##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(X) ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2001
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
for the transition period from      to

Commission File No. 0-10489

CENTENNIAL BANCORP

(Name of registrant as specified in its charter)

|                                |  |                                             
|------------------------------- |  | --------------------------------------------
|Oregon
(State of Incorporation) |  | 93-0792841
(IRS Employer Identification No.)

One S.W. Columbia Street
Portland, Oregon 97258
(Address of principal executive offices)

Registrants telephone number: (503) 973-5556

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

Securities registered under Section 12(g) of the Exchange Act:

Common Stock, without par value
(Title of class)

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained, to the best of registrants knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. [X]

State the aggregate market value of the voting stock held by non-affiliates of
the registrant. The aggregate market value shall be computed by reference to
the price at which the stock was sold, or the average bid and asked prices of
such stock, as of a specified date within 60 days prior to the date of filing.
$189,523,038 aggregate market value as of February 22, 2002, based on the price
at which the stock was sold.

Indicate the number of shares outstanding of each of the registrants classes
of common stock, as of the latest practicable date: 24,898,734 shares of
Common Stock on February 22, 2002.

DOCUMENTS INCORPORATED BY REFERENCE

Part III incorporates information by reference from the issuers definitive
proxy statement for the annual meeting of shareholders to be held on April 24,
2002.





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TABLE OF CONTENTS



|                                          |                                                                                               |  |  |  |  |  |  | 
|----------------------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I                                   
|                                          | Item 1. DESCRIPTION OF BUSINESS                                                              
|                                          | Item 2. DESCRIPTION OF PROPERTIES                                                            
|                                          | Item 3. LEGAL PROCEEDINGS                                                                    
|                                          | Item 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS                                      
|                                          | Item 5. MARKET FOR BANCORPS COMMON STOCK AND RELATED SHAREHOLDER MATTERS                    
|                                          | Item 6. SELECTED FINANCIAL DATA                                                              
|                                          | Item 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                                          | Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                          
|                                          | Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                          
|                                          | Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 
|PART III                                 
|                                          | Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF BANCORP                                         
|                                          | Item 11. EXECUTIVE COMPENSATION                                                              
|                                          | Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                      
|                                          | Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                      
|PART IV                                  
|                                          | Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K                    
|SIGNATURES                               
|INCENTIVE STOCK OPTION AGREEMENT         
|INCENTIVE STOCK OPTION AGREEMENT         
|SUBSIDIARIES OF REGISTRANT               
|CONSENT OF SYMONDS, EVANS & COMPANY, P.C.
|CERTAIN FACTORS TO CONSIDER              



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##### Table of Contents



Centennial Bancorp
Form 10-K
Annual Report

TABLE OF CONTENTS

|           |  |                                                                                                                                                                              |  |     
|---------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|           |  |                                                                                                                                                                              |  | Page
|PART I     |  |                                                                                                                                                                              |  |     
|Item 1.    |  | DESCRIPTION OF BUSINESS                                                                                                                                                      |  | 3   
|Item 2.    |  | DESCRIPTION OF PROPERTIES                                                                                                                                                    |  | 21  
|Item 3.    |  | LEGAL PROCEEDINGS                                                                                                                                                            |  | 21  
|Item 4.    |  | SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS                                                                                                                              |  | 21  
|PART II    |  |                                                                                                                                                                              |  |     
|Item 5.    |  | MARKET FOR BANCORPS COMMON STOCK AND RELATED
SHAREHOLDER MATTERS                                                                                                            |  | 21  
|Item 6.    |  | SELECTED FINANCIAL DATA                                                                                                                                                      |  | 22  
|Item 7.    |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS                                                                                        |  | 23  
|Item 7A.   |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK                                                                                                                   |  | 26  
|Item 8.    |  | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                                                                                                  |  | 27  
|Item 9.    |  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE                                                                                         |  | 49  
|PART III   |  |                                                                                                                                                                              |  |     
|           |  | (Items 10 through 13 are incorporated by reference from
Centennial Bancorps definitive proxy statement for the annual
meeting of shareholders to be held on April 24, 2002) |  |     
|Item 10.   |  | DIRECTORS AND EXECUTIVE OFFICERS OF BANCORP                                                                                                                                  |  | 49  
|Item 11.   |  | EXECUTIVE COMPENSATION                                                                                                                                                       |  | 49  
|Item 12.   |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                                                                                                               |  | 49  
|Item 13.   |  | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                                                                                                               |  | 49  
|PART IV    |  |                                                                                                                                                                              |  |     
|Item 14.   |  | EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K                                                                                                             |  | 49  
|SIGNATURES |  |                                                                                                                                                                              |  | 50  

2



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##### Table of Contents






PART I

This Annual Report 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
forward-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: general economic conditions,
either nationally or regionally, that could result in increased loan losses;
the ability to attract new deposits and loans; interest rate fluctuations;
competitive factors and pricing pressures; potential delays or other problems
in implementing Bancorps growth and expansion strategy; changes in legal and
regulatory requirements; changes in technology; and other factors described in
this and other Bancorp reports and statements, including, but not limited to,
Exhibit 99.1 to this Form 10-K, which is incorporated herein by reference.

Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date hereof. Bancorp does not intend to
update these forward-looking statements.




Item 1. DESCRIPTION OF BUSINESS

General

Centennial Bancorp (Bancorp), an Oregon corporation, was organized as a bank
holding company in 1981.

Bancorp has one wholly owned subsidiary, Centennial Bank (Centennial).
Effective May 31, 2001, Centennial Mortgage Co., a wholly owned subsidiary of
Bancorp at that date, was merged into Centennial. Unless the context clearly
suggests otherwise, references in this Annual Report on Form 10-K to Bancorp
include Centennial Bancorp and its subsidiary.

All share and per-share information has been restated to give retroactive
effect to the 5% common stock splits declared in January 2002 and July 2001,
the 10% common stock split declared in January 2001, and for various stock
splits and stock dividends declared in prior years.

Centennial

Centennial is a full-service commercial bank organized under the Oregon Bank
Act. Centennial provides a broad range of depository and lending services to
commercial, industrial and agricultural enterprises, financial institutions,
governmental entities and individuals. Deposit-taking and lending activities
are primarily directed to the communities in which offices are located.
Centennials primary marketing focus is on small- to medium-sized businesses
and on professionals in those communities.

At December 31, 2001, based on total assets, Centennial was the third largest
commercial bank headquartered in Oregon. Centennial operates 22 branches: three
full-service and seven limited-service branches in Portland, Oregon, including
the Marys Woods retirement center branch opened in February 2001 and the
Cherry Wood Village retirement center branch opened in August 2001; one
full-service branch each in the Beaverton, Clackamas and Tigard suburbs of
Portland; two full-service branches in Vancouver, Washington; one full-service
branch in Salem, Oregon; four full-service branches in Eugene, Oregon; one
full-service branch in adjacent Springfield, Oregon; and one full-service
branch in Cottage Grove, Oregon. During February 2002, Centennial opened a
full-service branch in Gresham, Oregon, also a suburb of Portland.

At December 31, 2001, Centennial also operated six commercial banking centers,
with one each in Portland, Eugene, Tigard, Clackamas, Vancouver, and the
Beaverton center which opened in February 2001.

Centennial provides personalized, quality financial services to its customers
and believes this dedication to service has enabled it to maintain a stable and
relatively low-cost retail deposit base, while historically generating a
substantial volume of loans. Average deposits increased from $649.0 million in
2000 to $716.3 million in 2001. Average net loans and loans held for sale
increased from $664.2 million in 2000 to $670.3 million in 2001.

Deposit accounts at Centennial are insured up to applicable limits by the
Federal Deposit Insurance Corporation (the FDIC). Centennial is not a member
of the Federal Reserve System.

3



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Centennial Mortgage

Effective May 31, 2001, Centennial Mortgage Co., a wholly owned subsidiary of
Bancorp at that date, was merged into Centennial. Now operating through the
real estate division of Centennial, and doing business as Centennial Mortgage,
it began operations in 1987, originating conventional and federally insured
residential mortgage loans for sale in the secondary market. Centennial
Mortgage originated $225.3 million, $142.0 million and $152.5 million of
mortgages in 2001, 2000 and 1999, respectively. Mortgage loans generally are
sold without recourse or retention of servicing rights but may be subject to
repurchase under certain circumstances. Centennial Mortgage also originates and
administers loans for the acquisition, development and construction of
commercial and residential real estate.

At December 31, 2001, the real estate division operated four Centennial
Mortgage offices, including two in Portland and two in Eugene.

A trend of rising interest rates, which started in 1999 and continued into
2000, reversed in 2001. Changes in interest rates can affect demand for real
estate acquisition, development and construction loans, as well as the
repayment of those loans from the sale of completed properties. Changing
interest rates can also have a significant effect on residential mortgage
lending activity.

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 portfolios,
and interest expense, principally on customer 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 level and relative mix of interest-earning assets and
interest-bearing liabilities. During 2001, 2000 and 1999, Bancorps average
interest-earning assets were $771.6 million, $737.2 million and $578.4 million,
respectively. During these same years, Bancorps net interest margin on a
tax-equivalent basis was 6.37%, 6.84% and 7.15%, respectively.

4



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##### Table of Contents



Average Balances and Average Rates Earned and Paid

The following table sets forth for 2001, 2000 and 1999 information with regard
to average daily 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,
|                                                                        |                                                     |         |                        
|                                                                        |                                                     |         | 2001                    |         | 2000     
|                                                                        |                                                     |         |                         |         |          
|                                                                        |                                                     |         |                         |         |           |       | Interest |         | Average |         |           |         |          |   | Interest |         | Average
|                                                                        |                                                     |         | Average                 |         | income or |       | yield or |         | Average |         | income or |         | yield or
|(Dollars in thousands)                                                  |                                                     | balance |                         | expense |           | rates |          | balance |         | expense |           | rates  
|                                                                        |                                                     |         |                         |         |           |       |          |         |         |         |           |        
|Assets                                                                  |                                                     |         |                         |         |           |       |          |         |         |         |           |        
|Interest-bearing deposits
with banks                                    |                                                     | $       | 530                     |         |           | $     | 14       |         |         |         | 2.70      | %       |          | $ | 106      |         |         | $ | 8      |        |  |  | 7.55  | %   
|Investment securities
taxable                                           |                                                     |         | 54,293                  |         |           |       | 3,373    |         |         |         | 6.21      |         |          |   | 36,699   |         |         |   | 2,268  |        |  |  | 6.18  |     
|Investment securities 
non-taxable(1)                                  |                                                     |         | 18,307                  |         |           |       | 1,296    |         |         |         | 7.08      |         |          |   | 27,569   |         |         |   | 2,197  |        |  |  | 7.97  |     
|Federal funds sold                                                      |                                                     |         | 17,885                  |         |           |       | 629      |         |         |         | 3.52      |         |          |   | 971      |         |         |   | 61     |        |  |  | 6.28  |     
|Loans and loans held for sale(2)                                        |                                                     |         | 680,539                 |         |           |       | 67,706   |         |         |         | 9.95      |         |          |   | 671,877  |         |         |   | 74,848 |        |  |  | 11.14 |     
|                                                                        |                                                     |         |                         |         |           |       |          |         |         |         |           |         |          |   |          |         |         |   |        |        |  |  |       |     
|Total interest-earning
assets/interest income(1)                        |                                                     |         | 771,554                 |         |           |       | 73,018   |         |         |         | 9.46      |         |          |   | 737,222  |         |         |   | 79,382 |        |  |  | 10.77 |     
|Allowance for loan losses                                               |                                                     |         | (10,280                 | )       |           |       |          |         |         |         | (7,657    | )       |          |   |          |        
|Cash and due from banks                                                 |                                                     |         | 36,306                  |         |           |       |          |         |         |         | 34,969    |         |          |   |          |        
|Premises and equipment, net                                             |                                                     |         | 15,609                  |         |           |       |          |         |         |         | 15,652    |         |          |   |          |        
|Other assets                                                            |                                                     |         | 27,234                  |         |           |       |          |         |         |         | 20,146    |         |          |   |          |        
|                                                                        |                                                     |         |                         |         |           |       |          |         |         |         |           |         |          |   |          |         |         |   |        |        |  |  |       |     
|                                                                        | Total assets                                        |         | $                       | 840,423 |           |       |          |         |         |         | $         | 800,332 |          |   |          |         |        
|                                                                        |                                                     |         |                         |         |           |       |          |         |         |         |           |         |          |   |          |         |         |   |        |        |  |  |       |     
|Liabilities and Shareholders Equity                                    |                                                     |         |                         |         |           |       |          |         |         |         |           |        
|Savings and interest-bearing
demand deposits                            |                                                     | $       | 331,396                 |         |           |       | 9,278    |         |         |         | 2.80      |         |          | $ | 300,119  |         |         |   | 11,045 |        |  |  | 3.68  |     
|Time deposits                                                           |                                                     |         | 244,823                 |         |           |       | 13,394   |         |         |         | 5.47      |         |          |   | 233,335  |         |         |   | 13,772 |        |  |  | 5.90  |     
|Borrowings                                                              |                                                     |         | 21,522                  |         |           |       | 1,233    |         |         |         | 5.73      |         |          |   | 63,690   |         |         |   | 4,164  |        |  |  | 6.54  |     
|                                                                        |                                                     |         |                         |         |           |       |          |         |         |         |           |         |          |   |          |         |         |   |        |        |  |  |       |     
|                                                                        | Total interest-bearing
liabilities/interest expense |         |                         | 597,741 |           |       |          | 23,905  |         |         |           | 4.00    |          |   |          | 597,144 |         |   |        | 28,981 |  |  |       | 4.85 | 
|Demand deposits                                                         |                                                     |         | 140,098                 |         |           |       |          |         |         |         | 115,545   |         |          |   |          |        
|Other liabilities                                                       |                                                     |         | 6,089                   |         |           |       |          |         |         |         | 4,836     |         |          |   |          |        
|                                                                        |                                                     |         |                         |         |           |       |          |         |         |         |           |         |          |   |          |         |         |   |        |        |  |  |       |     
|                                                                        | Total liabilities                                   |         |                         | 743,928 |           |       |          |         |         |         |           | 717,525 |          |   |          |         |        
|Shareholders equity                                                    |                                                     |         | 96,495                  |         |           |       |          |         |         |         | 82,807    |         |          |   |          |        
|                                                                        |                                                     |         |                         |         |           |       |          |         |         |         |           |         |          |   |          |         |         |   |        |        |  |  |       |     
|                                                                        | Total liabilities and
shareholders equity          |         | $                       | 840,423 |           |       |          |         |         |         | $         | 800,332 |          |   |          |         |        
|                                                                        |                                                     |         |                         |         |           |       |          |         |         |         |           |         |          |   |          |         |         |   |        |        |  |  |       |     
|Net interest income(1)                                                  |                                                     |         |                         | $       | 49,113    |       |          |         |         |         |           | $       | 50,401   |   |          |        
|Net interest spread(1)                                                  |                                                     |         |                         |         |           |       | 5.46     | %       |         |         |           |         |          |   | 5.92     | %      
|Net interest margin(1)                                                  |                                                     |         |                         |         |           |       | 6.37     | %       |         |         |           |         |          |   | 6.84     | %      
|Average interest-earning assets
to average interest-bearing
liabilities |                                                     |         |                         |         |           |       | 129      | %       |         |         |           |         |          |   | 123      | %      

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                                                                        |                                                     |         |                         |         |           |       |          |        |         |  |       |      | 
|----------------------------------------------------------------------- | --------------------------------------------------- | ------- | ----------------------- | ------- | --------- | ----- | -------- | ------ | ------- |  | ----- | ---- | 
|                                                                        |                                                     |         | Year ended December 31,
|                                                                        |                                                     |         | 1999                   
|                                                                        |                                                     |         |                        
|                                                                        |                                                     |         |                         |         |           |       | Interest |        | Average
|                                                                        |                                                     |         | Average                 |         | income or |       | yield or
|(Dollars in thousands)                                                  |                                                     | balance |                         | expense |           | rates
|                                                                        |                                                     |         |                         |         |           |      
|Assets                                                                  |                                                     |         |                         |         |           |      
|Interest-bearing deposits
with banks                                    |                                                     | $       | 104                     |         |           | $     | 8        |        |         |  | 7.69  | %   
|Investment securities
taxable                                           |                                                     |         | 41,954                  |         |           |       | 2,612    |        |         |  | 6.23  |     
|Investment securities 
non-taxable(1)                                  |                                                     |         | 28,155                  |         |           |       | 2,172    |        |         |  | 7.71  |     
|Federal funds sold                                                      |                                                     |         | 5,937                   |         |           |       | 280      |        |         |  | 4.72  |     
|Loans and loans held for sale(2)                                        |                                                     |         | 502,272                 |         |           |       | 54,134   |        |         |  | 10.78 |     
|                                                                        |                                                     |         |                         |         |           |       |          |        |         |  |       |     
|Total interest-earning
assets/interest income(1)                        |                                                     |         | 578,422                 |         |           |       | 59,206   |        |         |  | 10.24 |     
|Allowance for loan losses                                               |                                                     |         | (5,399                  | )       |           |       |          |       
|Cash and due from banks                                                 |                                                     |         | 31,440                  |         |           |       |          |       
|Premises and equipment, net                                             |                                                     |         | 13,993                  |         |           |       |          |       
|Other assets                                                            |                                                     |         | 16,547                  |         |           |       |          |       
|                                                                        |                                                     |         |                         |         |           |       |          |        |         |  |       |     
|                                                                        | Total assets                                        |         | $                       | 635,003 |           |       |          |        |        
|                                                                        |                                                     |         |                         |         |           |       |          |        |         |  |       |     
|Liabilities and Shareholders Equity                                    |                                                     |         |                         |         |           |      
|Savings and interest-bearing
demand deposits                            |                                                     | $       | 260,240                 |         |           |       | 7,865    |        |         |  | 3.02  |     
|Time deposits                                                           |                                                     |         | 167,702                 |         |           |       | 8,597    |        |         |  | 5.13  |     
|Borrowings                                                              |                                                     |         | 26,356                  |         |           |       | 1,405    |        |         |  | 5.33  |     
|                                                                        |                                                     |         |                         |         |           |       |          |        |         |  |       |     
|                                                                        | Total interest-bearing
liabilities/interest expense |         |                         | 454,298 |           |       |          | 17,867 |         |  |       | 3.93 | 
|Demand deposits                                                         |                                                     |         | 106,317                 |         |           |       |          |       
|Other liabilities                                                       |                                                     |         | 4,948                   |         |           |       |          |       
|                                                                        |                                                     |         |                         |         |           |       |          |        |         |  |       |     
|                                                                        | Total liabilities                                   |         |                         | 565,563 |           |       |          |        |        
|Shareholders equity                                                    |                                                     |         | 69,440                  |         |           |       |          |       
|                                                                        |                                                     |         |                         |         |           |       |          |        |         |  |       |     
|                                                                        | Total liabilities and
shareholders equity          |         | $                       | 635,003 |           |       |          |        |        
|                                                                        |                                                     |         |                         |         |           |       |          |        |         |  |       |     
|Net interest income(1)                                                  |                                                     |         |                         | $       | 41,339    |       |          |       
|Net interest spread(1)                                                  |                                                     |         |                         |         |           |       | 6.31     | %     
|Net interest margin(1)                                                  |                                                     |         |                         |         |           |       | 7.15     | %     
|Average interest-earning assets
to average interest-bearing
liabilities |                                                     |         |                         |         |           |       | 127      | %     



---

|(1) |  | Average yield on non-taxable securities, interest income, net interest
income, net interest spread and net interest margin have been computed on a
34% tax-equivalent basis.                                                                   
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Nonaccrual loans have been included in the
computation of average loans and loans held for sale. Loan fees recognized and
included in interest income totaled $7.4 million, $7.0 million and $7.3
million in 2001, 2000 and 1999, respectively.

5



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##### Table of Contents



Analysis of Changes in Interest Rate Differential

The following table shows the dollar amount of the increase (decrease) in
Bancorps interest income and interest expense for the years indicated, on a
tax-equivalent basis, 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, which were immaterial, have been allocated
equally between interest rate and volume.

|                                    |                                     |        |                                      |       |                                      |       |        |        |   |      |        |        |   |   |        |        |  |   |        |       |  |   |        |        | 
|----------------------------------- | ----------------------------------- | ------ | ------------------------------------ | ----- | ------------------------------------ | ----- | ------ | ------ | - | ---- | ------ | ------ | - | - | ------ | ------ |  | - | ------ | ----- |  | - | ------ | ------ | 
|                                    |                                     |        | 2001 vs. 2000                        |       | 2000 vs. 1999                       
|                                    |                                     |        | Change in net interest income due to |       | Change in net interest income due to
|                                    |                                     |        |                                      |       |                                     
|(In thousands)                      |                                     | Volume |                                      | Rate  |                                      | Total |        | Volume |   | Rate |        | Total 
|                                    |                                     |        |                                      |       |                                      |       |        |        |   |      |        |       
|Interest income:                    |                                     |        |                                      |       |                                      |       |        |        |   |      |        |        |   |   |        |        |  |   |        |       |  |   |        |       
|Balances due from banks             |                                     | $      | 21                                   |       |                                      | $     | (15    | )      |   | $    | 6      |        |   | $ |       |        |  | $ |       |       |  | $ |       |       
|Investment securities  taxable     |                                     |        | 1,091                                |       |                                      |       | 14     |        |   |      | 1,105  |        |   |   | (326   | )      |  |   | (18    | )     |  |   | (344   | )     
|Investment securities  non-taxable |                                     |        | (697                                 | )     |                                      |       | (204   | )      |   |      | (901   | )      |   |   | (46    | )      |  |   | 71     |       |  |   | 25     |       
|Federal funds sold                  |                                     |        | 826                                  |       |                                      |       | (258   | )      |   |      | 568    |        |   |   | (273   | )      |  |   | 54     |       |  |   | (219   | )     
|Loans and loans held for sale       |                                     |        | 913                                  |       |                                      |       | (8,055 | )      |   |      | (7,142 | )      |   |   | 18,587 |        |  |   | 2,127  |       |  |   | 20,714 |       
|                                    |                                     |        |                                      |       |                                      |       |        |        |   |      |        |        |   |   |        |        |  |   |        |       |  |   |        |       
|                                    | Total interest income               |        |                                      | 2,154 |                                      |       |        | (8,518 | ) |      |        | (6,364 | ) |   |        | 17,942 |  |   |        | 2,234 |  |   |        | 20,176 | 
|Interest expense:                   |                                     |        |                                      |       |                                      |       |        |        |   |      |        |        |   |   |        |        |  |   |        |       |  |   |        |       
|Deposits:                           |                                     |        |                                      |       |                                      |       |        |        |   |      |        |        |   |   |        |        |  |   |        |       |  |   |        |       
|                                    | Savings and interest-bearing
demand |        |                                      | 1,013 |                                      |       |        | (2,780 | ) |      |        | (1,767 | ) |   |        | 1,336  |  |   |        | 1,844 |  |   |        | 3,180  | 
|                                    | Time                                |        |                                      | 653   |                                      |       |        | (1,031 | ) |      |        | (378   | ) |   |        | 3,619  |  |   |        | 1,556 |  |   |        | 5,175  | 
|Borrowings                          |                                     |        | (2,586                               | )     |                                      |       | (345   | )      |   |      | (2,931 | )      |   |   | 2,216  |        |  |   | 543    |       |  |   | 2,759  |       
|                                    |                                     |        |                                      |       |                                      |       |        |        |   |      |        |        |   |   |        |        |  |   |        |       |  |   |        |       
|                                    | Total interest expense              |        |                                      | (920  | )                                    |       |        | (4,156 | ) |      |        | (5,076 | ) |   |        | 7,171  |  |   |        | 3,943 |  |   |        | 11,114 | 
|                                    |                                     |        |                                      |       |                                      |       |        |        |   |      |        |        |   |   |        |        |  |   |        |       |  |   |        |       
|Net interest income                 |                                     | $      | 3,074                                |       |                                      | $     | (4,362 | )      |   | $    | (1,288 | )      |   | $ | 10,771 |        |  | $ | (1,709 | )     |  | $ | 9,062  |       
|                                    |                                     |        |                                      |       |                                      |       |        |        |   |      |        |        |   |   |        |        |  |   |        |       |  |   |        |       

Market Areas

The greater Portland area, where Centennial has eight full-service branches and
seven limited-service branches, five commercial banking centers, and two
mortgage banking offices, is one of Bancorps two principal market areas. The
metropolitan area, including Vancouver, Washington, has a population of
approximately 1.9 million, and a diversified economy that allows for dilution
of loan portfolio risk. The Portland area, which has historically provided
excellent growth opportunity, experienced depressed economic conditions during
2001.

Bancorps other principal market area, with five full-service bank branches,
one commercial banking center, and two mortgage lending offices, is the
Eugene/Springfield area at the southern end of Oregons Willamette Valley. The
combined population of Eugene and Springfield is approximately 190,000. The
areas economy depends primarily upon federal, state and local governments,
educational institutions, forest products, general manufacturing (especially
small manufacturing and high-technology industries) and health care.

Bancorp also has a bank branch in downtown Salem, Oregon. Salem is the state
capitol with a population of approximately 130,000 and is located in the
Willamette Valley about midway between Portland and Eugene. The area economy is
highly dependent on the state government although educational institutions,
federal and local governments, healthcare and food processing are also very
significant.

