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, 1999
                                                -----------------
                                       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)

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

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

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

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

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

                         Common Stock, without par value
                                (Title of class)

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

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

  State the aggregate market value of the voting stock held by non-affiliates of
the registrant. The aggregate market value shall be computed by reference to the
price at which the stock was sold, or the average bid and asked prices of such
stock, as of a specified date within 60 days prior to the date of filing.
$160,763,112 aggregate market value as of March 15, 2000, 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: 19,684,373 shares of Common
Stock on March 15, 2000.

                       DOCUMENTS INCORPORATED BY REFERENCE

Part II incorporates information by reference from the issuer's Annual
Report to Shareholders for the fiscal year ended December 31, 1999. Part III is
incorporated by reference from the issuer's definitive proxy statement for the
annual meeting of shareholders to be held on April 26, 2000.


<PAGE>
<TABLE>
<CAPTION>


                                                 CENTENNIAL BANCORP
                                                      FORM 10-K
                                                    ANNUAL REPORT
                                                  TABLE OF CONTENTS
                                                  -----------------


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

<S>              <C>                                                                                       <C>
Item 1.           DESCRIPTION OF BUSINESS                                                                    4
                  -----------------------
Item 2.           DESCRIPTION OF PROPERTIES                                                                 37
                  -------------------------
Item 3.           LEGAL PROCEEDINGS                                                                         38
                  -----------------
Item 4.           SUBMISSION OF MATTERS TO A VOTE OF
                  ----------------------------------
                       SECURITY HOLDERS                                                                     38
                       ----------------


PART II

                  (Items 5 through 9 are incorporated by reference from
                  Centennial Bancorp's Annual Report to Shareholders)

Item 5.           MARKET FOR BANCORP'S COMMON STOCK
                  ---------------------------------
                       AND RELATED SHAREHOLDER MATTERS                                                      39
                       -------------------------------
Item 6.           SELECTED FINANCIAL DATA                                                                   39
                  -----------------------
Item 7.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  ---------------------------------------
                       FINANCIAL CONDITION AND RESULTS OF OPERATIONS                                        39
                       ---------------------------------------------
Item 7A.          QUANTITATIVE AND QUALITATIVE
                       DISCLOSURES ABOUT MARKET RISK                                                        39
                       -----------------------------
Item 8.           FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                               39
                  -------------------------------------------
Item 9.           CHANGES IN AND DISAGREEMENTS WITH
                  ---------------------------------
                       ACCOUNTANTS ON ACCOUNTING AND
                       -----------------------------
                       FINANCIAL DISCLOSURE                                                                 39
                       --------------------


PART III

                  (Items 10 through 13 are incorporated by reference from
                  Centennial Bancorp's definitive proxy statement for the annual
                  meeting of shareholders to be held on April 26, 2000)

Item 10.          DIRECTORS AND EXECUTIVE OFFICERS OF BANCORP                                               40
                  -------------------------------------------
Item 11.          EXECUTIVE COMPENSATION                                                                    40
                  ----------------------
Item 12.          SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
                  ----------------------------------------
                       OWNERS AND MANAGEMENT                                                                40
                       ---------------------
Item 13.          CERTAIN RELATIONSHIPS AND RELATED
                  ---------------------------------
                       TRANSACTIONS                                                                         40
                       ------------


                                       2
<PAGE>


PART IV

Item 14.          EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
                  ----------------------------------------
                  AND REPORTS ON FORM 8-K                                                                   41
                  -----------------------

SIGNATURES                                                                                                  45
----------




</TABLE>

                                       3
<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. STATEMENTS THAT EXPRESSLY OR
IMPLICITLY PREDICT FUTURE RESULTS, PERFORMANCE OR EVENTS ARE FORWARD-LOOKING. IN
ADDITION, THE WORDS "ANTICIPATE," "BELIEVE," "INTEND," "EXPECT" AND SIMILAR
EXPRESSIONS IDENTIFY FORWARD-LOOKING STATEMENTS. SUCH STATEMENTS ARE SUBJECT TO
CERTAIN RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THOSE ANTICIPATED. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO
SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THE FOLLOWING: (1) POTENTIAL
DELAYS OR OTHER PROBLEMS IN IMPLEMENTING BANCORP'S GROWTH AND EXPANSION
STRATEGY; (2) THE ABILITY TO ATTRACT NEW DEPOSITS AND LOANS; (3) INTEREST RATE
FLUCTUATIONS; (4) COMPETITIVE FACTORS AND PRICING PRESSURES; (5) GENERAL
ECONOMIC CONDITIONS, EITHER NATIONALLY OR REGIONALLY, THAT COULD RESULT IN
INCREASED LOAN LOSSES; (6) CHANGES IN LEGAL AND REGULATORY REQUIREMENTS; AND
(7) CHANGES IN TECHNOLOGY, AS WELL AS OTHER FACTORS DESCRIBED IN THIS AND OTHER
BANCORP REPORTS AND STATEMENTS, INCLUDING, BUT NOT LIMITED TO, EXHIBIT 99.1,
FILED AS PART OF THIS ANNUAL REPORT. 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.

         Centennial Bancorp has two wholly owned subsidiaries: Centennial Bank
and Centennial Mortgage Co. ("Centennial Mortgage"). Unless the context clearly
suggests otherwise, references in this Annual Report on Form 10-K to "Bancorp"
include Centennial Bancorp and its subsidiaries.


                                       4
<PAGE>

         All share and per-share information has been restated to give
retroactive effect to a 10% common stock split declared in January 1999, a 5%
common stock split declared in July 1999, a 10% common stock split declared in
January 2000, and for various stock splits and stock dividends declared in prior
years.

         CENTENNIAL BANK

         Centennial Bank is a full-service commercial bank organized 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. Deposit-taking
and lending activities are primarily directed to the communities in which
offices are located. Centennial Bank's 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, 1999, based on total assets, Centennial Bank was the
11th largest of the commercial banks maintaining offices in Oregon. At that
date, Centennial Bank had 19 branches: four full-service branches in Eugene; one
full-service branch in adjacent Springfield; one full-service branch in Cottage
Grove, Oregon; three full-service and five limited-service branches in Portland,
Oregon; one full-service branch each in Beaverton, Clackamas and Tigard, suburbs
of Portland; one full-service branch in Salem, Oregon; and one full-service
branch in Vancouver, Washington.

         Five of the fourteen full-service branches were opened during 1999. The
Oakway Center office opened in January 1999 as the fourth branch in the Eugene
area. The Hazel Dell office in Vancouver, acquired from Northwest National Bank
in April 1999, opened in May as Centennial Bank's first branch in Washington
state. The downtown Portland and downtown Salem branches opened during July, and
the Clackamas branch opened in November. A second Vancouver branch, the Mill
Plain office, opened in February 2000.

         During the first quarter of 1999, Centennial Bank completed a major
reorganization along functional, rather than the previous geographical, lines.
The change was made to facilitate continued growth and expansion. As a result of
the reorganization, in January 1999 two commercial banking centers were formed,
one in downtown Eugene and the other in southwest Portland. A third commercial
banking center opened during July in downtown Portland.

         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


                                       5
<PAGE>

loans. Total deposits increased from $484 million at December 31, 1998 to $573
million at December 31, 1999. Net loans and loans held for sale increased from
$428 million at December 31, 1998 to $594 million at December 31, 1999.

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

         CENTENNIAL MORTGAGE

         Centennial Mortgage began operations in 1987, originating conventional
and federally insured residential mortgage loans for sale in the secondary
market. Centennial Mortgage originated $152.5 million, $213.9 million and $111.6
million of mortgages in 1999, 1998 and 1997, respectively. Mortgage loans
generally are sold without recourse or retention of servicing rights but may be
subject to repurchase under certain circumstances. Centennial Mortgage also
originates and administers loans for the acquisition, development and
construction of commercial and residential real estate. Loan originated by
Centennial Mortgage are generally funded by and booked as assets of Centennial
Bank.

