3%               5.6%
         Expected life (in years)                                 7.3                7.3                7.3
         Expected volatility                                     36.4%              32.6%              31.0%
         Expected dividend yield                                    0%                 0%                 0%

</TABLE>

       The effect of applying the fair-value-based method to stock options
       granted in the years ended December 31, 2000, 1999 and 1998 resulted in a
       weighted-average grant date fair value of $3.49, $5.05 and $4.60,
       respectively.



                                       27
<PAGE>

                       CENTENNIAL BANCORP AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                  Years ended December 31, 2000, 1999 and 1998



14.    Shareholders' equity
       --------------------

       At  December  31,  2000  and  1999,  Bancorp  had  10,000,000  shares  of
       authorized but unissued preferred stock, which was comprised of 5,000,000
       shares each of voting and nonvoting  stock. In May 1998,  shareholders of
       Bancorp  authorized  an  amendment to the  Articles of  Incorporation  to
       change the preferred stock from $5 par value to no par value.

       At  December  31,  2000  and  1999,  Bancorp  had  50,000,000  shares  of
       authorized common stock. In May 1998,  shareholders of Bancorp authorized
       an amendment to the Articles of  Incorporation to change the common stock
       from $2 par value to no par value.

       In January 2000,  Bancorp authorized the repurchase of up to an aggregate
       of 5% of its then outstanding common stock over a two-year period. During
       the year ended December 31, 2000,  Bancorp  repurchased  59,715 shares of
       common  stock,  and, as of December  31,  2000,  approximately  1,075,000
       shares remain  authorized for possible  repurchase  under Bancorp's stock
       repurchase plan.

       During the years ended  December  31,  2000,  1999 and 1998,  Bancorp had
       various  stock  splits.  In  addition,  on January  24,  2001,  the Board
       declared  a 10% stock  split - payable  February  23,  2001 - to  Bancorp
       shareholders  of record at the close of business on February 2, 2001. All
       information in the  accompanying  consolidated  financial  statements and
       footnotes  has been  adjusted  to give  retroactive  effect  to all stock
       splits.

15.    Basic and diluted earnings per common share
       -------------------------------------------

       Bancorp's  basic  earnings  per common  share is computed by dividing net
       income by the weighted-average number of common shares outstanding during
       the period.  Bancorp's  diluted  earnings per common share is computed by
       dividing  net  income by the  weighted-average  number  of common  shares
       outstanding  plus dilutive  common shares  related to  outstanding  stock
       options.



                                       28
<PAGE>

                       CENTENNIAL BANCORP AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                  Years ended December 31, 2000, 1999 and 1998



15.    Basic and diluted earnings per common share (continued)
       ------------------------------------------------------

       The numerators and denominators used in computing basic and diluted
       earnings per common share for the years ended December 31, 2000, 1999 and
       1998 can be reconciled as follows:
<TABLE>
<CAPTION>
                                                                        Net
                                                                      income           Shares           Per-share
                                                                    (numerator)     (denominator)        amount
                                                                  --------------    -------------    --------------
       2000
       ----
      <S>                                                       <C>                  <C>                    <C>
       Basic earnings per common share -
         Income available to common shareholders                  $   14,202,579       22,783,420             $ .62
                                                                                                              =====
       Effect of assumed conversion of stock options                           -          523,146
                                                                  --------------    -------------
       Diluted earnings per common share                          $   14,202,579       23,306,566             $ .61
                                                                  ==============    =============             =====

       1999
       ----

       Basic earnings per common share -
         Income available to common shareholders                  $   12,106,765       22,642,500             $ .53
                                                                                                              =====
       Effect of assumed conversion of stock options                           -          729,527
                                                                  --------------    -------------
       Diluted earnings per common share                          $   12,106,765       23,372,027             $ .52
                                                                  ==============    =============             =====

       1998
       ----

       Basic earnings per common share -
         Income available to common shareholders                  $   11,434,546       22,443,313             $ .51
                                                                                                              =====
       Effect of assumed conversion of stock options                           -        1,028,435
                                                                  --------------    -------------
       Diluted earnings per common share                          $   11,434,546       23,471,748             $ .49
                                                                  ==============    =============             =====
</TABLE>

16.    Employee benefit plan
       ---------------------

       Bancorp has an employee  savings and profit sharing plan (the Plan) which
       covers all full-time employees over age 21 with one year of service.  The
       Plan allows  employees to contribute  from 2% to 15% of their salary on a
       tax-deferred  basis.  Bancorp's  matching  contributions  are  determined
       annually  by  the  Board  up  to a  maximum  of  6%  of  each  employee's
       compensation. In addition to the matching contributions, Bancorp may also
       make  discretionary  contributions to the Plan.  Bancorp's  contributions
       charged to operations related to the Plan totaled approximately  $460,000
       in 2000 ($400,000 in 1999 and 1998).


                                       29
<PAGE>

                       CENTENNIAL BANCORP AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                  Years ended December 31, 2000, 1999 and 1998



17.    Regulatory matters
       ------------------

       Bancorp and the Bank are subject to the  regulations  of certain  federal
       and state agencies and receive periodic  examinations by those regulatory
       authorities.  In  addition,  Bancorp  and the Bank are subject to various
       regulatory  capital  requirements  administered  by the  federal  banking
       agencies.  Failure to meet  minimum  capital  requirements  can  initiate
       certain  mandatory - and possibly  additional  discretionary - actions by
       regulators  that, if undertaken,  could have a direct  material effect on
       Bancorp's or the Bank's  financial  statements.  Under  capital  adequacy
       guidelines and the  regulatory  framework for prompt  corrective  action,
       Bancorp and the Bank must meet specific  capital  guidelines that involve
       quantitative    measures    of   assets,    liabilities    and    certain
       off-balance-sheet   items  as  calculated  under  regulatory   accounting
       practices.  Bancorp's and the Bank's capital  amounts and  classification
       are  also  subject  to  qualitative  judgments  by the  regulators  about
       components, risk weightings and other factors.