Centennial also has a branch office in Cottage Grove, Oregon, located
approximately 20 miles south of Eugene and Springfield. The population of
Cottage Grove is approximately 8,000. Its economy depends primarily upon forest
products, general manufacturing and agriculture.

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Lending Activities

General

Bancorp provides a broad range of commercial and real estate lending services.
The primary focus is to provide commercial loans to small- to medium-sized
businesses with annual revenues up to $100 million, and to professionals.
Commercial and residential real estate construction lending, as well as
residential mortgage loan origination and sales, are also important aspects of
Bancorps lending activities. Bancorp makes consumer loans, primarily to
accommodate existing customers, but does not actively pursue such business.
Most loans are made to customers in Bancorps trade areas.

Bancorp maintains sound loan underwriting standards with written loan policies,
conservative individual lending limits and, depending on the size of the credit
request, reviews by Centennials Senior Loan Committee and the Director Loan
Committee of Centennials Board of Directors. Underwriting standards are
designed to achieve a high-quality loan portfolio, compliance with lending
regulations and the desired mix of loan maturities and industry concentrations.
Bancorp further seeks to minimize credit losses by closely monitoring the
financial condition of its borrowers and the value of collateral. In-house
legal counsel assists in loan documentation and collections.

Loan Portfolio Composition

The following table sets forth information with respect to the composition of
the loan portfolio (loans and loans held for sale) by type of loan at December
31 for each of the last five years:

|                                    |  |              |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|----------------------------------- |  | ------------ | ------- | ---- |  | ---- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | - |  | - | ------- | -
|                                    |  | December 31,
|                                    |  |             
|(In thousands)                      |  | 2001         |         | 2000 |  | 1999 |         | 1998 |  | 1997
|                                    |  |              |         |      |  |      |         |      |  |     
|Commercial                          |  | $            | 259,961 |      |  | $    | 273,867 |      |  | $    | 219,588 |   |  | $ | 163,577 |   |  | $ | 146,594 |  
|Real estate  construction          |  |              | 212,577 |      |  |      | 261,727 |      |  |      | 227,388 |   |  |   | 150,816 |   |  |   | 88,842  |  
|Real estate  mortgage              |  |              | 163,525 |      |  |      | 147,737 |      |  |      | 129,221 |   |  |   | 94,475  |   |  |   | 87,357  |  
|Installment                         |  |              | 11,188  |      |  |      | 9,379   |      |  |      | 8,409   |   |  |   | 7,073   |   |  |   | 6,603   |  
|Loans held for sale                 |  |              | 12,394  |      |  |      | 10,890  |      |  |      | 6,155   |   |  |   | 11,039  |   |  |   | 5,585   |  
|Lease financing                     |  |              | 4,833   |      |  |      | 4,607   |      |  |      | 4,868   |   |  |   | 1,897   |   |  |   | 3,649   |  
|Other                               |  |              | 1,743   |      |  |      | 5,563   |      |  |      | 4,199   |   |  |   | 3,137   |   |  |   | 1,995   |  
|                                    |  |              |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|Total loans and loans held for sale |  |              | 666,221 |      |  |      | 713,770 |      |  |      | 599,828 |   |  |   | 432,014 |   |  |   | 340,625 |  
|Less allowance for loan losses      |  |              | (10,506 | )    |  |      | (9,150  | )    |  |      | (6,165  | ) |  |   | (4,451  | ) |  |   | (3,349  | )
|                                    |  |              |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|Loans receivable, net               |  | $            | 655,715 |      |  | $    | 704,620 |      |  | $    | 593,663 |   |  | $ | 427,563 |   |  | $ | 337,276 |  
|                                    |  |              |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  

The following table presents the aggregate maturities of loans in each major
category of the loan portfolio at December 31, 2001. Actual maturities may
differ from the contractual maturities shown below as a result of renewals and
prepayments.

|                           |  |          |         |                |  |            |         |          |  |       |         |  |  |   |         | 
|-------------------------- |  | -------- | ------- | -------------- |  | ---------- | ------- | -------- |  | ----- | ------- |  |  | - | ------- | 
|                           |  | Due      |         | Due after      |  |            |         |          |  | Total
|                           |  | within   |         | one but within |  | Due after  |         | loans by
|(In thousands)             |  | one year |         | five years     |  | five years |         | category
|                           |  |          |         |                |  |            |         |         
|Loan category              |  |          |         |                |  |            |         |         
|Commercial                 |  | $        | 166,653 |                |  | $          | 62,619  |          |  | $     | 30,689  |  |  | $ | 259,961 | 
|Real estate  construction |  |          | 175,858 |                |  |            | 21,574  |          |  |       | 15,145  |  |  |   | 212,577 | 
|Real estate  mortgage     |  |          | 22,595  |                |  |            | 46,645  |          |  |       | 94,285  |  |  |   | 163,525 | 
|Installment                |  |          | 3,093   |                |  |            | 7,700   |          |  |       | 395     |  |  |   | 11,188  | 
|Loans held for sale        |  |          |        |                |  |            |        |          |  |       | 12,394  |  |  |   | 12,394  | 
|Lease financing            |  |          | 380     |                |  |            | 4,453   |          |  |       |        |  |  |   | 4,833   | 
|Other                      |  |          | 1,310   |                |  |            | 91      |          |  |       | 342     |  |  |   | 1,743   | 
|                           |  |          |         |                |  |            |         |          |  |       |         |  |  |   |         | 
|Total loans by maturity    |  | $        | 369,889 |                |  | $          | 143,082 |          |  | $     | 153,250 |  |  | $ | 666,221 | 
|                           |  |          |         |                |  |            |         |          |  |       |         |  |  |   |         | 

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Of the $296.3 million of loans that mature after one year, a total of $233.0
million (approximately 79%) are fixed-rate loans, and a total of $63.3 million
(approximately 21%) are variable-rate loans.

At December 31, 2001, $539.4 million of loans (approximately 81% of the
portfolio) had fixed interest rates, and $126.8 million (approximately 19%)
had variable interest rates. Loans with an original floating or adjustable rate
that reached a ceiling rate or floor rate at December 31, 2001 are considered
to be fixed interest rate loans.

Commercial Loans

Commercial loans that are not secured by real estate are the largest category
of loans. Areas of emphasis include loans to small- to medium-sized businesses
and to professionals. Bancorp provides a wide range of commercial business
loans, including lines of credit for working capital and term loans for the
acquisition of equipment and other purposes. Collateral generally includes
equipment, accounts receivable and inventory. Where warranted by the overall
financial condition of the borrower, loans may be made on an unsecured basis.

At December 31, 2001, approximately 18% of Bancorps commercial loans had
floating or adjustable interest rates; the remaining 82% had fixed interest
rates. Operating lines of credit are payable on demand and subject to annual
renewal. Term loan maturities generally range from one to five years.
Commercial loans outstanding at December 31, 2001 were $260.0 million, compared
to $273.9 million at December 31, 2000 and $219.6 million at December 31, 1999.
The decline of commercial loans in 2001 was primarily due to a decrease in loan
demand, due to the weakening economy in the market areas served. Nonaccrual
loans in this category totaled $2.9 million at December 31, 2001 ($1.2 million
at December 31, 2000). There were no restructured loans in this category at
December 31, 2001 or 2000.

Real Estate Construction Loans

Real estate construction loans are the second largest category of loans. This
category includes loans that finance land acquisition, residential lot
development, construction of single-family and multi-family residential
properties, and the development and construction of a wide range of commercial
real estate projects. Land acquisition and lot development loans generally have
maturities of 12 to 18 months while residential construction loans generally
have maturities of 12 months. Commercial construction loans normally have 12 to
18 month maturities with extension options when justified. At December 31,
2001, 24% of the outstanding loans in this category had variable interest rates
with the remaining 76% having fixed rates.

Construction financing is generally considered to involve a higher degree of
risk than long-term financing on improved, occupied real estate. Bancorps
underwriting, monitoring and disbursement practices with respect to
construction financing are intended to ensure that sufficient funds are
available to complete construction projects, and that the value of the
completed project meets or exceeds that of initial estimates. Bancorp endeavors
to limit its risk through its underwriting procedures by using only approved,
qualified appraisers, by dealing only with qualified builders/borrowers, and by
closely monitoring the construction projects through the process of completion
and sale.

At December 31, 2001, real estate construction loans were $212.6 million,
compared to $261.7 million and $227.4 million at December 31, 2000 and 1999,
respectively. The decrease in 2001 was a result of Bancorps desire to reduce
concentration risks in hotel and motel and assisted living facility projects,
and the effect of a weakening regional economy. At December 31, 2001,
nonaccrual loans in this category totaled $4.3 million ($5.7 million at
December 31, 2000). The nonaccrual total was concentrated in loans to five
borrowers, which were in the process of liquidation. The value of the
real-estate collateral is believed adequate to support amounts outstanding, and
loss potential is considered nominal. At December 31, 2001 and 2000, there were
no restructured loans in this category.

Real Estate Mortgage Loans

Real estate mortgage loans represent Bancorps third largest category of loans.
Of the $163.5 million of real estate mortgage loans outstanding at December
31, 2001, $141.9 million consisted of income property and commercial loans
secured by real estate. Income property loans and commercial loans secured by
real estate typically involve large balances to single borrowers or groups of
related borrowers. These borrowers may be more sensitive to changes in economic
conditions than residential mortgage loan customers.

At December 31, 2001, approximately 88% of Bancorps real estate mortgage loans
had fixed interest rates; the other 12% had floating or adjustable interest
rates. Maturities of the real estate mortgage loans usually range from one to
ten years. Real estate mortgage loans outstanding increased to $163.5 million
at December 31, 2001 from $147.7 million at December 31, 2000 and $129.2
million at December 31, 1999. Growth during 2001 and 2000 was primarily due to
strategic emphasis on developing the income property and commercial real estate
portion of the portfolio. At December 31, 2001, nonaccrual loans in this
category totaled $434,000 ($336,000 at December 31, 2000). At December 31,
2001 and 2000, there were no restructured loans in this category.

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Bancorps underwriting standards specify the following ranges of loan-to-value
ratios for real estate loans, based on the financial strength of the borrower:
80% - 90% for loans secured by owner-occupied residences; 90% - 100% for loans
secured by presold residences; 80% for other residential loans; and 65% - 75%
for commercial real estate loans.

Bancorp originates SBA real estate loans on owner-occupied properties where the
maturities may be up to 20 years, and the loan-to-value ratio may reach 90% of
appraised value or cost, whichever is lower. Up to 90% of the amount of these
loans is guaranteed or insured by an agency of the U.S. Government. The
guaranteed portion of these loans is frequently sold to secondary-market
investors. At December 31, 2001, the amount of the non-guaranteed portion of
these loans retained by Bancorp was not material.

Installment Loans

Bancorp does not actively solicit consumer loans, but makes such loans
primarily as a convenience to existing customers. Included in the installment
loan category are personal lines of credit, and consumer installment loans
(such as for automobile purchases). Consumer loans may be secured or unsecured.
Collections depend principally on the borrowers financial condition or cash
flow.

Installment loans were $11.2 million at December 31, 2001 compared to $9.4
million at December 31, 2000 and $8.4 million at December 31, 1999. These
modest levels of installment loans to individuals were primarily due to
Bancorps focus on lending to businesses and professionals and significant
competition for consumer loans from the many credit unions, banks and finance
companies in Bancorps market areas. At December 31, 2001, nonaccrual loans in
this category totaled $10,000. There were no nonaccrual loans in this category
at December 31, 2000. At December 31, 2001 and 2000, there were no restructured
loans in this category.

Commitments and Contingent Liabilities

In the ordinary course of business, Bancorp enters into various types of
transactions that include commitments to extend credit and standby letters of
credit. Credit standards applied to commitments are the same as those used in
all lending processes, and these commitments are included in lending risk
evaluations. Collateral for these commitments may include cash, accounts
receivable, inventory, equipment, securities and/or real estate.

Credit Authority and Loan Limits

All loans and other credit facilities are subject to credit and collateral
approval procedures and loan amount limitations. Loan officers and lending unit
managers have individual authority to approve loans in amounts up to
established limits, ranging from $25,000 to $750,000. Credit requests in excess
of those limits, or not in conformance with lending policies, are reviewed by
successive levels of approval authority according to the total amounts
involved. These authority levels include, by ascending approval limits, Credit
Administration officers, the Senior Loan Committee, and the Director Loan
Committee of Centennials Board of Directors. The Senior Loan Committee
consists of senior management of Centennial. The Director Loan Committee has
eight members including six non-employee directors, the President and CEO of
Bancorp and Centennial, and Centennials Senior Credit Officer. All loans to
executive officers and directors of Bancorp or Centennial must be approved by
the Director Loan Committee and are reported to Centennials Board of
Directors. Loans to these individuals in excess of $500,000 must be approved by
Centennials Board of Directors.

Under Oregon law, permissible loans from a financial institution to one
borrower are generally limited to 15% of the institutions Tier 1 and Tier 2
capital, as defined by regulation. However, loans and other obligations up to
an additional 10% of the institutions capital may be made to the borrower if
the obligations are secured by a first lien on real estate, and the obligation
does not exceed 80% of the fair market value of the real estate as determined
by an independent appraisal. At December 31, 2001, Centennials legal lending
limit was $14.7 million (or $24.5 million if secured by a first lien on real
estate). However, for internal policy purposes, Centennials lending limit is
set at $7.0 million (or $9.0 million if secured by a first lien on real
estate).

Loan pricing decisions are based on an evaluation of credit risk, cost of
funds, operating and administrative costs, an allowance for loan losses,
desired profit margin and other factors. Bancorp uses a computer-based pricing
model that analyzes a borrowers contribution to net earnings and return on
equity.

Centennial sells loan participations to accommodate borrowers whose financing
needs exceed lending limits, to diversify risk and manage liquidity. Centennial
occasionally purchases participations in loans from correspondent banks. Policy
prohibits aggregate purchased participations in excess of 10% of the loan
portfolio.

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Non-performing Assets

Non-performing assets consist of loans past due 90 days or more, nonaccrual
loans, restructured loans, and other real estate owned (OREO). The following
table sets forth information concerning non-performing assets at the end of
each of the last five years:

|                                                                 |                                |      |              |       |  |      |       |       |  |      |       |       |  |   |       |       |  |   |       |       | 
|---------------------------------------------------------------- | ------------------------------ | ---- | ------------ | ----- |  | ---- | ----- | ----- |  | ---- | ----- | ----- |  | - | ----- | ----- |  | - | ----- | ----- | 
|                                                                 |                                |      | December 31,
|                                                                 |                                |      |             
|(Dollars in thousands)                                           |                                | 2001 |              | 2000  |  | 1999 |       | 1998  |  | 1997
|                                                                 |                                |      |              |       |  |      |       |       |  |     
|Non-performing loans:                                            |                                |      |              |       |  |      |       |       |  |      |       |       |  |   |       |       |  |   |       |      
|                                                                 | Loans past due 90 days or more |      | $            |      |  |      | $     | 481   |  |      | $     | 2,163 |  |   | $     | 1,043 |  |   | $     | 402   | 
|                                                                 | Nonaccrual loans               |      |              | 7,694 |  |      |       | 7,268 |  |      |       | 579   |  |   |       | 3,841 |  |   |       | 873   | 
|                                                                 |                                |      |              |       |  |      |       |       |  |      |       |       |  |   |       |       |  |   |       |      
|                                                                 | Total non-performing loans     |      |              | 7,694 |  |      |       | 7,749 |  |      |       | 2,742 |  |   |       | 4,884 |  |   |       | 1,275 | 
|                                                                 | Other real estate owned        |      |              | 1,104 |  |      |       | 602   |  |      |       | 413   |  |   |       | 105   |  |   |       |      | 
|                                                                 |                                |      |              |       |  |      |       |       |  |      |       |       |  |   |       |       |  |   |       |      
|                                                                 | Total non-performing assets    |      | $            | 8,798 |  |      | $     | 8,351 |  |      | $     | 3,155 |  |   | $     | 4,989 |  |   | $     | 1,275 | 
|                                                                 |                                |      |              |       |  |      |       |       |  |      |       |       |  |   |       |       |  |   |       |      
|Allowance for loans losses                                       |                                | $    | 10,506       |       |  | $    | 9,150 |       |  | $    | 6,165 |       |  | $ | 4,451 |       |  | $ | 3,349 |      
|Ratio of total non-performing assets
to total assets             |                                |      | 1.08         | %     |  |      | .98   | %     |  |      | .43   | %     |  |   | .87   | %     |  |   | .26   | %    
|Ratio of total non-performing loans
to total loans               |                                |      | 1.15         | %     |  |      | 1.09  | %     |  |      | .46   | %     |  |   | 1.13  | %     |  |   | .38   | %    
|Ratio of allowance for loan losses
to total non-performing loans |                                |      | 137          | %     |  |      | 118   | %     |  |      | 225   | %     |  |   | 91    | %     |  |   | 263   | %    

The accrual of interest on a loan is discontinued when the future collection of
principal or interest is in doubt. Loans placed on nonaccrual status may or
may not be contractually past due at the time of such determination, and may or
may not be secured. When a loan is placed on nonaccrual status, interest
previously accrued but uncollected is reversed and charged against current
income. The interest on these loans is accounted for on the cash-basis or
cost-recovery method until qualifying for return to accrual status. Loans are
returned to accrual status when all the principal and interest amounts
contractually due are brought current and future payments are reasonably
assured. If interest on nonaccrual loans had been accrued, such income would
have been approximately $659,000 in 2001, $1,226,000 in 2000 and $97,000 in
1999. Total interest income of $193,000, $318,000 and $27,500 was recognized on
nonaccrual loans during 2001, 2000 and 1999, respectively.

OREO consists of real estate acquired through foreclosure or by a deed in lieu
of foreclosure. Properties in OREO are carried at the lower of net realizable
value or the principal balance of the related loan. Any excess of the loan
balance over fair value of the property is charged to the allowance for loan
losses. At December 31, 2001, OREO totaled $1,104,000 and consisted of three
commercial properties. At December 31, 2000, OREO consisted of one commercial
property and one residential property and totaled $602,000.

Analysis of the Allowance for Loan Losses

The allowance for loan losses represents managements estimate of the losses
inherent in the loan portfolio. The allowance is based primarily on
managements evaluation of the overall quality and risk characteristics of
Bancorps loan portfolio, which is dependent upon numerous interrelated factors
including present non-performing and delinquent loans, borrowers perceived
abilities to repay, value of collateral, general and local economic conditions
and historical loan loss experience.

The Director Loan Committee reviews the adequacy of the allowance for loan
losses quarterly. Although determination of the adequacy of the allowance
involves substantial subjective judgment based on the Committees analysis of
the risk characteristics of the entire loan portfolio, the Committee also uses
a combination of quantitative methods to analyze the adequacy of the allowance.

One part of the analysis uses credit risk ratings and related loss factor
multipliers to calculate a range of potential losses in the portfolio. Credit
contingencies, including letters of credit and commitments, are also analyzed
by applying loss factor multipliers according to contingency type.

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A second part of the analysis measures impairment and provides a specific
valuation allowance for potential loss. The amount of impairment is
specifically determined for all loans of $100,000 or more that are identified
as impaired. A loan is considered impaired when, based on current information
and events, it is probable that all amounts due (both principal and interest)
will be unable to be collected according to the contractual terms of the loan
agreement. All collateral-dependent loans are measured for impairment based on
the estimated fair value of the collateral. The measurement of other impaired
loans is based on the present value of expected future cash flows discounted at
the historical effective interest rate.

The amounts calculated by the quantitative methods are then compared by the
Committee to the allowance for loan losses in evaluating the adequacy of the
allowance. Although a range is determined quantitatively, the final amount of
the allowance involves subjective judgment including the risk characteristics
of the entire loan portfolio, the current economic environment, and the current
regulatory environment.

Management believes the allowance for loan losses is adequate to cover
anticipated losses and is in accordance with accounting principles generally
accepted in the United States. There can be no assurance, however, that
management will not decide to increase the allowance for loan losses or that
regulators will not require the allowance to be increased, either of which
events could adversely affect results of operations. Further, there can be no
assurance that actual loan losses will not exceed the allowance.

The following table sets forth information regarding changes in the allowance
for loan losses for each of the last five years:

|                                                            |                            |                   |         |                                       |        |      |         |      |      |      |         |      |      |   |         |      |      |   |         |      |      |  
|----------------------------------------------------------- | -------------------------- | ----------------- | ------- | ------------------------------------- | ------ | ---- | ------- | ---- | ---- | ---- | ------- | ---- | ---- | - | ------- | ---- | ---- | - | ------- | ---- | ---- | -
|                                                            |                            |                   |         | At or for the year ended December 31,
|                                                            |                            |                   |         |                                      
|(Dollars in thousands)                                      |                            | 2001              |         | 2000                                  |        | 1999 |         | 1998 |      | 1997
|                                                            |                            |                   |         |                                       |        |      |         |      |      |     
|Loans and loans held for sale at year-end                   |                            | $                 | 666,221 |                                       |        | $    | 713,770 |      |      | $    | 599,828 |      |      | $ | 432,014 |      |      | $ | 340,625 |     
|Average loans and loans held for sale                       |                            |                   | 680,539 |                                       |        |      | 671,877 |      |      |      | 502,272 |      |      |   | 387,914 |      |      |   | 299,976 |     
|Allowance for loan losses, beginning of year                |                            |                   | 9,150   |                                       |        |      | 6,165   |      |      |      | 4,451   |      |      |   | 3,349   |      |      |   | 2,600   |     
|Charge-offs:                                                |                            |                   |         |                                       |        |      |         |      |      |      |         |      |      |   |         |      |      |   |         |     
|                                                            | Commercial and other       |                   |         | (1,580                                | )      |      |         | (649 | )    |      |         | (559 | )    |   |         | (370 | )    |   |         | (556 | )   
|                                                            | Real estate  construction |                   |         | (956                                  | )      |      |         | (200 | )    |      |         |     |      |   |         |     |      |   |         |     |     
|                                                            | Real estate  mortgage     |                   |         | (51                                   | )      |      |         |     |      |      |         | (110 | )    |   |         |     |      |   |         |     |     
|                                                            | Installment                |                   |         | (80                                   | )      |      |         | (58  | )    |      |         | (3   | )    |   |         | (82  | )    |   |         | (2   | )   
|                                                            |                            |                   |         |                                       |        |      |         |      |      |      |         |      |      |   |         |      |      |   |         |     
|                                                            |                            | Total charge-offs |         |                                       | (2,667 | )    |         |      | (907 | )    |         |      | (672 | ) |         |      | (452 | ) |         |      | (558 | )
|                                                            |                            |                   |         |                                       |        |      |         |      |      |      |         |      |      |   |         |      |      |   |         |     
|Recoveries:                                                 |                            |                   |         |                                       |        |      |         |      |      |      |         |      |      |   |         |      |      |   |         |     
|                                                            | Commercial and other       |                   |         | 64                                    |        |      |         | 91   |      |      |         | 43   |      |   |         | 43   |      |   |         | 55   |     
|                                                            | Real estate  construction |                   |         |                                      |        |      |         |     |      |      |         |     |      |   |         |     |      |   |         |     |     
|                                                            | Real estate  mortgage     |                   |         | 1                                     |        |      |         |     |      |      |         |     |      |   |         |     |      |   |         |     |     
|                                                            | Installment                |                   |         | 8                                     |        |      |         | 1    |      |      |         | 43   |      |   |         | 11   |      |   |         | 2    |     
|                                                            |                            |                   |         |                                       |        |      |         |      |      |      |         |      |      |   |         |      |      |   |         |     
|                                                            |                            | Total recoveries  |         |                                       | 73     |      |         |      | 92   |      |         |      | 86   |   |         |      | 54   |   |         |      | 57   |  
|                                                            |                            |                   |         |                                       |        |      |         |      |      |      |         |      |      |   |         |      |      |   |         |     
|Net loans charged off                                       |                            |                   | (2,594  | )                                     |        |      | (815    | )    |      |      | (586    | )    |      |   | (398    | )    |      |   | (501    | )   
|Loan loss provision                                         |                            |                   | 3,950   |                                       |        |      | 3,800   |      |      |      | 2,300   |      |      |   | 1,500   |      |      |   | 1,250   |     
|                                                            |                            |                   |         |                                       |        |      |         |      |      |      |         |      |      |   |         |      |      |   |         |     
|Allowance for loan losses at year-end                       |                            | $                 | 10,506  |                                       |        | $    | 9,150   |      |      | $    | 6,165   |      |      | $ | 4,451   |      |      | $ | 3,349   |     
|                                                            |                            |                   |         |                                       |        |      |         |      |      |      |         |      |      |   |         |      |      |   |         |     
|Ratio of net loans charged off to average
loans outstanding |                            |                   | (.38    | )%                                    |        |      | (.12    | )%   |      |      | (.12    | )%   |      |   | (.10    | )%   |      |   | (.17    | )%  
|Ratio of allowance for loan losses to loans
at year-end     |                            |                   | 1.58    | %                                     |        |      | 1.28    | %    |      |      | 1.03    | %    |      |   | 1.04    | %    |      |   | .98     | %   

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Loan losses are charged against the allowance for loan losses when ultimate
recovery is unlikely. Experience has shown that, at any particular time, loan
losses may exist in a loan portfolio that have not yet been identified. For
this reason, although management analyzes specific loans in determining the
adequacy of its allowance for loan losses, it does not allocate the allowance
to specific groups or categories of loans. Management estimates, however, that
the allocation of the allowance for loan losses by loan category, and the loans
in each category as a percentage of total gross loans, at the end of each of
the last five years was as set forth in the following table:

|                           |       |      |       |        |  |      |      |       |   |      |       |       |  |  |      |       |   |   |       |       |  |  |      |       |   |   |       |       |  |  |      |       |   |   |       |       |  |  |      |       |  
|-------------------------- | ----- | ---- | ----- | ------ |  | ---- | ---- | ----- | - | ---- | ----- | ----- |  |  | ---- | ----- | - | - | ----- | ----- |  |  | ---- | ----- | - | - | ----- | ----- |  |  | ---- | ----- | - | - | ----- | ----- |  |  | ---- | ----- | -
|(Dollars in thousands)     |       | 2001 |       | 2000   |  | 1999 |      | 1998  |   | 1997
|                           |       |      |       |        |  |      |      |       |   |     
|Commercial and other       |       | $    | 6,756 |        |  |      | 41.9 | %     |   | $    | 5,500 |       |  |  | 39.8 | %     |   | $ | 3,700 |       |  |  | 38.1 | %     |   | $ | 2,701 |       |  |  | 39.1 | %     |   | $ | 1,999 |       |  |  | 45.2 | %    
|Real estate 
construction |       |      | 2,500 |        |  |      | 31.9 |       |   |      | 2,750 |       |  |  | 36.7 |       |   |   | 1,850 |       |  |  | 37.9 |       |   |   | 1,350 |       |  |  | 34.9 |       |   |   | 1,000 |       |  |  | 26.6 |      
|Real estate  mortgage     |       |      | 950   |        |  |      | 24.5 |       |   |      | 650   |       |  |  | 22.2 |       |   |   | 450   |       |  |  | 22.6 |       |   |   | 275   |       |  |  | 24.4 |       |   |   | 250   |       |  |  | 26.2 |      
|Installment                |       |      | 200   |        |  |      | 1.7  |       |   |      | 150   |       |  |  | 1.3  |       |   |   | 100   |       |  |  | 1.4  |       |   |   | 75    |       |  |  | 1.6  |       |   |   | 50    |       |  |  | 2.0  |      
|Unallocated                |       |      | 100   |        |  |      |     |       |   |      | 100   |       |  |  |     |       |   |   | 65    |       |  |  |     |       |   |   | 50    |       |  |  |     |       |   |   | 50    |       |  |  |     |      
|                           |       |      |       |        |  |      |      |       |   |      |       |       |  |  |      |       |   |   |       |       |  |  |      |       |   |   |       |       |  |  |      |       |   |   |       |       |  |  |      |      
|                           | Total |      | $     | 10,506 |  |      |      | 100.0 | % |      | $     | 9,150 |  |  |      | 100.0 | % |   | $     | 6,165 |  |  |      | 100.0 | % |   | $     | 4,451 |  |  |      | 100.0 | % |   | $     | 3,349 |  |  |      | 100.0 | %

Investment Activities

The primary objectives of the investment portfolio are to maintain liquidity
and to generate after-tax profits consistent with the risk guidelines
established by the Board of Directors. At December 31, 2001, Voyageur Asset
Management, Inc. of Minneapolis, Minnesota advised Bancorp with respect to the
investment portfolio. Bancorp has no other relationship with Voyageur Asset
Management, Inc.

