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, 1996
                                                         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 Number: 0-10489

                               CENTENNIAL BANCORP
                (Name of registrant as specified in its charter)

        Oregon                                          93-0792841
(State of incorporation)                            (I.R.S. Employer
                                                     Identification No.)

                                 675 Oak Street
                              Eugene, Oregon 97401
                    (Address of principal executive offices)

                  Registrant's telephone number: (541) 342-3970

       Securities registered under Section 12(b) of the Exchange Act: None

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

                          Common Stock, $2.00 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. [ ]

  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.
$83,070,000 aggregate market value as of March 14, 1997, 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: 6,553,013 shares of $2.00
par value Common Stock on March 14 1997.

                       DOCUMENTS INCORPORATED BY REFERENCE

Part I and Part II incorporate information by reference from the issuer's Annual
Report to Shareholders for the fiscal year ended December 31, 1996. Part III is
incorporated by reference from the issuer's definitive proxy statement for the
annual meeting of shareholders to be held on May 21, 1997.


<PAGE>


                               CENTENNIAL BANCORP
                                    FORM 10-K
                                  ANNUAL REPORT
                                TABLE OF CONTENTS

PART I                                                                PAGE
------                                                                ----

                  (Portions of Item 1 are incorporated by
                  reference from Centennial Bancorp's
                  Annual Report to Shareholders)

Item 1.           DESCRIPTION OF BUSINESS                               3
                  -----------------------
Item 2.           DESCRIPTION OF PROPERTY                              37
                  -----------------------
Item 3.           LEGAL PROCEEDINGS                                    38
                  -----------------
Item 4.           SUBMISSION OF MATTERS TO A VOTE OF
                  SECURITY HOLDERS                                     39
                  ----------------------------------

PART II
-------

                  (Items 5, 6, 7 and 8 are incorporated by reference from
                  Centennial Bancorp's Annual Report to Shareholders)

Item 5.           MARKET FOR THE REGISTRANT'S COMMON EQUITY
                  AND RELATED STOCKHOLDER MATTERS                      40
                  -----------------------------------------
Item 6.           SELECTED FINANCIAL DATA                              40
                  -----------------------
Item 7.           MANAGEMENT'S DISCUSSION AND ANALYSIS                 40
                  ------------------------------------
Item 8.           FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA          40
                  -------------------------------------------
Item 9.           CHANGES IN AND DISAGREEMENTS WITH
                  ACCOUNTANTS ON ACCOUNTING AND
                  FINANCIAL DISCLOSURE                                 40
                  ---------------------------------

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 May 21, 1997)

Item 10.          DIRECTORS AND EXECUTIVE OFFICERS OF
                  THE REGISTRANT                                       41
                  -----------------------------------
Item 11.          EXECUTIVE COMPENSATION                               41
                  ----------------------
Item 12.          SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
                  OWNERS AND MANAGEMENT                                41
                  ----------------------------------------
Item 13.          CERTAIN RELATIONSHIPS AND RELATED
                  TRANSACTIONS                                         41
                  ---------------------------------
Item 14.          EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
                  AND REPORTS ON FORM 8-K                              41
                  ----------------------------------------

SIGNATURES                                                             46
----------

<PAGE>

                                     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. WHEN USED IN THIS ANNUAL REPORT, THE WORDS "ANTICIPATE,"
"BELIEVE" AND "EXPECT," AND WORDS OR PHRASES OF SIMILAR IMPORT, ARE INTENDED TO
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: CHANGES IN GENERAL BUSINESS AND ECONOMIC CONDITIONS,
PARTICULARLY IN OREGON; CHANGES IN THE INTEREST RATE ENVIRONMENT; COMPETITIVE
FACTORS, INCLUDING INCREASED COMPETITION AND INTEREST RATE PRESSURES; CHANGES IN
REGULATORY OR OTHER EXTERNAL FACTORS; AND OTHER FACTORS LISTED FROM TIME TO TIME
IN BANCORP'S SEC REPORTS, INCLUDING BUT NOT LIMITED TO, EXHIBIT 99.1 TO THIS
ANNUAL REPORT, 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, an Oregon corporation, was organized under the name
Valley West Bancorp in 1981 to become a bank holding company. In 1982,
Centennial Bank and Valley State Bank, both Oregon state-chartered banks, merged
and continued business as Centennial Bank. Immediately following the merger,
Valley West Bancorp acquired all the common stock of Centennial Bank. In May
1990, Valley West Bancorp changed its name to Centennial Bancorp.

     On December 2, 1994, CG Bancorp, an Oregon corporation, merged with and
into Centennial Bancorp in a stock transaction accounted for as a pooling of
interests. CG Bancorp was the parent corporation of Western Oregon Community
Bank, which operated a branch office in Creswell, Oregon in addition to its head
office in Cottage Grove, Oregon. Both branches of Western Oregon Community Bank
became branches of Centennial Bank. In May 1996, Centennial Bank closed its
Creswell office.

     At December 31, 1996, Centennial Bancorp ("Bancorp") has two wholly owned
subsidiaries: Centennial Bank and Centennial Mortgage Co. ("Centennial
Mortgage"). From July 1993 until its sale in August 1995, Bancorp also owned
Harding Fletcher Co. ("Harding Fletcher"), a mortgage banking subsidiary. Unless
the context clearly suggests otherwise, references in this Annual Report on Form
10-K to "Bancorp" include Centennial Bancorp and its subsidiaries.

<PAGE>

     All data in this Annual Report on Form 10-K has been restated to give
retroactive effect to the merger with CG Bancorp. In addition, all share and per
share information has been restated to give retroactive effect to a stock split
declared in January 1997, and for various stock splits and stock dividends
declared in prior years.


     CENTENNIAL BANK

     Centennial Bank is a full-service commercial bank organized in 1977 under
the Oregon Bank Act. Centennial Bank provides a broad range of depository and
lending services to commercial, industrial, and agricultural enterprises,
financial institutions, governmental entities and individuals. Centennial Bank
directs its deposit-taking and lending activities primarily to the communities
in which its branches are located. Its primary marketing focus is on small- to
medium-sized businesses and on professionals in those communities. Centennial
Bank does not provide trust services.

     At December 31, 1996, based on total assets, Centennial Bank was the 11th
largest bank of the 52 commercial banks maintaining offices in Oregon. At that
date, Centennial Bank has six branches; three in Eugene; one in adjacent
Springfield; one in Tigard, a suburb of Portland, Oregon; and the former Western
Oregon Community Bank office in Cottage Grove. An additional branch acquired
from Western Oregon Community Bank, located in Creswell, Oregon, was closed in
May 1996. Eugene and Springfield are at the southern end of the Willamette
Valley on Interstate 5, with Creswell and Cottage Grove located approximately 12
and 20 miles further south, respectively. Centennial Bank opened the Tigard
office in August 1994 and acquired the Western Oregon Community Bank offices in
December 1994.

     At December 31, 1996, Centennial Bank held regulatory approvals for two
additional branches in the Portland metropolitan area, and was negotiating to
purchase property for one of the branches in the Tanasbourne area of Hillsboro,
a suburb of Portland, and to lease a facility for the other branch in the Lloyd
District of Portland. The Lloyd District office negotiations were finalized and
that branch opened in late January 1997. The expected opening date of the
Tanasbourne branch is not known at this time.

     Centennial Bank 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 generating a
substantial volume of loans. Total deposits increased from $268 million at
December 31, 1995 to $340 million at December 31, 1996. Net loans and loans held
for sale increased from $189 million at December 31, 1995 to $266 million at
December 31, 1996.

<PAGE>

     Deposit accounts at Centennial Bank are insured up to applicable limits by
the Federal Deposit Insurance Corporation (the "FDIC"). Centennial Bank is not a
member of the Federal Reserve System. It is a merchant depository for MasterCard
and VISA. Centennial Bank also offers tax-deferred annuities and mutual funds
through a contract arrangement with Financial Marketing Group, Inc. of Portland,
Oregon. Its revenues from this activity are not significant.

     CENTENNIAL MORTGAGE

     Centennial Mortgage began operations in 1987, originating conventional and
federally insured residential mortgage loans for sale in the secondary market.
Centennial Bank regularly provides interim financing, generally for 30 to 60
days, for loans originated by Centennial Mortgage. Centennial Mortgage
originated $67.2 million, $30.0 million and $20.7 million of mortgages in 1996,
1995 and 1994, respectively. Mortgage loans generally are sold without recourse.
Prior to 1996, mortgage loans were generally sold with no servicing rights
retained. However, during 1996, Centennial Bank obtained Federal National
Mortgage Association and Federal Home Loan Mortgage Corporation approval to
service federally insured mortgage loans, and Centennial Bank began retaining
servicing rights for mortgage loans originated by Centennial Mortgage. Under
certain circumstances, Centennial Mortgage may be obligated to repurchase loans
sold in the secondary market.

     Centennial Mortgage has one office in Eugene, Oregon, and opened an office
in Lake Oswego, Oregon, a Portland suburb, in 1993. That office relocated to the
Centennial Bank building in Tigard, Oregon in 1995. Centennial Mortgage intends
to locate an additional office in the Centennial Bank office opened in the Lloyd
District of Portland. That office is expected to open during the second quarter
of 1997.