       Quantitative   measures  established  by  regulation  to  ensure  capital
       adequacy  require  Bancorp and the Bank to maintain  minimum  amounts and
       ratios  (set  forth in the  tables  below) of total and Tier I capital to
       risk-weighted  assets,  and of Tier I capital to average  assets  (all as
       defined in the regulations). Management believes that, as of December 31,
       2000,  Bancorp and the Bank meet all  capital  adequacy  requirements  to
       which they are subject.

       As of December  31,  2000,  Bancorp and the Bank were "well  capitalized"
       under the  regulatory  framework  for  prompt  corrective  action.  To be
       categorized  as "well  capitalized,"  Bancorp and the Bank must  maintain
       minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as
       set forth in the  following  tables.  There are no  conditions  or events
       since the  notifications  from the regulators  that  management  believes
       would change Bancorp's or the Bank's regulatory capital categorization.

       Bancorp's actual and required capital amounts and ratios are presented in
       the table below:
<TABLE>
<CAPTION>

                                                                                               Regulatory minimum
                                                                                            to be "well capitalized"
                                                                Regulatory minimum to be      under prompt correc-
                                               Actual           "adequately capitalized"     tive action provisions
                                      ------------------------  --------------------------  -------------------------
                                        Amount        Ratio        Amount        Ratio         Amount        Ratio
                                      -----------  -----------  -----------  -----------    -----------   -----------
      <S>                            <C>            <C>        <C>              <C>        <C>              <C>
       December 31, 2000:
       Total capital
         (to risk-weighted assets)    $91,269,000     11.0%     $66,396,000       8.0%       $82,996,000      10.0%
       Tier 1 capital
         (to risk-weighted assets)     82,119,000      9.9       33,198,000       4.0         49,797,000       6.0
       Tier 1 capital
         (to average assets)           82,119,000      9.9       33,102,000       4.0         41,377,000       5.0
</TABLE>



                                       30
<PAGE>

                       CENTENNIAL BANCORP AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                  Years ended December 31, 2000, 1999 and 1998



17.    Regulatory matters (continued)
       -----------------------------
<TABLE>
<CAPTION>

                                                                                                 Regulatory minimum
                                                                                              to be "well capitalized"
                                                                Regulatory minimum to be        under prompt correc-
                                               Actual           "adequately capitalized"        tive action provisions
                                      ------------------------  --------------------------   -------------------------
                                        Amount        Ratio        Amount        Ratio          Amount        Ratio
                                      -----------  -----------  -----------  -----------     -----------   -----------
      <S>                            <C>             <C>       <C>              <C>         <C>             <C>
       December 31, 1999:
       Total capital
         (to risk-weighted assets)    $73,308,000      9.9%     $59,239,000       8.0%       $74,048,000      10.0%
       Tier 1 capital
         (to risk-weighted assets)     67,143,000      9.0       29,619,000       4.0         44,429,000       6.0
       Tier 1 capital
         (to average assets)           67,143,000      9.7       27,688,000       4.0         34,610,000       5.0
</TABLE>

       The Bank's actual and required capital amounts and ratios are presented
       in the table below:


<TABLE>
<CAPTION>

                                                                                                Regulatory minimum
                                                                                              to be "well capitalized"
                                                                Regulatory minimum to be        under prompt correc-
                                               Actual           "adequately capitalized"       tive action provisions
                                      ------------------------  --------------------------   -------------------------
                                        Amount        Ratio        Amount        Ratio          Amount        Ratio
                                      -----------  -----------  -----------  -----------     -----------   -----------
      <S>                            <C>            <C>       <C>               <C>        <C>              <C>
       December 31, 2000:
       Total capital
         (to risk-weighted assets)    $83,520,000     10.1%     $65,951,000       8.0%       $82,439,000      10.0%
       Tier 1 capital
         (to risk-weighted assets)     74,370,000      9.0       32,976,000       4.0         49,463,000       6.0
       Tier 1 capital
         (to average assets)           74,370,000      9.1       32,831,000       4.0         41,039,000       5.0

       December 31, 1999:
       Total capital
         (to risk-weighted assets)     65,969,000      9.0       58,969,000       8.0         73,712,000      10.0
       Tier 1 capital
         (to risk-weighted assets)     59,804,000      8.1       29,485,000       4.0         44,227,000       6.0
       Tier 1 capital
         (to average assets)           59,804,000      8.7       27,613,000       4.0         34,516,000       5.0
</TABLE>


                                       31
<PAGE>

                       CENTENNIAL BANCORP AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                  Years ended December 31, 2000, 1999 and 1998



18.    Parent company financial information
       ------------------------------------

       Condensed financial information for Centennial Bancorp (parent company
       only) is presented as follows:
<TABLE>
<CAPTION>
                                               CONDENSED BALANCE SHEETS (Unconsolidated)

                                                                                             December 31,
                                                                                    -------------------------------
                                                                                        2000              1999
                                                                                    -------------    --------------
      <S>                                                                          <C>              <C>
       Assets:
         Cash and cash equivalents, deposited with the Bank                         $     195,368     $   1,972,516
         Equity securities available for sale                                             556,250                 -
         Equipment, net                                                                    55,810            69,209
         Deferred tax assets                                                              504,318         1,357,495
         Investment in subsidiaries, at cost plus equity in earnings                   88,255,567        69,883,713
         Other assets                                                                   3,160,883         2,411,998
                                                                                    -------------    --------------
              Total assets                                                          $  92,728,196    $   75,694,931
                                                                                    =============    ==============
       Liabilities and shareholders' equity:
         Accrued liabilities                                                        $   2,545,201    $    1,366,170
         Shareholders' equity                                                          90,182,995        74,328,761
                                                                                    -------------    --------------
              Total liabilities and shareholders' equity                            $  92,728,196    $   75,694,931
                                                                                    =============    ==============
</TABLE>
<TABLE>
<CAPTION>


                                            CONDENSED STATEMENTS OF INCOME (Unconsolidated)