The following table provides the carrying values of the investment portfolio at
the end of each of the last three years:

|                                  |                             |      |        |        |  |      |        |        |  |   |        |        | 
|--------------------------------- | --------------------------- | ---- | ------ | ------ |  | ---- | ------ | ------ |  | - | ------ | ------ | 
|(In thousands)                    |                             | 2001 |        | 2000   |  | 1999
|                                  |                             |      |        |        |  |     
|U.S. Treasury securities          |                             | $    |       |        |  | $    | 500    |        |  | $ | 1,399  |       
|U.S. Government agencies          |                             |      | 15,035 |        |  |      | 37,816 |        |  |   | 26,534 |       
|States and political subdivisions |                             |      | 23,139 |        |  |      | 16,259 |        |  |   | 27,316 |       
|Corporate bonds                   |                             |      | 5,175  |        |  |      | 2,033  |        |  |   | 2,205  |       
|Mortgage-backed securities        |                             |      | 32,523 |        |  |      | 3,199  |        |  |   | 1,905  |       
|Other                             |                             |      | 628    |        |  |      | 556    |        |  |   |       |       
|                                  |                             |      |        |        |  |      |        |        |  |   |        |       
|                                  | Total investment securities |      | $      | 76,500 |  |      | $      | 60,363 |  |   | $      | 59,359 | 
|                                  |                             |      |        |        |  |      |        |        |  |   |        |       

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The following table provides the carrying values, maturities and weighted
average yields of the investment securities at December 31, 2001, all of which are
classified as available for sale:

|                                  |                                         |               |             |        |          |  |      |      |     
|--------------------------------- | --------------------------------------- | ------------- | ----------- | ------ | -------- |  | ---- | ---- | ----
|                                  |                                         |               | Carrying    |        | Weighted
|                                  |                                         |               | value (fair |        | average 
|(Dollars in thousands)            |                                         | market value) |             | yield 
|                                  |                                         |               |             |       
|Type and maturity                 |                                         |               |             |       
|U.S. Government agencies          |                                         |               |             |       
|Due after 1 but within 5 years    |                                         | $             | 15,035      |        |          |  | 4.47 | %   
|                                  |                                         |               |             |        |          |  |      |     
|States and political subdivisions |                                         |               |             |        |          |  |      |     
|Due within 1 year                 |                                         |               | 2,059       |        |          |  | 4.89 |     
|Due after 1 but within 5 years    |                                         |               | 14,184      |        |          |  | 3.48 |     
|Due after 5 but within 10 years   |                                         |               | 386         |        |          |  | 5.58 |     
|Due after 10 years                |                                         |               | 6,510       |        |          |  | 5.00 |     
|                                  |                                         |               |             |        |          |  |      |     
|                                  | Total states and political subdivisions |               |             | 23,139 |          |  |      | 4.08 |     
|Corporate bonds                   |                                         |               |             |       
|Due within 1 year                 |                                         |               | 255         |        |          |  | 6.36 |     
|Due after 1 but within 5 years    |                                         |               | 4,920       |        |          |  | 5.20 |     
|                                  |                                         |               |             |        |          |  |      |     
|                                  | Total corporate bonds                   |               |             | 5,175  |          |  |      | 5.25 |     
|Mortgage-backed securities        |                                         |               |             |       
|Due after 1 but within 5 years    |                                         |               | 1,305       |        |          |  | 5.50 |     
|Due after 10 years                |                                         |               | 31,218      |        |          |  | 5.88 |     
|                                  |                                         |               |             |        |          |  |      |     
|                                  | Total mortgage-backed securities        |               |             | 32,523 |          |  |      | 5.86 |     
|Other                             |                                         |               | 628         |        |          |  | N/A  |     
|                                  |                                         |               |             |        |          |  |      |     
|                                  | Total investment securities             |               | $           | 76,500 |          |  |      | 5.00 | %(1)
|                                  |                                         |               |             |        |          |  |      |     



---

|(1) |  | Excludes weighted average yield of other securities.
|--- |  | ----------------------------------------------------

Deposits

Centennial offers a variety of accounts for depositors designed to attract
short-term and long-term deposits. These accounts include certificates of
deposit (CDs), savings accounts, money market accounts, checking and
interest-checking accounts and individual retirement accounts. These accounts
generally earn interest at rates established by management based on competitive
market factors and managements desire to increase or decrease certain types or
maturities of deposits.

Centennial offers a special account for customers age 50 or older called the
50+ Account. This account is designed to attract customers in this age group
who generally have higher than average deposits and favorable ability to repay
borrowings. Centennial also markets to small- to medium-sized businesses and to
professionals in its commercial lending program. These types of customers also
create substantial deposits, resulting in low-cost funds being available for
lending activities.

The following table presents the average balances for each major category of
deposits and the weighted average interest rates paid for interest-bearing
deposits for the years ended December 31, 2001, 2000 and 1999:

|                           |       |         |         |         |         |         |         |      |   |         |         |         |  |  |      |      |   |   |         |         |  |  |      |      |  
|-------------------------- | ----- | ------- | ------- | ------- | ------- | ------- | ------- | ---- | - | ------- | ------- | ------- |  |  | ---- | ---- | - | - | ------- | ------- |  |  | ---- | ---- | -
|                           |       |         | 2001    |         | 2000    |         | 1999   
|                           |       |         | Average |         | Average |         | Average
|                           |       |         |         |         |         |         |        
|(Dollars in thousands)     |       | Balance |         | Rate    |         | Balance |         | Rate |   | Balance |         | Rate   
|                           |       |         |         |         |         |         |         |      |   |         |         |        
|Noninterest-bearing demand |       | $       | 140,098 |         |         |         | N/A     |      |   | $       | 115,545 |         |  |  | N/A  |      |   | $ | 106,317 |         |  |  | N/A  |     
|Interest-bearing demand    |       |         | 260,067 |         |         |         | .59     | %    |   |         | 252,620 |         |  |  | 3.46 | %    |   |   | 231,861 |         |  |  | 2.99 | %   
|Savings                    |       |         | 71,329  |         |         |         | .56     |      |   |         | 47,499  |         |  |  | 4.85 |      |   |   | 28,379  |         |  |  | 3.26 |     
|CDs                        |       |         | 244,823 |         |         |         | 5.47    |      |   |         | 233,335 |         |  |  | 5.90 |      |   |   | 167,702 |         |  |  | 5.13 |     
|                           |       |         |         |         |         |         |         |      |   |         |         |         |  |  |      |      |   |   |         |         |  |  |      |     
|                           | Total |         | $       | 716,317 |         |         |         | 3.16 | % |         | $       | 648,999 |  |  |      | 3.82 | % |   | $       | 534,259 |  |  |      | 3.08 | %
|                           |       |         |         |         |         |         |         |      |   |         |         |         |  |  |      |      |   |   |         |         |  |  |      |     

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The following table shows the dollar amount of CDs that had balances of $100,000 or more at December 31, 2001 and 2000:

|                                              |                                         |       |   |              |        |  |   |        |         | 
|--------------------------------------------- | --------------------------------------- | ----- | - | ------------ | ------ |  | - | ------ | ------- | 
|                                              |                                         |       |   | December 31,
|                                              |                                         |       |   |             
|(In thousands)                                |                                         | 2001  |   | 2000        
|                                              |                                         |       |   |             
|CDs $100,000 or over with remaining maturity: |                                         |       |   |              |        |  |   |       
|                                              | Three months or less                    |       | $ | 37,466       |        |  | $ | 59,076 |        
|                                              | Over three months through twelve months |       |   | 47,010       |        |  |   | 53,489 |        
|                                              | Over one year through three years       |       |   | 3,644        |        |  |   | 14,057 |        
|                                              | Over three years                        |       |   | 128          |        |  |   | 238    |        
|                                              |                                         |       |   |              |        |  |   |       
|                                              |                                         | Total |   | $            | 88,248 |  |   | $      | 126,860 | 
|                                              |                                         |       |   |              |        |  |   |       

Short-Term Borrowings

Short-term borrowings consisted of the following at December 31, 2001, 2000 and 1999:

|                                                 |  |              |       |      |  |      |        |  |  |   |        | 
|------------------------------------------------ |  | ------------ | ----- | ---- |  | ---- | ------ |  |  | - | ------ | 
|                                                 |  | December 31,
|                                                 |  |             
|(In thousands)                                   |  | 2001         |       | 2000 |  | 1999
|                                                 |  |              |       |      |  |     
|Securities sold under agreement to repurchase    |  | $            | 7,051 |      |  | $    | 4,134  |  |  | $ | 8,214  | 
|Federal funds purchased                          |  |              |      |      |  |      | 9,000  |  |  |   | 19,600 | 
|FHLB cash management advance program             |  |              |      |      |  |      | 22,600 |  |  |   | 25,740 | 
|FHLB borrowings under promissory note
agreements |  |              |      |      |  |      | 23,900 |  |  |   | 21,000 | 
|                                                 |  |              |       |      |  |      |        |  |  |   |        | 
|Total short-term borrowings                      |  | $            | 7,051 |      |  | $    | 59,634 |  |  | $ | 74,554 | 
|                                                 |  |              |       |      |  |      |        |  |  |   |        | 

The following table sets forth certain information with respect to Bancorps short-term borrowings at
December 31 and during each of 2001, 2000 and 1999:

|                                                            |  |              |        |      |  |      |        |   |  |   |        |  
|----------------------------------------------------------- |  | ------------ | ------ | ---- |  | ---- | ------ | - |  | - | ------ | -
|                                                            |  | December 31,
|                                                            |  |             
|(Dollars in thousands)                                      |  | 2001         |        | 2000 |  | 1999
|                                                            |  |              |        |      |  |     
|Amount outstanding at year-end                              |  | $            | 7,051  |      |  | $    | 59,634 |   |  | $ | 74,554 |  
|Weighted average interest rate at year-end                  |  |              | 3.45   | %    |  |      | 6.30   | % |  |   | 5.42   | %
|Maximum amount outstanding at any
month-end during the year |  | $            | 63,315 |      |  | $    | 98,935 |   |  | $ | 74,554 |  
|Daily average amount outstanding
during the year            |  | $            | 21,494 |      |  | $    | 63,690 |   |  | $ | 26,356 |  
|Average weighted interest rate
during the year              |  |              | 5.73   | %    |  |      | 6.54   | % |  |   | 5.33   | %

Long-Term Debt

At December 31, 2001, Bancorps long-term debt consisted of $10 million
advanced from the Federal Home Loan Bank of Seattle to Centennial. Interest on
the debt is payable monthly at 3.61%. The debt matures on December 31, 2003 and
is secured by all of Centennials assets. At December 31, 2000 and 1999,
Bancorp had no long-term debt.

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Return on Equity and Assets

The following table sets forth Bancorps return on daily average assets and equity, and dividend payout ratio for 2001, 2000 and 1999:

|                                     |  |      |         |      |  |      |         |   |  |   |         |  
|------------------------------------ |  | ---- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | -
|(Dollars in thousands)               |  | 2001 |         | 2000 |  | 1999
|                                     |  |      |         |      |  |     
|Net income                           |  | $    | 14,206  |      |  | $    | 14,203  |   |  | $ | 12,106  |  
|Average total assets                 |  |      | 840,423 |      |  |      | 800,332 |   |  |   | 635,003 |  
|Return on average assets             |  |      | 1.69    | %    |  |      | 1.77    | % |  |   | 1.91    | %
|Net income                           |  | $    | 14,206  |      |  | $    | 14,203  |   |  | $ | 12,106  |  
|Average equity                       |  |      | 96,495  |      |  |      | 82,807  |   |  |   | 69,440  |  
|Return on average equity             |  |      | 14.72   | %    |  |      | 17.15   | % |  |   | 17.43   | %
|Average total equity                 |  | $    | 96,495  |      |  | $    | 82,807  |   |  | $ | 69,440  |  
|Average total assets                 |  |      | 840,423 |      |  |      | 800,332 |   |  |   | 635,003 |  
|Average total equity to assets ratio |  |      | 11.48   | %    |  |      | 10.35   | % |  |   | 10.94   | %
|Dividends declared per share         |  | $    | .08     |      |  | $    | .00     |   |  | $ | .00     |  
|Basic earnings per share             |  |      | .56     |      |  |      | .57     |   |  |   | .48     |  
|Dividend payout ratio                |  |      | 14.29   | %    |  |      | N/A     |   |  |   | N/A     |  

Employees

Bancorp has no employees other than its executive officers, who are also
employees of Centennial. At December 31, 2001, Centennial had 323 employees,
270 of whom work full time. Selective hiring and development of staff is a high
priority. Staff development involves training in customer service, marketing
and regulatory compliance. Bancorp has adopted extensive incentive programs for
employees that focus and are dependent on the achievement of certain financial,
service and marketing goals.

No employees are covered by collective bargaining agreements, and management
believes that Bancorps relationship with its employees is good.

Competition

The community banking business is highly competitive. Bancorp competes
primarily with other commercial banks, as well as savings and loan
associations, finance companies, money market funds, brokerage firms, credit
unions and other nonfinancial institutions. Many of these competitors have
substantially greater resources than Bancorp. Many of Bancorps competitors
also have substantially higher lending limits and offer certain services,
including trust and international banking services that Bancorp does not
provide. The larger institutions in Bancorps markets have competitive
advantages in that they have higher public visibility and are able to maintain
advertising and marketing activities on a much larger scale than Bancorp can
economically sustain.

During the past several years, Bancorp has capitalized on the marketing
opportunities created by the consolidation of the banking industry, as the
larger institutions were perceived to de-emphasize the small- to medium-size
business and professional market, which is Bancorps primary focus. Several
banks, which focus on the same type of customers as Bancorp does, have been
formed in Bancorps market areas during the last few years. This growing number
of community banks and a new emphasis by larger institutions on this market
segment have intensified competition.

With the enactment of the Gramm-Leach-Bliley Act (GLB Act) in 1999,
competition has further intensified from institutions outside the traditional
banking system, such as investment banking firms, insurance companies and
consumer finance companies. Bancorp cannot predict what future changes in the
competitive environment, or what changes in the financial condition of
Bancorp, may occur as a direct or indirect result of the GLB Act.

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SUPERVISION AND REGULATION

Bancorp and Centennial are extensively regulated under federal and Oregon law.
These laws and regulations are primarily intended to protect depositors and the
deposit insurance fund, not the shareholders. The following information is
qualified in its entirety by reference to applicable statutory and regulatory
provisions. Any change in applicable laws, regulations or regulatory policies
may have a material effect on the business, operations and prospects of
Bancorp and Centennial.

The Gramm-Leach-Bliley Act

In November 1999, Congress enacted the GLB Act, also known as the Financial
Services Modernization Act. The GLB Act made substantial changes that directly
affect the banking industry. The GLB Act removed several state and federal
barriers to affiliation among banks, insurance companies, securities firms, and
other financial services providers, and created an entity known as a financial
holding company (FHC). A bank holding company may elect to become an FHC
and, as an FHC, engage in a broader range of financial and other activities
than is permissible for the traditional bank holding company.

In order to qualify as an FHC, each depository institution subsidiary of the
bank holding company must be rated as well capitalized and well managed.
Also, in order to commence any of the new activities authorized by the GLB Act
or acquire control of a company engaged in such activities, the holding company
must qualify as an FHC and each depository institution subsidiary of the FHC or
its affiliates must have received at least a satisfactory rating in its most
recent examination under the Community Reinvestment Act of 1977 (the CRA).

FHCs are permitted to engage in activities defined by the GLB Act as financial
in nature including, among others, insurance underwriting and agency
activities, investment advisory services, merchant banking, investment banking
and underwriting activities, and dealing or making a market in securities. Bank
holding companies that do not qualify for, or have not elected, FHC status are
limited to those non-banking activities determined by the Board of Governors of
the Federal Reserve System (the FRB) to be so closely related to banking as
to be a proper incident thereto prior to adoption of the GLB Act. FHCs that do
not continue to meet all of the requirements for FHC status may not be able to
undertake new activities or acquisitions that are financial in nature, or
could lose their ability to continue activities that are not generally
permissible for bank holding companies.

In addition, the GLB Act provides for expanded activities for financial
subsidiaries of national banks. Financial subsidiaries may engage in financial
activities except for insurance underwriting, real estate development or
investment, and merchant banking, all of which may only be engaged in by a
subsidiary of an FHC. In order to have a financial subsidiary, the national
bank and each of its depository institution affiliates must be well
capitalized and well managed, and the total assets of all financial
subsidiaries may not exceed the lesser of 45% of the consolidated total assets
of the parent bank or $50 billion. In addition, the national bank must meet
certain rating requirements if it is one of the 100 largest insured banks and
engages in financial activities as a principal.

Insured state banks may control or hold an interest in a subsidiary that
engages in activities as a principal that would only be permissible for a
national bank to conduct through a financial subsidiary, so long as the bank
and all insured depository affiliates are well capitalized after meeting
certain capital deduction and financial statement disclosure requirements. In
addition, an insured state bank may retain its interests in subsidiaries
controlled or acquired before the enactment of the GLB Act. Oregon law permits
commercial banks chartered by the state to engage in any activity permissible
for national banks, so Centennial may form subsidiaries to engage in financial
activities to the same extent as a national bank.

Privacy Provisions

The GLB Act also includes extensive consumer privacy provisions. These
provisions mandate full disclosure by all financial institutions to consumers
of the institutions policies and practices regarding the sharing of non-public
information with both affiliates and other third parties. Consumers must
receive notice of and an opportunity to opt out of disclosure of non-public
personal information to non-affiliated third parties. Disclosures of an
institutions privacy policy are required at the time a customer relationship
is established, and at least annually for so long as the relationship
continues.

Effective July 1, 2001, Bancorp was to implement an information security
program pursuant to the interagency guidelines for establishing administrative,
technical and physical safeguards for customer records and information.
Management believes that Bancorp is in compliance with the guidelines.

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The USA Patriot Act

Under the USA Patriot Act of 2001, adopted by the U.S. Congress on October 26,
2001 to combat terrorism, FDIC-insured banks and commercial banks that
establish, maintain, administer or manage a private banking account or a
correspondent account in the United States for a non-United States person,
including a foreign individual visiting the United States, or a representative
of a non-United States person shall establish appropriate, specific and, where
necessary, enhanced due diligence policies, procedures and controls that are
reasonably designed to detect and report instances of money laundering through
those accounts.

Centennial Bancorp

General

Bancorp is a bank holding company registered under the Bank Holding Company Act
of 1956, as amended, and is subject to regulation, supervision and examination
by the FRB. Bancorp is required to file an annual report and such other reports
as the FRB may require.

Acquisitions

As a bank holding company, Bancorp is required to obtain the prior approval of
the FRB before: (1) acquiring direct or indirect ownership or control of any
voting shares of any bank or bank holding company, if after such acquisition,
Bancorp would own or control, directly or indirectly, more than 5% of the
voting shares of the bank or bank holding company; (2) merging or consolidating
with another bank holding company; or (3) acquiring all, or substantially all,
of the assets of any other bank. The FRB may not approve any acquisition,
merger or consolidation that would have a substantial anti-competitive result,
unless the anti-competitive effects of the proposed transaction are outweighed
by a greater public interest in meeting the needs and convenience of the
public. The FRB also considers managerial, capital and other financial factors
in acting on acquisition or merger applications. Bancorp also is required to
obtain the prior approval of the Director of the Oregon Department of Consumer
and Business Services (the Oregon Director) before acquiring direct or
indirect ownership or control of 25% or more of the voting shares of an Oregon
state-chartered bank or bank holding company.

The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the
Interstate Banking Act) allows adequately capitalized and managed bank
holding companies to acquire banks in any state. Such acquisitions must comply
with any applicable state law requiring a bank to be in existence for a minimum
period of time before the acquisition. Oregon law allows such acquisitions with
respect to banks that have been providing banking services for at least three
years. Therefore, Bancorp and Centennial could be acquired by a bank holding
company or an FHC located outside Oregon following receipt of necessary
regulatory approvals. Under the Interstate Banking Act, Bancorp could acquire
banks or bank holding companies in other states.

Permissible Activities

A bank holding company may not engage in, or acquire direct or indirect control
of more than 5% of the voting shares of any company engaged in, a non-banking
activity, unless the activity was determined by the FRB to be closely related
to banking or managing banks prior to the enactment of the GLB Act. The FRB has
identified certain non-banking activities in which a bank holding company may
engage with notice to, or prior approval by, the FRB.

Capital Adequacy

The federal bank regulatory agencies monitor the capital adequacy of bank
holding companies and have adopted risk-based capital adequacy guidelines to
evaluate bank holding companies and banks. If an institutions capital falls
below the minimum levels established by these guidelines, the bank holding
company may be denied approval to acquire or establish additional banks or
non-bank businesses. The guidelines require a minimum ratio of total capital to
risk-weighted assets of 8%. At December 31, 2001, Bancorps ratio of total
capital to risk-weighted assets was 13.1%.

The FRB also uses a leverage ratio to evaluate the capital adequacy of bank
holding companies. The leverage ratio is the ratio of Tier 1 capital
(generally, tangible common shareholders equity, perpetual preferred stock and
minority interests in consolidated subsidiaries) to adjusted average total
assets. The FRB requires a minimum leverage ratio of 3%. However, for all but
the most highly rated bank holding companies and for bank holding companies
seeking to expand, the FRB expects an additional cushion of at least 1% to 2%.
Bancorps leverage ratio at December 31, 2001 was 11.2%.

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If Bancorp fails to meet capital guidelines, the FRB may institute appropriate
supervisory or enforcement actions. As discussed below, Centennial is also
subject to capital adequacy requirements. Under the Federal Deposit Insurance
Corporation Improvement Act of 1991 (FDICIA), Bancorp could be required to
guarantee the capital restoration plan of Centennial, should Centennial become
undercapitalized.

Centennial

General

Centennial is an Oregon state-chartered bank; its deposits are insured by the
FDIC. Accordingly, Centennial files financial and other reports periodically
with, and is regularly examined by, both the Oregon Director and the FDIC.
Centennial is not a member of the Federal Reserve System.

Permissible Activities

Under FDICIA, no state bank may engage in any activity not permitted for
national banks, unless the institution complies with applicable capital
requirements and the FDIC determines that the activity poses no significant
risk to the insurance fund. This limitation should not affect Centennial, since
management believes that Centennial is not presently involved in any such
activities.