     Centennial Mortgage established a residential mortgage construction lending
department during 1994 to establish relationships with home builders in the
Eugene/Springfield and Portland-area markets and to attempt to generate
additional permanent loan activity as the houses-under-construction are sold.
Increases in interest rates could adversely affect demand for construction
lending, as well as the ability of borrowers to sell the houses when completed,
and thus could adversely impact Centennial Mortgage's permanent mortgage lending
activity.

     HARDING FLETCHER

     In July 1993, Bancorp formed a subsidiary to acquire certain assets of
Harding Fletcher, a commercial mortgage banker with offices in Oregon (Lake
Oswego), Washington (Tacoma) and California (Sacramento and Fresno). Bancorp
paid $320,000 for the Harding Fletcher assets and an additional $80,000 in
consideration for a noncompetition agreement with Wallace E. Harding, the
President and Chief Executive Officer of Harding Fletcher.

<PAGE>

     In August 1995, Bancorp sold substantially all of the assets of Harding
Fletcher for $741,000. Under the terms of the asset sale agreement, Bancorp
received $155,131 cash for the mortgage servicing rights and certain furniture
and equipment. The balance of the purchase price is to be paid over four years
from the transaction closing date from a percentage of loan servicing income the
buyer receives from the assets sold and from a percentage of loan origination
fees for certain identified transactions. At December 31, 1996, Bancorp had
received $235,000 of the deferred portion of the purchase price.

     Harding Fletcher arranged commercial real estate loans, which were funded
by insurance companies and other institutional investors. The loans arranged
were generally between $500,000 and $35 million in size. Harding Fletcher was
not a party to the loans, but was typically retained to service the loans.

BANCORP CONSOLIDATED STATISTICAL INFORMATION

     Bancorp incorporates by reference the following financial and statistical
information from its Annual Report to Shareholders for the year ended December
31, 1996:

                                                       Centennial Bancorp
                                                          Annual Report
                                                         to Shareholders
                                                             Page No.
                                                       ------------------

Investment securities                                           13
Loans and reserve for loan losses                               14
Deposits                                                         4

<PAGE>

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 result from 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 interest-earning
assets and is influenced by the level and relative mix of interest-earning
assets and interest-bearing liabilities. During 1996, 1995 and 1994, Bancorp's
average interest-earning assets were $323 million, $252 million and $205
million, respectively. During these same years, Bancorp's net interest margin
was 6.70%, 6.66% and 7.24%, respectively.

     AVERAGE BALANCES AND AVERAGE RATES EARNED AND PAID

     The following table sets forth for 1996, 1995 and 1994 information with
regard to average balances of assets and liabilities, as well as total dollar
amounts of interest income from interest-earning assets and interest expense on
interest-bearing liabilities, resultant average yields or rates, net interest
income, net interest spread, net interest margin and the ratio of average
interest-earning assets to average interest-bearing liabilities for Bancorp.

<PAGE>

<TABLE>
<CAPTION>

Year ended December 31,                         1996                              1995                             1994
                                   ------------------------------   ------------------------------   -----------------------------
                                              Interest    Average               Interest   Average               Interest  Average
                                    Average   income or  yield or     Average   income or yield or    Average    income or yield or
                                   balance(1)  expense    rates     balance(1)   expense   rates     balance(1)   expense   rates
                                   ---------- ---------  --------   ----------  --------- --------   ----------  --------- -------
<S>                                <C>        <C>        <C>        <C>         <C>       <C>        <C>         <C>       <C>

ASSETS:                                                                (Dollars in thousands)
Interest-bearing deposits with
  banks                              10,872   $    579     5.33%    $   5,971    $   352     5.90%   $   2,498   $    110    4.40%
Investment securities--
  taxable                            43,928      2,894     6.59        40,116      2,403    5.99        36,632      1,927    5.26
Investment securities--
  tax-exempt(2)                      39,037      3,112     7.97        24,159      1,827    7.56        23,040      1,866    8.10
Federal funds sold                    2,265        122     5.39         5,618        317    5.64         3,349        131    3.91
Loans and loans held for
  sale(3)                           226,965     26,299    11.59       176,384     20,909   11.85       139,672     16,003   11.46
                                   --------    -------              ---------    -------             ---------    -------
   Total interest-earning
     assets/interest income         323,067     33,006    10.22       252,248     25,808   10.23       205,191     20,037    9.77
Reserve for loan losses              (2,237)                           (1,824)                          (1,652)
Cash and due from banks              20,274                            16,975                           14,562
Premises and equipment, net           9,339                             8,477                            5,981
Other assets                          7,201                             5,876                            5,193
                                   --------                          --------                         --------
   Total assets                    $357,644                          $281,752                         $229,275
                                   ========                          ========                         ========
LIABILITIES AND SHAREHOLDERS'
  EQUITY:
Savings and interest-bearing
  demand                           $128,611      4,440     3.45      $107,983      3,352    3.10      $101,256      2,333    2.30
Time deposits                       100,549      5,208     5.18        71,912      4,146    5.77        47,258      2,106    4.46
Short-term borrowings                11,399        833     7.31        13,823        861    6.23         4,259        174    4.09
Long-term debt                       16,443        887     5.39         9,200        645    7.01         7,410        559    7.54
                                   --------    -------               --------     ------              --------    -------
   Total interest-bearing
     liabilities/interest
     expense                        257,002     11,368     4.42       202,918      9,004    4.44       160,183      5,172    3.23
Demand deposits                      66,525                            53,399                           47,406
Other liabilities                     2,617                             2,133                            2,984
                                   --------                          --------                         --------
   Total liabilities                326,144                           258,450                          210,573
Shareholders' equity                 31,500                            23,302                           18,702
                                   --------   --------               --------   --------              --------
   Total liabilities and
     shareholders' equity          $357,644                          $281,752                         $229,275
                                   ========                          ========                         ========
Net interest income                            $21,638                           $16,804                          $14,865
                                               =======                           =======                          =======
Net interest spread (2)                                     5.80%                            5,79%                            6.54%
                                                           =====                            =====                             ====
Net interest margin (2)                                     6.70%                            6.66%                            7.24%
Average interest-earning
  assets to average interest-
  bearing liabilities                   126%                              124%                             128%

<FN>

(1)   Average balances are based on daily averages and include nonaccrual loans.
(2)   Average yield on nontaxable securities, net interest spread and net
      interest margin have been computed on a 34% tax-equivalent basis.
(3)   Nonaccrual loans ($994,600, $631,100 and $783,200 in 1996, 1995 and 1994,
      respectively) have been included in the computation of average loans and
      loans held for sale. Loan fees recognized, included in interest income,
      totalled $3,745,900, $2,541,800 and $2,958,600 in 1996, 1995 and 1994,
      respectively.
</FN>
</TABLE>

<PAGE>

     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.

<TABLE>
<CAPTION>
                                                             1996 vs. 1995                           1995 vs. 1994
                                                               Change in                               Change in
                                                          net interest income                    net interest income
                                                               due to                                   due to
                                                    ----------------------------           -------------------------------
                                                    Volume      Rate      Total            Volume      Rate         Total
                                                    ------      ----      ------           ------      ----         ------
<S>                                                 <C>         <C>       <C>              <C>         <C>          <C>
                                                                               (In thousands)
Interest income:
  Balances due from banks                           $  275     $  (48)   $  227            $  179     $   63        $  242
  Investment securities -- taxable                     240        251       491               196        280           476
  Investment securities -- tax-exempt                1,156        129     1,285                88       (127)          (39)
  Federal funds sold                                  (185)       (10)     (195)              108         78           186
  Loans                                              5,928       (538)     5,390            4,279         627        4,906
                                                    ------     ------     ------           ------      ------       ------
     Total interest income                           7,414       (216)    7,198             4,850        921         5,771
                                                    ------     ------    ------            ------     ------        ------

Interest expense:
  Deposits:
    Savings and interest-bearing
      demand                                           676        412     1,088               182        837         1,019
    Time 1,567                                        (505)     1,062     1,260               780      2,040
  Short-term borrowings                               (164)       136       (28)              493        194           687
  Long-term debt                                       449       (207)      242               130        (44)           86
                                                    ------     ------    ------            ------     ------        ------
     Total interest expense                          2,528       (164)    2,364             2,065      1,767         3,832
                                                    ------     ------    ------            ------     ------        ------
Net interest income                                 $4,886     $  (52)    $4,834           $2,785      $ (846)      $1,939
                                                    ======     ======     ======           ======      ======       ======


</TABLE>

<PAGE>

MARKET AREAS


     Centennial Bank's primary market area is the Eugene/Springfield area at the
southern end of Oregon's Willamette Valley. The populations of Eugene and
Springfield total approximately 170,000. The area's economy depends primarily
upon educational institutions, U.S. and local government, forest products,
general manufacturing (especially small manufacturing and high-technology
industries), health care and tourism. The University of Oregon, located in
Eugene, is the area's largest employer.

     In August 1994, Centennial Bank opened a branch office in Tigard, a suburb
of Portland, Oregon, and in January 1997, it opened a branch office in the Lloyd
District of Portland. The Portland metropolitan area has a diverse economy and a
population of approximately 1.3 million. Management believes the Portland
metropolitan area offers an opportunity to increase Bancorp's asset size and
business operations, and to provide diversification of risk in its loan
portfolio through the diversity of the economic market in the metropolitan area.