                                                                              Years ended December 31,
                                                                  -------------------------------------------------
                                                                       2000             1999              1998
                                                                  --------------    -------------    --------------
      <S>                                                       <C>               <C>               <C>
       Income:
         Interest income from subsidiaries                        $       15,955    $     103,815    $      135,862
         Other income                                                          -                -            24,725
                                                                  --------------    -------------    --------------
               Total income                                               15,955          103,815           160,587
       Expenses:
         Salaries and employee benefits                                  677,004          702,931           704,256
         Other                                                           424,068          343,936           317,866
                                                                  --------------    -------------    --------------
              Total expenses                                           1,101,072        1,046,867         1,022,122
       Loss before income tax benefit and equity in
         undistributed net earnings of subsidiaries                   (1,085,117)        (943,052)         (861,535)
       Income tax benefit                                                419,680          366,030           237,601
                                                                  --------------    -------------    --------------
       Loss before equity in undistributed net earnings
         of subsidiaries                                                (665,437)        (577,022)         (623,934)
       Equity in undistributed net earnings
         of subsidiaries                                              14,868,016       12,683,787        12,058,480
                                                                  --------------    -------------    --------------

           Net income                                             $   14,202,579    $  12,106,765    $   11,434,546
                                                                  ==============    =============    ==============
</TABLE>

                                       32

<PAGE>

                       CENTENNIAL BANCORP AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                  Years ended December 31, 2000, 1999 and 1998



18.    Parent company financial information (continued)
       -----------------------------------------------
<TABLE>
<CAPTION>

                                          CONDENSED STATEMENTS OF CASH FLOWS (Unconsolidated)


                                                                             Years ended December 31,
                                                                ---------------------------------------------------
                                                                      2000             1999              1998
                                                                ----------------  ---------------  ----------------
      <S>                                                     <C>                <C>              <C>
       Cash flows from operating activities:
         Net income                                             $     14,202,579  $    12,106,765  $     11,434,546
         Adjustments to reconcile net income to
           net cash used by operating activities:
           Depreciation and amortization                                  99,187          101,490           100,238
           Undistributed net earnings of subsidiaries                (14,868,346)     (12,683,787)      (12,058,480)
           Deferred tax benefit                                          853,177         (873,249)          (43,442)
           Changes in certain assets and liabilities:
              Other assets                                            (2,734,683)        (382,763)         (831,450)
              Accrued liabilities                                      1,179,031           55,518           315,389
                                                                ----------------  ---------------  ----------------
                  Net cash used by operating activities               (1,269,055)      (1,676,026)       (1,083,199)
       Cash flows from investing activities:
         Purchases of equipment                                                -                -           (18,789)
         Purchase of equity securities
           available for sale                                           (513,260)               -                 -
                                                                ----------------  ---------------  ----------------
                  Net cash used by investing activities                 (513,260)               -           (18,789)
       Cash flows from financing activities:
         Proceeds from exercise of stock options                         495,496          383,619           267,381
         Repurchases of common stock                                    (490,329)               -                 -
                                                                ----------------  ---------------  ----------------
                  Net cash provided by
                    financing activities                                   5,167          383,619           267,381
                                                                ----------------  ---------------  ----------------
       Net decrease in cash and cash equivalents                      (1,777,148)      (1,292,407)         (834,607)
       Cash and cash equivalents at beginning of year                  1,972,516        3,264,923         4,099,530
                                                                ----------------  ---------------  ----------------

       Cash and cash equivalents at end of year                 $        195,368  $     1,972,516  $      3,264,923
                                                                ================  ===============  ================
</TABLE>

                                       33

<PAGE>



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

     THE  FOLLOWING DISCUSSION   SHOULD BE READ IN  CONJUNCTION  WITH  BANCORP'S
AUDITED CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES AT DECEMBER 31, 2000
AND FOR THE  THREE  YEARS IN THE  PERIOD  ENDED  DECEMBER  31,  2000,  WHICH ARE
INCLUDED ELSEWHERE IN THIS ANNUAL REPORT. ALL SHARE AND PER-SHARE INFORMATION IN
THIS ANNUAL REPORT HAS BEEN RESTATED TO GIVE RETROACTIVE EFFECT TO A STOCK SPLIT
DECLARED IN JANUARY  2001,  AND FOR VARIOUS   STOCK SPLITS AND  STOCK  DIVIDENDS
DECLARED IN PRIOR YEARS.  BANCORP HAS NEVER  DECLARED OR PAID CASH  DIVIDENDS TO
SHAREHOLDERS.

     THIS DISCUSSION CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS, WHICH ARE MADE
PURSUANT TO THE SAFE HARBOR PROVISIONS   OF THE  PRIVATE  SECURITIES  LITIGATION
REFORM ACT OF 1995.  STATEMENTS  THAT  EXPRESSLY OR  IMPLICITLY  PREDICT  FUTURE
RESULTS,  PERFORMANCE  OR EVENTS ARE  FORWARD-LOOKING.  IN  ADDITION,  THE WORDS
"ANTICIPATE,"  "BELIEVE,"  "INTEND," "EXPECT" AND SIMILAR  EXPRESSIONS  IDENTIFY
FORWORD-LOOKING  STATEMENTS.  SUCH  STATEMENTS  ARE SUBJECT TO CERTAIN RISKS AND
UNCERTAINTIES  THAT COULD CAUSE ACTUAL RESULTS TO DIFFER  MATERIALLY  FROM THOSE
ANTICIPATED. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE,
BUT ARE NOT LIMITED TO, THE FOLLOWING: (1) POTENTIAL DELAYS OR OTHER PROBLEMS IN
IMPLEMENTING BANCORP'S GROWTH AND EXPANSION STRATEGY; (2) THE ABILITY TO ATTRACT
NEW DEPOSITS AND LOANS; (3) INTEREST RATE FLUCTUATIONS;  (4) COMPETITIVE FACTORS
AND PRICING  PRESSURES;  (5) GENERAL ECONOMIC  CONDITIONS,  EITHER NATIONALLY OR
REGIONALLY THAT COULD RESULT IN INCREASED LOAN LOSSES;  (6) CHANGES IN LEGAL AND
REGULATORY  REQUIREMENTS;  (7)  CHANGES  IN  TECHNOLOGY;  AND (8) OTHER  FACTORS
DESCRIBED  IN THIS  AND  OTHER  BANCORP  REPORTS  AND  STATEMENTS.  READERS  ARE
CAUTIONED NOT TO PLACE UNDUE RELIANCE ON BANCORP'S  FORWARD-LOOKING  STATEMENTS,
WHICH SPEAK ONLY AS OF THE DATE  HEREOF.  BANCORP  DOES NOT INTEND TO UPDATE ITS
FORWARD-LOOKING STATEMENTS.