Branching and Acquisitions

Banks are permitted to conduct business through branches after application to
and approval of the FDIC and the Oregon Director, if they make certain findings
regarding the financial history and condition of the bank and the
appropriateness of the branch in the community to be served. Prior to opening a
new branch in Washington, Centennial must receive approval from the FDIC, the
Oregon Director and the Director of the Department of Financial Institutions in
the state of Washington (the Washington Director). Centennial currently has
23 branches, the most recent of which opened in February 2002.

Acquisitions of Oregon banks and bank holding companies by out-of-state banks,
holding companies and other financial institutions are permitted if the bank
being acquired has been providing banking services for a period of at least
three years prior to the effective date of the acquisition and upon receipt of
the approval of the Oregon Director. Other conditions set forth in Oregon law
also must be satisfied. Approval of the FRB and/or the FDIC is also required.

The Interstate Banking Act permits banks to merge with banks across state
lines, thereby creating out-of-state branches, without regard to whether such
transactions are prohibited under the law of any state. Oregon permits
interstate bank mergers. Banks are able to establish branches in other states
only through interstate mergers, as described above, unless the state where the
branch is proposed to be opened has opted in to de novo interstate branching.
Neither Oregon nor Washington has opted in to de novo branching.

Community Reinvestment Act

Enacted in 1977, the federal Community Reinvestment Act (the CRA) has become
increasingly important to financial institutions, including their holding
companies. Under the GLB Act, a satisfactory CRA rating for each depository
institution is required before a bank holding company may elect to be one of
the newly created FHCs. The CRA allows regulators to reject an application to
make an acquisition or establish a branch unless the applicant has performed
satisfactorily under the CRA. Satisfactory performance means adequately meeting
the credit needs of the communities the applicant serves, including low- and
moderate-income neighborhoods, consistent with the safe and sound operation of
the institution. The applicable federal regulators regularly conduct CRA
examinations to assess the performance of financial institutions. Centennial
has received satisfactory ratings in its most recent CRA examinations.

Transactions With Affiliates

Centennial is subject to certain FRB restrictions on transactions among related
parties. The Federal Reserve Act limits the amount of certain transactions,
including loans to and investments in affiliates of Centennial, requires
certain levels of collateral for such loans, and limits the amount of advances
to third parties that may be collateralized by the securities of Bancorp or
its subsidiary.

The Federal Reserve Act also requires that certain transactions between
Centennial and its affiliates be on terms substantially the same, or at least
as favorable to Centennial, as those prevailing at the time for comparable
transactions with or involving nonaffiliated companies or, in the absence of
comparable transactions, on terms and under circumstances, including credit
standards, that in good faith would be offered to or would apply to
nonaffiliated companies.

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In addition, the Federal Reserve Act requires that the aggregate amount of an
institutions loans to officers, directors and principal shareholders (and
their affiliates) is limited to the amount of its unimpaired capital and
surplus, unless the FDIC determines that a lesser amount is appropriate.

A violation of any of the foregoing restrictions may result in the assessment
of civil fines on a bank or a person participating in the conduct of the
affairs of such bank or the imposition of a cease and desist order.

Dividend Restrictions

Dividends paid by Centennial provide substantially all Bancorps cash flow.
FDICIA provides that a bank cannot pay a dividend if it will reduce the banks
capital ratios below the regulatory minimums required to be considered
adequately capitalized. Under Oregon law, an Oregon state-chartered bank may
not pay a cash dividend in an amount greater than unreserved retained earnings,
after first deducting to the extent not already charged against earnings or
reflected in a reserve, (1) all bad debts, which are debts on which interest is
unpaid and past due at least six months, unless the debt is fully secured and
in the process of collection; (2) all other assets charged off as required by
the Oregon Director or a state or federal examiner; and (3) all accrued
expenses, interest and taxes of the bank.

Examinations

The FDIC, the Oregon Director and the Washington Director periodically examine
and evaluate Centennial. Based upon such evaluations, the examining regulator
may revalue the assets of an insured institution and require that it charge off
or reduce the carrying value of specific assets or establish a specific
allowance to compensate for the difference between the value determined by the
regulator and the book value of such assets.

Capital Adequacy

Federal regulations establish minimum requirements for the capital adequacy of
depository institutions. The regulators may establish higher minimum
requirements if, for example, a bank has previously received special attention
or has a high susceptibility to interest rate risk. Banks with capital ratios
below the required minimums are subject to certain administrative actions,
including prompt corrective action, the termination of deposit insurance upon
notice and hearing, or a temporary suspension of insurance without a hearing.

The federal risk-based capital guidelines require a ratio of Tier 1 or core
capital to total risk-weighted assets of 4% and a ratio of total capital to
total risk-weighted assets of 8%. The leverage capital guidelines require that
banks maintain Tier 1 capital of no less than 4% of total adjusted average
assets, except in the case of certain highly rated banks for which the minimum
requirement is 3% of total adjusted assets. At December 31, 2001, Centennials
leverage ratio, Tier 1 capital to risk-weighted assets ratio and total capital
to risk-weighted assets ratio were 10.7%, 11.4% and 12.7%, respectively.

FDICIA requires federal banking regulators to take prompt corrective action
with respect to a capital-deficient institution, including requiring a capital
restoration plan and restricting certain growth activities of the institution.
Bancorp could be required to guarantee any such capital restoration plan
required of Centennial. Bancorps maximum liability under such guarantee would
be the lesser of 5% of Centennials total assets at the time it became
undercapitalized or the amount necessary for Centennial to be considered
adequately capitalized.

As an institutions capital decreases, the powers of the federal regulators
increase, which can include mandated capital-raising activities, restrictions
on interest rates paid, restrictions on transactions with affiliates, and
removal of management. In addition, an institution generally is prohibited from
paying dividends or management fees to control persons if the institution would
be undercapitalized after any such payment.

Pursuant to FDICIA, regulations were adopted defining five capital levels: well
capitalized, adequately capitalized, undercapitalized, severely
undercapitalized and critically undercapitalized. Under the regulations,
Centennial is considered well capitalized.

Reserve Requirements

The FRB requires that all depository institutions maintain reserves on
transaction accounts, such as demand deposits, savings deposits subject to
automatic transfers, and negotiable order of withdrawal accounts. The reserves
may be in the form of cash or non-interest-bearing deposits with the regional
Federal Reserve Bank and must equal 3% of the first $41.3 million of net
transaction accounts and $1.2 million plus 10% of the amount over $41.3
million. There is no reserve requirement on non-personal time deposits. At
December 31, 2001, Centennial met its reserve requirements.

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Internal Operating Requirements

Bancorp and Centennial are subject to federal regulations addressing, among
other things: (1) internal controls, information systems and internal audit
systems; (2) loan documentation; (3) credit underwriting; (4) interest rate
exposure; (5) asset growth; (6) ratio of classified assets to capital; (7)
minimum earnings; and (8) compensation and benefit standards for management
officials. These regulations add further to the cost of compliance and impose
record-keeping requirements on Centennial and Bancorp.

The consumer lending activities of Centennial are subject to certain state and
federal laws and regulations that prohibit discrimination based on race,
gender, age, marital status and other specified classifications, and that
impose other restrictions on credit and collection practices.

Real Estate Lending Evaluations

Federal regulators have adopted uniform standards for evaluating loans secured
by real estate or made to finance improvements to real estate. Banks are
required to establish and maintain written internal real estate lending
policies consistent with safe and sound banking practices and appropriate to
the size of the institution and the nature and scope of its operations. The
regulations establish loan-to-value ratio limitations on real estate loans,
which are equal to or higher than the loan-to-value limitations established by
Centennial.

Deposit Insurance Premiums

As an FDIC-insured institution and member of the Bank Insurance Fund (BIF),
Centennial is subject to quarterly deposit insurance premium assessments. The
FDIC uses a risk-related premium system that applies premium rates according to
an institutions risk category. Capital ratios and examination ratings are the
primary determinants of risk category assignments. The FDIC sets rate schedules
semi-annually based on an analysis of several factors including probable fund
losses, operating needs and the impact of assessments on BIF members. At
December 31, 2001, Centennial was not subject to a BIF assessment.

In addition to any BIF assessment, Centennial is also subject to an assessment
that helps support the FSLIC Resolution Fund (FRF). The FRF was established
in 1989 to liquidate the remaining Federal Savings & Loan Insurance Corporation
assets and liabilities resulting from thrift failures prior to that date. The
assessment is one-fifth of the assessment rate imposed on Savings Association
Insurance Fund members for the same purpose. At December 31, 2001, the
annualized assessment rate for Centennial was 1.82 basis points of assessable
deposits.

Bancorps FDIC insurance assessment expenses totaled $243,000 in 2001 and
$303,000 in 2000. The decrease of $60,000 in 2001 occurred primarily because
Centennials capital level, according to regulatory standards, changed from
adequately capitalized to well capitalized, making Centennial no longer
subject to the BIF assessment. Although well capitalized at the end of 2000,
the change in capitalization did not affect Centennials FDIC assessment until
mid-2001 because of the lag time that is a normal part of the FDICs assessment
rate and risk classification review process. Management expects a further
decrease in FDIC assessments during 2002 due to Centennials continuing well
capitalized status.

Effect of Economic Environment

The policies of regulatory authorities, including the monetary policies of the
FRB, have a significant effect on the operating results of FHCs, bank holding
companies and their subsidiaries. Among the means available to the FRB to
affect the money supply are open-market operations in U.S. Government
securities, changes in the discount rate on member bank borrowings, and changes
in reserve requirements against member bank deposits. These means are used in
varying combinations to influence overall growth and distribution of bank
loans, investments and deposits, and their use may affect interest rates
charged on loans or paid for deposits.

FRB monetary policies have materially affected the operating results of
commercial banks in the past and are expected to continue to do so in the
future. The nature of future monetary policies and the effect of such policies
on the business and earnings of Bancorp and its subsidiary cannot be predicted.

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Item 2. DESCRIPTION OF PROPERTIES

The primary properties owned by Bancorp include a four-story, 36,000 square
foot office building in Eugene, Oregon and a three-story, 21,000 square foot
office building in Tigard, Oregon. Each building houses one Centennial branch
and one Commercial Banking Center as well as various administrative and
operational support functions. The Tigard building also houses a Centennial
Mortgage office. The Tigard building is subject to a 50-year ground lease that
is renewable for two additional 10-year periods. Bancorp also owns six other
properties that house bank branches. One of those properties, the Springfield
Office, is also subject to a ground lease.

All other Bancorp facilities occupy leased space. See Note 9 to Bancorps
Consolidated Financial Statements for summary information concerning payments
and future obligations under non-cancelable operating leases.

Management considers all Bancorp facilities adequate for current and
anticipated future use.




Item 3. LEGAL PROCEEDINGS

Periodically, and in the ordinary course of business, various claims and
lawsuits are brought by and against Bancorp. As of the date of this Annual
Report, Bancorp was not a party to any legal proceedings management believes
are material.




Item 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS

None.




Item 5. MARKET FOR BANCORPS COMMON STOCK AND RELATED SHAREHOLDER MATTERS

Bancorps common stock is quoted on the Nasdaq National Market under the symbol
CEBC. At February 22, 2002, Bancorp had 24,898,734 shares of common stock
outstanding held by 1,166 shareholders of record.

The high, low and closing stock prices were as follows:

|                              |       |    |       |       |      |    |           |      |          |  |      |      |  |  |      |      | 
|----------------------------- | ----- | -- | ----- | ----- | ---- | -- | --------- | ---- | -------- |  | ---- | ---- |  |  | ---- | ---- | 
|                              |       |    | March |       | June |    | September |      | December
|Quarter ended                 |       | 31 |       | 30    |      | 30 |           | 31  
|                              |       |    |       |       |      |    |           |     
|2001                          |       |    |       |       |      |    |           |     
|Common stock price per share: |       |    |       |       |      |    |           |      |          |  |      |      |  |  |      |     
|                              | High  |    | $     | 8.11  |      |    | $         | 8.39 |          |  | $    | 8.86 |  |  | $    | 7.56 | 
|                              | Low   |    |       | 6.01  |      |    |           | 6.35 |          |  |      | 6.55 |  |  |      | 6.43 | 
|                              | Close |    |       | 7.26  |      |    |           | 7.48 |          |  |      | 7.18 |  |  |      | 7.03 | 
|Cash dividends declared       |       |    |      |       |      |    | 0.02      |      |          |  | 0.03 |      |  |  | 0.03 |     
|2000                          |       |    |       |       |      |    |           |     
|Common stock price per share: |       |    |       |       |      |    |           |      |          |  |      |      |  |  |      |     
|                              | High  |    | $     | 10.60 |      |    | $         | 8.15 |          |  | $    | 6.90 |  |  | $    | 8.19 | 
|                              | Low   |    |       | 6.25  |      |    |           | 4.81 |          |  |      | 4.54 |  |  |      | 4.77 | 
|                              | Close |    |       | 7.56  |      |    |           | 6.82 |          |  |      | 4.96 |  |  |      | 7.22 | 
|Cash dividends declared       |       |    |      |       |      |    |          |      |          |  |     |      |  |  |     |     

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Item 6. SELECTED FINANCIAL DATA

The following table sets forth selected financial data of Bancorp.

|                                             |  |      |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|-------------------------------------------- |  | ---- | ------- | ---- |  | ---- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | - |  | - | ------- | -
|(Dollars in thousands,                       |  |      |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|except per-share amounts)                    |  | 2001 |         | 2000 |  | 1999 |         | 1998 |  | 1997
|                                             |  |      |         |      |  |      |         |      |  |     
|Income Statement Data                        |  |      |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|Interest income                              |  | $    | 72,577  |      |  | $    | 78,635  |      |  | $    | 58,468  |   |  | $ | 49,849  |   |  | $ | 40,104  |  
|Interest expense                             |  |      | 23,904  |      |  |      | 28,981  |      |  |      | 17,868  |   |  |   | 15,837  |   |  |   | 13,566  |  
|                                             |  |      |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|Net interest income                          |  |      | 48,673  |      |  |      | 49,654  |      |  |      | 40,600  |   |  |   | 34,012  |   |  |   | 26,538  |  
|Loan loss provision                          |  |      | 3,950   |      |  |      | 3,800   |      |  |      | 2,300   |   |  |   | 1,500   |   |  |   | 1,250   |  
|Noninterest income                           |  |      | 6,180   |      |  |      | 3,767   |      |  |      | 3,527   |   |  |   | 4,184   |   |  |   | 3,195   |  
|Noninterest expense                          |  |      | 27,949  |      |  |      | 26,715  |      |  |      | 22,801  |   |  |   | 19,349  |   |  |   | 14,851  |  
|                                             |  |      |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|Income before income taxes                   |  |      | 22,954  |      |  |      | 22,906  |      |  |      | 19,026  |   |  |   | 17,347  |   |  |   | 13,632  |  
|Provision for income taxes                   |  |      | 8,748   |      |  |      | 8,703   |      |  |      | 6,919   |   |  |   | 5,912   |   |  |   | 4,329   |  
|                                             |  |      |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|Net income                                   |  |      | 14,206  |      |  |      | 14,203  |      |  |      | 12,107  |   |  |   | 11,435  |   |  |   | 9,303   |  
|Balance Sheet Data                           |  |      |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|Investment securities                        |  |      | 76,500  |      |  |      | 60,363  |      |  |      | 59,359  |   |  |   | 76,793  |   |  |   | 83,904  |  
|Loans, net                                   |  |      | 655,715 |      |  |      | 704,620 |      |  |      | 593,663 |   |  |   | 427,563 |   |  |   | 337,276 |  
|Total assets                                 |  |      | 814,615 |      |  |      | 852,975 |      |  |      | 726,738 |   |  |   | 572,050 |   |  |   | 492,573 |  
|Total deposits                               |  |      | 693,120 |      |  |      | 696,494 |      |  |      | 573,041 |   |  |   | 483,866 |   |  |   | 419,282 |  
|Short term borrowings                        |  |      | 7,051   |      |  |      | 59,634  |      |  |      | 74,554  |   |  |   | 20,600  |   |  |   | 7,716   |  
|Long-term debt                               |  |      | 10,000  |      |  |      |        |      |  |      |        |   |  |   |        |   |  |   | 10,000  |  
|Shareholders equity                         |  |      | 99,173  |      |  |      | 90,183  |      |  |      | 74,329  |   |  |   | 63,717  |   |  |   | 51,810  |  
|Share Data                                   |  |      |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|Basic earnings per common share              |  | $    | .56     |      |  | $    | .57     |      |  | $    | .48     |   |  | $ | .46     |   |  | $ | .38     |  
|Diluted earnings per common share            |  |      | .55     |      |  |      | .55     |      |  |      | .47     |   |  |   | .44     |   |  |   | .36     |  
|Book value per common share                  |  |      | 3.99    |      |  |      | 3.57    |      |  |      | 2.97    |   |  |   | 2.57    |   |  |   | 2.43    |  
|Cash dividends per common share              |  |      | .08     |      |  |      |        |      |  |      |        |   |  |   |        |   |  |   |        |  
|Basic weighted shares outstanding            |  |      | 25,175  |      |  |      | 25,119  |      |  |      | 24,963  |   |  |   | 24,744  |   |  |   | 24,519  |  
|Diluted weighted shares outstanding          |  |      | 25,717  |      |  |      | 25,695  |      |  |      | 25,768  |   |  |   | 25,878  |   |  |   | 25,619  |  
|Asset Quality Ratios                         |  |      |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|Loan loss allowance to ending total loans    |  |      | 1.58    | %    |  |      | 1.28    | %    |  |      | 1.03    | % |  |   | 1.04    | % |  |   | .98     | %
|Non-performing assets to ending total assets |  |      | 1.08    |      |  |      | .98     |      |  |      | .43     |   |  |   | .87     |   |  |   | .26     |  
|Net loan charge-offs to average loans        |  |      | .38     |      |  |      | .12     |      |  |      | .12     |   |  |   | .10     |   |  |   | .17     |  
|Selected Other Ratios                        |  |      |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|Return on average shareholders equity       |  |      | 14.72   |      |  |      | 17.15   |      |  |      | 17.43   |   |  |   | 20.16   |   |  |   | 20.25   |  
|Return on average total assets               |  |      | 1.69    |      |  |      | 1.77    |      |  |      | 1.91    |   |  |   | 2.18    |   |  |   | 2.12    |  
|Net interest spread                          |  |      | 5.46    |      |  |      | 5.92    |      |  |      | 6.31    |   |  |   | 6.25    |   |  |   | 6.03    |  
|Net interest margin                          |  |      | 6.37    |      |  |      | 6.84    |      |  |      | 7.15    |   |  |   | 7.22    |   |  |   | 6.92    |  
|Efficiency ratio                             |  |      | 50.95   |      |  |      | 50.01   |      |  |      | 51.67   |   |  |   | 50.66   |   |  |   | 49.95   |  

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Item 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Highlights

Bancorp reported net income of $14.2 million, or $.56 per basic share, for the
year ended December 31, 2001. This amount was consistent with net income for
the year ended December 31, 2000 of $14.2 million, or $.57 per basic share. Net
income in 2000 represented a 17.3% increase from 1999 net income of $12.1
million, or $.48 per basic share. The consistent earnings during the year ended
December 31, 2001 as compared to December 31, 2000 primarily reflect the growth
in average interest-earning assets from 2000 to 2001, offset by the decrease in
the average rates earned on these assets. During 2001, average interest-earning
assets increased $34.3 million, or 4.7%, to $771.6 million as compared to
$737.2 million in 2000.

During 2001, Bancorp continued to expand by opening two new limited-service
retirement center branches in the Portland area, and by announcing plans to
open a full-service branch in Gresham, Oregon during February 2002. In addition
to the branch expansion, Centennial expanded the range of products offered to
its customers, by developing new online banking capabilities and a 24/7 phone
banking service. Strategic alliances were formed to offer online business
insurance products, equipment leasing services, and corporate retirement plan
services.

Centennial continued to demonstrate a commitment to shareholders, by issuing
two stock splits during 2001, and implementing a cash dividend program. In
January 2001, Bancorp declared an 11-for-10 (10%) stock split. In July 2001,
Bancorp declared a quarterly cash dividend of $0.02 per share, and a 21-for-20
(5%) stock split. In September 2001, Bancorp declared a cash dividend of $0.03
per share. In December 2001, Bancorp declared a quarterly cash dividend of
$0.03 per share. In January 2002, Bancorp declared a 21-for-20 (5%) stock
split.

Results of Operations  Years Ended December 31, 2001, 2000 and 1999

Net Interest Income (on a tax-equivalent basis)

Impacted by a slowing economy and declining interest rates, Bancorps net
interest income decreased to $49.1 million in 2001 as compared to $50.4 million
in 2000 and $41.3 million in 1999. During 2001, average interest-earning assets
increased to $771.6 million as compared to average interest-earning assets of
$737.2 million in 2000 and $578.4 million in 1999. At the same time, average
interest-bearing liabilities increased to $597.7 million in 2001 from $597.1
million in 2000 and $454.3 million in 1999.

The average yield earned on interest-earning assets decreased by 1.31% (131
basis points) in 2001 and increased by .53% in 2000, while the average rates
paid on interest-bearing liabilities decreased by .85% in 2001 and increased by
 .92% in 2000. Net interest margin for 2001 decreased .47% to 6.37% from 6.84%,
primarily due to a .46% decrease in net interest spread to 5.46% in 2001 from
5.92% in 2000. Net interest margin in 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.

During 2001, Bancorp experienced a decrease in loan demand, due to the
weakening economy in the market areas served and an effort to reduce risk
exposure in certain sectors. Because of the shrinking loan base, borrowings
were further reduced during 2001, while deposits were maintained. 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.

Provision for Loan Losses

Managements policy is to maintain an adequate allowance for loan losses. In
2001, Bancorp charged a $4.0 million loan loss provision to income, as compared
to $3.8 million in 2000 and $2.3 million in 1999. The larger loan loss
provisions in 2001 and 2000 primarily reflect the specifically identified and
inherent risks of Bancorps loan portfolio, and the weakening economy. In
2001, loan charge-offs, net of recoveries, were $2.6 million, as compared to
loan charge-offs, net of recoveries, of $815,000 in 2000 and $586,000 in 1999.

Bancorps allowance for loan losses was $10.5 million at December 31, 2001, as
compared to $9.2 million and $6.2 million at December 31, 2000 and December
31, 1999, respectively. The ratio of the allowance for loan losses to total
non-performing loans was 137%, 118% and 225% at December 31, 2001, 2000 and
1999, respectively. The increase in the allowance ratio at December 31, 2001
was a reflection of the weakening economy. The decrease in the allowance ratio
at December 31, 2000 was mainly the result of increased nonaccrual totals,
which were concentrated in real-estate loans to two borrowers.

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Bancorps impaired loans totaled $23.7 million at December 31, 2001, as
compared to $15.2 million at December 31, 2000 and $5.8 million at December 31,
1999. The 2001 increase was concentrated in four accounts involving issues for
which action plans specific to each borrower were developed.

Noninterest Income

Noninterest income increased $2.4 million to $6.2 million in 2001 as compared
to 2000 and increased $240,000 to $3.8 million in 2000 as compared to 1999.
The 2001 increase resulted primarily from increased gains on sales of
securities, and gains on sales of loans. The increase in 2000 resulted from
significantly higher other income, which was partially offset by lower gains on
sales of loans.

Gains on sales of securities increased by $603,000 during 2001, as compared to
2000, from $268,000 to $871,000. These increased gains were primarily
attributable to the aggressive approach taken by Centennial in repositioning
the investment portfolio in conjunction with Bancorps overall asset/liability
management.

Gains on sales of loans increased by $985,000 during 2001, from $741,000 to
$1.7 million, mainly due to increased volumes of residential mortgage loans
that were caused, in part, by declining interest rates during 2001. Gains on
sales of loans decreased $254,000 in 2000 as compared to 1999, mainly due to
interest rate increases.

In 2001, Centennial announced the initiation of a merchant banking group to
provide alliance-based products and services to Centennial customers. Fees
generated from merchant banking supplemented the growth in other noninterest
income of $449,000, to $1.7 million in 2001. In 2000, other noninterest income
increased by $436,000 to $1.2 million, as compared to 1999, due primarily to a
strategic focus to develop merchant services income.

Noninterest Expense

Noninterest expense increased $1.2 million to $27.9 million in 2001 as compared
to 2000, and increased $3.9 million to $26.7 million in 2000 as compared to
1999. The 2001 increase resulted primarily from increases in legal and
professional fees, and increases in other noninterest expenses, partially
offset by a decrease in business development expenses. The increase in 2000 was
primarily attributable to increased staffing and facilities expenses.

Legal and professional expenses increased by $738,000 during 2001, as compared
to 2000, from $770,000 to $1.5 million. This increase was primarily due to
increased accounting fees paid to title companies.

In 2001, other noninterest expenses grew from $2.9 million to $3.5 million,
primarily due to increased costs associated with the OREO properties.

Business development expenses decreased from $993,000 in 2000 to $618,000 in
2001, due primarily to an effort made to reduce controllable business
development costs.

Due to Bancorps growth and rising per-employee costs during 2000, salaries and
employee benefit expenses increased $2.3 million to $16.6 million as compared
to 1999, and premises and equipment expense increased $760,000 to $4.1 million
as compared to 1999.