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

LENDING ACTIVITIES

     GENERAL

     Bancorp provides a broad range of commercial and real estate lending
services. Currently, the primary focus of Bancorp's lending activities is to
provide commercial loans to small- to medium-sized businesses with annual
revenues typically up to $20 million, and to professionals. Most of Bancorp's
loans are made to customers in the trade areas served by branch offices.

     Bancorp also makes construction loans and makes secured real estate loans,
most of which are sold in the secondary markets. Bancorp makes consumer loans,
primarily to accommodate existing customers, but does not actively pursue such
lending.

     Bancorp strives to maintain sound loan underwriting standards with written
loan policies, conservative individual and branch limits and, depending on the
size of the commitment, reviews by Centennial Bank's Administrative Loan and
Asset/Liability committees. 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. Management 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 Bancorp's loan portfolio (loans and loans held for sale) by type of loan at
December 31 for each of the last five years:

<TABLE>
<CAPTION>

                                                                December 31,
                                   ------------------------------------------------------------------------------
                                     1996             1995              1994             1993              1992
                                   --------         --------          --------        ---------          --------
<S>                                <C>              <C>               <C>             <C>                <C>
                                                           (Dollars in thousands)

Commercial and other               $119,450         $ 78,564          $ 66,845         $ 61,640          $ 48,496
Real estate -- mortgage              73,665           59,204            56,792           44,253            34,774
Real estate -- construction          66,244           44,003            29,337           11,626             5,214
Installment                           6,425            5,929             6,951           10,653             9,179
Lease financing                       3,775            4,001             2,686              138                --
                                   --------         --------          --------         --------          --------
     Total loans and
     loans held for sale            269,559          191,701           162,611          128,310            97,663

  Less deferred loan fees              (929)            (611)             (600)            (394)             (155)
  Less reserve for loan
     losses                          (2,600)          (1,928)           (1,700)          (1,514)           (1,078)
                                   --------         --------          --------         --------          --------

Loans receivable, net              $266,030         $189,162          $160,311         $126,402          $ 96,430
                                   ========         ========          ========         ========          ========

</TABLE>

<PAGE>

     The following table presents the aggregate maturities of loans in each
major category of Bancorp's loan portfolio at December 31, 1996. Actual
maturities may differ from the contractual maturities shown below as a result of
renewals and prepayments.


                                         Due after one                Total
                            Due within     but within   Due after     loans
   Loan category             one year      five years   five years  by category
   -------------            ----------   -------------  ----------  -----------

                             (Dollars in thousands)

Commercial                  $ 85,115       $22,367       $ 9,334      $116,816
Real estate--mortgage         30,713        13,512        25,902        70,127
Real estate--construction     58,516         5,982         1,746        66,244
Installment                    4,778         1,584            63         6,425
Loans held for sale               --            --         3,538         3,538
Lease financing                  113         3,662            --         3,775
Other                          1,950           582           102         2,634
Less deferred loan fees        (384)          (411)         (134)         (929)
                            --------       -------       -------      --------

Total loans by maturity     $180,801       $47,278       $40,551      $268,630
                            ========       =======       =======      ========

     Of Bancorp's $87.8 million of loans that mature after one year, a total of
$75.8 million (86.3%) are fixed-rate loans, and a total of $12.0 million (13.7%)
are variable-rate loans.

     At December 31, 1996, $95.0 million of Bancorp's loans (approximately 35.4%
of its loan portfolio) had fixed interest rates and $173.6 million
(approximately 64.6%) had variable interest rates.

     COMMERCIAL LOANS

     Commercial loans that are not collateralized by real estate represent the
largest category of Bancorp's loans. Bancorp's areas of emphasis include, but
are not limited to, 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.

<PAGE>

         At December 31, 1996, approximately 72% of Bancorp's commercial loans
had floating or adjustable interest rates; the remaining 28% 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, 1996 were $116.8 million, compared to $78.3
million at December 31, 1995 and $66.5 million at December 31, 1994. Management
believes the increases in 1996 and 1995 were primarily a result of Centennial
Bank's business development program and the opening of the branch office in
Tigard, Oregon in August 1994. Nonaccrual loans in this category totalled $1.5
million at December 31, 1996 ($478,000 at December 31, 1995); there were no
restructured loans at December 31, 1996 or 1995.

     REAL ESTATE MORTGAGE LOANS

     Real estate mortgage loans represent Bancorp's second largest category of
loans. Of the $70.1 million of real estate mortgage loans outstanding at
December 31, 1996, $48.6 million were made to commercial customers where the
collateral for the loans included the real estate occupied by the customers'
businesses. Therefore, many loans characterized as real estate mortgage loans
could be characterized as commercial loans that are collateralized by real
estate. Commercial real estate loans typically involve large loan balances to
single borrowers or groups of related borrowers. These borrowers may be more
sensitive to changes in economic conditions than are residential loan customers.
Real estate mortgage loans outstanding increased to $70.1 million at December
31, 1996 from $54.6 million at December 31, 1995. The increase was primarily a
result of the favorable real estate mortgage interest rate market available
during 1996, the demand for housing in the market areas served by Bancorp and
the expansion of Mortgage Co.'s residential mortgage office in the Portland
area. Real estate mortgage loans outstanding decreased to $54.6 million at
December 31, 1995 from $56.8 million at December 31, 1994. The decrease was
primarily a result of customers refinancing or otherwise paying off older
mortgage loans that had higher interest rates. At December 31, 1996 and 1995,
there were no nonaccrual loans or restructured loans in this category.

     At December 31, 1996, $42.4 million (or approximately 60%) of Bancorp's
real estate mortgage loans had fixed interest rates and $27.7 million (or
approximately 40%) had floating or adjustable interest rates. Maturities of the
real estate mortgage loans retained by Bancorp usually range from one to ten
years.

     Bancorp's underwriting standards specify the following maximum
loan-to-value ratios for real estate loans: 90% for loans collateralized by
owner-occupied residences, 85% for other residential loans and for construction
loans, and 85% for commercial real estate loans. Management believes that
Bancorp's current real estate mortgage portfolio does not present a material
risk of loan losses.

     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 85%
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 typically sold to secondary-market
investors. At December 31, 1996, the amount of the unguaranteed portion of these
loans retained by Bancorp was not material.

<PAGE>

     REAL ESTATE CONSTRUCTION LOANS

     Bancorp makes construction loans to individuals and contractors to
construct single-family primary residences or second homes and, to a much lesser
extent, small multi-family residential projects. The construction loans
represent custom homes, pre-sold homes and homes that are not pre-sold. These
loans generally have maturities of six to nine months. Interest rates are
typically adjustable, although fixed-rate loans are also made under appropriate
conditions. Centennial Bank provides funding for all the construction loans
originated by Centennial Mortgage, and Centennial Mortgage provides monitoring
and reporting services on all construction loans made by Centennial Bank.

     Construction financing is generally considered to involve a higher degree
of risk than long-term financing on improved, occupied real estate. The risk of
loss on construction loans depends largely upon the accuracy of the initial
estimate of the property's value at completion of construction or development
and the estimated cost (including interest) of construction. If the estimate of
construction costs proves to be inaccurate, Bancorp might have to advance funds
beyond the amount originally committed to permit completion of the project and
to protect its security position. Bancorp might also be confronted, at or prior
to maturity of the loan, with a project with insufficient value to ensure full
repayment. 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. 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, 1996 and 1995, there were no nonaccrual loans or
restructured loans in this category.

     INSTALLMENT LOANS

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

<PAGE>

     Installment loans were $6.4 million at December 31, 1996 compared to $5.9
million at December 31, 1995 and $7.0 million at December 31, 1994. These modest
level of installment loans to individuals at the periods presented 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 the market areas served by Bancorp. At December 31,
1996 and 1995, there were no nonaccrual loans or 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 as described in Note 9 of Notes to Consolidated Financial Statements of
Bancorp, which are incorporated by reference from Bancorp's 1996 Annual Report
to Shareholders. Bancorp applies the same credit standards to these commitments
as it uses in all its lending processes and has included these commitments in
its lending risk evaluations. Collateral for these commitments may include cash,
securities and/or real estate.

     CREDIT AUTHORITY AND LOAN LIMITS

     All Bancorp loans and other credit facilities are subject to credit and
collateral approval procedures and loan amount limitations. Individual loan
officers and branch managers have authority to approve loans in amounts up to
established limits, generally ranging from $25,000 to $50,000. Loans in excess
of branch limits, or not in conformance with credit or collateral criteria, are
reviewed by Centennial Bank's Administrative Loan Committee. The Asset/Liability
Committee, a majority of whom are nonofficer members of Centennial Bank's Board
of Directors, reviews loan applications over established Administrative Loan
Committee limits. All loans in excess of $25,000 to executive officers and
directors of Bancorp or any of its subsidiaries must be approved by the
Asset/Liability Committee and ratified by Centennial Bank'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 aggregate paid-up and
unimpaired capital and surplus. At December 31, 1996, Centennial Bank's
permissible loan limit was $3.5 million (or $5.8 million if the loan is
collateralized by real estate).