HIGHLIGHTS

     Centennial Bancorp reported net income of $14.2 million,  or $.62 per basic
share,  for the year ended December 31, 2000. This  represented a 17.3% increase
in net income,  as compared to $12.1 million,  or $.53 per basic share, in 1999.
Net income in 1999  represented  a 5.9%  increase  from 1998 net income of $11.4
million, or $.51 per basic share. The return on average assets was 1.77% in 2000
compared to 1.91% in 1999 and 2.18% in 1998. The increased earnings for 2000 and
1999  primarily  reflect  increased net interest  income due to the expansion of
Bancorp's interest-earning assets each year.

     At December  31,  2000,  total assets  increased  $126.2  million to $853.0
million.  This  increase  represented  a 17.4%  increase  over  total  assets at
December 31, 1999.  Earning  assets at December  31, 2000  represented  91.9% of
total assets,  which was an increase from December 31, 1999 when earning  assets
were 90.6% of total assets.

     2000 was a year of continuing expansion and growth for Bancorp. At December
31, 2000,  the Bank  operated 20 banking  offices:  four in Eugene;  one each in
Springfield,  Cottage Grove and Salem;  and 13 in the  Portland/Vancouver  area,
including  five   limited-service   retirement   center  branches  and  the  new
full-service  Mill Plain Office in Vancouver  which opened during February 2000.
During February 2001, the Bank opened a new limited-service branch in the Mary's
Woods retirement community near Lake Oswego,  Oregon. In addition,  early in the
second quarter of 2001, the Bank


                                       34
<PAGE>

plans  to  significantly   enhance  customer  service   capabilities   with  the
introduction of internet-based banking services.

     At December 31, 2000, the Bank also operated six commercial lending offices
with one each in Eugene  and  Salem,  and four in the  Portland/Vancouver  area,
including the Clackamas and Vancouver locations, which opened during 2000.

     At December 31, 2000,  Centennial  Mortgage Co.  ("Mortgage  Co.") operated
five  offices  including  two in  Portland,  two in Eugene  and a new  office in
downtown Salem, which opened in July 2000.


NET INTEREST INCOME

     For most financial  institutions,  including Bancorp, the primary component
of  earnings is net  interest  income.  Net  interest  income is the  difference
between interest income,  principally from loans and investment securities,  and
interest  expense,  principally  on  deposits  and  borrowings.  Changes  in net
interest  income relate to changes in "volume,"  "spread" and  "margin."  Volume
refers to the  dollar  level of  interest-earning  assets  and  interest-bearing
liabilities.   Spread   refers   to  the   difference   between   the  yield  on
interest-earning  assets and the cost of  interest-bearing  liabilities.  Margin
refers to net interest income divided by average  interest-earning assets and is
influenced  by the  amount  and  relative  mix of  interest-earning  assets  and
interest-bearing  liabilities.  During 2000,  1999 and 1998,  Bancorp's  average
interest-earning  assets  were $737  million,  $578  million  and $483  million,
respectively.  During these same years, Bancorp's net interest margin was 6.84%,
7.15% and 7.22%, respectively.


                                       35

<PAGE>
<TABLE>
<CAPTION>


     AVERAGE BALANCES AND AVERAGE RATES EARNED AND PAID

     The following table sets forth for 2000, 1999 and 1998 information with regard to average balances of assets and liabilities,
as well as total dollar amounts of interest income from interest-earning assets and interest expense on interest-bearing
liabilities, resultant average yields or rates, net interest income, net interest spread, net interest margin and the ratio of
average interest-earning assets to average interest-bearing liabilities for Bancorp.


Year ended December 31,                             2000                             1999                         1998
                                      -------------------------------  ------------------------------  ----------------------------
                                                  Interest   Average              Interest   Average              Interest  Average
                                       Average   income or  yield or    Average   income or  yield or  Average    income or yield or
                                      balance(1)  expense     rates    balance(1)  expense     rates   balance(1)  expense   rates
                                      ---------- ---------   -------   ---------- ---------  -------   ---------- ---------  -------
<S>                                    <C>       <C>        <C>       <C>        <C>          <C>     <C>        <C>         <C>
Assets:                                                                      (Dollars in thousands)
Interest-bearing deposits with banks    $    106  $      8    7.55%    $    104   $      8     7.69%   $    264    $    14     5.30%
Investment securities-- taxable           36,699     2,268    6.18       41,954      2,612     6.23      48,554      3,096     6.38
Investment securities-- non-taxable(2)    27,569     2,197    7.97       28,155      2,172     7.71      33,508      2,574     7.68
Federal funds sold                           971        61    6.28        5,937        280     4.72      13,253        691     5.21
Loans and loans held for sale(3)         671,877    74,848   11.14      502,272     54,134    10.78     387,914     44,348    11.43
                                        --------   -------             --------    -------             --------    -------
      Total interest-earning
           assets/interest income (2)    737,222    79,382   10.77      578,422     59,206    10.24     483,493     50,723    10.49
Allowance for loan losses                 (7,657)                        (5,399)                         (3,882)
Cash and due from banks                   34,969                         31,440                          28,351
Premises and equipment, net               15,652                         13,993                          11,407
Other assets                              20,146                         16,547                           5,848
                                        --------                       --------                         -------
      Total assets                      $800,332                       $635,003                        $525,217
                                        ========                       ========                        ========
Liabilities and shareholders' equity:
Savings and interest-bearing demand
 deposits                                300,119    11,045    3.68     $260,240      7,865     3.02    $211,896      6,889     3.25
Time deposits                            233,335    13,772    5.90      167,702      8,597     5.13     145,387      8,185     5.63
Short-term borrowings                     63,690     4,164    6.54       26,356      1,405     5.33      10,016        489     4.88
Long-term debt                                 -         -                    -          -                5,945        273     4.59
                                         -------   -------             --------     ------            ---------     ------
      Total interest-bearing
           liabilities/interest expense  597,144    28,981    4.85      454,298     17,867     3.93     373,244     15,836     4.24
Demand deposits                          115,545                        106,317                          90,166
Other liabilities                          4,836                          4,948                           5,095
                                        --------                       --------                        --------
      Total liabilities                  717,525                        565,563                         468,505
Shareholders' equity                      82,807                         69,440                          56,712
                                        --------   -------             --------    -------             --------    -------
      Total liabilities and
           shareholders' equity         $800,332                       $635,003                        $525,217
                                        ========                       ========                        ========
Net interest income(2)                             $50,401                         $41,339                         $34,887
                                                   =======                         =======                         =======
Net interest spread(2)                                        5.92%                            6.31%                           6.25%
                                                              =====                            =====                           =====
Net interest margin(2)                                        6.84%                            7.15%                           7.22%
Net interest income to average
 shareholders' equity (2)                            60.87%                          59.53%                          61.52%
Average interest-earning assets to
      average interest-bearing
      liabilities                            123%                           127%                            130%