         Centennial Mortgage has two offices in Eugene and three offices in the
Portland area. The second Eugene office opened in January 1999 and shares leased
space with the Oakway Center branch of Centennial Bank.

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

NET INTEREST INCOME

         For most financial institutions, including Bancorp, the primary
component of earnings is net interest income. Net interest income is the
difference between interest income, principally from loans and investment
securities portfolios, and interest expense, principally on customer deposits
and borrowings. Changes in net interest income 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 average
interest-earning assets and is influenced by the level and relative mix of
interest-earning assets and interest-bearing liabilities. During 1999, 1998 and
1997, Bancorp's average


                                       6
<PAGE>

interest-earning assets were $578 million, $483 million and $399 million,
respectively. During these same years, Bancorp's net interest margin on a
tax-equivalent basis was 7.15%, 7.22% and 6.92%, respectively.

         AVERAGE BALANCES AND AVERAGE RATES EARNED AND PAID

         The following table sets forth for 1999, 1998 and 1997 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.



                                       7
<PAGE>
<TABLE>
<CAPTION>


 Year ended December 31,                         1999                          1998                                  1997
                                ---------------------------------  -------------------------------    -----------------------------
                                             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
                                ----------   ---------  -------    ---------- ---------- --------     ---------- ---------- --------
                                                                          (Dollars in thousands)
<S>                             <C>         <C>         <C>       <C>         <C>        <C>         <C>         <C>        <C>
ASSETS:
Interest-bearing deposits
 with banks                      $     104    $     8     7.69%    $    264    $   14     5.30%       $  6,924    $   376     5.43%
Investment securities -
 taxable                            41,954      2,612     6.23       48,554     3,096     6.38          41,933      2,791     6.66
Investment securities -
 non-taxable (2)                    28,155      2,172     7.71       33,508     2,574     7.68          39,097      3,083     7.89
Federal funds sold                   5,937        280     4.72       13,253       691     5.21          10,925        573     5.24
Loans and loans held for
 sale (3)                          502,272     54,134    10.78      387,914    44,348    11.43         299,976     34,329    11.44
                                   -------     -------             ---------   -------                --------    -------
 Total interest-earning
 assets/interest income (2)        578,422     59,206    10.24      483,493    50,723    10.49         398,855     41,152    10.32
Allowance for loan losses           (5,399)                          (3,882)                            (3,123)
Cash and due from banks             31,440                           28,351                             27,552
Premises and equipment, net         13,993                           11,407                              9,790
Other assets                        16,547                            5,848                              6,112
                                  --------                         --------                           --------
 Total assets                     $635,003                         $525,217                           $439,186
                                  ========                         ========                           ========
LIABILITIES AND SHAREHOLDERS'
 EQUITY:
Savings and interest-bearing
 demand                            260,240      7,865     3.02     $211,896     6,889     3.25        $166,800      5,156     3.09
Time deposits                      167,702      8,597     5.13      145,387     8,185     5.63         129,756      7,299     5.63
Short-term borrowings               26,356      1,405     5.33       10,016       489     4.88           9,688        539     5.56
Long-term debt                                                        5,945       273     4.59          10,000        572     5.72
                                  --------     -------             --------   -------                 --------     ------
 Total interest-bearing
   liabilities/interest
   expense                         454,298     17,867     3.93      373,244    15,836     4.24         316,244     13,566     4.29
Demand deposits                    106,317                           90,166                             75,005
Other liabilities                    4,948                            5,095                              2,001
                                  --------                         --------                           --------
 Total liabilities                 565,563                          468,505                            393,250
Shareholders' equity                69,440                           56,712                             45,936
                                  ---------       --------         --------      ---------            --------
 Total liabilities and
 shareholders' equity             $635,003                         $525,217                           $439,186
                                  ========                         ========                           ========
Net interest income (2)                       $41,339                         $34,887                             $27,586
                                              =======                         =======                             =======

Net interest spread (2)                                   6.31%                           6.25%                               6.03%
                                                          =====                           =====                               =====
Net interest margin (2)                                   7.15%                           7.22%                               6.92%
Net interest income to
  average shareholders'
  equity (2)                         59.53%                           61.52%                             60.05%
Average interest-earning
  assets to average
  interest-bearing
  liabilities                          127%                             130%                               126%


--------------------------
(1)Average balances are based on daily averages.
(2)Average yield on non-taxable securities, interest income, net interest income, net interest spread, net interest margin and net
   interest income to average shareholders' equity have been computed on a 34% tax-equivalent basis.
(3)Nonaccrual loans have been included in the computation of average loans and loans held for sale. Loan fees recognized and
   included in interest income totaled $7,282,948, $6,855,866 and $4,769,700 in 1999, 1998 and 1997, respectively.
</TABLE>


                                       8
<PAGE>
<TABLE>
<CAPTION>


         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.

                                                               1999 vs. 1998                              1998 vs. 1997
                                                                 Change in                                  Change in
                                                         net interest income due to                net interest income due to
                                                    ---------------------------------          --------------------------------
                                                     Volume        Rate        Total            Volume       Rate        Total
                                                    --------      ------      -------          --------     ------       ------
                                                                                   (In thousands)
<S>                                                 <C>        <C>           <C>             <C>        <C>           <C>
Interest income:
         Balances due from banks                     $  (10)    $    4        $   (6)         $  (357)   $    (5)      $  (362)
         Investment securities -- taxable              (416)       (68)         (484)             431       (126)          305
         Investment securities -- non-taxable          (412)        10          (402)            (435)       (74)         (509)
         Federal funds sold                            (363)       (48)         (411)             122         (4)          118
         Loans                                       12,700     (2,914)        9,786           10,059        (40)       10,019
                                                     ------     ------         ------          ------      ------       ------
              Total interest income                  11,499     (3,016)        8,483            9,820       (249)        9,571

Interest expense:
         Deposits:
              Savings and interest-bearing
                demand                                1,516       (540)          976            1,430        303         1,733
              Time                                    1,200       (788)          412              880          5           885
         Short-term borrowings                          834         82           916               17        (67)          (50)
         Long-term debt                                (273)                    (273)            (209)       (90)         (299)
                                                     -------    ------         ------           ------     ------        ------
              Total interest expense                  3,277     (1,246)        2,031            2,118        151         2,269
                                                     ------     -------        ------           ------     ------        ------
Net interest income                                  $8,222    $(1,770)       $6,452           $7,702     $ (400)       $7,302
                                                     ======     =======        ======           ======     ======        ======

</TABLE>

                                                                          9
<PAGE>

MARKET AREAS

         The greater Portland area, where Centennial Bank has eight full-service
and five limited-service branches and two commercial banking centers and where
Centennial Mortgage has three offices, has become Bancorp's primary market. The
metropolitan area, including Vancouver, Washington, has an increasingly
diversified, growing economy and a population of approximately 1.8 million. The
Portland area continues to provide excellent growth opportunity and also allows
dilution of loan portfolio risk due to the area's economic diversity.

         Bancorp's other major market area, with five full-service bank
branches, a commercial banking center and two mortgage lending offices, is the
Eugene/Springfield area at the southern end of Oregon's Willamette Valley. The
populations of Eugene and Springfield combined total approximately 189,000. The
area's economy depends primarily upon U. S., state and local governments,
educational institutions, forest products, general manufacturing (especially
small manufacturing and high-technology industries) and health care.

         With the opening of a full-service bank branch in mid-1999, Bancorp
entered the Salem, Oregon market. Salem is the state capitol and is located in
the Willamette Valley about midway between Portland and Eugene. The Salem area
population is approximately 124,000. The area economy is highly dependent on the
state government although educational institutions, the U. S. and local
governments, healthcare and food processing are also very significant.

         Centennial Bank 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. Its economy depends primarily upon
forest products, general manufacturing and agriculture.