     Loan pricing decisions are based on an evaluation of risk, cost of funds,
operating and administrative costs, a reserve for loan losses, desired profit
margin and other factors. Loan risk is based in part on a risk rating assigned
to each loan. Bancorp uses a computerized pricing system that analyzes a
borrower's total contribution to net interest income.

<PAGE>

     Centennial Bank sells loan participations to accommodate borrowers whose
financing needs exceed Centennial Bank's lending limits, and to diversify risk.
Centennial Bank occasionally purchases participations in loans from
correspondent banks. Centennial Bank's policies prohibit aggregate purchased
participations in excess of 10% of Centennial Bank's loan portfolio.

NONPERFORMING ASSETS

     Nonperforming 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 Bancorp's nonperforming assets at the
end of each of the last five years:

<TABLE>
<CAPTION>

                                                                                December 31,
                                                          -------------------------------------------------------
                                                           1996        1995         1994         1993        1992
                                                          ------      ------       ------       ------      -----
<S>                                                       <C>         <C>          <C>          <C>         <C>
                                                                           (Dollars in thousands)
Nonperforming loans:
  Loans past due 90 days or more                          $  420      $  645      $  190       $  186      $  203
  Nonaccrual loans                                         1,480         478         693          881          --
  Restructured loans                                          --          --          --           --          --
                                                         -------     -------     -------      -------     -------
     Total nonperforming loans                             1,900       1,123         883        1,067         203
  Other real estate owned (1)                                 --          --         392          221         549
                                                          ------     -------      ------       ------      ------
     Total nonperforming assets                           $1,900      $1,123      $1,275       $1,288      $  752
                                                          ======      ======      ======       ======      ======

Reserve for loans losses                                  $2,600      $1,928      $1,700       $1,514      $1,078
Ratio of total nonperforming assets
  to total assets                                            .47%        .35%        .49%         .58%        .41%
Ratio of total nonperforming loans
  to total loans                                             .71%        .59%        .54%         .83%        .21%
Ratio of reserve for loan losses
  to total nonperforming loans                               137%        172%        193%         142%        531%

<FN>


(1)  OREO consists of real estate acquired through foreclosure or by a deed
     in lieu of foreclosure. The OREO specified above does not include Bancorp's
     former head office facility, which was reclassified as OREO in 1993 and
     sold in 1994.

</FN>
</TABLE>

<PAGE>

     Bancorp's total nonperforming assets increased by $777,000 during 1996 and
decreased by $152,000 during 1995. Total nonperforming assets, as a percentage
of total assets, increased to .47% at December 31, 1996 from .35% at December
31, 1995 and .49% at December 31, 1994. Nonperforming loans, comprised of loans
past due 90 days or more, nonaccrual loans and restructured loans, increased by
$777,000 during 1996 and increased by $240,000 during 1995. Nonperforming loans,
as a percentage of total loans, increased to .71% at December 31, 1996 from .59%
at December 31, 1995 and from .54% at December 31, 1994.

     The accrual of interest on a loan is discontinued when, in management's
judgment, the future collectibility 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, Bancorp's policy is to reverse, and charge against current
income, interest previously accrued but uncollected. Interest subsequently
collected on such loans is credited to loan principal if, in the opinion of
management, full collectibility of principal is doubtful. If interest on
nonaccrual loans had been accrued, such income would have been $117,500 in 1996,
$74,000 in 1995 and $77,000 in 1994. No interest income was recognized on these
loans in 1996, 1995 and 1994.

     Restructured loans are those for which concessions have been granted due to
the borrower's weakened financial condition or other factors. Such concessions
may include reduction of interest rates below rates otherwise available to that
borrower or deferral of interest or principal. Interest on restructured loans is
accrued at the restructured rate when it is anticipated that no loss of original
principal will occur. Bancorp had no restructured loans at December 31, 1996 or
1995.

     OREO consists of real estate acquired by Bancorp through foreclosure or by
a deed in lieu of foreclosure. Properties in OREO are carried at the lower of
fair market value (less anticipated selling costs) or the principal balance of
the related loan. Any excess of the loan balance over fair value of the property
is charged to the reserve for loan losses.

     At December 31, 1996 and 1995, Bancorp held no OREO. At December 31, 1994,
Bancorp's OREO consisted of one single-family dwelling with acreage in
Springfield, Oregon. At that date, the book value of the property was $392,000.
The property was sold during 1995 for a loss of $25,000.

ANALYSIS OF THE RESERVE FOR LOAN LOSSES

     The reserve for loan losses represents management's estimate of the losses
inherent in the loan portfolio. The reserve 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 nonperforming and delinquent loans, borrowers' perceived abilities to
repay, value of collateral, general and local economic conditions and historical
loan loss experience.

     Centennial Bank's Asset/Liability Committee reviews the adequacy of the
reserve for loan losses quarterly. Although determination of the adequacy of the
reserve involves substantial subjective judgment based on the Committee's
analysis of the risk characteristics of the entire loan portfolio, the Committee
also uses three quantitative methods to analyze the adequacy of the reserve.
Under the first method, management assigns a specific percentage to each
nonperforming, substandard or doubtful loan in Bancorp's loan portfolio to
calculate a total amount of average anticipated loan losses.

<PAGE>

     The second method uses the risk-weighted ratings (from one through five)
developed by the FDIC, with management assigning a percentage to the loans in
the various risk categories (using .0025% for loans in the lowest risk category
up to 50% for loans in the highest risk category) to calculate an alternative
amount of possible losses.

     The third method is in accordance with the requirements of Statement of
Financial Accounting Standards No. 114, "Accounting by Creditors for Impairment
of a Loan" ("SFAS 114"), which Bancorp adopted on January 1, 1995. Under SFAS
114, a loan is considered impaired based on current information and events if it
is probable that Bancorp will be unable to collect the scheduled payments of
principal or interest when due according to the contractual terms of the loan
agreement. This policy is generally consistent with Bancorp's nonaccrual policy.
Bancorp also specifically examines all loans greater than $100,000 that are
identified on an internal watch list. Loans which are over 90 days contractually
delinquent and loans which have developed inherent problems prior to being 90
days delinquent may be considered impaired. An insignificant delay or shortfall
in the amount of payments is not an event that, when considered in isolation,
would automatically cause a loan to be considered impaired for purposes of SFAS
114. The measurement of impaired loans is generally based on the present value
of expected future cash flows discounted at the historical effective interest
rate, except that all collateral-dependent loans are measured for impairment
based on the fair value of the collateral.

     The amounts calculated by the quantitative methods are then compared by the
Committee to the reserve for loan losses in evaluating the adequacy of the
reserve.

     As a result of declines in real estate market values in many parts of the
United States in the late 1980's and the significant losses experienced by many
financial institutions, regulators have increasingly scrutinized loan portfolios
and loss reserves, particularly with respect to commercial and multi-family
residential real estate loans. Management believes that Bancorp's reserve for
loan losses is adequate to cover anticipated losses and is in accordance with
generally accepted accounting principles. There can be no assurance, however,
that management will not decide to increase the reserve for loan losses or that
regulators will not require Bancorp to increase the reserve, either of which
events could adversely affect Bancorp's results of operations. Further, there
can be no assurance that Bancorp's actual loan losses will not exceed its
reserve.

<PAGE>

     The following table sets forth information regarding changes in Bancorp's
reserve for loan losses for each of the last five years:

<TABLE>
<CAPTION>

                                                             At or for the year ended December 31,
                                             -------------------------------------------------------------------
                                               1996           1995            1994           1993           1992
                                             --------       --------        --------       --------       ------
<S>                                          <C>            <C>             <C>            <C>            <C>
                                                                     (Dollars in thousands)

Loans and loans held for sale
  at year-end                                $268,630       $191,090       $162,011       $127,916        $97,508
                                             ========       ========       ========       ========        =======
Average loans and
  loans held for sale                        $226,965       $176,384       $139,672       $114,414        $98,476
                                             ========       ========       ========       ========        =======
Reserve for loan losses,
  beginning of year                          $  1,928       $  1,700        $ 1,514        $ 1,078        $ 1,116
Charge-offs:
  Commercial and other                            (89)          (128)          (108)           (18)          (112)
  Real estate -- construction                      --             --             --             --             --
  Real estate -- mortgage                          --             --            (17)            --           (160)
  Installment                                     (20)           (34)           (22)           (17)           (32)
                                             --------       --------        -------        -------        -------
     Total charge-offs                           (109)          (162)          (147)           (35)          (304)
                                             --------       --------        -------        -------        -------
Recoveries:
  Commercial and other                             24             10              8              7              5
  Real estate -- construction                      --              3             --            149             --
  Real estate -- mortgage                          20              7             --             --             --
  Installment                                       2             20             10              5              5
                                             --------       --------        -------        -------        -------
     Total recoveries                              46             40             18            161             10
                                             --------       --------        -------        -------        -------
Net loans (charged off) recovered                 (63)          (122)          (129)           126           (294)
Provision for loan losses                         735            350            315            310            256
                                             --------       --------        -------        -------        -------
Reserve for loan losses
  at year-end                                $  2,600       $  1,928        $ 1,700        $ 1,514        $ 1,078
                                             ========       ========        =======        =======        =======