(1)   Average balances are based on daily averages.
(2) Average  yield on  non-taxable  securities,  interest  income,  net interest income,  net interest  spread,  net interest margin
and net interest  income to average  shareholders' equity have been computed on a 34% tax-equivalent  basis.
(3) Nonaccrual  loans have been included in the computation of average loans and loans held for sale. Loan fees recognized  during
the period and included in the yield calculation totaled $6,963,575 in 2000,  $7,282,948 in 1999 and $6,855,866 in 1998.

</TABLE>

                                       36
<PAGE>



     ANALYSIS OF CHANGES IN INTEREST RATE DIFFERENTIAL

     The following table shows the dollar amount, on a tax-equivalent basis, of
the increase (decrease) in the Company's interest income and interest expense
for the years ended December 31, and attributes such dollar amounts to changes
in volume and changes in interest rates. Changes attributable to the combined
effect of volume and interest rate changes have been allocated equally between
interest rate and volume.
<TABLE>
<CAPTION>
                                                                   2000 vs. 1999                            1999 vs. 1998
                                                                     Change in                                  Change in
                                                             net interest income due to                net interest income due to
                                                        ------------------------------------       ---------------------------------

                                                         Volume        Rate        Total            Volume        Rate       Total
                                                        --------      ------      -------          --------      ------     -------
                                                                                     (In thousands)
<S>                                                    <C>          <C>          <C>              <C>         <C>            <C>
Interest income:
         Balances due from banks                        $     -      $    -       $    -           $   (10)    $     4        $ (6)
         Investment securities-- taxable                   (326)        (18)        (344)             (416)        (68)       (484)
         Investment securities-- non-taxable                (46)         71           25              (412)         10        (402)
         Federal funds sold                                (273)         54         (219)             (363)        (48)       (411)
         Loans and loans held for sale                   18,587       2,127       20,714            12,700       2,914)      9,786
                                                        -------      ------       ------            ------      ------       -----

               Total interest income                     17,942       2,234       20,176            11,499      (3,016)      8,483


Interest expense:
         Deposits:
               Savings and interest-bearing demand        1,336       1,844        3,180             1,516        (540)        976

               Time                                       3,619       1,556        5,175             1,200        (788)        412
         Short-term borrowings                            2,216         543        2,759               834          82         916
         Long-term debt                                       -           -            -              (273)          -        (273)
                                                        -------     -------       ------            ------      ------      ------
               Total interest expense                     7,171       3,943       11,114             3,277      (1,246)      2,031
                                                        -------     -------       ------            ------      ------      ------


Net interest income                                     $10,771     $(1,709)      $9,062            $8,222     $(1,770)     $6,452
                                                        =======     =======       ======            ======     =======      ======


</TABLE>


                                       37
<PAGE>



RESULTS OF OPERATIONS-- YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

     NET INTEREST INCOME

     As a result of volume increases, Bancorp's net interest income increased to
$50.4 million,  on a tax-equivalent  basis, in 2000 as compared to $41.3 million
in 1999 and $34.9 million in 1998. During 2000, average  interest-earning assets
increased to $737 million as compared to average interest-earning assets of $578
million  in  1999  and  $483  million  in  1998.  At  the  same  time,   average
interest-bearing liabilities increased to $597 million in 2000 from $454 million
in 1999 and $373 million in 1998.

     The average yield earned on  interest-earning  assets increased by .53% (53
basis  points) in 2000 and  decreased by .25% in 1999,  while the average  rates
paid on interest-bearing  liabilities increased by .92% in 2000 and decreased by
 .31% in 1999. Net interest margin for 2000 decreased .31% to 6.84% from 7.15% in
1999,  primarily due to a .39% decrease in net interest  spread to 5.92% in 2000
from 6.31% in 1999.  Net interest  spread for 1999 increased to 6.31% from 6.25%
in 1998 due to more loans, relative to securities investments, in the asset mix.
However,  1999  net  interest  margin  decreased  to 7.15%  from  7.22% in 1998,
primarily due to lower loan yields.

     During 2000, Bancorp supported continuing strong loan growth with increased
deposits, which mainly resulted from continuing business expansion, the maturing
of newer branches and aggressive marketing.  In addition,  deposit growth, along
with operating cash flow, allowed reduced  dependence on short-term  borrowings.
During 1999, loan growth, a major branch acquisition and substantial fixed-asset
purchases were supported by increased deposits,  short-term  borrowing,  partial
investment portfolio liquidation and operating cash flow.

     Bancorp  experienced rising interest rates during 2000 and 1999 as compared
to declining rates in 1998. Bancorp's current rate-sensitive asset and liability
portfolio mix has an  interest-rate  profile that should  enhance  earnings in a
rising rate  environment  but would be a detriment to earnings if interest rates
fall. See "Quantitative and Qualitative Disclosures about Market Risk" below.

