SECURITIES AND EXCHANGE COMMISSION
                    Washington, D. C.  20549

                          FORM 10-Q


(Mark One)

/X/      Quarterly Report Pursuant to Section 13 or 15(d) of the
         Securities Exchange Act of 1934

For the quarterly period ended September 30, 1998
                               ------------------

                                 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
     (Exact name of registrant as specified in its charter)


       OREGON                             93-0792841
(State of Incorporation)               (I.R.S. Employer
                                     Identification Number)


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

                       (541) 342-3970
     (Registrant's telephone number, including area code)

     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 / /
<PAGE>

     Indicate the number of shares  outstanding of each of the issuer's  classes
of common stock, as of latest practicable date:

15,316,869 shares as of October 31, 1998.



                               -2-


<PAGE>


                        CENTENNIAL BANCORP

                           FORM 10-Q

                       SEPTEMBER 30, 1998

                              INDEX
                              -----
<TABLE>
<CAPTION>

                                                        Page
PART I - FINANCIAL INFORMATION                        Reference
------------------------------                        ---------
<S>                                                   <C>

Condensed  Consolidated  Balance  Sheets as of            4
     September 30, 1998 and December 31, 1997.

Condensed Consolidated Statements of Income for           5
     the three months and nine months ended
     September 30, 1998 and 1997.

Condensed Consolidated Statements of Comprehensive        6
     Income for the three months and nine months 
     ended September 30, 1998 and 1997.

Condensed Consolidated Statements of Cash Flows           6
     for the nine months ended
     September 30, 1998 and 1997.

Notes to Condensed Consolidated Financial Statements      7 - 11

Management's Discussion and Analysis of Financial
     Condition and Results of Operations:
          Overview                                        12
          Material Changes in Financial Condition         13 - 14
          Material Changes in Results of Operations       14 - 15
          Market Risk                                     15
          Liquidity and Capital Resources                 16
          Effects of the Year 2000                        16 - 18

PART II - OTHER INFORMATION
---------------------------

Item 6 - Exhibits and Reports on Form 8-K.                19

Signatures                                                20
</TABLE>

                               -3-


<PAGE>


                                              CENTENNIAL BANCORP
                                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                                  (Unaudited)
<TABLE>
<CAPTION>
                                                                   September 30,             December 31,
                                                                       1998                     1997
                                                                   -------------            -------------
<S>                                                                <C>                      <C>
ASSETS
------
Cash and cash equivalents:
     Cash and due from banks                                        $ 29,652,721            $ 26,269,239
     Interest-bearing deposits with banks                                100,000                      --
     Federal funds sold                                                9,095,000              23,800,000
                                                                    ------------            ------------
          Total cash and cash equivalents                             38,847,721              50,069,239
Securities available-for-sale                                         84,730,442              83,904,253
Loans held for sale                                                   11,867,675               5,584,947
Loans receivable, net                                                402,789,324             331,691,399
Federal Home Loan Bank stock                                           4,986,300               4,711,100
Accrued interest receivable                                            4,004,248               3,618,596
Premises and equipment, net                                           12,464,422              10,486,892
Other assets                                                           2,840,653               2,506,985
                                                                    ------------            ------------
                                                                    $562,530,785            $492,573,411
                                                                    ============            ============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Liabilities:
     Deposits:
          Demand                                                    $ 99,196,385            $ 97,262,856
          Interest-bearing demand                                    202,949,905             173,583,239
          Savings                                                     26,481,592              13,751,676
          Time                                                       153,483,777             134,684,313
                                                                    ------------            ------------
               Total deposits                                        482,111,659             419,282,084
     Short-term borrowings                                            16,173,446               7,715,783
     Accrued interest and other liabilities                            3,658,901               3,765,386
     Long-term debt                                                           --              10,000,000
                                                                    ------------            ------------
               Total liabilities                                     501,944,006             440,763,253
Shareholders' equity:
     Preferred stock                                                          --                      --
     Common stock, 15,316,869 issued and outstanding
          (14,515,676 at December 31, 1997)                           29,228,372              29,031,352
     Retained earnings                                                30,479,607              22,082,696
     Unrealized gains on securities available-for-
          sale, net                                                      878,800                 696,110
                                                                    ------------            ------------
               Total shareholders' equity                             60,586,779              51,810,158
                                                                    ------------            ------------
                                                                    $562,530,785            $492,573,411
                                                                    ============            ============
</TABLE>
See accompanying notes.