LENDING ACTIVITIES

         GENERAL

         Bancorp provides a broad range of commercial and real estate lending
services. The primary focus of Bancorp's lending activities is to provide
commercial loans to small- to medium-sized businesses with annual revenues up to
$50 million, and to professionals. Commercial and residential real estate
construction lending, as well as residential mortgage loan origination and
sales, are also important aspects of Bancorp's lending activities. Bancorp makes
consumer loans, primarily to accommodate existing customers, but does not
actively pursue such business. Most of Bancorp's loans are made to customers in
branch office trade areas.


                                       10
<PAGE>

         Bancorp strives to maintain sound loan underwriting standards with
written loan policies, conservative individual limits and, depending on the size
of the credit request, reviews by Centennial Bank's Senior Loan Committee and
the Asset/Liability Committee of the Board of Directors. Underwriting standards
are designed to achieve a high-quality loan portfolio, compliance with lending
regulations and the desired mix of loan maturities and industry concentrations.
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,
                                  --------------------------------------------------------------------------------
                                     1999             1998              1997             1996               1995
                                  ----------       ----------         ---------       ----------           -------
                                                                  (In thousands)
<S>                                <C>              <C>              <C>               <C>               <C>
Commercial                          $219,588         $163,577         $146,594          $116,656          $ 77,983
Real estate - construction           227,388          150,816           88,842            66,001            43,851
Real estate - mortgage               129,221           94,475           87,357            79,870            54,442
Installment                            8,409            7,073            6,603             6,425             5,929
Loans held for sale                    6,155           11,039            5,585             3,538             4,573
Lease financing                        4,868            1,897            3,649             3,775             4,001
Other                                  4,199            3,137            1,995             2,365               311
                                   ---------        ---------         --------          --------         ---------
     Total loans and
     loans held for sale             599,828          432,014          340,625           278,630           191,090
Less allowance for loan
     losses                           (6,165)          (4,451)          (3,349)           (2,600)           (1,928)
                                    ---------        --------         --------          ---------         ---------
Loans receivable, net               $593,663         $427,563         $337,276          $266,030          $189,162
                                    =========        ========         ========          =========         =========
</TABLE>
<TABLE>
<CAPTION>

         The following table presents the aggregate maturities of loans in each major category of Bancorp's loan portfolio
at December 31, 1999. Actual maturities may differ from the contractual maturities shown below as a result of renewals and
prepayments.
                                                                                       Total
                                 Due within     Due after one but     Due after       loans by
        Loan category             one year      within five years    five years       category
        -------------             --------      -----------------    ----------      ---------
                                                        (In thousands)
<S>                               <C>                   <C>           <C>           <C>
 Commercial                        $133,703              $58,849        $27,036      $219,588
 Real estate - construction         162,244               59,503          5,641       227,388
 Real estate - mortgage              26,983               42,504         59,734       129,221
 Installment                          3,709                4,412            288         8,409
 Loans held for sale                     --                   --          6,155         6,155
 Lease financing                        174                4,694             --         4,868
 Other                                  830                3,059            310         4,199
                                   --------             --------        -------      --------
 Total loans by maturity           $327,643             $173,021        $99,164      $599,828
                                   ========             ========        =======      ========
</TABLE>

                                       11
<PAGE>

         Of Bancorp's $272 million of loans that mature after one year, a total
of $157 million (approximately 58%) are fixed-rate loans, and a total of $115
million (approximately 42%) are variable-rate loans.

         At December 31, 1999, $181 million of Bancorp's loans (approximately
30%) had fixed interest rates, and $419 million (approximately 70% of its loan
portfolio) had variable interest rates.

         REAL ESTATE CONSTRUCTION LOANS

         Real estate construction loans are Bancorp's largest category of loans.
This category includes loans which finance land acquisition, residential lot
development, construction of single-family and multi-family residential
properties, and the development and construction of a wide range of commercial
real estate projects. Land acquisition and lot development loans generally have
maturities of 12 to 18 months while residential construction loans generally
have maturities of 12 months. Commercial construction loans normally have 12 to
18 month maturities with extension options when justified. At December 31, 1999,
90% of the outstanding loans in this category had variable interest rates with
the remaining 10% having fixed rates.

         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 of 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, 1999, real estate construction loans had increased to
$227.4 million from $150.8 million at December 31, 1998 and $88.8 million at
December 31, 1997. The increases were primarily attributable to strong growth in
commercial real estate construction lending resulting from an expansion of
Centennial Mortgage's business strategy. No loans in this category were
non-accruing at December 31, 1999. The December 31, 1998 non-


                                       12
<PAGE>

accrual total was $2.3 million and was concentrated in loans to one borrower.
The borrower filed bankruptcy, and Centennial Bank subsequently foreclosed and
acquired the underlying real estate collateral which has been substantially
liquidated. Management believes the value of the remaining property is
sufficient to preclude loss when sold. At December 31, 1999 and 1998, there were
no restructured loans in this category.

         COMMERCIAL LOANS

         Commercial loans that are not secured by real estate represent the
second 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.

         At December 31, 1999, approximately 74% of Bancorp's commercial loans
had floating or adjustable interest rates; the remaining 26% 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, 1999 were $219.6 million, compared to $163.6
million at December 31, 1998 and $146.6 million at December 31, 1997. Loan
growth in 1999 and 1998 was primarily the result of Centennial Bank's business
development program, expansion through new commercial banking centers and branch
offices, and the continuing favorable Oregon economy. Non-accrual loans in this
category totaled $579,00 at December 31, 1999 ($776,000 at December 31, 1998);
there were no restructured loans at December 31, 1999 or 1998.

         REAL ESTATE MORTGAGE LOANS

         Real estate mortgage loans represent Bancorp's third largest category
of loans. Of the $135.4 million of real estate mortgage loans outstanding at
December 31, 1999, $109.7 million consisted of income property and commercial
loans secured by real estate. Income property loans and commercial loans secured
by real estate typically involve large balances to single borrowers or groups of
related borrowers. These borrowers may be more sensitive to changes in economic
conditions than residential mortgage loan customers.

         At December 31, 1999, approximately 66% of Bancorp's real estate
mortgage loans had fixed interest rates; the other 34% had floating or
adjustable interest rates. Maturities of the real estate mortgage loans retained
by Bancorp usually range from one to ten years. Real estate mortgage loans
outstanding increased


                                       13
<PAGE>

to $135.4 million at December 31, 1999 from $105.5 million at December 31, 1998
and $92.9 million at December 31, 1997. The strong 1999 growth was primarily due
to strategic emphasis on developing the income property and commercial real
estate portion of the portfolio. At December 31, 1999, there were no non-accrual
loans in this category ($726,000 at December 31, 1998). At December 31, 1999 and
1998, there were no restructured loans in this category.

         Bancorp's underwriting standards specify the following maximum
loan-to-value ratios for real estate loans: 85% for loans secured by
owner-occupied residences, 80% for other residential loans and for construction
loans, and 80% for commercial real estate loans.

         Bancorp originates SBA real estate loans on owner-occupied properties
where the maturities may be up to 20 years, and the loan-to-value ratio may
reach 90% of appraised value or cost, whichever is lower. Up to 75% 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, 1999, the amount of the
non-guaranteed portion of these loans retained by Bancorp was not material.

         INSTALLMENT LOANS

         Bancorp does not actively solicit consumer loans, but makes such loans
primarily as a convenience to existing customers. 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
secured or unsecured. Collections depend principally on the borrower's financial
condition or cash flow.

         Installment loans were $8.4 million at December 31, 1999 compared to
$7.1 million at December 31, 1998 and $6.6 million at December 31, 1997. These
modest levels of installment loans to individuals were primarily due to
Bancorp's focus on lending to businesses and professionals and significant
competition for consumer loans from the many credit unions, banks and finance
companies in the market areas served by Bancorp. At December 31, 1999 and 1998,
there were no non-accrual 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 7 to Bancorp's Consolidated Financial Statements,
which are incorporated by reference from Bancorp's 1999 Annual Report to
Shareholders. Bancorp applies the same credit standards to these


                                       14
<PAGE>

commitments as it uses in all its lending processes and includes these
commitments in its lending risk evaluations. Collateral for these commitments
may include cash, accounts receivable, inventory, equipment, securities and/or
real estate.