     A substantial  portion of Bancorp's  earning assets  consists of commercial
and  residential  construction  loans.  Recognizing  the risks  associated  with
construction lending, management has established a detailed approval process for
construction  lines of credit and maintains a continuous  review of construction
in progress to monitor loan activity.  Interest rate increases  could  adversely
affect the demand for  construction  loans and the repayment of those loans from
the sale or cash flow of completed properties.

     PROVISION FOR LOAN LOSSES

     Management's  policy is to maintain an adequate  allowance for loan losses.
In 2000,  Bancorp  charged a $3.8  million  loan loss  provision  to income,  as
compared to $2.3 million in 1999 and $1.5 million in 1998.  The larger loan loss
provisions in 2000 and 1999 primarily  reflect the  specifically  identified and
"inherent" risks of Bancorp's  growing loan totals.  In 2000, loan  charge-offs,
net of  recoveries,  were  $814,000,  as  compared to loan  charge-offs,  net of
recoveries, of $586,000 in 1999 and $398,000 in 1998.

     Bancorp's  allowance for loan losses was $9.2 million at December 31, 2000,
as compared to $6.2  million and $4.5  million at December 31, 1999 and December
31,  1998,

                                       38
<PAGE>

respectively.  The ratio of the allowance for loan losses to total nonperforming
loans was 118%, 225% and 91% at December 31, 2000, 1999 and 1998,  respectively.
The decrease in the  allowance  ratio at December 31, 2000 was mainly the result
of  increased  nonaccrual  totals,  which  were  concentrated  in  loans  to two
borrowers.   These  loans  were  real-estate  secured  and  in  the  process  of
liquidation.  The  increase  in the  allowance  ratio at  December  31, 1999 was
primarily due to the  substantial  liquidation  of loans to one borrower  during
1999.

     Bancorp's  impaired  loans  totaled  $15.4 million at December 31, 2000, as
compared to $5.8  million at December  31, 1999 and $5.2 million at December 31,
1998. The 2000 increase was  concentrated in the nonaccrual  accounts  discussed
above and three other accruing accounts  involving issues for which action plans
specific  to  each  borrower  were   developed.   Management   anticipates   the
satisfactory  disposition of these accounts during 2001 with no related material
adverse effects on Bancorp's operating results.

     Management  attributes  the relatively low levels of loans charged off, net
of recoveries,  during 2000, 1999 and 1998 to favorable economic  conditions and
effective credit risk management policies, procedures and practices.  Management
continues its efforts to collect amounts previously charged off.

     NONINTEREST INCOME

     Noninterest  income increased  $240,000 to $3.8 million in 2000 as compared
to 1999 and decreased  $656,000 to $3.5 million in 1999 as compared to 1998. The
2000  increase  resulted  from  significantly  higher  other  income,  which was
partially  offset by lower gains on sales of loans. The decrease in 1999 was due
to lower gains recognized on sales of loans and securities.

     Other  noninterest  income  increased  $436,00  to $1.2  million in 2000 as
compared  to 1999,  substantially  because of a $227,000,  or 220%,  increase in
merchant services income,  which resulted from a strategic focus to develop this
revenue source.

     Gains on sales of loans decreased  $254,000 in 2000 as compared to 1999 and
$757,000 in 1999 as compared to 1998, mainly due to lower volumes of residential
mortgage loans originated through the Mortgage Co. that are subsequently sold to
third-party investors.  Mortgage loan volumes were adversely affected both years
by interest rate increases.

     Bancorp  recognized  decreased  gains on sales of  securities  of  $301,000
during 1999 as compared to 1998.  Although the volume of securities sold in 1999
was  substantially  higher  than in 1998,  1999 gains on sales  were  limited by
unfavorable interest rate trends.

     NONINTEREST EXPENSE

     Noninterest  expense  increased  $3.9  million to $26.7  million in 2000 as
compared  to 1999,  and  increased  $3.5  million  to $22.8  million  in 1999 as
compared  to 1998.  The  increases  both years were  primarily  attributable  to
increased staffing and facilities expenses.

     Salaries and employee  benefits  expenses  increased  $2.3 million to $16.6
million in 2000 as compared to 1999, and increased $1.5 million to $14.3 million
in 1999 as

                                       39
<PAGE>

compared to 1998.  These increases were primarily the result of Bancorp's growth
and rising per-employee costs.

     Premises and equipment expense  increased  $760,000 to $4.1 million in 2000
as  compared to 1999 and  $672,000 to $3.3  million in 1999 as compared to 1998.
The increases were primarily due to the new Bank and Mortgage Co. offices opened
during 2000 and 1999.

     Data processing  expenses increased $20,000 to $685,000 in 2000 as compared
to 1999 and  $413,000 to $666,000 in 1999 as compared to 1998.  The  majority of
the large 1999 increase reflected the outsourcing of the Bank's item processing.
The increase was more than offset by internal  staffing  and  equipment  expense
savings.

     Other  noninterest  expense  increases in 2000 and 1999 were  primarily the
result of business expansion.


QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      Market risk is the risk of loss to future earnings ("earnings"), which may
result from changes in market prices and rates.  Bancorp's  primary  market risk
exposure  is the  interest  rate  risk  associated  with the  Bank's  investing,
lending,  deposit and borrowing activities.  Other types of market risk, such as
foreign currency  exchange rate risk and commodity price risk, do not materially
affect or are not part of Bancorp's  normal business  activities.  Interest rate
risk is the risk that changes in interest rates will adversely  affect earnings.
The risk of loss to  earnings  in a given  period  develops  when the degree and
timing of rate changes varies among rate-sensitive assets and liabilities.

      Management  actively  monitors and manages the Bank's  interest  rate risk
with  the  overall   objective  of   achieving   satisfactory   and   consistent
profitability  while maintaining  interest rate sensitivity within formal policy
guidelines  established  by the Board of  Directors.  The  Asset  and  Liability
Committee of the Board of  Directors  of the Bank  reviews  interest-sensitivity
reports and related matters  quarterly or more often if needed.  All significant
interest  rate risk issues  including  policy  exceptions  are  presented to the
Bank's Board of Directors for review.