                                                   -4-


<PAGE>


                                             CENTENNIAL BANCORP
                                 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                                                 (Unaudited)
<TABLE>
<CAPTION>
                                                     Three Months Ended                 Nine Months Ended
                                                       September 30,                      September
30,                                             ---------------------------       --------------------------
                                                   1998             1997                1998           1997
                                                ----------      -----------       -----------     ----------
<S>                                            <C>             <C>                <C>            <C>
INTEREST INCOME
     Interest and fees on loans                $11,494,731     $ 8,770,014        $32,476,557    $24,573,993
     Interest on investment securities           1,092,436       1,164,621          3,533,572      3,544,781
     Other interest income                         446,038         398,980            593,954        740,536
                                               -----------      ----------        -----------    -----------
        Total interest income                   13,033,205      10,333,615         36,604,083     28,859,310
INTEREST EXPENSE
     Interest on deposits                        4,104,959       3,362,955         11,111,447      9,040,636
     Interest on short-term borrowings             120,350          78,774            301,096        424,679
     Interest on long-term debt                     32,771         154,762            272,897        459,096
                                                ----------      ----------        -----------    -----------
          Total interest expense                 4,258,080       3,596,491         11,685,440      9,924,411
                                                ----------      ----------        -----------    -----------
NET INTEREST INCOME                              8,775,125       6,737,124         24,918,643     18,934,899
     Loan loss provision                           600,000         150,000          1,200,000      1,100,000
                                                ----------      ----------        -----------    -----------
          Net interest income after
            loan loss provision                  8,175,125       6,587,124         23,718,643     17,834,899
NONINTEREST INCOME
     Service charges                               310,149         266,565            878,247        766,474
     Other                                         155,032         156,287            474,948      1,076,892
     Net gains on sales of loans                   389,720         265,027          1,120,611        632,374
     Net gains on sales of investment securities   192,569           5,015            599,885         34,324
                                                ----------      ----------        -----------    -----------
          Total noninterest income               1,047,470         692,894          3,073,691      2,510,064
NONINTEREST EXPENSE
     Salaries and employee benefits              3,172,377       2,328,895          9,557,532      6,656,513
     Premises and equipment                        669,206         501,462          1,950,741      1,475,842
     Legal and professional                        229,355         216,916            639,493        532,495
     Advertising                                   165,223         135,996            501,753        376,470
     Printing and stationery                        94,567         118,684            320,397        304,242
     Other                                         361,845         367,418          1,345,807      1,076,522
                                               -----------      ----------        -----------    -----------
          Total noninterest expense              4,692,573       3,669,371         14,315,723     10,422,084
                                               -----------      ----------        -----------    -----------

Income before income taxes                       4,530,022       3,610,647         12,476,611      9,922,879
Provision for income taxes                       1,497,100       1,173,900          4,079,700      3,225,400
                                               -----------      ----------        -----------    -----------

NET INCOME                                     $ 3,032,922      $2,436,747        $ 8,396,911    $ 6,697,479
                                               ===========      ==========        ===========    ===========

Earnings per common share:
     Basic                                      $      .20      $      .16        $       .55     $      .44
     Diluted                                    $      .19      $      .15        $       .52     $      .43

Weighted average common shares outstanding:
     Basic                                      15,292,937      15,152,869         15,279,379     15,137,388
     Diluted                                    15,965,243      15,915,026         16,006,283     15,795,505

</TABLE>
See accompanying notes.

                                                   -5-


<PAGE>


                                         CENTENNIAL BANCORP
                      CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                             (Unaudited)
<TABLE>
<CAPTION>
                                                  Three Months Ended                  Nine Months Ended
                                                     September 30,                       September
30,                                          ---------------------------         --------------------------
                                                 1998             1997                1998           1997
                                              ----------      -----------        -----------     ----------
<S>                                          <C>              <C>               <C>             <C>

Net income                                   $ 3,032,922      $2,436,747         $ 8,396,911    $ 6,697,479
                                             -----------      ----------         -----------    -----------
Unrealized gains on securities
     available-for-sale:
     Unrealized gains arising
        during the period                        686,999         693,475           2,017,295        910,964
     Reclassification adjustment for gains
        included in statement of income         (192,569)         (5,015)           (599,885)       (34,324)
                                             -----------      ----------         -----------    -----------
                                                 494,430         688,460           1,417,410        876,640
     Income tax expense                         (187,870)       (261,620)           (538,610)      (333,130)
                                              ----------      ----------         -----------   ------------
        Net unrealized gains on
           securities available for sale         305,560         426,840             878,800        543,510
                                             -----------      ----------         -----------    -----------
Comprehensive income                         $ 3,339,482      $2,863,587         $ 9,275,711    $ 7,240,989
                                             ===========      ==========         ===========    ===========
</TABLE>