         CREDIT AUTHORITY AND LOAN LIMITS

         All Bancorp loans and other credit facilities are subject to credit and
collateral approval procedures and loan amount limitations. Loan officers and
lending unit managers have individual authority to approve loans in amounts up
to established limits, ranging from $25,000 to $750,000. Credit requests in
excess of those limits, or not in conformance with lending policies, are
reviewed by successive levels of approval authority according to the total
amounts involved. These authority levels include, by ascending approval limits,
Credit Administration officers, the Senior Loan Committee and the
Asset/Liability Committee of the Board of Directors. The Senior Loan Committee
consists entirely of Bancorp senior management. The Asset/Liability Committee
has seven members including five non-employee directors, Bancorp's President and
CEO, and Centennial Bank's President and CEO. 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 Tier 1 and Tier 2
capital, as defined by regulation. However, loans and other obligations up to an
additional 10% of the institution's capital may be made to the borrower if the
obligations are secured by a first lien on real estate, and the obligation does
not exceed 80% of the fair market value of the real estate as determined by an
independent appraisal. At December 31, 1999, Centennial Bank's legal lending
limit was $9.9 million (or $16.5 million if secured by a first lien on real
estate). However, for internal policy purposes, Centennial Bank's legal lending
limit is set at $9.25 million (or $15.5 million if secured by a first lien on
real estate).

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

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


                                       15
<PAGE>

participations in excess of 10% of Centennial Bank's loan portfolio.

NON-PERFORMING ASSETS

         Non-performing assets consist of loans past due 90 days or more,
non-accrual loans, troubled debt restructurings ("restructured loans") and other
real estate owned ("OREO"). The following table sets forth information
concerning Bancorp's non-performing assets at the end of each of the last five
years:
<TABLE>
<CAPTION>

                                                                                    December 31,
                                                           -------------------------------------------------------
                                                            1999       1998         1997         1996        1995
                                                           -----      ------       ------       ------      ------
                                                                           (Dollars in thousands)
<S>                                                      <C>          <C>        <C>          <C>          <C>
Non-performing loans:
  Loans past due 90 days or more                           $2,163      $1,043     $  402       $  420       $  645
  Non-accrual loans                                           579       3,841        873        1,480          478
  Restructured loans                                          --          --          --           --           --
                                                           ------      ------      ------       ------      ------
     Total non-performing loans                             2,742       4,884      1,275        1,900        1,123
  Other real estate owned                                     413         105         --           --           --
                                                           ------      ------     ------       ------       ------
     Total non-performing assets                           $3,155      $4,989     $1,275       $1,900       $1,123
                                                           ======      ======     ======       ======       ======

Allowance for loans losses                                 $6,165      $4,451     $3,349       $2,600       $1,928
Ratio of total non-performing assets
  to total assets                                            .43%        .87%        .26%         .47%        .35%
Ratio of total non-performing loans
  to total loans                                             .46%       1.13%        .38%         .71%        .59%
Ratio of allowance for loan losses
  to total non-performing loans                              225%         91%        263%         137%        172%
</TABLE>

         The accrual of interest on a loan is discontinued when, in management's
judgment, the future collection of principal or interest is in doubt. Loans
placed on non-accrual 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 non-accrual status, Bancorp's policy is to reverse, and charge against
current income, interest previously accrued but uncollected. The interest on
these loans is accounted for on the cash-basis or cost-recovery method until
qualifying for return to accrual status. Loans are returned to accrual status
when all the principal and interest amounts contractually due are brought
current and future payments are reasonably assured. If interest on non-accrual
loans had been accrued, such income would have been approximately $97,000 in
1999, $273,000 in 1998 and $103,000 in 1997. Total interest income of $27,500
and $141,600 was recognized on non-accrual loans during 1999 and 1998
respectively; no such income was recognized in 1997.

         Restructured loans occur when Bancorp, for economic or legal reasons
related to a borrower's financial difficulties, grants a concession that would
not otherwise be considered. Such concessions include reduction of the interest
rate for the remainder of the contract term, extension of the maturity date at


                                       16
<PAGE>

an interest rate less than the market rate for new debt of similar risk, and
forgiveness of accrued interest and/or principal. Bancorp had no restructured
loans at December 31, 1999, 1998 or 1997.

         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
net realizable value or the principal balance of the related loan. Any excess of
the loan balance over fair value of the property is charged to the allowance for
loan losses. At December 31, 1999 and 1998, OREO totaled $413,100 and $105,400,
respectively, and consisted of one property at each date. At December 31, 1997,
Bancorp held no OREO.

ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES

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

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

         The second method uses credit risk ratings (from one through eight) and
related loss factor multipliers (from .10% for loans in the lowest risk category
up to 100% 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"). 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 and interest when due according to
the contractual terms of the loan agreement. Bancorp specifically examines all
loans greater than $100,000 that are identified on an internal watch list. Loans
which are


                                       17
<PAGE>

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. All collateral-dependent loans are measured
for impairment based on the fair value of the collateral. The measurement of
other impaired loans is based on the present value of expected future cash flows
discounted at the historical effective interest rate

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

         Management believes that Bancorp's allowance 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 allowance for loan losses or that
regulators will not require Bancorp to increase the allowance, 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
allowance.

         The following table sets forth information regarding changes in
Bancorp's allowance for loan losses for each of the last five years:
<TABLE>
<CAPTION>

                                                            At or for the year ended December 31,
                                             ---------------------------------------------------------------------
                                               1999           1998            1997           1996           1995
                                             --------       --------        --------       --------       --------
                                                                 (Dollars in thousands)
<S>                                         <C>            <C>           <C>           <C>              <C>
Loans and loans held for sale
  at year-end                                $599,828       $432,014      $340,625       $268,630        $191,090
                                             ========       ========      ========       ========        ========
Average loans and
  loans held for sale                        $502,272       $387,914      $299,976       $226,965        $176,384
                                             ========       ========      ========       ========        ========
Allowance for loan losses,
  beginning of year                          $  4,451      $   3,349      $  2,600       $  1,928         $ 1,700
Charge-offs:
  Commercial and other                           (559)          (370)         (556)           (89)           (128)
  Real estate -- construction                      --             --            --             --              --
  Real estate -- mortgage                        (110)            --            --             --              --
  Installment                                      (3)           (82)           (2)           (20)            (34)
                                             --------       --------       -------        -------          ------
     Total charge-offs                           (672)          (452)         (558)          (109)           (162)
                                             --------       --------       -------        -------          ------
Recoveries:
  Commercial and other                             43             43            55             24              10
  Real estate -- construction                      --             --            --             --               3
  Real estate -- mortgage                          --             --            --             20               7
  Installment                                      43             11             2              2              20
                                            ---------       --------      --------       --------          ------
     Total recoveries                              86             54            57             46              40
                                            ---------       --------      --------       --------          ------
Net loans charged off                            (586)          (398)         (501)           (63)           (122)
Loan loss provision                             2,300          1,500         1,250            735             350
                                            ---------       --------      --------       --------          ------
Allowance for loan losses
  at year-end                                $  6,165       $  4,451      $  3,349       $  2,600         $ 1,928
                                             ========       ========      ========        =======          ======



                                       18
<PAGE>

Ratio of net loans charged off to average
  loans outstanding                             (.12)%         (.10)%         (.17)%        (.03)%           (.07)%
Ratio of allowance for loan losses
  to loans at year-end                           1.03%          1.04%           .98%          .97%            1.01%
</TABLE>

         Anticipated loan losses are charged against the allowance 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 allowance for loan
losses, it does not normally allocate the allowance to specific groups or
categories of loans. Management estimates, however, that the allocation of the
allowance for loan losses by loan category at the end of each of the last five
years was as set forth in the following tables:

                                               Amount of               Loans in
                                               allowance          category as a
                                                     for          percentage of
                                                    loan            total gross
                                                  losses                  loans
                                             ------------         --------------
                                                    (Dollars in thousands)
December 31, 1999
-----------------
Commercial and other                            $3,700                    38.1%
Real estate - construction                       1,850                    37.9
Real estate - mortgage                             450                    22.6
Installment                                        100                     1.4
Unallocated                                         65                      --
                                                ------                   -----
 Total                                          $6,165                   100.0%
                                                ======                   =====

December 31, 1998
-----------------
Commercial and other                            $2,701                    39.1%
Real estate - construction                       1,350                    34.9
Real estate - mortgage                             275                    24.4
Installment                                         75                     1.6
Unallocated                                         50                      --
                                                ------                   -----
 Total                                          $4,451                   100.0%
                                                ======                   =====

December 31, 1997
-----------------
Commercial and other                            $1,999                    45.2%
Real estate - construction                       1,000                    26.6
Real estate - mortgage                             250                    26.2
Installment                                         50                     2.0
Unallocated                                         50                      --
                                                ------                   ------
 Total                                          $3,349                   100.0%
                                                ======                   =====


                                       19
<PAGE>

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

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

     The following table details the carrying value of Bancorp's impaired loans,
in accordance with SFAS 114, by type of loan at December 31, 1999 and 1998:
                                                                          Net
                                       Recorded     Valuation        Carrying
                                         Amount     Allowance           Value
                                       --------     ---------           -----
December 31, 1999
----------------------
Commercial                           $5,170,200      $389,100      $4,781,100
Real Estate - construction              662,700        75,500         587,200
                                     ----------      --------      ----------
     Total                           $5,832,900      $464,600      $5,368,300
                                     ==========      ========      ==========

   December 31, 1998
----------------------
Commercial                           $1,576,700      $160,600      $1,416,100
Real Estate - construction            2,791,000       289,900       2,501,100
Real Estate - mortgage                  850,700       112,600         738,100
                                     ----------      --------      ----------
     Total                           $5,218,400      $563,100      $4,655,300
                                     ==========      ========      ==========

         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.



                                       20
<PAGE>


INVESTMENT ACTIVITIES

         Bancorp's investment portfolio consists 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, 1999 and 1998, 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 no more favorable than the terms on
similar loans to other borrowers.

         All of the securities held in the investment portfolio were classified
as available-for-sale at December 31, 1999 and 1998. 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.

         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 to
Bancorp's Consolidated Financial Statements for more information about
investment securities held at December 31, 1999, 1998 and 1997.


December 31,
------------

                                          1999             1998         1997
                                        -------          -------      -------
                                                       (In thousands)
U.S. Treasury securities                $ 1,399          $ 1,435      $ 1,417
U.S. Government agencies                 26,534           39,263       34,415
States and political subdivisions        27,316           29,578       39,434
Corporate bonds                           2,205            2,311        2,301
Mortgage-backed securities                1,905            4,206        6,337
                                        -------          -------      -------
  Total investment securities           $59,359          $76,793      $83,904
                                        =======          =======      =======

                                       21
<PAGE>


         The following table provides the carrying values, principal amounts,
maturities and weighted average yields of Bancorp's investment securities at
December 31, 1999, all of which are classified as available-for-sale:
<TABLE>
<CAPTION>

                                                                                            Weighted
                                                          Carrying value       Principal     average
               Type and maturity                       (fair market value)      amount       yield(1)
               -----------------                       -------------------    -----------   --------
                                                                         (Dollars in thousands)
<S>                                                          <C>             <C>             <C>
U.S. Treasuries
  Due within 1 year                                             $ 654          $  649         6.72%
  Due after 1 but within 5 years                                  745             751         5.70
  Due after 5 but within 10 years                                  --              --
                                                               ------          ------
    Total U.S. Treasuries                                       1,399           1,401         6.17

U.S. Government agencies
  Due after 1 but within 5 years                               12,545          13,000         5.69
  Due after 5 but within 10 years                              13,989          14,989         6.11
                                                               ------          ------
    Total U.S. Government agencies                             26,534          27,989         5.92

States and political subdivisions
  Due after 1 but within 5 years                                7,396           7,346         7.71
  Due after 5 but within 10 years                               3,044           3,045         7.75
  Due after 10 years                                           16,876          18,078         7.75
                                                               ------          ------
    Total states and political subdivisions                    27,316          28,469         7.74

Corporate bonds
  Due within 1 year                                               200             200         6.26
  Due after 1 but within 5 years                                1,762           1,826         6.19
  Due after 5 but within 10 years                                 243             258         6.08
                                                              -------          ------
    Total corporate bonds                                       2,205           2,284         6.18

Mortgage-backed securities
  Due within 1 year                                               451             469         4.76
  Due after 5 but within 10 years                               1,131           1,136         4.96
  Due after 10 years                                              323             330         5.94
                                                              -------          ------
    Total mortgage-backed securities                            1,905           1,935         5.08

        Total investment securities                           $59,359         $62,078         6.75
                                                              =======         =======
------------

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


                                       22
<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
interest checking accounts and individual retirement accounts. These accounts
generally earn interest at rates established by management based on competitive
market factors and management's desire to increase or decrease certain types or
maturities of deposits. Centennial 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.

         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, 1999, 1998 and 1997:
<TABLE>
<CAPTION>

                                                            1999                  1998                 1997
                                                       ----------------     ----------------      ---------------
                                                           Average               Average             Average
                                                       ----------------     ----------------      ---------------
                                                       Balance     Rate       Balance   Rate      Balance    Rate
                                                       -------     ----       -------   ----      -------    ----
                                                                          (Dollars in thousands)
<S>                                                  <C>                     <C>                 <C>
Noninterest-bearing demand                           $  106,317      N/A     $  90,166     N/A   $ 75,005      N/A
Interest-bearing demand                                 231,861     2.99       192,356    3.30    152,453     3.16
Savings                                                  28,379     3.26        19,540    2.79     14,347     2.36
CDs                                                     167,702     5.12       145,387    5.63    129,756     5.63
                                                        -------                -------           --------
         Total                                         $534,259     3.08      $447,449    3.37   $371,561     3.35
                                                       ========               ========           ========
</TABLE>

         The following table shows the dollar amount of CDs that had balances of
$100,000 or more at December 31, 1999 and 1998:
<TABLE>
<CAPTION>

                                                                          December 31,
                                                                  -----------------------------
                                                                     1999              1998
                                                                  -----------        ----------
                                                                         (In thousands)
     <S>                                                           <C>                <C>
     CDs $100,000 or over with remaining maturity:
        Three months or less                                         $20,043           $15,985
        Over three months through twelve months                       44,043            39,437
        Over one year through three years                             15,100             5,161
        Over three years                                                 239               125
                                                                    --------           -------
           Total                                                     $79,425           $60,708
                                                                     =======           =======
</TABLE>


                                       23
<PAGE>

SHORT-TERM BORROWINGS

         At December 31, 1999, Bancorp's short-term borrowings consisted of
securities sold under agreements to repurchase totaling $8.2 million, federal
funds purchased totaling $19.6 million and Federal Home Loan Bank of Seattle
advances totaling $46.7 million. Securities sold under agreement to repurchase
are due on demand, but generally range in duration from one to eighty-nine days.

         At December 31, 1998, Bancorp's short-term borrowings consisted of
securities sold under agreements to repurchase totaling $16.1 million, federal
funds purchased totaling $1.0 million and Federal Home Loan Bank of Seattle
advances totaling $3.5 million.

         At December 31, 1997, Bancorp's short-term borrowings consisted of
securities sold under agreements to repurchase totaling $7.7 million.