Provision for Income Taxes

Bancorps provision for income taxes was $8.7 million in 2001, $8.7 million in
2000 and $6.9 million in 1999. Bancorps effective tax rates for financial
reporting were 38.1% in 2001, 38.0% in 2000 and 36.4% in 1999. The effective
tax rate varies from federal statutory rates primarily because of nontaxable
interest income and state income taxes.

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Liquidity and Sources of Funds

Bancorps primary sources of funds are customer deposits, borrowings, loan
repayments, sales and repayments of investment securities, sales of loans and
operating cash flow. Scheduled loan and investment securities repayments are a
relatively stable source of funds, while deposit inflows and unscheduled loan
and investment security 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, purchases of
investment securities and capital expenditures. The repurchase of Bancorps
common stock and the payment of cash dividends were also significant uses of
funds during 2001.

Bancorps deposits decreased slightly to $693.1 million at December 31, 2001
from $696.5 million at December 31, 2000 and increased from $573.0 million at
December 31, 1999, while net loans and loans held for sale decreased to $655.7
million at December 31, 2001 from $704.6 million at December 31, 2000 and
increased from $593.7 million at December 31, 1999.

Centennial maintains, on an unsecured basis, federal funds lines with
correspondent banks as a backup source of temporary liquidity. At December 31,
2001, available and unused federal funds lines totaled $49.0 million. At
December 31, 2000, Centennial had federal funds lines totaling $44.0 million
with $9.0 million outstanding.

Centennial additionally maintains a funding line with the Federal Home Loan
Bank of Seattle (FHLB). The borrowing availability is primarily based on
Centennials holdings of various real estate related assets, and is limited to
10% of total assets. At December 31, 2001, Centennial had a $44.3 million FHLB
borrowing limit ($57.0 million at December 31, 2000) with $10.0 million
outstanding ($46.5 million outstanding at December 31, 2000). Advances are
secured by the FHLB stock owned by Centennial and by all its other assets.

At December 31, 2001, Centennial also had a fully available $22.5 million
($35.0 million fully available at December 31, 2000) secured discount window
line of credit with the Federal Reserve Bank of San Francisco.

Capital Resources

Total shareholders equity increased to $99.2 million at December 31, 2001 from
$90.2 million and $74.3 million at December 31, 2000 and 1999, respectively.
Total shareholders equity increased during 2001 and 2000 due to net income,
unrealized gains on available-for-sale securities and stock option exercises.
Somewhat offsetting the increase to shareholders equity in 2001 was the
declaration of $2.1 million in cash dividends. Bancorp shareholders equity
(Tier 1 capital) was 11.2% of average assets in 2001 as compared to 9.9% in
2000. Centennials shareholder equity (Tier 1 capital) was 10.7% of average
assets in 2001 as compared to 9.1% in 2000.

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, which expired January 2002, was
authorized in response to the investment opportunity created by a perceived
market under-valuation of Bancorp stock. During 2000, Bancorp repurchased
65,835 shares at a cost of approximately $490,000. During 2001, Bancorp
repurchased 512,182 shares at a cost of approximately $3.7 million.

In January 2002, Bancorps Board of Directors approved a new stock repurchase
program that, over the next two years and depending on market price and other
considerations, authorizes the purchase of up to an aggregate of 5% of
Bancorps outstanding common stock as of December 31, 2001.

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.

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Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of loss to future earnings, which may result from
changes in market prices and rates. Bancorps primary market risk exposure is
the interest-rate risk associated with its investing, lending, deposit and
borrowing 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.

Centennials senior management, through the Management Asset and Liability
Committee, actively monitors and manages interest-rate sensitivity with the
overall objective of achieving consistent, high quality earnings while
controlling interest-rate risk within formal policy guidelines. The Asset and
Liability Committee of the Board of Directors reviews interest-sensitivity
reports and related matters monthly. All significant interest rate risk issues
including policy exceptions are presented to Centennials Board of Directors
for review.

Centennials risk of loss to earnings is measured using a computer-based
system. An income simulation model is used to determine earnings sensitivity by
applying +/-2% rate changes to one-year earnings projections. The earnings
projections involve numerous assumptions including 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.

The following table summarizes Centennials after-tax earnings sensitivity as of December 31, 2001:

|                     |  |                            
|-------------------- |  | ---------------------------
|Interest Rate
Change |  | Change in Net Income       
|-2%
+2%              |  | $    -245,000    -1,105,000

The following table summarizes Centennials after-tax earnings sensitivity as of December 31, 2000:

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

At December 31, 2001, Centennial was liability sensitive to positive rate
changes as compared to asset sensitive at December 31, 2000. This reversal of
sensitivity developed because, as a result of the Federal Reserves rapid and
substantial easing of market rates during the year, a large amount of
Centennials variable-rate loans were at floor rates above current market
rates, causing them to react like fixed-rate loans within the positive
rate-change parameter specified.

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 unknown 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.

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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF MANAGEMENT

The management of Bancorp is responsible for the preparation, content and
integrity of the consolidated financial statements and other statistical data
and analyses compiled for this annual report. The consolidated financial
statements and related notes have been prepared in conformity with generally
accepted accounting principles and, in the judgment of management, present
fairly Bancorps consolidated financial position, results of operations and
cash flows. Management also believes that consolidated financial information
presented elsewhere in this annual report is consistent with that in the
consolidated financial statements. The amounts contained in the consolidated
financial statements are based on managements best estimates and judgments.

Management is also responsible for establishing and maintaining a system of
internal control designed to provide assurance as to the protection of assets
and the integrity of the consolidated financial statements and the regulatory
reporting process. This system of controls includes self-monitoring mechanisms,
written policies and procedures, proper delegation of authority and
organizational division of responsibility, and the careful selection and
training of qualified personnel. Management also maintains a code of ethics
that addresses among other things, conflicts of interest, compliance with laws
and regulations, and prompt reporting of any failure or circumvention of
controls. An effective internal audit function periodically tests the system of
internal control. Management takes action to correct control deficiencies as
they are identified. There are inherent limitations in the effectiveness of any
system of internal control, including the possibility of human error and the
circumvention or overriding of controls. Management believes that the system of
internal control provides reasonable assurances that consolidated financial
transactions are recorded properly to permit the preparation of reliable
consolidated financial statements and regulatory reports.

Bancorps independent auditors, Symonds, Evans & Company, P.C., have been
engaged to render an opinion on the consolidated financial statements and to
assist in carrying out the audit program described above. Their opinion on the
consolidated financial statements is based on procedures performed in
accordance with auditing standards generally accepted in the United States,
including tests of the accounting records to the extent necessary to allow them
to report on the fairness of the consolidated financial statements. Symonds,
Evans & Company, P.C., has full access to the Audit Committee and the Board of
Directors.

Management has made an assessment of Bancorps internal control, compliance
with laws and regulations, and procedures over financial reporting. Based on
that assessment, management believes that Bancorp maintained an effective
system of internal control for financial reporting and complied with designated
laws and regulations as of and for the year ended December 31, 2001.

|                                      |  |                                                     
|------------------------------------- |  | ----------------------------------------------------
|/s/ TED R. WINNOWSKI                  |  | /s/ NEAL T. MCLAUGHLIN                              
|Ted R. Winnowski                      |  | Neal T. McLaughlin                                  
|President and Chief Executive Officer |  | Executive Vice President and Chief Financial Officer

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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 subsidiary as of December 31, 2001 and 2000, 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, 2001. 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 subsidiary as of December 31, 2001 and 2000, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2001 in conformity with accounting principles generally accepted
in the United States.

/s/ SYMONDS, EVANS & COMPANY, P.C.

Portland, Oregon
January 18, 2002

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CENTENNIAL BANCORP AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2001 AND 2000

|                                         |                                                                                                                   |                                 |                                            |            |             |             |             |            |             |             | 
|---------------------------------------- | ----------------------------------------------------------------------------------------------------------------- | ------------------------------- | ------------------------------------------ | ---------- | ----------- | ----------- | ----------- | ---------- | ----------- | ----------- | 
|                                         |                                                                                                                   |                                 |                                            |            | 2001        |             | 2000       
|                                         |                                                                                                                   |                                 |                                            |            |             |             |            
|Assets                                   |                                                                                                                   |                                 |                                            |           
|Cash and cash equivalents:               |                                                                                                                   |                                 |                                            |            |             |             |             |           
|                                         | Cash and due from banks                                                                                           |                                 | $                                          | 36,350,215 |             |             | $           | 38,213,844 |            
|                                         | Federal funds sold                                                                                                |                                 |                                            | 3,910,000  |             |             |             | 3,465,000  |            
|                                         |                                                                                                                   |                                 |                                            |            |             |             |             |           
|                                         |                                                                                                                   | Total cash and cash equivalents |                                            |            | 40,260,215  |             |             |            | 41,678,844  |            
|Investment securities available-for-sale |                                                                                                                   |                                 | 76,499,705                                 |            |             |             | 60,362,569  |           
|Loans, net                               |                                                                                                                   |                                 | 643,321,169                                |            |             |             | 693,729,855 |           
|Mortgage loans held for sale             |                                                                                                                   |                                 | 12,393,968                                 |            |             |             | 10,890,003  |           
|Federal Home Loan Bank stock             |                                                                                                                   |                                 | 6,244,100                                  |            |             |             | 5,832,800   |           
|Premises and equipment, net              |                                                                                                                   |                                 | 15,358,894                                 |            |             |             | 15,367,393  |           
|Intangible assets, net                   |                                                                                                                   |                                 | 7,457,450                                  |            |             |             | 8,145,878   |           
|Accrued interest and other assets        |                                                                                                                   |                                 | 13,079,531                                 |            |             |             | 16,967,620  |           
|                                         |                                                                                                                   |                                 |                                            |            |             |             |             |           
|                                         |                                                                                                                   | Total assets                    |                                            | $          | 814,615,032 |             |             | $          | 852,974,962 |            
|                                         |                                                                                                                   |                                 |                                            |            |             |             |             |           
|Liabilities and Shareholders Equity     |                                                                                                                   |                                 |                                            |           
|Liabilities:                             |                                                                                                                   |                                 |                                            |            |             |             |             |           
|                                         | Deposits:                                                                                                         |                                 |                                            |            |             |             |             |            |            
|                                         |                                                                                                                   | Demand                          |                                            | $          | 164,974,596 |             |             | $          | 130,898,788 |            
|                                         |                                                                                                                   | Interest-bearing demand         |                                            |            | 257,976,599 |             |             |            | 244,647,939 |            
|                                         |                                                                                                                   | Savings                         |                                            |            | 62,568,237  |             |             |            | 53,878,931  |            
|                                         |                                                                                                                   | Time                            |                                            |            | 207,600,818 |             |             |            | 267,068,684 |            
|                                         |                                                                                                                   |                                 |                                            |            |             |             |             |           
|                                         |                                                                                                                   |                                 | Total deposits                             |            |             | 693,120,250 |             |            |             | 696,494,342 | 
|                                         | Borrowings                                                                                                        |                                 |                                            | 17,051,067 |             |             |             | 59,634,083 |            
|                                         | Accrued interest and other liabilities                                                                            |                                 |                                            | 5,271,190  |             |             |             | 6,663,542  |            
|                                         |                                                                                                                   |                                 |                                            |            |             |             |             |           
|                                         |                                                                                                                   |                                 | Total liabilities                          |            |             | 715,442,507 |             |            |             | 762,791,967 | 
|Shareholders equity:                    |                                                                                                                   |                                 |                                            |            |             |             |             |           
|                                         | Preferred stock                                                                                                   |                                 |                                            |           |             |             |             |           |            
|                                         | Common stock, 24,876,907 and 25,241,432 shares
issued and outstanding at December 31, 2001
and 2000, respectively |                                 |                                            | 27,213,622 |             |             |             | 30,535,794 |            
|                                         | Retained earnings                                                                                                 |                                 |                                            | 71,920,666 |             |             |             | 59,826,586 |            
|                                         | Accumulated other comprehensive income (loss)                                                                     |                                 |                                            | 38,237     |             |             |             | (179,385   | )          
|                                         |                                                                                                                   |                                 |                                            |            |             |             |             |           
|                                         |                                                                                                                   |                                 | Total shareholders equity                 |            |             | 99,172,525  |             |            |             | 90,182,995  | 
|                                         |                                                                                                                   |                                 |                                            |            |             |             |             |           
|                                         |                                                                                                                   |                                 | Total liabilities and shareholders equity |            | $           | 814,615,032 |             |            | $           | 852,974,962 | 
|                                         |                                                                                                                   |                                 |                                            |            |             |             |             |           

See accompanying notes.

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CENTENNIAL BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999

|                                              |                                              |                                    |            |            |            |      |            |            |            |   |            |            |            | 
|--------------------------------------------- | -------------------------------------------- | ---------------------------------- | ---------- | ---------- | ---------- | ---- | ---------- | ---------- | ---------- | - | ---------- | ---------- | ---------- | 
|                                              |                                              |                                    |            | 2001       |            | 2000 |            | 1999      
|                                              |                                              |                                    |            |            |            |      |            |           
|Interest and dividend income:                 |                                              |                                    |            |            |            |      |            |            |            |   |            |           
|                                              | Interest and fees on loans                   |                                    | $          | 67,706,109 |            |      | $          | 74,847,846 |            |   | $          | 54,133,662 |           
|                                              | Taxable interest on investment securities    |                                    |            | 2,961,303  |            |      |            | 1,904,742  |            |   |            | 2,227,213  |           
|                                              | Nontaxable interest on investment securities |                                    |            | 855,515    |            |      |            | 1,450,290  |            |   |            | 1,433,205  |           
|                                              | Dividends on Federal Home Loan Bank stock    |                                    |            | 411,555    |            |      |            | 364,000    |            |   |            | 385,100    |           
|                                              | Interest on federal funds sold               |                                    |            | 628,691    |            |      |            | 60,728     |            |   |            | 280,334    |           
|                                              | Deposits with banks                          |                                    |            | 14,315     |            |      |            | 7,970      |            |   |            | 8,303      |           
|                                              |                                              |                                    |            |            |            |      |            |            |            |   |            |           
|                                              |                                              | Total interest and dividend income |            |            | 72,577,488 |      |            |            | 78,635,576 |   |            |            | 58,467,817 | 
|Interest expense:                             |                                              |                                    |            |            |            |      |            |            |            |   |            |           
|Deposits:                                     |                                              |                                    |            |            |            |      |            |            |            |   |            |           
|                                              | Interest-bearing demand and savings          |                                    |            | 9,277,744  |            |      |            | 11,045,108 |            |   |            | 7,865,362  |           
|                                              | Time                                         |                                    |            | 13,394,364 |            |      |            | 13,772,392 |            |   |            | 8,596,805  |           
|Borrowings                                    |                                              |                                    | 1,232,438  |            |            |      | 4,163,980  |            |            |   | 1,405,250  |           
|                                              |                                              |                                    |            |            |            |      |            |            |            |   |            |           
|                                              |                                              | Total interest expense             |            |            | 23,904,546 |      |            |            | 28,981,480 |   |            |            | 17,867,417 | 
|                                              |                                              |                                    |            |            |            |      |            |            |            |   |            |           
|Net interest income                           |                                              |                                    | 48,672,942 |            |            |      | 49,654,096 |            |            |   | 40,600,400 |           
|Loan loss provision                           |                                              |                                    | 3,950,000  |            |            |      | 3,800,000  |            |            |   | 2,300,000  |           
|                                              |                                              |                                    |            |            |            |      |            |            |            |   |            |           
|Net interest income after loan loss provision |                                              |                                    | 44,722,942 |            |            |      | 45,854,096 |            |            |   | 38,300,400 |           
|Noninterest income:                           |                                              |                                    |            |            |            |      |            |            |            |   |            |           
|                                              | Service charges on deposit accounts          |                                    |            | 1,923,374  |            |      |            | 1,548,647  |            |   |            | 1,459,402  |           
|                                              | Gains on sales of loans, net                 |                                    |            | 1,726,766  |            |      |            | 741,463    |            |   |            | 995,823    |           
|                                              | Gains on sales of investment securities, net |                                    |            | 871,371    |            |      |            | 268,017    |            |   |            | 298,625    |           
|                                              | Other                                        |                                    |            | 1,658,419  |            |      |            | 1,208,986  |            |   |            | 773,432    |           
|                                              |                                              |                                    |            |            |            |      |            |            |            |   |            |           
|                                              |                                              | Total noninterest income           |            |            | 6,179,930  |      |            |            | 3,767,113  |   |            |            | 3,527,282  | 
|Noninterest expense                           |                                              |                                    | 27,948,963 |            |            |      | 26,715,433 |            |            |   | 22,801,627 |           
|                                              |                                              |                                    |            |            |            |      |            |            |            |   |            |           
|Income before income taxes                    |                                              |                                    | 22,953,909 |            |            |      | 22,905,776 |            |            |   | 19,026,055 |           
|Provision for income taxes                    |                                              |                                    | 8,747,558  |            |            |      | 8,703,197  |            |            |   | 6,919,290  |           
|                                              |                                              |                                    |            |            |            |      |            |            |            |   |            |           
|Net income                                    |                                              | $                                  | 14,206,351 |            |            | $    | 14,202,579 |            |            | $ | 12,106,765 |           
|                                              |                                              |                                    |            |            |            |      |            |            |            |   |            |           
|Basic earnings per common share               |                                              | $                                  | .56        |            |            | $    | .57        |            |            | $ | .48        |           
|                                              |                                              |                                    |            |            |            |      |            |            |            |   |            |           
|Diluted earnings per common share             |                                              | $                                  | .55        |            |            | $    | .55        |            |            | $ | .47        |           
|                                              |                                              |                                    |            |            |            |      |            |            |            |   |            |           
|Weighted average common shares outstanding:   |                                              |                                    |            |            |            |      |            |            |            |   |            |           
|                                              | Basic                                        |                                    |            | 25,175,330 |            |      |            | 25,118,721 |            |   |            | 24,963,356 |           
|                                              | Diluted                                      |                                    |            | 25,716,723 |            |      |            | 25,695,489 |            |   |            | 25,767,660 |           

See accompanying notes.

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##### Table of Contents



CENTENNIAL BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
Years ended December 31, 2001, 2000 and 1999

|                                         |                                                                                                                                                                                                                                                                                                           |  |            |   |        |   |            |   |               |   |               |            |               |   |             |            |   |   |            |            |       |   |            |            |  
|---------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------- | - | ------ | - | ---------- | - | ------------- | - | ------------- | ---------- | ------------- | - | ----------- | ---------- | - | - | ---------- | ---------- | ----- | - | ---------- | ---------- | -
|                                         |                                                                                                                                                                                                                                                                                                           |  |            |   |        |   |            |   |               |   |               |            |               |   | Accumulated |            |   |   |            |            |       |   |           
|                                         |                                                                                                                                                                                                                                                                                                           |  |            |   |        |   |            |   |               |   |               |            |               |   | other       |            |   |   |            |            | Total
|                                         |                                                                                                                                                                                                                                                                                                           |  | Number     |   | Common |   | Retained   |   | comprehensive |   | Comprehensive |            | shareholders'
|                                         |                                                                                                                                                                                                                                                                                                           |  | of shares  |   | stock  |   | earnings   |   | income (loss) |   | income (loss) |            | equity       
|                                         |                                                                                                                                                                                                                                                                                                           |  |            |   |        |   |            |   |               |   |               |            |              
|Balances at December 31, 1998            |                                                                                                                                                                                                                                                                                                           |  | 24,810,832 |   |        | $ | 29,690,949 |   |               | $ | 33,517,242    |            |               | $ | 508,950     |            |   |   |            |            |       | $ | 63,717,141 |           
|Comprehensive income:                    |                                                                                                                                                                                                                                                                                                           |  |            |   |        |   |            |   |               |   |               |            |               |   |             |            |   |   |            |            |       |   |            |           
|                                         | Net income                                                                                                                                                                                                                                                                                                |  |            |  |        |   |            |  |               |   |               | 12,106,765 |               |   |             |           |   |   | $          | 12,106,765 |       |   |            | 12,106,765 |  
|                                         | Other comprehensive loss -
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                  |                                                                                                                                                                                                                                                                                                           |  | 206,000    |   |        |   | 383,619    |   |               |   |              |            |               |   |            |            |   |   |            |            |       |   | 383,619    |           
|Tax benefit of stock options exercised   |                                                                                                                                                                                                                                                                                                           |  |           |   |        |   | 316,256    |   |               |   |              |            |               |   |            |            |   |   |            |            |       |   | 316,256    |           
|                                         |                                                                                                                                                                                                                                                                                                           |  |            |   |        |   |            |   |               |   |               |            |               |   |             |            |   |   |            |            |       |   |            |           
|Balances at December 31, 1999            |                                                                                                                                                                                                                                                                                                           |  | 25,016,832 |   |        |   | 30,390,824 |   |               |   | 45,624,007    |            |               |   | (1,686,070  | )          |   |   |            |            |       |   | 74,328,761 |           
|Comprehensive income:                    |                                                                                                                                                                                                                                                                                                           |  |            |   |        |   |            |   |               |   |               |            |               |   |             |            |   |   |            |            |       |   |            |           
|                                         | Net income                                                                                                                                                                                                                                                                                                |  |            |  |        |   |            |  |               |   |               | 14,202,579 |               |   |             |           |   |   |            | 14,202,579 |       |   |            | 14,202,579 |  
|                                         | Other comprehensive income -
unrealized gains on investment
securities of $1,673,204 (net of
income taxes of approximately
$1,026,000), net of 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                  |                                                                                                                                                                                                                                                                                                           |  | 290,435    |   |        |   | 495,496    |   |               |   |              |            |               |   |            |            |   |   |            |            |       |   | 495,496    |           
|Tax benefit of stock options exercised   |                                                                                                                                                                                                                                                                                                           |  |           |   |        |   | 139,803    |   |               |   |              |            |               |   |            |            |   |   |            |            |       |   | 139,803    |           
|Repurchases of common stock              |                                                                                                                                                                                                                                                                                                           |  | (65,835    | ) |        |   | (490,329   | ) |               |   |              |            |               |   |            |            |   |   |            |            |       |   | (490,329   | )         
|                                         |                                                                                                                                                                                                                                                                                                           |  |            |   |        |   |            |   |               |   |               |            |               |   |             |            |   |   |            |            |       |   |            |           
|Balances at December 31, 2000            |                                                                                                                                                                                                                                                                                                           |  | 25,241,432 |   |        |   | 30,535,794 |   |               |   | 59,826,586    |            |               |   | (179,385    | )          |   |   |            |            |       |   | 90,182,995 |           
|Comprehensive income:                    |                                                                                                                                                                                                                                                                                                           |  |            |   |        |   |            |   |               |   |               |            |               |   |             |            |   |   |            |            |       |   |            |           
|                                         | Net income                                                                                                                                                                                                                                                                                                |  |            |  |        |   |            |  |               |   |               | 14,206,351 |               |   |             |           |   |   |            | 14,206,351 |       |   |            | 14,206,351 |  
|                                         | Other comprehensive income -
unrealized gains on investment
securities of $749,158 (net of
income taxes of approximately
$468,000), net of reclassification
adjustment for gains on sales of
investment securities included
in net income of $531,536 (net
of income taxes of approximately
$340,000)     |  |            |  |        |   |            |  |               |   |               |           |               |   |             | 217,622    |   |   |            | 217,622    |       |   |            | 217,622    |  
|                                         |                                                                                                                                                                                                                                                                                                           |  |            |   |        |   |            |   |               |   |               |            |               |   |             |            |   |   |            |            |       |   |            |           
|Comprehensive income                     |                                                                                                                                                                                                                                                                                                           |  |           |   |        |   |           |   |               |   |              |            |               |   |            |            |   | $ | 14,423,973 |            |       |   |           |           
|                                         |                                                                                                                                                                                                                                                                                                           |  |            |   |        |   |            |   |               |   |               |            |               |   |             |            |   |   |            |            |       |   |            |           
|Stock options exercised                  |                                                                                                                                                                                                                                                                                                           |  | 147,657    |   |        |   | 281,860    |   |               |   |              |            |               |   |            |            |   |   |            |            |       |   | 281,860    |           
|Tax benefit of stock options exercised   |                                                                                                                                                                                                                                                                                                           |  |           |   |        |   | 102,783    |   |               |   |              |            |               |   |            |            |   |   |            |            |       |   | 102,783    |           
|Cash dividends declared ($.08 per share) |                                                                                                                                                                                                                                                                                                           |  |           |   |        |   |           |   |               |   | (2,112,271    | )          |               |   |            |            |   |   |            |            |       |   | (2,112,271 | )         
|Repurchases of common stock              |                                                                                                                                                                                                                                                                                                           |  | (512,182   | ) |        |   | (3,706,815 | ) |               |   |              |            |               |   |            |            |   |   |            |            |       |   | (3,706,815 | )         
|                                         |                                                                                                                                                                                                                                                                                                           |  |            |   |        |   |            |   |               |   |               |            |               |   |             |            |   |   |            |            |       |   |            |           
|Balances at December 31, 2001            |                                                                                                                                                                                                                                                                                                           |  | 24,876,907 |   |        | $ | 27,213,622 |   |               | $ | 71,920,666    |            |               | $ | 38,237      |            |   |   |            |            |       | $ | 99,172,525 |           
|                                         |                                                                                                                                                                                                                                                                                                           |  |            |   |        |   |            |   |               |   |               |            |               |   |             |            |   |   |            |            |       |   |            |           

See accompanying notes.