                                             CENTENNIAL BANCORP
                               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                 (Unaudited)
<TABLE>
<CAPTION>
                                                                                      Nine Months Ended
                                                                                        September 30,
                                                                                  --------------------------
                                                                                       1998          1997
                                                                                  ------------  ------------
<S>                                                                               <C>           <C>
Net cash provided by operating activities                                         $ 2,685,604   $ 5,424,653
                                                                                  -----------   -----------
Cash flows from investing activities:
     Net increase in loans                                                        (72,297,925)  (65,548,676)
     Purchases of investment securities                                           (31,984,219)  (14,974,773)
     Proceeds from investment securities:
          Maturities                                                               20,300,918     3,152,782
          Sales                                                                    11,754,232    11,020,078
     Purchases of premises and equipment                                           (3,164,386)   (1,596,092)
                                                                                  -----------    ----------
          Net cash used in investing activities                                   (75,391,380)  (67,946,681)

Cash flows from financing activities:
     Net increase in deposits                                                      62,829,575    61,982,959
     Net increase (decrease) in short-term borrowings                               8,457,663    (4,112,040)
     Payment of long-term debt                                                    (10,000,000)           --
     Proceeds from issuance of common stock                                           197,020       224,477
                                                                                  -----------   -----------
          Net cash provided by financing activities                                61,484,258    58,095,396
                                                                                  -----------   -----------
Net decrease in cash and cash equivalents                                         (11,221,518)   (4,426,632)
Cash and cash equivalents at beginning of period                                   50,069,239    38,397,505
                                                                                  -----------   -----------
Cash and cash equivalents at end of period                                        $38,847,721   $33,970,873
                                                                                  ===========   ===========
</TABLE>
See accompanying notes.

                                                         -6-


<PAGE>


                        CENTENNIAL BANCORP
      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                           (Unaudited)


1.   Basis of Presentation
     ---------------------

    The  interim  condensed   consolidated  financial  statements  include   the
    accounts of Centennial Bancorp, a bank holding company ("Bancorp"),  and its
    wholly owned subsidiaries,  Centennial Bank ("Bank") and Centennial Mortgage
    Co.  ("Mortgage  Co.").  The Bank is an Oregon  state-chartered  bank  which
    provides  commercial banking services.  Mortgage Co. originates  residential
    mortgage loans for resale in the secondary market.

    The  interim condensed consolidated financial statements are unaudited,  but
    include all adjustments,  consisting only of normal accruals,  which Bancorp
    considers necessary for a fair presentation of the results of operations for
    such interim periods.

    In preparing the  condensed consolidated financial statements, management is
    required to make estimates and assumptions  that affect the reported amounts
    of assets and  liabilities  as of the date of the balance  sheets and income
    and expenses for the periods  presented.  Actual  results  could differ from
    those estimates.

    All significant intercompany  balances and transactions have been eliminated
    in consolidation.

    The balance  sheet data  as of December  31, 1997 was derived  from  audited
    financial  statements,  but does not include all  disclosures  contained  in
    Bancorp's 1997 Annual Report to Shareholders.

    The interim condensed  consolidated  financial statements should  be read in
    conjunction with the consolidated financial statements,  including the notes
    thereto, included in Bancorp's 1997 Annual Report to Shareholders.

    Certain  amounts for 1997 have  been  reclassified  to conform with the 1998
    presentation.





                                       -7-


<PAGE>


2.   Loans and Reserve for Loan Losses
     ---------------------------------
<TABLE>
<CAPTION>

     The composition of the loan portfolio was as follows:
     <S>                             <C>            <C>

                                     September 30,  December 31,
                                          1998          1997
                                     ------------   ------------
     Real estate -- mortgage         $ 89,547,628   $ 87,631,611
     Real estate -- construction      142,345,048     89,119,688
     Commercial                       165,439,116    147,052,433
     Installment                        6,271,247      6,602,690
     Lease financing                    2,201,012      3,648,728
     Other                              2,107,644      1,994,689
                                     ------------   ------------
                                      407,911,695    336,049,839
     Reserve for loan losses           (4,154,237)    (3,348,914)
     Less deferred loan fees             (968,134)    (1,009,526)
                                     ------------   ------------
                                     $402,789,324   $331,691,399
                                     ============   ============
</TABLE>


Loans held for sale of  $11,867,675  and  $5,584,947  at September  30, 1998 and
December 31, 1997,  respectively,  represent real estate mortgage loans held for
sale. These loans are recorded at cost which approximates market.