Ratio of net loans (charged off)
  recovered to average
  loans outstanding                             (.03)%         (.07)%         (.09)%           .11%         (.30)%
Ratio of reserve for loan losses
  to loans at year-end                           .97%         1.01%           1.05%          1.18%          1.11%

</TABLE>

         Anticipated loan losses are charged against the reserve for loan losses
when, in management's opinion, ultimate recovery is unlikely or when bank
examiners require a charge-off. As the actual amount of loss with respect to
specific loans is often dependent upon future events (including liquidation of
collateral), Bancorp cannot accurately predict precisely what losses, if any,
will be sustained with respect to specific loans. Historical experience has also
shown that, at any particular time, loan losses may exist in a loan portfolio
that have not yet been identified. For these reasons, although management
analyzes specific loans in determining the adequacy of its reserve for loan
losses, it does not normally allocate the reserve to specific groups or

<PAGE>

categories of loans. Management estimates, however, that the allocation of the
reserve for loan losses by loan category at the end of each of the last five
years was as set forth below:


                                        Amount of              Loans in
                                         reserve             category as a
                                           for               percentage of
                                          loan                 total gross
                                         losses                  loans
                                        --------             -------------

                                               (Dollars in thousands)
    December 31, 1996
    -----------------
Commercial and other                     $1,500                    46.5%
Real estate -- mortgage                     250                    26.5
Real estate -- construction                 750                    25.0
Installment                                  50                     2.0
Unallocated                                  50                      --
                                         ------                   -----
  Total                                  $2,600                   100.0%
                                         ======                   =====

    December 31, 1995
    -----------------
Commercial and other                     $1,200                    44.1%
Real estate -- mortgage                     125                    29.2
Real estate -- construction                 520                    23.5
Installment                                  35                     3.2
Unallocated                                  48                      --
                                         ------                   -----
  Total                                  $1,928                   100.0%
                                         ======                   =====

    December 31, 1994
    -----------------
Commercial and other                     $1,000                    42.8%
Real estate -- mortgage                     125                    34.9
Real estate -- construction                 500                    18.0
Installment                                  35                     4.3
Unallocated                                  40                      --
                                         ------                   -----
  Total                                  $1,700                   100.0%
                                         ======                   =====

    December 31, 1993
    -----------------
Commercial and other                     $  550                    46.8%
Real estate -- mortgage                     120                    37.0
Real estate -- construction                 115                     9.1
Installment                                  35                     7.1
Unallocated                                 696                      --
                                         ------                   -----
  Total                                  $1,516                   100.0%
                                         ======                   =====

    December 31, 1992
    -----------------
Commercial and other                     $  550                    49.7%
Real estate -- mortgage                     120                    35.6
Real estate -- construction                 100                     5.3
Installment                                  30                     9.4
Unallocated                                 278                      --
                                         ------                   -----
  Total                                  $1,078                   100.0%
                                         ======                   =====


<PAGE>


     The following table details the carrying value of Bancorp's impaired loans,
in accordance with SFAS 114, by type of loan as of December 31, 1996 and 1995:

                                                                          Net
                                Recorded          Valuation            Carrying
                                 Amount           Allowance              Value
                               ----------         ---------            --------
   December 31, 1996
   -----------------
Commercial                     $1,412,000          $505,000            $907,000
                               ==========          ========            ========


   December 31, 1995
   -----------------
Commercial                     $  424,000          $100,000            $324,000
                               ==========          ========            ========


     The above impaired loans were measured based on the fair value of the
loan's collateral. The allowance for loan losses for all other loans is
determined based on the methodology discussed above.


INVESTMENT ACTIVITIES

     Bancorp's investment portfolio is comprised of U.S. government securities,
municipal securities, mortgage-backed securities, corporate bonds and equity
securities.

     Bancorp's primary investment objectives are to maintain liquidity and to
generate after-tax profits consistent with the risk guidelines established by
the Board of Directors. At December 31, 1996 and 1995, Blount Investment Group,
of Eugene, Oregon, advised Bancorp with respect to the investment portfolio.
Centennial Bank has extended loans to Blount Investment Group and its
affiliates. Such loans are made on terms, including interest rates and
collectibility, no more favorable to the borrowers than loans to other
borrowers.

     All of the securities held in the investment portfolio were classified as
available-for-sale at December 31, 1996 and 1995. Those securities will be sold
as necessary to provide liquidity and to respond to interest rate changes.
Because these securities are carried at their market value, fluctuations in
interest rates could affect the carrying value of these securities and,
therefore, the reported shareholders' equity of Bancorp.

<PAGE>

     The following table provides the carrying values of Bancorp's investment
portfolio at the end of each of the last three years. See Note 2 of Notes to
Consolidated Financial Statements for more information about investment
securities held at December 31, 1996 and 1995.


                                               December 31,
                                     ----------------------------------
                                       1996         1995          1994
                                     -------      -------       -------
                                              (In thousands)

U.S. Treasury securities             $ 1,405      $ 8,428       $15,162
U.S. Government agencies              32,594       29,422         8,457
States and political subdivisions     39,135       23,845        17,088
Corporate bonds                        2,249        2,300         5,118
Mortgage-backed securities             7,271        8,929         8,727
                                     -------      -------       -------
  Total debt securities               82,654       72,924        54,552
Federal Home Loan Bank stock           4,366        4,040         4,243
                                     -------      -------       -------
     Total investment securities     $87,020      $76,964       $58,795
                                     =======      =======       =======



<PAGE>


     The following table provides the carrying values, principal amounts,
maturities and weighted average yields of Bancorp's investment securities at
December 31, 1996, all of which are classified as available-for-sale:

                                      Carrying
                                        value                      Weighted
                                      (fair market    Principal     average
        Type and maturity               value)          amount      yield(1)
        -----------------             ------------    ---------    ---------
                                                  (Dollars in thousands)
U.S. Treasuries
  Due after 1 but within 5 years       $ 1,155         $ 1,150        6.06%
  Due after 5 but within 10 years          250             250        5.83
                                          ----             ---
    Total U.S. Treasuries                1,405           1,400        6.01

U.S. Government Agencies
  Due within 1 year                        201             200        8.20
  Due after 1 but within 5 years         2,503           2,500        7.03
  Due after 5 but within 10 years       29,238          29,700        7.04
  Due after 10 years                       652             650        7.15
                                       -------         -------
    Total U.S. Government Agencies      32,594          33,050        7.05

States and political subdivisions
  Due within 1 year                        303             300        7.27
  Due after 1 but within 5 years         4,242           4,150        7.54
  Due after 5 but within 10 years       10,669          10,380        8.08
  Due after 10 years                    23,921          24,200        8.02
                                       -------         -------
    Total states and political
      subdivisions                      39,135          39,030        7.98

Corporate bonds
  Due after 1 but within 5 years           193             200        6.30
  Due after 5 but within 10 years        2,056           2,010        6.12
                                       -------         -------
    Total corporate bonds                2,249           2,210        6.14

Mortgage-backed securities
 (U.S. Government agencies)              7,271           7,351        5.47
                                       -------         -------

        Total debt securities           82,654          83,041        7.30

Equity securities                        4,366           4,366
                                       -------         -------

             Total securities          $87,020         $87,407
                                       =======         =======
------------

(1)  Weighted average yield on state and political subdivisions has been
     computed on a 34% tax-equivalent basis.


<PAGE>


DEPOSITS

     Centennial Bank 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
negotiable order of withdrawal ("NOW") 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 Bank
does not pay brokerage commissions to attract deposits.

     Centennial Bank has developed a special account for customers age 50 or
older (called the "50+ Account"). The 50+ Account is designed to attract
customers in this age group, who generally have higher than average deposits and
favorable ability to repay borrowings. Centennial Bank 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 Centennial Bank's lending activities. Management
believes that Centennial Bank's percentage of demand deposits (relative to total
deposits) is among the highest in Oregon.

     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, 1996, 1995 and 1994:

                              1996                1995               1994
                       ----------------    ----------------   ----------------
                       Average             Average            Average
                       Balance   Rate      Balance   Rate     Balance    Rate
                       -------   ----      -------   ----     -------    ----
                                    (Dollars in thousands)

Noninterest-bearing
  demand               $ 66,525   N/A      $ 53,399   N/A     $ 47,406    N/A
Interest-bearing
  demand                114,445   3.61%      92,937   3.23%     82,916    2.45%
Savings                  14,166   2.15       15,046   2.34      18,340    2.48
CDs                     100,549   5.18       71,912   5.77      47,258    4.24
                       --------            --------           --------
    Total              $295,685   3.26     $233,294   4.17    $195,920    2.31
                       ========            ========           ========



<PAGE>


     The following table shows the dollar amount of CDs that had balances of
$100,000 or more at December 31, 1996 and 1995:


                                                        December 31,
                                                  --------------------
                                                    1996         1995
                                                  -------      -------
                                                      (In thousands)
CDs $100,000 or over with remaining maturity:
  Three months or less                            $17,451      $ 9,788
  Over three months through six months             28,220       19,449
  Over six months through twelve months             3,027        1,472
  Over twelve months                                  111          105
                                                   -------      -------
    Total                                          $48,809      $30,814
                                                   =======      =======



SHORT-TERM BORROWINGS

     At December 31, 1996, Bancorp's short-term borrowings consisted of
securities sold under agreements to repurchase totalling $4.3 million and
advances from the Federal Home Loan Bank of Seattle totalling $8.0 million.