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##### Table of Contents



CENTENNIAL BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 2001, 2000 and 1999

|                                                     |                                           |                                                                                   |                     |                                                                 |   |              |              |              |   |             |              |              |   |             |              |  
|---------------------------------------------------- | ----------------------------------------- | --------------------------------------------------------------------------------- | ------------------- | --------------------------------------------------------------- | - | ------------ | ------------ | ------------ | - | ----------- | ------------ | ------------ | - | ----------- | ------------ | -
|                                                     |                                           |                                                                                   |                     |                                                                 |   | 2001         |              | 2000         |   | 1999       
|                                                     |                                           |                                                                                   |                     |                                                                 |   |              |              |              |   |            
|Cash flows from operating activities:                |                                           |                                                                                   |                     |                                                                 |   |              |              |              |   |             |              |             
|                                                     | Net income                                |                                                                                   | $                   | 14,206,351                                                      |   |              | $            | 14,202,579   |   |             | $            | 12,106,765   |  
|                                                     |                                           | Adjustments to reconcile net
income to net cash provided
by operating activities: |                     |                                                                 |   |              |              |              |   |             |              |              |   |            
|                                                     |                                           |                                                                                   |                     | Gains on sales of mortgage
loans and investment
securities, net |   |              | (2,598,137   | )            |   |             | (1,009,480   | )            |   |             | (1,294,448   | )
|                                                     |                                           |                                                                                   |                     | Dividends on Federal Home Loan Bank stock                       |   |              | (411,555     | )            |   |             | (364,000     | )            |   |             | (385,100     | )
|                                                     |                                           |                                                                                   |                     | Loan loss provision                                             |   |              | 3,950,000    |              |   |             | 3,800,000    |              |   |             | 2,300,000    |  
|                                                     |                                           |                                                                                   |                     | Deferred income taxes                                           |   |              | (800,997     | )            |   |             | (1,327,747   | )            |   |             | (935,809     | )
|                                                     |                                           |                                                                                   |                     | Depreciation and amortization                                   |   |              | 2,562,574    |              |   |             | 2,404,180    |              |   |             | 2,356,296    |  
|                                                     |                                           |                                                                                   |                     | Originations of mortgage loans
held for sale                    |   |              | (225,314,122 | )            |   |             | (142,042,227 | )            |   |             | (152,458,419 | )
|                                                     |                                           |                                                                                   |                     | Proceeds from sales of
mortgage loans held for sale             |   |              | 225,536,923  |              |   |             | 138,049,027  |              |   |             | 158,337,944  |  
|                                                     |                                           |                                                                                   |                     | Changes in certain assets and
liabilities:                      |   |              |              |              |   |             |              |              |   |             |              |  
|                                                     |                                           |                                                                                   |                     | Accrued interest and other assets                               |   |              | 4,664,197    |              |   |             | (2,848,651   | )            |   |             | (12,391,249  | )
|                                                     |                                           |                                                                                   |                     | Accrued interest and other
liabilities                          |   |              | (2,103,307   | )            |   |             | 1,850,041    |              |   |             | 946,919      |  
|                                                     |                                           |                                                                                   |                     |                                                                 |   |              |              |              |   |             |              |              |  
|                                                     |                                           |                                                                                   |                     | Net cash provided by operating
activities                       |   |              | 19,691,927   |              |   |             | 12,713,722   |              |   |             | 8,582,899    |  
|Cash flows from investing activities:                |                                           |                                                                                   |                     |                                                                 |   |              |              |              |   |             |              |             
|                                                     | Investment securities available-for-sale: |                                                                                   |                     |                                                                 |   |              |              |              |   |             |              |              |  
|                                                     |                                           |                                                                                   | Purchases           |                                                                 |   | (131,311,269 | )            |              |   | (16,230,725 | )            |              |   | (11,202,082 | )           
|                                                     |                                           |                                                                                   | Maturities          |                                                                 |   | 34,354,964   |              |              |   | 2,626,655   |              |              |   | 2,312,850   |             
|                                                     |                                           |                                                                                   | Proceeds from sales |                                                                 |   | 81,804,917   |              |              |   | 15,278,447  |              |              |   | 23,071,850  |             
|                                                     | Net decrease (increase) in loans          |                                                                                   |                     | 46,458,686                                                      |   |              |              | (110,022,071 | ) |             |              | (173,283,354 | )
|                                                     | Purchases of premises and
equipment, net  |                                                                                   |                     | (1,634,474                                                      | ) |              |              | (1,160,182   | ) |             |              | (4,901,376   | )
|                                                     |                                           |                                                                                   |                     |                                                                 |   |              |              |              |   |             |              |              |  
|                                                     |                                           |                                                                                   |                     | Net cash provided by (used in)
investing activities             |   |              | 29,672,824   |              |   |             | (109,507,876 | )            |   |             | (164,002,112 | )
|Cash flows from financing activities:                |                                           |                                                                                   |                     |                                                                 |   |              |              |              |   |             |              |             
|                                                     | Net increase (decrease) in deposits       |                                                                                   |                     | (3,374,092                                                      | ) |              |              | 123,452,859  |   |             |              | 89,175,187   |  
|                                                     | Increase (decrease) in borrowings, net    |                                                                                   |                     | (42,583,016                                                     | ) |              |              | (14,919,884  | ) |             |              | 53,953,896   |  
|                                                     | Payment of cash dividends                 |                                                                                   |                     | (1,401,317                                                      | ) |              |              |             |   |             |              |             |  
|                                                     | Proceeds from exercise of stock options   |                                                                                   |                     | 281,860                                                         |   |              |              | 495,496      |   |             |              | 383,619      |  
|                                                     | Repurchases of common stock               |                                                                                   |                     | (3,706,815                                                      | ) |              |              | (490,329     | ) |             |              |             |  
|                                                     |                                           |                                                                                   |                     |                                                                 |   |              |              |              |   |             |              |              |  
|                                                     |                                           |                                                                                   |                     | Net cash provided by (used in)
financing activities             |   |              | (50,783,380  | )            |   |             | 108,538,142  |              |   |             | 143,512,702  |  
|                                                     |                                           |                                                                                   |                     |                                                                 |   |              |              |              |   |             |              |              |  
|Net increase (decrease) in cash and
cash equivalents |                                           |                                                                                   | (1,418,629          | )                                                               |   |              | 11,743,988   |              |   |             | (11,906,511  | )           
|Cash and cash equivalents at beginning
of year       |                                           |                                                                                   | 41,678,844          |                                                                 |   |              | 29,934,856   |              |   |             | 41,841,367   |             
|                                                     |                                           |                                                                                   |                     |                                                                 |   |              |              |              |   |             |              |              |  
|Cash and cash equivalents at end
of year             |                                           | $                                                                                 | 40,260,215          |                                                                 |   | $            | 41,678,844   |              |   | $           | 29,934,856   |             
|                                                     |                                           |                                                                                   |                     |                                                                 |   |              |              |              |   |             |              |              |  

See accompanying notes.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 subsidiary,
Centennial Bank (Centennial) (collectively, Bancorp). Effective May 31,
2001, Centennial Mortgage Co., a wholly owned subsidiary of Bancorp at that
date, was merged into Centennial. Centennial provides residential and
commercial financing, banking and other 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.

Bancorp is required to maintain an average reserve balance with the Federal
Reserve Bank or maintain such reserve balance in the form of cash. At December
31, 2001 and 2000, Bancorp met the Federal Reserve Bank requirements.

Supplemental disclosures of cash flow information

During 2001, 2000 and 1999, 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 2001, 2000 and 1999, Bancorp paid approximately $24,860,000, $28,200,000
and $17,647,000, respectively, in interest expense.

During 2001, 2000 and 1999, Bancorp paid approximately $9,375,000, $9,708,000
and $8,443,000, respectively, in income taxes.

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 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 generally over the period to maturity. Premiums and
discounts on mortgage-backed securities are amortized using the interest method
over a period that anticipates prepayments of principal.

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, 2001 and 2000 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 estimated 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
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 chargeoffs, net of recoveries.

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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. Personal guaranties of the borrower 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) that 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.

Loans are considered impaired when 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
qualifying 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 the allowance for loan losses. Such agencies may require
adjustments to the allowance based on their judgment of the information
available to them at the time of their examinations.

Mortgage loans

Centennial originates conventional and federally insured residential mortgage
loans for resale in the secondary market. Mortgage loans are sold without
recourse; however, these sales 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, 2001, 2000 and 1999, Bancorp held servicing rights to
approximately $35,604,000, $42,638,000 and $36,842,000, 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 $281,000 and
$386,000 at December 31, 2001 and 2000, 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
maintains a minimum level of investment in FHLB stock based on specific
percentages of its outstanding mortgages, total assets or FHLB advances. At
December 31, 2001, Bancorp met its minimum required investment of approximately
$500,000. 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.

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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 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.

Intangible assets

In connection with a branch acquisition in Clark County, Washington in 1999,
Bancorp recorded intangible assets in accordance with Statement of Financial
Accounting Standards (SFAS) No. 72, Accounting for Certain Acquisitions of
Banking or Thrift Institutions. Such intangible assets are being amortized on
a straight-line method over a period of approximately 15 years. It is Bancorps
policy to review intangible assets for impairment whenever events or changes in
circumstances indicate that it may not recover its investment in the underlying
assets or liabilities that gave rise to such intangible assets. Amortization of
intangible assets in 2001, 2000 and 1999 was approximately $688,000, $688,000
and $487,000, respectively.

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 2001, the Financial Accounting Standards Board (FASB) issued SFAS No.
141, Business Combinations, and SFAS No. 142, Goodwill and Other Intangible
Assets. These statements make significant changes to the accounting for
business combinations and goodwill. SFAS No. 141 eliminates the
pooling-of-interests method of accounting and requires that the purchase method
of accounting be used for business combinations initiated after June 30, 2001.
SFAS No. 142 discontinues the practice of amortizing goodwill and requires that
goodwill be continually evaluated for impairment and be written-down when
appropriate. SFAS No. 142 also requires that other intangible assets that have
been separately identified and accounted for continue to be amortized over a
determinable useful life. SFAS No. 142 is effective for fiscal years beginning
after December 15, 2001. Management is currently evaluating the impact that
SFAS No. 142 will have on its consolidated financial statements.

In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations. SFAS No. 143 addresses financial accounting and reporting
obligations associated with the retirement of long-lived assets and the
associated asset retirement costs. SFAS No. 143 is effective for fiscal years
beginning after June 15, 2002. Bancorp does not expect that adoption of SFAS
No. 143 will have a material effect on Bancorps consolidated financial
statements.

In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. SFAS No. 144 addresses financial accounting and
reporting for the impairment or disposal of long-lived assets. This statement
supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed of, and provides guidance on the
classification and accounting for such assets when held for sale or
abandonment. SFAS No. 144 is effective for fiscal years beginning after
December 15, 2001. Bancorp does not expect that adoption of SFAS No. 144 will
have a material effect on the Bancorps consolidated financial statements.

Reclassifications

Certain amounts in 2000 and 1999 have been reclassified to conform with the
2001 presentation. Net income was not affected by these reclassifications.

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2.     Investment securities available-for-sale

Investment securities available-for-sale consisted of the following at December 31, 2001 and 2000:

|                                                |       |   |            |            |            |   |            |         |            |   |         |         |  |   |            |            | 
|----------------------------------------------- | ----- | - | ---------- | ---------- | ---------- | - | ---------- | ------- | ---------- | - | ------- | ------- |  | - | ---------- | ---------- | 
|                                                |       |   |            |            |            |   | Gross      |         | Gross      |   |         |         | 
|                                                |       |   | Amortized  |            | unrealized |   | unrealized |         | Estimated 
|                                                |       |   | cost       |            | gains      |   | losses     |         | fair value
|                                                |       |   |            |            |            |   |            |         |           
|2001                                            |       |   |            |            |            |   |            |        
|U.S. Government and
agency securities           |       | $ | 14,750,756 |            |            | $ | 297,849    |         |            | $ | 13,889  |         |  | $ | 15,034,716 |           
|Obligations of state and
political subdivisions |       |   | 23,241,046 |            |            |   | 144,848    |         |            |   | 246,858 |         |  |   | 23,139,036 |           
|Corporate bonds                                 |       |   | 5,086,140  |            |            |   | 95,116     |         |            |   | 6,066   |         |  |   | 5,175,190  |           
|Mortgage-backed securities                      |       |   | 32,747,658 |            |            |   | 51,826     |         |            |   | 276,196 |         |  |   | 32,523,288 |           
|Other                                           |       |   | 617,338    |            |            |   | 10,137     |         |            |   |        |         |  |   | 627,475    |           
|                                                |       |   |            |            |            |   |            |         |            |   |         |         |  |   |            |           
|                                                | Total |   | $          | 76,442,938 |            |   | $          | 599,776 |            |   | $       | 543,009 |  |   | $          | 76,499,705 | 
|                                                |       |   |            |            |            |   |            |         |            |   |         |         |  |   |            |           
|2000                                            |       |   |            |            |            |   |            |        
|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  |           
|Other                                           |       |   | 513,261    |            |            |   | 46,189     |         |            |   | 3,200   |         |  |   | 556,250    |           
|                                                |       |   |            |            |            |   |            |         |            |   |         |         |  |   |            |           
|Total                                           |       | $ | 60,651,351 |            |            | $ | 216,016    |         |            | $ | 504,798 |         |  | $ | 60,362,569 |           
|                                                |       |   |            |            |            |   |            |         |            |   |         |         |  |   |            |           

The amortized cost and estimated fair value of investment securities
available-for-sale at December 31, 2001, 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.

|                             |       |   |            |            |            |   |            |            | 
|---------------------------- | ----- | - | ---------- | ---------- | ---------- | - | ---------- | ---------- | 
|                             |       |   | Amortized  |            | Estimated 
|                             |       |   | cost       |            | fair value
|                             |       |   |            |            |           
|Due in 1 year or less        |       | $ | 2,282,114  |            |            | $ | 2,313,480  |           
|Due after 1 through
5 years  |       |   | 33,710,779 |            |            |   | 34,138,640 |           
|Due after 5 through
10 years |       |   | 378,405    |            |            |   | 386,747    |           
|Due after 10 years           |       |   | 6,706,644  |            |            |   | 6,510,075  |           
|Mortgage-backed
securities   |       |   | 32,747,658 |            |            |   | 32,523,288 |           
|Other                        |       |   | 617,338    |            |            |   | 627,475    |           
|                             |       |   |            |            |            |   |            |           
|                             | Total |   | $          | 76,442,938 |            |   | $          | 76,499,705 | 
|                             |       |   |            |            |            |   |            |           

At December 31, 2001, investment securities available-for-sale with an
estimated fair value of approximately $12,628,000 (approximately $23,880,000 at
December 31, 2000) were pledged to collateralize public deposits, and
investment securities available-for-sale with an estimated fair value of
approximately $9,526,000 (approximately $29,235,000 at December 31, 2000) were
pledged to collateralize borrowings (see Note 6).

Gross realized gains and losses on sales of investment securities during the
years ended December 31, 2001, 2000 and 1999 were as follows:

|     |  |          |         |          |  |           |       |  |  |   |         | 
|---- |  | -------- | ------- | -------- |  | --------- | ----- |  |  | - | ------- | 
|     |  | Gross    |         | Gross    |  |           |       | 
|     |  | realized |         | realized |  | Net gains
|     |  | gains    |         | losses   |  | on sales 
|     |  |          |         |          |  |          
|2001 |  | $        | 876,999 |          |  | $         | 5,628 |  |  | $ | 871,371 | 
|2000 |  |          | 268,017 |          |  |           |      |  |  |   | 268,017 | 
|1999 |  |          | 298,625 |          |  |           |      |  |  |   | 298,625 | 

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3. Loans

Loans consisted of the following at December 31, 2001 and 2000:

|                               |  |      |             |      |  |   |             |  
|------------------------------ |  | ---- | ----------- | ---- |  | - | ----------- | -
|                               |  | 2001 |             | 2000
|                               |  |      |             |     
|Real estate  mortgage         |  | $    | 163,524,775 |      |  | $ | 147,737,507 |  
|Real estate 
construction     |  |      | 212,576,779 |      |  |   | 261,726,951 |  
|Commercial                     |  |      | 259,961,349 |      |  |   | 273,866,755 |  
|Installment                    |  |      | 11,187,783  |      |  |   | 9,379,311   |  
|Lease financing                |  |      | 4,833,024   |      |  |   | 4,606,838   |  
|Other                          |  |      | 1,743,580   |      |  |   | 5,562,841   |  
|                               |  |      |             |      |  |   |             |  
|                               |  |      | 653,827,290 |      |  |   | 702,880,203 |  
|Less allowance for
loan losses |  |      | (10,506,121 | )    |  |   | (9,150,348  | )
|                               |  |      |             |      |  |   |             |  
|Loans, net                     |  | $    | 643,321,169 |      |  | $ | 693,729,855 |  
|                               |  |      |             |      |  |   |             |  

Bancorp is located, and conducts its business primarily, within the greater
Portland metropolitan area; Lane County, Oregon; and Clark County, Washington.
A substantial portion of Bancorps loans are collateralized by real estate in
these geographic areas and, accordingly, the ultimate collectibility of a
substantial portion of the loan portfolio is susceptible to changes in the
local market conditions.

Transactions in the allowance for loan losses for the years ended December 31,
2001, 2000 and 1999 were as follows:

|                                           |  |      |            |      |  |      |           |   |  |   |           |  
|------------------------------------------ |  | ---- | ---------- | ---- |  | ---- | --------- | - |  | - | --------- | -
|                                           |  | 2001 |            | 2000 |  | 1999
|                                           |  |      |            |      |  |     
|Balance at
beginning
of year               |  | $    | 9,150,348  |      |  | $    | 6,164,507 |   |  | $ | 4,450,614 |  
|Loan loss
provision                        |  |      | 3,950,000  |      |  |      | 3,800,000 |   |  |   | 2,300,000 |  
|Loans
charged-off                          |  |      | (2,667,143 | )    |  |      | (906,319  | ) |  |   | (671,827  | )
|Recoveries of
loans previously
charged-off |  |      | 72,916     |      |  |      | 92,160    |   |  |   | 85,720    |  
|                                           |  |      |            |      |  |      |           |   |  |   |           |  
|Balance at
end of year                     |  | $    | 10,506,121 |      |  | $    | 9,150,348 |   |  | $ | 6,164,507 |  
|                                           |  |      |            |      |  |      |           |   |  |   |           |  

At December 31, 2001 and 2000, Bancorp had approximately $23,716,000 and
$15,214,000, respectively, in impaired loans. The specific valuation allowance
related to these impaired loans totaled approximately $3,744,000 and $2,253,000
at December 31, 2001 and 2000, respectively. The average recorded investment in
impaired loans for the years ended December 31, 2001, 2000 and 1999 was
approximately $19,465,000, $9,518,000 and $5,525,000, respectively. Interest
income recognized on impaired loans for the years ended December 31, 2001,
2000, and 1999 was approximately $1,278,000, $595,000, and $417,000,
respectively.

Loans on nonaccrual status at December 31, 2001 were approximately $7,694,000
($7,268,000 at December 31, 2000). Interest income, which would have been
realized on such nonaccrual loans outstanding at year-end if the loans had
remained current, was approximately $659,000, $1,226,000 and $97,000 during the
years ended December 31, 2001, 2000 and 1999, respectively. Loans contractually
past due 90 days or more on which interest continued to accrue were
approximately $529,000 at December 31, 2000 (none at December 31, 2001).

4. Premises and equipment

Premises and equipment consisted of the following at December 31, 2001 and 2000:

|                                               |  |      |             |      |  |   |             |  
|---------------------------------------------- |  | ---- | ----------- | ---- |  | - | ----------- | -
|                                               |  | 2001 |             | 2000
|                                               |  |      |             |     
|Land                                           |  | $    | 2,948,046   |      |  | $ | 2,948,046   |  
|Buildings and
leasehold
improvements           |  |      | 13,302,139  |      |  |   | 13,123,772  |  
|Furniture and
equipment                        |  |      | 11,294,264  |      |  |   | 9,919,282   |  
|                                               |  |      |             |      |  |   |             |  
|                                               |  |      | 27,544,449  |      |  |   | 25,991,100  |  
|Less accumulated
depreciation and
amortization |  |      | (12,185,555 | )    |  |   | (10,623,707 | )
|                                               |  |      |             |      |  |   |             |  
|Premises and
equipment, net                    |  | $    | 15,358,894  |      |  | $ | 15,367,393  |  
|                                               |  |      |             |      |  |   |             |  

5. Time deposits

Time deposits in excess of $100,000 aggregated approximately $81,048,000 and
$112,358,000 at December 31, 2001 and 2000, respectively.

At December 31, 2001, the scheduled annual maturities of all time deposits were approximately as follows:

|           |  |   |             | 
|---------- |  | - | ----------- | 
|2002       |  | $ | 191,298,000 | 
|2003       |  |   | 14,709,000  | 
|2004       |  |   | 1,210,000   | 
|2005       |  |   | 248,000     | 
|2006       |  |   | 30,000      | 
|Thereafter |  |   | 106,000     | 
|           |  |   |             | 
|           |  | $ | 207,601,000 | 
|           |  |   |             | 

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6. Borrowings

Borrowings and the related weighted average interest rates consisted of the
following at December 31, 2001 and 2000:

|                                                 |  |        |            |               |  |          |      |               |  |   |            |          |  |  |      |  
|------------------------------------------------ |  | ------ | ---------- | ------------- |  | -------- | ---- | ------------- |  | - | ---------- | -------- |  |  | ---- | -
|                                                 |  | 2001   |            | 2000         
|                                                 |  |        |            |              
|                                                 |  |        |            |               |  | Weighted |      |               |  |   |            | Weighted
|                                                 |  |        |            |               |  | average  |      |               |  |   |            | average 
|                                                 |  | Amount |            | interest rate |  | Amount   |      | interest rate
|                                                 |  |        |            |               |  |          |      |              
|Securities sold under agreement
to repurchase    |  | $      | 7,051,067  |               |  |          | 3.45 | %             |  | $ | 4,134,083  |          |  |  | 6.30 | %
|FHLB borrowings under promissory
note agreements |  |        | 10,000,000 |               |  |          | 3.61 |               |  |   | 23,900,000 |          |  |  | 6.43 |  
|Federal funds purchased                          |  |        |           |               |  |          |     |               |  |   | 9,000,000  |          |  |  | 6.40 |  
|FHLB cash management advance
program             |  |        |           |               |  |          |     |               |  |   | 22,600,000 |          |  |  | 6.83 |  
|                                                 |  |        |            |               |  |          |      |               |  |   |            |          |  |  |      |  
|                                                 |  | $      | 17,051,067 |               |  |          |      |               |  | $ | 59,634,083 |          |  |  |      |  
|                                                 |  |        |            |               |  |          |      |               |  |   |            |          |  |  |      |  

Securities sold under agreement to repurchase are due on demand and are secured
by investment securities available-for-sale. FHLB borrowings under promissory
note agreements are due in December 2003 and are secured by Bancorps total
assets.

At December 31, 2001, Bancorp has remaining available borrowings from the FHLB
of approximately $34,316,000. In addition, $49,000,000 of federal funds lines
are maintained with correspondent banks as a backup source of liquidity.
Bancorp also maintains a secured discount window line of credit with the
Federal Reserve Bank of San Francisco, whereby Bancorp had available borrowings
of $22,500,000 as of December 31, 2001.

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, 2001 and 2000, 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, 2001 and 2000 were approximately as follows:

|                                         |  |      |             |      |  |   |             | 
|---------------------------------------- |  | ---- | ----------- | ---- |  | - | ----------- | 
|                                         |  | 2001 |             | 2000
|                                         |  |      |             |     
|Commitments to
extend credit             |  | $    | 206,494,000 |      |  | $ | 236,915,000 | 
|Standby and commercial
letters of credit |  |      | 5,541,000   |      |  |   | 6,330,000   | 

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 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 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 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.

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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, 2001
and 2000.

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 Bancorps underlying value.

The following methods and assumptions are used to estimate the fair value of
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, 2001 and 2000
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 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, 2001
and 2000 rates offered on these instruments.

Borrowings: The carrying amount approximates the estimated fair value.