      The Bank's risk of loss to earnings is measured  using a system  initially
developed and implemented during 1999, which is computer based.  During the year
2000, the system was further developed and significantly modified to enhance the
measurement process and improve reporting quality. An income simulation model is
used to  determine  earnings  sensitivity  by  applying  +/-2%  rate  changes to
one-year earnings  projections.  Like all income simulation  models,  the Bank's
model is very assumption  dependent.  The earnings  projections involve numerous
assumptions  including,  but not limited to, those  concerning  future portfolio
growth  and mix,  interest  rates,  market and  economic  trends,  and  customer
behavior.  The application of rate changes also involves many assumptions  about
the basic  components of interest rate risk.  Although  management  believes all
assumptions  and  estimates  used  are  reasonable,   actual  results  may  vary
substantially.


                                       40
<PAGE>


      The following table summarizes the Bank's after-tax  earnings  sensitivity
as of December 31, 2000:

       Interest Rate Change                        Change in Net Income
                -2%                                     $-2,866,000
                +2%                                      +1,547,000

      Comparable  information  for 1999 was not available since the Bank was not
using the current  methodology at that time. At December 31, 1999, the model was
used to measure  earnings  sensitivity  by applying +/-1% and +/-2% rate changes
(annualized) to six-month earnings  projections.  The following table summarizes
the Bank's six-month earnings sensitivity as of December 31, 1999:

       Interest Rate Change                        Change in Net Income
                -2%                                       $-513,000
                -1%                                        -261,000
                +1%                                        +194,000
                +2%                                        +390,000

      The following table summarizes the Bank's six-month  earnings  sensitivity
as of December 31, 2000 using the prior methodology:

       Interest Rate Change                        Change in Net Income
                -2%                                       $-640,000
                -1%                                        -312,000
                +1%                                        +248,000
                +2%                                        +491,000

      Because of  uncertainties  about customer  behavior,  refinance  activity,
absolute and relative loan and deposit  pricing levels,  competitor  pricing and
market  behavior,  product  volumes  and mix,  and other  unexpected  changes in
economic events affecting movements and volatility in market rates, there can be
no assurance that  simulation  results are reliable  indicators of interest rate
risk under such conditions.


PROVISION FOR INCOME TAXES

      Bancorp's  provision  for  income  taxes was $8.7  million  in 2000,  $6.9
million in 1999 and $5.9  million  in 1998.  Bancorp's  effective  tax rates for
financial  reporting  were 38.0% in 2000,  36.4% in 1999 and 34.1% in 1998.  The
effective  tax rate varies from federal  statutory  rates  primarily  because of
nontaxable  interest  income  and  state  income  taxes.  See  Note  11  to  the
Consolidated Financial Statements.


LIQUIDITY AND SOURCES OF FUNDS

      Bancorp's  primary  sources  of funds are  customer  deposits,  short-term
borrowings,  loan  repayments,  sales and  repayments of investment  securities,
sales  of loans  and  operating  cash  flow.  Scheduled  loan  repayments  are a
relatively  stable source of funds,  while deposit inflows and unscheduled  loan
prepayments,  which are  influenced by general  interest  rate levels,  interest
rates available on other investments, competition, economic conditions and other
factors,  are not.  Bancorp's  primary uses of funds include new loan  advances,
customer deposit withdrawals and capital expenditures.


                                       41
<PAGE>

      Bancorp's  deposits  increased  to $696  million at December 31, 2000 from
$573 million at December  31, 1999 and $484 million at December 31, 1998,  while
net loans and loans held for sale increased to $705 million at December 31, 2000
from $594 million at December 31, 1999 and $428 million at December 31, 1998.

      The Bank  maintains,  on an  unsecured  basis,  federal  funds  lines with
correspondent banks as a backup source of temporary  liquidity.  At December 31,
2000,  the Bank had federal funds lines totaling $44.0 million ($30.0 million at
December 31, 1999) with $9.0 million  outstanding ($19.6 million  outstanding at
December 31, 1999).

      The Bank additionally maintains a cash management credit facility with the
Federal Home Loan Bank of Seattle ("FHLB").  The credit facility is based on the
Bank's holdings of specified  housing-finance-related  assets, and is limited to
10% of the Bank's total assets,  measured on a quarterly  basis. At December 31,
2000, the Bank had a $57.0 million credit  facility with the FHLB ($51.7 million
at December 31, 1999) with $46.5 million outstanding at December 31, 2000 ($46.7
million  outstanding  at December 31,  1999).  The increase in the Bank's credit
facility at December 31, 2000 from the level at December 31, 1999 was due to the
Bank's  increase in specified  housing-finance-related  assets during 2000.  The
credit  facility  is secured by the FHLB stock  owned by the Bank and by all its
other assets.

      The Bank also has a $35.0 million  secured  discount window line of credit
with the Federal  Reserve Bank of San  Francisco,  which was fully  available at
December 31, 2000.

      Management  anticipates  that Bancorp will continue to rely on the primary
liquidity  sources  previously  discussed.  Although deposit balances have shown
historical  growth,  such  balances may be  influenced by changes in the banking
industry,  interest  rates  available  on other  investments,  general  economic
conditions,  competition  and  other  factors.  Borrowings  may  be  used  on  a
short-term  basis to  compensate  for  reductions  in other  sources  of  funds.
Borrowings may also be used on a longer-term  basis to support  expanded lending
activities  and to match the  maturity or repricing  intervals  of assets.  FHLB
advances and federal funds  purchased  will probably  continue as Bancorp's main
sources of borrowed funds.

      In January 2000, Bancorp's Board of Directors authorized the repurchase of
up to an  aggregate  of 5% of  Bancorp's  then  outstanding  common stock over a
two-year  period.  The  repurchase  program  was  authorized  in response to the
investment  opportunity created by a perceived market under-valuation of Bancorp
stock.  During 2000, Bancorp repurchased 59,715 shares of common stock at a cost
of approximately $490,000.