     Securities sold under agreements to repurchase generally range in duration
from one to eighty-nine days. The advances from the Federal Home Loan Bank of
Seattle are due May 1997 and bear interest of 5.79%.

     The following table sets forth certain information with respect to
short-term borrowings at December 31 and during each of 1996, 1995 and 1994:

                                                 December 31,
                                      --------------------------------
                                        1996         1995         1994
                                      --------     --------     ------
                                             (Dollars in thousands)

Amount outstanding at year-end        $12,316      $11,419      $11,840
Weighted average interest rate
  at year-end                            5.78%        5.59%        6.23%
Maximum amount outstanding at any
         month-end during the year    $15,264      $16,458      $16,541
Daily average amount outstanding
         during the year              $11,399      $13,823      $ 4,259
Average weighted interest rate
         during the year                 7.31%        6.23%        4.09%

<PAGE>


LONG-TERM DEBT

     At December 31, 1996, Bancorp's long-term debt consisted of $10.0 million
of funds advanced from the Federal Home Loan Bank of Seattle to Centennial Bank.
Interest on the debt is payable monthly at the rate of 6.14%. The debt matures
on August 6, 1998, and is collateralized by Federal Home Loan Bank of Seattle
stock, funds on deposit with the Federal Home Loan Bank of Seattle, investments
and loans.

     At December 31, 1995, Bancorp's long-term debt consisted of $9.2 million of
7.0% Convertible Redeemable Exchangeable Subordinated Debentures due May 1, 2004
("Debentures"). During 1996, Bancorp issued a call for redemption of the
Debentures. Holders of the Debentures voluntarily converted $9,163,000 of the
Debentures into 922,531 shares of Bancorp's common stock. The amount of debt
converted, net of unamortized issue costs, was credited to common stock and
additional paid-in-capital. Bancorp redeemed the remaining $37,000 of the
Debentures for cash.

RETURN ON EQUITY AND ASSETS

     The following table sets forth Bancorp's return on daily average assets and
equity for 1996, 1995 and 1994:

                                            1996         1995         1994
                                         --------      --------     --------
                                                (Dollars in thousands)

Net income                               $  6,514      $  4,551     $  3,502
Average total assets                      357,644       281,752      229,275
Return on average assets                     1.82%         1.62%        1.53%

Net income                               $  6,514      $  4,551     $  3,502
Average equity                             31,500        23,302       18,702
Return on average equity                    20.68%        19.53%       18.72%

Average total equity                     $ 31,500      $ 23,302     $ 18,702
Average total assets                      357,644       281,752      229,275
Average total equity to assets ratio         8.81%         8.27%        8.16%

<PAGE>

CHANGES IN ACCOUNTING PRINCIPLES

     In February 1997, the Financial Accounting Standards Board issued FAS No.
128, Earnings per Share (EPS). This standard will revise the disclosure
requirements of EPS, simplify the computation of EPS and increase the
comparability of EPS on an international basis. FAS No. 128 will be effective in
1997. Centennial Bancorp has not determined the impact of adopting FAS No. 128
will have on the financial statements.

COMPETITION

     Commercial banking in Oregon is highly competitive with respect to both
loans and deposits. Centennial Bank competes principally with other commercial
banks, savings and loan associations, credit unions, mortgage companies, and
other financial institutions with respect to the scope and type of services
offered, interest rates paid on deposits and pricing of loans, among other
factors.

     Many of these competitors have substantially greater resources than
Centennial Bank and have branches in more locations. Certain of these
competitors have larger lending capabilities due to their greater size, and
provide other services that Centennial Bank does not offer.

     Centennial Bank competes for loans principally through the range and
quality of the services it provides. Centennial Bank believes its personal
service philosophy and its focus on small- to medium-sized businesses and on
professionals enables it to compete effectively with other financial
institutions for the loans and deposits it seeks. To serve customers whose
borrowing requirements exceed its lending limits, Centennial Bank arranges
participations with other lenders.

     During the past several years, many financial institutions in Oregon have
merged or consolidated. Management believes that, in many cases, the acquiring
institutions have shifted the focus of the acquired banks away from the small-
to medium-sized businesses that are at the core of Bancorp's marketing efforts.
Bancorp intends to capitalize on this banking environment.

<PAGE>

EMPLOYEES

     Centennial Bancorp has no employees other than its executive officers, who
are also employees of Centennial Bank. At December 31, 1996, Centennial Bank and
Centennial Mortgage had 159 and 36 full-time equivalent employees, respectively.
Bancorp places a high priority on selective hiring and development of staff.
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 of
Bancorp's financial, service and marketing goals.

     None of Bancorp's employees is covered by collective bargaining agreements,
and management believes that Bancorp's relationship with its employees is good.

                           SUPERVISION AND REGULATION

     Bancorp and Centennial Bank are extensively regulated under federal and
Oregon law. These laws and regulations are primarily intended to protect
depositors and the deposit insurance fund, not shareholders of Bancorp. 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 its subsidiaries.

CENTENNIAL BANCORP

     GENERAL

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

<PAGE>

     ACQUISITIONS

     As a bank holding company, Bancorp is required to obtain the prior approval
of the FRB before acquiring direct or indirect ownership or control of more than
5% of the voting shares of a bank or bank holding company. 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 Bank could be acquired by a bank
holding company 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
nonbanking activity, unless the activity has been determined by the FRB to be
closely related to banking or managing banks. The FRB has identified certain
nonbanking activities in which a bank holding company may engage with notice to,
or prior approval by, the FRB. Management believes that all activities conducted
by Centennial Mortgage are permitted nonbanking activities.

     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
nonbank businesses. The guidelines require a minimum ratio of total capital to
risk-weighted assets of 8%. At December 31, 1996, Bancorp's ratio of total
capital to risk-weighted assets was 13.2%.

     The FRB also uses a leverage ratio to evaluate the capital adequacy of bank
holding companies. The leverage ratio applicable to Bancorp requires a ratio of
"Tier 1" capital (generally, tangible common stockholders' equity, perpetual
preferred stock and minority interests in consolidated subsidiaries) to adjusted
average total assets of not less than 3% and up to 5% or higher depending on
Bancorp's general capital condition. Bancorp's leverage ratio at December 31,
1996 was 10.2%.

<PAGE>

     If Bancorp fails to meet capital guidelines, the FRB may institute
appropriate supervisory or enforcement actions. As discussed below, Centennial
Bank 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 Bank, should
Centennial Bank become undercapitalized. In addition, the Oregon Director has
the authority to require Bancorp to contribute additional capital to Centennial
Bank if its capital becomes impaired.


CENTENNIAL BANK

     GENERAL

     Centennial Bank is an Oregon state-chartered bank, the deposits of which
are insured by the FDIC. Accordingly, Centennial Bank files financial and other
reports periodically with, and is regularly examined by, both the Oregon
Director and the FDIC. Centennial Bank 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 Bank, since
management believes that Centennial Bank 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. Centennial Bank
currently has seven branches and has received regulatory approval to open a
branch in the Tanasbourne area of Hillsboro.

     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.

<PAGE>

     Beginning June 1, 1997, the Interstate Banking Act will permit 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. States can opt-in to interstate branching earlier, or opt-out before
January 1, 1997. In 1995, Oregon opted-in to permit 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. Oregon has not 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. 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. Citizens and interest groups have standing before
the FRB to assert noncompliance with 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 now
regularly conduct CRA examinations to assess the performance of financial
institutions. Centennial Bank has received satisfactory ratings in its most
recent CRA examinations.

     TRANSACTIONS WITH AFFILIATES

     Centennial Bank is subject to certain FRB restrictions on transactions
among related parties. Section 23A of the Federal Reserve Act limits the amount
of certain transactions, including loans to and investments in affiliates of
Centennial Bank, 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 subsidiaries.

     Section 23B of the Federal Reserve Act requires that certain transactions
between Centennial Bank and its affiliates must be on terms substantially the
same, or at least as favorable to Centennial Bank, 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.

<PAGE>

     In addition, Section 22(h) of 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 Bank provide substantially all Bancorp's cash
flow. Under federal law, prior to the declaration of any dividend by Centennial
Bank, the approval of the principal regulator is required if the total of all
dividends declared in any calendar year exceeds the total of Centennial Bank's
net profits for that year combined with its retained net profits for the
preceding two years. In addition, FDICIA provides that a bank cannot pay a
dividend if it will cause the bank to be "undercapitalized." Oregon law imposes
the following limitations on the payment of dividends by Oregon state-chartered
banks: (i) no dividends may be paid that would impair capital; (ii) until the
surplus fund of a bank is equal to 50% of its paid-in capital, no dividends may
be declared unless there has been carried to the surplus account at least 20% of
the bank's net profits for the dividend period; (iii) dividends cannot be
greater than net undivided profits minus losses, certain bad debts, certain
charged-off assets or depreciation and accrued expenses, interest and taxes; and
(iv) if the surplus fund does not exceed 50% of paid-up capital and a further
reduction in the surplus occurs due to losses, dividends cannot be declared or
paid in excess of 50% of net earnings until the surplus fund is restored to at
least the amount from which the surplus was originally reduced. At December 31,
1996, $12.4 million was available for declaration of dividends by Centennial
Bank to Bancorp without prior regulatory approval.

