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EXHIBIT 10.1      FORM OF SEVERANCE PAY AGREEMENT ENTERED INTO BETWEEN INTERWEST
                  BANK AND ITS EXECUTIVE OFFICERS

                             SEVERANCE PAY AGREEMENT


1.       EMPLOYER:         InterWest Bank   (InterWest)

2.       EMPLOYEE:         < < NAME > > of InterWest Bank.

3.       DUTIES: InterWest hereby agrees to continue the employment of Employee
         as an Officer of InterWest with such duties and responsibilities as may
         be determined from time to time by the Board of Directors and by Senior
         Management of InterWest, subject to the terms hereof.

4.       SUCCESSORS: This Agreement shall be binding upon InterWest and its
         Successors and Assigns.

5.       SEVERANCE PAY: Except as provided in Paragraph 8 below, if InterWest or
         successor terminates Employee, Employee shall be entitled to receive
         Severance Pay as follows:

         5.1      Employee shall be entitled to a minimum of an amount equal to
                  six (6) months Total Compensation, and

         5.2      After four (4) years employment, in addition to the six (6)
                  months total compensation Employee shall be entitled to an
                  amount equal to an additional one (1) month Total Compensation
                  for each additional twelve (12) months of employment by
                  Employee with InterWest and/or its successors, provided
                  however,

         5.3.     The total Severance Pay compensation shall not exceed an
                  amount equal to twelve (12) months Total Compensation.

6.       CHANGE OF CONTROL.

         6.1.     In the event of a Change of Control, during the term of
                  Employment, Employee will be entitled to Severance Pay in an
                  amount equal to twelve (12) months Total Compensation,
                  provided however, Employee shall not be eligible for Severance
                  Pay if Employee is offered substantially equivalent employment
                  by a successor entity that includes the following:

                  6.1.1    Comparable salary and benefits, and

                  6.1.2.   A comparable position of authority and
                           responsibility, and

                  6.1.3.   Does not require Employee to relocate beyond a
                           reasonable commuting distance, which distance may,
                           but need not be, established by InterWest as a matter
                           of policy, and

                  6.1.4.   The Employee is not permanently terminated by such
                           successor entity


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                           within one (1) year following such Change of Control.

         6.2      For the purposes of this Agreement, the term "Change of
                  Control" shall mean the acquisition of InterWest, or a
                  substantial part thereof, by another company; the merger of
                  InterWest into another company with the other company
                  surviving; the sale of substantially all of the assets of
                  InterWest to another company; or a hostile acquisition of
                  substantially all of the stock of InterWest. For purposes of
                  Change of Control, the term InterWest includes InterWest Bank
                  and its holding company, InterWest Bancorp.

7.       OTHER BENEFITS: The Severance Pay Compensation provided herein shall be
         the exclusive provision regarding Severance Pay, but shall be in
         addition to other benefits to which Employee may otherwise be entitled.

8.       TERMINATION: Employee shall not be entitled to Severance Pay if the
         Employment is terminated for any of the following reasons:

         8.1.     Employee may terminate employment upon thirty (30) days'
                  notice.

         8.2.     Employee shall not be entitled to any Severance Pay if
                  Employee's employment is terminated during the first ninety
                  (90) days of employment with InterWest.

         8.3.     InterWest may terminate Employee immediately without advance
                  notice for gross misconduct, which includes, but is not
                  limited to, drunkenness on the job; the use, sale or
                  possession of illegal drugs on the property of the Bank or its
                  subsidiaries; dishonesty; insubordination or willful failure
                  to discharge assigned duties; harassment of fellow employees
                  or customers of the Bank; violation of the conflict of
                  interest policy of the Bank or its subsidiaries; fighting or
                  assault; theft; possession of unauthorized weapons or firearms
                  (loaded or unloaded) on the premises of the Bank or its
                  subsidiaries; or conviction of a criminal offense.

         8.4.     The employment relationship shall terminate upon Employee's
                  death.

         8.5.     If Employee becomes totally disabled as defined in the Group
                  Insurance Policy providing Disability Income Benefits to
                  Employee.

         8.6.     If the Employee becomes so disabled that Employee is unable to
                  perform the material and substantial duties of the Employment
                  position Employee then holds, even with reasonable
                  accommodation by Employer.


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         9.       DEFINITIONS.

         For the purposes of this Agreement, the term "Total Compensation" shall
         mean the monthly average pay, including bonuses when applicable, paid
         to Employee during the preceding twelve (12) months, or during the
         preceding term of employment if the Employee has been employed for less
         than twelve (12) months. Compensation shall include the Employee's base
         salary, performance bonuses and incentive bonuses.




EMPLOYEE:                                          INTERWEST BANK
                                                   By:


-----------------------------------                -----------------------------
< < Name > >                                       B. R. Beeksma, Chairman
< < Title > >

Date:
     ------------------------------                -----------------------------
                                                   Stephen M. Walden, President


                                                   -----------------------------
                                                   Margaret Mordhorst, Secretary