Transactions  in the reserve for loan losses were as follows for the nine months
ended September 30:
<TABLE>
<CAPTION>
     <S>                             <C>             <C>

                                         1998           1997
                                     -----------     -----------
     Balance at beginning of period  $3,348,914      $2,599,653
     Provision charged to operations  1,200,000       1,100,000
     Recoveries                          32,237          37,352
     Loans charged off                 (426,914)       (557,533)
                                     ----------      ----------
     Balance at end of period        $4,154,237      $3,179,472
                                     ==========      ==========
</TABLE>

At September  30, 1998,  Bancorp had nine loans  requiring a specific  valuation
allowance in accordance with SFAS No. 114, as amended by SFAS No. 118 (two loans
at December 31, 1997).  The specific  valuation  allowance was $482,000 on loans
with  remaining  principal  outstanding  of  $4,865,200  at  September  30, 1998
($150,000 and $718,000,  respectively,  at December 31, 1997).  Each loan with a
current outstanding  principal balance of less than $100,000 is grouped into one
homogenous pool when considering the valuation allowance.

                                      -8-

<PAGE>


The specific  valuation  allowance  necessary for loans in this group of smaller
loans was $1,900 at September 30, 1998 (none at December 31, 1997). The increase
in the  specific  valuation  allowance  at  September  30,  1998  was  primarily
attributable  to one  borrower for which the specific  valuation  allowance  was
$240,000 on nonaccrual loans with remaining principal  outstanding of $2,400,500
(which  loans are also  included  in the  total of  nonaccrual  loans  disclosed
below).

It is  Bancorp's  policy  to  place  loans on  nonaccrual  status  whenever  the
collection of all or a part of the principal  balance is in doubt.  Loans placed
on  nonaccrual  status may or may not be  contractually  past due at the time of
such  determination,  and may or may not be  secured  by  collateral.  Loans  on
nonaccrual status at September 30, 1998 and December 31, 1997 were approximately
$3,690,000 and $873,000, respectively.

Loans past due 90 days or more on which  Bancorp  continued  to accrue  interest
were approximately $571,000 at September 30, 1998, and approximately $402,000 at
December  31, 1997.  There were no loans on which the  interest  rate or payment
schedule  were modified from their  original  terms to  accommodate a borrower's
weakened financial position at September 30, 1998 or December 31, 1997.

3.   Earnings per Share of Common Stock
     ----------------------------------

The basic and diluted earnings per share computations are reconciled as follows:

                                           Three Months Ended
                                             September 30,
                                       ------------------------
                                          1998          1997
                                       ----------    ----------
     Net income available to common
       shareholders -- basic and
       diluted                         $3,032,922    $2,436,747
                                       ==========    ==========

     Reconciliation of Basic and Diluted Shares
     ------------------------------------------

     Weighted average shares
       outstanding -- basic            15,292,937    15,152,869
     Incremental shares from
       stock options                      672,306       762,157
                                       ----------    ----------
     Weighted average shares
       outstanding -- diluted          15,965,243    15,915,026
                                       ==========    ==========
                                       -9-

<PAGE>



                                           Nine Months Ended
                                              September 30,
                                       ------------------------
                                          1998          1997
                                       ----------    ----------
     Net income available to common
       shareholders -- basic and
       diluted                         $8,396,911    $6,697,479
                                       ==========    ==========

     Reconciliation of Basic and Diluted Shares
     ------------------------------------------

     Weighted average shares
       outstanding -- basic            15,279,379    15,137,388
     Incremental shares from
       stock options                      726,904       658,117
                                       ----------    ----------
     Weighted average shares
       outstanding -- diluted          16,006,283    15,795,505
                                       ==========    ==========


The weighted average number of common shares outstanding  retroactively reflects
the effect of stock splits and stock dividends.


4.   Shareholders' Equity
     --------------------

    Effective  May 20,  1998,  shareholders  approved  an amendment to Bancorp's
    Restated  Articles of  Incorporation  to  eliminate  the par value of common
    stock.  Additionally,  shareholders  also approved an amendment to Bancorp's
    Restated 1995 Stock  Incentive Plan increasing the number of shares issuable
    under the Plan from 586,971 to 1,155,000 (as adjusted for a 21-for-20  stock
    split declared in July 1998).

5.   New Statements of Financial Accounting Standards
     ------------------------------------------------

    On January 1, 1998,  Bancorp  adopted  Statement  of  Financial   Accounting
    Standards ("SFAS") No. 130, "Reporting Comprehensive Income," which requires
    reporting of comprehensive  income in general purpose financial  statements.
    Comprehensive  income  includes such items as foreign  currency  translation
    adjustments and unrealized gains and losses on securities available-for-sale
    that are currently being included as a component of shareholders' equity. At
    September 30, 1998 and 1997, Bancorp's comprehensive income consisted of net
    income and unrealized gains or losses on securities available-for-sale,  net
    of related income taxes.