         The following table sets forth certain information with respect to
Bancorp's short-term borrowings at December 31 and during each of 1999, 1998 and
1997:

<TABLE>
<CAPTION>

                                                                                         December 31,
                                                                        ------------------------------------------
                                                                          1999            1998              1997
                                                                        -------         --------          --------
                                                                                     (Dollars in thousands)
<S>                                                                    <C>              <C>              <C>
Amount outstanding at year-end                                          $74,554          $20,600          $  7,716
Weighted average interest rate at year-end                                5.45%            4.55%             5.03%
Maximum amount outstanding at any month-end during the year              74,554          $20,500           $18,321
Daily average amount outstanding during the year                         26,356          $10,016          $  9,688
Average weighted interest rate during the year                            5.33%            4.88%             5.56%


</TABLE>
LONG-TERM DEBT
         At December 31, 1999 and 1998, Bancorp had no long-term debt.

         At December 31, 1997, 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 was payable monthly at the rate of 6.14%.
The debt matured and was paid August 6, 1998. The loan was secured by Federal
Home Loan Bank of Seattle stock, funds on deposit with the Federal Home Loan
Bank of Seattle, investments and loans.


                                       24
<PAGE>


RETURN ON EQUITY AND ASSETS

<TABLE>
<CAPTION>

         The following table sets forth Bancorp's return on daily average assets and equity for 1999, 1998 and 1997:

                                                                          1999            1998              1997
                                                                       --------         --------           -------

                                                                                 (Dollars in thousands)

        <S>                                                          <C>              <C>             <C>
         Net income                                                   $  12,106        $  11,435        $    9,303
         Average total assets                                           635,003          525,217           439,186
         Return on average assets                                         1.91%            2.18%             2.12%

         Net income                                                   $  12,106        $  11,435         $   9,303
         Average equity                                                  69,440           56,712            45,936
         Return on average equity                                        17.43%           20.16%            20.25%

         Average total equity                                         $  69,440         $ 56,712          $ 45,936
         Average total assets                                           635,003          525,217           439,186
         Average total equity to assets ratio                            10.94%           10.80%            10.46%
</TABLE>

CHANGES IN ACCOUNTING PRINCIPLES

         The Financial Accounting Standards Board ("FASB") has issued the
following accounting pronouncements which Bancorp has adopted in 1999 or will be
required to adopt in future fiscal reporting periods.

         SFAS NO. 133, 137

         In June 1999, FASB issued Statement of Financial Accounting Standards
137, "Accounting for Derivative Instruments and Hedging Activities--Deferral of
the Effective Date of FASB Statement 133" (SFAS 137), an amendment of SFAS 133,
which establishes accounting and reporting standards for derivative instruments
and hedging activities and requires that an entity recognize all derivatives as
either assets or liabilities in the balance sheet and measure those instruments
at fair value. SFAS 133, as amended by SFAS 137, is effective for all quarterly
and annual financial statements of fiscal years beginning after June 15, 2000.
Bancorp had no significant derivatives as of December 31, 1999, nor does Bancorp
engage in any hedging activities. Accordingly, Bancorp does not anticipate that
the adoption of SFAS 133, as amended by SFAS 137, will have a material effect on
its consolidated financial position or results of operations.

         SFAS NO. 134

         In October 1998, SFAS 134, "Accounting for Mortgage-Backed Securities
Retained After the Securitization of Mortgage Loans Held for Sale by a Mortgage
Banking Enterprise"

                                       25
<PAGE>

(SFAS 134), was issued. SFAS 134 was effective in 1999 and had no effect on
Bancorp's consolidated financial position or results of operation.

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.

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

         In addition, the Gramm-Leach-Bliley Act, enacted on November 12, 1999
(the "GLB Act"), eliminates several barriers to affiliation among providers of
financial services and may affect the competitive environment in which Bancorp
operates in substantial and unpredictable ways. Effective March 11, 2000, the
GLB Act permits certain business combinations between banks, insurance
companies, securities firms, and other financial service providers that were not
permitted previously. Using the Financial Holding Company structure created by
the GLB Act, insurance companies and securities firms may now compete more
directly with banks and bank holding companies, and attempt to acquire existing
financial institutions. Bancorp cannot predict the changes in the competitive
environment or the financial condition of Bancorp that may occur as a direct or
indirect result of the GLB Act and the increased competition it may create.

         Bancorp will continue to compete for loans and deposits principally
through the range and quality of the services it provides. Management believes
Bancorp's emphasis on high-quality, personal attention to customers and on
providing services specific to the needs of its customers enables it to compete
effectively with other financial institutions. To serve customers whose
borrowing requirements exceed its


                                       26
<PAGE>

lending limits, Centennial Bank arranges participations with other lenders.

EMPLOYEES

         Centennial Bancorp has no employees other than its executive officers,
who are also employees of Centennial Bank. At December 31, 1999, Centennial Bank
and Centennial Mortgage had 234 and 62 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.

         Various laws and regulations are enacted from time to time at the state
or federal level, which may change the operating environment of Bancorp in
substantial and unpredictable ways. The GLB Act recently enacted by Congress is
expected to have a significant impact on the banking industry. (See "Recent
Legislation - the Gramm-Leach-Bliley Act" below.) Several regulatory agencies
and state legislatures are in the process of responding to changes required or
suggested by the GLB Act. Bancorp cannot determine the ultimate effect that the
GLB Act, or the regulations implemented and legislation enacted as a result of
that act, will have on the operating structure, financial condition or results
of operations of Bancorp.

RECENT LEGISLATION - THE GRAMM-LEACH-BLILEY ACT

         On November 12, 1999, Congress enacted the GLB Act, also known as the
Financial Services Modernization Act. The GLB Act provides substantial changes
that directly affect the banking industry. The GLB Act removes several state and
federal barriers to affiliation among banks, insurance companies, securities
firms, and other financial services providers, and creates a new


                                       27
<PAGE>

entity known as a "financial holding company" ("FHC"). Effective March 11, 2000,
a bank holding company may elect to become an FHC and, as an FHC, engage in a
broader range of financial and other activities than is permissible for the
traditional bank holding companies.

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

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

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

         Insured state banks may control or hold an interest in a subsidiary
that engages in activities as a principal that would only be permissible for a
national bank to conduct through a financial subsidiary, so long as the bank and
all insured depository affiliates are well capitalized after meeting certain
capital deduction and financial statement disclosure requirements. In addition,
an insured state bank may retain its interests in subsidiaries controlled or
acquired before the


                                       28
<PAGE>

enactment of the GLB Act. Oregon law permits commercial banks chartered by the
state to engage in any activity permissible for national banks, so Centennial
Bank may form subsidiaries to engage in financial activities to the same extent
as a national bank.

         At this time, Centennial Bank is "adequately capitalized," and not
"well capitalized." Therefore, Bancorp would not qualify to become an FHC, and
Centennial Bank would not qualify to control or hold an interest in a new
financial subsidiary. Bancorp's management is examining its business plan and
operating policies to determine whether Bancorp would desire to utilize any of
the expanded powers provided to an FHC or a financial subsidiary by the GLB Act.

PRIVACY PROVISIONS

         The GLB Act also includes extensive consumer privacy provisions. These
provisions mandate full disclosure by all financial institutions to consumers of
the institution's policies and practices regarding the sharing of non-public
information with both affiliates and other third parties. Consumers must receive
notice of and an opportunity to "opt out" of disclosure of non-public personal
information to non-affiliated third parties. Disclosures of an institution's
privacy policy is required at the time a customer relationship is established,
and at least annually for so long as the relationship continues. Each federal
banking agency, the National Credit Union Administration, the Secretary of the
Treasury, the Securities and Exchange Commission, the Federal Trade Commission,
and state insurance regulators are all expected to design and enforce their own
privacy policies, and are in the process of drafting their privacy policies at
this time. Privacy legislation or regulation, including possible conflicts in
privacy policies when an institution is regulated by more than one entity, could
place additional limitations on Bancorp's operations or significantly affect
earnings.

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 FRB. Bancorp is required to file an annual
report and such other reports as the FRB may require.