     EXAMINATIONS

     The FDIC and the Oregon Director periodically examine and evaluate
state-chartered banks. 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 specific reserves to
compensate for the difference between the value determined by the regulator and
the book value of such assets.

<PAGE>

     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 for banks 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 5% of total adjusted
assets, except in the case of certain highly rated banks for which the minimum
requirement is 3% of total adjusted assets. At December 31, 1996, Centennial
Bank's leverage ratio, Tier 1 capital to risk-weighted assets ratio and total
risk-based capital to risk-weighted assets ratio were 9.0%, 10.9% and 11.7%,
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 Bank. Bancorp's maximum liability under such
guarantee would be the lesser of 5% of Centennial Bank's total assets at the
time it became undercapitalized or the amount necessary to bring Centennial Bank
into compliance with the capital plan.

     Under Oregon law, the Oregon Director has the authority to require the
shareholders of an Oregon state-chartered bank (Bancorp, in the case of
Centennial Bank) to contribute additional capital to the bank if its capital
becomes impaired. The capital of a bank is impaired under Oregon law when the
value of the bank's assets is insufficient to pay its liabilities plus the
amount of its paid-up capital stock.

     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.

<PAGE>

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

     INTERNAL OPERATING REQUIREMENTS

     In 1993, federal regulators adopted regulations addressing, among other
things: (i) internal controls, information systems and internal audit systems;
(ii) loan documentation; (iii) credit underwriting; (iv) interest rate exposure;
(v) asset growth; (vi) ratio of classified assets to capital; (vii) minimum
earnings; and (viii) compensation and benefit standards for management
officials. These regulations add further to the cost of compliance and impose
record-keeping requirements on Centennial Bank and Bancorp.

     The consumer lending activities of Centennial Bank are also regulated by
numerous laws and regulations which impose disclosure requirements, prohibit
discrimination based on race, sex, age, marital status and other specified
classifications and 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 Bank
and Centennial Mortgage.

     DEPOSIT INSURANCE PREMIUMS

     The FDIC has adopted regulations establishing a risk-based deposit
insurance premium schedule. In July 1995, Centennial Bank's assigned risk
assessment classification was reduced from $.23 to $.04 per $100 of insured
deposits. Effective January 1, 1996, Centennial Bank's risk assessment
classification was further reduced to $.00, so Centennial Bank paid a minimum
annual payment of $2,000 during 1996. Each of these risk assessment
classifications was the lowest possible classification at the time.
Classifications are reviewed semiannually. In addition, the FDIC has the power
to impose special assessments to cover the cost of borrowings from the U.S.
Treasury, the Federal Financing Bank, and Bank Insurance Fund member banks.

<PAGE>

     The Deposit Insurance Funds Act of 1996 ("Funds Act") eliminated the
statutorily-imposed minimum assessment amount effective January 1, 1997. The
Funds Act also authorizes assessments on Bank Insurance Fund-assessable deposits
(such as, the Centennial Bank deposits) and stipulates that the rate of
assessment must equal one-fifth the Financing Corporation assessment rate that
is applied to deposits assessable by the Savings Association Insurance Fund. The
Financing Corporation assessment rate for Bank Insurance Fund-assessable
deposits is 1.296 basis points. Management estimates that the additional
assessment authorized by the Funds Act will increase Bancorp's FDIC insurance
assessment expense in 1997 by approximately $45,000 based upon deposits held at
December 31, 1996.

CENTENNIAL MORTGAGE

     Centennial Mortgage is, by definition of the Department of Housing and
Urban Development, a nonsupervised lender. Because Centennial Mortgage is a
member of Bancorp's consolidated group, its accounts and activities are reviewed
by the FRB in conjunction with its periodic examinations of Bancorp. Centennial
Mortgage, like Centennial Bank, is indirectly affected by the monetary policies
of the FRB, which may have a material adverse effect on its business and
earnings.

     Oregon law requires the licensing of certain persons engaging in mortgage
brokering transactions. Centennial Mortgage is exempt from these requirements as
a wholly owned subsidiary of a regulated bank holding company.

CHANGING REGULATORY STRUCTURE

     The laws and regulations affecting banks and bank holding companies are in
a state of flux. The rules and the regulatory agencies in this area have changed
significantly over recent years, and there is reason to expect that similar
changes will occur in the future. It is difficult to predict the outcome of
these changes. The Clinton Administration has announced a program to reduce the
regulatory burden on banks and to streamline and consolidate regulatory
oversight. However, the scope and effect of this program are not yet known. In
addition, substantial revisions to the Oregon Bank Act have been proposed.

     One of the major additional burdens imposed on the banking industry by
FDICIA is the increased authority of federal agencies to regulate the activities
of federal and state banks and their holding companies. The FRB, the FDIC and
the Oregon Director have extensive enforcement authority to police unsafe or
unsound practices by depository institutions and their holding companies and to
penalize them for violating applicable laws and regulations. FDICIA and other
laws have expanded the agencies' authority in recent years, and the agencies
have not yet fully tested the limits of their powers.

<PAGE>

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 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 subsidiaries cannot be
predicted.

<PAGE>

ITEM 2.  DESCRIPTION OF PROPERTY
         -----------------------

     Bancorp's main offices are located at 675 Oak Street, Eugene, Oregon, in a
four-floor facility (approximately 35,000 square feet) owned by Centennial Bank.
Construction of the office building was completed in June 1993. Bancorp and
Centennial Bank occupy the lower two floors and the fourth floor of the
building. Centennial Bank has entered into five-year leases with two tenants for
a total of approximately 6,250 square feet of the building's third floor.
Centennial Bank is retaining for future use the remaining approximate 2,500
square feet of available space on the third floor.

     In February 1994, Bancorp entered into a long-term ground lease in Tigard,
Oregon, a suburb of Portland, where Centennial Bank has a branch office. The
ground lease has an initial term of 50 years and is renewable for two additional
10-year periods. Bancorp made lease payments averaging $6,285 per month in 1996,
with payments increasing as specified in the lease agreement. Construction of a
three-story office building was completed in June 1995 at a cost of $2.9
million. Centennial Bank occupies the first floor and part of the second floor,
while Centennial Mortgage occupies the remainder of the second floor. The third
floor of the building was leased to another company effective January 1996
pursuant to a five-year lease.

     At December 31, 1996, Centennial Bank deposited $25,000 earnest money for
purchase of a $1.2 million parcel of land in the Tanasbourne area of Hillsboro,
Oregon, a suburb of Portland. Centennial Bank intends to construct a branch
facility at the site. The design and cost of the building have not yet been
determined.

     Effective January 1, 1997, Centennial Bank entered into a lease for
approximately 3,200 square feet of an existing building in the Lloyd District
area of Portland, Oregon. The lease has an initial term of two years and is
renewable for one additional two-year period. Lease payments of $4,305 per month
began in January 1997.

     Centennial Bank owns three other branch facilities and leases two branch
facilities with annual lease payments of $149,000 in 1996. Centennial Bank also
leases certain storage facilities with annual lease payments of $19,000 in 1996.

     Centennial Bank also maintains a lease for a former branch site at an
annual rental of $13,200 in 1996. The lease expires in May 1997. Centennial Bank
has sublet the property through April 1997 for an annual rental of $16,600.

     Centennial Mortgage's offices are located in leased facilities. Centennial
Mortgage's Eugene office is located in a building formerly owned by Centennial
Bank which was sold to a third party in August 1994. Centennial Mortgage paid
lease payments of $71,200 to the new building owner in 1995. Centennial Mortgage
leases office space for its Portland-area office from Centennial Bank.

<PAGE>

ITEM 3.  LEGAL PROCEEDINGS
         -----------------

     Periodically, and in the ordinary course of business, various claims and
lawsuits are brought by and against Bancorp, such as claims to enforce liens,
condemnation proceedings on properties in which Bancorp holds security
interests, claims involving the making and servicing of real property loans and
other issues incident to Bancorp's business.

     As of the date of this report, Bancorp was not a party to any legal
proceedings it believed to be material other than the following actions:

     Galen Ritchie Enterprises, Inc., et al v. Centennial Bank, Case No.
16-96-03603 (filed in April 1996 in Circuit Court for the State of Oregon). The
plaintiff, one of the Bank's borrowers, claims that, in reliance on oral
representations of a Bank employee, plaintiff terminated an existing credit
relationship and entered into a relationship with the Bank in 1994. Over the
course of the relationship, plaintiff received several increases in its credit
facility, with final borrowings totalling in excess of $750,000. The loan is
collateralized and is guaranteed by plaintiff's owners. Plaintiff alleges, among
other things, breach of contract, fraud, intentional interference with business
relationships, rescission and reformation. Plaintiff seeks to recover in excess
of $848,000 in connection with the alleged breach of contract; in excess of $2.2
million in connection with the alleged fraud; and in excess of $2.0 million in
connection with the alleged intentional interference with business relationship.
The recovery sought for each claim is based, at least in part, on the same
damages. Plaintiff has also reserved the right to allege punitive damages in
connection with each claim. Plaintiff's claim for intentional interference with
business relationship was dismissed by the trial court. The other claims are
scheduled for trial. The Bank has filed suit against the plaintiff and
guarantors seeking judgment in excess of $700,000 and foreclosure of the
security agreements. The foreclosure suit has been consolidated for trial with
the plaintiff's suit. No trial date is presently set. Discovery is ongoing.
Outside counsel will represent the Bank at trial of the plaintiff's suit.
Bancorp's insurance carrier is involved in the case and has retained local
counsel. Plaintiff's claims exceed Bancorp's maximum insurance coverage.