                                      -10-

<PAGE>




    In June 1997,  SFAS No. 131,  "Disclosures  about Segments  of an Enterprise
    and Related  Information"  was issued.  SFAS No. 131 requires  publicly-held
    companies   to   report   financial   and   other   information   about  key
    revenue-producing  segments  of the  entity for which  such  information  is
    available and is utilized by the chief operating  decision  maker.  Specific
    information to be reported for individual  segments includes profit or loss,
    certain  revenue and expense items and total  assets.  A  reconciliation  of
    segment   financial   information  to  amounts  reported  in  the  financial
    statements will be required.  SFAS No. 131 becomes  retroactively  effective
    for financial  statements  for annual periods  beginning  after December 15,
    1997 and it has not yet been determined  whether Bancorp will be required to
    make any additional disclosure.

    In February 1998, SFAS No. 132, "Employers'  Disclosures about  Pensions and
    Other  Postretirement  Benefits - an amendment of FASB Statements No. 87, 88
    and 106," was issued, which revises and standardizes  employers' disclosures
    about  pension  and other  postretirement  benefit  plans.  SFAS No.  132 is
    effective for Bancorp in 1998.  Management  does not anticipate  significant
    disclosure changes as a result of adoption of SFAS No. 132.

    In June 1998,  SFAS No. 133,  "Accounting  for  Derivative  Instruments  and
    Hedging  Activities," which establishes  accounting and reporting  standards
    for  derivative  instruments  and for  hedging  activities  was  issued.  It
    requires  that an entity  recognize  all  derivatives  as  either  assets or
    liabilities  in the  statement  of  financial  position  and  measure  those
    instruments at fair value. The accounting for changes in the fair value of a
    derivative  (that is,  gains and losses)  depends on the intended use of the
    derivative  and the  resulting  designation.  SFAS No. 133 is effective  for
    Bancorp in 2000. The impact on Bancorp's  financial  statements has not been
    determined.



                                      -11-

<PAGE>


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


         WHEN USED IN THE FOLLOWING DISCUSSION,  THE WORD "EXPECTS," "BELIEVES,"
"ANTICIPATES"   AND  OTHER   SIMILAR   EXPRESSIONS   ARE  INTENDED  TO  IDENTIFY
FORWARD-LOOKING  STATEMENTS,   WHICH  ARE  MADE  PURSUANT  TO  THE  SAFE  HARBOR
PROVISIONS  OF THE  PRIVATE  SECURITIES  LITIGATION  REFORM  ACT OF  1995.  SUCH
FORWARD-LOOKING  STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES  THAT
COULD CAUSE ACTUAL RESULTS TO DIFFER  MATERIALLY FROM THOSE PROJECTED.  SPECIFIC
RISKS AND  UNCERTAINTIES  INCLUDE,  BUT ARE NOT LIMITED TO, GENERAL BUSINESS AND
ECONOMIC CONDITIONS, AND OTHER FACTORS LISTED FROM TIME TO TIME IN BANCORP'S SEC
REPORTS,  INCLUDING BUT NOT LIMITED TO,  EXHIBIT 99.1 TO BANCORP'S FORM 10-K FOR
THE YEAR ENDED  DECEMBER 31, 1996,  WHICH IS  INCORPORATED  HEREIN BY REFERENCE.
READERS  ARE  CAUTIONED  NOT TO PLACE UNDUE  RELIANCE  ON THESE  FORWARD-LOOKING
STATEMENTS,  WHICH  SPEAK  ONLY AS OF THE DATE  HEREOF.  BANCORP  UNDERTAKES  NO
OBLIGATION  TO  PUBLISH  REVISED  FORWARD-LOOKING   STATEMENTS  TO  REFLECT  THE
OCCURRENCE OF UNANTICIPATED EVENTS OR CIRCUMSTANCES AFTER THE DATE HEREOF.