         ACQUISITIONS

         As a bank holding company, Bancorp is required to obtain the prior
approval of the FRB before: (1) acquiring direct or indirect ownership or
control of any voting shares of any bank


                                       29
<PAGE>

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

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

         PERMISSIBLE ACTIVITIES

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

         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


                                       30

<PAGE>

holding company may be denied approval to acquire or establish additional banks
or non-bank businesses. The guidelines require a minimum ratio of total capital
to risk-weighted assets of 8%. At December 31, 1999, Bancorp's ratio of total
capital to risk-weighted assets was 9.88%.

         The FRB also uses a leverage ratio to evaluate the capital adequacy of
bank holding companies. The leverage ratio applicable to Bancorp requires the
ratio of "Tier 1" capital (generally, tangible common stockholders' equity,
perpetual preferred stock and minority interests in consolidated subsidiaries)
to adjusted average total assets to be not less than 3% and up to 5% or higher
depending on Bancorp's general capital condition. Bancorp's leverage ratio at
December 31, 1999 was 9.65%.

         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.

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.


                                       31
<PAGE>

Prior to opening a new branch in Washington, Centennial Bank must receive
approval from the FDIC, the Oregon Director and the Director of the Department
of Financial Institutions in the state of Washington (the "Washington
Director"). Centennial Bank currently has 20 branches, the most recent of which
opened in February 2000.

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

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

         COMMUNITY REINVESTMENT ACT

         Enacted in 1977, the federal Community Reinvestment Act (the "CRA") has
become increasingly important to financial institutions, including their holding
companies. Under the GLB Act, a satisfactory CRA rating for each depository
institution is required before a bank holding company may elect to be one of the
newly created FHCs. The CRA allows regulators to reject an application to make
an acquisition or establish a branch unless the applicant has performed
satisfactorily under the CRA. 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. The Federal Reserve Act limits the amount of certain
transactions, including loans to and investments in affiliates of Centennial
Bank, requires


                                       32
<PAGE>

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.

         The Federal Reserve Act also requires that certain transactions between
Centennial Bank and its affiliates to 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.

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

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

         DIVIDEND RESTRICTIONS

         Dividends paid by Centennial 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 reduce the bank's capital ratios below the
regulatory minimums required to be considered adequately capitalized. Under
Oregon law, Centennial Bank is subject to restrictions on the payment of cash
dividends to its shareholders (i.e., to Bancorp). An Oregon state-chartered bank
may not pay a cash dividend in an amount greater than the bank's unreserved
retained earnings, after first deducting to the extent not already charged
against earnings or reflected in a reserve, (1) all bad debts, which are debts
on which interest is unpaid and past due at least six months, unless the debt is
fully secured and in the process of collection; (2) all other assets charged off
as required by the Oregon Director or a state or federal examiner; and (3) all
accrued expenses, interest and taxes of the bank. At December 31, 1999, $11.8
million was available for declaration of dividends by Centennial Bank to Bancorp
without prior regulatory approval.


                                       33
<PAGE>

         EXAMINATIONS

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

         CAPITAL ADEQUACY

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

         The federal risk-based capital guidelines 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 4% 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, 1999, Centennial
Bank's leverage ratio, Tier 1 capital to risk-weighted assets ratio and total
risk-based capital to risk-weighted assets ratio were 8.7%, 8.1% and 9.0%,
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.

         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


                                       34
<PAGE>

control persons if the institution would be undercapitalized after any such
payment.

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

         INTERNAL OPERATING REQUIREMENTS

         In 1993, federal regulators adopted regulations addressing, among other
things: (1) internal controls, information systems and internal audit systems;
(2) loan documentation; (3) credit underwriting; (4) interest rate exposure; (5)
asset growth; (6) ratio of classified assets to capital; (7) minimum earnings;
and (8) compensation and benefit standards for management officials. These
regulations add further to the cost of compliance and impose record-keeping
requirements on Centennial Bank and Bancorp.

         The consumer lending activities of Centennial Bank are also regulated
by numerous laws and regulations which impose 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

         As an FDIC-insured institution and member of the Bank Insurance Fund
("BIF"), Centennial Bank is subject to quarterly deposit insurance premium
assessments. The FDIC uses a risk-related premium system that applies premium
rates according to an institution's risk category. Capital ratios and
examination ratings are the primary determinants of risk category assignments.
The FDIC sets rate schedules semi-annually based on an analysis of several
factors including probable fund losses, operating needs and the impact of
assessments on BIF members. At December 31, 1999, Centennial


                                       35
<PAGE>

Bank's BIF annualized assessment rate was three basis points of assessable
deposits.

         In addition to the BIF assessment, Centennial Bank is also subject to
an additional assessment which helps support the FSLIC Resolution Fund ("FRF").
The FRF was established in 1989 to liquidate the remaining Federal Savings &
Loan Insurance Corporation ("FSLIC") assets and liabilities resulting from
thrift failures prior to that date. The assessment is one-fifth of the
assessment rate imposed on Savings Association Insurance Fund members for the
same purpose. At December 31, 1999, the annualized assessment rate was 2.12
basis points of assessable deposits.

         Bancorp's FDIC insurance assessment expenses totaled $60,000 in 1999
and $50,000 in 1998. Based on deposit levels and assessment rates as of December
31, 1999, Centennial Bank's FDIC assessment expenses for 2000 would be
approximately $290,000. The significant increase in 2000 is expected primarily
because Centennial Bank's capital level changed from "well capitalized" to
"adequately capitalized" as a result of the goodwill associated with the
acquisition of the Hazel Dell branch. When "well capitalized," Centennial Bank
was not subject to a BIF assessment but, as "adequately capitalized," recently
became subject to the BIF assessment rate discussed above.

CENTENNIAL MORTGAGE

         Centennial Mortgage is, by definition of the Department of Housing and
Urban Development, a non-supervised 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 engaged 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
evolving. (See "Recent Legislation - the Gramm-Leach-Bliley Act" above.) The
rules and the regulatory agencies in the banking 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.



                                       36
<PAGE>

         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, the
Oregon Director and the Washington 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.

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.

ITEM 2.      DESCRIPTION OF PROPERTIES
             -------------------------

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

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

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


                                       37
<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 Annual Report, Bancorp was not a party to any
legal proceedings management believes are material.

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

         None.




                                       38
<PAGE>


                                     PART II
                                     -------

         The information called for by Items 5, 6, 7, 7A, 8 and 9 of Part II is
included in Centennial Bancorp's Annual Report to Shareholders for the year
ended December 31, 1999, and is incorporated herein by reference as follows:


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

ITEM 5.           MARKET FOR BANCORP'S COMMON STOCK
                  ---------------------------------
                      AND RELATED SHAREHOLDER MATTERS                  33
                      ------------------------------

ITEM 6.           SELECTED FINANCIAL DATA                              34
                  -----------------------

ITEM 7.           MANAGEMENT'S DISCUSSION AND
                  ---------------------------
                      ANALYSIS OF FINANCIAL CONDITION
                      -------------------------------
                      AND RESULTS OF OPERATIONS                   26 - 33
                      -------------------------

ITEM 7A.          QUANTITATIVE AND QUALITATIVE
                      DISCLOSURES ABOUT MARKET RISK               30 - 31
                      -----------------------------

ITEM 8.           FINANCIAL STATEMENTS AND
                  -------------------------
                      SUPPLEMENTARY DATA                           9 - 25
                      ------------------

ITEM 9.           CHANGES IN AND DISAGREEMENTS
                  ----------------------------
                      WITH ACCOUNTANTS ON ACCOUNTING
                      ------------------------------
                      AND FINANCIAL DISCLOSURE                         32
                      ------------------------



                                       39
<PAGE>


                                    PART III
                                    --------


ITEM 10.          DIRECTORS AND EXECUTIVE OFFICERS OF BANCORP
                  -------------------------------------------

                  The information called for by this item will be contained in
                  Centennial Bancorp's definitive proxy statement for the annual
                  meeting of shareholders to be held on April 26,2000, and is
                  incorporated herein by reference.