The estimated fair value of Bancorps significant on-balance sheet financial
instruments at December 31, 2001 and 2000 were approximately as follows:

|                       |                                             |  |          |             |       |  |           |             |       |  |   |             |           |  |   |             | 
|---------------------- | ------------------------------------------- |  | -------- | ----------- | ----- |  | --------- | ----------- | ----- |  | - | ----------- | --------- |  | - | ----------- | 
|                       |                                             |  | 2001     |             | 2000 
|                       |                                             |  |          |             |      
|                       |                                             |  |          |             |       |  | Estimated |             |       |  |   |             | Estimated
|                       |                                             |  | Carrying |             | fair  |  | Carrying  |             | fair 
|                       |                                             |  | value    |             | value |  | value     |             | value
|                       |                                             |  |          |             |       |  |           |             |      
|Financial assets:      |                                             |  |          |             |       |  |           |             |       |  |   |             |           |  |   |            
|                       | Cash and cash equivalents                   |  | $        | 40,260,000  |       |  | $         | 40,260,000  |       |  | $ | 41,679,000  |           |  | $ | 41,679,000  | 
|                       | Investment securities available-for-sale    |  |          | 76,500,000  |       |  |           | 76,500,000  |       |  |   | 60,363,000  |           |  |   | 60,363,000  | 
|                       | Loans and mortgage loans
held for sale, net |  |          | 655,715,000 |       |  |           | 664,134,000 |       |  |   | 704,620,000 |           |  |   | 700,265,000 | 
|                       | FHLB stock                                  |  |          | 6,244,000   |       |  |           | 6,244,000   |       |  |   | 5,833,000   |           |  |   | 5,833,000   | 
|Financial liabilities: |                                             |  |          |             |       |  |           |             |       |  |   |             |           |  |   |            
|                       | Deposits                                    |  |          | 693,120,000 |       |  |           | 695,242,000 |       |  |   | 696,494,000 |           |  |   | 697,573,000 | 
|                       | Borrowings                                  |  |          | 17,051,000  |       |  |           | 17,051,000  |       |  |   | 59,634,000  |           |  |   | 59,634,000  | 

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9. Commitments and contingencies

Bancorp leases certain land and facilities under noncancelable operating
leases, generally for terms of 5 to 50 years, some of which include renewal
options and escalation clauses. At December 31, 2001, 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:

|           |                              |   |           |            | 
|---------- | ---------------------------- | - | --------- | ---------- | 
|2002       |                              | $ | 1,187,000 |           
|2003       |                              |   | 1,070,000 |           
|2004       |                              |   | 1,068,000 |           
|2005       |                              |   | 1,084,000 |           
|2006       |                              |   | 1,060,000 |           
|Thereafter |                              |   | 7,485,000 |           
|           |                              |   |           |           
|           | Total minimum lease payments |   | $         | 12,954,000 | 
|           |                              |   |           |           

Total rent expense was approximately $1,920,000, $1,709,000 and $1,213,000 in
2001, 2000 and 1999, respectively.

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 was comprised of the following for the years ended December 31, 2001, 2000 and 1999:

|                               |  |      |            |      |  |      |            |  |  |   |            | 
|------------------------------ |  | ---- | ---------- | ---- |  | ---- | ---------- |  |  | - | ---------- | 
|                               |  | 2001 |            | 2000 |  | 1999
|                               |  |      |            |      |  |     
|Salaries and employee benefits |  | $    | 16,712,483 |      |  | $    | 16,585,759 |  |  | $ | 14,293,013 | 
|Premises and equipment         |  |      | 4,114,709  |      |  |      | 4,075,364  |  |  |   | 3,315,826  | 
|Business development           |  |      | 617,987    |      |  |      | 992,994    |  |  |   | 830,097    | 
|Legal and professional         |  |      | 1,508,559  |      |  |      | 770,639    |  |  |   | 657,816    | 
|Data processing                |  |      | 828,798    |      |  |      | 685,479    |  |  |   | 665,704    | 
|Other                          |  |      | 4,166,427  |      |  |      | 3,605,198  |  |  |   | 3,039,171  | 
|                               |  |      |            |      |  |      |            |  |  |   |            | 
|Total -noninterest expense     |  | $    | 27,948,963 |      |  | $    | 26,715,433 |  |  | $ | 22,801,627 | 
|                               |  |      |            |      |  |      |            |  |  |   |            | 

11. Income taxes

The provision (credit) for income taxes was comprised of the following for the
years ended December 31, 2001, 2000 and 1999:

|                           |         |   |           |           |      |   |            |           |  |   |           |           | 
|-------------------------- | ------- | - | --------- | --------- | ---- | - | ---------- | --------- |  | - | --------- | --------- | 
|                           |         |   | 2001      |           | 2000 |   | 1999      
|                           |         |   |           |           |      |   |           
|Current:                   |         |   |           |           |      |   |            |           |  |   |           |          
|                           | Federal |   | $         | 7,885,493 |      |   | $          | 8,223,672 |  |   | $         | 6,482,551 | 
|                           | State   |   |           | 1,663,062 |      |   |            | 1,807,272 |  |   |           | 1,372,548 | 
|Deferred                   |         |   | (800,997  | )         |      |   | (1,327,747 | )         |  |   | (935,809  | )        
|                           |         |   |           |           |      |   |            |           |  |   |           |          
|Provision for income taxes |         | $ | 8,747,558 |           |      | $ | 8,703,197  |           |  | $ | 6,919,290 |          
|                           |         |   |           |           |      |   |            |           |  |   |           |          

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, 2001, 2000 and 1999 were as
follows:

|                                                         |  |      |            |      |  |      |           |  |  |   |           |  
|-------------------------------------------------------- |  | ---- | ---------- | ---- |  | ---- | --------- |  |  | - | --------- | -
|                                                         |  | 2001 |            | 2000 |  | 1999
|                                                         |  |      |            |      |  |     
|Expected federal income tax provision at statutory rates |  |      | $8,033,869 |      |  | $    | 8,017,022 |  |  | $ | 6,659,004 |  
|State income tax, net of federal effect                  |  |      | 1,027,415  |      |  |      | 1,006,825 |  |  |   | 843,341   |  
|Tax-exempt interest income                               |  |      | (292,769)  |      |  |      | (498,153) |  |  |   | (478,504  | )
|Other, net                                               |  |      | (20,957)   |      |  |      | 177,503   |  |  |   | (104,551  | )
|                                                         |  |      |            |      |  |      |           |  |  |   |           |  
|Provision for income taxes                               |  |      | $8,747,558 |      |  | $    | 8,703,197 |  |  | $ | 6,919,290 |  
|                                                         |  |      |            |      |  |      |           |  |  |   |           |  

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The components of the net deferred tax assets at December 31, 2001 and 2000 were as follows:

|                                               |                                |   |           |           |      |   |           |           | 
|---------------------------------------------- | ------------------------------ | - | --------- | --------- | ---- | - | --------- | --------- | 
|                                               |                                |   | 2001      |           | 2000
|                                               |                                |   |           |           |     
|Deferred tax assets                            |                                |   |           |           |      |   |           |          
|Nonqualified benefit plans                     |                                | $ | 749,413   |           |      | $ | 716,865   |          
|Allowance for loan losses                      |                                |   | 4,227,156 |           |      |   | 3,446,345 |          
|Net unrealized losses on investment securities |                                |   |          |           |      |   | 126,076   |          
|Other, net                                     |                                |   | 830,965   |           |      |   | 769,293   |          
|                                               |                                |   |           |           |      |   |           |          
|                                               | Total deferred tax assets      |   |           | 5,807,534 |      |   |           | 5,058,579 | 
|Deferred tax liabilities                       |                                |   |           |           |      |   |           |          
|Mortgage servicing rights                      |                                |   | 110,309   |           |      |   | 151,795   |          
|FHLB stock dividends                           |                                |   | 1,168,628 |           |      |   | 1,006,887 |          
|Other, net                                     |                                |   | 350,344   |           |      |   | 371,711   |          
|                                               |                                |   |           |           |      |   |           |          
|                                               | Total deferred tax liabilities |   |           | 1,629,281 |      |   |           | 1,530,393 | 
|                                               |                                |   |           |           |      |   |           |          
|Net deferred tax assets                        |                                | $ | 4,178,253 |           |      | $ | 3,528,186 |          
|                                               |                                |   |           |           |      |   |           |          

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

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.

12. Transactions with related parties

Certain officers and directors (and the companies with which they are
associated) are customers of, and have had banking transactions with, Bancorp
in the ordinary course of business. In addition, Bancorp expects to continue to
have such banking transactions in the future. All loans and commitments to loan
to such parties are generally made on the same terms, including interest rates
and collateral, as those prevailing at the time for comparable transactions
with other persons. In the opinion of management, these transactions do not
involve more than the normal risk of collectibility or present any other
unfavorable features.

Activity with respect to loans to directors, their affiliates and executive
officers of Bancorp for the year ended December 31, 2001 was as follows:

|                             |  |   |            |  
|---------------------------- |  | - | ---------- | -
|Balance at January 1, 2001   |  | $ | 6,842,661  |  
|Additions or renewals        |  |   | 10,285,024 |  
|Amounts collected or renewed |  |   | (9,867,795 | )
|                             |  |   |            |  
|Balance at December 31, 2001 |  | $ | 7,259,890  |  
|                             |  |   |            |  

In addition, included in commitments in Note 7 are approximately $2,367,000 of
commitments to extend credit to directors, their affiliates, and executive
officers of Bancorp at December 31, 2001 ($1,401,000 at December 31, 2000).

13. Stock options

Bancorp has a 1993 Non-employee Director Stock Option Plan (Director Plan); a
1993 Incentive Stock Option Plan (Incentive Plan); and a 1995 Stock Incentive
Plan (Option Plan).

Director Plan

Under the Director Plan, 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 subsidiary. 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, 2001, 175,058 of the 177,509
options outstanding were exercisable, and 162,405 shares were reserved for
future grant.

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Incentive Plan

Under the Incentive Plan, officers of Bancorp and its subsidiary 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, 2001, all of the 129,119 options
outstanding were exercisable, and 1,256 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. At December 31, 2001, 1,420,287 options were outstanding under the
Option Plan, consisting of 682,336 incentive stock options and 737,951
nonstatutory stock options. At December 31, 2001, a total of 1,021,688 of the
options outstanding were exercisable, and 405,075 shares were reserved for
future grant. Bancorp has not granted any restricted stock awards under the
Option Plan.

Transactions involving option activity for the years ended December 31, 2001,
2000 and 1999 are summarized as follows:

|                             |  |             |           |          |  |             |      |          |  |             |           |           |  |   |      |  |  |           |           |   |  |   |       | 
|---------------------------- |  | ----------- | --------- | -------- |  | ----------- | ---- | -------- |  | ----------- | --------- | --------- |  | - | ---- |  |  | --------- | --------- | - |  | - | ----- | 
|                             |  | 2001        |           | 2000     |  | 1999       
|                             |  |             |           |          |  |            
|                             |  |             |           |          |  | Weighted-   |      |          |  |             |           | Weighted- |  |   |      |  |  | Weighted-
|                             |  |             |           |          |  | average     |      |          |  |             |           | average   |  |   |      |  |  | average  
|                             |  | Options     |           | exercise |  | Options     |      | exercise |  | Options     |           | exercise 
|                             |  | outstanding |           | price    |  | outstanding |      | price    |  | outstanding |           | price    
|                             |  |             |           |          |  |             |      |          |  |             |           |          
|Balance at beginning of year |  |             | 1,687,259 |          |  | $           | 5.37 |          |  |             | 1,809,667 |           |  | $ | 4.63 |  |  |           | 1,753,677 |   |  | $ | 3.65  | 
|Granted                      |  |             | 214,953   |          |  |             | 7.11 |          |  |             | 183,501   |           |  |   | 6.92 |  |  |           | 270,181   |   |  |   | 9.16  | 
|Forfeited                    |  |             | (27,640   | )        |  |             | 7.51 |          |  |             | (15,474   | )         |  |   | 7.06 |  |  |           | (8,191    | ) |  |   | 10.97 | 
|Exercised                    |  |             | (147,657  | )        |  |             | 1.91 |          |  |             | (290,435  | )         |  |   | 1.71 |  |  |           | (206,000  | ) |  |   | 1.86  | 
|                             |  |             |           |          |  |             |      |          |  |             |           |           |  |   |      |  |  |           |           |   |  |   |       | 
|Balance at end of year       |  |             | 1,726,915 |          |  | $           | 5.85 |          |  |             | 1,687,259 |           |  | $ | 5.37 |  |  |           | 1,809,667 |   |  | $ | 4.63  | 
|                             |  |             |           |          |  |             |      |          |  |             |           |           |  |   |      |  |  |           |           |   |  |   |       | 

Information regarding the number, weighted-average remaining contractual life and
weighted-average exercise price of options by range of exercise price at
December 31, 2001 is as follows:

|              |  |                     |           |                     |  |           |      |            |  |          |       |  |  |           |           |  |  |   |       | 
|------------- |  | ------------------- | --------- | ------------------- |  | --------- | ---- | ---------- |  | -------- | ----- |  |  | --------- | --------- |  |  | - | ----- | 
|              |  | 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   
|              |  |                     |           |                     |  |           |      |            |  |         
|Under $5.00   |  |                     | 721,257   |                     |  |           | 7.5  |            |  | $        | 2.46  |  |  |           | 721,257   |  |  | $ | 2.46  | 
|$5.01$10.00  |  |                     | 806,753   |                     |  |           | 10.9 |            |  |          | 7.69  |  |  |           | 474,593   |  |  |   | 8.10  | 
|$10.01$15.00 |  |                     | 198,905   |                     |  |           | 6.9  |            |  |          | 10.65 |  |  |           | 130,015   |  |  |   | 10.64 | 
|              |  |                     |           |                     |  |           |      |            |  |          |       |  |  |           |           |  |  |   |       | 
|              |  |                     | 1,726,915 |                     |  |           | 9.1  |            |  | $        | 5.85  |  |  |           | 1,325,865 |  |  | $ | 5.28  | 
|              |  |                     |           |                     |  |           |      |            |  |          |       |  |  |           |           |  |  |   |       | 

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Exercisable options at December 31, 2000 and 1999 totaled 1,194,257 and
1,195,118, 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 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, 2001, 2000 and 1999:

|                                   |  |      |            |      |  |      |            |  |  |   |            | 
|---------------------------------- |  | ---- | ---------- | ---- |  | ---- | ---------- |  |  | - | ---------- | 
|                                   |  | 2001 |            | 2000 |  | 1999
|                                   |  |      |            |      |  |     
|Net income:                        |  |      |            |      |  |      |            |  |  |   |            | 
| as reported                      |  | $    | 14,206,351 |      |  | $    | 14,202,579 |  |  | $ | 12,106,765 | 
| pro forma                        |  |      | 13,491,542 |      |  |      | 13,550,176 |  |  |   | 11,753,038 | 
|Basic earnings per common share:   |  |      |            |      |  |      |            |  |  |   |            | 
| as reported                      |  | $    | .56        |      |  | $    | .57        |  |  | $ | .48        | 
| pro forma                        |  |      | .54        |      |  |      | .54        |  |  |   | .47        | 
|Diluted earnings per common share: |  |      |            |      |  |      |            |  |  |   |            | 
| as reported                      |  | $    | .55        |      |  | $    | .55        |  |  | $ | .47        | 
| pro forma                        |  |      | .52        |      |  |      | .53        |  |  |   | .46        | 

The pro forma effect on net income for 2001, 2000 and 1999 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:

|                         |  |      |      |      |  |      |      |   |  |  |      |  
|------------------------ |  | ---- | ---- | ---- |  | ---- | ---- | - |  |  | ---- | -
|                         |  | 2001 |      | 2000 |  | 1999
|                         |  |      |      |      |  |     
|Risk-free interest rate  |  |      | 5.5  | %    |  |      | 5.0  | % |  |  | 6.3  | %
|Expected life (in years) |  |      | 7.3  |      |  |      | 7.3  |   |  |  | 7.3  |  
|Expected volatility      |  |      | 34.5 | %    |  |      | 36.4 | % |  |  | 32.6 | %
|Expected dividend yield  |  |      | 1.6  | %    |  |      | 0.0  | % |  |  | 0.0  | %

The effect of applying the fair-value-based method to stock options granted in
the years ended December 31, 2001, 2000 and 1999 resulted in a weighted-average
grant date fair value of $2.82, $3.17 and $4.58, respectively.

14.     Shareholders equity

At December 31, 2001 and 2000, Bancorp had 10,000,000 shares of no par value
authorized but unissued preferred stock, which was comprised of 5,000,000
shares each of voting and nonvoting stock. At December 31, 2001 and 2000,
Bancorp had 50,000,000 shares of no par value authorized common stock.

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 years
ended December 31, 2001 and 2000, Bancorp repurchased 512,182 and 65,835 shares
of common stock, respectively.

In December 2001, Bancorp approved a new repurchase program, authorizing the
repurchase of up to an aggregate of 5% of its currently outstanding common
stock over a two-year period.

During the years ended December 31, 2001, 2000 and 1999, Bancorp had various
stock splits. In addition, on January 16, 2002, the Board declared a 5% stock
split, payable on February 22, 2002, to Bancorp shareholders of record at the
close of business on February 1, 2002. All information in the accompanying
consolidated financial statements and footnotes has been adjusted to give
retroactive effect to all stock splits.

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15.     Basic and diluted earnings per common share

The numerators and denominators used in computing basic and diluted earnings
per common share for the years ended December 31, 2001, 2000 and 1999 can be
reconciled as follows:

|                                  |                                         |                                               |   |             |            |               |  |            |            |  |   |     |     | 
|--------------------------------- | --------------------------------------- | --------------------------------------------- | - | ----------- | ---------- | ------------- |  | ---------- | ---------- |  | - | --- | --- | 
|                                  |                                         |                                               |   | Net income  |            | Shares        |  | Per-share 
|                                  |                                         |                                               |   | (numerator) |            | (denominator) |  | amount    
|                                  |                                         |                                               |   |             |            |               |  |           
|2001                              |                                         |                                               |   |             |            |               |  |            |            |  |   |    
|Basic earnings per common share  |                                         |                                               |   |             |            |               |  |            |            |  |   |    
|                                  | Income available to common shareholders |                                               | $ | 14,206,351  |            |               |  | 25,175,330 |            |  | $ | .56 |    
|                                  |                                         |                                               |   |             |            |               |  |            |            |  |   |    
|                                  |                                         | Effect of assumed conversion of stock options |   |             |           |               |  |            | 541,393    |  |   |     |     | 
|                                  |                                         |                                               |   |             |            |               |  |            |            |  |   |    
|                                  |                                         | Diluted earnings per common share             |   | $           | 14,206,351 |               |  |            | 25,716,723 |  |   | $   | .55 | 
|                                  |                                         |                                               |   |             |            |               |  |            |            |  |   |    
|2000                              |                                         |                                               |   |             |            |               |  |            |            |  |   |    
|Basic earnings per common share  |                                         |                                               |   |             |            |               |  |            |            |  |   |    
|                                  | Income available to common shareholders |                                               | $ | 14,202,579  |            |               |  | 25,118,721 |            |  | $ | .57 |    
|                                  |                                         |                                               |   |             |            |               |  |            |            |  |   |    
|                                  |                                         | Effect of assumed conversion of stock options |   |             |           |               |  |            | 576,768    |  |   |     |     | 
|                                  |                                         |                                               |   |             |            |               |  |            |            |  |   |    
|                                  |                                         | Diluted earnings per common share             |   | $           | 14,202,579 |               |  |            | 25,695,489 |  |   | $   | .55 | 
|                                  |                                         |                                               |   |             |            |               |  |            |            |  |   |    
|1999                              |                                         |                                               |   |             |            |               |  |            |            |  |   |    
|Basic earnings per common share  |                                         |                                               |   |             |            |               |  |            |            |  |   |    
|                                  | Income available to common shareholders |                                               | $ | 12,106,765  |            |               |  | 24,963,356 |            |  | $ | .48 |    
|                                  |                                         |                                               |   |             |            |               |  |            |            |  |   |    
|                                  |                                         | Effect of assumed conversion of stock options |   |             |           |               |  |            | 804,304    |  |   |     |     | 
|                                  |                                         |                                               |   |             |            |               |  |            |            |  |   |    
|                                  |                                         | Diluted earnings per common share             |   | $           | 12,106,765 |               |  |            | 25,767,660 |  |   | $   | .47 | 
|                                  |                                         |                                               |   |             |            |               |  |            |            |  |   |    

16. Employee benefit plan

Bancorp has an employee savings and profit sharing plan (the Plan), which
covers all fulltime 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 of Directors, 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 $400,000 in 2001 ($460,000
in 2000 and $400,000 in 1999).

17. Regulatory matters

Bancorp and Centennial are subject to the regulations of certain federal and
state agencies and receive periodic examinations by those regulatory
authorities. In addition, Bancorp and Centennial 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 Centennials
financial statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, Bancorp and Centennial 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 Centennials capital amounts and
classification are also subject to qualitative judgments by the regulators
about components, risk weightings and other factors.

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Quantitative measures established by regulation to ensure capital adequacy
require Bancorp and Centennial 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, at December 31, 2001, Bancorp and Centennial met or
exceeded all capital adequacy requirements.

At December 31, 2001, Bancorp and Centennial were well capitalized under the
regulatory framework. There are no conditions or events since the notifications
from the regulators that management believes would change Bancorps or
Centennials regulatory capital categorization.

Bancorps actual and required capital amounts and ratios are presented in the
table below:

|                   |                |                           |  |        |             |                          |  |                   |      |       |  |                          |            |                         |  |  |     |   |  |                          |            |  |  |  |      |  
|------------------ | -------------- | ------------------------- |  | ------ | ----------- | ------------------------ |  | ----------------- | ---- | ----- |  | ------------------------ | ---------- | ----------------------- |  |  | --- | - |  | ------------------------ | ---------- |  |  |  | ---- | -
|                   |                |                           |  |        |             |                          |  |                   |      |       |  |                          |            |                         |  |  |     |   |  | Regulatory minimum      
|                   |                |                           |  |        |             |                          |  |                   |      |       |  |                          |            |                         |  |  |     |   |  | to be "well capitalized"
|                   |                |                           |  |        |             |                          |  |                   |      |       |  | Regulatory minimum to be |            | under prompt corrective
|                   |                |                           |  | Actual |             | "adequately capitalized" |  | action provisions
|                   |                |                           |  |        |             |                          |  |                  
|                   |                |                           |  | Amount |             | Ratio                    |  | Amount            |      | Ratio |  | Amount                   |            | Ratio                  
|                   |                |                           |  |        |             |                          |  |                   |      |       |  |                          |            |                        
|December 31, 2001: |                |                           |  |        |             |                          |  |                   |      |       |  |                          |            |                         |  |  |     |   |  |                          |            |  |  | 
|                   | Total Capital  |                           |  |        |             |                          |  |                   |      |       |  |                          |            |                         |  |  |     |   |  |                          |            |  |  |  |     
|                   |                | (to Risk-Weighted Assets) |  | $      | 101,289,000 |                          |  |                   | 13.1 | %     |  | $                        | 61,627,000 |                         |  |  | 8.0 | % |  | $                        | 77,034,000 |  |  |  | 10.0 | %
|                   | Tier 1 Capital |                           |  |        |             |                          |  |                   |      |       |  |                          |            |                         |  |  |     |   |  |                          |            |  |  |  |     
|                   |                | (to Risk-Weighted Assets) |  |        | 91,649,000  |                          |  |                   | 11.9 |       |  |                          | 30,813,000 |                         |  |  | 4.0 |   |  |                          | 46,220,000 |  |  |  | 6.0  |  
|                   | Tier 1 Capital |                           |  |        |             |                          |  |                   |      |       |  |                          |            |                         |  |  |     |   |  |                          |            |  |  |  |     
|                   |                | (to Average Assets)       |  |        | 91,649,000  |                          |  |                   | 11.2 |       |  |                          | 32,734,000 |                         |  |  | 4.0 |   |  |                          | 40,918,000 |  |  |  | 5.0  |  
|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  |  

Centennials actual and required capital amounts and ratios are presented in
the table below:

|                   |                |                           |  |        |            |                          |  |                   |      |       |  |                          |            |                         |  |  |     |   |  |                          |            |  |  |  |      |  
|------------------ | -------------- | ------------------------- |  | ------ | ---------- | ------------------------ |  | ----------------- | ---- | ----- |  | ------------------------ | ---------- | ----------------------- |  |  | --- | - |  | ------------------------ | ---------- |  |  |  | ---- | -
|                   |                |                           |  |        |            |                          |  |                   |      |       |  |                          |            |                         |  |  |     |   |  | Regulatory minimum      
|                   |                |                           |  |        |            |                          |  |                   |      |       |  |                          |            |                         |  |  |     |   |  | to be "well capitalized"
|                   |                |                           |  |        |            |                          |  |                   |      |       |  | Regulatory minimum to be |            | under prompt corrective
|                   |                |                           |  | Actual |            | "adequately capitalized" |  | action provisions
|                   |                |                           |  |        |            |                          |  |                  
|                   |                |                           |  | Amount |            | Ratio                    |  | Amount            |      | Ratio |  | Amount                   |            | Ratio                  
|                   |                |                           |  |        |            |                          |  |                   |      |       |  |                          |            |                        
|December 31, 2001: |                |                           |  |        |            |                          |  |                   |      |       |  |                          |            |                         |  |  |     |   |  |                          |            |  |  | 
|                   | Total Capital  |                           |  |        |            |                          |  |                   |      |       |  |                          |            |                         |  |  |     |   |  |                          |            |  |  |  |     
|                   |                | (to Risk-Weighted Assets) |  | $      | 97,277,000 |                          |  |                   | 12.7 | %     |  | $                        | 61,455,000 |                         |  |  | 8.0 | % |  | $                        | 76,819,000 |  |  |  | 10.0 | %
|                   | Tier 1 Capital |                           |  |        |            |                          |  |                   |      |       |  |                          |            |                         |  |  |     |   |  |                          |            |  |  |  |     
|                   |                | (to Risk-Weighted Assets) |  |        | 87,663,000 |                          |  |                   | 11.4 |       |  |                          | 30,728,000 |                         |  |  | 4.0 |   |  |                          | 46,091,000 |  |  |  | 6.0  |  
|                   | Tier 1 Capital |                           |  |        |            |                          |  |                   |      |       |  |                          |            |                         |  |  |     |   |  |                          |            |  |  |  |     
|                   |                | (to Average Assets)       |  |        | 87,663,000 |                          |  |                   | 10.7 |       |  |                          | 32,651,000 |                         |  |  | 4.0 |   |  |                          | 40,814,000 |  |  |  | 5.0  |  
|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  |  