OVERVIEW
--------

         Centennial  Bancorp  reported net income of $8.4  million,  or $.55 per
share (basic),  for the nine months ended September 30, 1998. This represented a
25.4% increase in net income and a 25.0% increase in earnings per share (basic),
as  compared to $6.7  million,  or $.44 per share  (basic),  for the nine months
ended September 30, 1997. Net income of $3.0 million, or $.20 per share (basic),
for the quarter ended September 30, 1998 similarly  represented a 24.5% increase
in net income and a 25.0%  increase in earnings  per share,  as compared to $2.4
million, or $.16 per share (basic) for the quarter ended September 30, 1997. The
increased  earnings  during the nine months and the quarter ended  September 30,
1998 primarily  reflect the expansion of Bancorp's  interest-earning  assets and
increased net interest income. At September 30, 1998, Bancorp recognized a 19.2%
increase  in total  assets and a 21.0%  increase in  interest-earning  assets as
compared to September 30, 1997. At September 30, 1998,  interest-earning  assets
represented 92.0% of total assets.



                                      -12-

<PAGE>



MATERIAL CHANGES IN FINANCIAL CONDITION
---------------------------------------

         Material changes in Bancorp's  financial  condition for the nine months
ended  September  30, 1998  included an increase in total  assets,  primarily in
loans and loans held for sale, which was offset in part by a decrease in federal
funds  sold.  The  increases  in loans  and loans  held for sale were  funded by
increases  in total  deposits  and  short-term  borrowings,  and  earnings  from
operations, and was offset in part by a reduction in long-term debt.

         At September 30, 1998,  total assets were $562.5 million,  representing
an increase of 14.2%, or $70.0 million,  over total assets at December 31, 1997.
The  increase in total  assets  includes an increase in loans and loans held for
sale of $78.2 million,  primarily due to heightened real estate construction and
commercial  loan  activity  of the Bank and to a modest  increase in real estate
mortgage  lending.  During the period from  December 31, 1997 to  September  30,
1998,  Bancorp's  construction  lending increased,  as a percentage of net loans
receivable,  from 27% to 35%.  Construction  lending is  subject to  substantial
risks, such as construction delays, cost overruns,  insufficient  collateral and
an inability to obtain permanent financing in a timely manner.

         Federal funds sold decreased  $14.7 million (or 61.8%) at September 30,
1998 as compared to December 31, 1997. Federal funds sold represent excess funds
which  are sold  overnight.  The  amount of  federal  funds  sold can  fluctuate
significantly on a day-to-day basis due to Bancorp's cash flows.

         Total deposits increased $62.8 million (or 15.0%) at September 30, 1998
as  compared  to  December  31,  1997.   The  increase  in  total  deposits  was
concentrated in the  interest-bearing  demand deposit,  savings and time deposit
categories.

         Bancorp actively  solicits demand and  interest-bearing  demand deposit
accounts  due to the lower  costs  associated  with  these  deposit  categories.
Bancorp also solicits time deposits, when needed, to provide funds for expansion
of the loan portfolio.

         Short-term  borrowings  increased $8.5 million (or 109.6%) at September
30, 1998 as compared to December 31, 1997. This increase resulted from increased
sales of securities under agreement to repurchase.

         Long-term  debt  decreased  $10.0  million  at  September  30,  1998 as
compared to December  31, 1997 due to the maturity of the Bank's  advances  from
the Federal Home Loan Bank of Seattle on August 6, 1998.

                                      -13-

<PAGE>



          All other changes experienced in asset and liability categories during
the first nine months of 1998 were comparatively modest.

         Shareholders'  equity  increased  $8.7  million  during the nine months
ended September 30, 1998, as compared to December 31, 1997, due to net income of
$8.3 million, exercises of stock options of $200,000 and an increase of $200,000
in unrealized gains on securities available-for-sale.


MATERIAL CHANGES IN RESULTS OF OPERATIONS
-----------------------------------------

         Total  interest  income  increased $7.7 million (or 26.8%) for the nine
months and $2.7 million (or 26.1%) for the quarter  ended  September 30, 1998 as
compared to the same periods in 1997.  These  increases  were  primarily  due to
increases in the volume of loans and loans held for sale during 1998 as compared
to 1997 and fee  income  earned by  Mortgage  Co.  for  originating  residential
mortgage loans during the 1998 periods.  These  increases were offset in part by
modest  decreases in interest  income on securities  available-for-sale  for the
nine months and the  quarter  ended  September  30, 1998 as compared to the same
periods in 1997.

         Total interest  expense  increased $1.8 million (or 17.7%) for the nine
months and  $662,000  (or 18.4%) for the  quarter  ended  September  30, 1998 as
compared to  comparable  1997 periods.  These  increases  were  primarily due to
increases in the volume of deposits held during 1998 as compared to 1997,  which
were offset in part by a decrease in interest  expense as a result of  long-term
debt maturing in 1998.