CAPITAL RESOURCES

      Total shareholders' equity increased to $90.2 million at December 31, 2000
from  $74.3   million  and  $63.7   million  at  December  31,  1999  and  1998,
respectively.  Total  shareholders'  equity  increased  during  2000  due to net
income,  unrealized  gains on  available-for-sale  securities  and stock  option
exercises.  Bancorp  shareholders'  equity  (Tier 1 capital) was 9.9% of average
assets in 2000 as compared to 9.7% in 1999. The Bank's  shareholder equity (Tier
1 capital) was 9.1% of average assets in 2000 as compared to 8.7% in 1999.


                                       42
<PAGE>

EFFECTS OF INFLATION AND CHANGING PRICES

      The primary  impact of  inflation  on  Bancorp's  operations  is increased
operating  overhead.  Unlike most  industrial  companies,  virtually  all of the
assets and liabilities of a financial  institution are monetary in nature.  As a
result,  interest rates generally have a more significant  effect on a financial
institution's performance than the effects of general inflation.  Interest rates
are affected by inflation,  but neither the timing nor the magnitude of interest
rate fluctuations coincides with changes in an inflation index.

      For  these  reasons,   management   believes  that   references  to  other
information  regarding interest rates earned and paid,  interest-earning  assets
and   interest-bearing   liabilities   will  be  of  greater   assistance   than
inflation-adjusted  presentations in understanding Bancorp's ability to react to
changing interest rates and inflationary trends.


FORM 10-K

      Copies of Bancorp's  annual  report on Form 10-K required to be filed with
the SEC under the Securities  Exchange Act of 1934 are available to shareholders
at no charge  upon  written  request to:  Michael J.  Nysingh,  Chief  Financial
Officer,  Centennial  Bancorp,  P.O. Box 1560, Eugene,  Oregon 97440.  Copies of
Bancorp's  material  filed with the SEC can also be accessed via the Internet at
"www.sec.gov."


MARKET FOR COMMON STOCK

      Bancorp's  Common Stock is quoted on the Nasdaq  National Market under the
symbol "CEBC."

      The following  table sets forth the high and low bid prices for the Common
Stock on the Nasdaq National Market for the last two years:
                                                      High             Low
                                                     ------           -----

      Year ended December 31, 2000:
           First quarter                              $9.42           $6.89
           Second quarter                              8.72            6.38
           Third quarter                               7.71            5.23
           Fourth quarter                              8.64            5.26

      Year ended December 31, 1999:
           First quarter                             $13.12           $9.37
           Second quarter                             10.73            7.68
           Third quarter                              11.15            8.56
           Fourth quarter                              9.35            7.67

      At  January  31,  2001,  Bancorp  had  22,904,234  shares of Common  Stock
outstanding held by 1,198 shareholders of record.

      Bancorp has never declared or paid cash dividends to shareholders  and has
no intention to do so in the foreseeable future.


                                       43
<PAGE>
<TABLE>
<CAPTION>


QUARTERLY FINANCIAL DATA
(In thousands, except per-share amounts)

                                     First             Second              Third              Fourth
    2000                            Quarter            Quarter            Quarter             Quarter             Total
---------------                     -------            -------            -------             -------            -------
<S>                                 <C>                <C>                <C>                 <C>                <C>
Interest income                     $17,887            $19,606            $20,538             $20,604            $78,635
Interest expense                      6,130              6,884              7,778               8,189             28,981
                                    -------            -------            -------             -------            -------
Net interest income                  11,757             12,722             12,760              12,415             49,654

Loan loss provision                     750                750              1,050               1,250              3,800
Net gains on sales of
    securities                            -                  -                  -                 268                268
Income before income taxes            5,241              5,451              6,049               6,165             22,906
Net income                            3,255              3,381              3,744               3,823             14,203
Earnings per share:
    Basic                           $   .14            $   .15            $   .16             $   .17            $   .62
    Diluted                         $   .14            $   .15            $   .16             $   .16            $   .61

    1999
---------------
Interest income                     $12,894            $13,939            $15,274             $16,361            $58,468
Interest expense                      3,833              4,237              4,670               5,128             17,868
                                    -------            -------            -------             -------            -------
Net interest income                   9,061              9,702             10,604              11,233             40,600

Loan loss provision                     500                600                600                 600              2,300
Net gains on sales of
    securities                          166                133                  -                   -                299
Income before income taxes            4,595              4,744              4,981               4,706             19,026
Net income                            2,960              3,045              3,102               3,000             12,107
Earnings per share:
    Basic                           $   .13            $   .13            $   .13             $   .14            $   .53
    Diluted                         $   .13            $   .13            $   .13             $   .13            $   .52



                                       44
</TABLE>
<PAGE>
<TABLE>
<CAPTION>


SELECTED FINANCIAL DATA

The following table sets forth selected  financial data of Bancorp (in thousands of dollars, except per-share amounts).

                                                 2000             1999              1998             1997             1996
                                              --------         --------          --------         --------         --------

<S>                                          <C>              <C>               <C>              <C>              <C>
Interest income                               $ 78,635         $ 58,468          $ 49,849         $ 40,104         $ 32,058
Interest expense                                28,981           17,868            15,837           13,566           11,368
                                              --------         --------          --------         --------         --------
Net interest income                             49,654           40,600            34,012           26,538           20,690
Loan loss provision                              3,800            2,300             1,500            1,250              735
Net income                                      14,203           12,107            11,435            9,303            6,514
Total assets                                   852,975          726,738           572,050          492,573          407,186
Total deposits                                 696,494          573,041           483,866          419,282          339,955
Short-term borrowings                           59,634           74,554            20,600            7,716           12,316
Long-term debt                                       -                -                 -           10,000           10,000
Shareholders' equity                            90,183           74,329            63,717           51,810           41,346

Earnings per common share:
     Basic                                    $    .62          $   .53          $    .51         $    .42         $    .34
     Diluted                                       .61              .52               .49              .40              .30



                                       45
</TABLE>