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18. Parent company financial information

Condensed financial information for Centennial
Bancorp(Parent company only) is presented as follows:

CONDENSED BALANCE SHEETS (Unconsolidated)

|                                                          |                                            |   |              |             |      |   |            |            | 
|--------------------------------------------------------- | ------------------------------------------ | - | ------------ | ----------- | ---- | - | ---------- | ---------- | 
|                                                          |                                            |   | December 31,
|                                                          |                                            |   |             
|                                                          |                                            |   | 2001         |             | 2000
|                                                          |                                            |   |              |             |     
|Assets                                                    |                                            |   |              |             |      |   |            |           
|Cash and cash equivalents, deposited with
Centennial      |                                            | $ | 3,570,033    |             |      | $ | 195,368    |           
|Time deposit with a financial
institution                 |                                            |   | 100,000      |             |      |   |           |           
|Equity securities
available-for-sale                      |                                            |   | 627,475      |             |      |   | 556,250    |           
|Equipment, net                                            |                                            |   | 44,354       |             |      |   | 55,810     |           
|Deferred tax assets                                       |                                            |   | 580,490      |             |      |   | 504,318    |           
|Investment in subsidiary, at cost plus equity in earnings |                                            |   | 95,151,877   |             |      |   | 88,255,567 |           
|Other assets                                              |                                            |   | 552,545      |             |      |   | 3,160,883  |           
|                                                          |                                            |   |              |             |      |   |            |           
|                                                          | Total assets                               |   | $            | 100,626,774 |      |   | $          | 92,728,196 | 
|Liabilities and shareholders equity                      |                                            |   |              |             |      |   |            |           
|Accrued liabilities                                       |                                            | $ | 1,454,249    |             |      | $ | 2,545,201  |           
|Shareholders equity                                      |                                            |   | 99,172,525   |             |      |   | 90,182,995 |           
|                                                          |                                            |   |              |             |      |   |            |           
|                                                          | Total liabilities and shareholders equity |   | $            | 100,626,744 |      |   | $          | 92,728,196 | 
|                                                          |                                            |   |              |             |      |   |            |           

CONDENSED STATEMENTS OF INCOME (Unconsolidated)

|                                                                                                                 |                                 |                                                                                              |                |         |           |           |            |         |                          |           |            |         |            |           | 
|---------------------------------------------------------------------------------------------------------------- | ------------------------------- | -------------------------------------------------------------------------------------------- | -------------- | ------- | --------- | --------- | ---------- | ------- | ------------------------ | --------- | ---------- | ------- | ---------- | --------- | 
|                                                                                                                 |                                 |                                                                                              |                |         |           |           |            |         | Years ended December 31, |           |            |         |           
|                                                                                                                 |                                 |                                                                                              |                |         |          
|                                                                                                                 |                                 |                                                                                              |                |         | 2001      |           | 2000       |         | 1999                    
|                                                                                                                 |                                 |                                                                                              |                |         |           |           |            |         |                         
|Income:                                                                                                          |                                 |                                                                                              |                |         |           |           |            |         |                          |           |            |        
|                                                                                                                 | Interest income from subsidiary |                                                                                              | $              | 48,414  |           |           | $          | 15,955  |                          |           | $          | 103,815 |           
|                                                                                                                 | Other income                    |                                                                                              |                | 157,865 |           |           |            |        |                          |           |            |        |           
|                                                                                                                 |                                 |                                                                                              |                |         |           |           |            |         |                          |           |            |         |           
|                                                                                                                 |                                 |                                                                                              | Total income   |         |           | 206,279   |            |         |                          | 15,955    |            |         |            | 103,815   | 
|Expenses:                                                                                                        |                                 |                                                                                              |                |         |           |           |            |         |                          |           |            |        
|                                                                                                                 | Salaries and employee benefits  |                                                                                              |                | 550,984 |           |           |            | 677,004 |                          |           |            | 702,931 |           
|                                                                                                                 | Other                           |                                                                                              |                | 456,439 |           |           |            | 424,068 |                          |           |            | 343,936 |           
|                                                                                                                 |                                 |                                                                                              |                |         |           |           |            |         |                          |           |            |         |           
|                                                                                                                 |                                 |                                                                                              | Total expenses |         |           | 1,007,423 |            |         |                          | 1,101,072 |            |         |            | 1,046,867 | 
|Loss
before income tax benefit, dividends from Centennial and equity in
undistributed net earnings of subsidiary |                                 |                                                                                              | (801,144       | )       |           |           | (1,085,117 | )       |                          |           | (943,052   | )      
|                                                                                                                 |                                 | Income tax benefit                                                                           |                |         | 321,865   |           |            |         | 419,680                  |           |            |         | 366,030    |          
|                                                                                                                 |                                 |                                                                                              |                |         |           |           |            |         |                          |           |            |         |           
|                                                                                                                 |                                 | Loss
before dividends from Centennial and equity in undistributed net earnings
of subsidiary |                |         | (479,279  | )         |            |         | (665,437                 | )         |            |         | (577,022   | )        
|                                                                                                                 |                                 | Dividends from Centennial                                                                    |                |         | 6,000,000 |           |            |         |                         |           |            |         |           |          
|                                                                                                                 |                                 | Equity in undistributed net earnings
of subsidiary                                           |                |         | 8,685,630 |           |            |         | 14,868,016               |           |            |         | 12,683,787 |          
|                                                                                                                 |                                 |                                                                                              |                |         |           |           |            |         |                          |           |            |         |           
|Net income                                                                                                       |                                 | $                                                                                            | 14,206,351     |         |           | $         | 14,202,579 |         |                          | $         | 12,106,765 |        
|                                                                                                                 |                                 |                                                                                              |                |         |           |           |            |         |                          |           |            |         |           

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CONDENSED STATEMENTS OF CASH FLOWS (Unconsolidated)

|                                                     |                                                                                             |                                            |                                                  |                                                     |             |                          |            |            |             |          |            |            |             |         |            |  
|---------------------------------------------------- | ------------------------------------------------------------------------------------------- | ------------------------------------------ | ------------------------------------------------ | --------------------------------------------------- | ----------- | ------------------------ | ---------- | ---------- | ----------- | -------- | ---------- | ---------- | ----------- | ------- | ---------- | -
|                                                     |                                                                                             |                                            |                                                  |                                                     |             | Years ended December 31,
|                                                     |                                                                                             |                                            |                                                  |                                                     |             |                         
|                                                     |                                                                                             |                                            |                                                  |                                                     |             | 2001                     |            | 2000       |             | 1999    
|                                                     |                                                                                             |                                            |                                                  |                                                     |             |                          |            |            |             |         
|Cash flows from operating activities:                |                                                                                             |                                            |                                                  |                                                     |             |                          |            |            |             |          |            |           
|                                                     | Net income                                                                                  |                                            | $                                                | 14,206,351                                          |             |                          | $          | 14,202,579 |             |          | $          | 12,106,765 |            
|                                                     | Adjustments to reconcile net income to net cash
provided by (used in) operating activities: |                                            |                                                  |                                                     |             |                          |            |            |             |          |            |            |            
|                                                     |                                                                                             | Depreciation and amortization              |                                                  |                                                     | 97,244      |                          |            |            | 99,187      |          |            |            | 101,490     |        
|                                                     |                                                                                             | Net earnings of subsidiary                 |                                                  |                                                     | (14,685,630 | )                        |            |            | (14,868,346 | )        |            |            | (12,683,787 | )      
|                                                     |                                                                                             | Dividends from Centennial                  |                                                  |                                                     | 6,000,000   |                          |            |            |            |          |            |            |            |        
|                                                     |                                                                                             | Deferred income taxes                      |                                                  |                                                     | (76,172     | )                        |            |            | 853,177     |          |            |            | (873,249    | )      
|                                                     |                                                                                             | Changes in certain assets and liabilities: |                                                  |                                                     |             |                          |            |            |             |          |            |            |             |        
|                                                     |                                                                                             | Other assets                               |                                                  |                                                     | 4,561,050   |                          |            |            | (2,734,683  | )        |            |            | (382,763    | )      
|                                                     |                                                                                             | Accrued liabilities                        |                                                  |                                                     | (1,801,906  | )                        |            |            | 1,179,031   |          |            |            | 55,518      |        
|                                                     |                                                                                             |                                            |                                                  |                                                     |             |                          |            |            |             |          |            |            |            
|                                                     |                                                                                             |                                            |                                                  | Net cash provided by (used in)
operating activities |             |                          | 8,300,937  |            |             |          | (1,269,055 | )          |             |         | (1,676,026 | )
|Cash flows used in investing activities:             |                                                                                             |                                            |                                                  |                                                     |             |                          |            |            |             |          |            |           
|                                                     |                                                                                             |                                            | Purchase of equity securities
available-for-sale |                                                     |             |                         |            |            |             | (513,260 | )          |            |             |        |           
|Cash flows from financing activities:                |                                                                                             |                                            |                                                  |                                                     |             |                          |            |            |             |          |            |           
|                                                     |                                                                                             |                                            | Payment of cash dividends                        |                                                     |             | (1,401,317               | )          |            |             |         |            |            |             |        |           
|                                                     |                                                                                             |                                            | Proceeds from exercise of stock options          |                                                     |             | 281,860                  |            |            |             | 495,496  |            |            |             | 383,619 |           
|                                                     |                                                                                             |                                            | Repurchases of common stock                      |                                                     |             | (3,706,815               | )          |            |             | (490,329 | )          |            |             |        |           
|                                                     |                                                                                             |                                            |                                                  |                                                     |             |                          |            |            |             |          |            |            |            
|                                                     |                                                                                             |                                            |                                                  | Net cash provided by (used in)
financing activities |             |                          | (4,826,272 | )          |             |          | 5,167      |            |             |         | 383,619    |  
|                                                     |                                                                                             |                                            |                                                  |                                                     |             |                          |            |            |             |          |            |            |            
|Net increase (decrease) in cash and cash equivalents |                                                                                             |                                            | 3,474,665                                        |                                                     |             |                          | (1,777,148 | )          |             |          | (1,292,407 | )         
|Cash and cash equivalents at beginning of year       |                                                                                             |                                            | 195,368                                          |                                                     |             |                          | 1,972,516  |            |             |          | 3,264,923  |           
|                                                     |                                                                                             |                                            |                                                  |                                                     |             |                          |            |            |             |          |            |            |            
|Cash and cash equivalents at end of year             |                                                                                             | $                                          | 3,670,033                                        |                                                     |             | $                        | 195,368    |            |             | $        | 1,972,516  |           
|                                                     |                                                                                             |                                            |                                                  |                                                     |             |                          |            |            |             |          |            |            |            

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Quarterly Financial Data (Unaudited)

|                           |         |         |        |         |  |         |        |         |  |         |        |     |  |   |        |     |  |   |        |     | 
|-------------------------- | ------- | ------- | ------ | ------- |  | ------- | ------ | ------- |  | ------- | ------ | --- |  | - | ------ | --- |  | - | ------ | --- | 
|(Dollars in
thousands,     |         | First   |        | Second  |  | Third   |        | Fourth  |  | Fifth  
|except per-share amounts)  |         | Quarter |        | Quarter |  | Quarter |        | Quarter |  | Quarter
|                           |         |         |        |         |  |         |        |         |  |        
|2001                       |         |         |        |         |  |         |        |         |  |         |        |     |  |   |        |     |  |   |        |    
|Interest income            |         | $       | 19,986 |         |  | $       | 18,549 |         |  | $       | 17,688 |     |  | $ | 16,354 |     |  | $ | 72,577 |    
|Interest expense           |         |         | 7,872  |         |  |         | 6,695  |         |  |         | 5,317  |     |  |   | 4,020  |     |  |   | 23,904 |    
|                           |         |         |        |         |  |         |        |         |  |         |        |     |  |   |        |     |  |   |        |    
|Net interest income        |         |         | 12,114 |         |  |         | 11,854 |         |  |         | 12,371 |     |  |   | 12,334 |     |  |   | 48,673 |    
|Loan loss provision        |         |         | 950    |         |  |         | 975    |         |  |         | 1,050  |     |  |   | 975    |     |  |   | 3,950  |    
|Noninterest income         |         |         | 1,399  |         |  |         | 1,550  |         |  |         | 1,408  |     |  |   | 1,823  |     |  |   | 6,180  |    
|Noninterest expense        |         |         | 6,767  |         |  |         | 7,244  |         |  |         | 7,051  |     |  |   | 6,887  |     |  |   | 27,949 |    
|                           |         |         |        |         |  |         |        |         |  |         |        |     |  |   |        |     |  |   |        |    
|Income before income taxes |         |         | 5,796  |         |  |         | 5,185  |         |  |         | 5,678  |     |  |   | 6,295  |     |  |   | 22,954 |    
|Net income                 |         |         | 3,651  |         |  |         | 3,173  |         |  |         | 3,461  |     |  |   | 3,921  |     |  |   | 14,206 |    
|Earnings per share:        |         |         |        |         |  |         |        |         |  |         |        |     |  |   |        |     |  |   |        |    
|                           | Basic   |         | $      | .14     |  |         | $      | .13     |  |         | $      | .13 |  |   | $      | .16 |  |   | $      | .56 | 
|                           | Diluted |         | $      | .14     |  |         | $      | .13     |  |         | $      | .13 |  |   | $      | .15 |  |   | $      | .55 | 
|2000                       |         |         |        |         |  |         |        |         |  |         |        |     |  |   |        |     |  |   |        |    
|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  |    
|Noninterest income         |         |         | 865    |         |  |         | 858    |         |  |         | 858    |     |  |   | 1,186  |     |  |   | 3,767  |    
|Noninterest expense        |         |         | 6,631  |         |  |         | 7,380  |         |  |         | 6,518  |     |  |   | 6,186  |     |  |   | 26,715 |    
|                           |         |         |        |         |  |         |        |         |  |         |        |     |  |   |        |     |  |   |        |    
|Income before income taxes |         |         | 5,241  |         |  |         | 5,450  |         |  |         | 6,050  |     |  |   | 6,165  |     |  |   | 22,906 |    
|Net income                 |         |         | 3,255  |         |  |         | 3,381  |         |  |         | 3,744  |     |  |   | 3,823  |     |  |   | 14,203 |    
|Earnings per share:        |         |         |        |         |  |         |        |         |  |         |        |     |  |   |        |     |  |   |        |    
|                           | Basic   |         | $      | .13     |  |         | $      | .14     |  |         | $      | .15 |  |   | $      | .15 |  |   | $      | .57 | 
|                           | Diluted |         | $      | .13     |  |         | $      | .13     |  |         | $      | .14 |  |   | $      | .15 |  |   | $      | .55 | 

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Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.




PART III




Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF BANCORP

The information called for by this item will be contained in Centennial
Bancorps definitive proxy statement for the annual meeting of shareholders to
be held on April 24, 2002, and is incorporated herein by reference.




Item 11. EXECUTIVE COMPENSATION

The information called for by this item will be contained in Centennial
Bancorps definitive proxy statement for the annual meeting of shareholders to
be held on April 24, 2002, and is incorporated herein by reference.




Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information called for by this item will be contained in Centennial
Bancorps definitive proxy statement for the annual meeting of shareholders to
be held on April 24, 2002, and is incorporated herein by reference.




Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information called for by this item will be contained in Centennial
Bancorps definitive proxy statement for the annual meeting of shareholders to
be held on April 24, 2002, and is incorporated herein by reference.




PART IV




Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)  The following documents are filed as part of this Annual Report on Form
10-K.

(1)  Financial Statements.

The financial statements are set forth under Item 8 of this report on Form
10-K.

(2)  Financial Statement Schedules.

Financial statement schedules have been omitted since they are either not
required, not applicable, or the information is otherwise included.

(3)  Exhibits.

See the Exhibit Index on page 51

We will furnish you with a copy of any exhibit upon written request and upon
payment of $.25 per page, which represents Centennial Bancorps reasonable
expenses in furnishing the exhibit requested. Written requests to obtain any
exhibit should be sent to Neal T. McLaughlin, Executive Vice President and
Chief Financial Officer, Centennial Bancorp, One SW Columbia Street, Suite
900, Portland, Oregon, 97258.

(b)  Bancorp filed no reports on Form 8-K during the quarter ended December 31,
2001.

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SIGNATURES

Pursuant to the requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

|       |  |                |  |                                                                                         
|------ |  | -------------- |  | ----------------------------------------------------------------------------------------
|       |  |                |  | CENTENNIAL BANCORP                                                                      
|       |  |                |  |                                                                                         
|DATED: |  | March 11, 2002 |  | By /s/ Ted R. WinnowskiTed R. Winnowski, President,
Chief Executive Officer and Director

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

|       |  |                |  |                                                                                                 
|------ |  | -------------- |  | ------------------------------------------------------------------------------------------------
|       |  |                |  | PRINCIPAL EXECUTIVE OFFICER
AND DIRECTOR                                                        
|      
|DATED: |  | March 11, 2002 |  | By /s/ Ted R. WinnowskiTed R. Winnowski, President,
Chief Executive Officer and Director        
|      
|       |  |                |  | CHIEF FINANCIAL OFFICER                                                                         
|      
|DATED: |  | March 11, 2002 |  | By /s/ Neal T. McLaughlinNeal T. McLaughlin
Executive Vice President
and Chief Financial Officer
|      
|       |  |                |  | DIRECTORS:                                                                                      
|      
|DATED: |  | March 11, 2002 |  | By /s/ Dan GiustinaDan Giustina, Director                                                       
|      
|DATED: |  | March 11, 2002 |  | By /s/ Cordy H. JensenCordy H. Jensen, Director                                                 
|      
|DATED: |  | March 11, 2002 |  | By /s/ Robert L. NewburnRobert L. Newburn, Director                                             
|      
|DATED: |  | March 11, 2002 |  | By /s/ Brian B. ObieBrian B. Obie, Director                                                     
|      
|DATED: |  | March 11, 2002 |  | By /s/ Richard C. WilliamsRichard C. Williams,
Director                                         

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Exhibit Index

Exhibit

|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1    |  | Restated Articles of Incorporation (filed as Exhibit 3.1 to
registrants Form 10-K Report for the year ended December 31, 1998, and
incorporated herein by reference)                                                                                                                                                                                                                                                                                     
|3.2    |  | Bylaws, as restated (filed as Exhibit 3.2 to registrants Form 10-K
Report for the year ended December 31, 2000, and incorporated herein by
reference)                                                                                                                                                                                                                                                                                                    
|10.1*  |  | Registrants 1993 Incentive Stock Option Plan, restated as of April 13,
1994 (filed as Exhibit B to registrants Proxy Statement for the 1994
annual shareholder meeting, filed April 29, 1994, and incorporated
herein by reference)                                                                                                                                                                                                                     
|10.2*  |  | Registrants Nonemployee Directors Stock Option Plan (filed as Exhibit
10.2 to registrants Form 10-K Report for the year ended December 31,
1991, and incorporated herein by reference)                                                                                                                                                                                                                                                                 
|10.3*  |  | Registrants 1993 Stock Option Plan for Nonemployee Directors, restated
as of April 13, 1994 (filed as Exhibit A to registrants Proxy
Statement for the 1994 annual shareholder meeting, filed April 29,
1994, and incorporated herein by reference)                                                                                                                                                                                                     
|10.4*  |  | Restated 1995 Stock Incentive Plan (filed as Exhibit A to registrants
Proxy Statement for the 1998 annual shareholder meeting, filed April
13, 1998, and incorporated herein by reference)                                                                                                                                                                                                                                                               
|10.5*  |  | Nonstatutory (Nonqualified) Stock Option Agreement dated November 22,
1995, between registrant and Richard C. Williams (filed as Exhibit
10.10 to registrants Form 10-K for the year ended December 31, 1995,
and incorporated herein by reference)(This option agreement has been
amended to permit the exercise of vested options at any time during the
term of the option notwithstanding the termination of Mr. Williams
employment with registrant)
|10.6   |  | Ground Lease, dated as of February 10, 1994, between registrant and
Pacific Realty Associates, L.P. (filed as Exhibit 10.10 to registrants
Registration Statement on SB-2, filed March 28, 1994, and incorporated
herein by reference)                                                                                                                                                                                                                   
|10.7   |  | Advances, Security and Deposit Agreement, dated February 5, 1999,
between Centennial Bank and the Federal Home Loan Bank of Seattle
(filed as Exhibit 10.7 to registrants Form 10-K for the year ended
December 31, 1999, and incorporated herein by reference)                                                                                                                                                                                          
|10.8*  |  | Centennial Bank Deferred Compensation Plan, dated effective January 1,
1996 (filed as Exhibit 10.13 to registrants Form 10-K for the year
ended December 31, 1996, and incorporated herein by reference)                                                                                                                                                                                                                                                 
|10.9*  |  | Participation Agreement for use with Centennial Bank Deferred
Compensation Plan (filed as Exhibit 10.14 to registrants Form 10-K for
the year ended December 31, 1996, and incorporated herein by reference)                                                                                                                                                                                                                                             
|10.10* |  | Employment Agreement dated July 29, 1997 between Thaddeus (Ted)
Winnowski and Centennial Bank (filed as Exhibit 10.17 to registrants
Form 10-Q Report for the quarter ended September 30, 1997, and
incorporated herein by reference)                                                                                                                                                                                                                    
|10.11* |  | Employment Agreement dated October 1, 1995, between Richard C. Williams
and registrant (filed as Exhibit 10.3 to registrants Form 10-K for the
year ended December 31, 1995, and incorporated herein by reference)                                                                                                                                                                                                                                       
|10.12* |  | First Amendment to Employment Agreement dated December 1, 1997, between
Richard C. Williams and registrant (filed as Exhibit 10.18 to
registrants Form 10-K for the year ended December 31, 1997, and
incorporated herein by reference)                                                                                                                                                                                                                  
|10.13* |  | Second Amendment to Employment Agreement dated May 5, 2000, between
Richard C. Williams and registrant (filed as Exhibit 10 to registrants
Form 10-Q Report for the quarter ended June 30, 2000, and incorporated
herein by reference)                                                                                                                                                                                                                   
|10.14  |  | Pledge, Security and Safekeeping Agreement dated September 30, 1997,
between Centennial Bank and the Federal Home Loan Bank of Seattle
(filed as Exhibit 10.13 to registrants Form 10-K for the year ended
December 31, 1999, and incorporated herein by reference)                                                                                                                                                                                      
|10.15  |  | Letter of Agreement for a Borrower-in-Custody dated May 4, 2000,
between Centennial Bank and the Federal Reserve Bank of San Francisco
(filed as Exhibit 10.14 to registrants Form 10-K for the year ended
December 31, 2000, and incorporated herein by reference)                                                                                                                                                                                      
|10.16* |  | Incentive Stock Option Agreement dated January 20, 1998 between
Thaddeus (Ted) Winnowski and registrant (filed as Exhibit 10.16 to
registrants Form 10-K for the year ended December 31, 2000, and
incorporated herein by reference)                                                                                                                                                                                                                     
|10.17* |  | Nonstatutory Stock Option Agreement dated January 20, 1998, between
Thaddeus (Ted) Winnowski and registrant (filed as Exhibit 10.17 to
registrants Form 10-K for the year ended December 31, 2000, and
incorporated herein by reference)                                                                                                                                                                                                                 
|10.18* |  | Nonstatutory Stock Option Agreement dated January 20, 1999, between
Thaddeus (Ted) Winnowski and registrant (filed as Exhibit 10.18 to
registrants Form 10-K for the year ended December 31, 2000, and
incorporated herein by reference)                                                                                                                                                                                                                 
|10.19* |  | Nonstatutory Stock Option Agreement dated January 20, 1999, between
Thaddeus (Ted) Winnowski and registrant (filed as Exhibit 10.19 to
registrants Form 10-K for the year ended December 31, 2000, and
incorporated herein by reference)                                                                                                                                                                                                                 
|10.20* |  | Incentive Stock Option Agreement dated January 3, 2000, between
Thaddeus (Ted) Winnowski and registrant (filed as Exhibit 10.20 to
registrants Form 10-K for the year ended December 31, 2000, and
incorporated herein by reference)                                                                                                                                                                                                                     
|10.21* |  | Incentive Stock Option Agreement dated January 2, 2001, between
Thaddeus (Ted) Winnowski and registrant                                                                                                                                                                                                                                                                                                                                                   
|10.22* |  | Incentive Stock Option Agreement dated December 19, 2001, between
Thaddeus (Ted) Winnowski and registrant                                                                                                                                                                                                                                                                                                                                                 
|10.23* |  | Form of severance agreement dated May 15, 2001, between registrant and
certain of its officers (filed as Exhibit 10.21 to registrants Form
10-Q for the quarter ended June 30, 2001 and incorporated herein by
reference)                                                                                                                                                                                                                                
|20.1   |  | Portions of definitive proxy statement for 2002 annual shareholder
meeting (to be filed with the Securities and Exchange Commission within
120 days after the end of the fiscal year covered by this Annual
Report)                                                                                                                                                                                                                                       
|21.1   |  | Subsidiaries of registrant                                                                                                                                                                                                                                                                                                                                                                                                                                
|23.1   |  | Consent of Symonds, Evans & Company, P.C., Independent Auditors                                                                                                                                                                                                                                                                                                                                                                                           
|99.1   |  | Certain Factors to Consider in Connection with Forward-Looking
Statements                                                                                                                                                                                                                                                                                                                                                                                 



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|* |  | Management contract or compensatory plan or arrangement.
|- |  | --------------------------------------------------------

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