         The  increases in interest  earned,  offset in part by the increases in
interest paid, served to increase  Bancorp's net interest income by $6.0 million
(or 31.6%) for the nine-month  period, and $2.0 million (or 30.3%) for the third
quarter of 1998, over the comparable periods in 1997.

         During the nine months ended September 30, 1998, Bancorp charged a $1.2
million loan loss provision to operations,  as compared to $1.1 million  charged
during the nine months  ended  September  30,  1997.  Loans  charged off, net of
recoveries,  during the nine months ended  September 30, 1998 were $394,700,  as
compared to net charge-offs of $520,200 for the 1997 nine-month period.

         At  September  30, 1998 and  December  31,  1997,  Bancorp's  loan loss
reserve was $4.2 million and $3.2 million, respectively.

                                      -14-

<PAGE>



Management  believes  that the reserve for loan losses is adequate for potential
loan losses,  based on  management's  assessment of various  factors,  including
present delinquent and non-performing  loans, past history of industry loan loss
experience,  and present and anticipated  future  economic trends  impacting the
areas and customers served by Bancorp.

         Noninterest  income  increased  $564,000 (or 22.5%) for the nine months
and $355,000 (or 51.2%) for the quarter ended  September 30, 1998 as compared to
the comparable  1997 periods.  The increases for the  nine-month  period and the
quarter were primarily attributable to gains recognized on the sale of loans and
gains on sales of investment securities available-for-sale. These increases were
offset in part by a decrease  during the nine months ended September 30, 1998 as
compared to  September  30, 1997 in other  noninterest  income,  due to the 1997
settlement of a claim against former legal counsel.

         Noninterest  expense  increased  $3.9  million  (or 37.4%) for the nine
months and $1.0 million (or 27.9%) for the quarter  ended  September 30, 1998 as
compared to the comparable 1997 periods.  All categories of noninterest  expense
increased  during the nine  months and the quarter  ended  September  30,  1998,
except that  printing  and  stationery  expenses  and other  expenses  decreased
modestly during the quarter then ended.

         The  provision  for income taxes  increased for the nine months and the
quarter ended September 30, 1998, commensurate with Bancorp's increase in income
before income taxes.

MARKET RISK
-----------

         Market risk is the risk of loss from adverse  changes in market  prices
and rates.  Bancorp's market risk arises  principally from interest rate risk in
its lending, deposit and borrowing activities.  Management actively monitors and
manages its interest rate risk exposure.  Although  Bancorp manages other risks,
as in credit  quality and  liquidity  risk,  in the normal  course of  business,
management  considers  interest rate risk to be a significant  market risk which
could have the largest  material  effect on Bancorp's  financial  condition  and
results of  operations.  Other types of market risks,  such as foreign  currency
exchange rate risk and  commodity  price risk, do not arise in the normal course
of Bancorp's business activities.

         Bancorp  did  not  experience  a  material  change  in  market  risk at
September 30, 1998 as compared to December 31, 1997.




                                      -15-

<PAGE>




LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

         Bancorp's principal  subsidiary,  Centennial Bank, has adopted policies
to maintain a relatively  liquid  position to enable it to respond to changes in
the Bank's needs and financial environment.  Generally, the Bank's major sources
of  liquidity  are  customer  deposits,   sales  and  maturities  of  investment
securities,  the use of federal funds markets and net cash provided by operating
activities.  Scheduled loan repayments are a relatively  stable source of funds,
while deposit inflows and unscheduled loan prepayments,  which are influenced by
general  interest rate levels,  interest rates  available on other  investments,
competition, economic conditions and other factors, are not.

         Along with federal funds lines,  the Bank  maintains a cash  management
advance  with the Federal  Home Loan Bank,  Seattle,  Washington,  which  allows
temporary borrowings for liquidity.  At September 30, 1998, Bancorp did not have
any borrowings  outstanding from the Federal Home Loan Bank of Seattle under the
cash management advance line.

         At September 30, 1998,  Bancorp's Tier 1 and total  risk-based  capital
ratios under the Federal Reserve Board's ("FRB")  risk-based  capital guidelines
were approximately 11.1% and 11.8%,  respectively.  The FRB's minimum risk-based
capital  ratio  guidelines  for  Tier  1  and  total  capital  are  4%  and  8%,
respectively.

         At September 30, 1998, Bancorp's capital-to-assets ratio under leverage
ratio  guidelines was  approximately  10.9%.  The FRB's current minimum leverage
capital ratio guideline is 3%.

EFFECTS OF THE YEAR 2000
------------------------

         The Year 2000 may pose unique  challenges to all  businesses due to the
inability  of some  computers  and  computer  software  programs  to  accurately
recognize,  for years after 1999, dates which are often expressed as a two-digit
number.   This  inability  to  recognize  date   information   accurately  could
potentially affect computer operations and calculations, or could cause computer
systems to not operate at all.