ITEM 11.          EXECUTIVE COMPENSATION
                  ----------------------

                  The information called for by this item will be contained in
                  Centennial Bancorp's definitive proxy statement for the annual
                  meeting of shareholders to be held on April 26, 2000, and is
                  incorporated herein by reference.


ITEM 12.          SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
                  --------------------------------------------------------------

                  The information called for by this item will be contained in
                  Centennial Bancorp's definitive proxy statement for the annual
                  meeting of shareholders to be held on April 26, 2000, and is
                  incorporated herein by reference.


ITEM 13.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
                  ----------------------------------------------

                  The information called for by this item will be contained in
                  Centennial Bancorp's definitive proxy statement for the annual
                  meeting of shareholders to be held on April 26, 2000, and is
                  incorporated herein by reference.



                                       40
<PAGE>


                                     PART IV
                                     -------

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

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

         (1)      Financial Statements.

                  The financial statements 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, 1999,
                  and are incorporated herein by reference:

                                                                    Annual
                                                                   Report to
                                                                 Shareholders
                                                                 Page Number
                                                                 -----------

                  Report of Independent Auditors                        8

                  Consolidated balance sheets at
                           December 31, 1999 and 1998                   9

                  For the three years ended December 31, 1999
                           Consolidated statements of income           10
                           Consolidated statements of
                                    shareholders' equity               11
                           Consolidated statements of cash flows       12

                  Notes to consolidated financial statements      13 - 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               Restated Articles of Incorporation (filed as
                                    Exhibit 3.1 to registrant's Form 10-K Report
                                    for the year ended December 31, 1998, and
                                    incorporated herein by reference)

                  3.2               Bylaws, as restated (filed as Exhibit 3.2 to
                                    registrant's Form 10-K Report for the


                                       41
<PAGE>

                                    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*             Registrant's Nonemployee Director's Stock
                                    Option Plan (filed as Exhibit 10.2 to
                                    registrant's Form 10-K Report for the year
                                    ended December 31, 1991, and incorporated
                                    herein by reference)

                  10.3*             Registrant's 1993 Stock Option Plan for
                                    Nonemployee Directors, restated as of April
                                    13, 1994 (filed as Exhibit A to registrant's
                                    Proxy Statement for the 1994 annual
                                    shareholder meeting, filed April 29, 1994,
                                    and incorporated herein by reference)

                  10.4*             Restated 1995 Stock Incentive Plan (filed as
                                    Exhibit A to registrant's Proxy Statement
                                    for the 1998 annual shareholder meeting,
                                    filed April 13, 1998, and incorporated
                                    herein by reference)

                  10.5*             Nonstatutory (Nonqualified) Stock Option
                                    Agreement dated November 22, 1995, between
                                    registrant and Richard C. Williams (filed as
                                    Exhibit 10.10 to registrant's Form 10-K for
                                    the year ended December 31, 1995, and
                                    incorporated herein by reference)

                  10.6              Ground Lease, dated as of February 10, 1994,
                                    between registrant and Pacific Realty
                                    Associates, L.P. (filed as Exhibit 10.10 to
                                    registrant's Registration Statement on SB-2,
                                    filed March 28, 1994, and incorporated
                                    herein by reference)

                  10.7              Advances, Security and Deposit Agreement,
                                    dated February 5, 1999, between Centennial
                                    Bank and the Federal Home Loan Bank of
                                    Seattle

                  10.8*             Centennial Bank Deferred Compensation Plan,
                                    dated effective January 1, 1996 (filed as
                                    Exhibit 10.13 to registrant's Form 10-K for
                                    the year ended December 31,


                                       42
<PAGE>

                                    1996, and incorporated herein by reference)

                  10.9*             Participation Agreement for use with
                                    Centennial Bank Deferred Compensation Plan
                                    (filed as Exhibit 10.14 to registrant's Form
                                    10-K for the year ended December 31, 1996,
                                    and incorporated herein by reference)

                  10.10*            Employment Agreement dated July 29, 1997
                                    between Thaddeus (Ted) Winnowski and
                                    Centennial Bank (filed as Exhibit 10.17 to
                                    registrant's Form 10-Q Report for the
                                    quarter ended September 30, 1997, and
                                    incorporated herein by reference)

                  10.11*            Employment Agreement dated October 1, 1995,
                                    between Richard C. Williams and registrant
                                    (filed as Exhibit 10.3 to registrant's Form
                                    10-K for the year ended December 31, 1995,
                                    and incorporated herein by reference)

                  10.12*            First Amendment to Employment Agreement
                                    dated December 1, 1997, between Richard C.
                                    Williams and registrant (filed as Exhibit
                                    10.18 to registrant's Form 10-K for the year
                                    ended December 31, 1997, and incorporated
                                    herein by reference)

                  10.13             Pledge, Security and Safekeeping Agreement
                                    dated September 30, 1997, between Centennial
                                    Bank and the Federal Home Loan Bank of
                                    Seattle

                  11.1              Earnings per Share Computation

                  13.1              Portions of 1999 Annual Report to
                                    Shareholders (which are incorporated by
                                    reference in this Form 10-K Annual Report)

                  16.1              Letter dated November 5, 1998 from
                                    PricewaterhouseCoopers LLP to the Securities
                                    and Exchange Commission (filed as Exhibit 16
                                    to registrant's Form 8-K Report filed
                                    November 5, 1998 and incorporated herein by
                                    reference)

                  20.1              Portions of definitive proxy statement for
                                    2000 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)


                                       43
<PAGE>

                  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 Symonds, Evans & Larson, P.C.,
                                    Independent Accountants

                  23.2              Consent of PricewaterhouseCoopers LLP,
                                    Independent Accountants

                  23.3              Report of PricewaterhouseCoopers LLP,
                                    Independent Accountants

                  27.1              Financial Data Schedule as of
                                    December 31, 1999

                  99.1              Certain Factors to Consider in Connection
                                    with Forward-Looking 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) Bancorp did not file any Forms 8-K during the quarter ended
         December 31, 1999.



                                       44
<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 20, 2000              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 20, 2000              By /s/ Richard C. Williams
                    --                      ------------------------
                                            Richard C. Williams, President,
                                            Chief Executive Officer and
                                            Director


                                          CHIEF FINANCIAL OFFICER

DATED:        March 20, 2000              By /s/ Michael J. Nysingh
                    --                      ------------------------
                                            Michael J. Nysingh
                                            Chief Financial Officer

                                          DIRECTORS:


DATED:        March 21, 2000              By /s/ Dan Giustina
                    --                      ------------------------
                                            Dan Giustina, Director

DATED:        March 22, 2000              By /s/ Cordy H. Jensen
                    --                      ----------------------
                                            Cordy H. Jensen, Director

DATED:        March 22, 2000              By /s/ Robert L. Newburn
                    --                      ------------------------
                                            Robert L. Newburn, Director

DATED:        March 23, 2000              By /s/ Brian B. Obie
                    --                      ------------------------
                                            Brian B. Obie, Director

DATED:        March 22, 2000              By /s/ Ted Winnowski
                    --                      ------------------------
                                            Ted Winnowski, Director



                                       45
<PAGE>


                                  EXHIBIT INDEX


Exhibit*
--------

10.7         Advances, Security and Deposit Agreement, dated February 5, 1999,
             between  Centennial Bank and the Federal Home Loan Bank of Seattle

10.13        Pledge, Security and Safekeeping Agreement dated September 30,
             1997, between Centennial Bank and the Federal Home Loan Bank of
             Seattle

11.1         Earnings per Share Computation

13.1         Portions of 1999 Annual Report to Shareholders (which are
             incorporated by reference into this Form 10-K Annual Report)

23.1         Consent of Symonds, Evans & Larson, P.C., Independent Accountants

23.2         Consent of PricewaterhouseCoopers LLP, Independent Accountants

23.3         Report of PricewaterhouseCoopers LLP, Independent Accountants

27.1         Financial Data Schedule as of December 31, 1999

99.1         Certain Factors to Consider in Connection with Forward-Looking
             Statements

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

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