<PAGE>

     Lisa Brumm v. Centennial Bank, Case No. 9702-01459 (filed in February 1997
in the Circuit Court for the State of Oregon). Plaintiff, who was employed by
the Bank for approximately ten weeks in the fall of 1996, alleges that she was
wrongfully discharged. Plaintiff seeks to recover $750,000 in economic and
noneconomic damages and also has reserved the right to allege punitive damages.
The Bank plans to vigorously contest this action.


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

         None.


<PAGE>

                                     PART II
                                     -------

     The information called for by Items 5, 6, 7 and 8 of Part II is included in
Centennial Bancorp's Annual Report to Shareholders for the year ended December
31, 1996, and is incorporated herein by reference as follows:

                                                        Centennial Bancorp
                                                           Annual Report
                                                          to Shareholders
                                                              Page No.
                                                        ------------------

ITEM 5.    MARKET FOR THE REGISTRANT'S COMMON
               EQUITY AND RELATED STOCKHOLDER
               MATTERS                                            39
           ----------------------------------

ITEM 6.    SELECTED FINANCIAL DATA                                 2
           -----------------------

ITEM 7.    MANAGEMENT'S DISCUSSION AND
               ANALYSIS OF FINANCIAL CONDITION
               AND RESULTS OF OPERATIONS                        26 - 39
           -----------------------------------

ITEM 8.    FINANCIAL STATEMENTS AND
               SUPPLEMENTARY DATA                                4 - 25
           ------------------------

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

               None.


<PAGE>


                                    PART III
                                    --------


ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
           --------------------------------------------------

           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 May 21, 1997, 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 May 21, 1997, 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 May 21, 1997, 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 May 21, 1997, and is
           incorporated herein by reference.


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 required in this Annual Report are
           listed below and are included in Centennial Bancorp's Annual
           Report to Shareholders for the year ended December 31, 1996,
           and are incorporated herein by reference:


<PAGE>
                                                                Annual
                                                               Report to
                                                             Shareholders
                                                             Page Number
                                                             ------------

           Report of Independent Accountants                       3

           Consolidated balance sheets at
             December 31, 1996 and 1995                            4

           For the three years ended December 31, 1996
             Consolidated statements of income                     5
             Consolidated statements of
               shareholders' equity                                6
             Consolidated statements of cash flows               7 - 8

           Notes to consolidated financial statements            9 - 25

     (2)   Financial Statement Schedules.

           All financial statement schedules are omitted since the
           required information is not present or not present in amounts
           sufficient to require submission of the schedule or because
           the information required is included in the consolidated
           financial statements or notes thereto.

     (3)   Exhibits.

           3.1      Articles of Incorporation, as restated and amended (filed as
                    Exhibit 3.1 to registrant's Form 10-Q Report for the quarter
                    ended June 30, 1990, 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, 1992, 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*    Form of Stock Option Agreement entered into between
                    registrant and certain employees pursuant to registrant's
                    1993 Incentive Stock Option Plan (filed as Exhibit 10.2 to
                    registrant's Registration Statement on SB-2, filed March 28,
                    1994, and incorporated herein by reference)

<PAGE>

           10.3*    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)

           10.4*    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)

           10.5*    Form of Stock Option Agreement entered into between
                    registrant and certain nonemployee directors pursuant to
                    registrant's Nonemployee Director's Stock Option Plan (filed
                    as Exhibit 10.5 to registrant's Registration Statement on
                    SB-2, filed March 28, 1994, and incorporated herein by
                    reference)

           10.6*    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)

           10.7*    Form of Stock Option Agreement entered into between
                    registrant and certain nonemployee directors pursuant to
                    registrant's 1993 Stock Option Plan for Nonemployee
                    Directors (filed as Exhibit 10.7 to registrant's
                    Registration Statement on SB-2, filed March 28, 1994, and
                    incorporated herein by reference)

           10.8*    Deferred Compensation Agreement between Centennial Bank and
                    Ron R. Peery (filed as Exhibit 10.3 to registrant's Form
                    10-Q Report for the quarter ended June 30, 1989, and
                    incorporated herein by reference)

           10.9*    Restated 1995 Stock Incentive Plan

           10.10*   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)

<PAGE>

           10.11    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)

           10.12    Advances, Security and Deposit Agreement, dated May 28,
                    1991, between Centennial Bank and the Federal Home Loan Bank
                    of Seattle (filed as Exhibit 10.11 to registrant's
                    Registration Statement on SB-2, filed March 28, 1994, and
                    incorporated herein by reference)

           10.13*   Centennial Bank Deferred Compensation Plan, dated effective
                    January 1, 1996

           10.14*   Participation Agreement for use with Centennial Bank
                    Deferred Compensation Plan

           10.15*   Form of Incentive Stock Option Agreement entered into
                    between registrant and certain officers and employees
                    pursuant to registrant's Restated 1995 Stock Incentive Plan

           10.16*   Form of Nonstatutory Stock Option Agreement entered into
                    between registrant and its nonemployee directors pursuant to
                    registrant's Restated 1995 Stock Incentive Plan

           11.1     Earnings per Share Computation

           13.1     Portions of 1996 Annual Report to Shareholders (which are
                    incorporated by reference in this Form 10-K Annual Report)

           20.1     Portions of definitive proxy statement for 1997 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 (filed as Exhibit 21.1 to
                    registrant's Form 10-K for the year ended December 31, 1995,
                    and incorporated herein by reference)

           23.1     Consent of Coopers & Lybrand L.L.P., Independent Accountants

<PAGE>

           27.1     Financial Data Schedule

           99.1     Safe Harbor for Forward-Looking Statements under Private
                    Securities Litigation Reform Act of 1995: Certain Cautionary
                    Statements


---------------

*  Management contract or compensatory plan or arrangement.



     Upon written request to Michael J. Nysingh, Chief Financial Officer,
Centennial Bancorp, Post Office Box 1560, Eugene, Oregon, 97440, shareholders
will be furnished a copy of any exhibit, upon payment of $.25 per page, which
represents Centennial Bancorp's reasonable expenses in furnishing the exhibit
requested.

  (b)      Reports on Form 8-K. Centennial Bancorp did not file any reports on
           Form 8-K during the last quarter of the fiscal year ended December
           31, 1996.


<PAGE>


                                   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 19, 1997                  By: /s/Richard C. Williams
                                           -----------------------
                                           Richard C. Williams, President


     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 19, 1997                   By: /s/Richard C. Williams
                                           -----------------------
                                           Richard C. Williams, President,
                                           Chief Executive Officer and Director


                                        CHIEF FINANCIAL OFFICER


DATED: March 19, 1997                   By: /s/Michael J. Nysingh
                                           ----------------------
                                           Michael J. Nysingh
                                           Chief Financial Officer


                                        DIRECTORS:


DATED: March 19, 1997                   By: /s/Dan Giustina
                                           ----------------------
                                           Dan Giustina, Director


DATED: March 19, 1997                   By: /s/Cordy H. Jensen
                                           -------------------------
                                           Cordy H. Jensen, Director


DATED: March 19, 1997                   By: /s/Robert L. Newburn
                                           ---------------------------
                                           Robert L. Newburn, Director


DATED: March 19, 1997                   By: /s/Brian B. Obie
                                           -----------------------
                                           Brian B. Obie, Director



<PAGE>


                                  EXHIBIT INDEX


Exhibit*

10.9        Restated 1995 Stock Incentive Plan

10.13       Centennial Bank Deferred Compensation Plan, dated effective January
            1, 1996

10.14       Participation Agreement for use with Centennial Bank Deferred
            Compensation Plan

10.15       Form of Incentive Stock Option Agreement entered into between
            registrant and certain officers and employees pursuant to
            registrant's Restated 1995 Stock Incentive Plan

10.16       Form of Nonstatutory Stock Option Agreement entered into between
            registrant and its nonemployee directors pursuant to registrant's
            Restated 1995 Stock Incentive Plan

11.1        Earnings per Share Computation

13.1        Portions of 1996 Annual Report to Shareholders, which are
            incorporated by reference in this Form 10-K

23.1        Consent of Coopers & Lybrand L.L.P., Independent Accountants

27.1        Financial Data Schedule

99.1        Safe Harbor for Forward-Looking Statements under Private Securities
            Litigation Reform Act of 1995: Certain Cautionary Statements


-----------------
*    See Item 14(a)(3) of this Annual Report for a list of all exhibits,
     including those incorporated by reference.