         The federal banking regulators have issued several statements providing
guidance to financial  institutions on the steps the regulators expect financial
institutions to take to become Year 2000 compliant.  Each of the federal banking
regulators is also examining the financial  institutions  under its jurisdiction
to assess each  institution's  compliance with the outstanding  guidance.  If an
institution's progress in addressing

                                      -16-

<PAGE>



the Year 2000 problem is deemed by its primary federal regulator to be less than
satisfactory,  the  institution  will be required to enter into a memorandum  of
understanding  with the regulator  which will,  among other things,  require the
institution to promptly  develop and submit an acceptable plan for becoming Year
2000 compliant and to provide  periodic  reports  describing  the  institution's
progress in implementing the plan.  Failure to  satisfactorily  address the Year
2000  problem  may  also  expose  a  financial  institution  to  other  forms of
enforcement  action that its primary  federal  regulator  deems  appropriate  to
address the deficiencies in the institution's Year 2000 remediation program.

         Bancorp is heavily  reliant on computers  for  accounting  for customer
records and  transactions,  as well as operating  performance.  Recognizing  the
risks of the Year 2000 problem,  management organized a task force in early 1997
to  identify  and  address  the issues  related to the Year 2000.  In  addition,
management  organized  and  sponsored  seminars in the Eugene and  Portland-area
markets to elevate  customer  and public  awareness of the  potential  Year 2000
problems.

         To date,  Bancorp's  Year 2000 task force has  identified  all internal
computer  hardware  and  software  utilized  by Bancorp,  as well as  mechanical
systems which may be dependent upon computer  components,  and contacted vendors
seeking their  certification  of Year 2000 compliance  (Bancorp does not utilize
any  proprietary  computer  hardware or  software).  The task force has retained
computer  consultants  to assist  with  testing  of all  computer  hardware  and
software,  and testing has begun.  Initial testing of Bancorp's  computer system
used to account for customer accounts has been successful.  Management estimates
that computer hardware,  software and connectivity to external processor testing
will be completed during the third quarter of 1999.

         Management  of  Bancorp  has  also  required  that  lending   personnel
ascertain  borrowing  clients'  awareness  and intent to timely comply with Year
2000 requirements.  In addition, management has interviewed selected significant
deposit   customers  to  determine  their  Year  2000  compliance   efforts  and
anticipated  cash  requirements  due to the Year 2000  because of the  potential
effects on Bancorp's  cash needs and  liquidity.  Finally,  management has begun
gathering  information to develop contingency plans in  the event that utilities
or other  business  activities  are  interrupted  due to the effects of the Year
2000.

         At the present  time,  management  has budgeted  $100,000 for Year 2000
compliance  expenses  for the year  1998,  of which  $58,000  had been  expended
through September 30, 1998. Management has not established a budget estimate for
Year 2000 compliance expenses for the year 1999 but will do so during the fourth
quarter of 1998 in conjunction with the regular  budgeting  process.


                                      -17-
<PAGE>


Management  believes  that its  efforts to comply  with the Year  2000,  and the
effects  of the Year  2000,  will  not have a  material  effect  on  operations.
Although  Bancorp believes the actions being taken at this time are suitable and
appropriate to address the Year 2000 issue,  there can be no assurance that such
measures  will be  sufficient  or that Year 2000 issues will not have an adverse
impact, at least temporarily, on operations. Specific factors which could affect
Bancorp's  ability to effect the  transition  into the 21st century  include the
ability to locate and correct all relevant  systems,  the ability of consultants
to complete their testing on schedule, the compliance of third-party vendors and
service providers upon whom Bancorp relies, and similar uncertainties.



                                      -18-


<PAGE>


                           PART II - OTHER INFORMATION



Item 6.  Exhibits and Reports on Form 8-K.
------------------------------------------

(a)  Exhibits

     3.1   Registrant's Restated Articles of Incorporation, including
           all amendments

     27    Financial Data Schedule


(b)  Reports on Form 8-K

     None



                                      -19-


<PAGE>


                                   SIGNATURES
                                   ----------



Pursuant  to the  requirements  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:  November 12, 1998                  /s/ Richard C. Williams
                                           -----------------------------------
                                           Richard C. Williams
                                           President & Chief Executive Officer




Dated:  November 12, 1998                  /s/ Michael J. Nysingh
                                           -----------------------------------
                                           Michael J. Nysingh
                                           Chief Financial Officer









                                      -20-